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2015 (8) TMI 886 - ITAT MUMBAI

2015 (8) TMI 886 - ITAT MUMBAI - [2015] 42 ITR (Trib) 596 (ITAT [Mum]) - 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. V .....

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o be assigned. - The facts of the case of the assessee before us are 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 com .....

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- ITA No. 640/M/2014, ITA No. 2196/M/2013 - Dated:- 14-8-2015 - Shri R. C. 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 a .....

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AO as company) engaged into the business of construction and maintenance 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 abo .....

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ea is given on rent wherein food court and shops are located. He has been 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, i .....

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acilities added to the venture which will be evident from the amount of investments 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 .....

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nities provided 1,78,07,853 Charges recovered towards common area maintenance 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 .....

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ries (P) Ltd. (2003) 183 CTR (Kar.) 275 (iv) S.G. Mercantile Corpn. (P) Ltd. 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. .....

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or occupation by the tenant. He has further opined that certain other provisions/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 a .....

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decided to commence business in partnership as Construction of Real Estate, 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, Fa .....

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siness/Business mutually decided from time to time between the partners. 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 faci .....

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assessee is also receiving substantial income for providing amenities/facilities 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 amenitie .....

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ity of construction of multiplex and cinema theatre, its maintenance and 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 co .....

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he Hon'ble Supreme Court in the case of Karnani Properties Ltd. v. CIT [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 conti .....

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upreme Court in the case of Chennai Properties & Investment Ltd. [2015] 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, wh .....

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ed out that the nature of dealings with the property would also be factor 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 .....

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