I)Commissioner Of Income-Tax v. Ii)Principal Commissioner Of Income-Tax V. Tops Security Ltd. [2019] 415 Itr 212 (Bom).Security Ltd. [2019] 415 Itr 212 (Bom

DDR IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1583 OF 2017 The Pr. Commissioner of Income Tax-6vs. ..Appellant City Centre Mall Nashik Pvt. Ltd...Respondent …........ Mr. A.R. Malhotra a/w. Mr. N.A. Kazi for the appellant.Mr. S. Sriram a/w. Mr. B.V. Jhaveri for respondent. …........CORAM : NITIN JAMDAR &M.S.KARNIK, JJ. DATE : 13 JANUARY 2020 P.C.:- By this Appeal, the Appellant has challenged the orderpassed by the Income Tax Appellate Tribunal, ‘C’ Bench, Mumbai,dated 23 September 2016 in Income Tax Appeal No. 1783/Mum/2015 pertaining to the Assessment Year 2010-11. 2.The Appellant – Revenue has raised followingquestions as the substantial questions of law in this Appeal :- “(A) Whether, on the facts and in the circumstance ofthe case and in law, the Hon’ble Tribunal was justifiedin holding that the assessee had exploited its propertycommercially by way of complex commercialactivities and hence, the rental income received by theassessee to be taxable as income from business andnot under the head “Income from House Property’ ? (B)Whether, on the facts and in the circumstance ofthe case and in law, the Hon’ble Tribunal was justifiedin ignoring the settled position of law that where themain contention is to simply let out property or anypart of it, the resultant income must be assessed asincome from house property and the amenities suchas electricity, cooling towers, elevators and car parkingprovided by the assessee to its tenants were incidentalto the letting out of the property and could not betermed as complex commercial activities to justify theassessment of rental income as income from business ? (C)Whether, on the facts and in the circumstance ofthe case and in law, the Hon’ble Tribunal was justifiedin directing the assessing officer to decide the issue ofdisallowance of unpaid service tax under Section 43Bof the Income Tax Act by following the decisionrendered by Hon’ble Bombay High Court in the caseof Ovira Logistrics Pvt. Ltd. (ITA No.1023 of 2013dated 17 April 2015) without appreciating thatDepartment has not filed SLP owing to tax effectbeing lower than the prescribed monetary limit forfiling further appeal?” 3.The questions of law No. (A) and (B) are overlappingand relate to the nature of the income as to whether it is from theBusiness or from House Property. 4.The question No. (C) relates to unpaid service taxunder Section 43B of the Income Tax Act. It is an agreed positionat the bar that the issue stands covered against the Appellant –Revenue in view of the following decisions of this Court : (i)Commissioner of Income-Tax v. Ovira Logistics P.Ltd. - [2015] 377 ITR 129 (Bom)It is informed that even SLP against the decision in the above case have also been dismissed by the Supreme Court.P.Ltd. - [2015] 377 ITR 129 (Bom)It is informed that even SLP against the decision in the above case have also been dismissed by the Supreme Court. (ii)Principal Commissioner of Income-Tax v. Tops Security Ltd. [2019] 415 ITR 212 (Bom).Security Ltd. [2019] 415 ITR 212 (Bom). (iii)Commissioner of Income-tax-2, Mumbai v. Knight Frank (India) (P.) Ltd. - [2016] 72 taxmann.com 300 (Bombay). Knight Frank (India) (P.) Ltd. - [2016] 72 taxmann.com 300 (Bombay). The SLP filed by Revenue against decision in Tops Security Ltd. (supra) is dismissed by the Supreme Court on 19 March 2019. Tops Security Ltd. (supra) is dismissed by the Supreme Court on 19 March 2019. Hence this question is answered against Appellant – Revenue. (ii)Principal Commissioner of Income-Tax v. Tops Security Ltd. [2019] 415 ITR 212 (Bom).Security Ltd. [2019] 415 ITR 212 (Bom). (iii)Commissioner of Income-tax-2, Mumbai v. Knight Frank (India) (P.) Ltd. - [2016] 72 taxmann.com 300 (Bombay). Knight Frank (India) (P.) Ltd. - [2016] 72 taxmann.com 300 (Bombay). The SLP filed by Revenue against decision in Tops Security Ltd. (supra) is dismissed by the Supreme Court on 19 March 2019. Tops Security Ltd. (supra) is dismissed by the Supreme Court on 19 March 2019. Hence this question is answered against Appellant – Revenue. 