IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "C", MUMBAI BEFORE SHIRI D. MANMOHAN, V.P. AND SHRI RAJENDRA SINGH, A.M. ITA No. : 6347/Mum/2010 Assessment Year : 2007-08 M/s. Prabhat Udyog Limited ITO WD 8(2)-4 Prabhat Udyog Nagar, Aayakar Bhavan, S. V. Road, Jogeshwari (W), Mumbai-400 020 Mumbai-400 102 Vs. PAN NO: AAACP 3603 M (Appellant) (Respondent) Appellant by : Shri Mahesh Saboo Respondent by : Shri Ajay Date of hearing : 07.02.2012 Date of Pronouncement : 10.02.2012 ORDER
Per RAJENDRA SINGH (AM) :
This appeal by the assessee is directed against the order dated 21.6.2010 of CIT(A) for the assessment year 2007-08. The only dispute raised in this appeal is regarding nature of income declared by the assessee as business income from providing warehousing facilities and handling of packaging etc.
2. Facts in brief are that the AO during the assessment proceedings noted that the assessee had received total sum of Rs.35,81,898/- from 2 ITA No. 6347/Mum/2010 M/s. Prabhat Udyog Limited different persons which had been declared as business receipts. On further examination, AO noted that amounts received from different parties were fixed amounts per month from letting out of the property. The AO noted that though in the debit notes, the receipts had been mentioned from labour and warehousing charges for handling of packages brought and taken, the true nature of receipts was rental income from letting out of land and building which was owned by the assessee for storage of material. The AO therefore, assessed receipts as house property income after placing reliance on the judgment of Hon'ble Supreme Court in the case of Shambhu Investments Pvt. Ltd. (263 ITR
143) and on the judgment of Hon'ble Madras High Court in the case of Chennai Properties and Investments Ltd. (303 ITR 33). 2.1 The assessee disputed the decision of AO and submitted before CIT(A) that the assessee was owner of open clot of land at Jogeshwari. The assessee had earmarked various partitions with temporary roof of asbestos which was let out to various merchants for stocking of goods as per their requirements. The plot had been specifically designed for stocking of particular goods for the purpose of earning business income. The assessee was also providing facilities of electricity and fans as well as security. Customers were changing throughout the year. Assessee was thus running a business centre for use by potential customers and accordingly income had been shown as business income. CIT(A) however, did not accept the contentions raised. It was observed by him 3 ITA No. 6347/Mum/2010 M/s. Prabhat Udyog Limited that income from godowns not actually used in business but let out on rent was assessable as income from house property. It was further observed by him that the nature of income did not change merelyy because assessee was providing some additional services. He placed reliance on the judgment of Hon'ble High Court of Madras in case of CIT vs. New India Maritime Agencies (P.) Ltd. (256 ITR 513) and on the judgment of Hon'ble High Court of Gujarat in the case of Gujarat Ginning & Mfg. Co. Ltd. vs. CIT (205 ITR 319). CIT(A) accordingly upheld the order of AO aggrieved by which the assessee is in appeal before the Tribunal.
3. Before us, the ld. AR for the assessee reiterated the submissions made before the lower authorities that the assessee was providing the services of business centre and not earning income from house property. The assessee had built specially designed stocking slots on its open land, covered with temporary asbestos roof for stocking particular goods like plywood and laminates. The customers of the stocking slots had common entrance which could not be entered by lessees without the permission of owner after a certain time. There were office rules which applied to all licensees. The assessee provided other services such as security for 24 hrs as well as electricity and fans and fire proof measures were also taken by the assessee. Property was under the possession and control of the assessee which was only provided for warehousing services. It was pointed out that the case of the assessee was similar to case of CIT vs. 4 ITA No. 6347/Mum/2010 M/s. Prabhat Udyog Limited National Storage Pvt. Ltd. (66 ITR 596) in which the assessee had constructed vaults of special designs, with doors and electrical fittings and tendered other services to vault holders. The key of the entrance which permitted access to the vaults was in the exclusive possession of the assessee. It was held by the Hon'ble Supreme Court in that case that the nature of income was from business. The ld. AR also pointed out that the department had accepted income declared from same property as business income till assessment year 2006-07 for the last 10 years in which many assessments had been made under section 143(3). Income was also accepted as business in assessment year 2008-09 under section 143(1). The department was not justified in changing the stand and assessing income as house property in assessment year 2007-08. It was also pointed out that the judgment of Hon'ble Supreme Court in case of Shambhu Investments Pvt. Ltd. (supra), and Hon'ble High Court of Madras in the case of Chennai Properties and Investments Ltd. (supra) were distinguishable as in those cases properties had been actually let out and possession handed over to the tenants unlike in case of the assessee who was only providing ware housing services and property remained under its control and possession. It was accordingly urged that the income declared by the assessee should be accepted. The ld. DR on the other hand supported the orders of authorities below and placed reliance on the findings given in the respective orders.5
ITA No. 6347/Mum/2010 M/s. Prabhat Udyog Limited
4. We have perused the records and considered the rival contentions carefully. The dispute is regarding nature of income received by the assessee from letting out of the space for stocking of goods like plywood and laminates by different customers. The assessee had declared income as business income whereas AO has assessed the same as income from house property. The assessee is the owner of land on which it has built stocking slots covered with temporary asbestors roof for stocking of plywood and laminates. The case of the assessee is that all slots have common entrance which is under control of the assessee and assessee was only providing warehousing services, alongwith security, electricity and fan and fire proof measures. The assessee has not handed over the possession of stocking slots and has only allowed the use of these slots by various customers which kept changing. There is nothing on record to controvert these claims. We also note from the assessment order that AO has himself noted that the receipts by the assessee in the various debt notes have been mentioned as labour and warehousing charges for handling of packages brought in and taken out. There is no finding by the AO that the assessee had raised building structures which had been independently let out and handed over to various tenants. We also note that the income from the same services has been assessed as business income by the department for more than 10 years up to assessment year 2006-07 in which many assessments have been completed under section 143(3). The department has to be consistent in its approach and nature of income accepted as business income can not be changed, legal and 6 ITA No. 6347/Mum/2010 M/s. Prabhat Udyog Limited factual position remaining the same. The principle of consistency is clearly in favour of the assessee. Considering the facts and circumstances of the case, in our view, the income declared and accepted as business income in the earlier year can not be changed to income from house property. We, accordingly set aside the order of CIT(A) and direct the AO to accept the income declared by the assessee as business income.
5. In the result, appeal of the assessee is allowed. Order pronounced on 10.02.2012.
Sd/- Sd/- ( D. MANMOHAN) ( RAJENDRA SINGH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, Dt: Jv. Copy forwarded to : 1. The Appellant, 2. The Respondent, 3. The C.I.T. 4. CIT (A) 5. The DR, C - Bench, ITAT, Mumbai BY ORDER ASSISTANT REGISTRAR ITAT, Mumbai Benches, Mumbai