ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), INDORE., INDORE V. MP ENTERTAINMENT AND DEVELOPERS PRIVATE LIMITED, INDORE

ITA 338/IND/2023

AI Insights

The case revolves around the classification of rental income by M.P. Entertainment and Developers Private Ltd., which operates the Malhar Mega Mall in Indore. Initially, the Assessing Officer (AO) classified this income as 'Income from House Property' in the assessment order dated 30.12.2017, leading to an increased tax liability. The assessee contested this in the first appeal, and the CIT(A) reversed the AO's decision, classifying the income as 'Income from Business'. The revenue, aggrieved by this reversal, appealed to the Income Tax Appellate Tribunal. The Tribunal, referencing a similar case for the assessment years 2011-12 to 2014-15 and a supporting High Court decision, upheld the CIT(A)'s decision.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 27223 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-09-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 05-09-2023
• Other Referred Cases: PCIT Vs. M.P. Entertainment and Developers (P) Ltd., Sultan Brothers Private Limited v. CIT, Chennai Properties and Investments Limited, Rayala Corporation Private Limited, Raj Dadarkar and Associates
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM KUMAR YADAV
• Assessee Lawyers: ANIL KAMAL GARG
• Keywords: Business income; Question of law
• Section: 143(3); 28

Judgement Text

" Page 1 of 5 आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.338/Ind/2023 Assessment Year : 2015-16 ACIT, 1(1), Indore. बनाम/ Vs. M.P. Entertainment and Developers Private Ltd., 94-101, 4th Floor, C-21 Malls, Indore (Revenue /Appellant) (Assessee /Respondent) PAN: AAECM8668D Assessee by Shri Anil Kamal Garg, CA Revenue by Shri Ram Kumar Yadav, CIT DR Date of Hearing 23.09.2024 Date of Pronouncement 11.10.2024 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 10.07.2023 passed by learned Commissioner of Income-tax, NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 30.12.2017 passed by learned DCIT, 3(1), Indore [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the revenue has filed this appeal on following grounds: “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts and circumstances of the case. ACIT,1(1), Indore vs. M.P. Entertainment & Developers P. Ltd., Indore. ITA No. 338/Ind/2023 – AY 2015-16 Page 2 of 5 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating business income of the assessee whereas the assessee owning the Mall had let out the shops to various tenants for carrying out their business therefrom. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating business income of the assessee whereas the assessee had house property income as per the rent agreement made with various tenants. 2. The background facts leading to present appeal are such that the assessee-company, engaged in the activity of running and managing a shopping-cum-entertainment mall named and styled as “Malhar Mega Mall” situated at Indore, filed return of income for AY 2015-16 declaring a total income of (-) Rs. 1,76,01,479/-. The case was selected for scrutiny and statutory notices u/s 143(2)/142(1) were issued. Ultimately, the AO completed assessment vide order dated 30.12.2017 u/s 143(3) determining total income at Rs. 44,00,853/- after making certain adjustments. 3. One of the adjustments made by AO in assessment-order was due to re-characterization of rental income earned by assessee from mall as “Income from House Property” in place of “Income from Business or Profession” shown by assessee. The assessee contested this adjustment in first-appeal whereupon the CIT(A) accepted claim of assessee and reversed the order of AO. Now, aggrieved by order of CIT(A), the revenue has come in this appeal before us. 4. Thus, the sole issue involved in present appeal filed by revenue concerns with the nature of rental income earned by assessee. While the ACIT,1(1), Indore vs. M.P. Entertainment & Developers P. Ltd., Indore. ITA No. 338/Ind/2023 – AY 2015-16 Page 3 of 5 assessee claims the impugned rental income was “Income from Business or Profession”, the revenue has taxed it as “Income from House Property”. 5. On hearing learned Representatives of both sides, we find that the issue is recurring in assessee’s case year after year. This same issue has already been decided by ITAT, Indore in assessee’s favour for preceding AYs 2011-12 to 2014-15 in ITA No. 117,118 & 344/Ind/2017 order dated 21.11.2023. Ld. AR pointed out that the ITAT’s order has already been upheld by Hon’ble High Court of Madhya Pradesh vide order dated 16.06.2024 in PCIT Vs. M.P. Entertainment and Developers (P) Ltd. (2024) 162 taxmann.com 6 (Madhya Pradesh), relevant paras of order are re-produced below: “14. We have perused the records and considered the above submissions. 