TaxTMI 
TaxTMI 
2015 (9) TMI 1562
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....e take up the revenue's appeals. The facts, for the sake of convenience, have been taken from ITA No.2750/M/2013 for A.Y. 2007-08. 2. The common issue involved in the appeals filed by the Revenue is as to whether the rental income earned by the assessee from leased premises is to be assessed as income from 'House property' or as 'Business income'. 3. The brief facts of the case are that the assessee is a Pvt. Ltd. company and is engaged in the business inter alia to acquire, develop, dispose of and maintain the properties and to build high-tech ports, industrial estates, townships, markets or other buildings, residential and commercial or conveniences and to deal with them in any manner including letting out etc. of the same. The source of income of the assessee company includes rental income from letting off of premises to M/s. Shoppers Stop Ltd., Pune which has been a part and parcel of the main activities of the assessee company. The assessee had shown the rental income from the leasing of the premises of M/s. Shoppers Stop Ltd. as business income and claimed depreciation and other expenses upon it. The return of income filed by the assessee was processed under section 143....
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....had already entered into lease agreement with Shoppers Stop dated 15.01.2004. In this clause it can been seen that the builders have agreed to hand over possession of the said premises to the said lessees for necessary fit out works and also had agreed to provide various amenities and facilities out of the said premises more particularly described in the mode. Therefore, it can be seen from the above that the appellant has only taken on transfer from the builders the preleased property to Shoppers Stop. The said property was already handed over to Shoppers Stop for fit out even before the appellant purchased it from the builders. The fittings, etc. for which the appellant entered into a separate agreement were already a part thereof. 5.6 The Ld. CIT(A) has, in appellant's own case for AY 2006-07, decided the issue, ex-parte against the appellant by relying on the order of M.S. Luvish Infotech Projects Pvt. Ltd. for AY 2005-06. 5.7 I have perused the order of the CIT (A)-V, Hyderabad in the case of M.S. Luvish Infotech Projects Pvt. Ltd. for A.Y. 2005-06. The only difference between the two cases is that M.S. Luvish Infotech Projects Pvt. Ltd. had acquired in simil....
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....n of the ITAT in holding that the maintenance charges recovered by the assessee towards the promotion and upkeep of the Mall, from the persons to whom the premises are let out and also from the persons to whom the premises were sold are attributable to conducting the business activity of running the Mall and therefore, the amount of maintenance charges received were business receipts assessable under the head 'business income' cannot be faulted. 12. In the result, we see no merit in the appeals and the some are hereby dismissed with no order as to costs." 5.10 Similarly, the Hon'ble ITAT has held in various cases as under: "In the case of ITO vs. Shanaya Enterprises (ITA no.3648/Mum/2010 for AY 2006-07 order dated June 30, 2011) the assessee let out its studio to production houses for shooting TV serials etc and offered the hire charges to tax as "business income". The AO relied on Sultan Brothers vs. CIT 51 ITR 353 (SC) & CIT vs. Shambhu Investments 263 ITR 143 (SC) and held that as the "main intention" was letting out of property, the hire charges was assessable as "Income from house property". The AO noted that TDS on the hire charges was asses....
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.... have been provided. 9.2. In this connection we recall the ruling of the highest, judiciary of the land in distinguishing the significance of merely letting out a bare building and a building braced up with various amenities in the case of CIT. Bombay City 1 v. Notional Storage Pvt. Ltd. reported in 66 ITR 596 (SC) wherein after analyzing the issue at length, the Hon'ble Court had visualized that - 9.2.1. Further, an identical issue to that of the present one had cropped up before the earlier Hon'ble Bangalore Bench in the case of Global Tech Pork (P) Ltd. v. ACIT - reported in (2008) 119 7TJ (Bang) 421 - wherein it was observed that- "The assessee having been incorporated with the sole intention of developing Technology Pork for which it obtained leasehold land from ICIOC and also obtained loan from bank for constructing superstructure thereon, it could not be considered as having mode investment in a property for earning rental income only. The lease of the property was shown as part of the business activity, thus, the income received there from cannot be said as income received as a land owner but as a trader...................The activity was ....
