MADRAS SHEET GLASS WORKS (P) LTD.,CHENNAI vs. ITO, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 8, Chennai dated 05.11.2015 relevant to the assessment year 2011-12. The assessee has raised following grounds in its appeal: (i) The CIT (A) erred in not accepting the appellant's claim that it was carrying on trading business in glass sheet, during the accounting period although on a small scale. (ii) The CIT (A) ought to have directed the assessing officer to compute the losses incurred by the assessee during the year (without taking into account the 2 lease rent received as sale proceeds of land) and set off said losses against the income from other sources included in the computation of total income. (iii) On the facts and circumstances of the case, the CIT (A) ought to have accepted the Appellant's contention that the lease rent of Rs12,08,898/- is assessable as business profits. (iv) For the grounds stated above and such other grounds which may be permitted to be adduced at the time of hearing the appeal, the appellant company prays for the relief as stated above.

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) dismissed the appeal filed by the assessee.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the assessee has been 3 in the business of letting out the property and lease rental income should be assessable as business profits and therefore the loss incurred by the assessee during the year should be set off against the business income and mainly relied on the decision in the case of Chennai Properties & Investments Ltd. v. CIT 373 ITR 673 (SC).

On the other hand, the ld. DR supported the order passed by the ld. CIT(A).

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. With regard to rental income, before the Assessing Officer, it was the submissions of the assessee that the assessee has been in the habit of letting out the property from 2005 onwards. In preceding assessment years, the assessee also sold part of the property. The object of the company was not to take any warehouse operation. It is only to exploit the property by way of letting out the same. Once it is not in dispute that one of the objects of the assessee was letting out the property we are of the considered opinion that the resulting rental income should be assessable to tax under the head “income from business” in view of the ratio laid down in the case of Chennai Properties & Investments Ltd. v. CIT 373 ITR 673 (SC) and relevant finding of the Hon’ble Supreme Court are reproduced as under: “11. We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this 4 judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treated as 'income from the house property'. We, accordingly, allow this appeal and set aside the judgment of the High Court and restore that of the Income Tax Appellate Tribunal. No orders as to costs.” 6.1 Further, we find that the Department could not produce any material evidence to show that the assessee company has been liquidated either voluntarily or by the order of the Court or under section 516 of the Companies Act, 1956 and in fact, the Assessing Officer himself noted in the assessment order that the assessee had trade receipt of ₹.42,166/- out of business. Therefore, it cannot be said that assessee’s business has been winded up.