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TMI Blog2017 (5) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... sion" as claimed by the Appellant? (3) Whether on the facts and circumstances of the case, and in law, the order of the Tribunal, confirming the action of the Respondent, is perverse inasmuch as the same is based on surmises, conjectures and suspicions by taking into account incorrect, irrelevant and extraneous consideration while ignoring relevant materials and considerations?" 2) Few facts giving the background in which aforesaid questions have arisen for consideration, may first be taken note of. These are recapitulated hereinafter: The Maharashtra Housing and Developing Authority ("MHADA") had constructed buildings known as Shyam Sunder Cooperative Society, Ram Darshan Cooperative Society and Sindhu Cooperative Society at Jariwala Compound Market, Opposite Navjivan Post Office, Lamington Road, Mumbai - 400088. However, there was a reservation for Municipal retail market on the plot on which MHADA had put up the construction. Therefore, MHADA handed over the ground floor [stilt portion] of the above said buildings and admeasuring around 17,925 sq. ft. (hereinafter referred to as the "market portion") to Market Department of Municipal Corporation Greater Bombay ("MCGB"). This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year 1999 till 2004, it had been offering the income from the aforesaid shops and stalls sub-licensed by it under the head "Profits and Gains of Business or Profession" of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). The income was also assessed accordingly. However, the case of the appellant for the Financial Year 1999-2000 was reopened by the respondent by issuing notice under Section 148 of the Act and in response to the same the appellant filed its return on 12.12.2003. Thereafter, notice under Section 143(2) of the Act dated 10.01.2005 was issued and served by the respondent. Reassessment order was framed, computed the income from the shops, and the stalls under head "Income from House Property" of the Act. The reasons given by the respondent for so computing the income under the head "Income from House Property" were: (i) By virtue of Section 27(iiib) of the Act, the appellant was "deemed owner" of the premises as it had acquired leasehold right in the land for more than 12 years; (ii) In agreements for sub-licensing the words "lease compensation" were used instead of "license fees" and deposits were referred as "sub-lease deposits". Further, in some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object clause of the firm as per the partnership deed, which reads as under: "The Partnership shall take the premises on rent and to sub-let or any other business as may be mutually agreed by the parties from time to time." According to him, it was in furtherance of the aforesaid object that, as a business activity, the appellant participated in the auction held by a Market Department of the MCGB. Thus, the sole intention of the appellant was to establish a retail hub wherein various small retailers could come together and carry on their business in an organised and systematic manner. Thus, sub-licensing the premises was only a part of this predominant object of the appellant. This was the sole and the only activity of the appellant. The appellant, being a partnership firm, maintained full and complete records of these business activities. Right from the year 1999 till 2004, the appellant had been offering the income from the shops and stalls sub-licensed by it under the head "Profits and Gains of Business or Profession" of the Act. 9) Mr. Maninder Singh, learned Additional Solicitor General, on the other hand, refuted the aforesaid arguments by referring to the order of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (d), means the doing of anything (whether by way of admitting as a member of or by way of transfer of shares in a co-operative society or company or other association of persons or by way of any agreement or arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, such property." 11) Thereafter, the High Court pointed out the circumstances under which the Market Department of MHAD had auctioned the market area wherein the appellant was the successful tenderor; the BMC permitted sub-letting of the shops and stalls in stilt portion; the appellant was permitted to carry out additions and alterations which he did; the manner in which the appellant after making necessary constructions sub-licensed to various types of traders etc. On that basis, the High Court concluded that reading of various clauses harmoniously as per the which the rights were given to the appellant in the said property, pointed out towards the appellant acquiring rights in or in respect of the building or part thereof, which rights were clearly traceable to Section 269UA(f) of the Act. 12) As pointed out above, the aforesaid conclusion is not even dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sen under the two heads with which we are concerned in the instant case as well, namely, income from the house property on the one hand and profits and gains from business on the other hand. On the facts of a particular case, income has to be either treated as income from the house property or as the business income. Tests which are to be applied for determining the real nature of income are laid down in judicial decisions, on the interpretation of the provisions of these two heads. Wherever there is an income from leasing out of premises and collecting rent, normally such an income is to be treated as income from house property, in case provisions of Section 22 of the Act are satisfied with primary ingredient that the assessee is the owner of the said building or lands appurtenant thereto. Section 22 of the Act makes 'annual value' of such a property as income chargeable to tax under this head. How annual value is to be determined is provided in Section 23 of the Act. 'Owner of the house property' is defined in Section 27 of the Act which includes certain situations where a person not actually the owner shall be treated as deemed owner of a building or part thereof. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on rent and sub-letting them. In the instant case, by legal fiction contained in Section 27(iiib) of the Act, the appellant is treated as "deemed owner". (b) The aforesaid clause also mentions that partnership firm may take any other business as may be mutually agreed upon by the partners. 17) In the instant case, therefore, it is to be seen as to whether the activity in question was in the nature of business by which it could be said that income received by the appellant was to be treated as income from the business. Before us, apart from relying upon the aforesaid clause in the partnership deed to show its objective, the learned counsel for the appellant has not produced or referred to any material. On the other hand, we find that ITAT had specifically adverted to this issue and recorded the findings on this aspect in the following manner: "26. ...On this issue facts available on record are that the assessee let out shops/stalls to various occupants on a monthly rent. The assessee collected charges for minor repairs, maintenance, water and electricity. As per the terms of allotment by the BMC, the assessee was bound to incur all these expenses. The assessee, in turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is discussed in para 8 of Chennai Properties & Investments Ltd. case and the reproduction thereof would bring home the point we are canvassing: "8. With this background, we first refer to the judgment of this Court in East India Housing and Land Development Trust Ltd. case [East India Housing and Land Development Trust Ltd. v. CIT, (1961) 42 ITR 49 (SC)] which has been relied upon by the High Court. That was a case where the company was incorporated with the object of buying and developing landed properties and promoting and developing markets. Thus, the main objective of the company was to develop the landed properties into markets. It so happened that some shops and stalls, which were developed by it, had been rented out and income was derived from the renting of the said shops and stalls. In those facts, the question which arose for consideration was: whether the rental income that is received was to be treated as income from the house property or the income from the business? This Court while holding that the income shall be treated as income from the house property, rested its decision in the context of the main objective of the company and took note of the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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