TaxTMI 
TaxTMI 
2015 (4) TMI 625
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....s "income from other sources". 2. The following question of law arises for consideration:- " Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in holding that rental income of Rs. 38,23,281/- earned by the appellant from terrace floor/roof area was assessable under the head "Income from other sources", as opposed to "Income from house property" returned by the appellant?" 3. The assessee is a company incorporated under the Companies Act, 1956 having its registered office at G-6 and 7, Vikram Tower, 16, Rajendra Place, New Delhi. It is the absolute owner of the terrace floor of the property. On 31.10.2007, it entered into a formal arrangement styled as "Leave and Licence Agreement" with M/s Arvind Mills Ltd. (Telecommunication), a company incorporated under the Companies Act having corporate office at 3rd Floor, "Lingfield Plaza", S. No. 66/67, Salunke Vihar road, Wanowrie, Pune - 411 040. By virtue of the said agreement, the assessee company gave on "licence" the terrace floor as the "space for mounting a tower/mast and antenna and gen set in addition to covered space admeasuring 132 Sq. Ft. for installation of radio trunking related ....
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....of "lessee" unto the licensee, the right for passage for ingress into and egress from the licensed space to be subject to the prescription of the licensor. The licensee, however, is permitted to deploy on 24-hours basis its own security guard with stipulation that the legal possession of the licensed space shall "always remain with the licensee". 6. The case of the appellant-assessee was taken up for assessment under Section 143(3) of the Act. The Assessing Officer (AO) by his order dated 27.12.2010 rejected the claim of the appellant regarding the income of Rs. 38,23,281/- on account of "rent from space and antenna" being income from house property. He noted that the property of Vikram Tower had been reflected in the fixed assets of the assessee company and the space for antenna shown in the financial statements as "stock-in-trade". By order sheet entry dated 30.11.2010, the assessee was called upon to show cause as to why this income be not treated as business income, since it had been derived from the property held as stock-in-trade. 7. The AO eventually held against the assessee and, inter alia, observed that the assessee is a builder/developer, the primary objective of i....
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....and, it required to be examined as to whether the assessee could exploit the property as its owner; as to what was the dominant object of letting out the property; as to whether the income was earned as owner of the property or some further activities/services were involved; and, as to whether any complex commercial activity is involved in letting out the property. 10. On the basis of material examined, the CIT (Appeals) concluded as under:- "...the appellant had let out the structures on the terraces of the buildings to various companies and government departments for housing their communication equipments and antennas and did not render any other services to them. It is also a fact that the appellant was not entitled to sell any space on the terraces of the buildings. Therefore, it had to exploit the property as owner only and it was not an interim arrangement to let out the property pending final sale. The dominant object of the letting out was to enjoy and utilize the property as owner. No complex commercial activity was involved in the process of earning rental income ..." 11. The CIT (Appeals) also rejected the contention of the Revenue founded on the fact that the p....
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....ings in the vicinity. Thus, in essence the main purpose of hiring terraces is to have open space for mounting antennae and other instruments. The terrace does not have any appurtenant land. Therefore, the agreement of renting and hiring terraces is in essence an agreement of hiring space and not building and land appurtenant thereto. The existence of small rooms on the terrace is incidental to hiring the space as some spare parts may have to be kept there and the personnel attending to the antennas may use them for routine servicing and repairs. ...the income is rightly assessable either as business income or income from other sources and not as property income. From the facts brought on record, it transpires that the letting out is for three years but extendable up to 9 years on the option of the parties. Therefore, it is not a case where systematic activity of lending space is being carried out so as to render it as a business activity. Thus, the income is rightly assessable under the head "income from other sources". It may be mentioned here that Tribunal will be within its right to correct the head of income although it may not be in a position to enhance the income. Treating t....
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.... In Mukherjee Estate (P.) Ltd. (supra), the issue concerned income generated by the assessee by letting out space for putting up hoardings for display of advertisements. Noticeably, there was an irrefutable finding of fact recorded by the ITAT that it was the hoardings which had been let out instead of space on the roof for putting up all such hoardings. In these facts and circumstances, the Calcutta High Court took the view that the income from the hoardings could not be taken as income from house property since hoardings were not part of the building. 17. In Karanpura Development Co. Ltd. (supra), the Supreme Court had ruled as under:- "Ownership of property and leasing it out may be done as a part of business, or it may be done as landowner. Whether it is the one or the other must necessarily depend upon the object with which the act is done. It is not that no company can own property and enjoy it as property, whether by itself or by giving the use of it to another on rent. Where this happens, the appropriate head to apply is "Income from property' ...even though the company may be doing extensive business otherwise. But a company formed with the specific object of acq....