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TMI Blog2011 (3) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable under the head income from house property - Decided against the assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... trade. Once assets are transferred from the closing stock/stock-in-trade and is converted as fixed assets, then the nature of the asset changes itself to a capital asset. Consequently, the income earned by the assessee from the said assets cannot be anything other than income from house property since the lease assets are not commercial assets and the intention behind the lease of property is purely to enjoy the rental income which is no way connected or incidental to the business activity of the assessee company. The Assessing Officer while distinguishing the decisions relied on by the assessee on the ground that the leased assets are not commercial assets but part of the fixed assets and the character of the property as well as the intention of the assessee to enjoy the rental proceeds proves that they are not part of any business activity held that the rental income received by the assessee company is chargeable under the head income from house property and accordingly he assessed the rental income under the head income from house property at Rs. 28,77,627 as per computation given at page 8 of the assessment order. 3. On appeal, the ld. CIT(A) while distinguishing the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of commercial utilisation of immovable property and hence forms part of the business of the company. During the year, the assessee company has let out few units, the details of rent received and other details are as under :-- "S. No Name of party Bldg. & Unit Nature of property Date of lease & duration of lease Cost of leased assets Rent revd Status as on date 1a. Lear Seating Pvt. Ltd. Hamilton AGR & Ist Flr Commercial 15/7/01 36 months 15898000 2657325 Still on lease 1b. Lear Seating Pvt. Ltd. Caviana Flat 15-7-01 11 months NOTE 1 NOTE 1 Sold on 19-12-02 2. Lupin Ltd. Stanford 103 Flat 1-3-02 2 months 1400000 30000 Sold on 29-7-02 3. Bharti Cellular Ltd. Stanford Antena rent Putting up Antenna 27-4-02 N.A. Nil 225000 Handed over to Society 4. Mastek BPO Pvt. Ltd. Hamilton B 6th floor Commercial 1-3-02 3 years 8174430 121440 Sold on 18-11-03 5. Mind Axis (1) Sol Pvt. Ltd. Hamilton A 203 Commercial 15-4-02 33 months 814000 186480 Sold on 21-6-05 6. Varun Polyclinic Hamilton A 204 Commercial 15-8-02 33 months 814000 179760 Sold on 26-7-04 7. Vista International Pvt. Ltd. Hamilton A 201 Commercial Mar-02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from house property. The ld. D.R. while distinguishing the decisions relied on by the ld. Counsel for the assessee, strongly relied on the decisions in the case of Shambhu Investments (P.) Ltd. (supra) and East India Housing & Land Development Trust Ltd. v. CIT [1961] 42 ITR 49 (SC) and submits that in view of the ratio laid down therein, the order passed by the Assessing Officer treating the rental income as income from house property be upheld. 7. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that principal object of the assessee company is to develop and sell the premises constructed. There is no material on record to show that the principle object of the assessee company includes to lease its stock i.e., certain premises for a temporary period to persons/companies interested for temporary use. In the case before us, the assessee company has given on lease temporarily certain units to the aforesaid lessees for a period of 2 months to 36 months and received rent therefrom. According to the assessee, leasing is one of the methods of commercial utilisation of immovable property form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of complex commercial activities in that event it must be held as business income." And observed and held that the agreement was one of tenancy and that the assessment of the income as business income was not correct on the basis of the finding that the primary intention to let out the premises was to get rent. 9. In Atma Ram Properties (P.) Ltd. (supra) it has been held that rental income derived by the assessee company by letting out a property simplicitor was chargeable to tax under the head 'income from house property' and not as business income irrespective of the fact that assessee company was doing business of acquiring, developing and selling of properties and the rental income was received by it because of ownership and not by exploitation of the property by way of complex commercial activity. 10. In Chennai Properties & Investments Ltd.'s case (supra) it has been held that the assessee was only exploiting the property as owner by leasing out the same and realising the income by way of a rent. Such rental income was liable to be assessed under the head "Income from house property". 11. In East India Housing & Land Development Trust Ltd.'s. case (supra) it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the premises constructed and there is no material on record to show that the said principal object of the assessee company includes that leasing is also one of the principle objects of the assessee company. We further find that the assessee after taking interest free security deposits has given its portion of the building on lease and received lease rent from the said property and there is no material on record to show that the said lease rent received by the assessee is from exploitation of the property by way of complex commercial activities as prime object. This being so, we are of the view that the rental income derived by the assessee as an owner of the property is liable to be assessed under the head 'income from house property' for the purpose of section 22 of the Act. 15. As regards the rental income from terrace given to Bharti Cellular Ltd., we observe that terrace is not like an open space of land, but is an integral part of the building wherein the lessee was also entitled to put up temporary structure on the terrace for proper use and occupation thereof. The income from such terrace floor, therefore, could not be termed as income from business. It is very clearly c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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