TaxTMI 
TaxTMI 
2024 (9) TMI 961
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....bunal committed a gross error in law by affirming the order of the Assessing Authority reversed by the first appellate authority, finding the rental income of the assessee to be one assessed under the head 'Income From House Property' and not as an Income from Business.' 2. Learned Senior Counsel for the assessee Sri A. K. Rastogi argued that both the assessees had only rental income in the subject assessment years and that was the main object of their constitution as revealed from the Memorandum of Understanding (for brevity 'MoU'). It is also pointed out that the rental income of the assessees had been regularly assessed prior to the subject assessment years as 'income from business' and there was no valid ground to deviate from the consistent stand taken by the Department. It is argued that both the assessees had only rental income in their subject year which indicated that this was the only business carried out by the assessee and in that circumstance, there could not be an assessment made of the above rental income generated by the assessee as 'Income from House Property'. The learned counsel would rely on the decision of the Hon'ble Supreme Court in Rayala Corporation Pvt. L....
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....Ltd. (supra) was a case in which the MoA specifically indicated the main object of the assessee was acquisition and holding of properties called "Chennai House" and "Firhavin Estate", to let out those properties and making advances upon the lands and buildings or other properties or interest therein. The entire income accrued in the subject year was from letting out the specified properties which led to the Hon'ble Supreme Court finding the income to be assessable as income from 'Profits or Gains of Business or Profession'. 5. A Division Bench of this Court in Pandooi Palace v. CIT, Patna (supra) followed the aforesaid decisions of the Hon'ble Supreme Court. The assessee therein had constructed a Commercial complex in the name and style of Pandooi Palace and was drawing rental income from the same. It was on the facts that the High Court ruled in favor of the assessee in the above case. 6. We will first look at the objects as revealed from the respective MoAs produced in the appeals. Insofar as the one of the assessees H. R. Properties Pvt. Ltd. is concerned, the MoA produced as Annexure-1 indicates the following objects which is extracted below :- The main objects to be pursue....
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....te the project with regard to development of the acres of vacant land comprised in Municipal Holding No. C9/207 and C9/207-1 in Mouja Habibpur, Pergana Dehat Amant, Mahalla Chetgunge in the district of Varanasi now held by the said firm for building, estate-cum-cinema centre-cum-shopping complex and to sell, lease or otherwise dispose of the flats, offices, shop-rooms, shops, garages, parking spaces, Cinema-houses, godowns and other accommodations therefore absolutely on ownership basis or otherwise to such persons and on such terms as may be considered fit. (vi) "To Carry on the business of Hotel keepers, owners of restaurants," lodging and boarding house keepers and as owners of restaurants." 7. Insofar as the other assessee Chero Medico & Developers Pvt. Ltd.; the MoA indicates following objects which are extracted below:- I. To acquire and take over as a going concern the businesses, works and activities of the firm carried on as a partnership in the name and style of Chero Medico and Developers Private Limited, having its principal office situated at Ganga Mahal, Judges Court Road, in the town and district of Patna, in the State of Bihar, including the goodwill, property ....
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....l purposes and to sell, lease out, exchange, let out rent, and otherwise dispose of the same and to trade and deal in all res and estates of every description, buildings, promises, houses, shops, fates, built in floors and places and to deal withering of the above in any man conducive and they on all work and works allied to all or any of the to do and carry on all other transactions, activities and business as are commonly done and carried on by the real estate developer, and as trade dealers in real properties of every description and as agents and contract estate and properties. 4. To undertake, carry out and complete the project with regard to the development of various plots of lands and buildings belonging to the partnership firm as more fully in part I to VII of the schedule appearing hereinabove and for that demolish, if necessary, the brick built houses and buildings and structure thereon for the purposes of carrying out the above objects of the company. 8. Hence, both the assessee's can be said to be capable of being engaged in the business of land developing and are also builders, but the test as is seen from the cited decisions is as to the actual business carried on....
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....he assessee since its incorporation in 1975 nor has it booked any major sale since Financial Year 2000-2001. Even the Assessing Officer finds that the assessee has been pursuing its object of earning rental income through letting out and makes a casual statement that this is the object pursued more vigorously than the others referred in the Memorandum of Association. The presumption of the Assessing Officer that no prudent person would wait for more than 10-20 years even after payment of twice the cost of the building cannot be countenanced. If the building has not been conveyed to the purchaser and remains with the developer then there is nothing wrong in the developer leasing out the premises. There is no sale noticed, in the very many years, by the Assessing Officer, who also states that the Company had furnished the name of 25 persons who had entered into agreements for sale who were all related parties of the assessee. It is also presumed that the transactions appear to be a prima facie business connivance (sic) and that retention of huge advance money without any legal claims from the prospective customers cannot be countenanced. 10. We cannot understand how the absence of l....