M/S IMPROVEMENT TRUST vs. COMMI, OF IT, AAYAKAR BHAWAN, PANCHKULA, HRY

ITA No. 70 of 2011 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 70 of 2011 Date of Decision: 28.4.2011 M/s Improvement Trust ....Appellant. Versus Commissioner of Income Tax, Panchkula ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajiv Sharma, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 24.4.2010 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 1222/CHD/2009, relating to the assessment year 2006-07, claiming the following substantial questions of law:- “I. Whether the ITAT was justified in confirming the orders of Authorities below without appreciating the correct facts of the case, provisions of law, evidence and written submissions filed while treating the appellant as not a local Authority? II. Whether the ITAT was justified in confirming the

ITA No. 70 of 2011 -2- orders of Authorities below in upholding the assessment of 'rental income' as income from 'House Property' instead of income from business and profession despite the fact that in the immediately preceding year the same rental income was assessed as income from 'business & profession' and the same position could not be altered as held in ITA No. 567 of 2009 holding: “once a similar position is accepted by the department it is not permissible to deviate from the earlier stand?” 2. Put succinctly, the facts necessary for disposal as narrated in the appeal are that the assessee filed its return for the assessment year 2006-07 on 7.7.2006 declaring loss at Rs.6,83,633/-. The said return was selected for scrutiny. The Assessing Officer vide order dated 26.11.2008 rejected the claim of the assessee on account of depreciation and treated the rent from letting out of shops as income from 'house-property' instead of income from 'business or profession'. Feeling aggrieved, the assessee took the matter in appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT (A) vide order dated 1.10.2009 dismissed the appeal. On further appeal by the assessee, the Tribunal vide order dated 24.4.2010 affirmed the findings recorded by the Assessing Officer as well as the CIT(A) and dismissed the appeal. Hence, the present appeal by the assessee. 3. We have heard learned counsel for the appellant. 4. At the outset, it is noticed that in view of insertion of Explanation to Section 10(20) by Finance Act, 2002 effective from

ITA No. 70 of 2011 -3- 1.4.2003 the assessee-Improvement Trust could not be treated to be a local authority, learned counsel for the assessee did not challenge the findings of the Tribunal and, therefore, question No.I cannot be said to be a substantial question of law. 5. The point that arises for determination in this appeal relates to the nature of income in respect of rental received on letting of godowns by the assessee. The question is whether the amount so received by the assessee was income from 'house property' or was income from 'business or profession'. 6. The assessee had treated the receipt of rental on letting of godowns as income from 'business or profession' and claimed depreciation thereon. The Tribunal on consideration of the matter had concluded the same to be income from house property. The finding as recorded by the Tribunal in para 10 of its order reads thus:- “10. Before us, learned counsel for the assessee has merely reiterated the submissions that such income is liable to be treated as business income of the assessee. In the course of hearing, learned counsel has referred to the judgment of the Hon'ble Supreme Court in the case of Commissioner of Excess Profits Tax v. Shri Lakshmi Silk Mills Ltd., 20 ITR 451 (SC). The facts in the case of Shri Lakshmi Silk Mills Ltd. (supra) are that assessee was engaged in the manufacture of silk cloth and dyeing of silk yarn. It was unable to operate its dyeing plant on account of difficulty in obtaining silk yarn and,

ITA No. 70 of 2011 -4- therefore, it temporarily let out the dyeing plant and earned rental income. Income earned from such letting out was treated as business income by the assessee whereas the Assessing Officer sought to tax it as income under the head 'House Property'. The Hon'ble Supreme Court treated such income as business income for the reason that letting out seen as a part of the usual activities of business and as per the Hon'ble Court, temporary letting out of plant did not result in the plant ceasing to be a commercial assets. In the present case, there is no material to show that the assessee is engaged in the business of letting out of properties. The facts in the present case are quite different and the judgment of the Supreme Court in the case of Shri Lakshmi Silk Mills (supra) does not help the case of the assessee. As a result thereof, we find no error in the approach of the lower authorities in treating the rental income under the head 'income from house property' and consequently the depreciation on buildings is not allowable and the lower authorities are justified in denying the claim of depreciation on buildings. On this ground, the assessee fails.” 7. The submission of learned counsel for the assessee was that on the principle of consistency, it should have been treated as income from 'business or profession' as had been treated in the earlier

ITA No. 70 of 2011 -5- years. 8. We do not find any substance in the said argument. Learned counsel for the assessee was unable to show that in the earlier years the returns were scrutinized by the department and such income was accepted to be an income from 'business or profession'. Once it was not so, in the light of the finding, noticed above, wherein no fault has been pointed out by the learned counsel for the assessee, it is held that no substantial question of law arises in this appeal. 9. Accordingly, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE April 28, 2011 (ADARSH KUMAR GOEL) gbs JUDGE