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The Deputy Commissioner of Income Tax, Company Circle – II (4) , Chennai Versus M/s Keyaram Hotel Pvt. Ltd. and Vica-Versa

2016 (6) TMI 978 - ITAT CHENNAI

Rental income from letting out the commercial complex, including the amenities - assessable under the head “income from house property” OR “business income” - Held that:- It is not in dispute that apart from letting out the property, the assessee is maintaining common area, lift operation, providing security, maintenance of waiting hall, meeting hall, etc. These activities are carried on in a systematic and regular manner. Therefore, the service provided by the assessee in a systematic and regul .....

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pted by the CIT(Appeals) for assessment year 2003-04. - This Tribunal is of the considered opinion that in view of the law laid down in Chennai Properties and Investments Ltd. (2015 (5) TMI 46 - SUPREME COURT) part of the rental income received by the assessee for providing services has to be classified as income from business. Since the assessee itself claims 75% of rental income has to be classified as income from house property, the CIT(Appeals) has rightly found that 75% of the rental i .....

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from house property and 25% has to be classified as income from business. - ITA No.402/Mds/2013, ITA No.1095/Mds/2014, ITA Nos.2215 & 2216/Mds/2015 - Dated:- 1-6-2016 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER For The Revenue : Sh. P. Radhakrishnan, JCIT For The Assessee : Shri S. Sridhar, Advocate ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: I.T.A. No.402/Mds/2013 is filed by the Revenue for the assessment year 2003-04 and other appeals, viz. I.T.A. No. .....

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to various persons and received rental income and charges for amenities. In the earlier assessment year, the assessee claimed the entire income as income from business. However, the Assessing Officer classified the entire rental income as income from house property. On further appeal, the same was also confirmed by this Tribunal and the High Court. In fact, for the assessment year 2001-02, the Madras High Court in Keyaram Hotels P. Ltd. v. ACIT (2008) 300 ITR 118 confirmed the order of this Trib .....

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for assessment year 2001-02 (supra), the High Court confirmed the order of this Tribunal by holding that the entire rental income has to be assessed as income from house property. According to the Ld. counsel, the basis for the High Court s judgment for earlier assessment year in the assessee's own case is the judgment of Division Bench of Madras High Court in Chennai Properties and Investments Ltd. (supra). Now, the Apex Court in Chennai Properties and Investments Ltd. v. CIT (2015) 373 IT .....

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s, security, etc. This Tribunal placed its reliance on the judgment of Kerala High Court in Attukal Shopping Complex P. Ltd. v. CIT (2003) 259 ITR 567. The Assessing Officer, after considering the activity of the assessee, again found that the income has to be assessed as income from house property. On appeal before the CIT(Appeals), the CIT(Appeals) found that the assessee has not just let out the property, but undertaken to maintain the same by providing indispensable amenities. Therefore, the .....

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order of the CIT(Appeals), for the assessment year 2003-04, the Revenue has filed the appeal. 3. Coming to the assessment years 2010-11, 2006-07 and 2009-10, the CIT(Appeals) confirmed the order of the Assessing Officer holding that the rental income from letting out the commercial complex, including the amenities, is assessable under the head income from house property and not under the head business income . Against these orders of the CIT(Appeals), the assessee has also filed appeals. 4. Shr .....

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ssessee has to be systematically engaged in managing the amenities such as security services, common area maintenance, lift operation, maintenance of meeting room, reading room and waiting room, etc. These facilities are to be undertaken in a systematic manner, therefore, according to the Ld. counsel, part of the rental income has to be considered as income from business. Without providing these services in a systematic and routine manner, the tenants would not have taken the building on lease. .....

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that the entire rental income is income from house property. 5. Referring to the judgments of Madras High Court in the assessee's own case for assessment year 2001-02 and for assessment years 2004-05, 2005-06, 2007-08 and 2008-09, the Ld.counsel submitted that the basis for the judgments of Madras High Court is the judgment of Division Bench in Chennai Properties and Investments Ltd. (supra). The Apex Court examined the correctness of the judgment of Madras High Court in Chennai Properties .....

