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TMI Blog2015 (6) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... r of assessee. Disallowance of brand building expenses - CIT(A) deleted disallowance - Held that:- No reasons to take any other view of the matter than the view so taken by us for the assessment year 2009-10 wherin genuineness, revenue nature and business expediency of these expenses is accepted by the Assessing Officer himself. Respectfully following the said order, we uphold the stand of the CIT(A), hold that he rightly deleted the impugned disallowance and decline to interfere in the matter. In the result, the appeal of the Assessing Officer is thus dismissed. - Decided in favour of assessee. - I.T.A. No.: 5048/Del/13, I.T.A. No.: 5451/Del/13 - - - Dated:- 31-3-2015 - Pramod Kumar and C. M. Garg, JJ. Dr Rakesh Gupta and Adesh Anand, for the Appellant Y Kakkar for the Respondent ORDER Pramod Kumar, Accountant Member 1. These cross appeals call into question correctness of learned CIT(A)'s order dated 4th July 2013, in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2010-11. We will take up these cross appeals together, for disposal by way of this consolidated order. 2. In the appeal filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable as 'income from other sources' or as 'income from house property' and it was in this context that the Tribunal held that the income was taxable as income from house property. This decision, according to the Assessing Officer, had no relevance in the present context where the dispute is with respect to taxability under the head 'profits and gains from business and profession' vis- -vis taxability under the head 'income from house property'. As regards the reference to the main objects of the assessee company, the AO was of the view that this fact shows that rental income from commercial plaza is to be taxed as business income more so in view of business objects for which company is established . The AO then proceeded to draw parity between renting out the space in commercial plaza and in renting out the hotel rooms and observed that there is no difference between letting out of the hotel rooms and the renting out of the shops in the hotel premises especially when hotel premises, inter alia, includes commercial complex also . He further noted that the commercial complex has no separate identity and is just a part of the hotel building . The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable legal position. 6. The true test for as to whether income from letting of a property is to be taxed under the head income from house property or as a business income is as to what is the primary object of the assessee, rather than whether the assessee is letting out the property as part of its main business. As held by Hon'ble Calcutta High Court in the case of CIT v. Shambhu Investments Pvt Ltd (249 ITR 47), which has been approved by Hon'ble Supreme Court in the case of Shambhu Investments Pvt Ltd v. CIT (263 ITR 143), if it is found applying such test 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 property and in case it is found that the main intention is to exploit the immovable property by way of complex commercial activities in that event it must be held as business income . There can be situations in which the assessee's main business may be to let out a property but when, in the course of such a business, the assessee lets out simplictor, without complex commercial activities, the income from such letting out will still be taxable under the head 'income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e licensees. It was held that the assessee was carrying on an adventure or concern in the nature of trade and the subject which was hired out was a complex one. Dealing with the activities carried on by the assessee in that case and agreeing with the view taken by the Bombay High Court, the Supreme Court held : The assessee kept the key of the entrance which permitted access to the vaults in its own exclusive possession. The assessee was thus in occupation of all the premises for the purpose of its own concern, the concern being the hiring out of specially build vaults and providing special services to the licensees. As observed by Viscount Finlay in Governors of the Rotunda Hospital, Dublin v. Coman [1920] 7 TC 517; [1921] AC 1, 'the subject which is hired out is a complex one' and the return received by the assessee is not the income derived from the exercise of property rights only but is derived from carrying on an adventure or concern in the nature of trade. 7. It is, therefore, quite clear that an income from letting out can be brought to tax under the head 'profits and gains of business and profession' only when income received is not only for lettin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the commercial complex being on the same plot does not help the case of the revenue. The physical proximity of the hotel and the commercial complex does not really matter as long as the character of arrangement has distinct character, and there is no dispute on that aspect. It is a case of renting simplictor and the services incidental to letting out do not constitute such complex character so as to be render it as a business by itself. 9. We have also noted that undisputedly in the earlier assessment years, coordinate benches have held that the income from letting out is in the nature of income from house property. Once there are categorical findings to this effect, and there is no dispute on that fact, it is not open to the lower authorities to still hold that the income can be taxed as business income because that aspect of the matter was not examined. We are unable to see any merits in this approach. As laid down by the apex Court in the case of Ambika Prasad Mishra v. State of UP AIR 1980 SC 1762 : [1980] 3 SCC 719 (p. 1764 of AIR 1980 SC) Every new discovery nor argumentative novelty cannot undo or compel reconsideration of a binding precedent... A decision does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther bill of ₹ 12,00,128 was raised on the basis of gross room revenue. It was also noticed that the assessee was asked to contribute 0.50% of gross room revenue, in addition to 0.25% of GRR and reservation fees of 0.25%. On these facts, the AO disallowed the 50% of the expenses as relatable to the subsequent assessment year, by observing as follows: The expenses which have been enhanced this way will help the company in future years and, therefore, cannot be said to be expenses held for business during the year under consideration. The assessee company has been following the mercantile method of accounting, and, therefore, out of total expenses debited, a sum of 50% (being the additional brand building expenses charged) is related to the profits of the subsequent years and cannot be allowed. Therefore, disallowed and added back to the income of the assessee company. This will result in disallowance of ₹ 25,95,251 and the income of the company is enhanced by this much of amount. 15. Aggrieved by the stand so taken by the AO, assessee carried the matter in appeal before the CIT(A) who deleted the disallowance and observed as follows: The submissions of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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