Sahney Kirkwood Private Limited vs The Additional Commissioner of Income Tax

Although seven questions are raised by the Appellant Assessee in this appeal, basically the questions relate to three issues, namely:

(A) Whether the ITAT was justified in holding that the reopening of assessment was valid ?

(B) Whether the ITAT was justified in holding that the leave and licence agreement entered into by and between the Appellant and Minicon Insulated Wires Limited (Minicon for short) for letting out the premises belonging to the Assessee was a sham transaction and that the amounts received by Minicon on letting out the said premises to third parties were liable to be assessed in the hands of the Assessee ?

(C) Whether the ITAT was justified in holding that the income received by the Assessee by letting out the premises in question on leave and licence basis was chargeable to tax under the head ''income from house property'' instead of taxing under the head ''profits and gains of business or profession'' ?

By a Leave and Licence Agreement dated 29th May 1995, the Assessee had let out a part of its premises to Minicon Insulated Wires Limited on a monthly rent of Rs. 47,000/per month. Thereafter, Minicon let out the said premises on leave and licence to various third parties, first of such agreement was dated 19th September 1996. The Assessing Officer sought to tax the amount received by Minicon from various persons in the hands of the Assessee on the ground that the leave and licence agreement between the Appellant Assessee and Minicon was a sham transaction. Appeal filed by the Assessee against the assessment order was dismissed by the Commissioner of Income Tax (Appeals) as also the Income Tax Appellate Tribunal. Hence, the Assessee has filed these appeals u/s 260A of the Income Tax Act, 1961.

It is not in dispute that the amounts received by Minicon have been taxed in the hands of Minicon and the assessment orders passed to that effect have attained finality. If the amounts received by Minicon by letting out the premises taken on leave and licence agreement from the Assessee, have been taxed in the hands of Minicon, then taxing the very same amount once again in the hands of the Assessee would amount to taxing an income twice which is not permissible in law. In similar circumstances, this Court in the case of Commissioner of Income Tax Vs. Akshay Textiles Trading and Agencies (P) Ltd., has held that in the absence of any cogent evidence to show that the transaction was not genuine, the amounts received by an intermediary cannot be assessed in the hands of the Assessee. In the present case, save and except the fact that one of the directors of the Assessee company was also a director in Minicon, there is nothing on record to show that the transaction between the Assessee and Minicon is a sham transaction. In these circumstances, in our opinion, the decision of the Tribunal in holding that the amounts received by Minicon on account of letting out the premises were liable to be assessed in the hands of the Assessee on the ground that the transaction between the Assessee and Minicon was a sham and bogus transaction cannot be accepted. Accordingly, the second question is answered in favour of the Assessee and against the Revenue.

In view of our answer to question (B), question (A) becomes academic and, hence needs No. consideration.

As regards question (C) is concerned, counsel for the Appellant does not press question (C), in view of our answer to question (B).

The appeal is disposed off accordingly with No. order as to costs.