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....bsequently, the assessee-company built a commercial complex on the said land and allotted the same to the various parties and earned income therefrom. For the year 1985-86 and 86-87, the assessee filed its returns of income showing losses for which the AO completed the assessments making minor adjustments in computing the losses. The CIT initiated suo motto proceedings u/s 263 and after such proceedings directed the AO to make fresh assessments computing the income from rentals received from the commercial complex under the head "Income from house property." On an appeal by the assessee, the Tribunal held that the income derived by the assessee could have been assessed only as income from business and not under the head "Income from house property". According to the Tribunal, since the land over which the property had been built is a leasehold land, the assessee cannot be treated as the owner of the land which is a condition precedent for treating the income as income from house property under section 22 of the Act. The Han'ble Court, taking cue from the ruling of the Hon'ble Supreme court in the case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625, ha....
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....eatment plants to attain the status of a Soft-ware Technology Park whereas in the case of Shambhu Investment P. Ltd., the immovable was a tiny property and the so called amenities provided to the occupants only as against the amenities provided in a STP to feed a special purpose. Letting out of a building in a STP is incidental whereas the fact in the case of Sambhu Investment was rather predominant and, thus, Sambhu Investment case cannot, at any stretch of imagination, be equated with that of the present assessee. 9.4. Taking into account the facts and circumstances of the issue, we are, therefore, of the firm view that the case laws on which the Revenue placed reliance cannot come to its rescue." 5.12 The Honble ITAT, 'A' Bench Mumbai in the case of Krishna Land Developers Private Limited vs. ACIT -2(1) Mumbai in ITA no. 5045/Mum./2011 for AY 2006-07 has held on August 8, 2012 as under: "2. At the outset, the learned Counsel for the assessee submitted before us that all the grounds of appeal are covered in favour of the assessee by the co-ordinate bench decision being ITA no.1057/Mum./2010, vide order dated 12th August 2011, in assessee's o....
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....l facilities, high speed lift, power back-up, etc. Just because a sister concern incurred this expenditure and claims reimbursement from the assessee, it cannot be said that the facilities are not provided by the assessee. Whoever maintains them, the fact remains that it is the assessee who ultimately bears such expenditure for the services and undertakes to provide such services. The facilities are made available by the assessee to the person occupying the premises. Coming to the case laws in Saptorshi Services Ltd. (supra), the Hon'ble Gujarat High Court held that the income earned from business centre is to be assessed under the head 'Income from Business & Profession'. The Special Leave Petition filed by the Revenue against this judgment was rejected by the Hon'ble Supreme Court which is reported as 264 ITR (St.) 36. Coming to the decision of the Mumbai Bench of the Tribunal in Harvindarpal Mehto (supra), the Tribunal, in this decision, after considering the judgment in Shambhu Investments P. Ltd., held that the income earned from business centre is to be assessed under the head "Income from Business & Profession". The decision of Mumbai Bench of the Tribunal in....
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....nternal painting/POP, and flooring * False ceiling. * Escalators to be from ground to 1st and from 1st to 2nd floor with a lift in the premises. The make to be of OTIS/Mitsuhshi/Kone. The width of the escalator to be minimum 1.00 mtrs. * High side equipments of HVAC (Air conditioning plant, AHUS, Control panels chilled water pipes etc.). * Provision of chilled water and AHUs in the area as per HVAC layout and specifications. * 100% power back up. * Central Air conditioning plant-supply and installation of central air-conditioning plant of adequate capacity to cover the premises including storerooms etc. Actual tonnage requirement to be calculated so as to maintain uniform temperature of 22+, - degrees Celsius inside the premises and fresh air opening for AHU locations. To provide the air-conditioning plant and control panels, air-handling units, fan coil units and other equipment required for operation of the air-condition plant. Air conditioning plants would be of reciprocal type/screw type/blue star/carrier or similar make. Chilled water lines upto AHU/fan coils units in each floor level. Common areas of the complex to be used....
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....y Three and Paid Fifty Only) calculated @ Rs. 50/- per chargeable sq.ft. area, towards electricity meter deposits, legal charges, contribution of share money, entrance fees for membership of the co-operative society/condominium/limited company to be formed and charges for formation, registration of the co-operative society/condominium/limited company etc. These charges are payable to the builders along with the payment of balance consideration referred in the clause 2(ii) above." (emphasis supplied) 5.25 The above emphasized portion shows that the amount toward maintenance of the premises and the facilities was paid in advance by the appellant and in fact has made contribution to the corpus of the maintenance fund. 5.26 The fourth Schedule mentioned in the agreement wherein the specifications have been mentioned as under: "THE FOURTH SCHEDULE ABOVE REFERRED TO * Office/shop No.G-1 (Part No.2), on the Ground Floor (including area of balcony if applicable) (with adjoining terrace -if applicable and if marked on the plan annexed hereto) Built-up Area admeasuring 3648.03 sq.ft. i.e. 338.91 sq.mtrs, carpet area (un-plastered wall to un-plastered wall)....
