TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 693
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....ss of Rs. 2,46,06,893/- and treating the same as preoperative expenses. 3 The learned CIT(A) erred in fact and in law in confirming the action of AO in considering rental income of Rs. 1,35,000/- as income from other sources and thereby taxing the said income. 4 The learned CIT(A) erred in fact and in law in confirming the action of AO in not allowing set off of business loss against other income. 5. The learned CIT(A) erred in fact and in law in confirming the action of AO in initiating penalty proceedings u/s. 27l(l)(a). 3. The facts of the case are that the assessee company was engaged in the business of providing immovable property on hire/rent basis. During the year, the assessee was doing construction of building to give on rent. The assessee purchased a land in the financial year 2005-06 and commenced the construction of building a Mall in the Financial Year 2007-08. The Mall is completed in the Financial Year 2009-10. The Company started marketing its property to prospective customers. 4. The assessee entered into a MoU on 19.02.2007 with Cinemax outlining the broad terms of lease of the property. While the construction was underway, the Company also derived income ....
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.... In first appeal, the ld. CIT(A), after issuing notice for enhancement and affording the opportunity, held that the income of the assessee is from house property and the claim of business loss was denied. 8. In the A.Ys. 2012-13 and 2013-14 ,the A.O, has assessed the income as income from house property which is upheld by the ld, CIT(A). 9. In the proceedings before the Tribunal that assessee submitted that the main object of the Company since incorporation is to carry on the business of leasing of premises. In pursuing this objective, the assessee purchased the land and started constructing the Mall premises. The premises in the Mall are rented out to various parties and t1oe terms of agreement of lease varies from party to party. Referring to the copies of agreements placed in. the Paper Book, it was pointed out that the terms of agreement with each of the occupiers are different. The broad terms of agreements with some of the parties" were being as under: a) Reliance Trends i) The area leased is 18,094 sq.ft. [Page No. 102] from 18.03.2010 for a period of 60 months [Page No. 79 & 80] ITA No 3034/Ahd/2014 ii) The License fees is not to be paid for the first 34 days from t....
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....essor to provide D.G. set for power back up. [Page No. 113] v) The timings of the Mall shall be 11.00 a.m. to 10.00 p.m. However, the Lessee could use the premises between 5.30 a.m. to 10.00 p.m. [Page No. 116] c) Cinemax India Ltd. i) The lessor to ensure occupancy of 50% of Mall premises at all times. If Mall premises exceeding 50% remain vacant for more than 6 months affecting the revenue of lessee, the lease rent to be negotiated. [Page No.143.] ii) Lock-in period of 9 years. [Page No. 146] iii) Services to be provided by the Lessor: [Page No. 159-160] (a) Repairs and maintenance of the Mall. (b) Insurance (c) Overall security systems including security personnel (d) Cleaning and maintenance of common area (e) Maintenance and upkeep of Air Conditioning, Fire Fighting Equipment, Utilities, D.G. Set / Power supply (f) Maintenance and upkeep of landscaping and other infrastructure. d) Cosmo Flavours i) The charges recoverable for letting out the premises is referred as Lease Rent. The lease rent to be recovered @ 45 per sq. ft. for the first six months and thereafter @ 51 per sq. ft. [Page No. 169] ii) The lease is for a period of 9 years with 15% inc....
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....ract or on regular basis for rendering all the services as agreed with the lessees. 14. The assessee also relied on various decisions in support of the claim that the income of the assessee, in the facts of the case, shall be income from business. The decisions relied are - * Chennai Properties & Investments Ltd. Vs. CIT - 56 taxmanii.com 456 (SC) * Rayala Corporation Pvt. Ltd. Vs. ACIT 72 taxmann.com 149 (SC) * Pr. CIT Vs. Atlantis Multiplex Pvt. Ltd. in ITA Nos. 71/2017 and 61/2017 (All.) * ITO Vs. Nishta Mall Management Co. Pvt. Ltd. in ITA No. 5882/Mum/20lO dated 30.10.2015 (Mum. Trib.) * PFH & Retail Management Ltd. Vs. ITO - 110 ITD 337 (Kolkata Trib.) * ACIT Vs. Steller Developer Pvt.Ltd. 54 taxmann.com 252 (Mumbai Trib.) 15. In Chennai Properties & Investments Ltd. Vs. CIT - 56 taxmanii.com 456 (SC). The Hon'ble Apex Court held : "Section 28(i), read with section 22, of the Income-tax Act, 1961 - Business income -Chargeable as (Letting out of properties) - Whether where in terms of memorandum of association, main object of assessee-company was to acquire properties and earn income by letting out same, said income was to be brought to tax as business inco....
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.... being indirect expenses incurred, in profit and loss account - Held, yes [Para 8] [In favour of assessee]" 18. The ld. D.R. did not controvert the factual submissions nor has brought to the notice any contrary judgments. 19. We have gone through the relevant record and impugned order. The construction of the building is commenced in the Financial Year 2007-08 and is completed in the Financial Year 2009-10. The source of funds for the construction of Mall being own funds, unsecured loans from promoters as also borrowing to the extent of Rs. 8.65 crores from Financial Institutions. The company had started marketing the availability of premises in the Mall and entered into a MoU dated 19.02.2007 with Cinemax proposing the broad terms on which the property would be licensed/leased. In the accounts prepared for the Financial Year 2008-09, the business of the construction of Mall had already commenced and the appellant derived some income from renting of hoarding signs etc. and mainly company is engaged in renting of premises and in the Assessment Year 2010-11, ld. A.O. denied the claim of loss of Rs. 2,46,03,893/- as claimed in the return of income holding that assessee's project was....
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....ding year and has held that income from renting of Mall to be treated as business income. Thus, disallowance of expenses of 5% i.e. Rs. 1.07,16,176/-. 26. In the result, this appeal is also allowed. ITA No. 1864/Ahd/2016 for AY. 2012-13. 27. The assessee has taken following grounds: 1. The ld. CIT(A)-2, Vadodara has erred in confirming the addition made by the ld. A.O. and wrongly treated the entire income declared by the appellant as income from house property without considering the fact that the same is income earned from business. The impugned addition being in complete disregards of the applicable facts and law is prayed to be deleted. 2. The ld. CIT(A)-2, Vadodara has erred in confirming the addition made by the ld. A.O. and not allowed the depreciation claimed by the appellant on the mall without considering the fact that the appellant in the business of running a mall and giving its space on rent. The impugned addition being in complete disregards of the applicable facts and law is prayed to be deleted. 28. Since we have given relief to the appellant in earlier two years, we reiterate in this appeal that renting of property of Mall income to be a business income. .....