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TMI Blog2016 (12) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, in brief, are that the assessee is a partnership firm engaged in the business of Promoter and Builder. It filed its return of income on 21-03-2011 declaring total income of ₹ 11,06,420/-. During the course of assessment proceedings the AO observed that assessee has not effected any sales during the year. However, it has credited office rent at ₹ 27,03,280/- and property tax has been debited in the profit and loss account at ₹ 1,64,664/-. On being questioned by the AO regarding the rental income derived by the assessee it was submitted that rental income has been derived by the assessee by letting out a property simplicitor is chargeable to tax under the head income from house property only and not as business income irrespective of the fact that the assessee is doing business of acquiring, developing and selling of properties as the rental income received by the assessee is because of ownership of the property and not by exploitation of the property by way of complex commercial activity. Various decisions were also cited before the AO to this proposition. 4. However, the AO was not satisfied with the explanation given by the assessee. He noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business . The assessee had never treated the said property in the portfolio of investment and never let out this property or any other property owned by the assessee for earning or claiming rental income. She also analysed the leave and license agreement dated 06-02-2009 between the assessee and Vishal Retail Ltd and noted that clause 4.2 clearly states the nature of the property as a commercial building constructed as one by the licensor and was let out to the licensee under leave and license agreement as a commercial building. There is no iota of any investment in the house property for the purpose of earning rental income within the provisions of section 22 to 24 of the I.T. Act. On the other hand the very nature of business activities carried out by the assessee holding of commercial property and let it out for commercial purpose explicitly establishes that such income is required to be offered by the assessee as well as taxed by the department under the head income from business and in no case the same could be treated as income from house property . For the above proposition she relied on the decision of Hon ble Supreme Court in the case of Chennai Properties and Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of our trading, profit loss account and balance sheet, wherein we have duly highlighted the shops appearing under the head investment 12. Referring to the copy of the leave and license agreement with Vishal Retail Ltd., copy of which is placed at pages 22 to 37 of the paper book he drew the attention of the Bench to clause 4.2 which the Ld.CIT(A) has relied upon and submitted that this is the standard clause in all agreements and therefore this cannot be held against the assessee. He submitted that even after completing the assessment for this year u/s.143(3) treating the rental income as income from business as against income form house property shown by the assessee, the AO has completed the assessment for subsequent year u/s.143(3) and no action u/s.147/148 has been initiated. 13. Referring to the decision of Hon ble Delhi High Court in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd. and others reported in 354 ITR 180 he submitted that the assessee in that case was engaged in the business of Development of Mini Townships, Construction of house property, commercial and shop complex etc. In the assessment proceedings the AO assessed the annual let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t those properties, therefore, it constituted business income. However, the facts of the present case are distinguishable and not application to the facts of M/s. Chennai Properties (Supra). Various other decisions relied on by the CIT(A) are also not applicable to the facts of the present case and are distinguishable. He accordingly submitted that the order of the CIT(A) be set aside and the ground raised by the assessee should be allowed. 15. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). She submitted that the Ld.CIT(A) has given finding as to why and how the rental income received by the assessee from letting out of the shops should be treated as income from business and not as income from house property . She accordingly submitted that the order of CIT(A) be upheld and the grounds raised by the assessee should be dismissed. 16. I have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. The only dispute in the instant appeal is regarding the treatment of rental inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avin Estate both in Chennai and to let out these properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. Accordingly, it was held that such income has to be treated as income from business . 19. However, in the instant case, the main object of the assessee company is not to acquire property and to let out those properties. The assessee is a Builder and Developer. It had considered a part of its unsold stock as investment and the rental income derived from such investment has been declared under the head income from house property . 20. I find identical issue had come up before the Hon ble Delhi High Court in the case of Ansal Housing Finance and Leasing Company Ltd. In that case, the assessee company was engaged in the business of Development of Mini Townships, Construction of house property, commercial and shop complexes etc. The AO assessed the annual letting value of the flats which the assessee had constructed but were lying unsold under the head income from house property . The assessee however contended that the said flats were its stock in trade and therefore the annual letting value of the flats co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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