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M/s. Shreeji Exhibitors Versus Asstt. Commissioner of Income Tax, Central Circle -41, Mumbai

2015 (8) TMI 886 - ITAT MUMBAI

Income/loss from letting out of multiplex/shopping mall and cinema theatre along with amenities - “Income from house property’ or “business income’ - assessee is a partnership firm constituted by the partners for carrying out the business activity - Held that:- As decided in Chennai Properties & Investment Ltd. case [2015 (5) TMI 46 - SUPREME COURT] relying on earlier Judgment in the case of Karanpura Development Co. Ltd. Vs. CIT [1961 (8) TMI 7 - SUPREME Court] held where there is a letting out .....

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on better footings. The assessee’s objects are not in respect of letting of any particular property, but it has the main objects of acquiring, constructing, operating and maintaining of the multiplexes, business center, marriage halls etc. The very object is the commercially exploitation of the properties. Besides that the assessee is also providing hosts of amenities and facilities, as discussed above, which amounts to composite business activity. - Thus the issue is squarely covered in fav .....

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. Sharma And Shri Sanjay Garg,JJ. For the Petitioner : Shri V. Mohan, A. R. For the Respondent : Shri Neil Philip, D. R. ORDER Per Sanjay Garg, Judicial Member: The above titled appeals have been preferred by two different assessees against the orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 10.12.2013 and 26.12.2012 respectively. Since the facts and issues involved therein are identical in nature, hence the same were heard together and are being .....

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of mall, letting out premises on lease and providing amenities therein and exhibition of feature films at multiplex. The assessee constructed a Multiplex complex in Bhayander (West) comprising of multiplex theatres, shops, entertainment and game zone, kiosk, food court, etc. which was commissioned in the previous year ending on 31.03.2009 relevant to the assessment year 2009-10. The assessee offered income/loss from the above activity as under the head Income from business or profession whereas .....

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further explained that since, on the films exhibited in the Multiplex screens, entertainment tax is exempted for a period of 5 years from the date of commencement, the complex is required to comply with certain requirements with regard to facilities that are mandatorily to be provided and the entire complex is provided with amenities such as open area as per Municipal Regulations, escalators, air-conditioning facilities, interiors and electrical fittings as per the specifications of the occupan .....

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nvestments made in construction and assembly of amenities that were to be made available to tenants. The following amounts were incurred towards capital cost for providing various amenities: Air-Conditioners Rs.3,54,40,455 Electrical Fittings Rs.6,38,53,663/- Escalator Rs.1,38,93,405/- Special Tiling Rs.1,09,81,232/- Hardware Materials ₹ 64,75,106/- Rs.13,06,43,861/- The assessee has further explained that besides the above, substantial portion of Iron and Steel cost, Cement cost and labou .....

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ance Godown rent 1,13,53,129 Rental from Kiosk 2,78,000 Compensation for use of antenna 9,28,700, 15,00,396 4,63,55,104 Advertising bill receivable 28,21,768 Corporate membership 31,000 General membership 31,000 Net collections 3,63,11,865 TDO cards 1,50,000 Theatre maintenance charges 27,42,820 Discount 1,871, 8,84,45,428 The assessee s stand has been that with regard to the entire income from the complex, the same should be assessed under the head 'Business' since as the object behind .....

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td. vs. CIT 1972 CTR (SC) 8 (v) PFH Mall & Retail Management Ltd. vs. ITO, Ward 8(3), Kolkata (112 TTJ 523) (Honble ITAT, Kolkata) (vi) ITO, Ward 19(3)(4), Mumbai vs. Shanaya Enterprises in ITA No.3648/M/2010 dated 30.06.2011 (Hon'bte ITAT, Mumbai) (vii) Mukherjee Estates (P) Ltd. vs. CIT (244 ITR 1) (viii) DCIT, Circle-3, Pune vs. Magarpatta Township Development & Construction Co. in ITA No.822/PN/2011 and C.O.No.04/PN/2012 dated 18.09.2012 (Hon'ble lTAT Pune) (ix) CIT vs. Runwa .....

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visions/facilities viz. provision for firefighting equipments, sprinklers, hydrants, elevators etc. have been provided as required under rules and regulations of the local authority/municipal authority. He has further observed that even if certain cosmetic additions viz. false ceiling or glass facade etc. have been made to the building they are in the nature of cost incurred on the improvement of the building. The alleged amenities have no independent existence without the building which has bee .....

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te, Multiplex Centre, Entertainment Complex, Commercial Centre, Marriage Hall, Restaurant, Builders and Land Developers and operation and management of Multiplex, Restaurant and Marriage Hall etc. and/or any other Business/Business mutually decided from time to time between the partners under the name and style of M/s. Shreeji Exhibitors with its place of business at Old S. No.677 (7A), New S.No.277, Near Timba Hospital, Fatak Road, Bhayander (West), Dist. Thane.401 101. (emphasis supplied) Furt .....

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6. A perusal of the above reveals that not only the very purpose of formation of the assessee firm but also its objects specifically include the construction of Multiplex Center, Entertainment Complex, Commercial Center and their operation and management. 7. The otherwise undisputed facts of the case are that the assessee along with leasing of the premises is also earning substantial income from providing amenities and facilities. Such facilities are not the basic facilities required for occupat .....

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ilities to the occupants/tenants. The assessee s activity thus can not be said to be mere letting of the building owned by it but its activity is a business activity of construction of mall, maintaining it, leasing the shops/ area for the purpose of commercial exploitation of the asset, arrange and provide the facilities and amenities not only to the occupants/lessees but also to provide and maintain facilities and amenities in the common areas for the attraction, convenience and comfort of the .....

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providing amenities and facilities therein, thus can not be said to be mere letting out of the property but in our view is a composite business activity. Merely because income is attached to a property it cannot be a sole factor for assessing such income as income from house property and it has to be seen that whether it was the primary objective of the assessee to exploit the property in a simple manner or to exploit it commercially i.e. to exploit it by way of complex commercial activities to .....

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T [1971] 82 ITR 547 has laid down the precise tests that are necessary to determine whether the services rendered by an assessee to its tenants/recipients of service, are in the nature of business activities and income generated therefrom assessable as business income, or not. The Hon'ble supreme Court has expressed the view that if the services rendered by the assessee are the results of its activities carried on continuously in an organized manner, with a set purpose and with a view to ear .....

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5] 373 ITR 673(SC) has noted that in its (Supreme court) earlier Judgment in the case of Karanpura Development Co. Ltd. Vs. CIT 44 ITR 362 (SC), the position of law on this issue has been summed up in the following words:- "As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving .....

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to determine whether the activities fall for consideration under the head 'business income'' or "house property income". The Hon ble Supreme Court thus noticed the aforesaid principle and applied the same to the facts of the case before it. The facts of the case before the Hon ble Supreme Court were that as per the memorandum of association, the main objects of the appellant company was to acquire and hold the properties known as Chennai House and Firhavin Estate both in C .....

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