15. The A.O. determined Rs.50,21,35,712/- (rupees fifty crore twenty one lakhs thirty five thousand seven hundred twelve only) as \"house property income\" for the Assessment Year 2013-14 and determined \"business / professional income\" at Rs.6,63,59,504/- (rupees six crore sixty three lakhs fifty nine thousand five hundred four only) for the same Assessment Year. The CIT(A) has held that rental income derived by the respondent - assessee from leasing out the properties in the mall falls under the head of \"income from business\" and not under the head of the \"income from the house properties\". It has been held so because all the properties including the right of leasing were owned by the appellant. The same were put to use for the purpose of business or ready to put to use, as the main business of the assessee. Thereafter, in revenue appeals filed by the Department, learned ITAT has discussed this issue in detail after considering the documents filed by the respondent - assessee. The learned ITAT found that the main object of the assessee is the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc. as per Memorandum of Article and Association, which is liable to be categorized as income derived from the shopping mall under the head of \"income from business\" under Section 28 of the Income Tax Act. The assessee owned a building in the name of Mall and getting it furnished and thereafter let out to various persons with all furniture, ACIT,1(1), Indore vs. M.P. Entertainment & Developers P. Ltd., Indore. ITA No. 338/Ind/2023 – AY 2015-16 Page 4 of 5 fixtures, light or air conditioner for being used as table space by executing a rent agreement. 16. In the case of Sultan Brothers Private Limited v. CIT reported in (1964) 5 SCR 807, the Apex Court held that each case has to be looked at from the businessman's point of view to find out whether the letting was the doing of business or exploitation of the property by the owner, it is not possible to say that particular activity is a business because it is concerned with an asset with which the trade is commonly carried on. In case of Chennai Properties and Investments Limited (supra), the Apex Court found that the entire income of the appellant was through letting out of the two properties it owned and there was no other income of the assessee except the income from letting out the said properties, which was the business of the assessee. 17. The same situation was in the case of Rayala Corporation Private Limited (supra). The Apex Court while holding that the income shall be treated as \"income from the house property\", rested its decision in the context of main object of the company and took noted the fact that letting out the property was not the object of the company at all. Hence, the character of the income which was from the house property had not been altered, because it was received by the Company form the object of the developing and setting up of the properties. The aforesaid two judgments were distinguished in the case of Raj Dadarkar and Associates (supra), because the assessee therein did not produce sufficient material on record to show its entire income or substantial income was from letting out the properties which was the principal business activities of the appellant i.e. Raj Dadarkar and Associates. 18. In the present case, the A.O. did not find any material against the respondent-assessee to come to the conclusion that sub-leasing of the premises was only a part of its predominant object of the assessee. The respondent's right from the construction of mall till the matter was taken into scrutiny had been offering income from the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc., sub- licence by it under the head \"profit and gain of business or profession\" of the Income Tax Act. Therefore, the CIT (A) as well as ITAT have rightly set aside the order of A.O. 19. The Apex Court in case of Raj Dadarkar and Associates (supra) has held that ITAT being a last forum in so far as factual determination is concerned, these findings have attained finality. No material has been produced even before us to show how the aforesaid findings are perverse. The order passed by learned A.O. nowhere shows that the entire income or substantial income of the assessee was from letting out of the properties, which is admittedly not the principal business activity of the assessee. Therefore, we do not find any perversity in the findings recorded by the ITAT as well as the CIT(A) and also do not find any substantial question of law involve in these appeals.” ACIT,1(1), Indore vs. M.P. Entertainment & Developers P. Ltd., Indore. ITA No. 338/Ind/2023 – AY 2015-16 Page 5 of 5 6. Therefore, respectfully adopting the same view, we too hold that the rental income was rightly offered by assessee as “Income from Business”. Accordingly, we uphold the impugned order passed by CIT(A). The revenue’s appeal is dismissed being devoid of merit. 7. Resultantly, this appeal is dismissed. Order pronounced in open court on 11.10.2024 Sd/- Sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 11.10.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore "