Patna High Court
H. R. Properties Pvt. Ltd vs The Assistant Commissioner Of Income ... on 12 January, 2024
Bench: Chief Justice, Rajiv Roy
IN THE HIGH COURT OF JUDICATURE AT PATNA
Miscellaneous Appeal No.280 of 2011
======================================================
H. R. Properties Pvt. Ltd., A limited company incorporated under the
Companies Act, 1956, having its registered office at Hathwa House, South
Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna through its Executive Director, Smt. Punam Sahi, daughter of Late Sri
Yadunandan Prasad Narayan Singh, presently aged about 57 years, resident of
Hathwa House, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income tax, Circle 2, Patna
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 281 of 2011
======================================================
H. R. Properties Pvt. Ltd., A limited company incorporated under the
Companies Act, 1956, having its registered office at Hathwa House, South
Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna through its Executive Director, Smt. Punam Sahi, daughter of Late Sri
Yadunandan Prasad Narayan Singh, presently aged about 57 years, resident of
Hathwa House, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income tax, Circle 2, Patna.
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 295 of 2011
======================================================
H.R. Properties Pvt. Ltd. A limited company incorporated under the
Companies Act, 1956, having its registered office at Hathwa House, South
Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and District of
Patna through its Executive Director, Smt. Punam Sahi, daughter of Late Sri
Yadunandan Prasad Narayan Singh, presently aged about 57 years, resident of
Hathwa House, G.P.O. Patna, P.S. Gandhi Maidan, in the town and district of
Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income Tax Circle -2, Patna.
Patna High Court MA No.280 of 2011 dt.12-01-2024
2/19
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 296 of 2011
======================================================
H.R. Properties Pvt. Ltd. A limited company incorporated under the
Companies Act, 1956, having its registered office at Hathwa House, South
Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and District of
Patna through its Executive Director, Smt. Punam Sahi, daughter of Late Sri
Yadunandan Prasad Narayan Singh, presently aged about 57 years, resident of
Hathwa House, G.P.O. Patna, P.S. Gandhi Maidan, in the town and district of
Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income Tax, Circle 2, Patna.
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 297 of 2011
======================================================
H. R. Properties Pvt. Ltd., A limited company incorporated under the
Companies Act, 1956, having its registered office at Hathwa House, South
Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna through its Executive Director, Smt. Punam Sahi, daughter of Late Sri
Yadunandan Prasad Narayan Singh, presently aged about 57 years, resident of
Hathwa House, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income tax, Circle 2, Patna.
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 298 of 2011
======================================================
H. R. Properties Pvt. Ltd. A limited company incorporated under the
Companies Act, 1956, having its registered office at Hathwa House, South
Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna through its Executive Director, Smt. Punam Sahi, daughter of Late Sri
Yadunandan Prasad Narayan Singh, presently aged about 57 years, resident of
Hathwa House, G.P.O. Patna, P.S. Gandhi Maidan in the town and district of
Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income Tax Circle 2, Patna.
Patna High Court MA No.280 of 2011 dt.12-01-2024
3/19
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 366 of 2011
======================================================
Chero Medico and Developers Pvt. Ltd. a limited company incorporated
under Companies Act, 1956, having its registered office at Hathwa House,
South Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and
district of Patna through its Executive Director, Dhrub Shankar, Son of Late
Bishwanath Prasad Narayan Singh, presently aged about 62 years, resident of
Chainpur Kothi, Nawal Kishore Road, Kadam Kuan, P.O. - Kadam Kuan, P.S.
Kadam Kuan, in the town and district of Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income Tax Circle 2, Patna.
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 414 of 2011
======================================================
Chero Medico and Developers Pvt. Ltd., A limited company incorporated
under Companies Act, 1956, having its registered office at Hathwa House,
South Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and
district of Patna through its Executive Director, Dhrub Shankar, son of Late
Bishwanath Prasad Narayan Singh, presently aged about 62 years, resident of
Chainpur Kothi, Nawal Kishore Road, Kadam Kuan, P.O. Kadam Kuan, P.S.
Kadam Kuan, in the town and district of Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income tax, Circle 2, Patna.
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 415 of 2011
======================================================
Chero Medico and Developers Pvt. Ltd., A limited company incorporated
under Companies Act, 1956, having its registered office at Hathwa House,
South Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and
district of Patna through its Executive Director, Dhrub Shankar, son of Late
Bishwanath Prasad Narayan Singh, presently aged about 62 years, resident of
Chainpur Kothi, Nawal Kishore Road, Kadam Kuan, P.O. Kadam Kuan, P.S.
Kadam Kuan, in the town and district of Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income tax, Circle 2, Patna.
Patna High Court MA No.280 of 2011 dt.12-01-2024
4/19
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 416 of 2011
======================================================
Chero Medico and Developers Pvt. Ltd., A limited company incorporated
under Companies Act, 1956, having its registered office at Hathwa House,
South Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and
district of Patna through its Executive Director, Dhrub Shankar, son of Late
Bishwanath Prasad Narayan Singh, presently aged about 62 years, resident of
Chainpur Kothi, Nawal Kishore Road, Kadam Kuan, P.O. Kadam Kuan, P.S.
Kadam Kuan, in the town and district of Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income tax, Circle 2, Patna.
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 417 of 2011
======================================================
Chero Medico and Developers Pvt. Ltd. A limited company incorporated
under Companies Act, 1956, having its registered office at Hathwa House,
South Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and
District of Patna through its Executive Director, Dhrub Shankar, son of Late
Bishwanath Prasad Narayan Singh, presently aged about 62 years, resident of
Chainpur Kothi, Nawal Kishore Road, Kadam Kuan, P.O. Kadam Kuan, P.S.
Kadam Kuan in the town and District of Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income Tax Circle 2, Patna.
... ... Respondent/s
======================================================
with
Miscellaneous Appeal No. 418 of 2011
======================================================
Chero Medico and Developers Pvt. Ltd. A limited company incorporated
under Companies Act, 1956, having its registered office at Hathwa House,
South Gandhi Maidan, G.P.O. Patna, P.S. Gandhi Maidan in the town and
district of Patna through its Executive Director, Dhrub Shankar, Son of Late
Bishwanath Prasad Narayan Singh, presently aged about 62 years, resident of
Chainpur Kothi, Nawal Kishore Road, Kadam Kuan, P.O. - Kadam Kuan, P.S.
Kadam Kuan, in the town and district of Patna.
... ... Appellant/s
Versus
The Assistant Commissioner of Income tax Circle 2, Patna.
Patna High Court MA No.280 of 2011 dt.12-01-2024
5/19
... ... Respondent/s
======================================================
Appearance :
(In Miscellaneous Appeal No. 280 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 281 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 295 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 296 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 297 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 298 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 366 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 414 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 415 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Patna High Court MA No.280 of 2011 dt.12-01-2024
6/19
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 416 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 417 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
(In Miscellaneous Appeal No. 418 of 2011)
For the Appellant/s : Mr. Ajay Kumar Rastogi, Sr. Advocate
Ms. Smriti Singh, Advocate
For Income Tax : Mrs. Archana Sinha, Sr. SC, Income Tax
Mr. Alok Kumar, Advocate
Ms. Swarna Roy, Advocate
======================================================
CORAM: HONOURABLE THE CHIEF JUSTICE
and
HONOURABLE MR. JUSTICE RAJIV ROY
CAV JUDGMENT
(Per: HONOURABLE THE CHIEF JUSTICE)
Date : 12-01-2024
The above appeals under the Income Tax Act,
arises out of orders of the Income Tax Appellate Tribunal
(henceforth for short 'the Tribunal') are of two different
assessees, with respect to assessment years 2002-03 to 2007-
08, raising the very same question of law. The question of law
framed is as below:-
'Whether the Tribunal committed a gross error in law
by affirming the order of the Assessing Authority reversed by
the first appellate authority, finding the rental income of the
assessee to be one assessed under the head 'Income From
House Property' and not as an Income from Business.'
2. Learned Senior Counsel for the assessee Sri
Patna High Court MA No.280 of 2011 dt.12-01-2024
7/19
A. K. Rastogi argued that both the assessees had only rental
income in the subject assessment years and that was the
main object of their constitution as revealed from the
Memorandum of Understanding (for brevity 'MoU'). It is
also pointed out that the rental income of the assessees had
been regularly assessed prior to the subject assessment
years as 'income from business' and there was no valid
ground to deviate from the consistent stand taken by the
Department. It is argued that both the assessees had only
rental income in their subject year which indicated that this
was the only business carried out by the assessee and in that
circumstance, there could not be an assessment made of the
above rental income generated by the assessee as 'Income
from House Property'. The learned counsel would rely on
the decision of the Hon'ble Supreme Court in Rayala
Corporation Pvt. Ltd v. ACIT reported in (2016) 386 ITR
500 SC and Chennai Properties & Investments Ltd. v. CIT
reported in (2015) 373 ITR 673 SC and the judgment of a
Division Bench of this Court in M.A. No. 567/2007 dated
18.11.2016
, Pandooi Palace v. CIT, Patna. The Assessing
Officer has erroneously relied on the decision of the
Patna High Court MA No.280 of 2011 dt.12-01-2024
Hon'ble Supreme Court in Shambhu Investment Pvt. Ltd. v.
