TaxTMI 
TaxTMI 
2011 (12) TMI 258
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....e reason that the return for that year was accepted by the Revenue as such u/s. 143(1), and not subject to scrutiny assessment. 3.1 The facts of the case are that the assessee is a company in the hospitality business. It entered into three separate Agreements of even date, i.e., 03.8.1999, with M/s. Tata Sons Limited (acting through its Division 'Tata Consultancy Services, Mumbai ('TCS' for short)). The first agreement was for construction of hostel/transit facility, so as to provide residential accommodation for it's (the latter's) trainees/new recruits, being trained at Trivandrum for the time being. The assessee, stated to be engaged in providing hostel facilities and other related services, was to construct the said hostel at its cost (on a land already acquired by it, i.e., duly identified in the Agreement), consisting of 150 rooms (and later extended to 175 rooms) and other facilities, within a period of 18 months from the day the construction activity is commenced. The design of the building was to be made by an architect, as approved by TCS. The hostel was contemplated to contain all amenities, suitably well-furnished and equipped in accordance with Sch....
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....#39;business', and there is therefore no scope for artificially segregating the two, i.e., one qua house property, and the other qua business. The Revenue's case is that the three agreements, though running concurrently, reserves separate rights and duties for the parties there-to. As such, where the consideration for the lease has been separately defined and enumerated, the same would only constitute income from house property. In fact, even where there is a composite agreement, so that an indivisible consideration is provided therefor, i.e., the rent received/receivable from the house property, as well as the provision of amenities/facilities, the higher courts of law have approved the principle of allocation of such consideration reasonably into that for the two identifiable sources of income, so that the rent is assessed under Chapter IV-C of the Act, i.e., as income from house property (refer: Attukal Shopping Complex (P.) Ltd. v. CIT [2003] 259 ITR 567/[2002] 125 Taxman 881 (Ker.). Reliance is also placed by it in the case of Shambhu Investment (P.) Ltd. v. CIT [2003] 263 ITR 143/129 Taxman 70 (SC). 4. We have heard the parties, and perused the material on record. ....
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....er, provides an exception to income from letting of house property being assessable as 'business income' or as 'income from other sources', where the same arises integrally to the letting of a plant, machinery, or furniture. This is as, even as explained by the apex court per its five-member constitution bench decision in the case of Sultan Bros. (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC), is for the reason that it then becomes a new kind of income, not covered u/s. 9 (of the 1922 Act, corresponding to s. 22 of the 1961 Act). That is, income, not from the ownership of the building alone, but an income which though arising from building, would not have arisen if the plant, machinery, or furniture had not been let along with it: Income from other sources. '56(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in s. 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-....
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....t agreement, as abundantly clarified vide clause (6) thereof. The preamble to the leas agreements, as well as the clauses thereof, which we may advert to for the purpose, would clarify this beyond doubt: Agreement to Lease 'AND WHEREAS it was one of the conditions of the "Agreement of construction" that upon the hostel facilities being completed the Lessor will grant unto the Lessee a lease of the hostel facilities (hereinafter called 'the premises') subject to the period of lease and payment of rent hereinafter reserved and shall provide in the premises the amenities and facilities and maintain the said amenities and facilities during the period of the lease in the manner specified in the "Agreement for provision and maintenance of amenities and facilities". Now these Presents Withnessth and it is Hereby Agreed by and Between the Parties Hereto as follows: 1a. The Lessor hereby agrees to demise unto the lease the premises together with all fixtures, fittings, appurtenances there-to and stairs, lifts and common areas to hold unto the Lessee upon paying the monthly rent here-under reserved.' (PB pg. 44) Agreement for Provision and Maintenance of Amenities and f....
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....ase, therefore, it is definitely a case of the answers to the first two questions (stated at para 4.3 above) being decidedly in the affirmative, and of the third, in the negative. True, where there is a long term understanding as in the instant case, being for a period of 10 years, it would give rise to a presumption of being only a rental income. So, however, the lease period matches with the period for which the hostel facilities are to be operated and provided by the assessee. As such, the regularity of income, which the ld. DR would emphasize, would bear no special significance in the facts and circumstances of the present case so as to alter the character of the income. 4.5 The next question that arises is whether the income by way of lease rental of the building is to be assessed u/s. 28 (i.e., as business income) or u/s. 56 (i.e., income from other sources). There can hardly be any doubt with regard to this, even as there is no material to exhibit that the assessee-company is in this trade, as contended by it. A trade in any case can always be commenced at any time. We express absence of any doubt in this regard, because this income, which we have held as forming an integr....