TaxTMI 
TaxTMI 
2016 (9) TMI 159
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....t of India. 2) . ......... 3) To license or sub license or lease or sub lease or let such lands or property or premises or any part thereof and to provide such other facilities." 3. On 16.04.1991 the Assessee entered into an agreement with M/s East India Hotels Limited (now renamed as EIH Limited) to acquire under a license an area of 9,000 square feet in Hotel Oberoi Towers, Bombay (now renamed as Trident Nariman Point) for the purpose of using the same as a shopping centre. The tenure of the said leave and license was a period of 50 years at a fixed monthly license fee as agreed between the parties. After acquiring the said shopping space the assessee utilized it in granting different portions of the shopping space to various parties who were interested in setting up shops there with the condition that the shopkeepers had to subscribe to a specific number of shares of the assessee apart from payment of monthly charges (termed as contribution from shops). The Assessee also provided various services to the licensees like air-conditioning, telephone services, maintenance, electricity, water, sanitary, security etc. In consideration for the same The licensees were required to pa....
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....ointed out that as per the said provision, a person who acquires any right in or with respect to any building or part thereof by virtue of any transactions which is referred to in clause (f) of section 269UA, is deemed to be the owner of the building. The Assessee pointed out that under clause (f) of section 269UA of the Act, transfer in relation to any immovable property referred to in sub-clause (i) of clause (d), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882). Explanation to the said clause provides as follows: "For the purposes of this sub-clause, a lease which provides for the extension of the term thereof by a further term or terms shall be deemed to .be a lease for a term of not less than twelve years, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years" The Asssessee contended that section 269UA(f) covers....
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....nt evasion of tax. Clause (f) of section 269UA gives the extended meaning of transfer which makes it very clear that the lease for a term of not less than 12 years includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of property act 1882. Therefore mere occupation of the property for a term of not less than 12 years does not make an assessee owner of the property. According to section 27(iiib) the transaction should be the one referred to in section 269UA(f). Then only the person concerned will be the owner of the building or part thereof on the basis of extended meaning of transfer in section 269UA. The building or part of the building as referred to in section 27(iiib) should be a building or part of the building as referred to in section 269UA(f). Taking of the building by the assessee on leave and licence had no relevance in the instant case. There was no agreement for transfer, except giving the immovable property on rent by the real owner to the assessee, who in turn sub let it. With the extended definition of the expression ownership transactions covered by sec....
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..... Thus, in order to carry on the business of providing premises on license the assessee has made available the whole infrastructure of various facilities/services and for which the assessee charges certain amount. Thus, income earned from the above is nothing but business income. 7. The Assessee relied on the decision of the Hon'ble Supreme Court in the case of Universal Plast Ltd. -vs.- CIT (1999) 237 ITR 454 that the question as to whether the rental income received by the assessee would fall under the head Profit and gains of business has to be determined from the point of view of a businessman after considering facts and circumstances of each case. Reliance was placed on the decision of the Hon'ble Gujarat High Court in the case of CIT vs New India Industries Ltd. (1993) 201 ITR 208(Guj.) wherein it was held that whether an income falls under one head or another has to be decided according to the common notions of a practical and reasonable man after considering facts and circumstances involved in each case. It was contended that in the present case, the Assessing Officer did not give any cognizance to the fact that the intention of the assessee behind giving the property on ....
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.... the Assessee. 9. Without prejudice to the above contentions, the Assessee submitted that the assessee since its inception has been offering the above income as business income and the same has never been challenged by the revenue. It was argued that though the principle of res-judicata does not apply to Income tax matters it has been held in a number of cases including the apex court that the principle of consistency cannot be ignored. Reliance in this regard was placed on the following judgements: Radhasoami Satsang vs. CIT (1992) 193 ITR 321(SC) CIT vs. A. K. J. Security Printers (2003) 264 ITR 276 H. A. Shah & Co. vs. CIT (1956) 30 ITR 618, 625 The Assessee prayed that the income in question be treated as business income. 10. The CIT(A) in the appeal for A.Y.2007-08, however, confirmed the order of AO by observing as follows :- 3.2 It is seen that an identical issue was involved in the appellant's group concern Oberoi Building and Investments Pvt. Ltd. in AY. 2005-06. In that case, under similar facts and circumstances, my predecessor had allowed relief. Revenue filed appeal against the said order. Vide its order dated 23.07.2010 in ITA No. 330/Ko1/2008. Hon'....
