TMI Blog2021 (10) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... e by providing various facilities are amounting to business activity of the assessee and the income earned out of such an activity has to be treated as a business income - case followed M/S CHENNAI PROPERTIES INVESTMENTS LTD VERSUS THE COMMISSIONER OF INCOME TAX [ 2015 (5) TMI 46 - SUPREME COURT] - Decided in favour of assessee. - ITA No.1159/Chny/2019 - - - Dated:- 8-10-2021 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Mr. Suresh Periasamy, JCIT For the Respondent : Mr. R. Sricharan, C.A ORDER PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-8, Chennai in I.T.A No.190 366/16-17 dated 31.01.2017 relevant to the Assessment Year 2014-15. 2. The Revenue has raised the following grounds: 1. The order of the Id. CIT(A) is contrary to law and facts of the case. 2. The Ld.CIT(A) erred in holding that rental receipts should be assessed under the head business income. 2.1 The Id.CIT(A) erred in deleting the addition made by the AO by placing reliance on the decision of the Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f properties (as mentioned in the MOA of assessee), rental income from property will be charged to tax under the head Income from house property. Hence, the assesses has earned income from the renting of shops developed by it wax to be held to be taxed under income from house property. Considering the facts of the case tn our considerate view, rental income earned should be taxed under the head income from house property and the receipts from other amenities should be taxed under the income from other source. Accordingly the assessment is completed and the rental receipts from letting out of the shops are computed as under. 4. On appeal before the Ld. CIT(A), it was submitted as per the Memorandum of Association, the main object of the company is to acquire and hold the properties and let out those properties is the business of the assessee therefore, the lease rental income received by the assessee has to be treated as a business income and he also relied on the judgment of the Hon ble Supreme Court in the case of Chennai Properties Investments Ltd. v. CIT, Central-III, Tamil Nadu [2015] 373 ITR 673 (SC) and submitted that the issue is squarely covered. The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estates (P.) Ltd. [2019] 103.taxmann.com 413 (Ker.) 4) PCIT, Pune v. Krome Planet Interiors (P.) Ltd. [2020] 423 ITR 62 (Bom.) 5) PCIT v. City Centre Mall Nashik (P.) Ltd. [2020] 424 ITR 85 (Bom.) 9. We have heard both the sides, perused the materials available on record and gone through the orders of the authorities below. The assessee is a private limited company incorporated in August, 2007 under the provisions of the Companies Act, 1956. The main objects of the company are 1) To purchase, own or otherwise acquire by way of mortgage, lease, license in India or elsewhere, any right, title and interest in real estates of all kinds and deal in the same by sale, lease, trade or otherwise on such terms as may deem fit. 2) To acquire, promote, co-promote, design, construct, develop, demolish, furnish, reerect, refurbish, rebuild, renovate, modify or maintain in India or elsewhere all types of properties including flats, public residential complexes, homes, residences, bungalows, apartments, condominiums offices, office space, commercial space, shopping malls, shopping complexes, auditoriums, factories, tenements, parks, townships, infrastructure projects, multiplexes, te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repair and AMC of the lifts/Generators, maintenance and repair and insurance of building etc. and the lessor submitted a complete audit document of all charges collected. From the above, it is very clear that the assessee has not simply let out the shops to lessees. It is the obligation of the assessee-company to maintain entire shop including security, cleaning, electricity, sanitary, plumbing, housekeeping, repairs and AMC of the lifts/generators, maintenance of repair and insurance of building etc. From the above, it is very clear that the assessee is exploiting shopping mall as a business in a systematic and organized manger therefore, the activities carried by the assessee are in the nature of commercial activity. Therefore, the income arising out of systematic activity of the assessee has to be treated as business income. In the assessment order, the A.O has noted that the assessee from the incorporation i.e., in the year 2007 to till date, the assessee has constructed only one commercial building with the amount borrowed from its Directors let out the same to the various tenants. He also observed that to decide whether the income from property is a business income or house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is to be treated as income from house property, in case provisions of Section 22 of the Act are satisfied with primary ingredient that the assessee is the owner of the said building or lands appurtenant thereto. Section 22 of the Act makes annual value of such a property as income chargeable to tax under this head. How annual value is to be determined is provided in Section 23 of the Act. Owner of the house property is defined in Section 27 of the Act which includes certain situations where a person not actually the owner shall be treated as deemed owner of a building or part thereof. In the present case, the appellant is held to be deemed owner of the property in question by virtue of Section 27(iiib) of the Act. On the other hand, under certain circumstances, where the income may have been derived from letting out of the premises, it can still be treated as business income if letting out of the premises itself is the business of the assessee. 15) What is the test which has to be applied to determine whether the income would be chargeable under the head income from the house property or it would be chargeable under the head Profits and gains from business or profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. CIT [1964] 51 ITR 353 (SC) and observed that where the income may have been derived from letting out of the premises, it can be treated as business income, if letting out of the premises itself is the business of the assessee. It is further observed that whether the income from house property or business income, it has to be decided based on the facts and circumstances of each case. It is further observed that whether the income from same property in the form of lease rentals, is the main source of business of the assessee, which has its business exclusively or substantially in the form of earning of the rental only from the business assets in the form of such landed properties, then, in our opinion, the more appropriate head of income applicable in such cases would be income of business . 13. In the present case, the assessee main object is to construct buildings and leased out the same for the purpose of business therefore, the main object of the assessee itself is to carry the business, the income arising out of such an activity has to be treated as a business income. 14. The Hon ble Supreme Court in the case of Sultans Brothers (P.) Ltd. v. CIT (supra) , has ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
