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TMI Blog2005 (7) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... years where action has been taken under section 147, the appellant has also challenged such action. 3. It may be mentioned here that on similar issues in assessee's own case for assessment years 1993-94 1994-95, in I.T.A. Nos. 747 748/Hyd./2003, Hyderabad Bench 'A' (SMC), vide order dated 25-1-2005 has decided the issues against the assessee. However, as the appellant has placed reliance on the case of Dy. CIT v. Manmeet Arcade (P.) Ltd. (2005) 93 TTJ (Bang.) 463, we have heard both the parties extensively on merit. We will consider the same in the following paragraphs. Reopening of assessments:- 4. For assessment years 1996-97, 1998-99 1999-2000, the returns were processed under section 143(1)(a) on 17-2-1997, 3-8-1999 and 29-9-2000 respectively. Notices under section 148 were issued on 12-3-2003 for all the three assessment years. The contention of the appellant before us, as before the ld. CIT(A), is that the reopening has been done by the assessing officer merely on the basis of change of opinion, and, therefore, the same is invalid. On the other hand, Revenue's case is that the Assessing Officer, during the processing of return under section 143(1)(a) cannot for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or alienate their interest in the land and any construction thereon on the following conditions among others:- (i) On the expiry of 60 years or on the non-performance of any of the conditions mentioned in the deed, all the structures shall stand reverted to the lessor without any compensation to the lessee. (ii) The lessee, alienees or purchasers of the flats etc. will also be bound by the above terms. (iii) The lessee will be responsible for all acts done by it, and the lessor will not be responsible for the same. (iv) On expiry of the 60 years, if the occupants of various constructed area want to continue their possession they have to negotiate with the lessor individually. 5.2 The appellant put up certain constructions on the above property as per terms of the lease deed, sold some of them and gave some of them on rent/lease. The construction was completed around the year 1988. Terms of selling part of such constructions as per some sample agreements filed by the appellant are as under:- (1) Full consideration is received by the assessee and the purchaser gets right of possession and enjoyment for a period which is co-terminus with the lease agreement entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, income from renting out of building or part thereof has been correctly assessed as income under the head "Income from house property". Even otherwise, appellant is beneficial owner of the building which would come within the ambit of the word "owner" as used in section 22 of the Act. Lease as defined in section 105 of the Transfer of Property Act "is a transfer of right to enjoy such property". (iii) As the income from rent is assessable as "income from house property", any income relatable to such renting/leasing has to be assessed under the head "Other sources". 7.1 For the above propositions, Revenue has placed reliance on the following case law:- (i) Order of the ITAT, A Bench, Hyderabad in ITA Nos. 747 748/H/2003, dated 25-1-2005 in appellant's own case. (ii) CIT v. Phabiomal Sons [1986] 158 ITR 773 (AP) (iii) CIT v. Veerabhadra Industries [1999] 240 ITR 52 (AP) (iv) Shambhu Investment (P.) Ltd. v. CIT [2003] 263 ITR 143 (SC) (v) CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 (SC) (vi) CIT v. Mithila Properties Publication Contractor Enterprises (P.) Ltd. [1997] 228 ITR 713 (Pat.) 8. It may be mentioned here that nothing much has been said by eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof; (iiib) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof; (vi) taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property." Section 28 of the Income-tax Act, 1961 is reproduced below: "28. Profits and gains of business or profession.-The following income shall be chargeable to income-tax under the head 'Profits and gains of business or profession'." From the above, it may be seen that section 22 of the present Act and section 9(1) of 1922 Act are more or less pari materia whereas same is not the case as regards deemed ownership defined in section 27 of the present Act and corresponding provision in the 1922 Act. In the above background we will discuss the case laws relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court that income derived by renting out the above property to various tenants constituted business income, following the judgment of the Apex Court in the case of S.G. Mercantile Corpn. (P.) Ltd. 3. Dy. CIT v. Manmeet Arcade (P.) Ltd. (2005) 93 TTJ (Bang.) 463 - Assessment years involved in this case are 1993-94 to 1995-96. The assessee-company was engaged in the business of real estate and developing property, promoting commercial complexes and leasing and selling them and taken vacant land on lease and constructed a complex on it. The said complex was let out along with other facilities. The assessee was not the owner of the land and was required to surrender the lease with improvement made over the land at the end of 30 years as per lease agreement. After considering the judgment of the Apex Court in the case of S.G. Mercantile Corpn. (P.) Ltd. and the Hon'ble Karnataka High Court judgment in the case of Sri Balaji Enterprises, it was held by the Bench that assessee not being owner of the property, income earned from such letting out was assessable as income under the head 'Business'. 4. CIT v. Phabiomal Sons [1986] 158 ITR 773 (AP)- Assessment years involved in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubts as to the meaning of the word 'owner' in section 22 of the Act. In the light of clear exposition of the position of declaratory and clarificatory of the AC, the Apex Court opined that it was not necessary to multiply the authorities on this point. It was therefore held that the amendment introduced by the Finance Bill, 1988 was declaratory/clarificatory in nature so far as it relates to section 27(3), (3d) and (3b) of the Act. Consequently these provisions were held to have retrospective operation. In this view of the matter, it was held by Their Lordships that for the purpose of section 22, owner is a person who is entitled to receive income from the property in his own right. 8. CIT v. Mithila Properties Publication Contractor Enterprises (P.) Ltd. [1997] 228 ITR 713 (Pat.) - Assessment year involved was 1979-80. The assessee is a company. It took on lease a plot of land for a period of 25 years on payment of lease rent on monthly basis. The assessee entered into an agreement with the Food Corporation of India (FCI) for construction of godowns and for letting out the said godowns to the FCI on monthly rental basis. Assessee claimed the rental income so derived as its bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e building. (3) If assessee is not the owner of the building, income from letting out the same with amenities, etc., would have to be assessed either under the head 'Business' or under the head 'Income from other sources' depending on the fact as to whether renting out of the building or land appurtenant thereto was done in the course of business or not. (4) If it is held that income from renting of building or land appurtenant thereto is to be assessed under the head 'Income from house property' then income from providing amenities and facilities together with the renting will have to be assessed as 'House property' income if the consideration for letting out the same is not mentioned separately in the concerned agreement. That is to say if there is a composite consideration for letting out it has to be assessed under the head 'Income from house property'. But if there are separate considerations for renting out building or land appurtenant thereto and the amenities and facilities provided by the owner. The first component will be assessed under the head 'Income from house property' and the latter component has to be assessed under the head 'Other sources'. (5) If assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the complex salary and emoluments of the personnel who are kept for the above purpose. Applying the same logic, this income has also to be assessed under the head 'Business'. Income received on account of maintenance charges:- 13. The appellant received maintenance charges from the parties who have purchased part of the building which is of the nature of reimbursement of expenses incurred by the assessee towards such activities. Applying the principle laid down above, such income is rightly assessable under the head 'Business'. However, fixed maintenance charges received from the tenants will have to be assessed as income under the head 'Income from house property', as under this head 'a fixed percentage of ALV is allowed as a deduction. We hold accordingly. 14. The assessee for assessment years 1996-97, 1998-99 and 1999-2000 has also taken a ground urging that ground Nos. 4 to 8 taken before the ld. CIT(A) were not disposed by him. Similarly, for assessment year 2002-03, a ground has been taken to the effect that ground Nos. 2 to 6 taken before the ld. CIT(A) were not disposed of by him. As regards the first three assessment years, during the course of hearing, such ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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