TaxTMI 
TaxTMI 
2011 (1) TMI 763
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....case? (c) When any property is taken on lease for running a hotel and restaurant, and some portion of it is further let out for avoiding losses and expenditure, whether it can be said that this activity was not a business activity and income derived from sub-letting is not a business income? (d) Whether the Income-tax Appellate Tribunal was justified in reversing the well-reasoned order of Commissioner of Income-tax (Appeals)? (e) Any other substantial question of substantial law with the leave of the Hon'ble Court?" 3. The assessee received income from letting out of a building but sought to treat the same as business income. However, the Assessing Officer treated the same as rental income relying upon judgment of Hon'ble Supreme Court in Shambhu Investment (P.) Ltd. v. CIT [2003] 263 ITR 1431. The CIT(A) reversed the said view and upheld the plea of the assessee as follows :- "I have considered these submissions. The actions of the appellant certainly partake of those of a businessman trying to minimise the expenditure reduce the losses due to non-completion of the hotel/restaurant project. This is a finding of fact and is borne out by t....
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....also supports its stand, as also in the case of CIT v. Shree S. Shakti Mills (P.) Ltd. [1999] 239 ITR 120, 131 of the Calcutta High Court wherein rental income from the superstructure on lease-hold was held to be business income. Viewed in totality, all the facts support the stand of the appellant. No house owner would leave a plot of land and then construct a building and agree to remove it the conclusion of the relatively short lease period of 9 years. These activities partake instead of a business exploitation of an asset. It is also not necessary for the appellant to have a number of activities or sources of income, as per the Assessing Officer, to prove that it is commercially exploiting one of the assets. There need be only one single asset for it to be exploited commercially and for the income to be assessed as income from business. In view of the above detailed discussion, the Assessing Officer's action in assessing the income as income from house property cannot be upheld. Hence, ground of appeal No. 2 is allowed and Assessing Officer is directed to treat the income as business income." 4. The Tribunal set aside the above finding and restored the view taken by the Asses....
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....t included that the assessee was permitted to raise construction on the plot, with the condition that the assessee would remove the said structure at its own costs and would not be entitled to any compensation on this account. On 21-9-2001, the assessee-company entered into a lease deed with CFCFIL, giving the building constructed on the aforesaid plot to CFCFIL, for an initial period of three years, as per the following terms and conditions :- "(i) The lease agreement is for initial period of three years commencing from 21-12-2001 and shall be extended for another term of three years on 20 per cent enhancement in the existing rent. As per agreement, the lease shall stand terminated on expiry of nine years and the assessee-company will be given back the vacant premises and terrace thereon. (ii) Premises will be for commercial use only and if any charges/duties/taxes/penalties etc., imposed by any authority will be born by the tenant in this case i.e., Association India Financial Services Pvt. Ltd. (presently known as City Financial Consumer Finance India Ltd.). The Corporation Tax at the rate of 12 per cent approximate will be borne by the tenant company."....
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....in the assessment order. The learned CIT(A) has also taken objection to such fact. However, in the assessment order, in the narration of the contentions of the assessee too, it does not come out that the assessee ever made out any such case before the Assessing Officer. Before us, on our asking the learned counsel for the assessee could not deny that no such argument was raised before the Assessing Officer. Further, the stand of the assessee that it was not the owner of the property, has also been proved to be incorrect. Before the Assessing Officer the assessee denied such ownership. However, it was found in the agreement with CFCFIL, the assessee had stated that it was absolute owner in possession of the property in question. Further, the assessee had also claimed depreciation and expenses on account of repairs of the building. As such, the assessee was undisputedly the owner of the premises leased out, so far as regards income-tax purposes and was to taxed in respect the annual value of such building, under section 22 of the Act. 14. The assessee having given an unfurnished accommodation on lease also does not help the case of the assessee. The assessee has tried to raise this ....
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....e contention of the assessee that it has given on rent the building as temporary arrangement is not only misleading but also untrue as the conduct of the business of the company so far." 17. From the above, it is evident that the assessee did not carry on the business of running of hotel/restaurant during the year. Though, as rightly observed by the learned CIT(A), the Assessing Officer went wrong in observing that the main object of the assessee-company did not include hotel/restaurant business, the fact remain that even though this was the one of the main objects of the assessee-company, it did not carry on any such business." 5. We have heard learned counsel for the parties. 6. Learned counsel for the assessee submitted that the intention of the assessee in letting out the property was to minimise its business loss and thus transaction of letting out could be treated as part of business activity of the assessee as held by the CIT(A). Letting out was for a temporary period, pending obtaining of Pub licence by the assessee. It was, therefore, different from a transaction of letting out of property with a view to earn income from the property. In these circumstances, the view ta....
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....has to maintain a staff and to incur expenditure. But, on that account, the income derived from letting out property belonging to the appellant does not become "profits or gains" from business within the meaning of sections 6 and 10 of the Income-tax Act. By section 6 of the Income-tax Act the following six different heads of income are made chargeable : (1) salaries, (2) interest on securities, (3) income from property, (4) profits and gains of business, profession or vocation, (5) income from other sources and (6) capital gains. This classification under distinct heads of income, profits and gains is made having regard to the sources from which income is derived. Income-tax is undoubtedly levied on the total taxable income of the taxpayer and the tax levied is a single tax on the aggregate taxable receipts from all the sources; it is not a collection of taxes separately levied on distinct heads of income. But the distinct heads specified in section 6 indicating the sources are mutually exclusive and income derived from different sources falling under specific heads has to be computed for the purposes of taxation in the manner provided by the appropriate section. If the income fro....