Bombay H.C : income arising from licensing of the business premises was ‘income from other sources’ and not ‘profits and gains of business or profession’

High Court Of Bombay

Ocean City Trading (India) (P) Ltd. vs. CIT

Section 22, 28(i), 37

Asst. Year 2003-04

Dr. D.Y. Chandrachud & J.P. Devadhar, JJ.

IT Appeal No. 2417 of 2009

12th March, 2010

Counsel Appeared :

Percy J. Pardiwala with Anil Mishra, instructed by PKP Legal Solutions, for the Appellant : A.S. Shivsharan, for the Respondent

JUDGMENT

Dr. D.Y. Chandrachud, J. :

The appeal by the assessee against the order of the Tribunal dt. 31st Oct., 2008 basically raises the following two questions of law :

“(a) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that income arising from licensing of the business premises was ‘income from other sources’ and not ‘profits and gains of business or profession’ ?

(b) Whether on the facts and in the circumstances of the case, the Tribunal erred in holding that the expenses incurred by the appellant in relation to training of an employee abroad was not wholly and exclusively for the purpose of the business of the appellant ?”

2. The appeal pertains to the asst. yr. 2003-04. The issue before the Tribunal on the first question was whether income received from licensing of immovable property belonging to the assessee can be assessed as Income from business or as Income from other sources. The assessee submitted that from the asst. yrs. 1993-94 to 2000-01 the returned income treating the rental/licensing income as assessable under the head of ‘Profit and gains of business’ was accepted by the Revenue. For the asst. yrs. 1993-94 and 2001-02 the assessments were completed under s. 143 (3) whereby the AO had accepted the submission that the licence fees received by the assessee were business income. The Court is informed that this was brought to the notice of the Tribunal. The assessee submits that no distinguishing features were brought before the Tribunal by the Revenue to justify a different treatment for the assessment year in question. In these circumstances, we are of the view that the Tribunal may be requested to reconsider its decision having due regard to the circumstances which are pointed out. We, however, clarify that we have expressed no opinion on the merits and all the contentions are kept open. For the aforesaid reasons, we quash and set aside the order and remand the matter on the first question.

3. On the second question, we do not find any reason to interfere with the decision of the Tribunal, having regard to the factual position. As noted in the order of the Tribunal, the assessee was not able to substantiate that sending Shri Naval Kumar for training abroad was for the benefit of the business of the assessee. Counsel appearing on behalf of the assessee fairly placed on record the judgment of the Division Bench in the case of Echjay Forgings Ltd. vs. Asstt. CIT (2010) 328 ITR 286 (Bom) (IT Appeal No. 584 of 2009, decided on 12th June, 2009) where this Court affirmed the decision of the Tribunal for similar reasons.

4. For the reasons aforesaid, while we affirm the view of the Tribunal on the second question, we are remanding the proceedings back to the Tribunal for reconsideration of the first question noted above, in the light of the observations made by us. The appeal is disposed of accordingly. There shall be no order as to costs.

[Citation : 328 ITR 290]