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2017 (11) TMI 563 - AT - Income TaxContribution received from the Shops - assessable under the head Income from House Property or Income from business or profession - Held that - The assessee s main object as stated in its Memorandum of Association was to acquire on license or by purchase, lease, exchange, hire or otherwise lands and property of any tenure, or premises in any part of India and to license or sub-license or lease or sub-lease or let, such lands or property or premises or any part thereof, clearly spells out that the assessee s main business is to carry out systematic and regular activity in the nature of business of letting out property. We also note that section 27(iiib) read with section 269UA(f) of the Act, is not applicable in the instant case as the agreement is only for use of property and not for the transfer of the same. Since the company is neither the owner nor the deemed owner in terms of section 27(iiib) of the Act, therefore the Contribution from Shops cannot be assessed under the head Income from house property. The said issue is squarely covered by the Hon ble Supreme Court judgment in Chennai Properties & Investments Ltd. s case (2015 (5) TMI 46 - SUPREME COURT) wherein it had been held that in case, letting of the properties was in fact the business of the assessee, then the assessee s income disclosing the same under the head income from business has to be upheld and it cannot be treated as income from house property. - Decided in favour of assessee.
Issues Involved:
1. Classification of income from contributions received from shops as "Income from House Property" or "Income from Business or Profession." 2. Disallowance under section 14A on dividend income. Issue-Wise Detailed Analysis: 1. Classification of Income from Contributions Received from Shops: The primary issue in the appeals was whether the contributions received from shops should be classified under "Income from House Property" or "Income from Business or Profession." The assessee claimed the income under "Income from Business or Profession," whereas the Assessing Officer (AO) assessed it under "Income from House Property." Facts and Arguments: - The assessee had booked income from contributions from shops amounting to ?3,52,680/- and related expenses of ?1,15,398/-. - The AO, upon examining the details, noted that the contributions were in the nature of charges received from tenants and considered the assessee as having an irrevocable right over the shopping space for 50 years, thus treating the income as "Income from House Property." - The assessee argued that they were not the legal owner of the shopping arcade and that the agreement was a license, not a lease, thereby not transferring any interest in the property to the licensee. The assessee further contended that their main business was to acquire premises on license and sub-license them, making the income assessable under "Income from Business or Profession." CIT(A) Decision: - The CIT(A) upheld the AO's decision, relying on a similar case involving the assessee's group concern, Oberoi Building & Investment Pvt. Ltd., where the Tribunal had treated the income as "Income from House Property." The CIT(A) noted that the Tribunal's order was stayed by the High Court but remained valid until overruled. Tribunal's Analysis and Decision: - The Tribunal considered the Supreme Court judgments in Chennai Properties & Investments Ltd. v. CIT and Rayala Corporation (P.) Ltd. v. Asstt. CIT, which held that if letting out properties was the business of the assessee, the income should be treated as "Income from Business." - The Tribunal noted that the assessee's main objective, as stated in its Memorandum of Association, was to acquire properties on license and sub-license them, indicating a systematic and regular business activity. - The Tribunal also observed that section 27(iiib) read with section 269UA(f) was not applicable as the agreement was for the use of property, not its transfer. - Based on these considerations, the Tribunal concluded that the income from contributions received from shops should be assessed under "Income from Business" and set aside the CIT(A)'s order. 2. Disallowance under Section 14A on Dividend Income: - The assessee did not press grounds related to the disallowance under section 14A on dividend income during the hearing. - Consequently, the Tribunal dismissed these grounds without adjudication. Conclusion: - The appeals were partly allowed, with the Tribunal ruling in favor of the assessee on the primary issue of income classification, treating it as "Income from Business." - The grounds related to section 14A disallowance were dismissed as they were not pressed by the assessee. Order Pronouncement: - The order was pronounced in the open court on 04/10/2017.
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