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....istribution boards at each level at mutually agreed location. * Lessor to provide power supply at one point only with, one DB and one main switch directly to MSEB. In case metering is through sub-meter, transmission loss needs to be taken into account and paid by space occupier. Total power requirements by Lessee is @ 20 watts per sq. ft. of carpet area. * Water supply, plumbing and sewerage as per Municipal rules. * High side equipments of HVAC (Air Conditioning plant, AHUS, Control panels chilled water pipes, etc.) as lessee heat load requirements as given by lessee. * Provision of chilled water at AHUs in lessee area as per HVAC layout and specification of lessee. * Lessor to provide on lift-VVF type with stainless steel cage interiors (minimum 15 passengers). * Lift interiors including flooring, ceiling, handrail and lighting etc. as per manufacturers specifications. * 100% power back up is to be provided by lessor to lessee. * Elevation design as per lessors architecht's design for building elevations. * Suitable building elevations as designed by the lessors architect * To make struc....
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.... in the instant case the appellant was providing maintenance of common area, maintenance of light in the common area, maintenance of a whole lot of other facilities. In effect, the entire activity is carried out in an organized manner as business venture with many day to day activities being carried out. 5.29 The following case laws have dealt with similar issue: (i) Commissioner of Excess Profits Vs. Shri Lakshmi Silk Mills Ltd (20 ITR 451) (SC). (ii) 69 ITR 247 (Puj) - Ginning Factory leased out for years a going concern - court held that income derived is business income. (iii) 96 ITR 499 (Pat) - Cinema as a going concern held as business income (iv) 128 ITR 497 (Del) - Leasing out Cinema House is assessable under business income. (v) 164 ITR 571 (MP) - Rice Mill and Theatre both leased out - rentals are chargeable to business income. (vi) 284 ITR 229 (Born) - Leasing of Hotels with Fittings & Fixtures was held to be business income. (vii) 283 ITR 162 (MP) - Bidi manufacturing activities and let out some of its godown - assessable as business income. (viii) 114 ITR 779 (Kol) - Everest Hotels - The e....
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....High Court in the case of CIT Vs. Mohiddin Hotels P Ltd (2006) (284 ITR 229) as under:- "The general principles laid down by the Supreme Court in this connection are thus as under (page 461): (1) no precise test can be laid down to ascertain whether income (referred to by whatever nomenclature, lease, amount, rents license fee) received by an assessee from leasing or letting out of assets would fall under the head 'Profits and gains of business or profession; (2) it is a mixed question of law and fact and has to be determined from the point of view of a businessman in that business on the facts and in the circumstances of each case, including true interpretation of the agreement under which the assets are let out.; (3) where all the assets of the business are let out, the period for which the assets are let out is a relevant factor to find out whether the intention of the assessee is to go out of business altogether or to come back and restart the same. (4) If only a few of the business assets are let out temporarily, while the assessee is carrying out his other business activities, then it is a case of exploiting the business assets....
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.... High Court, which considered the test laid down by the Hon'ble Supreme Court in the case of Sultan Brothers Pvt. Ltd (1964)(51 ITR 33). The relevant observations made by the Hon'ble High Court is extracted below:- "Before taking a decision on the issue let us first deal with the decisions cited by Mr. Murarka. (i) Sultan Brothers Pvt. Ltd. vs. CIT (1964) 51 ITR 353 (SC) : A :. five judges' Bench of the apex court herein has considered a case .1 ? where in the assessee constructed a building and filled it up with furniture and fixtures and let it out on lease fully equipped and furnished for the purpose of running a hotel. The lease provided for a monthly rent for the building and a hire charge for the furniture and fixtures." 5.35 Dealing with the said case, the apex court held that the letting out of the said building did not amount to the carrying on of a business and the income tinder the lease would not, therefore, be assessed as income from business. The apex court directed the said income to be assessed accordingly. 5.36 To decide such an issue the apex court gave a guideline that to come to t conclusion one has to find out the....