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....ire on a licence and grant space so acquired on sub-license, was to be assessed as "income from house property" or "Income from Business" has been considered by the Hon'ble Supreme Court in the case of Chennai Properties and Investments Ltd. Vs CIT 373 ITR 673(SC). It was further pointed out that the Hon'ble Supreme Court in a very recent decision in Civil Appeal No.6437 of 2016 dated 11.08.2016 in the case of M/s. Rayala Corporation Pvt. Ltd. Vs ACIT again dealt with the question whether income derived by a private limited company from giving the property on rent where the main objects of the assessee was the business of giving on rent its properties as to whether the same has to be assessed under the head 'Income from business" or "income from house property'. The Hon'ble Supreme Court referred to its earlier decision in the case of Chennai Properties and Investments Ltd. (supra) held as follows :- "9. Upon hearing the learned counsel and going through the judgments cited by the learned counsel, we are of the view that the law laid down by this Court in the case of Chennai Properties (supra) shows the correct position of law and looking at the facts of the case in question, the....
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....and licence basis 9000 sq.ft. of shopping area from M/s.The East India Hotels Ltd., in Out of this sq.ft in Hotel Oberoi Towers, Bombay Reclamation Estate, Mumbai, in an area ear marked as shopping area on payment of monthly licence fee computed at Rs. 1.50 per month. The licence was not only for use of the shop area but also for use of facilities like air conditioners, use of elevators etc., Security service charges, sanitary services etc. The operative portion of the lease deed is as follows :- (The hotel company means "The East India Hotels Ltd." And the Subsidiary means "The Assessee") "The Hotel Company and Licensee in concurrence have agreed to give licence to the Subsidiary and the & subsidiary has agreed to take over the said area in the shopping centre from the Hotel Company and licensee on licence commencing on and from 15th April, 1991 and ending 'on 31st December, 2033. (2) The Subsidiary shall observe and perform the following terms and conditions and stipulations, namely :- (i) (a) To pay to the Hotel Company compensation for the said Licence at the rate of Rs. 1.50 per month during the period of the Licence and pro-rata compensation for any broken period; t....
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.... and expenses of and incidental to the preparation and execution of the licence in triplicate." 15. In the light of the aforesaid clauses of the Agreement between the parties the question to be decided is as to whether the relationship between the parties could be said to be licensor or licensee or lessor or lessee. Except for clause (xiv) all other terms of the agreements between the parties clearly indicates that the relationship between the parties was that of the licensor or licencee. The test for determining whether a transaction is in the nature of 'license' or 'lease' has been laid down in judicial pronouncements. Before distinguishing the concept of lease and licence, first of all, let us see the definition of both these terms. Sec.105 of the Transfer of Property Act, 1882 defines a lease as transfer of a right to enjoy an immovable property for a certain period, in consideration of price paid or promised to be paid in cash or kind. Sec.52 of The Indian Easements Act, 1882 defines Licence as a right to do or continue to do, in or upon the immovable property of the grantor, something which would in the absence of such right does not amount to an easement or an interest in t....
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....from. Once we come to the conclusion that the Assessee is only a licencee, then it can safely be said that the provisions of Sec.22 read with Sec.27(iiib) of the Act are not attracted and hence the income in question cannot be assessed under the head "Income from House Property". 17. The assessee was not only deriving licence fee but also deriving service fee and other fees which were as follows :- COMPENSATION PAID TO THE EIH LIMITED DURING 2005-2006 Month LICENCE FEES(RS) SERVICE FEES(RS.) AIR-COND FEES(RS) TOTAL APRIL 12,657.00 42,190.00 71,723.00 126,570.00 MAY 12,657.00 42,190.00 71,723.00 126,570.00 JUNE 12,657.00 42,190.00 71,723.00 126,570.00 JULY 12,657.00 42,190.00 71,723.00 126,570.00 AUGUST 12,657.00 42,190.00 71,723.00 126,570.00 SEPTEMBER 12,657.00 42,190.00 71,723.00 126,570.00 OCTOBER 12,657.00 42,190.00 71,723.00 126,570.00 NOVEMBER 12,657.00 42,190.00 71,723.00 126,570.00 DECEMBER 12,657.00 42,190.00 71,723.00 126,570.00 JANUARY 12,657.00 42,190.00 71,723.00 126,570.00 FEBRUARY 12,657.00 42,190.00 71,723.00 126,570.00 MARCH 12,657.00 42,190.00 71,723.00 126,570.00 TOTAL 151,884.00 506,280.00 86....