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Batra Palace P. Ltd. Versus Commissioner of Income-Tax

2016 (7) TMI 705 - PUNJAB AND HARYANA HIGH COURT

Lease income out of leasing out commercial property - business income or income from house property - Held that:- It has been categorically recorded by the Tribunal on appeal by the Revenue that perusal of the memorandum of understanding dated August 27, 2002 between the assessee and the lessee, i.e., M/s Pizza Hut showed that the property in question was given for use for a period of 12 years which was renewable for a further period of 12 years. It was nowhere shown that the intention to let ou .....

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case law on the point. - I. T. A. No. 56 of 2010 - Dated:- 31-3-2016 - Ajay Kumar Mittal and Raj Rahul Garg, JJ. For the Appellant : Rajiv Sharma, Advocate For the Respondent : Rajesh Katoch, Advocate JUDGMENT Ajay Kumar Mittal, J. 1. This appeal has been preferred by the appellant-assessee under section 260A of the Income-tax Act, 1961 (in short, "the Act") against the order dated May 15, 2009, annexure A.1 passed by the Income-tax Appellate Tribunal, Chandigarh Bench "A", .....

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aged in parallel business activities as income from house property and not income from business when the appellant has to provide various basic facilities as that to the franchisee ?" 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant-assessee is a company engaged in the business of running a hotel and also earning income from house property. It filed its return of income for the assessment year 2005- 06 on October 30 .....

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ase was for a total period of 12 years but subject to the condition as per clause (3) of Memorandum of Understanding (MOU) that the lease rent will be subject to increase of 15 per cent. after completion of every three years. The tenant "Pizza hut" was in the business of running Pizza Hut which had the potential of advertising the business of the assessee and introducing new customers and therefore, was beneficial for the business of the assessee and for this reason only, the assessee .....

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ficer held the income from lease of commercial property declared as business income as income from house property vide order dated December 28, 2007, annexure A.3. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income-tax (Appeals) (CIT(A)). Vide order dated November 18, 2008, annexure A.2, the Commissioner of Income-tax (Appeals) partly allowed the appeal and decided the issue in favour of the assessee. Not satisfied with the order, the Revenue filed appeal before .....

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d upholding the order passed by the Assessing Officer. Primary reliance was placed on the judgment of this court in Anand Rubber and Plastics P. Limited's case (supra). On the other hand, learned counsel for the respondent-Revenue supported the impugned order. 4. We have heard learned counsel for the parties. 5. Admittedly, the assessee was owning a building in which it was running a hotel and restaurant business. A portion of the said property was leased out to another concern for running a .....

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recorded by the Tribunal on appeal by the Revenue that perusal of the memorandum of understanding dated August 27, 2002 between the assessee and the lessee, i.e., M/s Pizza Hut showed that the property in question was given for use for a period of 12 years which was renewable for a further period of 12 years. It was nowhere shown that the intention to let out was only for a temporary period. Thus, the Commissioner of Income-tax (Appeals) was not held to be justified in concluding that the letti .....

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accessibility of rental income derived by the assessee. The question is whether the rent is assessable as income from property or business income. It is a settled proposition that in order to address such controversy, what has to be seen is whether the asset in question is being exploited commercially by way of renting out or whether it is being rented out for the purpose of enjoying the rental income. The hon'ble Punjab and Haryana High Court in the case of Anand Rubber and Plastics P. Ltd. .....

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esaid judgment to decide the controversy in favour of the assessee. In this regard, we have carefully examined the facts of the present case. In the present case, the facts are that the assessee is owning a building in which it is running a hotel and restaurant business. A portion of the said property was leased out to another concern for running a restaurant by the name of Pizza Hut. The claim of the assessee is that such renting was done for a temporary period as the premises were vacated afte .....

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ther period of 12 years as mutually agreed upon by both the parties. From such an arrangement, it does not show that the intention to let out was only for a temporary period. No doubt, the property has been put to use by the lessee also for running a restaurant business as done by the asses see, so however, the lease cannot be termed to be for a short period or temporary. We are conscious that the property has been vacated within a period of 2 to 3 years as canvassed by the assessee. However, wh .....

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the property which in our considered opinion, was rightly brought to tax under the head "Income from house property" in the assessment order. The judgment of the hon'ble Punjab and Haryana High Court in the case of Anand Rubber and Plastics (P) Limited (supra) was clearly inapplicable because of different facts. In view of the aforesaid discussion, we therefore, set aside the order of the Commissioner of Income-tax (Appeals) on this issue and restore that of the Assessing Officer.& .....

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as recorded by this court that in order to determine whether rent is assessable as income from property or business income, what has to be seen is whether the asset is being exploited commercially by the letting out or whether it is being let out for the purpose of enjoying the rent. It was held that the portion of the property was leased out temporarily as a commercial asset. Thus, the rent received was assessable as business income. Such is not the position in the present case. Herein the prop .....

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