DCIT RG 8(1), MUMBAI V. E-CITY PROJECTS CONSTRUCTION P. LTD, MUMBAI

ITA 5696/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100558 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI A.D.JAIN (JM) AND RAJENDRA (AM) . . , , ./ I.T.A. NO. 5696 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 10 - 11 ) ASSTT. COMMISIONER OF INCOME TAX 9(2)(2), ROOM NO.259, 2 ND FLOOR, AAYAKAR BHAVNA, M K ROAD, MUBMAI - 400020 / VS. M/S E - CITY PROJECTS CONSTRUCTION P LTD. 844/4, FUN REPULLIC ,SHAH INDUSTRIAL ESTA TE, OFF, NEW LINK ROAD, ANDHERI (E), MUMBAI - 400053 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AABCE5486E / APPELLANT BY SHRI S S RANA / RSPONDENT BY SHRI RAJESH CHAMARIAL / DATE OF HEARING : 2 9 . 7 . 201 5 / DATE OF PRONOUNCEMENT : 7. 8. 201 5 / O R D E R PER A D JAIN ( J M) TH IS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 200 10 - 11 , TAK ING THE FOLLOWING GROUNDS: ' 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN NOT UPHOLDING T HE ACTION TAKEN BY THE A O IN TREATING THE RENTAL INCOME FROM 'OPERATING FAMIL Y ENTERTAINMENT CENTRE CUM MALL' (RENT) AND 'MAINTENANCE CHARGES' AM OUNTING RS.13,73,54,169/ - AND RS .4 ,41,27,855/ - RESPECTIVELY, AS 'INCOME FROM HO U SE PROPERTY'. 2 . 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DIRECTING THE A O TREAT THE INCOME FROM COMMERCIAL COMPLEX AS 'INCOME ITA NO. 5696 / MUM/20 1 3 2 FROM BUSINESS' WI THOUT CONSIDERING THAT THE ASSESSEE HAS RECEIVED RENT FOR ALLOWING USE OF THE PROPERTY A ND NOT FOR CARRYING OUT ANY SYSTEMATIC ACTIVITY, WHICH IS PRECONDITION OF BUSINESS. 3 . 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN COMPLETELY IGNORIN G 'THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD. V/S CIT(2003) 184 CTR (SC) 91: (2003) 263 ITR 143(SC), WHEREIN IT IS HELD INCOME DERIVED BY AN ASSESSEE BY LETTING OUT FURNISHED PREMISES ON MONTHLY BASIS TO VARIOUS PARTIE S ALONG WITH VARIOUS SERVICES, IS ASSESSABLE AS INCOME PROPERTY AND NOT BUSINESS INCOME.' 4 . 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN HOLDING THE IN FROM COMMERCIAL COMPLEX AS 'INCOME FROM BUSINESS' WITHOUT CONSIDERING THAT THE A SSESSEE WAS PROVIDING VARIOUS SERVICE AND AMENITIES, VIZ. SECURITY SYSTEM, CLEA NING AND MAINTENANCE LIGHTING, REPAIR AND MAINTENANCE OF LIFTS, PROVISION AND MANAGE MENT OF PARKING SPACE, FIRE FIGHTING EQUIPMENT AND INSURANCE OF THE PROPERTY, REPRESENT RUN NING AND MAINTENANCE EXPENSES FOR THE PROPERTY AND CONSTITUTE REG ULAR AMENITIES AND FACILITIES FOR OCCUPANTS INCLUDING TENANTS .' 2. THE AO OBSERVED THAT THE ASSESSEE COMPANY SHOULD HAVE SHOWN THE INCOME OF RS.13,73,54,169/ - AND MAINTENANCE CHARGES OF RS .4,41,27,855/ - , INTER ALIA, THE OPERATING INCOME OF RS.13,73,54,169/ - HAD BEEN SUB - DIVIDED INTO INCOME FROM COMMERCIAL COMPLEX OF RS.12,39,97,853/ - , PARKING INCOME OF RS.26,18,880/ - AND ADVERTISEMENT AND SPONSORSHIP INCOME OF RS.1,07,37,436/ - . THESE R ECEIPTS HAD BEEN TAKEN BY THE ASSESSEE AS ITS INCOME FROM BUSINESS. THE AO, HOWEVER, HELD THAT THE INCOME EARNED BY THE ASSESSEE WAS FROM LETTING OUT OF THE PROPERTY AND OUGHT TO HAVE TAXED AS INCOME FROM HOUSE PROPERTY . ACCORDINGLY, THE RENTAL RECEIPT WAS BROUGHT TO TAX AS THE ASSESSEES INCOME FROM HOUSE PROPERTY . 