Inocome derived from renting of lease & rental property held business income, HC

Facts in Brief:

1. The assessee was a private limited company and was engaged in the business of buying properties on ownership or lease or rental basis and to give on long lease, sublease and/or rental basis. The source of income of the assessee company was rental income which was part and parcel of the activities of the company. The assessee company was duly reflecting such rental income as income from business or profession and the same. The assessee had also duly reflected these assets as business assets and also claimed depreciation in each and every year.

2. The Assessing Officer had treated the income offered by the assessee as business gain, as income from house property.

3. The Commissioner (Appeals) held that income was derived from operation of business.

On appeal HC held as under:

4. There is no simple landlord and tenant relationship between the assessee company and the lessee. Since, there is no change of the party in the lease agreement i.e. Shopper Stop Ltd. and since there is no fresh agreement also for the same even after acquiring the property, it is clear that the intention of the assessee has not gone for a change and it remains the earlier one only, i.e., to exploit commercially by way of complex commercial activities generating the business income as part and parcel of the assessee's business activity only.

Relevant Paras of Judgment are as under:

5. Merely because income is attached to a property it cannot be a sole factor for assessing such income as income from house property and it has to be seen that whether it was the primary objective of the assessee to exploit the property in a simple manner or to exploit it commercially, i.e, to exploit it by way of complex commercial activities to arrive at the generation of income that could be taxed under the head income from house property or as income from business.

6. Where assessee company has developed shopping malls/business centres on properties owned by it and let out same by providing host of services/facilities/amenities in the said mall/business centres, it can be said that basic intention of assessee was commercial exploitation of its properties by developing them as shopping malls/business centres, therefore, income derived therefrom is assessable as business income.

7. In the instant case there is no dispute that as per memorandum of Association of the company it is the main object of the company to purchase and/or acquire property and to give on lease and/or on license basis along with complex commercial activities and that is how the company has declared its income from such property as their business income. Even the agreement executed with the lessee of the impugned property does not mention the word "tenant",

Case Reference-Assistant Commissioner of Income-tax, Rg. 5(3), Mumbai v. Steller Developer (P.) Ltd

IN THE ITAT MUMBAI BENCH 'H'