Commissioner of Income Tax reported in (2003) 263 ITR
143 (SC). Insofar as consistency required to be maintained
by the Department, reliance was placed on a Division Bench
of this Court in Dr. Narendra Prasad & Others v. CIT &
Another, (2010) 322 ITR 171 (Pat).
3. Smt. Archana Shahi, learned Senior Standing
Counsel for the Income Tax Department, however, pointed
out that the assessee is a real estate developer and builder
and the rental income generated is of the buildings
constructed by the appellant which were not sold off. The
business of the assessee, even as per the MoU was not
confined to leasing out properties and the rental income
generated can only be assessed as 'income from house
properties' and not as 'income from business'. The learned
counsel also pointed out that Rayala Corporation Pvt. Ltd &
Chennai Properties & Investments Ltd. (supra) are on the
facts coming out from the above decision not applicable to
the present case. As far as consistency is concerned, it is
argued that it is trite that every assessment year is a separate
cause of action and if the view taken by the Assessing
Patna High Court MA No.280 of 2011 dt.12-01-2024
Officer in the earlier years is found to be erroneous, there
can be no rule of consistency, which would work against the
provision of the Act itself.
4. Rayala Corporation Pvt. Ltd (supra) was on
the specific finding that admittedly the assessee had only
one business; which was of leasing out of properties and
earning rent from them. It was specifically noticed by the
Hon'ble Supreme Court in paragraph 5 that the assessee
was a Private Limited Company, the MoA of which
indicated the business to be dealing in real estate and also to
earn income by leasing out property belonging to the
assessee company. It was going by the admitted facts in that
case, that the assessee company had only one business of
lease and earning rent from property, the decision was
rendered permitting the assessment of income as one arising
from 'Profits and Gains of Business and Profession'.
Chennai Properties & Investments Ltd. (supra) was a case
in which the MoA specifically indicated the main object of
the assessee was acquisition and holding of properties
called "Chennai House" and "Firhavin Estate", to let out
those properties and making advances upon the lands and
Patna High Court MA No.280 of 2011 dt.12-01-2024
buildings or other properties or interest therein. The entire
income accrued in the subject year was from letting out the
specified properties which led to the Hon'ble Supreme
Court finding the income to be assessable as income from
'Profits or Gains of Business or Profession'.
5. A Division Bench of this Court in Pandooi
Palace v. CIT, Patna (supra) followed the aforesaid
decisions of the Hon'ble Supreme Court. The assessee
therein had constructed a Commercial complex in the name
and style of Pandooi Palace and was drawing rental income
from the same. It was on the facts that the High Court ruled
in favor of the assessee in the above case.
6. We will first look at the objects as revealed
from the respective MoAs produced in the appeals. Insofar
as the one of the assessees H. R. Properties Pvt. Ltd. is
concerned, the MoA produced as Annexure-1 indicates the
following objects which is extracted below :-
The main objects to be pursued by the Company on
its incorporation are :
(i) To take over and adopt the firm carried on under
the name and style of at Patna in the State of Bihar (which
is a partnership business carried on by the signatories to
these Memorandum and Articles of Association of the
present Company) as a going concern including the
Patna High Court MA No.280 of 2011 dt.12-01-2024
goodwill, assets and liabilities thereof and to issue fully
paid up shares of the Company of the face value equal to
the value of the shares of the several partners respectively
in the partnership;
(ii) To carry on all or any of the business carried on
by land developers and builders and to purchase, acquire,
construct, re-construct, build, re-build, remodel, renovate
equip, maintain, prepare for market, acquire by purchase,
lease or otherwise any land, building, wholly or in part,
floors, flats, apartments, shops, godown and to sell, let on
hire or on rent, lease out on long/short term, trade or
otherwise dispose of and to trade or deal in all real
properties and estates buildings, shops, floors, flats,
houses, godown or portions thereof to do and carry on all
such businesses and transactions as are commonly and
usually done or carried on by persons firms and bodies
corporate as dealers of real properties and estates and all
such other works, conveniences and things connected
with all or any of the above.
