TMI Blog2015 (9) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue are dismissed. - Decided against revenue. - ITA No. 382/PNJ/2014 - - - Dated:- 9-7-2015 - N. S. Saini, AM And George Mathan, JM,JJ. For the Appellant : Shri V Srinivasan, CA For the Respondent : Shri B Balakrishna, DR ORDER Per N. S. Saini, Accountant Member This is an appeal filed by the Revenue against the order of Commissioner of Income Tax(Appeals), Panaji, dated 06/08/2014. 2. Ground Nos. 1 and 2 of the appeal reads as under:- 1. Under the facts and circumstances of the case, the CIT(A) has failed to appreciate the fact that the assessee had never started the business and the Hon'ble Bombay High Court in the case of CIT Vs. Mohiddin Hotels Pvt. Ltd and Anr. has clearly held that if the assessee had never started the business, an inference is to be drawn that the assessee intended to exploit the property and not the business asset? 2. Whether the CIT(A) was right in concluding that the assessee had intention to run the business of hotel and in allowing the benefits of depreciation to the assessee under the facts and circumstances of the case? 3. Brief facts of the case are that the company is managed by three Directors namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en given for a period of 10 years and that 99% shares of the assessee company are held by a foreigner, who does not reside in India. Thus, the Assessing Officer has tried to prove that the assessee does not intend to do business and that he is only interested in earning rental income on a long term basis. Commissioner of Income Tax (Appeals) further observed that as per the terms of agreement between the assessee company and M/s. Shunya Project Consultancy Pvt. Ltd., all the rooms in the hotels were furnished by the assessee company which included air conditioners, generators, crockery, computers, telephones, bed-sheets, blankets, face towels etc. Even the incidental expenses like insurance, repairs and maintenance etc. were borne by the assessee company. Further, there are common Directors in the assessee's company as well as M/s. Shunya Projects Consultancy Pvt. Ltd., who actually manage the business of the hotel. The assessee's intention becomes clear from the Memorandum of Association, wherein the main objective of the assessee is to organize, maintain, operate and run heritage, leisure house, holiday homes, resorts and boarding and lodging house. 6. He, therefore, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner (Appeals). The Department appealed to the High Court which held that the income derived by letting out of the properties would not be income from business but could be assessed only as income from house property. On appeal by the assessee: Held, allowing the appeals, that letting of the properties was in fact the business of the assessee. The assessee, therefore, rightly disclosed the income under the head Income from business . It could not be treated as Income from house property . 9. Further, relied on the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Mohiddin Hotels P. Ltd. and another reported in (2006) 284 ITR 229 (Bom.) , wherein it was held as under:- An agreement dated February 1, 1987, was entered into between the asses-see and a company, S. The agreement recited that the assessee had recently completed construction of a building comprised of a ground floor and three upper floors on a plot of land situated in the town of Vasco da Gama with a view to running a hotel therein. The hotel at the time of the execution of the agreement was ready for the purpose of commissioning the hotel business. S possessed the necessary know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee; that S shall be at liberty to replace any fixtures or fittings and items of machinery and other equipment affixed to and/or existing in the said building after intimation to the assessee; that S shall not be liable to render accounts to the assessee and that the agreement was not intended to transfer the hotel to S, but to improve the management thereof, so as to run it efficiently and profitably. The Assessing Officer treated the income received by the assessee in the previous year relevant to the assessment year 1990-91 from S in the form of guarantee income as income from house property . The Tribunal however held that it was business income. On appeal to the High Court: Held, that from the facts found by the Tribunal as well as the agreement dated February 1, 1987, it was more than clear that the agreement between the assessee and S related to the building that was ready for the purposes of commencing the hotel business. The agreement did not relate to a bare tenement but was in respect of the hotel. That the said hotel was complete with fittings and fixtures and ready for commencing the business was apparent from the agreement. The fact that all licences, pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the said two properties under the head 'income from house property' by placing reliance on the decision of the Hon'ble Bombay High Court in the case of Mohiddin Hotels P. Ltd. (supra) on the ground that the Hon'ble High Court has held that if the assessee had never started the business, an inference may be drawn that the assessee intended to exploit the property and not the business assets. According to the Assessing Officer, the assessee had not started the business and therefore, the intention of the assessee was not to exploit the assets as business assets but to earn rental income, and therefore, assessed the income from these properties under the head 'income from the house property'. We find from the reading of the order of the Hon'ble Bombay High Court in the case of Mohiddin Hotels P. Ltd. (supra) that the Hon'ble High Court has observed that the period for which the business assets are let out is always a relevant factor in finding out whether the intention of the assessee is to let out the business assets permanently and if the assessee had never started the business, an inference may be drawn that the assessee intended to exploit the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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