OCEAN CITY TRADING INDIA PVT LTD vs. THE COMMISSIONER OF INCOME TAX- 19 MUMBAI
What did the High Court hold?
On the first issue, the High Court found merit in the assessee's submission regarding the consistent acceptance of licensing income as business income by the Revenue in prior assessment years, particularly where assessments were completed under Section 143(3). The Court noted the absence of distinguishing features presented by the Revenue for the assessment year in question. Consequently, the High Court quashed and set aside the ITAT's order on this issue and remanded the matter back to the Tribunal for reconsideration, clarifying that no opinion on the merits was expressed. On the second issue, concerning the deductibility of expenses for foreign employee training, the High Court found no reason to interfere with the Tribunal's decision. The Court agreed with the Tribunal's finding that the assessee failed to substantiate that the training was wholly and exclusively for the benefit of its business. The Court referred to a previous decision of its own Division Bench in M/s. Echjay Forgings Ltd. V/s. The Asstt. Commissioner of Income Tax & Anr. which affirmed a similar decision of the Tribunal on analogous facts.
What were the facts?
The assessee, Ocean City Trading (India) Pvt. Ltd. (now Bhuvan Leasing & Infrastructures Pvt. Ltd.), filed an appeal before the Bombay High Court challenging an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 2003-04. The appeal raised two primary questions of law. The first concerned the classification of income from licensing business premises as either 'income from other sources' or 'profits and gains of business and profession'. The second question related to the deductibility of expenses incurred for an employee's training abroad. The assessee pointed out that for several preceding assessment years, the Revenue had accepted similar licensing income as business income without distinguishing features for the current year. The High Court noted that the ITAT had ruled against the assessee on both issues.
What were the issues?
1. Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that income arising from licensing of the business premises was "income from other sources" and not "profits and gains of business and profession"? The assessee contended that for assessment years 1993-94 to 2000-01, and specifically for 1993-94 and 2001-02 where assessments were completed under Section 143(3), the Revenue had accepted licensing income as business income. The assessee argued that no distinguishing features were presented by the Revenue to justify a different treatment for the assessment year 2003-04. The Revenue's contentions are not explicitly recorded in the judgment. 2. Whether on the facts and in the circumstances of the case, the Tribunal erred in holding that the expenses incurred by the appellant in relation to training of an employee abroad was not wholly and exclusively for the purpose of the business of the appellant? The assessee argued that the training was for the benefit of the business. The Revenue's contentions are not explicitly recorded. The Tribunal had found that the assessee was unable to substantiate the business benefit of the foreign training.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPPEAL NO.2417 OF 2009 Ocean City Trading (India) Pvt. Ltd. ) Now known as Bhuvan Leasing & ) & Infrastructures Pvt. Ltd., Building ) No.A-49, Flat No.1360, MIG Colony, ) Adarsh Nagar Co-operative Society, ) Prabhadevi, Mumbai - 400 025. )..Petitioner. V/s. Commissioner of Income Tax ) Mumbai. )..Respondent. Mr. Percy J. Pardiwala, senior Advocate with Anil Mishra i/b. PKP Legal Solutions for appellant. Mr. A.S. Shivsharan for respondent. CORAM : DR. D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ.
DATED : 12TH MARCH, 2010 ORAL JUDGMENT (PER DR. D.Y.CHANDRACHUD. J.) 1) The appeal by the assessee against the order of the Tribunal dated 31st October, 2008 basically raises the CNR No : HCBM020069402009 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:09:14
2 following two questions of law : a) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that income arising from licensing of the business premises was "income from other sources" and not "profits and gains of business and profession" ? b) Whether on the facts and in the circumstances of the case, the Tribunal erred in holding that the expenses incurred by the appellant in relation to training of an employee abroad was not wholly and exclusively for the purpose of the business of the appellant ? 2) The appeal pertains to assessment year 2003-04. The issue before the Tribunal on the first question was whether income received from licensing of immovable property belonging to the assessee can be assessed as income from business or as income from other sources. The assessee submitted that from assessment years 1993-94 to 2000-01 the returned income treating the rental / licensing income as assessable under the head of profit and gains of business was accepted by the Revenue. For assessment years 1993-94 and 2001-02 the assessments were completed under Section 143(3) whereby the Assessing Officer had accepted the submission that the licence fees received by the assessee were business income. The Court is informed that this was brought to the notice of the Tribunal. The assessee submits Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:09:14
3 that no distinguishing features were brought before the Tribunal by the Revenue to justify a different treatment for the assessment year in question. In these circumstances, we are of the view that the Tribunal may be requested to reconsider its decision having due regard to the circumstances which are pointed out. We, however, clarify that we have expressed no opinion on the merits and all the contentions are kept open. For the aforesaid reasons, we quash and set aside the order and remand the matter on the first question. 3) On the second question, we do not find any reason to interfere with the decision of the Tribunal, having regard to the factual position. As noted in the order of the Tribunal, the assessee was not able to substantiate that sending Shri Naval Kumar for training abroad was for the benefit of the business of the assessee. Counsel appearing on behalf of the assessee fairly placed on record the judgments of the Division Bench in the case of M/s. Echjay Forgings Ltd. V/s. The Asstt. Commissioner of Income Tax & Anr. [Income Tax Appeal No. 584 of 2009] decided on 12th June, 2009 where this Court affirmed the decision of the Tribunal for similar reasons. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:09:14
4 4) For the reasons aforesaid, while we affirm the view of the Tribunal on the second question, we are remanding the proceedings back to the Tribunal for reconsideration of the first question noted above, in the light of the observations made by us. The appeal is disposed of accordingly. There shall be no order as to costs. (J.P.DEVADHAR, J.) (DR. D.Y.CHANDRACHUD, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:09:14 Powered by TCPDF (www.tcpdf.org)
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