2017 (8) TMI 295 - HC - Income Tax

Nature of income - income from house property or business income - nature of activity - Held that - The Commissioner (Appeals) and the Tribunal after going through the object of the company as detailed in the memorandum of association and also considering activities, the nature of the transaction, has held the income to be a business income. It is also held that the assets also include various amenities such as electricity, cooling towers, elevators, car parking for the lessees/visitors and the said services and amenities provided by the Assessee are inseparable and are provided along with the building. Both the authorities have concurrently correctly observed that the basic intention of the Assessee was commercial exploitation of its properties by developing them as shopping malls/business centers and therefore, income derived there from is assessable as business income. The main object of the company, the nature of the business activities of the Assessee Company as well as the terms of the agreement has been considered. The various services provided by the Assessee company during the course of operation and running of said commercial complex are also considered. Thus plausible conclusion arrived at. - Decided against revenue.

Summary

Issues involved:
Appeal regarding classification of income as business income or income from house property for multiple Assessment Years.

Analysis:
1. The Assessing Officer initially accepted the income as business income, but later reclassified it as income from house property. The CIT and Tribunal upheld the income as business income, leading to the Revenue's appeal.
2. The Appellant argued that the income should be classified as income from house property due to the main intention being letting out the property, with amenities being incidental. They cited settled law on this matter.
3. The Respondent contended that the income is rightfully classified as business income, as per the company's objectives of property development and leasing, supported by the memorandum of association and commercial activities.
4. The Assessee, a Private Limited Company, has been consistently reflecting rental income as business income since 2000, claiming depreciation each year. The Commissioner and Tribunal considered the company's objectives, activities, and provided amenities to classify the income as business income.
5. Both authorities concluded that the Assessee's primary intention was commercial exploitation of properties by developing them into shopping malls/business centers, justifying the classification of income as business income.
6. The judgment referred to the Apex Court case of M/s. Chennai Properties and Investments Ltd. vs. CIT and a previous High Court order to support the classification of income as business income.
7. The decision was based on a thorough examination of the company's main objectives, business activities, agreements, and services provided during the operation of the commercial complex.
8. The Tribunal's conclusion was deemed plausible based on the evidence presented, leading to the dismissal of the appeals as no substantial question of law arose in the matter.