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TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 400
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....ncome of Rs. 6,59,36,930, which has been offered to tax by the assesse as an income under the head 'income from house property', has rightly been taxed by the Assessing Officer under the head 'profits and gains of business and profession'. The dispute is, thus, confined to the head under which the income in question is to be taxed. 4. The relevant material facts, as culled out from the material produced before us, are as follows. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assesse had shown an income of Rs. 6,85,30,860 as an income from house property and claimed deductions, inter alia, in respect of municipal taxes of Rs. 31,96,341 and standard deduction under section 24 at 30% which worked out to Rs. 1,97,81,079. In response to the Assessing Officer's requisition for details, inter alia, of rental income, it was submitted that the rental income of the assesse "comprises of the rent from letting out of the space in the commercial plaza to different parties". When Assessing Officer required the assesse to show cause as to why this income not be taxed as a business income, it was submitted by the assesse that "renting of commerci....
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....tter in appeal before the CIT(A) but without any success. Learned CIT(A) noted that as per the 'notes to accounts', 'the project', which essentially includes commercial premises so given on rent as well, is constructed on the land taken on lease from the Airport Authority of India. It was also noted that the tax audit report describes the business of the assesse as 'hotel with commercial complex'. He was also of the view that, as evident from the balance sheet and profit and loss account of the assesse, accounts of the assesse are 'single and composite'. It was also noted that all the fixed assets of the hotel as also the commercial complex are reported together and without any segregation. In the light of these observations, the CIT(A) held that the "entire activity of the appellant in an organized manner was to earn profits out of investments made by it in its project of hotel with commercial space, as a commercial venture". Learned CIT(A) also noted that its only income from a property, other than a property used for planned business activity, which can be taxed as 'income from house property', and since the income in question was by way of an organized business activity, the As....
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....tion is different where the income received is not from the letting of the tenements or from the letting accompanied by incidental services or facilities but the subject 'hired' is a complex one and the income obtained is not so much because of the bare letting of the tenements but because of the facilities and services rendered, and the operations involved in each letting of the property may be of the nature of business or trading operations. In such a case, the income derived is liable to be assessed under the head 'Business'. The above propositions emerge from the decision of the Supreme Court in CIT vs. National Storage (P) Ltd. (supra), affirming the decision of the Bombay High Court in the same case (1963) 48 ITR 577." 11. In CIT vs. National Storage (P) Ltd. (supra), the assessee purchased a plot of land and constructed godowns for storage of films. There were 13 units and each unit was divided into four vaults having a ground floor for rewinding of films. The units were constructed in conformity with the requirements and specifications laid down in the Cinematograph Film Rules, 1948. The vaults were licensed to film distributors. Under the licence, the vault could ....
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.... and message services, butler and endless other services. These services, and complex business activity in respect thereto, are so vital that the importance of these services is as much as the property itself even when such services donot relegate the property let out into relative insignificance. On the other hand, even when property is let out in the course of the business or as a part of the core business, in a situation in which consideration for such letting out is predominantly for the use of property itself, rather than the incidental facilities and services, the income will nevertheless be taxable as 'income from house property'. 8. In the situation that we are dealing with, it is not even the case of the Assessing Officer that the letting is accompanied by incidental services and facilities which have a dominant role to play in the earning from the property let out. We have also perused the lease agreements filed before us and we find that the property is let out, without any dominant incidental services as part of this arrangement, for the purposes of running offices and commercial establishments. We donot find it a case of anything more than simple letting out of proper....
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.... move on to the appeal filed by the Assessing Officer. 13. Grievance raised by the Assessing Officer is as follows: That the learned CIT(A) erred in law and on facts of the case in deleting the addition of R 25,95,251 made by the Assessing Officer on account of disallowance of brand building expenses. 14. So far as this grievance of the Assessing Officer is concerned, the relevant material facts are as follows. During the course of the assessment proceedings, the Assessing Officer noted that the assesse had debited a sum of Rs. 51,90,502 on account of contribution for brand building expenses payment to Carlson Hospital Marketing Pvt Ltd. It was noted that the assesse was paying Rs. 56,000 per month in this regard, and a further bill of Rs. 12,00,128 was raised on the basis of gross room revenue. It was also noticed that the assesse was asked to contribute 0.50% of gross room revenue, in addition to 0.25% of GRR and reservation fees of 0.25%. On these facts, the AO disallowed the 50% of the expenses as relatable to the subsequent assessment year, by observing as follows: The expenses which have been enhanced this way will help the company in future years and, therefore, cannot b....