TMI Blog2018 (11) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... s being indirect expenses incurred, in profit and loss account. Thus, we are considered opinion, that in assessee’s case, the income from renting a properties in Mall to be taxed as business income and not income from house property as well as business loss also to be allowed. - Decided in favour of assessee. - ITA. No: 3034/AHD/2014 And ITA 1865, 1866 & 3487/AHD/2016 - - - Dated:- 15-10-2018 - Shri Pramod Kumar, Accountant Member And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri Mukund Bakshi, AR For the Respondent : Shri S. K. Dev, Sr. D.R. ORDER PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. These four appeals have been filed by the Assessee against the order of the ld. CIT(A). Since grounds are common for the assessment years and amounts are different, therefore, for the sake of convenience, we would like to dispose of all the four appeals together. 2. In ITA No. 3034/Ahd/2014 for A.Y. 2010-11 Assessee s appeal. The assessee has taken following grounds of appeal: 1 The learned Commissioner of Income Tax (Appeals)-III Baroda erred in fact and in law in holding that the income of the assessee is taxable under the head Income from house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee for the subsequent assessment years as well We, therefore, make it clear that the observations made by the CIT(A), so far as period outside the assessment year 2009-10 is concerned, are devoid of any basis and stand vacated. A fresh call on merits will have to be taken for the assessment years, uninfluenced by the stand taken by the C1T(A) in the assessment year 2009-10, and the observations in this order, to that extent, stand expunged. Learned counsel, in this background, does not press the ground of appeal on merits and he is content with the unwarranted observations of the CIT(A) being held to be devoid of legal force, 6. In the A.Y. 2010-11, the assessee has claimed a business loss of ₹ 2,46,03,893/- which is denied by the A.O. holding that the project of the assessee is still under construction during the year and. therefore, the loss could not be allowed. In first appeal, the Ld. CIT(A), following his order for A.Y. 2009-10, held that since the activity of the assessee is that of earning income from house property and that the Company shall not carry out any business, the claim of loss allowed was upheld. 7. In the A.Y. 2011-12, the appellant claimed a bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kages, sewage and drainage lines functioning and servicing. Availability of uninterrupted services such as electricity, water connection and other required services for the Mall. (e) General security services for the said Mall, parking lot and other surrounding portion of the plot forming part of the said development. However, Licensee is free and entitled to appoint security for the unit of required by the Licensee. (f) Manage monitoring of housekeeping of the common areas and facilities including the parking area of the said Mall. vi) The common area maintenance is to be collected @ ₹ 7 per sq. ft. carpet area or actuals, whichever is lower. [Page No. 83-84] vii) The Licensor could sell the licensed premises to any other person [Page No. 88] viii) The Licensor to insure the property. [Page No. 88] ix) The Licensee to make payments for electricity, water etc. [Page No. 92] x) The agreement does not create any right of tenancy. [Page No, 100] b) The Forge: i) The charges recoverable for letting out the premises are referred as Lease Rental to be recovered @ ₹ 45 per sq. ft. for initial 3 years and thereafter increase of 20%. The total l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the terms of agreement with each of the parties is different. In the case of Reliance Trends, it was pointed out that the licence fees was to be quantified as percentage of the net sales or an agreed rent. 11. It was also pointed out that along with the premises, a large number of services were also required to be provided. It was stated that the activity of lease with each of the lessees is complex and involves the risk. The activities are carried out on a systematic and on regular basis in the nature of business. Therefore, such income was required to be taxed as the business income. 12. It was also pointed out that the assessee company has no other activity and this is the only activity and business. For substantiation of this contention, the extracts of the Profit Loss account for the A.Y. 2011-12 to 2013-14 were furnished being reproduced: Particulars 2012-13 2011-12 2010-11 A.Income 362.65 372.30 205.82 B. Expenditure a)Cost of services rendered 111.97 114.21 68.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Mall was purchased. As per the method of accounting prescribed as per AS-16 issued by The Institute of Chartered Accountants of India, the interest cost incurred up to the date of completion of the building is capitalized being attributable to the construction. The interest expense incurred after the date of completion and all other expenses like administrative and other expenses which are not attributable to the construction or creation of asset is claimed as revenue expenditure resulting into loss. According to him, such loss is to be allowed. Reliance was placed on under noted judgments: Dhoomketu Builders Development Pvt. Ltd. Vs. ACIT 17 taxmann.com 36 (Trib.Delhi)-Confirmed in 34 taxmann.com 18 (Delhi) Tetron Commercial Ltd. Vs. CIT 261 ITR 422 (Cal) Hotel Alankar Vs. CIT 133 ITR 866 (Guj.) Hagwood Commercial Developers Pvt. Ltd. Vs. ACIT 82 taxniann.com 475 Mum. Trib.) 17. In Hagwood Commercial Developers Pvt. Ltd. Vs. ACIT 82 taxniann.com 475 Mum. Tribunal held : Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowablity of (Capital v. Revenue expenditure) - Assessment year 2012- 13 - Assessee was engaged in construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at income of the appellant to be taxed under the head income from house property. 21. As we can see, that in similar circumstances, Hon ble Supreme Court in the matter of Chennai Properties Investments Ltd. (supra) decided matter in favour of the assessee holding that income from renting a property of Mall to be treated as business income and in those circumstances, appellant case is fully covered by the aforesaid judgment. ITAT Bench of Mumbai in the matter of Hagwood Commercial Developers Pvt. Ltd. (supra) has also given finding in favour of assessee. To the effect that even if Mall had not commenced business till end of relevant year, assessee had rightly debited general overhead expenses being indirect expenses incurred, in profit and loss account. Thus, we are considered opinion, that in assessee s case, the income from renting a properties in Mall to be taxed as business income and not income from house property as well as business loss also to be allowed. 22. So far initiating of penalty proceeding u/s. 271(1)(a) is concerned, same are premature. Thus, we do not want to comment on that. 23. In the result, appeal filed by the Appellant is allowed. ITA No. 1865 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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