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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Amarjit Singh
This appeal by the assessee is directed against the order of the CIT(A)- 1, Mumbai dated 03.03.2011 for A.Y. 2006-07. The assessee has filed a petition for condonation of delay in filing this appeal which is accompanied by an affidavit sworn to by the Director of the assessee company. Order on Petition for condonation of delay in filing the appeal for A.Y. 2006-07 2.1 Admittedly the impugned order of CIT(A)-1, Mumbai dated 03.03.2011 for A.Y. 2006-07 was served on the assessee on 08.04.2011. In that view of the matter, the assessee ought to have filed its appeal before the ITAT on or before 07.06.2011 but it was filed only on 04.06.2013 resulting in a delay of 728 days. In the affidavit accompanying the petition for condonation of delay it has been stated that the said delay has occurred on account of bonafide reasons. The reasons cited by the assessee in the affidavit are extracted hereunder: - I Mrs. Vidya Prakash Virkar aged 61 years, Director of Four Oceans Publishers Private Limited do hereby state on solemn Four Oceans Publishers P. Ltd. affirmation as under:
1. 1. I say that I am a director of Four Oceans Publishers Pvt. Ltd. since September 2012. 1 am conversant with the facts of the case and hence unable to depose the same.
2. I say that the appeal filed by the Assessee Company before the Commissioner of Income tax (Appeals) was disposed of by him by his impugned order dated 03.03.2011. This order was received by us on 08.04.2011.
3. I Say that the time for filing of the appeal before the Tribunal was to expire on 07.06.2011.
4. I say that my father Mr. T. N. Shanbhag was managing director of the company who was handling affairs of the company. After his death on 27.02.2009 there was only one Director of the company viz, Mrs. Asha Narayan Shanbhag. At that time she was 83 years old & physically incapable of conducting the activities of business due to her sickness.
5. I say that no appeal was filed against the order of the CIT(A) before the Tribunal during the stipulated time because there was no person in the Company to take Proper care of the affairs of the company.
6. I say that I am the married daughter who was based in Bangalore up to August 2012. I relocated myself from Bangalore to Mumbai and was appointed as a Director of the said company from September, 2012. Before that I had no knowledge of the affairs of the company.
7. I say that at the time of my appointment as a director the accounts of the assessee company were not finalized for financial years 2007-08 and onwards. Consequently returns of income were also not filed. After taking charge of the company I saw to it that the Accounts of the company from then were finalized which happened somewhere in December, 2012. Thereafter in response to notices received from the Income-tax Department returns of income have also been filed for Assessment Years 2008-09 to 2012-2013, 8. I Say that subsequently around May 2013 the present Auditor of the company advised that appeal against the CIT(A)’s impugned order dated March 03, 2011 has remained to be filled. Pursuant thereto we have now prepared and filed the appeal on 4/6/2013 which involves a delay of 627 days.
9. I say that delay in filing the appeal has occurred on account of bonafide reasons because there was no responsible executive in the company. No prejudice would be caused to the revenue if the delay is condoned. On the other hand, if the appeal is not admitted a meritorious matter may get dismissed without adjudication.
Four Oceans Publishers P. Ltd.
I say that the above circumstances, I most respectfully submit that the delay involved in filing the appeal may be condoned.” 2.2 In support of the petition for condonation of delay of 728 days in filing the appeal and accompanying affidavit, the learned A.R. of the assessee submitted that there was no malafide or deliberate intention on the part of the assessee to delay the filing of this appeal and the averments in the affidavit (supra) evidence that there was reasonable cause for filing the appeal belatedly. In these circumstances, the learned A.R. of the assessee, inter alia, praying for condonation of delay in filing this appeal placed reliance on the principles laid down by the Hon'ble Apex Court in the case of: - (i) Collector, Land Acquisition vs. MST Katiji & Others (167 ITR 471) (SC) (ii) Radhakrishna Rai vs. Allahabad Bank and Others (2009) 9 SCC 733 (iii) CIT vs. WSest Bengal Infrastructure Development Corporation Ltd. (2011) 334 ITR 269 (SC) 2.3 Per contra, the learned D.R. opposed the condonation of delay. 