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M/s. Prestige Garden Constructions P. Ltd Versus Deputy Commissioner of Income-tax, Circle – 5 (1) (2) , Bengaluru

2016 (7) TMI 504 - ITAT BANGALORE

Revision u/s 263 - Rental income received - treated as income from business or house property - Held that:- There is no break-up of the rent between facilities and shop area rented out. Obviously the lease deeds were composite. No doubt consistent view taken by various courts including Hon’ble Apex Court is that an assessee, even if it was in the business of real estate, income earned from letting out of property was to be assessed under the head ‘ income from house property’. - Exception t .....

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sessee was in the business of real estate development and leasing of commercial space. This mentioned in the first sentence of the assessment order passed u/s.143(3) of the Act, which was the subject matter of the revisionary proceedings. So it is not a case where AO had not made enquiries. He was aware that assessee was into real estate development and leasing of commercial space. Assessee was required to file copies of lease deeds, specifically mentioning the types of services to be given by t .....

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CIT ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : Through this appeal, assessee assails an order, dt.23.03.2015, passed by the Pr. CIT, u/s.263 of the Income-tax Act, 1961 ( the Act in short). Grounds taken by the assessee is reproduced hereunder : 1.1 The learned Principal Commissioner of Income tax, Bangalore 5, Bangalore has erred in concluding that income / loss from business of operation and maintenance of Forum Value Mall, Whitefield, Bangalore is assessable under the head 'Income .....

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ned Principal Commissioner of Income tax, Bangalore 5, Bangalore is distinguishable on both facts and law. 1.4 On facts and in the circumstances of the case and law applicable, income / loss from the business of operation and maintenance of Forum Value Mall, Whitefield, Bangalore is assessable under the head 'Profits and gains of business' as declared by the assessee in the return of income and as assessed to tax by the learned assessing officer in the order passed under section 143(3) f .....

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e interests of the revenue and consequently the order passed by the learned Principal Commissioner of Income tax, Bangalore 5, Bangalore is bad in law and liable to be quashed. 3.1 In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned Principal Commissioner of Income tax, Bangalore 5, Bangalore under section 263 be quashed or in the alternative the income /loss from the business of operation and maintenance of Forum .....

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hat the representative had furnished relevant details and documents. Assessment was completed accepting the loss returned by the assessee. 03. On 05.03.2015, notice u/s.263 of the Act, was issued to the assessee by the Pr. CIT. According to him, assessee had admitted income from rentals under the head profits and gains of business or profession , whereas the proper head was income from house property . By considering the receipt of business income, assessee, in the opinion of Pr. CIT, had claime .....

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from exercise of property rights. 04. However the Pr. CIT was not impressed by the above reply. According to him, by virtue of the decision of Hon ble Apex Court in the case of Shambhu Investment P. Ltd, V. CIT [263 ITR 143], a property once let out, whether it was furnished or unfurnished, if the intention was to receive rental income then such income would be assessable under the head income from house property . He held that the assessment done by the AO was not only erroneous but also preju .....

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the paper book. According to him specific questions regarding break-up of rental income received by the assessee, party-wise break up of the lease deposits, details of expenditure incurred and details of sundry creditors were raised. As per the Ld. AR, through its reply placed at page 28 of the paper book, assessee had given all the above details including sample lease deeds. Further as per the Ld. AR, sample lease deeds, copies of which have been placed at paper book-II, pages 1 to 266, clearl .....

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out of the premises. Lease was a composite one. As per the Ld. AR, AO was very well aware of this position. It was after verifying the lease deeds, that the AO came to the conclusion regarding the nature of income of the assessee in the original assessment. Ld. AR submitted that assessee s income was rightly considered under the head income from business and not income from income from house property . Thus as per the Ld. AR, AO having taken a possible view which was a lawful one, Pr.CIT could n .....

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per the Ld. AR it was held by the Hon ble Karnataka High Court that rental income based on lease deeds, through which facilities were also to be provided to the lessor, where such facilities were inseparable would fall only under the head profits and gains from business or profession . As per the Ld. AR assessee in the above case was a sister concern of the assessee here and the said decision was also related to renting out a similar mall called Forum Mall as that of the assessee here. Thus acco .....

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see were basic essential facilities that was sine qua non for renting out the property. As per the Ld. DR there was nothing special in providing such services and the AO had taken a patently unlawful view. As per the Ld. DR AO had not applied his mind and never made enquiries though he had received the copies of the lease deeds from the assessee. Absence of enquiry, rendered the order of the AO erroneous and prejudicial to the interests of Revenue. Reliance was placed on the Hon ble Madras High .....

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proceedings has been placed at paper book page 25 and 26. Page 26 brings out the details that were called from the assessee. This is extracted below for brevity : 08. Assessee had given a reply to the above and filed copies of the lease deeds. A perusal of one of the lease deeds placed at paper book pages 1 to 15 does show that assessee had to give a number of facilities and services to the lessees which included the following : 09. Rent payable by the lessees is given in Schedule 2 of the agre .....

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nt, machinery and furniture in which case circumstance alone, it could be treated as income from business. This position of law has been clearly enunciated by the Hon ble Madras High Court in the case of Keyaram Hotels (supra), after considering its own judgment in the case of Chennai Properties & Investments Ltd, (supra). AO was aware that assessee was in the business of real estate development and leasing of commercial space. This mentioned in the first sentence of the assessment order pas .....

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illegal or unlawful view which was not possible in the facts and circumstances of the case. 11. The question whether rental income received from a Mall should be treated as income from business or house property had come up before the Hon ble jurisdictional High Court in the case of Prestige Estate Projects Ltd, (supra). Substantial question of law raised before the Hon ble jurisdictional High Court is reproduced hereunder : Whether on the facts and in the circumstances of the case the Tribunal .....

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