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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-24, Mumbai [in short CIT(A)], in appeal No. CIT(A)-22/DCIT-10(3)/IT-150/14-15 dated 05.02.2016. The Assessment was framed by the Dy. Commissioner of Income Tax, Ward10(3), Mumbai (in short ‘DCIT') for the A.Y. 2012-13 vide order dated 25.03.2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in assessing the income from lease rentals of the plant and machinery together with building income from other sources. For this assessee has raised the following ground No.2: -
“2.1 On the facts and in the circumstances of the case and in law, the CIT (A) erred in upholding the stand of the Assessing Officer that the income from lease rental of the plant and machinery together with building is assessable tinder the head 'Income from Other Sources' without appreciating that the Appellant continued to develop and deploy Its intellectual property rights, engage a huge work force of scientists and engineers for rendering of manufacturing services to the Lessee as a composite arrangement.
2.2 On the facts and in the circumstances of the case and in law, the CIT (A) grossly erred in upholding the stand of the Assessing Officer that since the Appellant has leased out all its assets therefore the said assets have ceased to be business assets without appreciating the fact that the said assets are the commercial assets of the Appellant."
Similarly, the assessee has also raised the second issue of treatment of interest income as income from other sources by the AO and confirmed by CIT(A). For this assessee has raised the following ground No. 3 : -
“3. Re: Treatment of interest income as income from other sources - Rs.1,19,75,576/-.
3.1 On the facts and in the circumstances of the case and in law, the CIT (A) erred in upholding the contention of the Assessing Officer by treating interest income of Rs 1,19,75,576/- as income from other sources on the ground that Assessee does not carry on any business activity."
At the outset, the learned Counsel for the assessee stated that this issue is covered by Tribunal’s order for AY 2006-07 and both the grounds are inter linked consequent to the treatment given to the receipt of manufacturing services income as income from other sources and also consequently lease rental and interest income. Learned Counsel for the assessee stated that the tribunal consistently in AYs 2006-07,2007-08, 2008-09 and 2010-11 has set aside both the issues to the file of the Assessing Officer. He requested for this year also the matter may be restored back to the file of the AO exactly on the same terms and conditions. The learned Counsel for the assessee particularly relied on the Para 7 of the Tribunals order in for AY 2006- 07 vide order dated 02.07.2013 reads as under: -
“7. In view of this, we have no option than to set aside the issue to the file of AO to determine exactly the nature of services being rendered by the assessee consequent to the agreement dated 1.08.2005 and to examine whether the assessee has simply leased out factory along with licenses and /or rendering any consultancy services as claimed, so that this activity can be taken as a separate business activity. AO is also directed to examine the other contention (a) that the salaries were reimbursed and to what extent and the number of employees and further whether any separate licenses were obtained for manufacturing bulk drugs on the basis of patents/process developed by assessee’s research unit, so as to consider special technical services and whether sharing of profit was limited to assessee’s own unit leaseed out or on also other sales done by AIL on the basis of technical services so rendered/ claimed. The Assessing Officer was directed to examine whether license of factory is incidental to the so called manufacturing services agreement or independent of the same. After examining the facts, AO was directed to decide whether both streams of income are to be considered as income from other sources or they can be considered as business incomes independently or otherwise. In case assessee activity was considered as separate business activity to the extent of earning manufacturing services income, then proportionate disallowance of scientific research expenses claimed u/s. 35(1)(iv) may not arise. Otherwise, the proportionate disallowance is to be restricted from 15th December, 2005 only and not from 1st December, 2005 as assessee was having its own manufacturing activity up to 15.12.2005. With these directions, the issue in ground No. 3 to 6 are restored to the file of Assessing Officer for examination of the facts and contentions afresh and to decide accordingly. Needless to say, assessee should be given due opportunity in the proceedings."
This order was followed in other years. We find that the Tribunal in all the years have restored these two issues and other issues also to the file of the AO for fresh adjudication. Accordingly, we direct the AO to decide these two issues afresh in the terms of the decision of the Tribunal.
Accordingly, we set aside the orders of the lower authorities and remand the matter back to the file of the AO for fresh adjudication of the appeal. The appeal of the assessee is allowed for statistical purposes.
In the result, the appeal assessee is allowed for statistical purposes.