TMI Blog2016 (2) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... dication. 2. The facts of the case as emanating from the records are: The assessee is engaged in the business of leasing out of shop space (units) in the Shopping Mall. The building where the Shopping Mall has been developed was allegedly purchased by the assessee to earn income by letting out of the property. The assessee in the return of income for the impugned assessment years had declared the income received from leasing out of shops/units to various persons as business receipts. The assessee had also claimed depreciation on the building. Apart from the rental income the assessee has received certain charges from the lessees viz. Common Amenities, maintenance Charges, Advertisements and Miscellaneous receipts etc. During the Course of scrutiny assessment proceedings the Assessing Officer rejected the claim of assessee in treating the income from leasing of shops as business receipts. The Assessing Officer held that the income received by the assessee from leasing of shops is to be assessed under the head Income from house property . Accordingly, the Assessing Officer disallowed the claim of depreciation on the building. Further, the Assessing Officer brought to tax the rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. AR referred to profit and loss account for year ended 31-03-2008 at pages 48 and 49 of the paper book to show that the assessee has incurred expenditure on account of housekeeping expense, securities services, and diesel for DG set etc. The ld. AR in order to support his submissions placed reliance on the following decisions: i. Karnani Properties Ltd. Vs. Commissioner of Income-tax, 82 ITR 547 (SC); ii. Assistant Commissioner of Income Tax Vs. Saptarshi Services Ld., 265 ITR 379 (Guj.); and iii. PFH Mall Retail Management Ltd. Vs. Income-tax Officer, 110 ITD 337 (Kol.). 4. On the other hand Shri Dheeraj Kumar Jain representing the Department vehemently supported the findings of the authorities below. The ld. DR submitted that the agreement entered into between the assessee and various parties to whom shops have been rented out shows that the assessee is receiving consolidated monthly rent from the occupants. The rent includes charges for the amenities provided by the assessee. Therefore, the income from renting of the shops has to be assessed under the head, Income from House Property . A further perusal of records show that the TDS has been deducted under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shopping Mall is given in Clause 7 of the agreement. Illustrative list of the facilities/amenities provided by the assessee to the Licensees are given here-in-under: i. Lighting arrangement for common areas like passages, atrium, rest rooms, loading / unloading areas, waste disposal areas, staircase, basements, car parking areas, compound, parking etc. ii. Installation of Water cooled Split Air conditioners with compressors, condensers, fan coil units ducting systems (HVAC) more particularly defined in ANNEXURE- B . iii. Installation of good reputed brand elevators for vertical movement. iv. Installation of electronic security system in the common areas, atrium and surrounding the main Shopping Mall within the plot boundaries. v. Installation of Customized Fire Hydrant Sprinkler system. vi. Installing the central garbage collection disposal system. vii. Provision of separate area for garbage collection, loading / unloading docks and logistics area. viii. Installation of common dining arrangement for occupants, their staff workers with tables, chairs, benches, etc. ix. Installation of common water purifier and dispensing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous decisions rendered by the Hon'ble High Courts and the decision of Hon'ble Supreme Court of India in the case of Shambhu Investment (P) Ltd. Vs. Commissioner of Income Tax (supra) has held that the income from letting out of shops in the shopping complex is a business income. The relevant extract of the findings of the Tribunal are reproduced here-in-under: 6. We have carefully considered the relevant facts, the arguments advanced by the rival parties and the decisions cited. In our view, before arriving at any conclusion about the particular head under which the income derived by the assessee is required to be assessed, it is necessary to examine the relevant provisions of the agreements that the assessee had entered into with the users. In all the agreements the assessee is shown as the owner of the premises in which the shopping malls/business centres are located and the other party to the agreement is shown as the user. The assessee, as owners of the premises, has the responsibility of providing security, communication and other services as specified in the agreements. The agreements with Pantaloon Industries Ltd., PFH Entertainment Ltd. and Pantaloon Fashions ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of ground rent/lease rent, maintenance charges, municipal and other taxes, rates and cesses as well as other such outgoings. However, in case of increase in assessee's liabilities on account of increase in taxes, charges, dues or liabilities payable to any governmental body or authority, the fees payable by the users for enjoying services and facilities provided by the assessee may be proportionately increased at the discretion of the assessee. Thus the assessee has contractual obligation for providing services to its customers (users) like electricity, telephone, watch and ward, etc. As per the terms of the agreement the customers had no right of occupancy. They have only limited access to use the space for the purpose of their business, and that too, in respect of certain activities, during the specific hours of the day only. Furthermore the keys of the premises are kept by the assessee meaning thereby that the premises are fully in control of the assessee. 6.1 At this juncture it would be pertinent to focus our attention to some undisputed facts pertaining to this case. The assessee has given up its business of trading in textiles and embarked on setting up shop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely earning of rental income. The various features of the agreements, as stated above, also indicate that there is much more than letting out of the properties simpliciter for earning rental income. 6.2 The Hon'ble Bombay High Court in the case of CIT v. National Storage (P.) Lid., while laying down the principles to be followed in determining the particular head under which an income is to be assessed, observed: In cases where the income received is not from the bare letting of the tenement or from the letting accompanied by incidental services or facilities, but the subject hired out is a complex one and the income obtained is not so much because of the bare letting of the tenement but because of the facilities and services rendered, the operations involved in such letting of the property may be of the nature of business or trading operations and the income derived may be of the nature of business or trading operations and the income derived may be income not from exercise of property rights properly so-called so as to fall under section but income from operations of a trading nature falling under Section 10 of the Act; The facts in the instant case undoub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for providing shopping facilities to customers is also a commercial activity. So applying the above principles laid down by the court the irresistible conclusion would be that the income derived by the assessee from the shopping malls/business centres is to be assessed as business income. 6.5 In the case of Saptarshi Services Ltd. (supra), the Hon'ble Gujarat High Court summarily dismissed the appeal of the revenue against the decision of the Tribunal that the income from developing the property as business centre constitutes business income. The decision of the Tribunal is based on the finding that the assessee is providing a number of services, e.g. having an EPABX machine facilitating telephone services to the occupants of the business centre, services of lift, services of receptionists, secretarial services, data processing, conference room, etc. Thus what the assessee is providing in reality happens to be a working place along with the aforesaid facilities. It is apparent that the various services and facilities provided by the present assessee are very similar in nature. Therefore, it can be justifiably inferred that here too the assessee is actually providing a wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same. The way the agreements have been drafted gives ample evidence of such intention of the assessee. The fact that the Apex Court held that the income earned by Shambhu Investment Pvt. Ltd. is assessable as property income has no relevance in the facts and circumstances of the present case. Because in that case the facts showed that the main intention was to earn rental income. That was why the entire cost of the property was recovered from the tenants by way of interest-free advance. In the instant case, on the other hand, the assessee had taken bank loans to finance his projects like any other businessman. As discussed hereinabove, every action of the present assessee appears to be with the sole object of commercial exploitation of the premises. 6.8 After carefully analysing the facts of the instant case, and following the consensus of judicial opinion on the issue, our considered view is that, the mere fact that the income is attached to immovable property, cannot be the sole criterion for assessment of such income as income from house property. It is necessary to dig further to find out what is the primary object of the assessee while exploiting the property. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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