2.4.1 We have heard the rival contentions on the issue of condonatoin of delay of 728 days in filing the appeal for A.Y. 2006-07 and perused and carefully considered the material on record. At the outset we observe that the Hon'ble Apex Court in the case of MST Katiji (167 ITR 471) (SC) while laying down the principles for considering the matters of condonatoin of delay in filing appeals has emphasized that substantial justice should prevail over technical considerations. The Hon'ble Court also explained that ‘every days delay must be explained’ does not mean that a pedantic approach should be taken. The doctrine must be applied in a natural, common sense and pragmatic manner. In the case of Shakuntala Hegde, L/R of R.K. Hegde in ITA No. 2785/Bang.2004 for A.Y. 1993-94, the ITAT, Bangalore Bench condoned delay of about 1331 days in filing the appeal wherein the plea taken for delay in filing the appeal was due to advice given by a new counsel, was accepted as sufficient. Keeping in mind the aforesaid principles and on an appreciation of the reasons cited in the assessee’s affidavit (supra), we find that there has been no intentional, Four Oceans Publishers P. Ltd. deliberate or wilful neglect on the part of the assessee to file the appeal belatedly but that this was due to the reasons cited in the affidavit which in our view constitute reasonable cause for filing the appeal for A.Y. 2006- 07 belatedly. We are also of the opinion that by condonation of the aforesaid delay of 728 days in filing the appeal, there will be no loss to Revenue as legitimate taxes payable in accordance with law alone would be collected. In this view of the matter, we accept the reasons cited by the assessee for condonation of delay in filing this appeal and accordingly condone the delay of 728 days and admit the appeal for consideration on merits. O R D E R
The facts of the case, briefly are as under: - 3.1 The assessee company, engaged in business of book binding, publishing, storage of books, etc. filed its return of income for A.Y. 2006- 07 on 30.11.2006 declaring loss of `1,20,061/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 27.10.2008 wherein the income of the assessee was determined at `10,85,000/-. In doing so, the AO treated the rent of `15,50,000/- received by the assessee from Strand Book stall and declared as ‘business income’ to be ‘income from house property; allowing the assessee only deduction of 30% on account of repairs and thereby disallowing the entire business expenditure claimed by the assessee. 3.2 Aggrieved by the order of assessment dated 27.10.2008 for A.Y. 2006-07, the assessee preferred an appeal to the CIT(A)-1, Mumbai, who dismissed the assessee’s appeal vide the impugned order dated 03.21.2011.
Aggrieved by the order of the CIT(A)-1, Mumbai dismissing it appeal for A.Y. 2006-07, the assessee has preferred this appeal. 4.1 In this appeal, the assessee has raised the following grounds: - Four Oceans Publishers P. Ltd. “1. The CIT(A) erred in confirming the order passed by the Income Tax Officer 1(1)(3) assessing income received of Rs.15,50,000/- from Strand Book Stall for providing warehousing, binding, shrink wrapping, supervision charges and mailing charges under the head “income from House Property” as against under the head “Income from Business” as declared by the Appellant in its return of income.
2. The CIT(A) failed to appreciate that: The Assessee had not let out its premises to Licensee but the arrangement was to simply provide various services to that concern through the appellant’s own employees; The nomenclature given to a transaction cannot be decisive as to the head under which an income is to be taxed.
3. The Appellant craves leave to add, alter, delete or modify all or any of the above ground at the time of hearing.” 4.2.1 At the outset, the learned A.R. of the assessee submitted that the grounds raised (supra) pertained to only one issue of whether the amount `15,50,000/- of received from Strand Book Stall for providing warehousing, binding, shrink wrapping, supervision charges, etc. constitute ‘income from house property’ as held by the Assessing Officer (AO) or ‘income from business’ as declared by the assessee. According to the learned A.R. the assessee; who reiterated submissions dated 04.03.2010 and others put forth before the learned CIT(A); the main activity of the assessee company was from its factory premises at Thane, which business was discontinued in 1981 due to labour unrest. In order to commercially exploit its business asset, since 1982 the assessee started providing and outsourcing services to outsiders like M/s. Strand Book Stall, a concern engaged in business of holding both book fairs/exhibitions in Mumbai. The assessee entered into an arrangement with Strand Book Stall to provide various services like ensuring receipts and binding of books, proper storage, outgoing, binding, security, etc. which were undertaken solely by the employees of the assessee concern. It is submitted that the main intention of the activities undertaken by the assessee was of commercial exploitation of its business asset and not letting out of its commercial property and therefore the resultant income must be held to be business income of the assessee and not income form house property as Four Oceans Publishers P. Ltd. has been misconstrued by the authorities below. It was also pointed out that expenditure incurred on telephone, electricity, municipal assessment bills, etc. was being borne only by the assessee, the keys, possession and control of the entire factory premises was in the possession and control of the assessee. The learned A.R. contends the above facts clearly demonstrate that the assessee was carrying on its business activity of providing the aforesaid services to M/s. Strand Book Staff in a systematic and organized way and therefore though the receipt from Strand Book Stall may be mentioned as rent, the consideration was for rendering of various services and the premises was only incidental, and hence the nomenclature given cannot be the decisive factor as to under which head the same is exigible to tax. 4.2.2 The learned A.R. of the assessee further submitted that the position of the assessee; that this constituted ‘business income’ was accepted by the I.T. Department since 1982, including the two scrutiny assessments completed under section 143(3) of the Act for assessment years 1996-97 and 2003-04. It was contended that while it is true that each assessment year is an independent proceeding and the principle of res-judicata does not apply to income tax proceedings, various High Courts and the Apex Court have held that the principle of consistency requires that the view taken by the Revenue authorities in earlier years should not be departed from unless there was a change in the factual and legal position. In the case on hand, the factual position has not changed in this year from that of the earlier years. 