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TMI Blog2015 (4) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... es not have any appurtenant land. We, therefore, reject the conclusion of ITAT that the agreement of renting and hiring terrace is in essence for hiring space and not hiring building or land appurtenant thereto. - Decided in favour of the assessee. - ITA 43/2014 - - - Dated:- 25-3-2015 - S. Ravindra Bhat And R. K. Gauba,JJ. For the Appellant : Mr. Ajay Vohra, Sr. Adv. with Ms. Kavita Jha and Ms. Shraddha, Advs. For the Respondent : Mr. Kamal Sawhney, Sr. Standing Counsel, Mr. B. Chakraborty and Mr. Mukul Mathur, Advs. ORDER Mr. Justice R. K. Gauba 1. This appeal under Section 260-A of Income Tax Act, 1961 (hereafter referred to as the Act ) has been preferred by the assessee questioning the correctness of the view taken by the Income Tax Appellate Tribunal (hereinafter referred to as the ITAT ) in its order dated 30.04.2012 deciding ITA No. 901/Del/2012 and rejecting the contention of the appellant that the income claimed as rent from space antenna in respect of the top terrace of property described as Vikram Tower, 16, Rajendra Place, New Delhi (hereinafter referred to as the property ), in the sum of ₹ 38,23,281/- for the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities and use the licensed space for radio-based communication and service subject to rules and regulations prescribed by the appropriate/statutory authorities. The licensee was permitted by the agreement to make a minor masonry work in the licensed space to install tower/mast and antenna equipments but not so as to cover the portion of the open space nor allow its use to any third party, with the exception of sister concerns or subsidiaries . The terms stipulate that the licensee shall permit the licensor or its authorized agents to enter into the licensed space during the working hours upon reasonable notice for the purpose of viewing its condition, reserving the right of the licensor to carry out, without any objection or hinderance as the part of licensee, necessary repairs, alterations or improvements of the licensed space including for laying water pipes, drains, etc. 5. The agreement further stipulated that the tenure of the licence and its renewal would inure and stand transferred in case the title to the property changes hands without in any way imparing the rights and privileges of the licensee . It contained an express understanding that the licence only allows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture. 8. The appellant-assessee was aggrieved and, thus, took out an appeal before Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT (Appeals) ]. It submitted that the crucial test is as to what is the primary object in exploiting the property as against the primary object of the activities in which the assessee company was engaged. The assessee pointed out that it had entered upon arrangement in above nature respecting the licensed space as owner of the property and would sell only such portions of the property as it was legally permitted to do. It also submitted that only such portions of the property had been let out (to government departments or other public utility organizations) which it was not legally or contractually permitted to sell and, thus, there was no question of turning the let out property to account . It was also submitted that the assessee (i.e. licensor vis- -vis the agency to which the licensed space has been given) was not required to render any services. 9. The appeal was allowed by the CIT(Appeals) taking note of, amongst others, the law laid down by the Supreme Court in the case of Karanpura Development Co. Ltd. v. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d question, it is necessary to find out the true nature of the asset as to whether it is a fixed asset or stock-in-trade. The admitted facts in this connection are that the assessee has been renting the space and small rooms constructed on terraces for the last 9 years. Thus, the intention is not to sell the space on the terrace as stock-in-trade but hold on to it as a fixed asset. Therefore, it is held that the asset has been wrongly classified in accounts and for the purpose of law it should be taken as a fixed asset. Now, we have to decide as to whether the space and small rooms on the terraces constitute house property, i.e., building and land appurtenant thereto. The space on the terrace is taken on rent for mounting antennae and other instruments for reception of electro-magnetic signals or transmission thereof. For this purpose open pieces of land can also be taken on hire. However, that would require construction of high towers on which the instruments and antennae may be mounted for reception or transmission of electromagnetic signals so as to avoid obstruction by buildings in the vicinity. The terraces are found most suitable as they obviate the necessity of constructing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of making them available on licence basis to film distributors for storing cinema films, the ground floor being reserved for purposes of examination, cleaning, waxing and rewinding of films. The licensees were permitted access to the vaults, the entry being regulated and the exclusive possession of the premises retained by the licensor. The assessee/licensor was responsible for maintaining a regular staff, inter alia, providing services in the nature of fire-proofing, railway booking counter, canteen, etc. Against this factual backdrop, it was held that the income derived was not income generated from the exercise of property rights but on account of carrying on trade. Holding that the letting out of the space from which the assessee derives income has to have a definite and identifiable nexus with the business of the assessee, it was ruled that such income was bound to be treated as income from business and not as income from house property. The court held that the assessee was in occupation of the entire premises and providing special services to the licensee. Thus, the fee received was held to be income derived not from the exercise of property rights but in the nature of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handed over to the licensee not only for setting up the tower/mast on which antenna is to be mounted but also for construction of a room where the watch/ ward staff can be stationed and space used for storage purposes. 20. Unlike the case of Mukherjee Estate (P.) Ltd. (supra) where no space on the terrace floor was let out (the income generated being restricted to the display of advertisement on the hoardings provided), in the case of the assessee here, the licensee is virtually given exclusivity in utilizing the terrace floor for achieving the objectives set out in the agreement. There is no parallel with the case of National Storage Pvt. Ltd. (supra), where the giving of vault spaces in the building developed was the dominant purpose of the business activity undertaken by the assessee. 21. In the case at hand, the building the top terrace of which is the subject of focal attention here has been developed for its various portions to be sold or let out with no possibility of the terrace floor being subjected to such utilization. The assessee continues to be the owner of the terrace floor. It has conceivably no other purpose to be served by such property as is held on the terr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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