Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (6) TMI 394 - ITAT DELHI

2015 (6) TMI 394 - ITAT DELHI - TMI - Rental income - taxable income from house property or business income - Held that:- No reasons to take any other view of the matter than the view so taken by us for the assessment year 2009-10 wherein held that is true that the commercial or office complex is on the same plot on which the hotel is situated but it is undisputedly distinct from, even if somewhat attached to, the hotel itself, and, therefore, the fact of the commercial complex being on the same .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Officer to tax the impugned rental income under the head 'income from house property'. - Decided in favour of assessee.

Disallowance of brand building expenses - CIT(A) deleted disallowance - Held that:- No reasons to take any other view of the matter than the view so taken by us for the assessment year 2009-10 wherin genuineness, revenue nature and business expediency of these expenses is accepted by the Assessing Officer himself. Respectfully following the said order, we uphold the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

learned CIT(A)'s order dated 4th July 2013, in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2010-11. We will take up these cross appeals together, for disposal by way of this consolidated order. 2. In the appeal filed by the assessee, the following grievance is raised: "The learned CIT(A)-II New Delhi has erred on fact in confirming the action of ACIT, CC -3, New Delhi under section 143(3) with regard to assessing the taxable income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

930, which has been offered to tax by the assessee as an income under the head 'income from house property', has rightly been taxed by the Assessing Officer under the head 'profits and gains of business and profession'. The dispute is, thus, confined to the head under which the income in question is to be taxed. 4. The relevant material facts, as culled out from the material produced before us, are as follows. During the course of the scrutiny assessment proceedings, the Assessin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n the commercial plaza to different parties". When Assessing Officer required the assessee to show cause as to why this income not be taxed as a business income, it was submitted by the assessee that "renting of commercial complex is one of the main objects of the company" and that this issue "was raised in earlier years also and finally settled by the ITAT Bench 'A' in which it was held that income from commercial complex is to be assessed as property income only&quo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dispute is with respect to taxability under the head 'profits and gains from business and profession' vis-à-vis taxability under the head 'income from house property'. As regards the reference to the main objects of the assessee company, the AO was of the view that this fact shows that "rental income from commercial plaza is to be taxed as business income more so in view of business objects for which company is established". The AO then proceeded to draw parity .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ut for a longer duration, there cannot be a treatment different from what is given to the rentals from letting of rooms. The AO also referred to, and relied upon, Hon'ble AP High Court's judgment in the case of CIT v. A P Small Scale Industrial Development Corpn. (175 ITR 352) and he also briefly referred to Hon'ble Karnataka High Court's decision in the case of Balaji Enterprises v. CIT (225 ITR 471). It was in this backdrop that the Assessing Officer rejected the stand of the a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n on lease from the Airport Authority of India. It was also noted that the tax audit report describes the business of the assessee as 'hotel with commercial complex'. He was also of the view that, as evident from the balance sheet and profit and loss account of the assessee, accounts of the assessee are 'single and composite'. It was also noted that all the fixed assets of the hotel as also the commercial complex are reported together and without any segregation. In the light of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Assessing Officer rightly taxed it under the head 'profits and gains from business and profession'. The assessee is not satisfied by the stand so taken by the CIT(A) as well, and is in further appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. The true test for as to whether income from letting of a property is to be taxed under the head income from house property .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion thereof the same must be considered as rental income or income from property" and "in case it is found that the main intention is to exploit the immovable property by way of complex commercial activities in that event it must be held as business income". There can be situations in which the assessee's main business may be to let out a property but when, in the course of such a business, the assessee lets out simplictor, without complex commercial activities, the income fr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the course of letting out the property, which is determinative of the head under which rental income is to be brought to tax. Hon'ble AP High Court's judgment in the case of AP State Small Scale Development Corp (supra), which has been relied upon by the AO as well, also has expressed similar views when Their Lordships observed as follows: .............We are in entire agreement with the observations of the Tribunal: "But the position is different where the income received is not f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he above propositions emerge from the decision of the Supreme Court in CIT v. National Storage (P) Ltd. (supra), affirming the decision of the Bombay High Court in the same case (1963) 48 ITR 577." 11. In CIT v. National Storage (P) Ltd. (supra), the assessee purchased a plot of land and constructed godowns for storage of films. There were 13 units and each unit was divided into four vaults having a ground floor for rewinding of films. The units were constructed in conformity with the requi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee was carrying on an adventure or concern in the nature of trade and the subject which was hired out was a complex one. Dealing with the activities carried on by the assessee in that case and agreeing with the view taken by the Bombay High Court, the Supreme Court held : "The assessee kept the key of the entrance which permitted access to the vaults in its own exclusive possession. The assessee was thus in occupation of all the premises for the purpose of its own concern, the con .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that an income from letting out can be brought to tax under the head 'profits and gains of business and profession' only when income received is not only for "letting accompanied by incidental services or facilities but the subject 'hired' is a complex one and the income obtained is not so much because of the bare letting of the tenements but because of the facilities and services rendered". The true test for deciding whether income is to be taxed under the head proper .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by and common space, recreational facilities, health club and swimming pool, telephone, fax and message services, butler and endless other services. These services, and complex business activity in respect thereto, are so vital that the importance of these services is as much as the property itself even when such services donot relegate the property let out into relative insignificance. On the other hand, even when property is let out in the course of the business or as a part of the core busine .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

