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2010 (12) TMI 547

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....see derives income from letting out of properties and business in tobacco. The assessee owned few immovable properties which were let out to different tenants. One property was let out to M/s. Food World, second property at Bangalore was let out to Standard Chartered Bank and other properties at Chennai were also let out to different tenants. The rental income received by the assessees was claimed to be the business income of the assessees on the ground that assessee was engaged in construction activities and letting of properties is one of the main business activity. The assessing officer examined the claim of the assessee in the light of various judicial pronouncements and finally concluded that the rental income of the property is an inc....

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....efore, the CIT(A) order deserves to be set aside.   6. Having heard the rival submissions and from a careful perusal of the orders of the lower authorities we find that undisputedly the assessee was engaged in the business of tobacco and commission and besides he has also derived income from letting out of the properties. He has constructed its property at different places and let out to different tenants. In any case, one property was let out to a single tenant either for 3 years or for 10 years. Now the question arise under this type of situation whether rental income is to be treated as an "income from house property" or a business income. The controversy in this regard has been set at rest by the judgement of the apex court in the....

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.... said properties were actually rent received from the occupiers and not to be regarded as service charges and maintenance and cannot be termed as business income and revise the order of the assessing officer by holding that rental income has to be assessed under the head "income from house property". The matter traveled to the High Court and the Hon'ble Calcutta High Court having examined this issue in detail has categorically held that income derived by the assessee from letting out the furnished premises on monthly rent basis to various parties for being used as a table space' is to be assessed as income from property and not business income. The relevant observations of the Hon'ble High Court are extracted hereunder:   "Merely beca....

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....s activities are prime motto and letting out the property is a secondary one. There is no separate agreement for furniture and fixtures or for providing security and other amenities. The only intention was to let out the portion of the premises to the respective occupants. Hence, the intention in making such agreement is to allow the occupants to enjoy the table space together with the furniture and fixtures. From a plain reading of the agreement it appears that the intention of the parties to the said agreement are clear and unambiguous by which the first party has allowed the second party to enjoy the said table space upon payment of the comprehensive monthly rent. As discussed hereinbefore it is composite table space let out to various o....

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....roperty is the business activity of the assessees or the commercial assets are exploited by the assessee for a temporary period. Therefore, the rental income derived from these immovable properties is nothing but an income from house property. The present facts of the case is rather worst than the case of the Shambhu Investment (supra) in which assessee was engaged in other activities of providing amenities or facilities to the tenants besides earning the rental income. We have examined the judgements referred to by the assessee in the case of CIT vs. Anand Theatres etc. 244 ITR 192 and CIT vs. D.P. Sandhu Brothers Chambers Pvt. Limited 273 ITR 1. But these judgements are rendered in different context. Therefore, no assistance can be drawn ....