2021 (3) TMI 68 - AT - Income Tax

Correct head of income - income from let out of various properties in the mall - Income from House Property OR Income from Business and Profession - HELD THAT - Similar fact has been adjudicated by the ITAT in earlier years 2019 (8) TMI 1431 - ITAT AHMEDABAD AND 2019 (11) TMI 1078 - ITAT AHMEDABAD in favour of the assessee treating the said income as profit and gain from business or profession, therefore, we direct the Assessing Officer to assessee the income earned by the assessee under the head profit and gain from business or profession. Accordingly, this appeal of the assessee is allowed.

Summary

Issues Involved:
1. Classification of income from let out properties: "Income from House Property" vs. "Income from Business and Profession."
2. Deduction of various expenditures against common area maintenance income and space selling income.

Issue-wise Detailed Analysis:

1. Classification of Income from Let Out Properties:
The primary issue in this appeal is whether the income of ?7,93,93,398/- earned by the assessee from let out properties should be classified under "Income from House Property" or "Income from Business and Profession." The assessee argued that it was engaged in the business of constructing, developing, and operating malls, specifically running a fully equipped retail mall known as Gulmohar Park. The income was derived from providing space in the mall to licensees for retail operations, along with various services and amenities essential for the mall's operation. The assessee maintained that this income should be classified as business income, not merely rental income.

The Assessing Officer, however, treated this income as "Income from House Property," consistent with the treatment in the previous assessment year. The CIT(A) upheld this view.

Upon appeal, the Tribunal noted that similar issues had been adjudicated in favor of the assessee in previous years (2010-11 to 2013-14). The Tribunal emphasized that the income from the mall's operation, which included various services beyond mere letting out of property, constituted business income. The Tribunal cited the Supreme Court's judgment in the case of Radhasoami Satsang v. CIT, which held that a consistent treatment of income in different assessment years should not be altered without any material change in facts. The Tribunal also referred to the case of CIT vs. E-City Real Estate (P.) Ltd., where it was held that income from operating and running a mall, including various services provided, should be treated as business income.

The Tribunal concluded that the authorities below erred in treating the income as "Income from House Property" and directed the Assessing Officer to classify it under "Profits and Gains from Business or Profession."

2. Deduction of Various Expenditures:
The second issue was the denial of deductions for various expenditures incurred against common area maintenance income and space selling income. The assessee contended that these expenditures were related to its business operations and should be deductible under "Income from Business and Profession."

Given the Tribunal's decision to classify the income as business income, the issue of deductions became academic. The Tribunal's direction to treat the income as "Profits and Gains from Business or Profession" inherently allowed for the deduction of related business expenditures.

Conclusion:
The Tribunal allowed the appeal, directing the Assessing Officer to treat the income earned by the assessee from the mall as "Profits and Gains from Business or Profession," thereby also allowing the deduction of related business expenditures. The decision was pronounced in the open court on 19-02-2021.