perused the lease agreements filed before us and we find that the property is let out, without any dominant incidental services as part of this arrangement, for the purposes of running offices and commercial establishments. We donot find it a case of anything more than simple letting out of property where the emphasis is on the property itself rather than the services. It is true that the commercial or office complex is on the same plot on which the hotel is situated but it is undisputedly disti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t as a business by itself. 9. We have also noted that undisputedly in the earlier assessment years, coordinate benches have held that the income from letting out is in the nature of income from house property. Once there are categorical findings to this effect, and there is no dispute on that fact, it is not open to the lower authorities to still hold that the income can be taxed as business income because that aspect of the matter was not examined. We are unable to see any merits in this approa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ither judicially appropriate nor legally permissible. In this view of the matter, for the reason of consistency in approach and bound by the judicial precedent by the coordinate bench also, we hold that the income from letting out the property ought to have been taxed under the head 'income from house property'. 10. In view of the above discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee and direct the Assessing Officer to tax the rental income o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

income from house property'. The assessee thus succeeds in his appeal. 6. In the result, the appeal of the assessee is allowed. 7. In the appeal filed by the Assessing Officer, the only grievance is as follows: "That the learned CIT(A) erred in law and on facts of the case in deleting the addition of ₹ 16,72,367 made by the Assessing Officer on account of disallowance of brand building expenses." 8. Learned representative fairly agree that whatever we decide in the appeals fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tribution for brand building expenses payment to Carlson Hospital Marketing Pvt Ltd. It was noted that the assessee was paying ₹ 56,000 per month in this regard, and a further bill of ₹ 12,00,128 was raised on the basis of gross room revenue. It was also noticed that the assessee was asked to contribute 0.50% of gross room revenue, in addition to 0.25% of GRR and reservation fees of 0.25%. On these facts, the AO disallowed the 50% of the expenses as relatable to the subsequent assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sallowed and added back to the income of the assessee company. This will result in disallowance of ₹ 25,95,251 and the income of the company is enhanced by this much of amount. 15. Aggrieved by the stand so taken by the AO, assessee carried the matter in appeal before the CIT(A) who deleted the disallowance and observed as follows: The submissions of the appellant are considered. It is apparent that from FY 07-08, relevant to AY 08-09, the appellant is paying a higher sum towards its contr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ustained. 16. The Assessing Officer is aggrieved of the relief so given by the CIT(A) and is in appeal before us. 17. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 18. We find that the Assessing Officer has made the impugned disallowance on the short ground that the benefits of this expenditure will also be available in the subsequent years and since the assessee is admittedly following the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version