TaxTMI 
TaxTMI 
2008 (4) TMI 532
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....-1993. Subsequently, the said premises was allowed to be used by various companies of assessee's group with effect from 1-4-1994 at a fixed monthly charge provided in the agreement. The copy of agreement with West Coast Paper Mills Ltd., is placed on record. It is stated that all the agreements are similarly worded though monthly charges are different, perhaps, depending upon the area used by the occupants. For the year under consideration, the assessee declared the income of Rs. 52,575 under the head 'Business income'. The relevant details are given below. [STATEMENT SHOWING YEAR-WISE RECOVERY OF ESTABLISHMENT CHARGES MADE] Sr. No. Nature of expenses F.Y. 1994-95 to 1997-98 F.Y. 1998-1999 F.Y. 1999-2000 1. Cambay Investments Ltd. 90000 99000 126000 2. Oriental Co. Ltd. 90000 99000 126000 3. Maharaja Shree Umaid Mills Ltd. 180000 198000 252000 4. The West Coast Paper Mills Ltd. 60000 60000 84000 5. Shree Laxmi Agents Ltd. 60000 60000 60000 6. Shri Synthetics Ltd. 12000 15000 24000 7. Fort Gloster Industries Ltd. 12000 12000 24000 504000 ....
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....Court in the case of Asstt. CIT v. Saptarshi Services Ltd. [2004] 265 ITR 379 as well as the decision of the Tribunal in the case of PFH Mall & Retail Management Ltd. v. ITO [2008] 298 ITR (AT) 371 (Kol.) for the proposition that income derived from the activity of running of a business centre or exploitation of property for commercial use must be assessed as business income under the head 'Profits and gains from business or profession'. He also relied on the decision of Hon'ble Supreme Court in the case of Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 wherein it was held that service charges received by the assessee on account of supply of electric current, provisions of hot and cold water, scavenging and lift services etc., were assessable as business receipts. 4. On the other hand, the learned DR has referred to the decision of Hon'ble Supreme Court in the case of Shambhu Investment (P.) Ltd. (supra) wherein it was held that income derived from letting out the furnished accommodation is assessable under the head 'Income from house property' and not as 'business income'. He also relied on the decision of Hon'ble Supreme Court in the case of East India Housing & Land Develop....
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....by letting out the property and therefore, the same was assessable under the head 'Income from house property'. The decision of the High Court has been upheld by the Hon'ble Supreme Court in Shambhu Investment (P.) Ltd.'s case (supra). 7. In the present case, the facts are similar inasmuch as the property had been let out to its group companies on fixed monthly rent basis. The fact that the property was let out along with facilities like telephone, electricity and office equipment etc., is not relevant since rent was composite one like the case before the Apex Court. On going through the resolution passed by the assessee company and the agreements between the assessee and other companies, we find some discrepancy. In the resolution dated 15-12-1993, the assessee decided to make available the said premises for use along with facilities including telephone, etc., but the agreement provides that the premises would be available to the company for use along with facilities including office equipment, telephone, vehicles, etc. However, the perusal of balance sheet does not show that vehicles were owned by it. The parties to the agreements belonged to the same group and, therefore, ass....
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....t out' in section 22/23 of the Act does not make any such distinction. The letting out of property would include not only cases where property is given under lease agreement but also cases where property is given under leave & licence agreement. If the intention of the assessee is to earn rental income from the property owned by it, whether furnished or unfurnished, income derived would be computable under the head 'Income from house property'. 10. The contention of the learned counsel for the assessee that no specific area is allotted to the occupants also appears to be without force for the reason that consideration received varies from party to party as is apparent from the chart given in para 2. For example, Rs. 15,000 per month was received from Maharaja Shree Umaid Mills Ltd., Rs. 7,500 per month was received from two companies, Rs. 5,000 per month from other two companies, and Rs. 1,000 per month from another two companies all belonging to assessee group. The assessee has not been able to explain as to why different charges were received from different parties if no specific area was allotted. The fact that different charges were received from different parties itself sho....
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....e the Assessing Officer treated the same as 'income from house property'. The Tribunal found that assessee was not the owner of the property and therefore, question of assessing the income as 'income from house property' did not arise. Further, it was found that charges received by the assessee were not only for space but also for various commercial activities and therefore, income was assessable as business income. On appeal, the High Court held that no question of law arose from the order of the Tribunal. The above decision is distinguishable on two grounds. Firstly, assessee was not the owner while in the present case the property is owned by the assessee. Secondly, in that case various facilities were given to customers such as secretarial services, services of receptionist and telephone operator, message services and local transport facilities, data process and word processing facility which are absent in the present case. Statement of Profit & Loss Account in the present case shows salary worth Rs. 64,932 which is attributable only for watch and ward facility. We have already pointed out that no vehicle is maintained by the assessee. Since no facility is provided by the asses....
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....e it is received by a company formed with the object of developing and setting up markets. Therefore, even assuming for the sake of argument that object of letting out was exploitation of business asset, the income was still computable under the specific head 'Income from house property'. 16. However, we make it clear that if the intention of the assessee is really to carry on business and the property was merely used to achieve that object then it would be a case where the income would be assessable as 'business income'. The word 'business' connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose as held by the Hon'ble Supreme Court in the case of Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765. If this test is satisfied then income earned would be computed as business income. For example, the activity of running a hotel, hospital, banquet hall, business centre, etc., where activity is carried on in a systematic or organised manner. Before applying this test, the distinction must be kept in mind as to whether property per se is let out or the property is used as a means to achieve the object of running a business. In the ....