TMI Blog2011 (1) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... consisting of three in Mumbai and one in Park Street, Kolkata. It also owned three properties, one in Jolly Maker Chamber, Nariman Point, Mumbai; the other in Movie Tower Office, Oshivara, Andheri, Mumbai; and the third in NCL (8th Floor), Bandra Kurla Complex, Mumbai. All the properties both the owned properties as well as the properties taken on rent were let out to different concerns in consideration of service charges which amounted to ₹ 1,30,44,564/- for the year ended 31.03.2003. According to the assessee, the properties were not simply let out but they were converted into business centres and were let out to the concerns who used them and paid service charges. In accordance with this stand, the assessee declared the entire service charges as Business income . The Assessing Officer, however, took the view that so far as the three owned properties are concerned, the service charges cannot be assessed as Profits and gains of business but should be assessed under the head House property . He examined the business service agreement and held that the premises were let out on monthly rent basis along with the furniture fixtures, lights, air-conditioners, etc. and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relates to the NCL (8th Floor) property. It measures about 6000 square feet, out of which 150 square feet was retained by the assessee for administrative purposes. The balance area was let out to M/s Seaworld Shipping and Logistics Private Limited (hereinafter referred to as Seaworld ). The assessee was to furnish / air-condition the premises in terms of the requirements of Seaworld. It was provided that all the furniture, airconditioning plant and other infrastructural facilities provided by the assessee shall always remain the assessee s property. The assessee was required to spend ₹ 1.25 crores for furnishing / air conditioning the office in terms of the requirements of Seaworld, on the specific understanding that in the event of the arrangement being terminated within three years, Seaworld would pay 50% of the amount to the assessee. If the agreement is terminated between three and four years, 25% will be recovered by the assessee. Seaworld was permitted to have access to the centre and occupy and use the furniture and infrastructural facilities for itself and its bona fide employees, servants, agents, visitors, etc. Seaworld was permitted also to use the furniture, air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and setting up markets. In coming to this conclusion the Supreme Court relied on its earlier decision in the case of United Commercial Bank Ltd. vs. CIT (1957) 32 ITR 688 (SC) and the English case of Fry vs. Salisbury House Estates Co. Ltd. (1930) AC 432. In this English case decided by the House of Lords, the company provided staff to operate the lifts in the building acquired by it and also acted as porters and watch and protect the building. It also provided certain services such as heating and cleaning to the tenants on payment of additional charges. On these facts the House of Lords held that the income received by the company should be assessed as Property income and not as Business income . This principle was applied by the Supreme Court in the case of East India Housing and Land Development Trust Ltd. (supra). We are of the view that the principle of these decisions is applicable to the present case in respect of the owned properties. A perusal of the business service agreement, the important clauses of which we have already referred to, shows that this is not a case of a business centre being let out to various concerns during the year, in which case it could possibly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the assessee which are normally provided in a business centre, the most important services being secretarial services, conference room services, computer and internet facilities, facilities for catering, etc. A business centre indicates that the person who takes it on hire feels as if he is in his own office. The business service agreement in the present case, to which we have already referred, does not show that any of the above services was rendered by the assessee to Seaworld. Merely because furniture and fittings and the air-conditioners were installed, that too as per the requirement of Seaworld, the letting out of the office space does not become a business centre. We are unable to say that the assessee was exploiting a commercial asset. It simply is a case of letting out of the property with furniture and fixtures for a consolidated rent. This aspect has been highlighted by the Assessing Officer, with whom we agree. 8. In the case of Shambhu Investment P. Ltd. vs. CIT (2003) 263 ITR 143 (SC), the assessee partly occupied an immovable property owned by it and let out the rest to be used as table space to occupants, with furniture fixtures, lights and air-con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l representative drew our attention to the order of the Mumbai Bench of the Tribunal in the case of Marwar Textiles (Agency) (P) Ltd. vs. ITO (2009) 116 ITD 335 (Mum). A perusal of the order shows that the facts were substantially similar to the facts of the case before us. It was held that in that case that it was a case of letting out of furnished accommodation on long term basis, whereas in the case of business centre the purpose is to provide space to business people on short term basis for holding conferences, exhibitions, etc. It was therefore held that the ruling of the Supreme Court in the case of Shambhu Investment P. Ltd. vs. CIT (supra) would apply and that the income was assessable as Property income and not as Business income . This ruling, with which we respectfully agree, applies to the facts of the present case. 11. We now take up the alternative plea of the assessee that the service charges should be broken up into Property income and Income from other sources on the basis that the rent for the property should be assessed as Property income and the service charges collected for the services should be assessed as Income from other sources . There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three years. Thus Ground No.3 for the assessment year 2003-04 and Ground No.2 for the assessment years 2004-05 and 2005-06 are dismissed. 14. In the appeal for the assessment year 2003-04, there is one more ground, which is Ground No.2 and the same is to the effect that the CIT(A) erred in directing the Assessing Officer to treat the income from properties taken on rent and let out as Income from business , as claimed by the assessee, in preference to the stand of the Assessing Officer that the same should be assessed under the head Income from other sources . We have already seen that in respect of the four properties (three in Mumbai and one in Kolkata) taken by the assessee on rent and let out, the Assessing Officer computed the income at ₹ 5,48,746/- and treated the same as Income from other sources . The CIT(A) accepted the assessee s plea that this income should be assessed as Business income . The revenue is in appeal and we have considered the facts and the rival contentions. Such income has been treated as Business income even by the Assessing Officer right from the assessment year 1992-93. There is no change in the facts or in the legal position. The quest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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