2024 (7) TMI 1181 - AT - Income Tax

Deduction u/s 80IB(7A) - income on sale of the shop credited in the Profit Loss Account is business income derived from multiplex - HELD THAT - The legal definition of owning of the property means having the title to a property in the owner name. This title grants him the right to possess, use, and transfer the property as deem fit. The legal owner of the property has control over its management, development and potential sale. Assessee loses both ownership and operating power over the shop as integral part of the multiplex theatre at the time of earning income from sale/transfer of the shop. Hence, we find force in the argument and contention of the Sr. DR that the shop which sold was though built by the appellant/assessee; however, the shop was neither owned nor operated as an integral part of multiplex theatre by the appellant/assessee at the time of accrual/receivable of income on sale/transfer of the shop. No merit in the contention of the Ld. AR that the similar disallowance of deduction under section 80IB(7A) of the Act has not been made in AY 2007-08 in scrutiny assessment because the appellant/assessee has shown income on sale/transfer of the shop under the head Capital Gains in AY 2007-08. Hence, there is no precedent of consistency of assessing the income accrued/received on sale/transfer of the shop under the head Business income . Therefore, the case law relied upon in this regard by the Ld. AR is of no relevance. Decided against assessee.

Summary

Issues:
Whether income from the sale of a shop in a multiplex theatre complex qualifies as business income eligible for deduction under section 80IB(7A) of the Income Tax Act, 1961.

Analysis:
The case involved an appeal for the Assessment Year 2008-09 against the order passed by the Commissioner of Income Tax (Appeals). The core issue was whether income from the sale of a shop in a multiplex theatre complex could be considered business income eligible for deduction under section 80IB(7A) of the Income Tax Act.

The appellant argued that the sale of the shop, being part of the multiplex complex, constituted business income, making it eligible for the deduction. They emphasized fulfilling all conditions for the deduction and cited relevant case law to support their claim. The rule of consistency was also invoked to support the deduction claim based on past assessments.

On the other hand, the Senior Departmental Representative contended that the appellant did not meet the requirements of section 80IB(7A) as they no longer owned or operated the shop integral to the multiplex theatre at the time of the sale. It was argued that the income from the sale should be assessed as Short-Term Capital Gains rather than business income.

After considering both parties' arguments and examining the relevant legal provisions, the Tribunal found that the appellant had lost ownership and operational control over the shop at the time of the sale, rendering it ineligible for the deduction under section 80IB(7A). The Tribunal rejected the appellant's arguments regarding past assessments and held that the income from the sale of the shop should be treated as Short-Term Capital Gains, not business income.

Consequently, the Tribunal declined to interfere with the order passed by the Commissioner of Income Tax (Appeals) and dismissed the appellant's appeal. Each ground related to the core issue was treated as disposed of accordingly, and the appeal was ultimately dismissed.