TaxTMI 
TaxTMI 
2015 (6) TMI 394
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....09-10, which were heard alongwith these cross appeals, will apply mutatis mutandis for this assessment year as well. 4. Vide our order of even date, for the assessment year 2009-10, we have held as follows: '3. In plain words, the assessee is aggrieved of the CIT(A) holding that the income of Rs. 6,59,36,930, which has been offered to tax by the assessee 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 assessee 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 inco....
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....ourt's decision in the case of Balaji Enterprises v. CIT (225 ITR 471). It was in this backdrop that the Assessing Officer rejected the stand of the assessee and proceeded to bring to tax income from renting the commercial premises as an income under the head 'profits and gains from business and profession'. Aggrieved by the stand so taken by the Assessing Officer, assessee carried the matter 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 assessee 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 assessee, accounts of the assessee 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 "....
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....ut complexity of the business activity, in the course of letting out the property, which is determinative of the head under which rental income is to be brought to tax. Hon'ble AP High Court's judgment in the case of AP State Small Scale Development Corp (supra), which has been relied upon by the AO as well, also has expressed similar views when Their Lordships observed as follows: .............We are in entire agreement with the observations of the Tribunal: "But the position 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 v. National Storage (P) Ltd. (supra), affirming the decision of the Bo....
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....es in examining complexity of the activity which shifts the core and proximate reason of earning from property let out to the earning from business activity carried out. Take the case of hiring out a hotel room which has added value for earning not because of the room simplictor but because of the integrated complex activities such as room maintenance and upkeep, house keeping support, amenities inside and outside the room, room service and support, lobby and common space, recreational facilities, health club and swimming pool, telephone, fax 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'....
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....y the judicial precedent by the coordinate bench also, we hold that the income from letting out the property ought to have been taxed under the head 'income from house property'. 10. In view of the above discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee and direct the Assessing Officer to tax the rental income of Rs. 6,59,36,930 under the head 'income from house property' and allow the deduction under the scheme of taxability of income under this head. 11. In the result, the appeal of the assessee is allowed.' 5. We see no reasons to take any other view of the matter than the view so taken by us for the assessment year 2009-10. Respectfully following the said order, we uphold the plea of the assessee and direct the Assessing Officer to tax the impugned rental income under the head 'income from house property'. The assessee thus succeeds in his appeal. 6. In the result, the appeal of the assessee is allowed. 7. In the appeal filed by the Assessing Officer, the only grievance is as follows: "That the learned CIT(A) erred in law and on facts of the case in deleting the addition ....
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....eration, adhoc disallowance to the extent of 50% has been made without any clear and cogent basis or findings to demonstrate that it is relatable to future years. The arbitrary disallowance out of the total expenses debited under the brand building expenses is devoid of logic and, therefore, cannot be sustained. 16. The Assessing Officer is aggrieved of the relief so given by the CIT(A) and is in appeal before us. 17. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 18. We find that the Assessing Officer has made the impugned disallowance on the short ground that the benefits of this expenditure will also be available in the subsequent years and since the assessee is admittedly following the mercantile method of accounting, the expenditure should be allowed in the year to which it pertains. In doing so, however, what the Assessing Officer has overlooked is that even under the mercantile method of accounting, the expenses are booked at the point of time when the liability to pay crystallizes and irrespective of whether the benefit are wholly in the curre....