TMI Blog2011 (12) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... , confirming the assessments as framed u/s. 143(3) of the Income-tax Act, 1961 ('the Act', hereinafter) vide orders dated 7.12.2006 and 19.12.2008 for the successive years respectively. The subject matter of the appeals being the same, the same were taken for hearing together, and are being disposed of vide a common, consolidated order. 2. At the very outset, the ld. AR clarified that the absence of any appeal by the assessee for the intervening period, i.e., 2005-06, is for the reason that the return for that year was accepted by the Revenue as such u/s. 143(1), and not subject to scrutiny assessment. 3.1 The facts of the case are that the assessee is a company in the hospitality business. It entered into three separate Agreements of even date, i.e., 03.8.1999, with M/s. Tata Sons Limited (acting through its Division 'Tata Consultancy Services, Mumbai ('TCS' for short)). The first agreement was for construction of hostel/transit facility, so as to provide residential accommodation for it's (the latter's) trainees/new recruits, being trained at Trivandrum for the time being. The assessee, stated to be engaged in providing hostel facilities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2 While the assessee returned the entire receipts, i.e., from the said three agreements, as a part of its business receipts for the year, the Revenue has segregated the lease rent of hostel building and, accordingly, assessed it as income from house property. The assessee's case is that the three agreements constitute a part of a composite arrangement entered into by it with the TCS, i.e., for provision of hostel facilities. Accordingly, the same constitutes a part of the same indivisible 'business', and there is therefore no scope for artificially segregating the two, i.e., one qua house property, and the other qua business. The Revenue's case is that the three agreements, though running concurrently, reserves separate rights and duties for the parties there-to. As such, where the consideration for the lease has been separately defined and enumerated, the same would only constitute income from house property. In fact, even where there is a composite agreement, so that an indivisible consideration is provided therefor, i.e., the rent received/receivable from the house property, as well as the provision of amenities/facilities, the higher courts of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as to whether it is a case of inseparable letting, or not so. We say so as the third agreement, i.e., for the provision and maintenance of amenities and facilities, is also nothing but a lease agreement; its clause (1)(a) reading as under:- 1(a) The Lessor hereby agrees to provide the Lessee and maintain in the premises demised the amenities and facilities specified herein for the duration of the lease upon the lessee paying the monthly charges hereunder reserved. The law, per s. 56 (2)(iii), reproduced hereunder, provides an exception to income from letting of house property being assessable as 'business income' or as 'income from other sources', where the same arises integrally to the letting of a plant, machinery, or furniture. This is as, even as explained by the apex court per its five-member constitution bench decision in the case of Sultan Bros. (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC), is for the reason that it then becomes a new kind of income, not covered u/s. 9 (of the 1922 Act, corresponding to s. 22 of the 1961 Act). That is, income, not from the ownership of the building alone, but an income which though arising from building, would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Simply put, would the assessee-company undertake the construction of the hostel premises, if not accompanied by the lease agreement in its respect, as well as for the provision of facilities to the lessee-company. In our view, the answer, as borne out of the agreements between the parties and their conduct, is clearly in the negative. In fact, in our view, there is essentially only one and not three, agreements. The 'agreement for lease' and the 'agreement for provision of facilities' form part of the construction agreement, the parent agreement, as abundantly clarified vide clause (6) thereof. The preamble to the leas agreements, as well as the clauses thereof, which we may advert to for the purpose, would clarify this beyond doubt: Agreement to Lease 'AND WHEREAS it was one of the conditions of the Agreement of construction that upon the hostel facilities being completed the Lessor will grant unto the Lessee a lease of the hostel facilities (hereinafter called 'the premises') subject to the period of lease and payment of rent hereinafter reserved and shall provide in the premises the amenities and facilities and maintain the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l facilities to TCS, the lessee, over a ten year period. The three agreements have to be considered as a part of one composite arrangement, and only for the provision of hostel facilities by the assessee to the TCS for a period of 10 years. Maintaining and operating of a hostel as in the case of a lodge, and which the ld. AR was at pains to emphasize before us, with reference to the decision in the case of Joseph George Co. v. ITO [2010] 328 ITR 161 (Ker), is only a business, even as we may clarify that the said decision does not have a direct application in the facts and circumstances of the present case. In the instant case, therefore, it is definitely a case of the answers to the first two questions (stated at para 4.3 above) being decidedly in the affirmative, and of the third, in the negative. True, where there is a long term understanding as in the instant case, being for a period of 10 years, it would give rise to a presumption of being only a rental income. So, however, the lease period matches with the period for which the hostel facilities are to be operated and provided by the assessee. As such, the regularity of income, which the ld. DR would emphasize, would bea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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