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TMI Blog2015 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... verified the rent/ lease deed and it was noticed that both the above mentioned cases, receipt is depended on certain percentage of turnover of the lessee. The AO reproduced the relevant clause of lease agreement pertaining to Hari Bhawan as under:- ''3. The total license fee payable by the licensee to the licensor would 20% of gross receipt in respect of the licensed portion in each financial year on present rooms. This would increase to 25% when the number of rooms is increased to more than 7 rooms. 20. the licensee shall pay the license fees every month by preparing a statement of turnover which can be checked by licensor at any time. He may post/ send a person to check the turnover statement and the sales of the hotel at all the times. The statement shall be audited by the auditor appointed by the licensor.'' Further the title lease deed of Hari Bhawan says 'Hotel operating license agreement. The AO held that this clearly says that it is in the nature of agreement to operate the hotel not simply a rent agreement. Further supplement, hotel operating licensing agreement was executed on 5-09- 2003 when the licensee was converted into a firm. In the said agreement, relevant clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lessee but merely did not earn from house property as an asset. Rather assessee was having percentage share in the gross receipt of income. In this case, the assessee leased the hotel to other party would have made it as a brand wherein assessee was having its rights reserved to receive certain percentage of gross receipt. Moreover, as per clauses of the lease agreement, assessee made himself entitled for interfering and examining the books of account and bills and voucher of the lessee's business. Therefore, assessee leased out its unit for commercial purposes wherein he kept his rights reserved to examine and interfere in the business of lessee's business. Thus basic motive of the assessee was not merely to use his asset as owner but rather it was sort of business adventure. While deciding the head of income from letting out of house property, it was to be seen that whether the asset was being exploited commercially by letting out or whether it was being let out for the purpose of enjoying the rent. The distinction between the two is a narrow one and has to depend on certain facts peculiar to each case. So long as the assets are used as business assets, it is irrelevant whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first two grounds of appeal are decided against the assessee. Regarding the allowance of depreciation, it is pertinent to note that as per the observation of the AO in the assessment order in spite of repeated opportunity, the assessee failed to file any details regarding its claim of depreciation. Similarly, during the course of appellate proceedings, no details were furnished regarding the depreciation allowable to the appellant. Therefore, the depreciation of Rs. 1 lac allowed by the AO appears to be reasonable and is confirmed. Thus the grounds of appeal no. 3,4, & 5 are decided in favour of the Department.'' 2.4 Now the assessee is before us. The ld. AR of the assessee reiterated the arguments as made before the ld. CIT(A) and further argued that these properties which leased out belonged to Shri Mahendra Singh, Shri Shashank Nath Singh, Shri Tirtath Raj Singh and Smt. Sunita Sisodia was looking after the collection and it is the basis of the lease rent. There is no reason to believe that the rent received was to be treated as business income. Earlier the said building was used by the petitioner for his residence purposes. There is no interference in the hotel activities bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case as compared to earlier years. Even though, principle of res judicata does not apply to income-tax proceedings, but at the same time principles of consistency have to be followed while administering justice. Therefore, the ld. CIT(A) was justified in directing the AO to tax warehousing charges under the head 'Income form house property' and allow deduction as per Section 24 after verification. The ld. AR of the assessee further relied on the case of Shambhu Investments (P) Ltd. vs. CIT , 249 ITR 47 (Cal.) wherein the Hon'ble High Court considered the issue of furnished premises let out on monthly rent basis to various parties alongwith furniture, fixtures, light, air-conditioners etc. for being used as 'table space'. The assessee was also providing services like watch and ward staff, electricity, water and other common amenities to the occupiers. These services are not separately charged. Entire cost of property already recovered by way of interest free advance by the assessee. Only intention was to let out the portion of premises to respective occupants. Income derived from letting is assessable as income from property and not business income. Thus the ld. AR of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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