WTA--16/2005. Case: COMMISSIONER OF WEALTH TAX Vs. ATMA RAM PROPERTIES (P) LTD.. High Court of Delhi (India)

Case NumberWTA--16/2005
CitationNA
Judgement DateSeptember 21, 2017
CourtHigh Court of Delhi (India)

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* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ WTA 16/2005

Reserved on: September 12, 2017 Date of decision: September 21

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

+ WTA 17/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

+ WTA 18/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior

WTA No. 16/2005 & connected matters Page 1

counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

+ WTA 20/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

+ WTA 21/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

WTA No. 16/2005 & connected matters Page 2

+ WTA 25/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

+ WTA 26/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

+ WTA 27/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar,

WTA No. 16/2005 & connected matters Page 3

Advocates.

With

+ WTA 28/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

With

+ WTA 34/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

versus

ATMA RAM PROPERTIES (P) LTD. ..... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

And

+ WTA 35/2005

COMMISSIONER OF WEALTH TAX ..... Appellant

Through: Mr. Raghvendra Singh, Senior counsel.

WTA No. 16/2005 & connected matters Page 4

versus

ATMA RAM PROPERTIES (P) LTD. . .... Respondent

Through: Mr. V.P. Gupta with Mr. Arunav Kumar, Advocates.

CORAM:

JUSTICE S.MURALIDHAR JUSTICE PRATHIBA M. SINGH

JUDGMENT % 21.09.2017 Dr. S. Muralidhar, J. :

1. These are eleven appeals by the Commissioner of Wealth Tax 'Revenue') under Section 27A of the Wealth Tax Act, 1957 against the orders of the Income Tax Appellate Tribunal (ITAT) Assessment Years (‘AYs’) 1984-85 to 1992-93 and AYs 1997-98 to

99.

Facts in brief

2. The facts relevant to the present appeals are in a narrow compass. Assessee executed an agreement to sell dated 31st January 1979 whereby agreed to purchase the Scindia House Connaught Place, New (‘Scindia House property’) from its erstwhile owners for a consideration Rs. 75 lakhs. Possession of the said property was delivered to the on the execution of the agreement to sell. At the time, the entire was tenanted. Under the agreement to sell, the Assessee became entitled receive the rent from the tenants. A sale deed in respect of the Scindia House property was executed on 31st May 1980 and thereby the Assessee its owner.

WTA No. 16/2005 & connected matters Page 5

3. According to the Assessee the purpose of acquiring the said property to construct one floor thereon and sell the property in piecemeal persons. According to the Assessee, consistent with its Memorandum Association (‘MoA’) it proposed to deal with the said property as a

Position under the Income Tax Act

4. For the purposes of the Income Tax Act 1961 (ITA), the categorised the rental income from the Scindia House property in its for AY 1980-81 as 'business income'. However, the Assessing Officer held the rental income to be taxable as ‘income from other sources'.

the Commissioner of Income Tax (Appeals) [CIT (A)] agreed with the the Assessee went in appeal before the ITAT. The contention Assessee that its investment of Rs. 75 lakhs was not for just meagre rental income, but to exploit the property commercially of business found favour with the ITAT. The ITAT agreed with the Assessee that the letting out of the property was only incidental to its main and that, therefore, the rental income should be treated as business The said order of the ITAT attained finality when the Revenue's petition before this Court for AY 1980-81 (ITR No. 128 of 1983) dismissed by this Court on account of the failure to file a paper book.

5. For AY 1981-82 the rental income was shown as business income Assessee and accepted as such by the AO. However, for AY 1982-83, AO took note of the change brought about by the sale deed dated 31st 1980 whereby the Assessee became the owner of the property. The AO

WTA No. 16/2005 & connected matters Page 6

that the rental income was taxable as 'income from house property'. confirmed by the CIT (A) but on appeal, the ITAT relied on its order for AY 1980-81 and held it to be taxable as 'business income'. The said orders followed by the ITAT for the subsequent AYs holding the rental income be ‘business income’.

