2014 (9) TMI 623 - AT - Income Tax

Business income treated as income from house property Held that - The assessee has declared the receipts on account of business arrangement fee under the head business and computed on the basis of percentage - The Business Arrangement Agreement dated 23.08.2002 entitled the assessee to receive a fixed consideration per annum with an increase every year @ 15% and thereafter every three years the fee shall be increased with mutual consent - The AO in earlier years and subsequent years has accepted the position as it is and treated the receipts declared as business income - the mere fact of attachment of income to any immovable property cannot be the sole factor for assessment of such income as income from house property - It is necessary to find out the primary object of assessee while exploiting the property - If it is found that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from house property - the main intent ion is to exploit the immovable property by way of complex commercial activities, in that event it must be held as business income - it was a case of rental or commercial utilization of properties, which has been accepted, there is no reason to uphold this deviation the order of the CIT(A) Decided against revenue.

Summary

Issues Involved:
1. Classification of income as business income or income from house property.
2. Consistency in the treatment of income in subsequent assessment years.

Issue-wise Detailed Analysis:

1. Classification of Income:
The primary issue in both appeals was whether the income declared by the assessee as "business income" should be treated as "income from house property" by the Assessing Officer (AO). The AO treated the business arrangement fees received by the assessee as rental income, leading to the disallowance of claimed expenses. The assessee argued that the income should be classified as business income due to the nature of the Business Arrangement Agreement, which involved providing space and various services to M/s. Trent Limited for retail business operations. The Commissioner of Income Tax (Appeals) [CIT(A)] ruled in favor of the assessee, stating that the income was derived from commercial exploitation of the property, not merely from letting out the property. The CIT(A) emphasized that the property was developed as a business center with numerous facilities and services, which constituted a complex commercial activity, thus categorizing the income as business income.

2. Consistency in Treatment of Income:
The assessee's counsel highlighted the principle of consistency, noting that in earlier and subsequent years, the AO had accepted the income as business income. The CIT(A) and the Tribunal upheld this view, referencing the principle of consistency as supported by the Hon'ble Supreme Court in cases like Radhasoamy Satsang and Shambhu Investment. The Tribunal emphasized that the primary object of the assessee was commercial exploitation of the property, and the income derived from such activities should be treated consistently as business income. The Tribunal also noted that the AO had accepted similar treatment in other years, reinforcing the need for consistent application of the law.

Conclusion:
The Tribunal dismissed the appeals filed by the Revenue, confirming the CIT(A)'s order to treat the income as business income. The Tribunal reiterated the importance of the primary objective in exploiting the property and upheld the principle of consistency in tax assessments. The decision emphasized that income derived from complex commercial activities involving property should be classified as business income, not as income from house property.