TaxTMI 
TaxTMI 
2016 (11) TMI 1153
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.... heard the parties and perused the record. Learned AR submitted that mall consists of five floors, a multiplex theatre with five screens and parking lot with capacity of 600 cars and 700 two wheelers. Besides the above mall is also having an auditorium for public entertainment. Learned AR further submitted that the assessee company was incorporated the main objective of constructing and operating commercial complexes. He submitted that the assessee has employed more than 200 employees for running and maintaining the mall. Learned AR accordingly submitted that the assessee is carrying on complex commercial activities and hence income should be assessed under the head 'income from business'. The assessee has furnished written submissions in this regard and the same are extracted below:- "Complex Commercial Activity-The Company has to provide the following services to the licensees/occupants in order to enable them to earn more revenue from the Mall operation, which would in turn result into more revenue for the Company from Mall operations: a) 24 hrs Mall Security Services, Housekeeping services, gardening, pest control for the common area of the mall. b) Maintenance & regular c....
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.... festivals to promote the foot fall in the mall, providing assistance in market survey, customer complaints to the occupants, providing piped music in the mall etc. The Company during the year under consideration has incurred Marketing and Advertisement expenses of INR 1.07 crores on the operation of the Mall. The Company has carried out various promotional activities in the Mall to attract customers to the Mall. The Company has incurred expenses on various promotional activities carried out within the Mall. Advertisement of Mall would include regular advertisements in print and electronic media, hoardings in the city and surrounding areas, distribution of leaflets etc. Sales promotion activities would include seasonal discount schemes, incentive schemes, lottery/draws, customer loyalty program, Diwali Dhamaka Festive for 12 days etc. The Company spends on the advertisement and sales promotional activities to increase the foot fall and (number of persons entering the Mall) and the "Conversion Factor" (number of customers entering the Mall ending up in spending money). The Company submits that it is not merely providing facilities such as electricity bill, water charges, AC char....
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....used the record. We notice that the Hon'ble Supreme Court has considered the issue of assessing rental income under the head "Income from business" in the case of M/s. Rayala Corporation Pvt. Ltd. (Civil Appeal No. 6437 of 2016 dated 11.8.2016). For the sake of convenience, we extract below the order passed by learned CIT(A) in the above said case :- "1. Being aggrieved by the judgment delivered by the High Court of Madras on 4th October, 2013 in Tax Case (Appeal) Nos.91, 99 and 212 of 2012; and 230 and 231 of 2007, these appeals have been filed. 2. The issue involved in all these appeals is common but it pertains to different Assessment Years and therefore, all these appeals had been heard together. The facts in all these appeals, in a nutshell are as under: The appellant-assessee, a private limited company, is having house property, which has been rented and the assessee is receiving income from the said property by way of rent. The main issue in all these appeals is whether the income so received should be taxed under the head "Income from House Property" or "Profit and gains of business or profession". The reason for which the aforestated issue has arisen is that thoug....
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....ties below had come to a specific finding to the effect that the assessee company had stopped its other business activities and was having only an activity with regard to the leasing its properties and earning rent therefrom. Thus, except leasing the properties belonging to the assessee company, the company is not having any other business and the said fact is not in dispute at all. 7. For the afore-stated reasons, the learned counsel submitted that the impugned judgment delivered by the High Court is not proper for the reason that the High Court has directed that the income earned by the appellant assessee should be treated as "Income from House Property". 8. On the other hand, the learned counsel appearing for the respondent- Revenue made an effort to justify the reasons given by the High Court in the impugned judgment. The learned counsel also relied upon the judgment delivered by this Court in the case of M/s. S.G. Mercantile Corpn. (P) Ltd. v. CIT, Calcutta (1972) 1 SCC 465. According to him, the important question which would arise in all such cases is whether the acquisition of property for leasing and letting out all the shops and stalls would be essentially a part of b....
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....Chennai) and to let out properties. The Hon'ble Supreme court, after considering the decisions rendered by it in the case of East India Housing and Land Development Trust Ltd Vs. CIT (42 ITR 49); Sultan Brothers (P) Ltd Vs. CIT (1964)(51 ITR 353) and Karanpura Development Co Ltd (44 ITR 362) held that the rental income derived by the assessee is to be assessed as its business income. The Hon'ble Apex Court took note of the fact that the main object of the assessee was to acquire and hold the properties known as "Chennai House" and "Firhavin Estate" and to let those properties as well as to make advances upon the security of lands and buildings or other properties. The Hon'ble Apex Court further observed as under:- "What we emphasise is that holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. It may further be recorded that in the return that was filed, the entire income which accrued and was assessed in the said return was from letting out of these properties." The Hon'ble Supreme Court held that the assessee cited above was carrying on its activities as its business activities and for this purpose, it took s....
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....tail management Vs. ITO (298 ITR (AT) 371)(Kol), the Kolkatta bench of Tribunal held that income from Mall operation is assessable as business income, since various services & facilities as well as other amenities similar to company's operations are provided by the assessee. Further the activities are carried on continuously in an organized manner with a set purpose and with a view to earn profit. Identical view was also expressed in the case of ACIT Vs. Stellar Developers P Ltd (ITA No.4891/Mum/2008)(Mum). 11. In view of the foregoing, we are of the view that there is merit in the contentions of the assessee that the impugned income should be assessed as business income. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to assess the income from Shopping Mall as business income. 12. The next issue contested by the assessee relates to the disallowance made u/s 14A of the Act. The AO applied the provisions of Rule 8D to compute the disallowance. The case of the assessee is that the Share application money, which was not immediately required for mall construction purposes, was invested in mutual funds in order to earn dividend income. According....