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me has to be assessed as income from business. In view of this judgment of Apex Court, according to the Ld. counsel, the earlier judgments of Madras High Court in the assessee's own case for assessment year 2001-02 and 2004-05, 2005-06, 2007-08 and 2008-09 are not applicable to the facts of this case. 6. On the contrary, Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that the assessee let out the commercial complex to various persons and receiving rental income. The ass .....

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sment years 2004-05, 2005-06, 2007-08 and 2008-09, the Madras High Court confirmed the decision of this Tribunal, holding that the entire rental income has to be assessed as income from house property. For the assessment year 2003-04, this Tribunal, however, found that the assessee, apart from letting out the property and collecting rent, provides services such as general public refreshments, maintenance of waiting room, reading room, meeting room and other conveniences, internal security, maint .....

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the matter came before the CIT(Appeals) for the assessment year 2003-04, the assessee claimed that 25% of the rental income was attributable to the services rendered for maintaining the common area, waiting room, reading room, sundry services and lift room, therefore, the 25% of rental income has to be assessed as income from business. The assessee had appealed before the CIT(Appeals) that the balance 75% of rental income has to be assessed as income from house property. This claim of the assess .....

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e bifurcation made by the CIT(Appeals) that 75% of the rental income has to be assessed as income from house property and the balance 25% of the rental income has to be treated as income from business, is not justified. 7. Referring to the assessee s appeals for assessment years 2010-11, 2006-07 and 2009-10, the Ld. Departmental Representative submitted that the CIT(Appeals) has rightly confirmed the orders of the Assessing Officer by holding that the rental income has to be assessed as income f .....

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with regard to classification of rental income received by the assessee from the commercial complex. For the assessment years 2001-02, 2004-05, 2005-06, 2007-08 and 2008-09, the issue travelled upto Madras High Court and the Madras High Court found that the entire rental income has to be assessed as income from house property. For the assessment year 2003-04, this Tribunal found that the activities carried on by the assessee were not considered by the authorities below, therefore, the matter wa .....

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, part of the rent has to be classified as income from business. Accordingly, the CIT(Appeals) found that 25% of the rental income has to be treated as income from business and 75% has to be assessed as income from house property. Therefore, the Revenue filed appeal before this Tribunal for assessment year 2003-04. For other assessment years, namely, 2010-11, 2006-07 and 2009-10, the CIT(Appeals) confirmed the orders of the Assessing Officer holding that the rental income has to be treated as in .....

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nd Development Trust Ltd. v. CIT (1961) 42 ITR 49. As rightly submitted by the Ld.counsel for the assessee, the Apex Court considered the correctness of the judgment of the Madras High Court in Chennai Properties and Investments Ltd. (supra). The Apex Court found that the ownership of land or leases cannot be a deciding factor but the nature of activities of the assessee and nature of operation in relation to them would be the deciding factor. After referring to the judgment of Privy Council and .....

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m business. In view of this judgment of Apex Court, this Tribunal is of the considered opinion that the matter needs to be examined in the light of the activities and operation carried on by the assessee. Since, in the earlier judgment in assessee's own case, the Madras High Court decided based upon its judgment in Chennai Properties and Investments Ltd. (supra) and the same was reversed by the Apex Court, this Tribunal is of the considered opinion that the judgment of Madras High Court in t .....

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007-08 and 2008-09. 10. We have considered the facts of the case in the light of the judgment of Apex Court in Chennai Properties and Investments Ltd. (supra). It is not in dispute that apart from letting out the property, the assessee is maintaining common area, lift operation, providing security, maintenance of waiting hall, meeting hall, etc. These activities are carried on in a systematic and regular manner. Therefore, the service provided by the assessee in a systematic and regular manner w .....

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