2017 (11) TMI 1562 - AT - Income Tax

Nature of income - Rent received - Income from house property OR Income from other sources - Held that - Consistent with this view taken in the earlier years on similar set of facts which are permeating in this year also and as a matter of judicial precedence, we agree with the assessee s contention and hold that the income/receipts from PVR Ltd. is to be assessed under the head income from house property and the assessee shall be entitled for all statutory deduction as are permissible under the law including standard deduction of 30 per cent. This ground raised by the assessee (Revenue) is dismissed.

Issues Involved:
1. Whether the rent received by the appellant amounting to ?2,03,18,090 should be treated as "Income from house property" or "Income from other sources."

Issue-wise Detailed Analysis:

1. Treatment of Rent Received:
The primary issue in this case was whether the rent received by the assessee from PVR Ltd. should be classified as "Income from house property" or "Income from other sources." The Revenue contended that the income should be assessed under "Income from other sources" based on the nature of the agreement between the assessee and PVR Ltd., which was perceived as a franchisee agreement rather than a rental agreement.

Tribunal’s Previous Rulings:
The Tribunal had previously ruled in the assessee's favor for the assessment years 2007-08 and 2008-09, stating that the income derived from the property should be assessed under "Income from house property." This precedent was crucial in the current assessment year (2010-11) as the facts and circumstances remained unchanged.

Assessing Officer’s View:
The Assessing Officer (AO) had concluded that the agreement between the assessee and PVR Ltd. was a franchisee agreement, thus disallowing the statutory deduction of 30% claimed by the assessee. The AO’s view was based on an in-depth analysis of the "operation and management agreement" dated May 18, 2000, which he believed indicated a profit-sharing arrangement rather than a rental agreement.

Commissioner of Income-tax (Appeals) Decision:
The Commissioner of Income-tax (Appeals) disagreed with the AO, following the Tribunal's earlier decisions and allowing the assessee's claim that the income should be taxed as "Income from house property."

Principle of Consistency:
The Tribunal emphasized the principle of consistency, noting that while the rule of res judicata does not apply to Income-tax proceedings, the rule of consistency should not be ignored. The Tribunal highlighted that the AO had accepted the assessee's claim in previous years without any new facts or evidence to justify a change in stance.

Analysis of the Agreement:
The Tribunal carefully reviewed the "operation and management agreement" and other related documents. It concluded that the agreement's intention was to rent out the property for a fixed consideration, not to share profits from a cinema business. The Tribunal observed that PVR Ltd. had taken over only the cinema building and not the furniture, fixtures, or equipment, which were returned to the assessee.

Legal Precedents:
The Tribunal cited the Bombay High Court's decision in Parekh Traders v. CIT, which distinguished between income from letting out land or house property and income from letting out plant and machinery. The court had held that income derived as rent from property must be computed under "Income from house property."

Conclusion:
The Tribunal concluded that the income received from PVR Ltd. should be assessed under "Income from house property," allowing the assessee all statutory deductions, including the standard deduction of 30%. The Revenue's appeal was dismissed, and the Tribunal's order was pronounced in the open court on October 6, 2017.

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