ACIT CIR 5(3), MUMBAI V. STELLAR DEVELOPERS P LTD, MUMBAI

ITA 6512/MUM/2011

• Counselvise Citation: 651219914 RSA 2011
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 12-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./ I.T .A. NO. 6512 / MUM/20 11 ( / ASSESSMENT YEAR : 2008 - 09 ) ASSTT.COMMISSIONER OF INCOME TAX - 5 ( 3 ),ROOM NO. 573 , 5 TH FLOOR, A A YAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 / VS. M/S STELLAR DEVELOPERS PVT.LTD. 103, SANGEETA ENCLAVE, SARVODA YA NAGAR, MULUND (W) , MUMBAI ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AABCS 1078 C / APPELLANT BY SHRI NEIL PHILIP / RSPONDENT BY MS.VASANTI PATEL / DATE OF HEARING : 8. 7 . 201 5 / DATE OF PRONOUNCEMENT : 8. 7. 201 5 / O R D E R PER B.R. BASKARAN (AM) THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 5.7.2011 PASSED BY LD CIT(A) - 9 , MUMBAI AND IT RELATES TO ASSESSMENT YEAR 2008 - 09. 2. THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT LEASE RENTAL INCOME RECEIVED BY THE ASSESSEE SHOULD BE ASSESSED AS PROFIT S AND GAIN S OF BUS INESS INSTEAD OF ASSESSING THE SAME AS INCOME FROM HOUSE PROPERTY. ITA NO. 6512 / MUM/20 11 2 3. THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) HAS FOLLOWED HIS OWN DECISION RENDERED I N ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 AND AC CORDINGLY HELD THAT THE LEASE RENTAL INCOME IS ASSESSABLE AS PROFITS AND GAINS OF BUSINESS. . THE LD. C OUNSEL FURTHER SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 HAS SINCE BEEN UPHELD BY THE TRIBUNAL , VI DE ITS ORDER DATED 21.1.2015 PASSED IN ITA NO.4891/MUM/2008 AND ITA NO.6635/MUM/2009 . ACCORDINGLY, THE LD. AR SUBMITT ED THAT THE ORDER OF THE TRIBUNAL REFERRED ABOVE MAY BE FOLLOWED IN THE INSTANT YEAR ALSO . THE LD A.R ALSO SUBMITTED THAT THE DECISION RENDERED BY LD CIT(A) FINDS SUPPORT FROM THE RECENT DECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF M/S CHENNAI PROPERTIES LTD. 4 . WE HEARD LD D.R AND PERUSED THE RECORD. AS SUBMITTED BY THE LD. AR, THE TRIBUNAL HAS CONSIDERED THE IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR AYS 2005 - 06 AND 2006 - 07 AND UPHELD THE VIEW TAKEN BY THE LD.CIT(A) THAT THE LEASE RENTAL INCOME IS ASSESSABLE AS BUSINESS INCOME. THE RELEVANT OBSERVATION MADE BY THE TRIBUNAL ARE EXTRACTED BELOW FOR THE SAKE OF CONVENIEN CE : 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD WE FOUND THAT THE AO TREATED THE INCOME FROM COMMERCIAL EXPLOITATION OF ASSETS AS INCOME FROM HOUSE PROPERTY ON THE PLEA THAT IMPUGNED PROP ERTY HAS BEEN ACQUIRED BY THE ASSESSEE DURING THE YEAR WHEREAS THE SAME, WAS TAKEN BY THEM ON LEASE IN EARLIER YEAR. MERELY BECAUSE INCOME IS ATTACHED TO A PROPERTY IT CANNOT BE A SOLE FACTOR FOR ASSESSING SUCH INCOME AS INCOME FROM HOUSE PROPERTY AND IT H AS TO BE SEEN THAT WHETHER IT WAS THE PRIMARY OBJECTIVE OF THE ASSESSEE TO EXPLOIT THE PROPERTY IN A SIMPLE MANNER OR TO EXPLOIT IT COMMERCIALLY I.E. TO EXPLOIT IT BY WAY OF COMPLEX COMMERCIAL ACTIVITIES TO ARRIVE AT THE GENERATION OF INCOME THAT COULD BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR AS INCOME FROM BUSINESS. IF IT IS FOUND THAT ITA NO. 6512 / MUM/20 11 3 MAIN INTENTION IS TO SIMPLY LET OUT PROPERTY OR ANY PART OF IT, RESULTANT INCOME MUST BE ASSURED ASSESSED AS INCOME FROM HOUSE PROPERTY BUT IF MAIN INTENTION IS FOUND TO BE EXPLOITATION OF PROPERTY BY WAY OF COMMERCIAL ACTIVITIES, THEN