(iii) To acquire by purchase, lease, exchange, or
otherwise land and/or buildings and structures situated in
the State of Bihar and/or Uttar Pradesh and to turn the
same to account as may seem expedient, and in particular
by preparing building sites and by constructing,
reconstructing, altering, improving, decorating, houses,
shops, cinema houses, theaters, buildings, works and
conveniences of all kinds and by consolidating or sub-
dividing properties and by leasing; selling or disposing of
the same whether in whole or by parts, offices, flats,
houses, cinema houses, theaters or other buildings
absolutely on ownership basis or other removes wise;
(iv) To manage land, building and other property
situated as aforesaid whether belonging to the Company
or not and to collect rents and income and to supply to
tenants and occupiers and others benefits and uses of
lights, waiting room, reading room, eating rooms,
lavatories and such other advantages as may be
considered fit;
(v) For the present the Company shall under-take,
Patna High Court MA No.280 of 2011 dt.12-01-2024
carry out and complete the project with regard to
development of the acres of vacant land comprised in
Municipal Holding No. C9/207 and C9/207-1 in Mouja
Habibpur, Pergana Dehat Amant, Mahalla Chetgunge in
the district of Varanasi now held by the said firm for
building, estate-cum-cinema centre-cum-shopping
complex and to sell, lease or otherwise dispose of the
flats, offices, shop-rooms, shops, garages, parking spaces,
Cinema-houses, godowns and other accommodations
therefore absolutely on ownership basis or otherwise to
such persons and on such terms as may be considered fit.
(vi) "To Carry on the business of Hotel keepers,
owners of restaurants," lodging and boarding house
keepers and as owners of restaurants."
7. Insofar as the other asseessee Chero Medico
& Developers Pvt. Ltd.; the MoA indicates following
objects which are extracted below:-
I. To acquire and take over as a going concern the
businesses, works and activities of the firm carried on as a
partnership in the name and style of Chero Medico and
Developers Private Limited, having its principal office
situated at Ganga Mahal, Judges Court Road, in the town
and district of Patna, in the State of Bihar, including the
goodwill, property and assets thereof and to pay the
purchase consideration by the issue and allotment of fully
paid up Equity Shares in the capital of the Company to
the several partners respectively in the partnership and as
more fully described hereinabove in the Memorandum of
Agreement.
2. To carry on, establish, setup and maintain
hospitals and nursing home and aftercare home for the
reception and treatment of ailing person and persons
suffering from illness and for reception and treatment of
patients and persons during convalescence requiring
Patna High Court MA No.280 of 2011 dt.12-01-2024
medical and surgical attention and nursing and after care
attendances and to provide medical relief to all suffering
persons and to appoint and make arrangements for
doctors, specialists in medical science and nurses and
other persons and to conduct and carry on biological and
pathological tests and examinations and to purchase,
acquire and work latest sophisticated plants and
machinery for the proper identification of diseases and for
medical and surgical treatment and to do all other work
and works allied to any of the above relating to surgical,
pharmaceutical, biological and pathological tests and
examination operations and investigations and to carry on
the business as manufacturers buyers, sellers, improvers
and exporters of and dealers in all pharmaceutical
chemical preparations and compounds, drugs, medicines
and surgical implementations and as suppliers of food and
estables to patients and others and to carry on the business
of dry and machine cleaners, dyers and launderers on all
other acts, activities, work and works allied thereto and
any of the above.
3. To carry on the business of buyers sellers and
developers of and dealers, buildings, premises, real
estates, flats, apartments, built in spaces, and as builders,
constructors, civil and electrical engineers, architects,
plumber polishers, wood workers, structural engineers,
designers, buyers and sellers materials of all kinds
including iron, cement, stone chips, sand etc., and build,
rebuild, pull out, acquire, construct, reconstruct, remodel,
renovate maintain and to acquire by purchase, exchange
or lease or otherwise a land, building, wholly or in part
for the purposes of construction and flats, apartments,
premises, godowns, stock yards, shopping and recreating
eating places, parking places, and built in spaces of every
description either dential or for commercial purposes and
to sell, lease out, exchange, let out rent, and otherwise
dispose of the same and to trade and deal in all res and
estates of every description, buildings, promises, houses,
shops, fates, built in floors and places and to deal
Patna High Court MA No.280 of 2011 dt.12-01-2024
withering of the above in any man conducive and they on
all work and works allied to all or any of the to do and
carry on all other transactions, activities and business as
are commonly done and carried on by the real estate
developer, and as trade dealers in real properties of every
description and as agents and contract estate and
properties.
4. To undertake, carry out and complete the project
with regard to the development of various plots of lands
and buildings belonging to the partnership firm as more
fully in part I to VII of the schedule appearing
hereinabove and for that demolish, if necessary, the brick
built houses and buildings and structure thereon for the
purposes of carrying out the above objects of the
company.
