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TMI Blog2016 (5) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were leased out and the assessee has rental income from both the hotels. The assessee had leased the building and restaurant along with furniture and fixture. The Assessing Officer asked the assessee as to why the income from leased out hotels not be treated as "income from house property" and deduction under section 80-IC of the Income-tax Act, 1961 (in short "the Act") he disallowed as the assessee was not doing any business. The assessee replied to the Assessing Officer that both the hotels had been leased out to manager for smooth running of the business but the Assessing Officer noticed that no expenditure relating to running of hotels had been debited and the assessee had no role in running the business of hotel except getting reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also denied. 4. Aggrieved by this order of the learned Commissioner of Income-tax (Appeals), the assessee has come up in appeal before us. During the course of hearing before us, learned counsel for the assessee made elaborate submissions to the effect that the assessee is actually engaged in the business and rental incomes received from two hotels are its business income. Thus, the activities carried on by the assessee in building and giving up the hotels on lease is in line with the definition of business as provided under section 2(4) of the Act. It was observed that the assessee had made huge investment in Phase-I of the hotel, which includes six rooms and one restaurant. If the assessee would not have made conscious efforts to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax (Appeals). 6. We have heard the learned representatives of both parties, perused the findings of the authorities below and considered the material available on record. We have gone through various pages of the paper book filed by the assessee, on perusal of which we see that undisputed facts of the case are that the assessee-company has leased out two hotels namely Blossom and Bliss during the year under consideration. The investments have been made in the construction of the rooms, restaurant and electrical and electronic gadgets to run the hotels. The approval from the Government of Himachal Pradesh, Department of Tourism and Civil Aviation has also been received for both the hotels, to notify the bed capacity and rate of lodgin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enities are embedded in lease rental received by the assessee. Further, for giving it on lease the assessee has obtained approval from appropriate authorities to make the premises as "hotel". Converting a mere space into a compact asset called "hotel" and getting the lease rent out of it depends not on the occupation of premises by the assessee but also constant efforts put in by it to enable such conversion. It is a trite law by now, that merely the fact that a premises is being let out on rent does not mean that the income out of it is to be taxed as income from house property. It has to be seen that what is the primary object of letting out such property. The object, as it appears, in the present case, is exploitation of a commercial ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned under other objects in the memorandum of association, of the company and not in the main objects, is immaterial to decide the issue in question. 10. In a judgment of the hon'ble jurisdictional High Court in the case of Capital Foundry and Engineering Works v. CIT [1982] 138 ITR 833 (P&H), while allowing the appeal of the assessee, the hon'ble court referred to a judgment of an earlier Division Bench of the Punjab and Haryana High Court in Dal Chand and Sons v. CIT [1968] 69 ITR 247 (P&H), whereby speaking for the Bench, the hon'ble Chief Justice, Mehar Singh, observed as under (page 834 of 138 ITR) : "A business may be done in a number of ways and one of the ways is to run a commercial asset as such and another way ..... X X X X Extracts X X X X X X X X Extracts X X X X
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