5.For the questions No. (A) and (B), a brief narration ofthe facts would be necessary. The Respondent – Assessee is aprivate limited company incorporated with an object ofconstruction and running of commercial and shopping malls. TheRespondent – Assessee set up a commercial complex-cum-shopping mall and the operations commenced during the financialyear 2009-10. According to the Respondent – Assessee the totalproject cost was from its own funds and loan facilities. The mall /commercial complex had lower ground and ground floor plus fourfloors and a Multiplex with 5 screens and also a parking lot whichcan accommodate approximately 600 cars and 700 two wheelersand an Auditorium for public entertainment. The Respondent – 46. itxa 1583-17.docAssessee let out various shops in this commercial complex/malldealing with various products, such as grocery, household goods,textiles and garments, furniture, electronic goods, jewellery, etc.Apart from letting out the premises, the Respondent – Assesseeprovided various services to the occupants of the said premisessuch as security services, housekeeping, maintenance, lightening,Air condition repairing, marketing and promotional activities,advertisement and such other activities. When the premises werelet out on leave and license basis, compensation was also based onthe revenue sharing basis. 6.For the relevant assessment year 2010-11, theRespondent – Assessee declared its income under the head Incomefrom Business. The Assessing Officer, however, treated the same asIncome from House Property. The Respondent – Assessee filed anappeal before the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals) by order dated 27 January2015 dismissed the Appeal. Thereafter, the assessee filed anIncome Tax Appeal before Tribunal, which has been allowed bythe impugned order. 7.We have heard Mr. Malhotra, learned counselappearing for the Appellant and Mr. S. Sriram, learned counselappearing for the Respondent. 46. itxa 1583-17.doc 6.For the relevant assessment year 2010-11, theRespondent – Assessee declared its income under the head Incomefrom Business. The Assessing Officer, however, treated the same asIncome from House Property. The Respondent – Assessee filed anappeal before the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals) by order dated 27 January2015 dismissed the Appeal. Thereafter, the assessee filed anIncome Tax Appeal before Tribunal, which has been allowed bythe impugned order. 7.We have heard Mr. Malhotra, learned counselappearing for the Appellant and Mr. S. Sriram, learned counselappearing for the Respondent. 46. itxa 1583-17.doc 8.Mr. Malhotra, learned counsel for the Appellant firstlysubmitted that a detailed order was passed by the Commissioner ofIncome Tax (Appeals) considering all facts, however, the decisionof the Tribunal is not a reasoned one. Secondly, he submitted thatthe Respondent – Assessee has shown income of Rs.1,23,41,567/-which clearly indicates that the Respondent – Assessee has othersource of income and therefore, decision in the case of ChennaiProperties and Investments Ltd. v. Commissioner of Income-Tax -[2015] 373 ITR 673 (SC) which is foundation relied upon,thereafter, cannot be applied. He submitted that in the case ofChennai Properties (supra), the Court was considered the factsituation whether the entire income was from the commercialcomplex and it is in that context that the Supreme Court laiddown the dicta. He also submitted that in case of Raj Dadarkar(supra), this fact has been categorically noted by the SupremeCourt while commenting upon the law laid down in ChennaiProperties. Mr. Malhotra, thirdly submitted that facts as present inthe case clearly showed that the income was from House Propertyand the conclusion of the Tribunal is illegal and perverse. Hesubmitted that the revenue sharing which is one of the groundputforth by the Respondent – Assessee cannot be stand alone forconsideration. He submitted that in these circumstances, theimpugned order passed by the Tribunal cannot be sustained andgive rise to the above mentioned substantial questions of law. 46. itxa 1583-17.doc 9.The first contention raised by Mr. Malhotra isregarding question of reasoning in the decision of the Tribunal. Itcannot be stated that the decision of the Tribunal is an elaborateone but what the reading of the decision it is seen that thereference is made to all the relevant facts which are necessary