COMMISSIONER OF INCOME TAX V. M/S. PRESTIGE ESTATE

ITA/119/2014

AI Insights

The case involves an appeal by the Commissioner of Income Tax (Appeals)-IV and the Joint Commissioner of Income Tax (OSD), Central Range, Bangalore against M/s. Prestige Estate Projects Ltd. The appeal was filed under Section 260-A of the Income Tax Act, 1961, challenging the order passed by the Appellate Tribunal which classified the rental income from Forum Mall, Eva Mall, and UB City as 'Income from Business' instead of 'Income from House Property'. The appellants argued that there was a specific landlord-tenant relationship established through agreements, and the rental income was paid monthly. The respondents contended that the properties were part of a business operation, thus the income should be classified under business profits. The court referenced a similar case (I.T.A. No. 73/2014) and a precedent (Velankani Information Systems case) to support the decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 741662 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 03-06-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax-III Vs. Velankani Information Systems (P) Limited, Shambhu Investments (263 ITR 143)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ASHOK KULKARNI
• Assessee Lawyers: E I SANMATHI
• Keywords: Assessment Year 2009-10; Income from Business; Income from house property; Rental income
• Section: 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 3RD DAY OF JUNE, 2014 PRESENT THE HON’BLE Mr. JUSTICE N. KUMAR AND THE HON’BLE Mr. JUSTICE B. MANOHAR I.T.A. No. 119/2014 BETWEEN : 1. COMMISSIONER OF INCOME TAX (APPEALS)-IV BANGALORE. 2. JOINT COMMISSIONER OF INCOME TAX (OSD) CENTRAL RANGE BANGALORE. … APPELLANTS (BY Sri. E.I. SANMATHI, ADV.) AND : M/S. PRESTIGE ESTATE PROJECTS LTD., THE FALCON HOUSE No. 1, MAIN GUARD CROSS ROAD BANGALORE– 560 001. … RESPONDENT (BY Sri. ASHOK KULKARNI, ADV.) 2 THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, TO SET ASIDE THE ORDER DATED 11.10.2013 PASSED IN I.T.A. No. 78/Bang/2013 FOR THE ASSESSMENT YEAR 2009-10. THIS I.T.A. COMING ON FOR ORDERS THIS DAY, N. KUMAR, J, DELIVERED THE FOLLOWING; J U D G M E N T This appeal is preferred by the revenue challenging the order passed by the Appellate Tribunal. The substantial questions of law which is raised in this appeal by the appellants is: “1. Whether on the facts and in the circumstances of the case the Tribunal is justified in law in holding that the rental income received from Forum Mall, Eva Mall and UB City should be treated as “Income from Business” and not as “Income from House Property”, despite a specific agreement between the landlord and tenant contemplating a landlord tenant relationship and rental income being paid every month as held by the Apex Court in the case of Shambhu Investments (263 ITR 143)? 3 2. Whether on the facts and in the circumstances of the case the ITAT is justified in law in holding that the rental received from Fit Outs (i.e., bare superstructure of the building) is liable to be treated as “Income from Business” and not as “Income from House Property”, as held by the Assessing Officer?” 2. Similar question arose for consideration before this Court in I.T.A. No. 73/2014 which was decided on 01.04.2014 following the judgment of this Court in the case of Commissioner of Income Tax-III Vs. Velankani Information Systems (P) Limited reported in (2013) 218 Taxman 88 (Karnataka). In the aforesaid decision this Court has observed as under:. “26…. … … If the intention is to exploit commercial property by putting up construction and letting out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building fall under the head 4 ‘income from house property’. But if the assessee is in the business of taking land, putting up commercial buildings thereon and letting out such buildings with all furniture as his profession or business, then notwithstanding the fact that he has constructed a building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the heading of income from house property. Therefore, firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying at complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession.” 3. In that view of the matter we do not see any merit in this appeal. As the substantial questions of law raised in this 5 appeal are already answered in the aforesaid decision, this appeal is dismissed. Sd/- JUDGE. Sd/- JUDGE. LRS. "