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2016 (11) TMI 249 - ITAT MUMBAI

2016 (11) TMI 249 - ITAT MUMBAI - TMI - Operational income from mall - treated as capital gain or income from business - Held that:- Issue under consideration is squarely covered by the order of the Tribunal in assessee's own case, wherein Tribunal have held that operational income received by the assessee company from running of Malls in the form of rent and service charges are assessable as business income in place of income from house property. Respectfully following the order of the Tribunal .....

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cision of the assessee. No prudent businessman will suo motto make payment of expense unless and until it is due and payable nor will leave what is due to him. We have carefully gone through the terms of agreement dt. 01/12/2007 between the assessee and IL&FS for payment of interest on share application money and found that it is not a suo motto decision of the Assessee as alleged by the Ld. AO. The decision of payment of interest is consideration for use of funds for the purpose of business of .....

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the cross appeals filed by the assessee and the Revenue against the order of Ld. CIT(A) for the AY 2008-2009, in the matter of order passed under section 143(3) of the Income Tax Act. 2. The assessee has taken the following grounds in its appeal: 1. The Ld. CIT(A) erred in law and facts in upholding disallowance of interest expenses of ₹ 82,571,088/- paid to IL & FS crystallized during the year. The reasons given by him for doing so are wrong, contrary to the facts of the case and agai .....

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al No.1437/M/2012 has been decided in favour of the assessee for the AY 2007-08, 2008-09, & 2009-10, after having the following observations: "12. We have considered the rival submissions and also perused the relevant material available on record. It is observed that both the assessee companies in the present case have come into existence as a result of demerger of E-City Entertainment (India) Pvt. Ltd. which took place on 1-4-2006. Prior to the demerger, the said demerged company was a .....

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ce charges was consistently offered by the demerged company to tax as its business income in the earlier years upto 2006-07 and as submitted by the Id. Counsel for the assessee at the time of hearing before us and also noted by the Id. CIT(A) in his impugned orders, the same was accepted by the department. After demerger, both the assessee companies took over the assets and liabilities of the demerged company and continued the same business of operating and running the Malls. In these facts and .....

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nt facts and circumstances of the case. 13. It is also observed that while accepting the claim of the assessee companies that operational income in the form of rent and service charges constituted their business income on merit, the Id. CIT(A) has considered all the judicial pronouncements cited by the assessee as well as relied upon by the A.O. and decided the issue in favour of the assessee by applying the legal position emanating from the said judicial pronouncements. While doing so, he has d .....

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he conclusion that the intention of the assessee companies was to commercially exploit the property and letting out was only incidental to carrying on such business. 14. As held by the Hon'ble Calcutta High Court in the case of Shambhu Investment Pvt. Ltd. (2001) 249 ITR 47 (Ca I.) , which has been subsequently affirmed by the Hon'ble Supreme Court, what has to be seen in this context is what is the primary object of the assessee while exploiting the property. If it is found applying suc .....

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to exploit the commercial property by way of complex commercial activities and it was not a case of letting out the property owned by the assessee companies simpliciter. The rental income was not received by the assessee companies merely because of the ownership of the property but the same was received because of the complex commercial activity carried on by them of operating and running Malls which brought that rental income. The rental income and service charges thus were received by the ass .....

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he Id. Counsel for the assessee also supports the case of the assessees. In the said case, the income received by the assessee from the operation of shopping malls in the form of rent and service charges was held to be business income of the assessee by the Tribunal holding that giving space with services and facilities of varied and wide nature would definitely constitute a business and the relationship between the parties in such case is distinguished from that merely of a landlord and tenant .....

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der consideration is squarely covered by the order of the Tribunal in assessee's own case, wherein Tribunal have held that operational income received by the assessee company from running of Malls in the form of rent and service charges are assessable as business income in place of income from house property. Respectfully following the order of the Tribunal we do not find any infirmity in this part of order of the Ld. CIT(A) accepting assessee s claim of income from business. 6. In the resul .....

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to E-City Project Construction Ltd. and E-City Real Estate P. Ltd, the said amount was transferred to the assessee company. No shares were allotted to IL&FS during the year under consideration. The Ld. AO held that the assessee's income is assessed as 'income from house property' and not as business income. Hence, section 43B is not applicable. The Ld. AO further held that the said funds were not obtained as a loan but as a share application money for allotment of shares and over .....

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. 8. It was argued by the Ld. AR that in terms of agreement dated 01/12/2007 assessee was under obligation to pay interest on the funds provided by way of share application money. Reliance was also placed on the decision of Pune Bench of the Hon'ble Tribunal in the case of S.R. Thorat Milk Products(P) Ltd. Vs. ACIT (159 ITD 255) in support of the proposition that the share application money cannot be equated with the share capital as obligation to return money is always implicit in event of .....

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re. 9. Further in support of proposition of deductibility of interest in the year of crystallisation reliance was placed on the decision of Delhi Bench in case of Urban Improvement Co. (P.) Ltd. Vs. ITA [177 Taxman(Mag) 104], wherein it was held that assessee was entitled to deduction on account of interest relating to earlier year, on the plea that same was crystallized only during the year under consideration. Reliance was also placed on the decision of Delhi High Court in case of Krishak Bhar .....

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n money kept deposited with the assessee in terms of agreement dated 01/12/2007. As per the agreement assessee was required to pay interest on the funds provided by way of share application money. We found that money received as a share application was utilized by the assessee for the purpose of its business, therefore as a matter of commercial expediency, interest on share application money so utilized for the purpose of business is required to be allowed as business expenditure. Hon'ble Bo .....

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