TaxTMI 
TaxTMI 
2009 (4) TMI 549
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.... of the business of the appellant. (iii)On the facts and in the circumstances of the case and in law and without prejudice to the appellant's contention that the entire income from operating of commercial complexes and business centre is business income, the learned Assessing Officer erred in not allowing deduction of operating expenses amounting to Rs. 2,00,48,959 in computing income from providing services at Commercial Complexes and Business Centre. He ought to have appreciated the fact that the above expenditure, forming part of total operating expenditure Rs. 3,84,60,790 was incurred for rendering these services." Revenue's appeal - ITA No. 3418/M/06 "(i)On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing to treat receipt of Rs. 8,20,38,325 as a business receipts/income out of total rental receipts of Rs. 16,58,49,884 and directing to compute income from house property on rental receipts of Rs. 8,38,11,559. (ii)On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 6,40,19,530 being disallowed of administrative expenses." Assessees' Cross objections - C.O. No. 1....
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.... services/facilities including furnished executive suites, state of the art computer telephone integration, video conferencing, secretarial staff etc. Receipts from operating commercial complexes arose from GE Centers and Plazas at Delhi and Pune being state of the art commercial buildings and from providing hi-tech amenities and services like air conditioning, power back up, parking, water filtration plant with chlorination, security system through CCTV etc. Assessee considered the receipts from operating the business centers and commercial complexes as business income and claimed the related expenses as business expenditure as also depreciation on the buildings and the related assets. However, the Assessing Officer, after considering the submissions of the assessee concluded that the receipts were assessable as income from house property and computed the income as under : Total Receipts Rs. 16,58,49,884 Less: Municipal Taxes Rs. 1,33,14,992 Annual Value Rs. 15,25,34,892 Less: 1/4th of Annual Value Rs. 3,81,33,723 Income from House property Rs. 11,44,01,169 In line with the aforesaid finding, the Assessing Officer disallowed the expenses incurred by the assessee for ope....
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....er the intention of the assessee was to let out the properties. For arriving at this conclusion she referred to the agreements assessee had entered with its clients using the premises, which inter alia specified that that the entire hire charges for the duration of the agreements were to be paid in advance by the lessees. 9. Nevertheless, ld. CIT(A) directed the Assessing Officer to assess only so much of receipts as income from house property as were received by way of hiring of space, and the balance receipts from rendering of services were held to be assessable as business income. Reliance was placed on the decisions in CIT v. Kanak Investments (P.) Ltd. [1974] 95 ITR 419 (Cal.), CIT v. Shankaranarayana Hotels (P.) Ltd. [1993] 201 ITR 138 (Kar.) and CIT v. Sarabhai (P.) Ltd. [2003] 263 ITR 197 (Guj.) Consistent with this finding, she also directed the Assessing Officer to allow the expenses for rendering of the services as business expenses but upheld the disallowance to depreciation on buildings. 10. Now before us, assessee is aggrieved by the finding of the CIT(A) regarding assessability of receipts on account of hiring of space as income from house property and disallowance....
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....s drawn to the business centre agreement at pages 117 and 118 of the PB which provided payments of separate consideration for use of space and for services. Nature of services mentioned were similar to those for the commercial complexes with further add-ons towards services of conference rooms, video conferencing, communication and secretarial services etc. Finally, the learned AR referred to the agreement with the property manager placed at page 143 of the PB and submitted that the assessee had engaged an agency who was entrusted with the responsibility of managing the complexes and rendering specified services to the occupiers in tune with the service obligations undertaken by the assessee. 12. Learned AR also placed before us a compilation of the decision of Hon'ble Supreme Court in the case of Shambhu Investment (P.) Ltd. (supra), decisions of the Hon'ble jurisdictional High Court, a decision of Calcutta Bench of the Tribunal which had taken into consideration the case laws considered by the lower authorities. In support of the modified grounds of appeal he filed the decision of Hon'ble Apex Court in the case of Sultan Bros. (P.) Ltd. v. CIT [1964] 51 ITR 353 . The learned AR ....
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....s in an inseparable manner and therefore, the income should not be treated as arising from letting of house property. To the same effect, the decision of the same Court in the case of CIT v. Associated Building Co. Ltd. [1982] 137 ITR 339 was also referred to. Next in line of reference was the decision of Kolkata Bench of the Tribunal in the case of PFH Mall & Retail Management Ltd. v. ITO [2008] 110 ITD 337 for the reinforcing the same propositions. And lastly Ld. counsel relied on the decision of Hon'ble Supreme Court in the case of Sultan Bros. (P.) Ltd. (supra) in support of the modified ground of appeal in support of his contention that use of AC system and DG sets was inseparable from the hiring of the space and therefore, depreciation on building should be granted under section 57 if the allowance under section 32 were to be denied. According to the learned AR, assessee had provided a commercial infrastructure to the occupiers; complex commercial services have been rendered which were inseparable from letting of buildings; the commercial activities were performed in a systematic and organized manner; the facts in the case of Shambhu Investment (P.) Ltd. (supra) were distingu....
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....ies for provision of services and amenities could not by itself be determinative of the nature of such consideration. In our view, the basic principle permeating through all the judicial precedents cited by the lower authorities in their respective orders and those cited before us by the learned AR and DR, is that, if the main intention is to use the property as a business asset, as a handmaid to the commercial exploitation of the property , income therefrom should be assessed as business income. However, on the other hand, if the primary intention is to let out the property, simpliciter, the income has to be assessed as income from house property. Decision of Honourable Apex Court in the case of Shambhu Investment (P.) Ltd. (supra), relied upon heavily by the lower authorities, has not laid down any different proposition. The jurisdictional High Court in the case of Mohiddin Hotels (P.) Ltd. (supra), rendered after the Shambhu Investment (P.) Ltd.'s case (supra) observed as under : "By catena of decisions the Courts, time and again, have held that where the subject-matter that is let out or given on licence is not bare tenement but is a complex one like a well-furnished paying gu....
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....iness. Thus, in our view the assessee had created a commercial infrastructure and the services rendered were complex commercial/business activity. As aforesaid a perusal of the agreements and the stipulations contained therein would not leave any doubt about the commercial character of the relationship between the parties as distinguished from that merely of a landlord and his tenant. Occupation of space was inseparable from the provision of services and amenities. In fact, the undisputed facts on record do demonstrate that assessee was a property manager rather than a passive owner of the property. The responsibilities entrusted to the outsourced agency, extracted hereunder from pages 151 and 152 of the paper book, bring out this facet of the case. "Scope of work of the Property Manager- 1. Security of Common Areas. 2. Cleaning and Maintenance of Common Areas. 3. Maintenance and operation of all machinery and equipment including lifts, pumps, generator, security and access control system equipment, fire fighting, detection and alarm system equipments, water filtration and treatment plant, electricity sub-station and electricity distribution system, telephone, automation/contro....