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2009 (4) TMI 549 - ITAT MUMBAIDetermination of “head of income” - business income or income from other sources - Method of ascertaining receipts - hiring of space - measurement of consideration for services - disallowance of depreciation - Assessee considered the receipts from operating the business centers and commercial complexes as business income and claimed the related expenses as business expenditure as also depreciation on the buildings and the related assets - AO, held that receipts were assessable as income from house property - also disallowed depreciation - CIT(A) directed AO to assess only so much of receipts as income from house property as were received by way of hiring of space, and the balance receipts from rendering of services were held to be assessable as business income. HELD THAT:- In our view, the basic principle permeating through all the judicial precedents cited by the lower authorities in their respective orders and those cited before us by the ld AR and DR, is that, if the main intention is to use the property as a business asset, as a handmaid to the commercial exploitation of the property, income therefrom should be assessed as business income. However, on the other hand, if the primary intention is to let out the property, simpliciter, the income has to be assessed as income from house property. We find considerable strength in the submission of the assessee that facts in its case were distinguishable from those in the case of Shambhu Investment (P.) Ltd.[2001 (3) TMI 77 - CALCUTTA HIGH COURT]. Separate agreements for provision of services and amenities clearly spell out intention to render commercial services to the occupiers. Further, advance received for the hiring of services for a period of 12 months was a normal commercial arrangement and bore no relationship with the cost of the property. Further the factum of the services rendered and the facilities provided to the occupiers was not in dispute at all. Agreement for hiring out the space and agreements for the services and the facilities were inextricably linked with similar tenures. It is clearly discernible for these agreements that the parties entered into the arrangement with the assessee with the intention of using the bundled services and amenities. Assessee was giving space with services and facilities which were varied and wide and such activities together would definitely constitute an organized structure for making profits, and would necessarily constitute a business. Thus, in our view the assessee had created a commercial infrastructure and the services rendered were complex commercial/business activity. As aforesaid a perusal of the agreements and the stipulations contained therein would not leave any doubt about the commercial character of the relationship between the parties as distinguished from that merely of a landlord and his tenant. Occupation of space was inseparable from the provision of services and amenities. Thus, the facts on record lead to the finding that the properties in question were business assets of the assessee and these assets were exploited by the assessee for the purpose of business by rendering complex commercial and business services as property managers in a systematic and organized manner and therefore, the case of the assessee merits acceptance. Accordingly, we hold as under : Assessee’s appeal is partially allowed due to the withdrawal of the third ground by the assessee itself. Apropos the first two grounds of appeal, AO is directed to treat the entire receipts from the properties as business income and allow depreciation thereon as claimed. In view of these findings, the modified ground of appeal is rendered infructuous. Both grounds in revenue’s appeal are dismissed. it is dismissed for the reason that, once the receipts are considered as under the head ‘Profits and Gains of business or profession’, there can be no disallowance of any administrative expenses. CO. of the assessee, has as a result become infructuous and therefore, stands dismissed.
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