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TMI Blog2014 (9) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty. We will discuss the facts from assessment year 2004-05. 3. Briefly stated the facts are that Assessing Officer during the course of assessment proceedings assessed the receipt declared by the assessee on account of business arrangement fees under the head "business" as income from house property. Once the Assessing Officer has treated the business income as income from house property, consequently he disallowed the expenses claimed by the assessee. The Assessing Officer discussed that the assessee in its Profit & Loss A/c. has credited an amount of Rs. 2,05,57,201/- under the head "business arrangement fees" and this was computed under the head "income from business or profession". On query from the Assessing Officer as to why the receipt should not be assessed under the head "income from house property", assessee replied that the assessee-company as an MOU with Woodside Parks Limited, which own several divisions like garment division, rental and leasing division, consultancy division and franchising division with independent units of building at 22, Camac Street, Kolkata, has entered into a joint retail venture i .e. Business Arrangement Agreement with M/s. Trent Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions cannot be ignored merely for the reason that the receipt is attached to the immovable property. But, in addition of providing the space the appellant has provided a hose of improvements in the property, facilities and the services as specified in the agreements. The AO was of the opinion that whatever has been done by the appellant for M/s. Trent Ltd., it was in the capacity of a landlord. However, this view of the AO cannot be accepted. The AO has mentioned that neither M/s. Trent nor the appellant company has produced any evidences about the services rendered by M/s. Woodside Fashions. However, the AO has not specified the evidences which required to be produced before him. The fact remains that both M/s. Trent Ltd., time and again and M/s. Woodside Fashions Ltd. explained before the AO the nature of services rendered by the appellant to M/s. Trent Ltd. I am of the opinion that it is not always necessary that an expenditure would be attached for rendering the services. If the director of the appellant company had confirmed that he himself was rendering services to M/s. Trent Ltd as specified in business arrangement agreement and also confirmed by M/s. Trent Ltd. , the reci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Overseas Bank Ltd.-vs-CIT [246 ITR 206] also the bank received an amount on the letting out of a portion of its premises which was held to be assessable as rental income. In the case of Mithila Properties and Contractor Enterprises Pvt. Ltd. 228 ITR 173, the assessee constructed godowns and let out the same to Food Corporation of India on monthly rental basis. It was held that income so derived from rentals is assessable as income from house property and not business income. However, the facts in the case of appellant are totally different. 6.6. In my considered opinion the appellant company developed the property as a business centre and provided various facilities and services. Hence, the property under question was exploited commercially by the appellant company and entered into a Business Arrangement Agreement. Thus, the income so derived is an income from business and not income from house property. The appellant company has not simply let out its premises to M/s. Trent Ltd. to earn the rental income but the property is attached with a host of services and facilities like providing adequate light, installation and maintenance of lifts, installation and management of centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty. It is necessary further to find out the primary object of the assessee while exploiting the property if the main intention is simply letting the property or any portion thereof , the resultant income must be assessed as income from house property. If, on the other hand, the main intention is exploitation of the immovable property by way of commercial activities, then the resultant income must be held to be business income. Just as utilization of accommodation for providing customers with board and lodging is a commercial activity, utilization of space for providing shopping facilities to customers is also a commercial activity. That the assessee is the owner of the properties developed as shopping malls /business centres and it has provided a host of services and facilities to the users as per agreements. Further, the agreements specifically stipulated that the user was only granted permission to use the services and facilities provided in the premises and user would not be vested with or enjoy and right, title or interest of any kind in the services and facilities provided by the asseessee. The users did not enjoy any tenancy right. The service charges payable by the users w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the basis of percentage. The Business Arrangement Agreement dated 23.08.2002 entitled the assessee to receive a fixed consideration per annum with an increase every year @ 15% and thereafter every three years the fee shall be increased with mutual consent. The Assessing Officer in earlier years and subsequent years has accepted the position as it is and treated the receipts declared as business income. The assessee's ld. Counsel before us has reiterated the rule of consistency and cited the case laws, which we will discuss in next para. 6. Hon'ble Kolkata High Court in the case of Shambhu Investment held that "the mere fact of attachment of income to any immovable property cannot be the sole factor for assessment of such income as income from house property. It is necessary to find out the primary object of assessee while exploiting the property. If it is found that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from house property. In case, it is found that the main intent ion is to exploit the immovable property by way of complex commercial activities, in that event it must be held as busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year".
This principle has been upheld and re-stated by Hon'ble Supreme Court recently in the case of PFH Mall & Retail Mangt. P. Ltd. dated 04.09.2012, wherein reiterated the Rule of Consistency and applied the same on the very issue, that is whether the income in question is to be treated as income from business or as income from house property. In view of these discussions and bearing in mind the fact that it was a case of rental or commercial utilization of properties, which has been accepted, we are of the considered view that there is no reason to uphold this deviation. In view of the above discussions, we confirm the order of the ld. CIT(Appeals).
7. In the result, the appeals filed by the Revenue are dismissed.
Order pronounced in the open Court on 27th day of June, 2014. X X X X Extracts X X X X X X X X Extracts X X X X
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