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....e let out to various occupants, the amenities granted to those occupants including the user of the furniture and fixtures are attached to such letting out and the last question, in view of the same, must be answered in the negative. Applying the said test we hold that by the said agreement the parties have intended that such letting out would be an inseparable one. Hence, we hold that the prime object of the assessee under the said agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture arid fixtures and other common facilities for which rent was being paid month by month in addition to the security fee advance covering the entire cost of the said immovable property. In view of the facts and law discussed above we hold that the income derived from the said property is an income from property and should be assessed as such". The view taken by the Hon'ble Calcutta High Court was approved by the Hon'ble Supreme Court and the said decision of the Apex court is reported in 263 ITR 143. 5.33 In the instant case, the three questions framed by the apex court ar....
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....be operated as a commercial complex with lot of amenities and facilities attached to it, which activity was a part of the objects of the assessee company as provided in the memorandum of association of the company. The Ld. CIT(A) has observed that the main intention of the assessee in this case was to exploit the property by way of complex commercial activities. The assessee had been offering complex services by way of providing amenities such as infrastructure facilities, excalators, power back-up, central Air- conditioning, lifts, maintenance of the common area and maintenance of a whole lot of other facilities. The Ld. CIT(A) has listed the various facilities and amenities offered by the assessee to the occupants in the relevant part of his order as reproduced above.. The Ld. CIT(A) has also observed that the amount towards maintenance of the premises and the facilities was paid in advance by the assessee and in fact had made contribution to the corpus of the maintenance of the fund. After analyzing the entire lease agreement and the details of the services and amenities offered by the assessee he arrived at a conclusion that the entire activity was carried out by the assessee i....
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....case are that the assessee the rental income from leasing of the premises include substantial income from providing amenities and facilities. Such facilities are not the basic facilities required for occupation or renting of a building or premises, but these are the special facilities for running of the multiplex/shopping mall etc. and are meant to attract the customers and provide comfort of shopping to them. These facilities can not be said to be basic/normal facilities required for occupation of the premises. Not only the cost of common facilities has been embedded in the lease rentals but also the substantial amount on account of providing amenities/facilities to the occupants/tenants. The assessee's activity thus can not be said to be mere letting of the building owned by it but its activity is a business activity of construction of mall, maintaining it, leasing the shops/area for the purpose of commercial exploitation of the asset, arrange and provide the facilities and amenities not only to the occupants/lessees but also to provide and maintain facilities and amenities in the common areas for the attraction, convenience and comfort of the customers/visitors. In our view, ....
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....547 has laid down the precise tests that are necessary to determine whether the services rendered by an assessee to its tenants/recipients of service, are in the nature of business activities and income generated therefrom assessable as business income, or not. The Hon'ble supreme Court has expressed the view that if the services rendered by the assessee are the results of its activities carried on continuously in an organized manner, with a set purpose and with a view to earn profits, those activities would constitute business activities and the income arising therefrom would be assessable as business income under section 28 of the Act. The activities of the assessee in this case in providing the various services/facilities/amenities meet all the aforesaid four requirements laid down by Hon'ble Supreme Court to qualify as business activities. 9. In a very recent judgment, the Hon'ble Supreme Court in the case of 'Chennai Properties & Investment Ltd.' [2015] 373 ITR 673(SC) has noted that in its (Supreme court) earlier Judgment in the case of 'Karanpura Development Co. Ltd. Vs. CIT" 44 ITR 362 (SC), the position of law on this issue has been summed up in the follo....
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....ftware zones, commercial & residential complexes and to grant the same on lease/license also. The very object is the commercially exploitation of the properties. Besides that the assessee is also providing hosts of amenities and facilities, as discussed above, which amounts to composite business activity. Thus the issue is squarely covered in favour of the assessee by the above noted decisions of the Hon'ble Supreme Court. We therefore hold that the income/loss from the multiplex is liable to be assessed as 'business income/loss and not as income from house property. The assessee consequently is also entitled to the claim of deductions in respect of expenditure incurred and depreciation on assets etc. in relation to such income. Hence, we do not find any reason to deviate from the findings recorded by the Ld. CIT(A) on this issue. 10. The next issue raised by the Revenue is as to whether the interest on fixed deposits kept with bank is to be treated as business receipts or income from other sources. Admittedly, the interest was earned from the bank receipts. The Ld. A.R. could not convince us as to how the interest earned on fixed deposits can be said to be business activi....