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TMI Blog2012 (1) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... L. KALRA Appellant by : Shri Sanjay Jhanwar Respondent by : Shri D.K. Meena ORDER PER R.K. GUPTA, J.M. These are two appeals by the assessee against the orders of the ld. CIT (A) relating to assessment year 2006-07. 2. Similar facts are involved in both these appeals, therefore, they are being disposed off together. 3. We will discuss the facts of the case of M/s. Vibhuti Financial Services Pvt. Ltd. 4. Ground No. 1 was not pressed, therefore, the same is dismissed as not pressed. 5. In Ground No. 2, the assessee is objecting in treating the rent received from letting/renting of shops/offices in the commercial complex as well as from letting/renting of space on roof and space on walls for advertisement as Income from business instead of Income from house property and thereby denying deduction claimed under section 24(a) of the Act being 30% of annual value. 6. Brief facts of the case recorded by ld. CIT (A) at pages 2 to 6 are as under :- 2.1 Brief facts on the issue are that M/s Mahima Real Estate Pvt. Ltd (denoted as developer) entered into an agreement with M/s Vibhuti Financial Services P. Ltd., (denoted as owner ) for constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent still form the part of the closing stock. It means assessee s have not left the idea to sale the let out space and it does not matter even after the expiry of lease period. 6. Thirdly, there have been sale of space in commercial complex in the year under consideration. 7. Again there is an increase of about ₹ 2 crore in work-in-progress inventory (Investment in construction of shop etc.) for sale in the relevant year. 8. Since inception company has undertaken only the business of development and sale of real estate. 9. It means letting out of business asset with the intent to regain it is a motive to earn profit by exploitation of business asset utilizes the profit in another business. 10. In the relevant previous year shops let out to Gail India Ltd. has been hypothecated to PNB to secure a loan of ₹ 21.82 lakhs payable within 21 months. 11. Hot Nut restaurant was intended to run by the assessee companies itself but it has been let out with plants and machinery and utensils. Depreciation on such plants and machinery has been claimed in the books of account of the assessee. Hence the amount received is for the area let out as well as for the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve not given up the idea to sale the premises to the other company under same management. The commercial asset still retains the characteristics the commercial asset does not matter whether utilized by the assessee or some others. Thus again rent ₹ 1,80,000/- received from M/s Hot Nut Restaurant is held as business income not income from house property. (vi) Similar is the condition with respect rent received by letting out the shop to other tenants and realization of rental income by the assessee was the exploitation of business asset commercially in the course of its business in prosecution of its collaboration objects. Thus rent receipt of ₹ 2,52,000/- (from Crystal Mall Developer ₹ 90,000/- Shashi Arora ₹ 60,000/- Tulsidas Somani ₹ 30,000/- and Murli Kumar ₹ 72,000/-) is held as business receipts. (vii) Assessee has shown receipt of ₹ 22,40,353/- by letting out the roof from and other open space on and around the commercial building for signage. Advertisement boards and V sat antenna. In this regard director of the company has already submitted by reply dated 5.12.08 to treat this income as income from other sources instead of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty and not under the head profits and gain of business . CIT v. Chugandas Co. (1965) 55 ITR 17 (SC). In the case of companies building spaces which were let out were traded as its fixed asset before letting out to tenants. There is no letting out of property temporarily or for a short period and therefore there is no reason to assess any part of rental income from property as business income. The Ld. A.O. is wrong in assessing the income from letting out of building owned by assessee as income from business instead of income from house property. The ld. A.O. is also wrong in treating the rental income derived by Assessee Company from letting out, roof, parapet wall and outer wall of building as rental income derived from open space and not from building. In this connection, it is submitted that in section 22 of I.T. Act no definition of building or land appurtenant thereto has been given and therefore its ordinary meaning has to be adopted. The word building would therefore include building occupied or intended for residence, building let out for office use or for storage or for warehousing or for use as a factory etc. The building includes its roof, parapets and outer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the rental income as Income from business. 9. Section 22 has application to property consisting of any buildings or lands appurtenant thereto. If the constituent building etc. are not occupied by the owner then for the purpose of any business carried on by him, the profits of which are chargeable to income-tax. Otherwise the rent charges by assessee on the property rented by assessee are chargeable under the head Income from house property. In case of PVG Raju, 66 ITR 122 (AP), the Hon ble Andhra Pradesh High Court has held that letting out the building such as shops, godown etc. is assessable under this section as Income from house property. 10. In case of East India Housing and Land Development Trust, 42 ITR 49 (SC), the Hon ble Supreme Court has held that even if the company set up with the object of buying and developing landed properties and promoting and developing markets, purchased a piece of land and built thereon a market consisting of shops and stalls etc. which it had let out and earned income thereby the income was to be assessed as Income from house property and not from business. 11. Similarly in case of Chugandas Co., 55 ITR 17 (SC), the Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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