OMEGA SHIPPING P. LTD,MUMBAI vs. ITO 8(2)(4), MUMBAI

In this appeal, the assessee is aggrieved for treating the business income as income from house property. The assessee company has offered the lease rentals received by it as “business income”. The AO held that the lease rental is taxable as Income from House Property. By the impugned order, the CIT(A) confirmed the same, against which the assessee is in further appeal before us, wherein the assessee has raised 2 a without prejudice ground that the expenditure incurred by the assessee should be allowed under the head income from other sources.

We have considered rival contentions and found that the assessee company was acting as shipping agent of Himalya Express upto F.Y.2001-02. During the F.Y.2002-03 agency was terminated and company received compensation of Rs.1.96 crore which was offered to tax. Having failed in its efforts to revive business and left with staff along with all peripherals like furniture, fixture, computers, cabins, cubical etc. the company leased out four premises to various licenses on leave and license along with various furniture, fixture and equipment, details of which have been incorporated in para 3.3 at page 2 of the CIT(A)’s order. Letting out of premises along with equipment and furniture & fixture was inseparable from each other. Premises along with equipment and furniture & fixture were leased out so that employees of the company can be paid and administrative expenses can be met while company explores possibility of reviving its agency business with other carriers. From the record we found that claim of the assessee for treating such income as income from business or profession is confirmed by the IT department itself during the assessment of earlier year i.e. A.Y.2006-07. Copy of order u/s.143(3) along with copy of balance sheet and profit & loss account was also placed on record. Keeping in view the totality of facts and circumstances of the case vis-à-vis the fact that assessee is not in a business of letting out its assets for earning business income, we direct the AO to assess the income as “income from other sources”.