TMI Blog2008 (5) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... l over the premises is with the assessee. Further, there is no intention of mere letting out the property and earn the rental income since customers keep on changing from time-to-time. The space is provided to the customers on weekly/monthly basis for carrying out their work of assignment or for completing the specific work. Sometimes, there may be no customer and space may remain vacant. In such cases, the activity is to run business centre as a commercial activity like hotels and hospitals and use of the property is incidental to carrying on such business activity. Sec. 22 of the Act specifically excludes those cases where property is used for business purposes. Therefore, we are of the view that the object of the assessee is to run the business centre by exploiting the property and not mere letting out the property. Consequently, the receipts from such activity must be considered as business receipts. Accordingly, we hold so. The view taken by us is fortified by the decision of Hon'ble Gujarat High Court in the case of Asstt. CIT vs. Saptarshi Services Ltd. [ 2003 (2) TMI 415 - GUJARAT HIGH COURT] . Therefore, the order of the CIT(A) is set aside and consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the business of service centre, the assets get commercially exploited. Since, the income arising from commercial exploitation of the premises, the income arising therefrom has been offered for taxation as business income . 3. The above explanation of the assessee was rejected by the Assessing Officer. According to him, the assessee was the owner of the house property which had been let out to others for their use. The income arising therefrom by way of service charges, or by whatever name it is called is in the nature of rent, the genesis of which emerged from the ownership of the property let out. He also referred to the provisions of Section 14 of the Income-tax Act, 1961 (the Act) which classifies the heads of income under which total income is to be computed. He also referred to provisions of section 22 of the Act which provide that annual value of the property of which assessee is the owner shall be chargeable to tax under that head. Since the assessee was owner of the property, it was held by him that receipt arising from letting out of the property was assessable under the head Income from house property. Regarding the receipt received from subletting the premises, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one system, fax machine, tube-lights, tables, electric call bells etc. (viii) In addition to the above mentioned items provided by the centre, the centre also provides office-cum reception room of the centre premises, one receptionist's desk with a chair, a telephone operator and two telephone connections. (ix) The centre also provides one peon and one sweeper and for maintenance supervisor for the purpose of cleaning the centre premises. (x) A waiting room of the premises is also allowed to be used. (xi) For all the services to be rendered the customer has to pay by way of service charges. (xii) It is specifically declared that the company will be allowed to occupy the premises and it is hereby expressly agreed by and between the parties hereto that none of the provisions contained herein shall be construed as giving tenancy rights. In support of his contention, the assessee relied on the decision of Hon'ble Supreme Court in the case of Sultan Bros. (P) Ltd. vs. CIT (1964) 51 ITR 353 (SC). It was further submitted that it is the intention of the assessee which is to be seen in deciding the issue as held by the Hon'ble Calcutta High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat certain spaces in the building whether owned by the assessee or taken on lease were provided to different customers for small small periods. It reveals that the charges are per week and in some cases, it is per month also. He also referred to the services provided by the assessee which have been noted by the CIT(A) in his order. Therefore, it was pleaded that the decision of the hon'ble Supreme Court in the case of Shambhu Investments Pvt. Ltd., is distinguishable on facts. On the contrary, the legal position laid down by hon'ble Calcutta High Court in the said case supports the assessee. In response to a Bench query, it was explained that the two units of the assessee were centrally air-conditioned while the other unit known as Nirma Plaza was not central air-conditioned. According to him, it is not a mere letting out of building or furniture but it is a case of providing various facilities. He drew our attention to the fact that a receptionist is provided to attend the customers. The telephone operator is there to receive and connect the telephone calls of the customers. Various staff is employed who are engaged in the upkeep of the premises used by the customers. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty, whether furnished or unfurnished, is let out with the intention to have rental income, it would be assessable as 'income from house property' as held by the Apex Court in the case of Shambhu Investments Pvt. Ltd. (supra). On the other hand, if the primary object is to exploit the property by 'complex' commercial activities, then income from the same should be considered as business income. This test has been laid down by the hon'ble Calcutta High Court in the case of Shambhu Investments Pvt. Ltd. which has been approved by the Apex Court (supra). The relevant observations of the hon'ble High Court are being reproduced as under: Merely because income is attached to any immovable property, that cannot be the sole factor for assessment of such income as income from property. If the main intention of the assessee is to let out the property or any portion thereof the income must be considered as rental income or income from property whereas if the primary object is to exploit the immovable property by way of complex commercial activities in that event it must be held as business income. 9. The legal position laid down in the above case is binding on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically excludes those cases where property is used for business purposes Therefore, considering the facts of the case, we are of the view that the object of the assessee is to run the business centre by exploiting the property and not mere letting out the property. Consequently, the receipts from such activity must be considered as business receipts Accordingly, we hold so. 10. The view taken by us is fortified by the decision of hon'ble Gujarat High Court in the case of Saptarshi Services Ltd. (2004) 265 ITR 379 (Guj). In that case, one 'K' had leasehold rights over a land on which part construction was done. 'K' subleased the property to the assessee under which the assessee could develop the said property into a business centre. After developing the said property, the assessee carried on the business as business centre by providing the following services: (a) Services of lift; (b) Services of receptionist to greet the visitors of members and accept the message on behalf of the members; (c) Telephone services for directing the calls; (d) Secretarial services/assistance like steno services; (e) Data processing and word processing facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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