2021 (9) TMI 543 - AT - Income Tax

Correct head of Income - income towards Mall Operating Revenue - taxable under the head Income from House Property or Income from Business and Profession - principle of rule of consistency - assessee is engaged in development and maintenance of immovable properties and Mall management - HELD THAT - DR has not pointed out any fundamental changes in the facts of this year with that of earlier years, prompting us to take a different view. Rather, both the Revenue authorities gone to record a finding that there is no change in the facts and in order to maintain consistency with the earlier years, income of the assessee is to be treated as income from house property. Since identical issue was dealt with by the Tribunal in earlier year 2019 (11) TMI 1078 - ITAT AHMEDABAD in the assessee s own cases, following the principle of consistency, we direct the AO to treat the impugned income earned by the assessee under profit and gains from business or profession . Disallowing deduction of business expenditure and depreciation on fixed assets against income from business operation - HELD THAT - As we have held that income earned by the assessee is to be treated under the head profits and gains from business or profession , as a consequence thereof, this expenditure is also to be considered from that angle. Accordingly, this ground is allowed.

Summary

Issues Involved:
1. Classification of income from Mall Operating Revenue.
2. Deduction of business expenditure and depreciation on fixed assets.

Issue-wise Detailed Analysis:

1. Classification of Income from Mall Operating Revenue:

The primary issue in this case revolves around whether the income earned by the assessee from mall operating revenue should be classified under "Income from House Property" or "Income from Business and Profession." The assessee, engaged in the development and maintenance of immovable properties and mall management, declared this income under "Income from Business and Profession." However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] classified it as "Income from House Property."

The assessee argued that the income was derived from providing several services, including leasing and other allied facilities as per the lease agreement. The income was not solely from leasing out units but included mall operating revenue, common area maintenance revenue, and other miscellaneous business revenues. The assessee provided various services such as security, electrical, telephone, overall maintenance, and business development activities, making the income inseparable from the leasing activities. The AO, however, did not accept this explanation and maintained consistency with previous years' assessments, classifying the income under "Income from House Property."

The Tribunal noted that in previous assessment years (2010-11 to 2013-14), the same issue was consistently decided in favor of the assessee, treating the income as "Income from Business and Profession." The Tribunal emphasized that without any material change in facts and circumstances, it would not be appropriate to deviate from this view. The Tribunal referenced the Supreme Court's judgment in Radhasoami Satsang v. CIT, which supports maintaining consistency in such cases. The Tribunal also cited judgments from the Supreme Court and Kerala High Court, which supported the classification of such income as "Income from Business and Profession" due to the complex nature of services provided.

2. Deduction of Business Expenditure and Depreciation on Fixed Assets:

The second issue concerns the deduction of business expenditure and depreciation on fixed assets against the income from business operations amounting to ?2,64,48,936/-. Given that the Tribunal decided to classify the income under "Income from Business and Profession," it logically followed that the related business expenditures and depreciation should also be considered accordingly.

The Tribunal directed the AO to allow the deduction of business expenditure and depreciation, consistent with the treatment of the income as "Income from Business and Profession."

Conclusion:

In conclusion, the Tribunal allowed the appeal of the assessee, directing the AO to treat the income from mall operations as "Income from Business and Profession" and to allow the deduction of related business expenditure and depreciation. This decision was based on the principle of consistency and supported by relevant judicial precedents. The appeal was partly allowed, with the Tribunal maintaining the classification of income and allowing the deductions accordingly.