ITO 2(2)(3), MUMBAI vs. MADHU SNAP FASTNERS MFG CO. P.LTD, MUMBAI

The only effective ground raised by the Revenue reads as under:–

Brief facts are, as stated by the Assessing Officer in the assessment order, the assessee company is engaged in the business of warehousing. For the assessment year under dispute, the assessee filed its return of income on 12th September 2013, declaring total income of ` 13,46,502. During the assessment proceeding, the Assessing Officer found that the assessee has received warehousing charges of ` 54,46,280, from Madura Coats Pvt. Ltd., which has been shown as income under the head business and profession after deducting expenditure incurred. After calling for necessary details relating to the warehousing income, the Assessing Officer found that as per the terms of agreement, the sole intention of the assessee appears to be earning of income by letting the godown on monthly rental basis. Referring to the decision of the Hon'ble Supreme Court in Shambhu Investments Pvt. Ltd. v/s CIT, [2003] 263 ITR 143 (SC) and few other decisions, the Assessing Officer ultimately held that the warehousing income received from Madura Coats Pvt. Ltd. is to be treated as income from house property and accordingly added back the entire amount of ` 54,46,280 as income under the house property without allowing any deduction. Further, the Assessing Officer also treated the income received of ` 14,78,510, from Cellular companies towards installing their equipments in the open terrace / roof area of the building as income from house property. Being aggrieved of the 3 Madhu Snap Fastners Mfg. Co. Pvt. Ltd. aforesaid decision of the Assessing Officer, the assessee preferred appeal before the first appellate authority.

The learned Commissioner (Appeals) after considering the submissions of the assessee found that as per the terms of agreement, the assessee was providing warehousing facilities to its client and has not let out the property as a landlord. Further, he found that for the past fifteen years the warehousing charges received from Madura Coats Pvt. Ltd. has been shown by the assessee as business income and the Department has accepted it. He also found that in assessee’s own case for the assessment year 2008–09, the first appellate authority has decided the issue in favour of the assessee. He also referred to the decision of the Hon'ble Jurisdictional High Court in Nutan Warehousing Co. Pvt. Ltd., 326 ITR 94 (Bom.). Therefore, applying the rule of consistency as well as the ratio of the decision of the Hon'ble Jurisdictional High Court as well as the order passed by the first appellate authority in assessee’s own case for assessment year 2008–09, he directed the Assessing Officer to assessee the income received from warehousing and telecom companies under the head income from business and profession.

Learned Departmental Representative relied upon the observations of the Assessing Officer as well as ground raised.

Learned Authorised Representative strongly supporting the decision of the first appellate authority submitted that as far as receipt of warehousing charges from Madura Coats Pvt. Ltd. is concerned, the assessee is in warehousing business and the amount received towards warehousing charges is in the course of carrying on such business. The learned Authorised Representative drawing our attention to different clauses of the agreement with Madura Coats Pvt. Ltd., submitted that it is not an agreement for simply letting out of the warehouse. He submitted, as per the scope of work forming part of the agreement, the assessee has to undertake and provide various other services including loading and unloading of goods, transportation and security as well. He submitted, as per the terms of the agreement possession of the warehouse always remained in exclusive control of the assessee and it was never handed over to Madura Coats Pvt. Ltd. He, therefore submitted, since the warehousing charges were received for providing warehousing facilities which is the main business of the assessee, the income has to be assessed under the head income from business. In this context, he relied upon the following decisions:–

Further, the learned Authorised Representative submitted, though, the warehousing charges have been shown as business

We have heard rival submissions and perused material on record. So far as warehousing charges is concerned, undisputedly, the assessee has entered into an agreement with Madura Coats Pvt. Ltd. for providing warehousing facilities. As observed by the learned Commissioner (Appeals), the aforesaid agreement is subsisting between the parties for more than 15 years and is being renewed form time to time. On a perusal of the agreement, a copy of which is at Page–16 of the paper book, it is evident that as per the terms of agreement, the assessee apart from providing facilities for storage of goods of Madura Coats Pvt. Ltd. is also required to provide certain other services like providing facilities for loading and unloading of goods, transportation and securities, etc. For that purpose the assessee is required to engage / appoint contractor to carry out the 6 Madhu Snap Fastners Mfg. Co. Pvt. Ltd. work of carrying out loading and unloading of goods. The assessee is also required to certify the quantity, weight and quality of goods delivered at the time of taking delivery. Further, the assessee is also responsible for storing and handling the goods with due care and shall also ensure that the goods are not exposed to any danger including theft or pilferage. For that purpose, the assessee is required to depute security guard and shall keep the facility locked at all time. Agreement further provides that the assessee will be in exclusive possession of the warehousing facility at all point of time and the possession will not be handed over to Madura Coats Pvt. Ltd. Thus, from the reading of the terms of agreement as a whole it is clear that the agreement entered into by the assessee with Madura Coats Pvt. Ltd. is not an agreement for lease between a landlord and tenant simpliciter, but, it is an agreement for storage of goods along with the other incidental and ancillary services as required in warehousing business. Thus, the material on record clearly establishes that the warehousing charges received by the assessee were for providing warehousing facilities which is the main business of the assessee. That being the case, the amount received towards warehousing charges has to be assessed as income under the head income from business or profession. The decisions relied upon by the learned Authorised Representative also support this view. Moreover, as brought to our notice by the learned Authorised Representative, though, the agreement with Madura Coats

In the result, Revenue’s appeal is dismissed. Order pronounced in the open Court on 28.03.2018