TaxTMI 
TaxTMI 
2017 (5) TMI 116
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....sponse to notices, the authorized representative of the assessee appeared and furnished the information called for. During the course of assessment proceedings, the A.O. noticed that the assessee has considered income from rental receipts under the head "income from business". After considering the details furnished by the assessee and analyzing the provisions, held that income from lease rentals received by the assessee is assessable under the head income from house property, but not under the head income from profits and gains of business or profession. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). The CIT(A) for the reasons recorded in his order dated 29.2.2016 confirmed additions made by the A.O. by holding that income derived by an assessee by letting out furnished premises on monthly rent to various parties is assessable as income from house property and not as business income. Aggrieved by the CIT(A) order, the assessee is in appeal before us and raised following ground: "1. The Ld. CIT(A)-1, Guntur ought to have upheld the addition made by the A.O. towards disallowance of claim of the assessee, considering the rental receipts as p....
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.... lease basis from others, as mutually agreed upon from time to time, and lease out the same to others". It is also mutually agreed that any other business also may be carried with the mutual consent of all the partners if deemed lucrative. From the above, it is clear that the intention of the assessee is to acquire the land by its own or by lease out the land for a longer period and there after construct a building and lease out the same to the third parties. This is the activity of the assessee. In the assessment order, the A.O. has noted that the assessee has leased out near about 4 properties one to Standard Chartered Bank, Mumbai, second to Bata India Limited, Calcutta, third to EDS Electronic Data Systems India (P) Limited and fourth to Food World Super Market (Spencer) Limited, though the nature of the business of the assessee is as per the partnership deed "to construct the godowns or residential or commercial buildings or flats or commercial shops on land owned by the firm by taking land on lease basis from others, leased out or sale to others, besides conducting the tobacco business", came to a conclusion that the income received by the assessee is an income from house pro....
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....ss activity such as to construct the godowns or residential or commercial buildings or commercial shops, etc. the lands owned by firm or by taking land on long lease from others is the activity of the assessee. In our opinion, the judgement of the Hon'ble Supreme Court squarely applies to the facts of the case and we hold that the income earned by the assessee is "Income from business" and not "Income from house property". 13. So far as the order of the ITAT in the assessee's own case (supra) is concerned, the Tribunal has observed that assessee has constructed its properties at various places and let out to different tenants for a longer period, it cannot be inferred that the activity of the assessee is a business activity. So far as the above observation of the Tribunal is concerned, the jurisdictional High Court in the case of CIT Vs. S. Premalatha 367 ITR 298 (AP) has observed that "the lease was for a fairly longer period does not bring about any change in the character of rights. The construction of the building on the land taken on lease was obviously for the purpose of business and not with an intention to own it. If the intention of the respondent was to own the propert....
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....at the unspecified business proposed to be carried on with mutual consent was only an optional but not the main objective of the partnership firm. Thus the optional business proposed was not as clear and emphatic as that of the main business. b) Be that as it may, admittedly during the assessment period under scrutiny, the assessee firm earned income in tobacco business as well as by rents. Hence the point was whether the assessee firm under law, was entitled to show both the incomes under the head income from business or under two different heads i.e., income from business and profession and income from house property. c) In M/s. Chennai Properties & Investments Ltd., Chennai's case (supra), the brief facts were that the appellant-assessee was a Company and its main objective as stated in its Memorandum of Association was to acquire the properties in City of Madras and to let out those properties. The assessee showed its rental income as income from business in its return. However, the Assessing Officer computed it under the head rental income. The appeal preferred by the assessee before the Commissioner of Income Tax (Appeals) was allowed. Aggrieved, the departm....