3. BY VIRTUE OF THE IMPUGNED ORDER, FOLLOWING THE FIRST APPELLATE AUTHORITYS ORDERS IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007 - 08 TO 2009 - 10, THE LD. CIT(A) DIRECTED THE AO T O TREAT THE INCOME FROM THE COMMERCIAL COMPLEX ITA NO. 5696 / MUM/20 1 3 3 AS BUSINESS INCOME OF THE ASSESSEE AND INTEREST INCOME AS INCOME FROM OTHER SOURCES. 4. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2 009 - 10, THE TRIBUNAL , VIDE ITS ORDER DATED 30.7.2014, HAS CONFIRMED THE ORDER OF LD. CIT(A) FOR THAT YEAR , WHILE DISMISSING THE DEPARTMENTS APPEAL AND HAS UPHELD THE ACTION OF THE LD.CIT(A) IN TREATING THE OPERATIONAL INCOME RECEIVED BY THE ASSESSEE CO MPANIES FROM RUNNING OF MALLS IN THE FORM OF RENT AND SERVICE CHARGES, AS THEIR BUSINESS INCOME. A COPY OF THE SAID TRIBUNAL ORDER HAS BEEN PLACED ON RECORD. 5. THE DEPARTMENT HAS NOT BEEN ABLE TO REFUTE THE ABOVE POSITION. THE LD. CIT(A) HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE, FOR THE YEAR UNDER CONSIDERATION, OBSERVING AS FOLLOWS : 2.3 THE AO'S ORDER, THE CONTENTIONS OF THE APPELLANT AS WELL AS MATERIALS ON RECORD HAVE BEEN CONSIDERED. THE SAME ISSUE HAD COME UP FOR CONSIDERATION IN APP EAL FOR AY 2008 - 09, WHEREIN THE CIT(A) - 16, MUMBAI HAD FOLLOWED HIS OWN ORDER ON SIMILAR ISSUE IN AY 2007 - 08, WHEREIN VIDE HIS ORDER DATED 16.9.2010 IN APPEAL NO. CIT(A) - 16/IT - 369/2009 - 10 DATED 16.09.2010, HE HAD HELD THAT INCOME FROM THE COMMERCIAL COMPL EX IS TO BE TREATED AS INCOME FROM BUSINESS AND THE INTEREST INCOME IS TO BE TREATED AS INCOME FROM OTHER SOURCES. IN AY 2009 - 10, IN APPEAL ORDER DATED 9.11.2012 IN APPEAL NO. CIT (A) - 16/ACIT - (OSD) - 8(1)/IT.171/2011 - 12, IT WAS HELD THAT ' ..... INCOME SHOW N IN SCHEDULE 'O' AS 'OTHER INCOME' INCLUDES INTEREST RECEIVED, APART FROM MISCELLANEOUS INCOME, AND THE LATTER INCLUDES PRIMARILY HELMET INCOME, MEDIA BARRIER DEAL, PROMOTION CASH INCOME, ATRIUM CORPORATE DEAL, LOST AND FOUND, LEASING DC SET INCOME ETC., AND THE LATTER HAVE BEEN DIRECTED TO BE TREATED AS BUSINESS INCOME IN THE EARLIER YEARS' APPELLATE ORDERS. SINCE THE FACTS AND CIRCUMSTANCES REMAIN THE SAME IN THE PRESENT YEAR UNDER APPEAL, VIZ., AY 2009 - 10, FOLLOWING THE ORDER OF MY PREDECESSOR CIT(A)S I N A YS.2007 - 08 AND 2008 - 09, THE ASSESSING OFFICER IS DIRECTED TO TREAT THE INCOME FROM THE COMMERCIAL COMPLEX AS INCOME FROM BUSINESS AND INTEREST INCOME AS INCOME FROM OTHER SOURCES. ACCORDINGLY THE GROUNDS 1 TO 3 ARE PARTLYALLOWED.' SINCE THE FACTS ARE S IMILAR IN THE PRESENT APPEAL FOR AY 2010 - 11, FOLLOWING THE APPEAL ORDERS IN EARLIER YEARS, IN AY 2010 - 11, THE AO IS DIRECTED TO TREAT THE INCOME FROM ITA NO. 5696 / MUM/20 1 3 4 THE COMMERCIAL COMPLEX AS INCOME FROM BUSINESS AND INTEREST INCOME AS INCOME FROM OTHER SOURCES. GROUNDS N O.1 TO 3, THUS, ARE PARTLY ALLOWED. IN VIEW OF THE FINDING GIVEN IN RESPECT OF GROUNDS 1 TO 3 THAT THE INCOME FROM COMMERCIAL COMPLEX IS TO BE TREATED AS INCOME FROM BUSINESS, GROUND NO. 4 IS RENDERED INFRUCTUOUS AND IS DISMISSED. 