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TMI Blog2016 (11) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment was made only of Share application money needs factual verification. Accordingly we restore this matter to the file of the AO with the direction to examine the factual aspects and decide this issue by following the decision rendered by the jurisdictional High Court in the case of HDFC Bank Ltd (2014 (8) TMI 119 - BOMBAY HIGH COURT). With regard to the disallowance to be made out of administrative expenses, we direct the AO to make disallowance on a reasonable basis, after considering the explanations of the assessee. The order passed by Ld CIT(A) on this issue is set aside accordingly. Disallowance of Service tax liability u/s 43B - Held that:- Since the claim of the assessee that the outstanding service tax liability has not accrued as on the last day of year, requires verification, we restore this issue to the file of the AO with the direction to examine the factual aspects and decide the issue by following the decision rendered by jurisdictional High Court in the case of Ovira Logistics P Ltd [2015 (4) TMI 684 - BOMBAY HIGH COURT] - I.T.A. No. 1783/Mum/2015 - - - Dated:- 23-9-2016 - Shri B.R. Baskaran (AM) Shri Amarjit Singh (JM) For The Assessee : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ening of the common areas Power Supply through 100% power back up. d) Air conditioning of common area. e) Regular repair maintenance of lifts, escalators, air conditioning plants, generators pumps other plant machinery. f) Marketing Promotional activities of the mall in general. g) Providing space for Advertising in the mall premises at various places in the mall. h) Organizing various events programmers at regular intervals at the time of festivals to promote the foot fall in the mall. i) Providing maintaining common parking facilities. j) Providing assistance in market survey, customer complaints etc to the occupants. k) Providing piped music in the mall. l) Fire detection protection system in the common Areas. m) Providing facilities for loading unloading and easy access to service Lift. n) Providing canteen space for the employees of the occupants. o) Providing facilities for play area for Kids entertainment zone food court zone. The Company has not merely given the premises in the Mall on rent but has offered the same along with various services that are required along with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to meet very high service standards in order to attract Licensees as well as customers to the Mall. The said service standard findings would go to show that the Company is required to provide highest level of services within the Mall. It cannot merely let out shops within the Mall and earn rental income. Only with the services provided, it can generate higher income from revenue sharing. It is submitted that in the Mall operation, services rendered by the Mall owner i.e. the Company plays dominant role. Accordingly, it would be taxable under the head 'Business income'. Revenue Sharing arrangements - The Company has entered into Agreement with various parties laying down terms for occupying a space in the Mall. It has agreed on different billing arrangement with each licencee. These arrangements are different from mere renting of property wherein rent is fixed per month, independent of business generated by the Licensees. In most of the cases, it is in the form of revenue sharing whichis dependent on income generated by the Licensee. None of the licensee has an option to pay only for use of the building and have his own resources for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany is in business of renting its properties and is receiving rent as its business income, the said income should be taxed under the Head Profits and gains of business or profession whereas the case of the Revenue is that as the income is arising from House Property, the said income must be taxed under the head Income from House Property . 3. The learned counsel appearing for the assessee submitted that the issue involved in these appeals is no more res integra as this Court has decided in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC) that if an assessee is having his house property and by way of business he is giving the property on rent and if he is receiving rent from the said property as his business income, the said income, even if in the nature of rent, should be treated as Business Income because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income. 4. According to the learned counsel appearing for the assessee, the afore-stated judgment in the case of Chennai Properties (supra) has referred to all the judgments on the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue, leasing and letting out of shops and properties is not the main business of the assessee as per Memorandum of Association and therefore, the income earned by the assessee should be treated as income earned from House Property. He, therefore, submitted that the impugned judgment is just legal and proper and therefore, these appeals should be dismissed. 9. Upon hearing the learned counsel and going through the judgments cited by the learned counsel, we are of the view that the law laid down by this Court in the case of Chennai Properties (supra) shows the correct position of law and looking at the facts of the case in question, the case on hand is squarely covered by the said judgment. 10. Submissions made by the learned counsel appearing for the Revenue is to the effect that the rent should be the main source of income or the purpose for which the company is incorporated should be to earn income from rent, so as to make the rental income to be the income taxable under the head Profits and Gains of Business or Profession . It is an admitted fact in the instant case that the assessee company has only one business and that is of leasing its property and earning rent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd, wherein it was observed as under:- As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or subletting is part of a trading operation. The dividing line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned. 9. In the instant case, we have noticed that the assessee was incorporated with the object, inter alia, to construct and maintain shopping malls. The relevant objects of the Company, as given in the written submissions, read as under:- (A) Main Object of the Company as per Memorandum of Association:- Object No.1 :- To acquire by purchase, lease, exchange or otherwise deal in land, estates, building, halls, dwelling houses .. and to do various types of construction of buildings, commercial complexes, houses, halls, officer premises, shops, shopping malls, cinema halls clubs . And maintaining for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e out of interest expenditure as held in the case of HDFC Bank Ltd (366 ITR 505). With regard to the disallowance to be made out of administrative expenses, the assessee has submitted that the assessee has made investment only in SBI mutual fund and hence the expenses may be estimated @ ₹ 50/- per transaction. We are of the view that the claim of the assessee that the investment was made only of Share application money needs factual verification. Accordingly we restore this matter to the file of the AO with the direction to examine the factual aspects and decide this issue by following the decision rendered by the jurisdictional High Court in the case of HDFC Bank Ltd (supra). With regard to the disallowance to be made out of administrative expenses, we direct the AO to make disallowance on a reasonable basis, after considering the explanations of the assessee. The order passed by Ld CIT(A) on this issue is set aside accordingly. 13. The next issue relates to the disallowance of Service tax liability u/s 43B of the Act. According to the assessee, the service tax liability has not accrued on the last date of the year, i.e., the service tax liability shall accrue only when t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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