2012 (1) TMI 308

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....ying deduction claimed under section 24(a) of the Act being 30% of annual value. 6. Brief facts of the case recorded by ld. CIT (A) at pages 2 to 6 are as under :- " 2.1 Brief facts on the issue are that M/s Mahima Real Estate Pvt. Ltd (denoted as developer) entered into an agreement with M/s Vibhuti Financial Services P. Ltd., (denoted as 'owner') for construction of commercial complex named "Crystal Mall" inter-alia including the following relevant clauses. "(i) Parties to the agreement i.e. M/s Vibhuti Financial Services Pvt. Ltd. is denoted as owner and M/s Mahima Real Estate Pvt. Ltd is denoted as developer. (ii) That the developer will bear the cost of construction starting from architect fee, conversion of land into commercial approval of map by the appropriate authority an cost of superstructure and all other expenditure relating advertisement states promotion and brokerage. (iii) That the developer will pay Rs. 15 lakhs to the owner as earnest money. (iv) The construction is to be completed within 2 years otherwise developer has to pay penalty for default of every day. (v) That the developer will be entitled to get 5....

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....elevant previous year shops let out to Gail India Ltd. has been hypothecated to PNB to secure a loan of Rs. 21.82 lakhs payable within 21 months. 11. Hot Nut restaurant was intended to run by the assessee companies itself but it has been let out with plants and machinery and utensils. Depreciation on such plants and machinery has been claimed in the books of account of the assessee. Hence the amount received is for the area let out as well as for the plants and machinery and utensils. Let out amount cannot be surrogated for area and plant and machinery."  2.3 A.O. further observed as follows:- (i) Total construction area is represented and valued in closing stock. It shows the intention of the assessee that unsold stock let out for certain period is the business asset of the assessee company. (ii) Premises no. 304 to 309 and 401 to 404 let out Gail India Ltd. under a lease agreement for 9 years. (iii) Against the proposed sale of the same premises assessee has got advance Rs. 45 lakh from M/s Kamdhenu Suppliers Pvt. Ltd. Advances were received from 28.8.03 to 31.12.2003. (iv) Lease rent out was discounted with PNB and ag....

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....,000/- Shashi Arora Rs. 60,000/- Tulsidas Somani Rs. 30,000/- and Murli Kumar Rs. 72,000/-) is held as business receipts. (vii) Assessee has shown receipt of Rs. 22,40,353/- by letting out the roof from and other open space on and around the commercial building for signage. Advertisement boards and V sat antenna. In this regard director of the company has already submitted by reply dated 5.12.08 to treat this income as income from other sources instead of income from house property. This view was expressed to avoid litigation with the department. However, the contention of the assessee is examined in the light of statute. In the instant case open space on around the building such as roof parapet face of building adjacent open conspicuous space around the commercial building are used for advertisement signage or hoarding and installation of V sat antenna to provide internet broad band service are the utilization of open space of a commercial building which is necessarily not the utilization of the building but the exploitation of space of commercial asset. Thus the roof of open space on and around a commercial building cannot be termed building or land appurtenant theret....

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.... from open space and not from building. In this connection, it is submitted that in section 22 of I.T. Act no definition of building or land appurtenant thereto has been given and therefore its ordinary meaning has to be adopted. The word building would therefore include building occupied or intended for residence, building let out for office use or for storage or for warehousing or for use as a factory etc. The building includes its roof, parapets and outer walls and they cannot be held as separate from building or merely open spaces. The V. Sats are either installed at roof or parapet walls of buildings and signage and advertisements hoardings are displayed on walls of building and thus the rent received from letting out spaces of building for installation of V. Sat and for display of signage and hoardings are income from property assessable u/s 22 of I.T. Act. In view of above submissions the ld. A.O. is wrong in assessing the income from letting out of property owned by assessee company as income from business instead of income from house property as claimed by it and thereby disallowing deduction of Rs. 9,54,423/- claimed by assessee u/s 24(a) of I.T. Act, 1961." 8. A....

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...., the Hon'ble Supreme Court has held that even if the company set up with the object of buying and developing landed properties and promoting and developing markets, purchased a piece of land and built thereon a market consisting of shops and stalls etc. which it had let out and earned income thereby the income was to be assessed as Income from house property and not from business. 11. Similarly in case of Chugandas & Co., 55 ITR 17 (SC), the Hon'ble Supreme Court has held that income is assessable as Income from house property. In this case it was held that in case of companies building spaces which were let out were traded as its fixed asset before letting out to tenants. There is no letting out of property temporarily or for a short period and therefore there is no reason to assess any part of rental income from property as business income. 12. In the present case undisputedly the properties are not rented out temporarily or for a short period and, therefore, in our considered view, there was no reason to hold that this is a business income and not income from house property. Accordingly, we hold that AO and ld. CIT (A) were not justified in holding that income of the buil....