TaxTMI 
TaxTMI 
2016 (5) TMI 1158
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....sment was Rs. 2,40,87,912/-. 3. The facts of the case are, assessee has its premises located in Biotechnology Park developed by Government of Andhra Pradesh. It has leased its premises to the following lessees: Sl.No Name of the Tenant Property leased out Lab No./Suite No. Lease rent collected per annum Maintenance collected per annum 1. Finoso Pharma Pvt. Ltd 213, 214 26,94,000 5,38,800 2. Incozen Therapeutics Pvt. Ltd., 223, 224, 233, 234 57,60,000 12,00,000 3. TATA Communications Ltd., 301 2,58,000 -- 4. Shakti Bio systems Phase I - Web Labs 18,40,902 2,82,702 5. Biological E-rent 230-243 29,06,835 2,83,440 6. ITC 230-243 1,20,00,000 24,00,000 7. Symphony Pharma 230-243 32,10,900 6,68,938 8. Avesthegen 230-243 16,000 25,16,076 9. HDFC Bank Ltd., ATM Facility 16,000 -- 10 Deccan Bio Ventures Pvt. Ltd., 4,13,779 11 Biomax Lifesciences 8,11,837 12 Other utilities recovered 12,05,567 Total 2,87,02,637 1,03,21,139 3.1. During the period, assessee had rental income of Rs. 3,90,23,775/- from which various expenses were claimed by the assessee. 3.2. Th....
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....dently. g) That assessee collected separate amounts for letting out the premises and for the maintenance of the complex. Assessee is collecting fixed monthly charges towards the rent. The maintenance charges for the premises are either collected or recovered. h) Further the TDS is deducted by the tenants u/s.194-I, the section refers to TDS on rent. In view of the above, the AO held that the income from letting out of the premises is to be treated as 'income from house property' and the income from maintenance should be taxed under the head 'Income from other sources'. AO relied on the following cases - i). CIT vs. Lakshmi Co. (Madras HC) ii). CIT vs. Shambhu Investments (P) Ltd. (2001) 249 ITR 47 (Cal). 4. Before Ld. CIT(A), assessee submitted that: a) assessee was formed as a joint venture between Shapoorji Pallomji Company Limited and the Government of Andhra Pradesh with an objective of developing the Biotech Park in the state of Andhra Pradesh for providing necessary infrastructure facilities to users that intend to set up Biotech based industries. b) The appellant has developed and leased out various lab spaces for the purpose of carrying out research and development ....
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....operty leased out was on the Ground Floor of 4490 sq.ft. As per the maintenance agreement, lease charges are also collected on monthly basis. The maintenance charges include repairs to structures, electrical repairs, plumbing, etc. In addition to fixed maintenance charges, the tenants also have to pay telephone, electricity, water, depending on their usage. Types of services rendered by appellant are- * Filtered water * Water supply of Metropolitan Board * Nitrogen Line for supply of Nitrogen from a centralized cylinder bank located in the Service building. * Compressed Air line * Vacuum Line * Telecom Line * Air conditioning * DG set for 100% back up in case of main APSEB power failure. * Line for UPS & Raw Power * Electrical Lighting and Service Points . * Security * Sewerage Treatment * Waste Management It was explained by the appellant that the general maintenance like providing security, electricity, air conditioning, telephone lines, sewerage and water management, are carried out by the appellant itself. The special services like providing Nitrogen gas, compressed air, etc., were provided by third parties. The appellant has entered int....
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....loiting the entire premises as a commercial venture. Therefore, the income is to be assessed under the head 'business income'. Therefore, the Grounds of Appeal Nos. 1 to 14 are treated as allowed". 6. Revenue has raised the following grounds: "2. The learned CIT(A) erred in ignoring the 'fact that the Hon'ble Karnataka High Court in the case of Venlankani Information Systems Pvt. Ltd. 218 Taxamn 88 clearly held that if the intention is to exploit commercial property by putting up construction and letting out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building fall under the head 'income from house property' in the present case, the assessee developed the commercial property and let out the same to the tenants and getting the rental income. 3. The CIT(A) erred in ignoring the fact that assessee has deducted the tax u/s 1941, which denotes that there is relationship of lessor and lessee. 4. The learned CIT(A) erred in not considering the decision of Kolkata High Court in the case of Shambu Investments which in turn discussed the Apex courts decision in t....
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....her sources', thereby segregating the receipts under two heads as they are received by way of separate agreements. Thus, AO has accepted that assessee's incomes are not exploiting the property alone. If the facilities provided are simple as contended by DR, the whole of receipts should have been assessed under the head 'house property'. This was not done indicating that the activity of providing various facilities and environment for research are complex in nature. On similar facts, the Hon'ble High Court of Karnataka, in the case relied on by Ld. CIT(A) as well as Revenue in the grounds, has held: "The assessee let out a commercial complex with certain facilities like specially furnished buildings, special electrical connections, antennae interconnectivity and special furniture. These facilities were inseparable from letting. The rental income was assessable as business income". 10. Vide para 25/26, it was further held that: "25. We have to find out in that context what was the intention of the parties in entering into the lease transaction. It is not the number of agreements, which are entered into between the parties which is decisive in determining the nature of transac....
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....f business or profession'. But for any reason, if it does not fall under that head, it shall fall under the head 'Income from other sources', but certainly not under the heading income from house property. If the intention is to exploit commercial property by pulling up construction and letting it out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building falls under the head 'Income from house property'. But if the assessee is in the business of taking land, pulling up commercial buildings thereon and letting out such buildings with all furniture as his profession or business, then notwithstanding the fact that he has constructed a building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the heading of income front house property. Therefore, firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it, is inseparable or not. If they a....
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....s namely, "Chennai House" and "Firhavin Estate". Thus, there is no other income of the assessee except the income from letting out of these two properties. We have to decide the issue keeping in mind the aforesaid aspects. With this background, we first refer to the judgment of this Court in East India Housing and Land Development Trust Ltd's case which has been relied upon by the High Court. That was a case where the company was incorporated with the object of buying and developing landed properties and promoting and developing markets. Thus, the main objective of the company was to develop the landed properties into markets. It so happened that some shops and stalls, which were developed by it, had been rented out and income was derived from the renting of the said shops and stalls. In those facts, the question arose for consideration was: whether the rental income that is received was to be treated as income from the house property or the income from the business. This court while holding that the income shall be treated as income from the house property, rested its decision in the context of the main objective of the company and took note of the fact that letting out of the p....
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....re there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned". After applying the aforesaid principle to the facts, which were there before the Court, it came to the conclusion that income had to be treated as income from business and not as income from house property. We are of the opinion that the aforesaid judgment in Karampura Development Co. Ltd.,'s case squarely applies to the facts of the present case. No doubt in sultan Brothers (P) Ltd's case, Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether....