2007 (6) TMI 177 - HC - Income Tax

Income derived from letting out the commercial complex - Taxable under head Income from Business or Income from House Property - service-cum-lease agreements - No bifurcation for a portion of the rental receipt - HELD THAT - It is fairly stated by counsel appearing for the assessees that mere letting out the property and deriving income from it should be assessed only under the head Income from house property and also the issue now stands concluded by this court judgment in CIT v. Chennai Properties and Investments Ltd. 2003 (3) TMI 28 - MADRAS HIGH COURT in favour of the Revenue. Hence we answer the questions in favour of the Revenue against the assessee. An alternative argument is also advanced that the whole receipt amount should not be assessed under the head Income from house property on the ground that certain portion of the amount is related to services provided as per the agreements which are independent ones. It is clear that the assessee-firm has to provide certain services. For the purpose of providing such services the occupant has to pay a consolidated charge of Rs. 1, 200 per month in the case of T.C. There is no dispute regarding the actual services provided by the assessee firms and the Revenue also did not deny the same. The only reason given by the Tribunal is that the assessees failed to substantiate their claims. The profit and loss account as well as balance-sheet were filed before the authorities wherein all the details regarding expenditure as well as receipts were reflected. There is no proper consideration of the details regarding providing services as well as receipt of the same by the authorities below. The authorities ought to have considered the same. If it is necessary they have to bifurcate a portion of the rental receipt into various heads. In such circumstances in the interest of justice we direct the Assessing Officer to consider the details regarding the services provided as well as the amount received for the same and the said receipt amounts derived from providing services may be considered under the head Income from other sources or under the head Income from business and pass orders in accordance with law after giving opportunity to the assessees. With the above observations the tax cases are disposed of.

Summary

Issues:
1. Classification of income derived from a commercial complex
2. Assessment of income under the correct head - Business or House Property

Issue 1: Classification of income derived from a commercial complex
The appeals were filed against the Income-tax Appellate Tribunal's order regarding the treatment of income derived from a commercial complex. The substantial questions of law revolved around whether the income should be treated as income from property or business asset exploitation. The assessees argued that the income constituted business receipts as they provided various services to occupants. However, the Revenue contended that the income should be assessed as income from property based on a previous court judgment. The court noted that the issue was settled by a previous judgment in favor of the Revenue, leading to a ruling in favor of the Revenue against the assessees.

Issue 2: Assessment of income under the correct head - Business or House Property
The court analyzed the nature of the services provided by the assessees to occupants of the commercial complexes. It was observed that the assessees did provide services as per agreements with occupants, which were not disputed by the Revenue. The court highlighted that the authorities failed to consider the evidence of services provided and did not properly assess the receipts. The court directed the Assessing Officer to reevaluate the details of services provided and the corresponding income received, suggesting that such amounts derived from services should be assessed under the head "Income from other sources" or "Income from business." The court emphasized the need for a proper assessment based on the evidence presented and ordered a reevaluation by the Assessing Officer.

In conclusion, the judgment addressed the classification of income from a commercial complex and the correct assessment under the relevant heads. It emphasized the importance of considering evidence of services provided and directed a reassessment by the Assessing Officer for a fair and accurate determination of income.