TaxTMI 
TaxTMI 
2021 (6) TMI 452
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....,202/- u/s 115JB of the Act, which was processed u/s 143(1) of the Act. Subsequently, the AO noticed that the income received by the assessee on leasing properties was shown as operation income in P&L Account, and as income from house property in its return of income and also claimed deduction u/s 24(a) and, therefore, issued notice u/s 148 of the Act on 19/09/2017. After issuing statutory notices, the AO completed the assessment u/s 143(3) rws 147 assessing the total income at Rs. 8,39,01,215/- by treating the income shown by the assessee as income from business as against the income shown by the assessee under the head 'income from house property. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) raising the grounds that the reopening of assessment is invalid and treating the income as business income by the AO. 4. The CIT(A) confirmed the action of the AO with regard reopening of assessment. 5. As regards the treating the income as business income by the AO, the CIT(A) directed the AO to treat the income from letting out of flats as income from house property following the decision of the ITAT in assessee's own case in ITA No. 571/Hyd/2....
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....T u/s. 263 of the Act. It is seen that the ITAT has upheld the initiation of proceedings u/s. 263 of the Act, and has directed the Assessing Officer to consider the nature of transaction in line with the case laws on the subject. Thus, it cannot be said that the stand of the Revenue that the income is to be treated as 'business income' has been upheld by the ITAT. Thus, the case laws relied upon by the assessee are not applicable to the case before us. 7.1 The main reason for treating rental income as 'business income of the assessee' by the A.O, is the admission of the assessee itself in its letters addressed to the A.O that its business was also of leasing or letting out of its properties. The Assessing Officer had relied upon the judgment of the Hon'ble Supreme Court in the case of Sultan Brothers (P.) Ltd., Vs. CIT (supra), wherein it was held that 'the intention or the primary object of the assessee while exploiting the property forms the nucleus of the issue'. He held that in the case before us, the primary intention was to commercially exploit the commercial properties developed by it, and hence such an intention leads to business activit....
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....e or otherwise acquire lands, houses, offices, workshops, buildings and premises for the purpose of that business. 7.2 Thus, from a literal reading of clause (4) of para III, it is clear that the assessee's business is to purchase, sell, develop, take in exchange or on lease, hire or otherwise acquire the properties and to carryon business as proprietors of lands and buildings and to-let on lease (emphasis given by us) or otherwise apartments therein and to provide for the conveniences commonly provided in flats, suits and residential business quarters. Therefore, the main business of the assessee is to develop the properties and also to let out the properties on lease. In the case of Chennai properties, the said company had two properties known as 'Chennai House Esplanade' Madras and 'Fishayen Estate' at South beach road, Madras which were let out. We find that the objects of 'Chennai properties' was only to develop and let out those two to enjoy the rental income while in the case of the assessee, it is to develop the properties and also let out the properties on rent. Therefore, we are of the opinion that the objects of the assessee company a....
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....the date such interior, fitting and fixture work is completed an certified by the Lessor. 7.3 We have also noticed that the lease rental is to be paid to the lessor only after the lessor i.e assessee herein, completes all the interior, fittings and furniture works and has provided the infrastructural facilities and materials to the lessees as per Annexure - A to the agreement. Therefore, it is not mere bare structure that is provided by the assessee to the tenant on rent but it is with furniture and fixtures along with power back up and AC facility. The Ld. Counsel for the assessee has relied upon various decisions in favour of his arguments let us therefore examine the applicability of the said decisions to facts of the case before us. i) The judgement of the Hon'ble Supreme Court in the case of Raj Dadarkar and associates (supra); In this case, we find that the Hon'ble Supreme Court was dealing with an assessee who was allotted, premises which was a bare structure i.e pillar / column, Sans even four walls. In terms of the allotment the assessee had to make entire premises fit to be used as market including construction of walls, construction of entire co....
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....decision has been admitted by the Apex Court as reported in [2017] 77 taxmann.com 288(SC). iv) The Hon'ble Punjab & Haryana High Court in the case of Batra Palace (P.) Ltd. Vs. CIT, reported in [2017] 79 taxmann.com 324 (P&H), held that where it is not shown that the intention was to let out the properties for a temporary period, it was the intention of the assessee to enjoy the rental income from the letting out the property and hence it was to be treated as income from house property. v) The Hon'ble Apex Court in the case of Sultan Brothers (P) Ltd., reported in [1964] 51 ITR 353 (SC) has held that where property has been let out fully equipped and furnished for running a hotel, it could not be said that letting of building amounts to doing business and rental income could not be assessed as business income u/s 10 of 1922 Act. 7.4 By applying the rationale of the above decisions, we find that the fact that the property let out is a commercial complex is not sufficient to treat the rental income therefrom as 'Business Income'. The tests to be applied are; 1) the tenure of the lease, 2) the objects of the company; 3) the intention of the c....