TaxTMI 
TaxTMI 
2016 (2) TMI 374
X X X X Extracts X X X X
X X X X Extracts X X X X
....me received from leasing out of shops/units to various persons as business receipts. The assessee had also claimed depreciation on the building. Apart from the rental income the assessee has received certain charges from the lessees viz. Common Amenities, maintenance Charges, Advertisements and Miscellaneous receipts etc. During the Course of scrutiny assessment proceedings the Assessing Officer rejected the claim of assessee in treating the income from leasing of shops as business receipts. The Assessing Officer held that the income received by the assessee from leasing of shops is to be assessed under the head "Income from house property". Accordingly, the Assessing Officer disallowed the claim of depreciation on the building. Further, the Assessing Officer brought to tax the receipts received by the assessee on account of common amenities, maintenance, advertisement etc. under the head "Income from other sources". Aggrieved by the assessment order dated 31-12-2010 for the assessment year 2008-09 and dated 05-03-2013 for assessment year 2010-11, the assessee preferred separate appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) uph....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TR 547 (SC); ii. Assistant Commissioner of Income Tax Vs. Saptarshi Services Ld., 265 ITR 379 (Guj.); and iii. PFH Mall & Retail Management Ltd. Vs. Income-tax Officer, 110 ITD 337 (Kol.). 4. On the other hand Shri Dheeraj Kumar Jain representing the Department vehemently supported the findings of the authorities below. The ld. DR submitted that the agreement entered into between the assessee and various parties to whom shops have been rented out shows that the assessee is receiving consolidated monthly rent from the occupants. The rent includes charges for the amenities provided by the assessee. Therefore, the income from renting of the shops has to be assessed under the head, 'Income from House Property'. A further perusal of records show that the TDS has been deducted under the provisions of the Act on account of rental income. Further, there is no sharing of revenue with the tenants. The shops have been given on rent for long period. Thus, from the facts of the case it is evident that the income from letting of shops has to be assessed under the head, Income from House Property'. In support of his submissions the ld. DR placed reliance on the decision of Ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tallation of Water cooled Split Air conditioners with compressors, condensers, fan coil units & ducting systems (HVAC) more particularly defined in ANNEXURE-'B'. iii. Installation of good & reputed brand elevators for vertical movement. iv. Installation of electronic security system in the common areas, atrium and surrounding the main Shopping Mall within the plot boundaries. v. Installation of Customized Fire Hydrant & Sprinkler system. vi. Installing the central garbage collection & disposal system. vii. Provision of separate area for garbage collection, loading / unloading docks and logistics area. viii. Installation of common dining arrangement for occupants, their staff & workers with tables, chairs, benches, etc. ix. Installation of common water purifier and dispensing system to provide clean & hygienic potable water. x. Installation of common rest room facilities. 6.2 Charges for some of the facilities and utilities are included in the license fees charged for the shop space. For example cost of common lighting and electrification of common areas, including charges towards the cost of electricity cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d here-in-under: "6. We have carefully considered the relevant facts, the arguments advanced by the rival parties and the decisions cited. In our view, before arriving at any conclusion about the particular head under which the income derived by the assessee is required to be assessed, it is necessary to examine the relevant provisions of the agreements that the assessee had entered into with the users. In all the agreements the assessee is shown as the owner of the premises in which the shopping malls/business centres are located and the other party to the agreement is shown as the user. The assessee, as owners of the premises, has the responsibility of providing security, communication and other services as specified in the agreements. The agreements with Pantaloon Industries Ltd., PFH Entertainment Ltd. and Pantaloon Fashions (India) Ltd., are operative for a period of six years commencing from 1-4-1999 and that with Pantaloon Retail (India) Ltd. is made operative for a period of seven years commencing from the date of official launch of the mall, or, in any case, on or before 15-3-2000, by which time the owner would endeavour to provide the user with all the services a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es and facilities provided by the assessee may be proportionately increased at the discretion of the assessee. Thus the assessee has contractual obligation for providing services to its customers (users) like electricity, telephone, watch and ward, etc. As per the terms of the agreement the customers had no right of occupancy. They have only limited access to use the space for the purpose of their business, and that too, in respect of certain activities, during the specific hours of the day only. Furthermore the keys of the premises are kept by the assessee meaning thereby that the premises are fully in control of the assessee. 6.1 At this juncture it would be pertinent to focus our attention to some undisputed facts pertaining to this case. The assessee has given up its business of trading in textiles and embarked on setting up shopping malls/ business centres at various metros in India in a big way. For this purpose it had secured loans from the banks, observed various formalities and obtained necessary permissions. Apart from providing various services, in q subsequent years it has also taken up, as part and parcel of its mall management activities, the job of marketing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowed in determining the particular head under which an income is to be assessed, observed: In cases where the income received is not from the bare letting of the tenement or from the letting accompanied by incidental services or facilities, but the subject hired out is a complex one and the income obtained is not so much because of the bare letting of the tenement but because of the facilities and services rendered, the operations involved in such letting of the property may be of the nature of business or trading operations and the income derived may be of the nature of business or trading operations and the income derived may be income not from exercise of property rights properly so-called so as to fall under section but income from operations of a trading nature falling under Section 10 of the Act; The facts in the instant case undoubtedly show that the income obtained is not merely because of the bare letting of the premises but also because of the facilities and services rendered. Thus the income derived by the assessee cannot be regarded as simply from the exercise of property rights. Rather the income is derived by the assessee from complex g operations o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of Saptarshi Services Ltd. (supra), the Hon'ble Gujarat High Court summarily dismissed the appeal of the revenue against the decision of the Tribunal that the income from developing the property as business centre constitutes business income. The decision of the Tribunal is based on the finding that the assessee is providing a number of services, e.g. having an EPABX machine facilitating telephone services to the occupants of the business centre, services of lift, services of receptionists, secretarial services, data processing, conference room, etc. Thus what the assessee is providing in reality happens to be a working place along with the aforesaid facilities. It is apparent that the various services and facilities provided by the present assessee are very similar in nature. Therefore, it can be justifiably inferred that here too the assessee is actually providing a working place for doing business with the attendant facilities. In this view of the matter, the irresistible conclusion is that what the appellant has earned is business income and the same should be assessed under the head of 'Profits ctnd gains from business and profession'. 6.6 In the case o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se. Because in that case the facts showed that the main intention was to earn rental income. That was why the entire cost of the property was recovered from the tenants by way of interest-free advance. In the instant case, on the other hand, the assessee had taken bank loans to finance his projects like any other businessman. As discussed hereinabove, every action of the present assessee appears to be with the sole object of commercial exploitation of the premises. 6.8 After carefully analysing the facts of the instant case, and following the consensus of judicial opinion on the issue, our considered view is that, the mere fact that the income is attached to immovable property, cannot be the sole criterion for assessment of such income as income from house property. It is necessary to dig further to find out what is the primary object of the assessee while exploiting the property. If it is found, that the main intention is for simply letting out of property or any portion thereof, the resultant income must be assessed as income from house property. If, on the other hand, the main intention is found to be the exploitation of the immovable property by way of commercial activ....