9911796707
TMI Blog2015 (10) TMI 2560X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was approved by the Jaipur Development Authority (JDA) on 19.10.2006 and thereafter the construction of the complex was started in F.Y. 2006-07 and was completed on 30.09.2008. In the constructed area, the property consists of ground floor, mezzanine floor and seven storey building. As per the assessee the total saleable area was 45,577.50 sq. ft. In the A.Y. 2009-10, the assessee has leased out the entire third floor to M/s. Indus Towers Ltd. vide registered lease deed for 9 years. Similarly the assessee has also let out the fourth floor to M/s. Ericsson India Pvt. Ltd., Dhaka House, 17/18 WEA Pusa Road , Karol Bagh, New Delhi. The monthly rent in respect of M/s. Indus Towers Ltd. was Rs. 3,67,660/- (Rs. 33,08,942/- for the period May, 2008 to January, 2009 ) and monthly rent of Rs. 3,62,423/- per month for the 4th floor leased out to M/s. Ericsson India Pvt. Ltd. (Rs. 32,61,808/- for the period July, 2008 to March, 2009). 2.1. The assessee has declared the total receipt from lease rentals of Rs. 65,70,750/- on account of letting out of 3rd and 4th floor and has claimed deduction under section 24(a) of the IT Act treating the lease rent as income from the house p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s asset and its exploitation could be in the nature of business activity and assessable as business income. d. The assessee company is engaged in the business of developing property and office premises constructed are its stock in trade of business as depicted in books of accounts. Though the property is intended to be sold but due to various commercial reasons as the property does not have immediate buyers it was leased out to show its utility and capacity to fetch return. The fact that whole of the area constructed was not leased out but only a part thereof and that too, to attract potential customers, support the contention that though leased the property is still being used for the purpose of business. As a prudent business persons, the assessee is not letting its commercial property remain idle and earning lease rent for its used, till it finds potential buyer at the right price it can be concluded that character of the assets in the hands of the assessee remains commercial asset, stock in trade of business, despite it being leased out. Now it can be inferred that leased income is not falling within the provisions of section 22 and the same is business income. Such a transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ारा बेची गयी सम्पत्ति "विक्रय" ने पूर्व में ही मैसर्स इण्डस टावर्स लिमिटेड को 9 साल की अवधि के लिये लीज पर दे रखी है जिसका लीज डीड विक्रेता एवंम मैसर्स इण्डस टावर्स लिमिटेड के मध्य दिनांक 28 अप्रैल सन 2008 ईस्वी को न ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2381;राप्त करने का पूर्ण अधिकार होगा। उक्त लीज डीड में जो भी अधिकार प्रथमपक्ष ने मैसर्स इण्डस टावर्स लिण् को प्रदान कर रखो हैं वे सभी अधिकार द्वितीयपक्ष को लीज की अवधि में लीज की अवधि में लीज शुद सम्पत्ति खाली ह ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness income as against house property income declared by the appellant. As a result of this, appellant was not allowed 30% deduction under section 24(a) of IT Act. The reasons given by the AO for making such disallowance was that appellant was involved in the business of construction of property and, therefore, unsold property was stock in trade. Any income derived from stock in trade is business income. He also examined appellant's objective which no where mentioned property rental as its activity. On the other hand appellant submitted that any rent received on property not used for the purpose of its own business, is taxable in house property head. Appellant relied upon several judicial decisions of Supreme Court, various High Courts and also of ITAT. Decision of ITAT special bench Delhi, relied upon by the appellant is on the same facts in which it is held that rental income from property is taxable in house property head only, irrespective of whether it is part of stock in trade. Respectfully following these decisions, it is held that rental income received by the appellant is taxable in house property head and appellant is entitled to deductions allowable in house property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 09.01.2012 and ITA No. 818/JP/2011 dated 02.02.2012 for A.Ys. 2006-07 and 07-08 respectively has decided the issue in favour of the assessee thereby holding that the income from the shops let out in the commercial complex is required to be treated as Income from house property and not income from the business. 7. In our view after passing of the judgment in the matter of East India Housing and Land Development Trust Ltd. (supra), the other judgments namely, Sultan Brothers Pvt. Ltd. vs. CIT, 5 SCR 807, Karanpura Development Co. vs. CIT, (1962) 44 ITR 362 & Ors. were also passed by the Hon'ble Supreme Court wherein the Hon'ble Supreme Court has succinctly held as under :- "We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he true nature of assessee's activities with a view to ascertain whether the letting was a business activity or was exploitation of property by the owner. In our view, for that purposes AO is required to make more enquiries like whether there are any other source of income besides giving the properties on rent or what is true intention of the assessee by letting the property or whether the properties were leased out interregnum period waiting actual the sale of the property with a view to mitigate the loss as would have been done by an ordinary property owner. We notice that the various portions of the property, like the ground floor, 1st floor, 6th floor and 7th floor were lying vacant as mentioned in the closing stock as on 31.3.2011. In our opinion, AO should also bear in mind the status of vacant floors in the property while deciding the issue.
8. In the light of our above observations, we restore the matter to the file of AO to decide afresh after affording reasonable opportunity of being heard to the assessee.
9. In the result, Revenue's appeal is allowed for statistical purposes.
Order pronounced in the open court on 30/10/2015. X X X X Extracts X X X X X X X X Extracts X X X X
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