2024 (4) TMI 753 - HC - Income Tax

Company's mall leasing income treated as business income not house property under Section 22

The Principal Commissioner of Income Tax-I, Indore (Madhya Pradesh) Versus M/s. M.P. Entertainment And Developers Pvt. Ltd.

The MP HC affirmed ITAT's decision that income from leasing properties in a shopping-cum-entertainment mall constitutes business income rather than house ... Correct head of income - True character of the income - Income from leasing or letting out the properties in shopping-cum-entertainment Mall - “income from business” or “income from house property” - ITAT held that where the letting out the property is the main object of a company, its income is to be computed under the head “income from business” and it cannot be treated as “income from house property”, affirmed the order passed by the CIT (A) HELD THAT:- AO did not find any material against the assessee to come to the conclusion that sub-leasing of the premises was only a part of its predominant object of the assessee. The respondent’s right from the construction of mall till the matter was taken into scrutiny had been offering income from the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc., sub-licence by it under the head “profit and gain of business or profession” of the Income Tax Act. Therefore, the CIT (A) as well as ITAT have rightly set aside the order of A.O. The Apex Court in case of Raj Dadarkar and Associates [2017 (5) TMI 586 - SUPREME COURT] has held that ITAT being a last forum insofar as factual determination is concerned, these findings have attained finality. No material has been produced even before us to show how the aforesaid findings are perverse. The order passed by A.O. nowhere shows that the entire income or substantial income of the assessee was from letting out of the properties, which is admittedly not the principal business activity of the assessee. Therefore, we do not find any perversity in the findings recorded by the ITAT as well as the CIT (A) and also do not find any substantial question of law involve in these appeals. Issues Involved:The judgment involves appeals filed by the Principal Commissioner of Income Tax-1, Indore under Section 260-A of the Income Tax Act, 1961 against the consolidated order passed by the Income Tax Appellate Tribunal (ITAT) for various Assessment Years related to M/s. M.P. Entertainment & Developers Private Limited.Income Tax Appeal No.180 of 2023:The Assessee declared a total loss for the Assessment Year 2013-14, which was scrutinized by the Assessing Officer under Section 143 (3) of the Income Tax Act. The issue revolved around the claim of depreciation on a shopping-cum-entertainment Mall named 'Malhar Megha Mall.'Income Tax Appeal No.216 of 2023:Similar to the previous year, the Assessee declared a net loss for the Assessment Year 2012-13, which was also scrutinized by the Assessing Officer under Section 143 (3) of the Income Tax Act. The dispute involved the treatment of income derived from leasing properties in the Mall.Income Tax Appeal No.217 of 2023:For the Assessment Year 2011-12, the Assessee declared total income and claimed losses under different provisions of the Income Tax Act. The issue centered around the categorization of income from the Mall construction and renting activities.Income Tax Appeal No.218 of 2023:In the Assessment Year 2014-15, the Assessee declared a net loss, which was assessed by the AO under Section 143 (3) of the Income Tax Act. The dispute focused on the treatment of income from the Mall operations and rental activities.The judgment analyzed the nature of income derived by the Assessee from leasing properties in the Mall and whether it should be categorized as 'income from business' or 'income from house property' under the Income Tax Act. The CIT (A) and ITAT decisions were challenged by the Income Tax Department, leading to a detailed examination of relevant case laws and legal principles.The Court upheld the decisions of the CIT (A) and ITAT, concluding that the income from leasing properties in the Mall falls under the head of 'income from business' based on the Assessee's business activities related to property development and leasing. The judgment referenced key legal precedents to support this conclusion, emphasizing the business nature of the Assessee's activities.The Court dismissed the appeals filed by the Income Tax Department, finding no perversity in the findings of the ITAT and CIT (A). It was determined that the Assessee's income from leasing properties was integral to its business operations, justifying its classification as 'income from business' rather than 'income from house property.'The Court also addressed the issue of delay in filing the appeals, which was condoned based on reasons provided in the application supported by the Officer-in-Charge's affidavit. The judgment concluded by disposing of any pending interlocutory applications and directing a copy of the order to be kept in connected appeals.