RESULTANT INCOME MUST BE HELD AS BUSINESS INCOME. WHERE ASSESSEE COMPANY HAS DEVELOPED SHOPPING MALLS/BUSINESS CENTRES ON PROPERTIES OWNED BY IT AND LET OUT SAME BY PROVIDING HOST OF SERVICES/FACILITIES/AMENITIES IN THE SAID MALL/BUSINESS CENTRES, IT CAN BE SAID THAT BASIC INTENTION OF ASSESSEE WAS COMMERCIAL EXPLOITATION OF ITS PROPERTIES BY DEVELOPING THEM AS SHOPPING MALLS/BUSINESS CENTRES, THEREFORE, INCOME DERIVED THEREFROM IS ASSESSABLE AS BUSINESS INCOME. IN THE INSTANT CASE BEFORE US THERE IS NO DISPUTE THAT AS PER MEMORANDUM OF ASSOCIATION OF THE COMPANY IT IS THE MAIN OBJECT OF THE COMPANY TO PURCHASE AND/OR ACQUIRE PROPERTY AND TO GIVE ON LEASE AND/OR ON LICENSE BASIS ALON G WITH COMPLEX COMMERCIAL ACTIVITIES AND THAT IS HOW THE COMPANY HAS DECLARED ITS INCOME FROM SUCH PROPERTY AS THEIR BUSINESS INCOME. EVEN THE AGREEMENT EXECUTED WITH THE LESSEE OF THE IMPUGNED PROPERTY DOES NOT MENTION THE WORD TENANT, THEREFORE THERE I S NO SIMPLE LANDLORD AND TENANT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE LESSEE. SINCE, THERE IS NO CHANGE OF THE PARTY IN THE LEASE AGREEMENT I.E. M/S SHOPPER STOP LTD. AND SINCE THERE IS NO FRESH AGREEMENT ALSO FOR THE SAME EVEN AFTER ACQUIRING THE PROPERTY, IT IS CLEAR THAT THE INTENTION OF THE ASSESSEE HAS NOT GONE FOR A CHANGE AND IT REMAINS THE EARLIER ONE ONLY I.E. TO EXPLOIT COMMERCIALLY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES GENERATING THE BUSINESS INCOME AS PART AND PARCEL OF THE ASSESSE ES BUSINESS ACTIVITY ONLY. 7. THE HONBLE SUPREME COURT IN THE CASE OF KARNANI PROPERTIES LTD. V. CIT, (1971) 82 ITR 547 VERY SUCCINCTLY ENUNCIATED THE UNIQUE CHARACTERISTICS OF A BUSINESS ACTIVITY. THE APEX COURT HAS LAID DOWN PRECISE TESTS THAT ARE NE CESSARY TO DETERMINE WHETHER THE SERVICES RENDERED BY AN ASSESSEE TO ITS TENANTS/RECIPIENTS OF SERVICE, ARE IN THE NATURE OF BUSINESS ACTIVITIES AND INCOME GENERATED THEREFROM ASSESSABLE AS BUSINESS INCOME, OR NOT. THE HONBLE COURT EXPRESSED THE VIEW THAT IF THE SERVICES RENDERED BY THE ASSESSEE ARE THE RESULTS OF ITS ACTIVITIES CARRIED ON CONTINUOUSLY IN AN ORGANIZED MANNER, WITH A SET PURPOSE AND WITH A VIEW TO EARN PROFITS, THOSE ACTIVITIES WOULD CONSTITUTE BUSINESS ACTIVITIES AND THE INCOME ARISING THE REFROM WOULD BE ASSESSABLE AS BUSINESS INCOME UNDER SECTION 28 OF THE 1961 ACT. ITA NO. 6512 / MUM/20 11 4 8. A PERUSAL OF THE AGREEMENTS ENTERED BY ASSESSEE WOULD SHOW THAT THE ACTIVITIES INVOLVED IN PROVIDING THE VARIOUS SERVICES/FACILITIES/AMENITIES MEET ALL THE AFORESAID FOUR REQUIREMENTS LAID DOWN BY HONBLE SUPREME COURT TO QUALIFY AS BUSINESS ACTIVITIES. HENCE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDINGS RECORDED BY THE CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEALS OF THE REVENUE A ND ALLOW THE APPEAL OF THE ASSESSEE ON THE ISSUE OF TREATMENT OF INCOME DECLARED BY ASSESSEE AS INCOME FROM BUSINESS. SINCE THE VIEW TAKEN BY THE LD.CIT(A) IS ACCORDANCE WITH THE VIEW EXPRESSED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE EARLIER YEARS , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD.CIT(A). 5 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 8 TH JULY , 2015. 8 TH J ULY , 2015 SD SD ( / SANJAY GARG ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT ME MBER MUMBAI: 8TH JULY ,2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE 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