TMI Blog2002 (7) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law the learned CIT(A) erred in directing to tax the income derived by the assessee from house property as 'income from business', as against same assessed as income from property by the AO." 3. The facts of the case are the that the assessee-company had entered into a deed of lease with M/s Kohinoor Tobacco Products (P) Ltd. According to the lease agreement which is unregistered M/s Kohinoor Tobacco Products (P) Ltd. had leasehold land on which construction till the plinth level was carried out. The leasehold land was located in Jabalpur. The assessee took this land on sub-lease from M/s Kohinoor Tobacco Products (P) Ltd. w.e.f. 1st Oct., 1987, at a monthly rent of Rs. 1,000 The assessee took this property on lease wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that no electricity expenses have been claimed in the P L a/c and that the services rendered could not be provided without electricity. It was also the view of the AO that the assessee had designed its affairs in such a way that it could take the benefits of various case law and thus avoid the payment of tax. The AO also relied on the ratio laid down in the case of East India Housing Land Development Trust vs. CIT (1961) 42 ITR 49 (SC). He was, therefore, of the view that the entire receipts had to be taxed as income from house property and not income from business. 4. The matter was carried in appeal before the first appellate authority wherein the assessee submitted a written submission which is as under: 1.02. The assessee is a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails regarding the acquisition of lift, acquisition of air cooling plant and acquisition of furniture and fixtures had been given along with balance sheet and P L a/c. 1.05. During the course of assessment proceedings, the learned AO has asked to show-cause as to why the rent received from the tenants be not treated as income under the head 'income from house property'. In response to this notice, assessee had submitted detailed reply vide letter dt. 5th Feb., 1996, where it had been pointed out that the company was dealing in real property, as also the activity of taking property on lease, setting up the premises for the purpose of business centre and giving it to the members for the purposes of using it as an office. The number of ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Mills Co. Ltd. (1958) 34 ITR 155 (Bom) (iv) CIT vs. Ajmer Industries (P) Ltd. (1976) 103 ITR 245 (Cal) (v) Addl. CIT vs. Hindustan Machine Tools Ltd. (1979) 12 CTR (Kar) 316 : (1979) 121 ITR 798 (Kar) (vi) CIT vs. Vikram Cotton Mills Ltd. (1988) 67 CTR (SC) 169 : (1988) 169 ITR 597 (SC) Finally, the assessee submitted that the impugned income should be assessed as income from business and not as income from house property. The CIT(A) held as under: '4. I have considered the facts of the case. The appellant-company is not the owner of the land though the building was constructed by it. In the land the appellant had interest as sub-lessee whereas it was the owner of the building constructed on the said land. Under the Indian C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaving out the facilities of the transport and data processing all the other facilities were provided by the appellant to its tenants. Regarding data processing services and transport facilities, it was stated that the users of the business centre did not ask for the services and, therefore, they were not provided. In this case the entire income earned has two components i.e.: (i) part of the income is attributable to the letting out the building. (ii) the other part is attributable to rendering of services by the appellant to its tenants. As both the activities belong to one line of activity and as they are one composite whole, in my opinion, the entire activity can be classified as a business activity. This view is supported by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h to M/s Saptarashi Services (P) Ltd. to construct a new building thereon, as per the plan approved by the Municipal Corporation Accordingly, M/s Saptarashi Services (P) Ltd. constructed the service centre. The director of Kohinoor Tobacco Products (P) Ltd. are: 1. Shri Vadilal D. Pandya 2. Shri Chimanbhai D. Patel Whereas, the directors of M/s Saptarashi Servies (P) Ltd. are: 1. Shri Lalitbhai R. Patel, Baroda. 2. Shri Jayeshbhai N. Patel, Baroda 3. Shri Girishbhai A. Patel, Ahmedabad The directors of M/s Saptarashi Services (P) Ltd. are not related to the directors of M/s Kohinoor Tobacco Products (P) Ltd. The electricity charges from 1st Oct., 1989 to 31st March, 1990 were paid by M/s Mohanlal Hargovandas who were one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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