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Maharashtra Fertilisers and Chemicals Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 127 of 1974
Judge
Reported in(1983)37CTR(Bom)9; [1984]150ITR317(Bom)
Acts Income Tax Act, 1961 - Sections 23(1)
AppellantMaharashtra Fertilisers and Chemicals
RespondentCommissioner of Income-tax
Excerpt:
direct taxation - income from property - section 23 (1) of income tax act, 1961 - assessee-firm constructed godown - later godown was given on rent - whether income so derived by assessee be treated as income from house property - held, income must be computed under head income from property. - .....instead of using the godown for its own business the assessee gave the same on rent to m/s. parekh traders. the question that arose was whether the income so derived by the assessee should be treated as income from house property.2. the ito held that such income had to be assessed as income from other sources. the aac, on appeal filed by the assessee, held that such income was income from house property, but enhanced the annual value of the godown. the tribunal, for reasons which are identical to its reasons in the case of m/s. parekh traders, with which we have just dealt in reference no. 129 of 1974 parekh traders v. cit : [1984]150itr310(bom) held that such income was income from business.3. in the case of m/s. parekh traders, we have held that the income derived from the.....
Judgment:

Bharucha, J.

1. In this case the assessee at whose instance the reference is made, is a registered firm carrying on business in the manufacture and sale of manure mixtures. It is assessed to income-tax at Poona for being used constructed a godown outside the municipal limited of Poona for being used in its business. Before the construction was completed, a firm named M/s. Parekh Trader requested (the assessee) that the godown be give to it one rent. There was no machinery nor plant fixed in the godown. Instead of using the godown for its own business the assessee gave the same on rent to M/s. Parekh Traders. The question that arose was whether the income so derived by the assessee should be treated as income from house property.

2. The ITO held that such income had to be assessed as income from other sources. The AAC, on appeal filed by the assessee, held that such income was income from house property, but enhanced the annual value of the godown. The Tribunal, for reasons which are identical to its reasons in the case of M/s. Parekh Traders, with which we have just dealt in Reference No. 129 of 1974 Parekh Traders v. CIT : [1984]150ITR310(Bom) held that such income was income from business.

3. In the case of M/s. Parekh Traders, we have held that the income derived from the letting out of the godown is income derived from property. The instant case is, if at all, stronger on facts than was the case of M/s. Parekh Traders because in the instant case the assessee never actually utilised the godown for its own business purposes. For the same reasons that have moved us in deciding the case of Parekh Traders, we answer the question that is framed for our consideration, viz., 'Whether, the Tribunal was justified in law in holding that for purposes of charge of income-tax and computation of total income, the godown rent received by the applicant from M/s. Parekh Traders, Poona, during the relevant assessment year should be classified as 'Profits and gains of business or profession' ?', in the negative, i.e., in favour of the assessee.

4. Having regard to the fact that we take the view that the said income must be computed under the head on income from property, the Tribunal shall consider what should be the annual value of the godown within the meaning of s. 23(1) of the I.T. Act, 1961.

5. The Revenue shall pay to the assessee the costs of the reference.


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