TMI Blog2009 (4) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( i )On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in taxing an amount of Rs. 8,38,11,559 as income from house property instead of income from business. ( ii )On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming disallowance of depreciation on buildings in the amount of Rs. 8,34,89,010 failing to appreciate the fact that assets/premises were owned by the appellant and used for the purpose of the business of the appellant. ( iii )On the facts and in the circumstances of the case and in law and without prejudice to the appellant s contention that the entire income from operating of commercial complexes and business centre is business income, the learned Assessing Officer erred in not allowing deduction of operating expenses amounting to Rs. 2,00,48,959 in computing income from providing services at Commercial Complexes and Business Centre. He ought to have appreciated the fact that the above expenditure, forming part of total operating expenditure Rs. 3,84,60,790 was incurred for rendering these services." Revenue s appeal - ITA No. 3418/M/06 "( i )On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... briefly set out at paras 6 to 9 hereunder. 6. Assessee s business comprises of rendering of project management services, leasing of commercial premises as business centers and operation of commercial complexes. Out of gross receipts of Rs. 26,03,40,422, receipts from operation of commercial complexes were Rs. 14,30,18,286 and those from business centers were Rs. 2,28,31,598. Assessing Officer noted that the business center receipts arose from commercial buildings, namely, GE center at Delhi by providing specialized services/facilities including furnished executive suites, state of the art computer telephone integration, video conferencing, secretarial staff etc. Receipts from operating commercial complexes arose from GE Centers and Plazas at Delhi and Pune being state of the art commercial buildings and from providing hi-tech amenities and services like air conditioning, power back up, parking, water filtration plant with chlorination, security system through CCTV etc. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessee was not entitled to deduction for the related expenses as also depreciation as falling beyond the scope of section 24 of the Income-tax Act. 8. Assessee carried the matter in appeal to CIT(A) who confirmed, in principle, the findings of the Assessing Officer by citing more judicial pronouncements supporting the case of Assessing Officer. The crux of her finding is that the primary object of the assessee has to be ascertained. If the main intention is to let out the properties and not exploitation by way of complex commercial activities, the income, according to her, had to be assessed under section 22. According to her the intention of the assessee was to let out the properties. For arriving at this conclusion she referred to the agreements assessee had entered with its clients using the premises, which inter alia specified that that the entire hire charges for the duration of the agreements were to be paid in advance by the lessees. 9. Nevertheless, ld. CIT(A) directed the Assessing Officer 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 he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, water supply system, running and maintenance of the plaza and all common facilities and amenities including generating set, AC plant, electrical installations, plumbing, drainage etc. and ensuring provision for uninterrupted electricity supply. Learned AR specifically referred to the agreement for providing services placed at page 106 of the paper book which stipulated for payment at the rate of Rs. 49.74 per square foot for the services of air conditioning equipment with centrifugal chilling machines and computerized building management systems to control the functioning of the AC system as also power back up facility through DG sets. Then our attention was drawn to the business centre agreement at pages 117 and 118 of the PB which provided payments of separate consideration for use of space and for services. Nature of services mentioned were similar to those for the commercial complexes with further add-ons towards services of conference rooms, video conferencing, communication and secretarial services etc. Finally, the learned AR referred to the agreement with the property manager placed at page 143 of the PB and submitted that the assessee had engaged an agency who was ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, according to him, were materially different and therefore, the learned AR submitted that the finding rendered in the case of Shambhu Investment (P.) Ltd. ( supra ) could not be applied to assessee s case. Next case cited was of Honourable jurisdictional High Court in CIT v. Mohiddin Hotels (P.) Ltd. [2006] 284 ITR 229 (Bom.), rendered after the decision of Shambhu Investment (P.) Ltd. s case ( supra ), for the proposition that where infrastructural facilities were provided which were inseparable from letting of building, such composite income could not be assessed as income from house property. It was submitted that in assessee s case commercial infrastructure was provided to the occupiers in an inseparable manner and therefore, the income should not be treated as arising from letting of house property. To the same effect, the decision of the same Court in the case of CIT v. Associated Building Co. Ltd. [1982] 137 ITR 339 was also referred to. Next in line of reference was the decision of Kolkata Bench of the Tribunal in the case of PFH Mall Retail Management Ltd. v. ITO [2008] 110 ITD 337 for the reinforcing the same propositions. And lastly Ld. counsel relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was correct and proper as per law and on these grounds assessee s appeal should be dismissed and revenue s appeal be allowed. 14. We have considered the rival contentions very carefully. At the outset, we will deal with the submission of learned DR regarding the measurement of consideration for services with reference to the area occupied which fact, as per the learned DR was indicative of bifurcation of consideration for letting out itself into separate components. We are afraid we do not find this submission attractive for the reason that neither the lower authorities nor the learned DR have disputed the actual provision of services and amenities to the occupiers. Method of ascertaining the consideration, agreed to by the transacting parties for provision of services and amenities could not by itself be determinative of the nature of such consideration. 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 learned 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 , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 insepar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Agencies/Authorities and for all matters related to the smooth functioning of the said property. 12. Property Manager shall be responsible implementation and co-ordination for all common statutory property outgoings such as Municipal taxes, deposit of electricity bill, ground rent, insurance, etc. and will also be responsible for augmenting the water and electricity required for the said building. 13. That all legal expenses in the event of any dispute on account of work responsibility handled by the Property Manager will be the sole responsibility of the property manager including the cost of arbitration for setting such disputes." Aforesaid terms spell out that the commercial complexes and business centers required continuous management, monitoring and attention for provision of complex services. 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. 16. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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