2015 (10) TMI 2743 - AT - Income Tax

Business Centre Service Charges - nature of income - treated as Business Income OR Income from House Property - commercial exploitation - Held that - After considering the Business Conducting Agreement between the assessee and PRIL the CIT(A) recorded finding that the assessee has granted permissive use of the services and facilities provided in the premises by the assessee. The Conductor has no right of occupancy but only limited access for the purposes of business activities during hours of day fixed in the agreement. We also found that the premises are in the control of the assessee and the assessee is required to provide services as per the agreement for which personnel on permanent basis were to be employed. Thus the management and administration of the mall vested with the assessee. The detailed finding recorded by the CIT(A) has not been controverted by the department by bringing any positive material on record. Accordingly no merit to interfere in the order of CIT(A). We further found that the issue is squarely covered in the case of Chennai Properties and Investment Ltd. 2015 (5) TMI 46 - SUPREME COURT in favour of the assessee for holding that such commercial exploitation renders income from business rather than income from house property. - Decided against revenue.

Summary

Issues:
Revenue's appeal against CIT(A) order regarding classification of Business Centre Service Charges as "Business Income" instead of "Income from House Property."

Analysis:
1. The appeal was filed by the revenue challenging the CIT(A) order for the assessment year 2006-07, regarding the treatment of Business Centre Service Charges as "Business Income" instead of "Income from House Property."

2. The assessee company was incorporated with the main object of dealing in real estate, and the income from the business center was offered as income from business and profession. However, the AO treated it as income from house property.

3. The CIT(A) accepted the assessee's contention that the income was from business, not house property, based on the nature of activities and agreements. The CIT(A) considered the primary objective of exploiting the property through commercial activities, leading to the income being classified as business income.

4. The CIT(A) referred to the Business Conducting Agreement, highlighting that the assessee had control over the premises, provided services, and managed the property, indicating a business asset being exploited for commercial services systematically.

5. The tribunal upheld the CIT(A) decision, emphasizing that the property was used for complex commercial activities, and the management and administration vested with the assessee. The tribunal found no merit in the revenue's appeal, noting the absence of contrary evidence and citing a Supreme Court decision supporting the assessee's position.

6. Ultimately, the tribunal dismissed the revenue's appeal, affirming the classification of Business Centre Service Charges as business income rather than income from house property based on the commercial exploitation of the property.

This detailed analysis of the judgment highlights the key arguments, observations, and legal principles considered in the decision regarding the classification of income for the assessment year in question.