tomake distinction between a Income from Business and the Incomefrom House Property. Once these factors have been referred to asexisting, we cannot straight away come to the conclusion that theimpugned order was not a reasoned to give rise to question of law. 10.The second contention of Mr. Malhotra is that theRespondent – Assessee has other substantial source of income.This contention is based on an erroneous factual premise. Mr.Sriram, learned counsel for the Respondent – Assessee pointed outthat a typographical error has occurred in the assessment orderwherein dividend income is shown as Rs.1,23,41,567/-. He haspointed out from the compilation of the documents which wasbefore the Tribunal, more particularly the balancesheet whereinother income is referred to as Rs.17,25,740/-. He pointed out thatthese amounts were the deposits received from the persons towhom the premises were let out in the mall and the same wasinvested in the Mutual Fund and this dividend and the interestthereupon and the profit of sale of the Mutual Fund constitutedthe amount of Rs.17,25,740/-. He submitted that income cannotbe considered as an independent income neither it is a substantial 46. itxa 1583-17.doc 46. itxa 1583-17.doc one. In the facts of the case it is not necessary for us to commenton the absolute proposition advanced by Mr. Malhotra that it isonly in those circumstances when the entire income is arising outof the commercial complex that it can be considered as incomefrom the business and no other source of income must exist. Wefind that the dividend income in the present case is from thedeposits received from the licensees which was invested in theMutual Fund and the amount is not substantial as contended. 11.Turning now to the third contention of Mr. Malhotra.The question as to whether a income is to be treated from Businessor from House Property comes up consideration of the Court’soften. In the case of Principal Commissioner of Income Tax-6, Pune v. Krome Planet Interiors (P.) Ltd.[1], the Court consideredthe case in identical facts of a commercial complex and mall. TheCourt took into consideration the various facilities provided by theassessee therein. The facilities were : lightening arrangement,installation of water cooled split Air conditioners, elevators,security system, fire prevention, garbage collection and disposalsystem, dining arrangement for occupants, installation of waterpurifier and rest room facilities. The Court noted that the assesseehad taken loan facilities, license period was for short duration andalso provided range of common facilities and amenities to the1 [2019] 107 taxmann.com 443 (Bombay) 46. itxa 1583-17.doc occupiers. The Court also referred to the decision in the case ofRaj Dadarkar & Associates v. Assistant Commissioner of Income-tax,CC-46[2]. 12.In the matter at hand, the object of the Respondent –Assess is clearly to acquire, develop, let out the commercialcomplex. It is clear from the objects with which the assessee wasincorporated to derive income from running and maintaining theshopping mall. The relevant objects as per Memorandum ofAssociation are as follows : “ (A) Main Object of the Company as per Memorandumof Association :- Object No.1 :-To acquire by purchase,exchange or otherwise deal in land, estates, building,halls, dwelling houses ……. and to do various types ofconstruction of buildings, commercial complexes, houses,halls, officer premises, shops, shopping malls, cinemahalls clubs ……… And maintaining for shopping arcade,mall, shops, dwelling houses, office premises and othercommercial and educational purposes …. (B)Other objects of the Company as per Memorandumof Association : Object No.34 :-To carry on business of runninga Super shop, shopping mall, Multi shop, DepartmentalStores, chain Stores, Speciality stores … Object No. 35 :-To build, construct, establish,own, take on lease, purchase, or exchange or otherwiseacquire, hold, maintain and manage industrial,commercial or residential buildings, factory premises, 2[2017] 81 taxmann.com 193 (SC) ……….. clubs, theaters, Cinemas or other show houses,meeting and lecture halls, libraries, health resorts andsanitariums, gardens, bazzar, car parks and markets and tolet, shublet, give on lease ...” The objects are narrated in the impugned order. The activities andthe