TMI Blog2019 (8) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... egrated and essential for successful operation of mall, consideration for which is included in the charges received from unit holders. The fact that these unit holders treat these charges as rent simpliciter and tax deducted at source u/s 194-I cannot determine the question of taxability in the hands of the recipient. In the business model embedded by the operation of the shopping mall, as we have pointed out earlier, a complex web of integrated services are to be provided and the consideration received from those occupying the business premises is not simply as such rent for the premises. We are of the considered view that the authorities below were indeed in error in treating the consideration received by the assessee for commercial space given in the mall to various persons as income from house property. We vacate the action of the authorities below and direct that the said income be treated as profits and gains from business or profession. As this core issue has been decided by us in favour of the assessee - ITA Nos. 3559 & 3560/Ahd/2015 - - - Dated:- 27-8-2019 - Justice P P Bhatt, President And Pramod Kumar, Vice President For the Appellant : Tushar Hemani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be so held now. 5.0 The assessing officer erred in restricting deduction to ₹ 6,33,86,149/- being interest on borrowed funds. The appellant submits that expenditure of ₹ 7,87,11,753/- was incurred by the appellant by way of interest on the borrowed funds which were utilized for constructing the house property and acquiring plants and machinery and equipments wherefrom income was derived. The assessing officer ought to have allowed deduction of ₹ 7,87,11,753/- in computation of the total income. The appellant submits that it be so held now. 6.0 The assessing officer erred in not allowing deduction in respect of various expenses incurred wholly and exclusively for the purpose of the business and depreciation on the fixed assets against income from business operations of ₹ 15,37,872/- computed by him. The appellant submits that each and every expenditure was incurred wholly and exclusively for the purpose of the business and the fixed assets were used for the purpose of the business of the appellant. The appellant submits that the assessing officer ought to have allowed deduction in respect of various expenses and also depreciation on plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house property. His line of reasoning is as follows:- 4. The assessee s reply is duly considered but not found acceptable in view of the following: 4.1 The assessee derives income from leasing various spaces in the mall. Further, the assessee has also collected deposits from various tenants to whom the premises are given on lease. The assessee in its reply dated 03.01.2013 stated that it has provided certain incidental services such as maintenance of the building, maintaining the inner areas given on lease, maintaining elevators, provision of security service etc. The assessee claims depreciation on the assets and claims interest costs under the head of Profit Gains of business or Profession . In fact, the assessee s income in having the nature of House Property and not business income in consideration of the facts and circumstances of the case. The assessee derives its major part of income from giving on lease the mall premises. It has collected deposit from the tenants while leasing out the various space/area of the mall premises and collects rent regularly from these tenants as per the agreement. The above ingredients of the transactions took place during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) S.V. Mercantile Corpo (P) Ltd vs. CIT, 83 ITR 700 (SC) (d) CIT vs. Khostla India Ltd , 700 (SC) (e) Universal Plant Ltd, 237 ITR 454 (SC) (f) CIT Vs. Vikram Cotton Mills Ltd, 169 ITR 597 (SC) (g) Balaji Enterprises vs. CIT 225 ITR 471 (Kerala) (h) PFH Mall Retails Mgt. Ltd. Vs. Asst, CIT 16 GOT 83 (Kolkata lTAT). The above case laws are duly considered but the same are not found acceptable in view of the facts and circumstances of the assessee's case. The assessee s ease is a clear case which involves wrong treatment of the basic nature of income and by which claiming the deductions/expenses which are not allowable as per the law. Reliance is put on the following legal decisions relevant to the present case: (a) East India Housing Land Development Trust Ltd. Vs. Commissioner of Income tax (42 ITR 49 [SC] 1961): Income received from tenants from shops and staffs by an assessee company formed with an object of developing landed properties is liable to be taxed as property income and not as business income. Further, in this case it was also held that income from tenants of shops and stalls is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. 7. We have noted that in assessee s own case for the assessment year 2009- 10, the Assessing Officer himself has accepted the treatment of income in question as profits and gains from business or profession . No doubt the principles of res judicata do not apply to the income-tax proceedings, but where a fundamental aspect permeating through different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. This is so held by the Hon ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC). In this perspective, when we approach the facts of the present case, we find that whether the income in question is to be treated as income from house property or income from business or profession is a question which must depend on the appreciation of complex web of facts pertaining to the services offered by mall to, and for, those occupying the business premises on such mall. Once the Assessing Officer himself comes to the conclusion that given the complexity of these s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts business income in the earlier years and the same was accepted by the Department as a business income. 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. The Tribunal has considered the nature of the business activities of the Assessee Company, as well as, terms and conditions of the relevant agreements, under which the commercial space in the mall was given on hire by the Assessee Companies to the concerned parties. It also considered the various services provided by the Assessing Companies during the course of operation and running of the Family Entertainment Centre-cum-malls. On appreciation of facts, the Commissioner (Appeals) and the Tribunal have concurrently arrived at a conclusion that the intention of the Assessing Companies was to commercially exploit the property by way of complex commercial activities and it was not a case of letting out the property simplicitor. The rental income and the service charges thus were received by the Assessee Company as business income during the course of business carried out by them of operating and running a Mall a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property. 28. On the basis of the discussion above, we find that the amount received by the assessee company on letting out the shop rooms in the mall constructed by it has to be treated as business income and it has to be assessed to tax under the head profits and gains of business and not under the head income from house property . The substantial question of law is answered in favour of the assessee and against the revenue. 9. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that the authorities below were indeed in error in treating the consideration received by the assessee for commercial space given in the mall to various persons as income from house property. We vacate the action of the authorities below and direct that the said income be treated as profits and gains from business or profession. As this core issue has been decided by us in favour of the assessee, all other issues are rendered academic and infructuous. The appeal of the assessee is thus allowed. 10. Now we take-up appeal No. 3560/Ahd/2015 for assessment year 2011-12. Learned representatives fairly agree that ident ..... X X X X Extracts X X X X X X X X Extracts X X X X
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