7 . FOR THE ASSESSMENT Y EAR 2009 - 10, VIDE ORDER DATED 30.7.2014, IN ITA NO.1230/MUM/2013, THE TRIBUNAL HAS UPHELD THE ACTION OF LD.CIT(A) BY OBSERVING , INTERALIA, AS FOLLOWS : 14. AS HELD BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD. (2001) 249 ITR 47 (CAL.), WHICH HAS BEEN SUBSEQUENTLY AFFIRMED BY THE HONBLE SUPREME COURT, WHAT HAS TO BE SEEN IN THIS CONTEXT IS WHAT IS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS FOUND APPLYING SUCH TEST THAT THE MAIN INTENTION IS TO LET OUT THE PROPERTY OR ANY PORTION THEREOF, THE SAME MUST BE CONSIDERED AS INCOME FROM HOUSE PROPERTY. IN CASE IT IS FOUND THAT THE VERY INTENTION IS TO EXPLOIT THE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITY, IN THAT EVENT IT MUST BE HELD AS BUSINE SS INCOME. IN OUR OPINION, THE FACTS OF THE PRESENT CASE AS BORNE OUT FROM THE RECORD CLEARLY SHOWS THAT THE CASES OF THE ASSESSEES FALL UNDER THE LATTER CATEGORY AS THE INTENTION OF THE ASSESSEES CLEARLY WAS TO EXPLOIT THE COMMERCIAL PROPERTY BY WAY OF CO MPLEX COMMERCIAL ACTIVITIES AND IT WAS NOT A CASE OF LETTING OUT THE PROPERTY OWNED BY THE ASSESSEE COMPANIES SIMPLICITER. THE RENTAL INCOME WAS NOT RECEIVED BY THE ASSESSEE COMPANIES MERELY BECAUSE OF THE OWNERSHIP OF THE PROPERTY BUT THE SAME WAS RECEIVE D BECAUSE OF THE COMPLEX COMMERCIAL ACTIVITY CARRIED ON BY THEM OF OPERATING AND RUNNING MALLS WHICH BROUGHT THAT RENTAL INCOME. THE RENTAL INCOME AND SERVICE CHARGES THUS WERE RECEIVED BY THE ASSESSEE COMPANY AS BUSINESS INCOME DURING THE COURSE OF ITS BU SINESS CARRIED ON BY THEM OF OPERATING AND RUNNING THE MALLS AS A COMMERCIAL ACTIVITY AND AS RIGHTLY HELD BY THE LD. CIT(A), THE SAID INCOME PRIMARILY ARISING FROM THE EXPLOITATION OF COMMERCIAL ASSETS BY WAY OF COMPLEX COMMERCIAL ACTIVITY CONSTITUTED THE BUSINESS INCOME OF THE ASSESSEE COMPANY. 15. IT IS OBSERVED THAT THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S KHANDELWAL ESTATE P. LTD. (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASSESSEE ALSO SUPPORTS THE CASE OF THE ASSESSEES . IN THE SAID CASE, THE INCOME RECEIVED BY THE ASSESSE FROM THE OPERATION OF SHOPPING MALLS IN THE FORM OF RENT AND SERVICE CHARGES WAS HELD TO BE BUSINESS INCOME OF THE ITA 8390/M/10, ITA 1435, ITA 1436/M/12 & ITA 1430 15 ASSESSEE BY THE TRIBUNAL HOLDING THAT GIVING SPACE WITH SERVICES AND FACILITIES OF VARIED AND WIDE NATURE WOULD DEFINITELY CONSTITUTE A BUSINESS AND THE RELATIONSHIP BETWEEN THE PARTIES IN SUCH CASE IS DISTINGUISHED FROM THAT MERELY OF A LANDLORD AND TENANT RELATIONSHIP. WE ITA NO. 5696 / MUM/20 1 3 5 THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDERS OF THE LD. CIT(A) TREATING THE OPERATIONAL INCOME RECEIVED BY THE ASSESSEE COMPANIES FROM RUNNING OF MALLS IN THE FORM OF RENT AND SERVICE CHARGES AS THEIR BUSINESS INCOME AND UPHOLDING THE SAME ON THIS ISSUE, WE DISMIS S THESE APPEALS FILED BY THE REVENUE. 7. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER (SUPRA) IN ASSESSEES OWN CASE, THE GRIEVANCE OF THE DEPARTMENT IS FOUND TO BE WITHOUT MERIT AND IS REJECTED AS SUCH. 8 . IN THE RESULT, THE APPE AL OF THE DEPARTMENT IS DISMISSED. PRONOUNCED ACCORDINGLY ON 7 TH AUG , 2015. 7 TH AUG , 2015 SD SD ( / RAJENDRA) ( . . , / A.D. JAIN ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: 7TH AUG ,2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI