IN THE ITAT
Income-tax Officer, Ward 8(4),
v.
Skipper Properties (P.) Ltd.
I.P. Bansal, Judicial Member
And Rajendra Singh, Accountant Member
IT Appeal
NO. 1432 (
[ASSESSMENT YEAR 2000-01
June 18, 2007
Section 28(i) of the Income-tax Act, 1961 - Business income -
Chargeable as - Assessment year 2000-01 - Assessee-company owned a theatre and
was engaged in business of exhibiting films in its theatre - During relevant
year, on account of difficult market conditions and poor health of director who
was looking after such business, assessee, leased out said theatre for a short
period on fixed hire charges and thereafter, it came back to its
business and restarted same - Whether on facts, it could be said that intention
of assessee was not to go out of business altogether and letting out of theatre
for limited purpose of exhibition of films was only temporary - Held, yes -
Whether therefore, hire charges received by assessee from such leasing was
assessable as income from business - Held, yes
FACTS
The assessee-company owned a theater. During the assessment year 2000-01, the theatre was given on hire to two parties for different periods. The assessee claimed that the hire charges so received by it were assessable as income from business and profession. The Assessing Officer, denied said claim and assessed the receipts as income from house property. On appeal, the assessee submitted, that it had been engaged in the business of exhibition of movies in its theatre for the last many years and income therefrom was assessed under the head ‘Profit and gains of business or profession’ by the revenue during all those years, that during the assessment year 1998-99, it could not take up the business on its own due to difficult market conditions and poor health of the director who was looking after the business, and, therefore, to continue the business of exhibition of films, the theatre was let out to two parties that it again started running the business of its own with effect from 1-4-2000 and continued till 20-1-2002 and, hence, the letting out of the theatre for the limited purpose of exhibition of films was, only temporary and had been resorted to under extreme compulsion. The Commissioner (Appeals) accepted the said submissions and directed the Assessing Officer to treat the receipts in question as receipt of business and allow the expenses claimed thereon on merits and as per law.
On revenue’s appeal:
HELD
There was no material on record to controvert the fact that for shorter
period the assessee had leased out its theatre to two parties and the reasons
were stated to be the difficult market conditions and the poor health of
director who was looking after such business of the assessee. The period for
which such lease was given from the assessment year 1998-99 till
31-3-2000. Earlier to that, the assessee
had been carrying out the activity of exhibiting films in its theatre and such
income of the assessee was being declared and assessed under the head ‘Profit
and gains of business or profession’. These facts also had not been
controverted by the revenue. Thus, the contention of the assessee that leasing
out of the theatre was for a shorter period could not be rejected. (
Looking into the
fact that leasing was for a shorter period and it had not been shown that the
intention of the assessee was to go out of the business altogether, the
contention of the assessee had to be accepted that it could not be considered
to be a non-business activity. (
Having held that
the period of lease was short, thereafter the intention of the assessee was
relevant to find out that whether assessee intented to get out of business
altogether or he intended to come back and restart the same. From the facts it
was clear that after leasing out the property, the assessee had come back to
its business and had restarted the same. Therefore, income derived by the
assessee was assessable as income from business. (
Further, it
could not be held that letting out of the theatre by the assessee was not
commercial utilization of the assets particularly when the assessee could not
itself run it by compulsion of certain circumstances. (
Therefore, the
order of the Commissioner (Appeals) was to be upheld and the appeal was to be
dismissed. (
CASE REVIEW
CIT v. Chennai Properties
& Investments Ltd. [2004] 266 ITR 685] /136 Taxman 202 (