TMI Blog2017 (11) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... Court judgment in Chennai Properties & Investments Ltd.'s case (2015 (5) TMI 46 - SUPREME COURT) wherein it had been held that in case, letting of the properties was in fact the business of the assessee, then the assessee's income disclosing the same under the head income from business has to be upheld and it cannot be treated as income from house property. - Decided in favour of assessee. - ITA No. 1204-1205/Kol/2014 - - - Dated:- 4-10-2017 - A. T. Varkey, Judicial Member And Dr. A. L. Saini, Accountant Member Assessee by : Shri A. K. Gupta, FCA Respondent by :Shri Kalyannath, ACIT (DR) ORDER Per Dr. Arjun Lal Saini, AM The captioned two appeals filed by the Assessee(group companies` appeals), pertaining to Assessment Year 2007-08, in respect of M/s Oberoi Investments Pvt. Ltd. and M/s Oberoi Buildings Investments Pvt. Ltd., are directed against the orders passed by the Commissioner of Income Tax (Appeals)-VI, which in turn arise out of assessment orders passed by the Assessing Officer u/s 143(3) of the Income Tax, 1961 (hereinafter referred to as the 'Act'). 2. Since these two appeals relate to same group of assessee, same Assessment Year, id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was asked to furnish the details of contribution from shops, details of compensation paid and copies of agreement about acquisition of the space and letting out of the space. The same were furnished by the assessee. On examination of the compensation paid, it was noted by AO that the amount consists of license fees, service fees, air-condition fees and special service charges. The contributions for shops are in the nature of charges received from the tenants. The assessee company acquired 5,665 sq. ft. Shopping area from Oberoi Sheraton Hotel at Bombay by virtue of a written agreement. According to that written agreement, the acquisition of the licensed space by the assessee will take effect not earlier than 1st September,1972 and not later than 31st December, 1972 on certain terms and conditions as mentioned in the said written agreement. According to point No.2(xiv) it has been mentioned that the live and license shall be irrevocable for a period of 50 years i.e. ending on 31st December 2022. After acquiring the said shopping space, the assessee company further let out different portion of shopping spaceto different persons on certain terms and conditions. This letting out inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny under lease, which is different from a lease. By entering into a licence agreement with EIH Limited what the company has received is only a right to use the said shopping space. The same would be evident from clause7(i) of the agreement which provides that 'this agreement does not create any interest or any other right in favour of Licensee in the said shopping centre or any part thereof but it is mere license to use the said shopping centre given to the Licensee'. A license to use the property is distinguished from a lease in respect that a licensee does not have any possession or interest in the property. In case of license, all the ingredients of ownership including the right to possession vest in the owner licensor and not in the licensee. Since a leave and license is materially different from lease and also does not transfer any interest in the property to the licensee, it will obviously be outside the scope of section 269UA(f). A pure and simple licensee cannot, therefore, be treated as a deemed owner under section 27(iiib). Again, there are restrictive clauses e.g. clauses 2(v), (vi), (vii), (viii), (ix), (xii), (xv), (xvi), (xvii) (xviii) in the licence agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law such as the Transfer of Property Act, Registration Act, etc But, in the context of Section 22 of the Income Tax Act having regard to the ground realities and further having regard to object of the Income Tax Act, namely, 'to tax the income', 'owner' is a person who is entitled to receive income from the property in his own right. The requirement of Registration of the Sale Deed in the context of Section 22 is not warranted. Based on the judgment of the Hon'ble High Court (supra), the AO held that since the assessee was having the irrevocable right for 50 years over the shopping space, in view of provisions of section 27(iiib) of the I. T. Act, 1961 and findings of the Apex Court of the country stated above, the assessee is the owner of the building or shopping space. Therefore, the income derived from the said building or shopping space are to be taxed under the head income from House property. 5. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the CIT(A) who has confirmed the order passed by the Assessing Officer. The ld CIT(A) observed in case of the said assessee a similar addition was made in the year Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2005-06 has been stayed by the Hon'ble High Court. But the Hon'ble Supreme Court in Chennai Properties Investments Ltd. v. CIT [2005] 373 ITR 673 has categorically held that in case, letting of the properties was in fact the business of the assessee, then the assessee disclosing the same under the head income from business had to be upheld and it cannot be treated as income from house property. This proposition of law had been reiterated by the Hon'ble Supreme Court in Rayala Corporation (P.) Ltd. v. Asstt. CIT [2016] 386 ITR 500. Taking into consideration the ratio laid down by the Hon'ble Supreme Court, the coordinate Bench of this Tribunal B Bench, Kolkata in the case of the sister concern of the assessee i.e. Bombay Plaza Pvt. Ltd. Vs. ACIT, ITA No. 1641 1203/Kol/2014 for AYs 2006-07 and 2007-08 was pleased to uphold the assessee's claim that the income from granting premises on sub-license was to be assessed under the head income from business. In this case, the Tribunal also took note of the order of the assessee's case in which the Coordinate Bench had decided in favour of the revenue by treating the contribution received from sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other hand, ld DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 8. We have heard both the parties and perused the materials available on record,we take note of the fact that the assessee's main object as stated in its Memorandum of Association was to acquire on license or by purchase, lease, exchange, hire or otherwise lands and property of any tenure, or premises in any part of India and to license or sub-license or lease or sub-lease or let, such lands or property or premises or any part thereof, clearly spells out that the assessee's main business is to carry out systematic and regular activity in the nature of business of letting out property. We also note that section 27(iiib) read with section 269UA(f) of the Act, is not applicable in the instant case as the agreement is only for use of property and not for the transfer of the same. Since the company is neither the owner nor the deemed owner in terms of section 27(iiib) of the Act, therefore the Contribution from Shops cannot be assessed under the head Income from house prope ..... 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