8. Hence, both the assessee's can be said to be
capable of being engaged in the business of land developing
and are also builders, but the test as is seen from the cited
decisions is as to the actual business carried on by the
assessee. It was argued by the Department that in the
assessment orders of both the assesses it has been stated that
the buildings were handed over to the company in a finished
mode and the company had also received advance for their
buildings from the prospective purchasers, which sale has
not fructified by transfer of ownership since the full
consideration had not been rescind. The assessees had thus
let out for rent the aforesaid building, the rental income of
Patna High Court MA No.280 of 2011 dt.12-01-2024
which is not a business income but the income on house
property. The Assessing Officer has also looked at the
specific object as extracted herein above from the MoA.
The companies were holding the buildings as stock-in trade
for more than 20 years. The income from house property
has three conditions to be satisfied that the property should
consist of buildings, the assessee should be the owner of the
building and that the building should not be used by the
owner for the purpose of business or profession carried on
by him, the profits of which are chargeable to tax. In the
present case, the Assessing Officer relies on CIT v.
Chugandas and Co. reported in (1965) 55 ITR 17 (SC),
which declare that even if an assessee carries on business of
purchase and selling of buildings, income received from the
buildings so long as they are owned by the assessee will be
shown as 'Income from House Property' and not an income
from 'Profits and Gains of Business and Profession'.
9. In the case of H.R. Properties Ltd., the
Assessment Order has recorded that on perusal of balance-
sheet, P & L Account and its enclosures as well as TDS
Certificates enclosed with the return; the assessee is earning
Patna High Court MA No.280 of 2011 dt.12-01-2024
income from letting out of buildings, held as stock in trade.
The Company was also earning lease rent from a hotel
which building has been furnished as a hotel. The stock in
trade of the buildings were received as a consequence of a
Development Agreement and it is the finding of the
Assessing Officer that despite construction and sale of
buildings, being one of the main objects of the assessee, it
has not undertaken any construction project till date. Hence,
though there were many objects as revealed from the
Memorandum of Association, even the Assessing Officer
finds that the assessee did not have any other business but
lease of the properties. The finding is also that no
construction project has been carried out by the assessee
since its incorporation in 1975 nor has it booked any major
sale since Financial Year 2000-2001. Even the Assessing
Officer finds that the assessee has been pursuing its object
of earning rental income through letting out and makes a
casual statement that this is the object pursued more
vigorously than the others referred in the Memorandum of
Association. The presumption of the Assessing Officer that
no prudent person would wait for more than 10-20 years
Patna High Court MA No.280 of 2011 dt.12-01-2024
even after payment of twice the cost of the building cannot
be countenanced. If the building has not been conveyed to
the purchaser and remains with the developer then there is
nothing wrong in the developer leasing out the premises.
There is no sale noticed, in the very many years, by the
Assessing Officer, who also states that the Company had
furnished the name of 25 persons who had entered into
agreements for sale who were all related parties of the
assessee. It is also presumed that the transactions appear to
be a prima facie business connivance (sic) and that
retention of huge advance money without any legal claims
from the prospective customers cannot be countenanced.
10. We cannot understand how the absence of
legal proceedings by the intending purchasers can impact
the tax levy of the assessee. The fact remains that the
Assessing Officer has clearly found that but for the lease of
properties the assessee is not engaged in any other business.
This is the precise facts on which Rayala Corporation and
Chennai Properties (both supra) have been decided.
11. In so far as Chero Medico and Developers
Private Limited is concerned, there also the findings of the
Patna High Court MA No.280 of 2011 dt.12-01-2024
Assessing Officer are almost identical to that referred to in
the other case; that the assessee was enjoying property
rights over the buildings leased out and have been dealing
with the buildings as its owner. Irrespective of the fact that
they were held as stock in trade or fixed assets, it is
admitted by the Assessing Officer that the lease of buildings
is the only business carried on by the assessee. The assessee
also has been receiving rental income from these buildings
as is admitted by the assessee and accepted by the Assessing
Officer.
12. The First Appellate Authority rightly found
the income to be from business and not under the head,
income from house property, especially since the assessee
has only the business of renting out buildings in the subject
years.
13. On the specific finding of facts made by the
Assessing Officer in the assessment order, we are convinced
that there is no question of the income of the assessee being
treated as income from house property.
14. We find the order of 'the Tribunal' to be
perverse and set it aside answering the question of law
Patna High Court MA No.280 of 2011 dt.12-01-2024
framed, in favour of the assessee and against the Revenue.
15. The appeals stand allowed leaving the
parties to suffer their respective costs.
(K. Vinod Chandran, CJ)
Rajiv Roy, J.
(Rajiv Roy, J)
Sharun/Pravin
AFR/NAFR
CAV DATE 08.01.2024
Uploading Date 15.01.2024
Transmission Date