amenities provided by the Respondent – Assessee have beenreproduced in the order of the Tribunal, which read thus :- “Complex Commercial Activity – The Company hasto provide the following services to thelicensees/occupants in order to enable them to earnmore revenue from the Mall operation, which wouldin turn result into more revenue for the Companyfrom Mall operations : a)24 hrs Mall Security Services, Housekeepingservices, gardening, pest control for the common areaof the mall. b)Maintenance & regular cleaning of the commonareas of the mall & elevation of the building, exteriorand interior cleaning of the mall, landscaping,providing and maintaining wash rooms & toilets,garbage removal & disposal from the common areaetc. c)Lightening of the common areas & Powersupply through 100% power back up. d)Air conditioning of common area. “Complex Commercial Activity – The Company hasto provide the following services to thelicensees/occupants in order to enable them to earnmore revenue from the Mall operation, which wouldin turn result into more revenue for the Companyfrom Mall operations : a)24 hrs Mall Security Services, Housekeepingservices, gardening, pest control for the common areaof the mall. b)Maintenance & regular cleaning of the commonareas of the mall & elevation of the building, exteriorand interior cleaning of the mall, landscaping,providing and maintaining wash rooms & toilets,garbage removal & disposal from the common areaetc. c)Lightening of the common areas & Powersupply through 100% power back up. d)Air conditioning of common area. e)Regular repair & maintenance of lifts, escalators,air conditioning plants, generators pumps & otherplant & machinery.air conditioning plants, generators pumps & otherplant & machinery. f)Marketing & Promotional activities of the mallin general.in general. g)Providing space for Advertising in the mallpremises at various places in the mall. h)Organizing various events & programmers atregular intervals & at the time of festivals to promotethe foot fall in the mall. i)Providing & maintaining common parkingfacilities. j)Providing assistance in market survey, customercomplaints etc. to the occupants. k)Providing piped music in the mall. l)Fire detection & protection system in thecommon areas. m)Providing facilities for loading & unloading andeasy access to service Lift. n)Providing canteen space for the employees ofthe occupants. o)Providing facilities for play area for Kids &entertainment zone & food court zone.” The Respondent – Assessee has provided even marketing andpromotional activities and also organising various events andprograms. This being done by the Respondent – Assessee also inthe context of the revenue sharing agreement copies of which havebeen placed on record. A perusal of one such agreement showsthat the Appellant – Revenue receives not only license fee of theamounts specified therein and percentage of net revenue. In someof the agreements the compensation is either license fee orpercentage of net revenue, whichever is higher. Though Mr.Malhotra has sought to contend that the revenue sharing is notstand alone criteria, it can be taken into consideration with totality 46. itxa 1583-17.doc of the circumstances. The Intention of the Assessee is also amaterial circumstance and the objects of Association, the kind ofservices rendered clearly point out that the Income is fromBusiness. All the factors cumulatively taken demonstrate that theassessee had intended to enter into a Business of renting outcommercial space to interested parties. The other income is onlyan income which is a dividend income from the deposits receivedfrom the Business income. 13.Therefore, considering all these factors which havebeen enumerated above and referred to by the Tribunal, thefindings rendered by the Tribunal on assessment of the factualposition before it that the income in question has to be treated asBusiness Income cannot be called perverse assessment of facts,necessary test for such determination have been employed by theTribunal. Therefore, the question of law as proposed has to beanswered against the Appellant – Revenue. The Appeal does notgive rise to any substantial question of law. The same is dismissed. (M.S.KARNIK, J.) (NITIN JAMDAR, J.) Digitallysigned byDikshaDikshaRaneRaneDate:2020.01.2018:23:01+0530