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Issues: (i) Whether the receipts from operating the family entertainment centre cum mall, including maintenance charges, were assessable as business income or as income from house property. (ii) Whether interest on the borrowed funds relating to the Chandigarh property was allowable as a business expenditure or was to be restricted under section 24(b).
Issue (i): Whether the receipts from operating the family entertainment centre cum mall, including maintenance charges, were assessable as business income or as income from house property.
Analysis: The assessee's own case for earlier assessment years had already been decided by the jurisdictional High Court and the Tribunal on the same facts. The receipts arose from the commercial exploitation, operation and running of the mall as a business activity, and the same character applied to the operating income and maintenance recoveries for the year under appeal. The Assessing Officer's reliance on the pendency of an SLP did not justify departure from the binding jurisdictional precedent.
Conclusion: The receipts were correctly assessable as business income, in favour of the assessee.
Issue (ii): Whether interest on the borrowed funds relating to the Chandigarh property was allowable as a business expenditure or was to be restricted under section 24(b).
Analysis: Once the rental and allied receipts were held to be business income, the related interest expenditure followed the same character and became allowable as business expenditure. The disallowance under section 24(b) could not survive independently in view of the conclusion on the primary head of income.
Conclusion: The interest expenditure was allowable, in favour of the assessee.
Final Conclusion: The Revenue's challenge failed because the assessee's receipts retained their business character and the related interest claim was consequentially allowable.
Ratio Decidendi: Where the dominant activity is the commercial operation and running of a mall, receipts from such exploitation are assessable as business income, and expenditure integrally connected with that business is allowable on the same footing.
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