Ocean City Trading (India) P. Ltd. (now known as Bhuvan Leasing and Infrastructure P. Ltd.) vs Commissioner of Income Tax

D.Y. Chandrachud, J.—The appeal by the Assessee against the order of the Tribunal dated October 31, 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 ?

The appeal pertains to the assessment year 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 assessment years 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 assessment years 1993-94 and 2001-02 the assessments were completed u/s 143(3) whereby the Assessing Officer 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.

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. Assistant Commissioner of Income Tax and Another, (income tax Appeal No. 584 of 2009, decided on June 12, 2009) where this Court affirmed the decision of the Tribunal for similar reasons.

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.