4.2.3 In support of the assessee’s proposition that the said income of the assessee received from M/s. Strand Book Stall for provision of various services is to be assessed only as ‘business income’, the learned A.R. of the assessee placed reliance on the following judicial pronouncements which he submitted were based on similar factual situations: - (i) CIT vs. NDR Warehousing Pvt. Ltd. (2015) 372 ITR 690 (Mad.) (ii) Vora Warehousing (P) Ltd. vs. ACIT (1999) 70 ITD 518 (Mum)
Four Oceans Publishers P. Ltd. It was also contends that the judicial decisions relied on by the authorities below were not applicable to the factual or legal position of the case on hand. 4.3 Per contra, the learned D.R. for Revenue placed reliance on the orders of the authorities below. 4.4.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. On an appreciation of the facts as emanate from the record it is not disputed that the assessee received an amount of `15,50,000/- during the year under consideration from M/s. Strand Book Stall by way of the arrangement between them for provision of various services by the assessee such as binding, shrink wrapping, supervision charges, security and storage facilities, etc.; all these works being performed solely by the assessee’s employees. Admittedly the commercial exploitation of its business asset, the factory at Thane, was being done for outsiders since 1982, after lock out and closure of the said factory in 1981. It is also not disputed that the keys and possession of the business asset, being the factory premises at Thane, was in the possession and control of the assessee only and expenses incurred in connection thereto, such as electricity, telephone charges, etc. were borne exclusively by the assessee. In this factual matrix of the case, it appears to us that the assessee has established that it was carrying on its activities of commercially exploiting its business asset, i.e. the said factory premises at Thane, to render the aforementioned services to M/s. Strand Book Stall for a consideration which constitute ‘business income’ . It is not disputed that this position, i.e. such income for rendering of similar services to M/s. Strand Book Stall was accepted as ‘business income’ as declared by the assessee, even in scrutiny assessments under section 143(3) of the Act for A.Y. 1996-97 and 2003-04. While the principle of res-judicata is not applicable to income tax proceedings, we observe that the authorities below have not brought on record any material to prove that the factual matrix of the case on this Four Oceans Publishers P. Ltd. issue has undergone any change in the year under consideration in the case on hand. 4.4.2 In the case of CIT vs. NDR Warehousing P. Ltd. (2015) 372 ITR 690 (Mad), which we have respectfully perused, we find that on similar facts, as in the case on hand, the Hon'ble Madras High Court has held that when the assessee is engaged in business of warehousing, handling and provision of various other allied activities such as pest control, rodent control, provision of security, etc. the activities were more than merely letting out of godowns for tenancy and moreover when the Department itself in the past had accepted the position and assessed such income as business income, it was exigible to tax as ‘business income’ and not ‘income from house property’. Similar view was expressed by a Coordinate Bench of the Tribunal in the case of Vora Warehousing (P) Ltd. vs. ACIT (1999) 70 ITD 518 (Mum). In our considered view, the factual matrix of the case on hand in similar to that of the case of CIT vs. NDR Warehousing P. Ltd. (supra) of the Hon'ble Madras High Court and the same would squarely cover the issue in the case on hand. Moreover the Department having accepted the assessee’s position in earlier years, even in scrutiny assessments that the income from M/s. Strand Book Stall even though bearing the nomenclature of rent was exigible as ‘business income’, we find that it is nobody’s case that the factual matrix of the case has undergone any such change that required action that such income was to be taxed under the head ‘income from other sources’ and not ‘business income’ as declared by the assessee. Respectfully following the decision of the Hon'ble Madras High Court in the case of NDR Warehousing P. Ltd. (supra), we reverse the decision of the authorities below and hold that the income of `15,50,000/-earned by the assessee from M/s. Strand Book Stall for provision of various services alongwith storage in its factory premises at Thane constitutes activity of commercial exploitation of its business asset in systematic manner and is to be assessed as ‘business income’ as declared by the assessee and not income from house property. We hold and direct accordingly. Consequently, assessee’s grounds are allowed.