6. Against the above decisions of the ITAT for AYs 1981-82 to 1986-appeals were filed or reference sought to this Court by the Revenue. reference to this Court (ITR No. 6 of 1995) by the Revenue For AY 1987-88 was dismissed by this Court by an order dated 26th April 2011 for effect. No appeal was filed by the Revenue before the ITAT for AY

89.

7. For AYs 1989-90 to 1991-92, the ITAT again held that the rental of the Assessee was taxable as business income. No appeal was filed Revenue in this Court against the decision of the ITAT for AY 1989-However, as regards AYs 1990-91 and 1991-92, the Revenue filed ITA Nos 355 of 2002 and 101 of 2002 respectively in this Court.

8. The ITAT changed its view for AY 1992-93. It held that there material change in the facts inasmuch as the Assessee was not the the property in AY 1980-81 but became the owner from AY onwards. According to the ITAT, this material change escaped its which resulted in it erroneously accepting the claim of the Assessee rental income was 'business income'.

9. From AY 1992-93 onwards up to 1999-2000 the ITAT consistently

WTA No. 16/2005 & connected matters Page 7

that the rental income received by the Assessee was taxable as ‘income from house property’. Against the order of the ITAT for AY 1992-93,

filed an appeal being ITA No. 162 of 2003 in this Court.

10. For AYs 1993-94 to AYs 1998-99 after the AO and the CIT (A) against the Assessee, by treating the rental income as 'income from property' and not 'business income', the Assessee filed appeals before ITAT. A Special Bench (SB) of the ITAT was constituted to consider question whether the said decisions of the AO and CIT (A) for the said AYs were contrary to the decisions of the ITAT from AYs 1980-81 till and subsequent AYs.

11. By an order dated 7th April 2006 in Atma Ram Properties (P)

v. Joint Commissioner of Income Tax (2006) 102 TTJ (Del) 345

the ITAT answered the said question in favour of the Revenue by that the rental income was 'income from house property'.

12. After discussing the decisions of the Supreme Court in East Housing and Land Development Trust Limited v. Commissioner Income Tax (1961) 42 ITR 49 (SC); Karanpura Development Co.

CIT (1962) 44 ITR 362 (SC); Sultan Bros. P. Ltd. v. CIT (1964) 51 353 (SC); CIT v. Chugandas & Co. (1965) 55 ITR 17 (SC); Mercantile Corporation (P) Ltd. v. CIT (1972) 83 ITR 700 (SC); Universal Plast Ltd. v. CIT (1999) 237 ITR 454 (SC) and a host of decisions High Courts the SB of the ITAT concluded as under:

".... the legal position which emerges can be summarized as If in the given case, the assessee is found to be the owner

WTA No. 16/2005 & connected matters Page 8

property and rental income is earned by him by letting predominantly the said property, such rental income will be assessable under the head "Income from house property" and not "Profits gains of business or profession". What is let out should predominantly the said property inasmuch as the rental income should be from the bare letting of the tenements or from letting accompanied by incidental services or facilities. The subject hired out should not be a complex one and the income obtained should not be so because of the facilities and services rendered than because of letting of the tenements. If such a situation is found to be obtained, the other aspects such as nature of the property commercial/business asset, etc. in the hands of the assessee as well as nature of the business of the assessee do not change the character the income and the rental income does not become income from trade or business.

26. In the present case, the subject property let out by the company was undisputedly owned by it and it was a case of letting of tenement and the subject hired out was not a complex one. It was thus a case of letting out of a property owned by the simpliciter and not a case of exploitation of the property by complex commercial activity. The rental income earned from the property thus was chargeable to tax under the head "Income house property" and not under the head "Profits and gains of business or profession" as claimed by the assessee. As such, considering all the facts of the case and keeping in view the legal position from the various judicial pronouncements discussed hereinabove, hold that the rental income received by the assessee in the year consideration was assessable to tax under the head...

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