The Principal Commissioner Ofincome Tax-6, Pune v. M/S. Krome Planet Interiors Pvt. Ltd.…

1 / 6 03-ITXA-282-17.odt IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.282 OF 2017 The Principal Commissioner ofIncome Tax-6, Pune .... Appellant versus M/s. Krome Planet Interiors Pvt. Ltd.….... ... Respondent Mr.Suresh Kumar, Advocate for Appellant.Mr.Suresh Kumar, Advocate for Appellant. CORAM : AKIL KURESHI &SARANG V. KOTWAL, JJ.DATE: 15[th] APRIL, 2019. P.C. : 1. This appeal is filed by the revenue to challenge the judgment of Income Tax Appellate Tribunal. Following questionis presented for our consideration; “Whether on the facts and circumstances of the case and inlaw, the Hon'ble Income tax Appellate Tribunal erred intreating the House Property Income as Business Income?” 2. Brief facts are as under; The Respondent-Assessee is a private limited company and is engaged in the business of leasing out of shop space inshopping malls. The assessee had filed the return with Income 2 / 6 03-ITXA-282-17.odtTax department for the assessment year 2008-2009 declaringthe income received from such activity of leasing out of shopsand other commercial establishments to various persons asbusiness income. The assessee, in addition to receiving rentalincome had also received certain charges from the licensees suchas common amenities charges, maintenance charges,advertisement charges. The Assessing Officer held that theincome was from house property and not the business income.The issue eventually reached the tribunal. The tribunal by theimpugned judgment held that the income was the businessincome. The tribunal noted that the assessee had entered intoleave and license agreement with the licensee which shows thatthe building was constructed for the purpose of shopping mallwith the approval of the Pune Municipal Corporation. Theassessee was providing various facilities and amenities apartfrom giving shopping space on lease. The agreement containedthe list of facilities to be provided by the assessee. Some of themwere as under; "i. Lighting arrangement for common areas like passages,atrium, rest rooms, loading/unloading areas, wastedisposal areas, staircase, basements, car parkingareas, compound, parking etc. atrium, rest rooms, loading/unloading areas, wastedisposal areas, staircase, basements, car parkingareas, compound, parking etc. ii. Installation of Water cooled Split Air conditionerswith compressors, condensers, fan coil units & ductingsystems (HVAC) more particularly defined inANNEXURE-'B'.with compressors, condensers, fan coil units & ductingsystems (HVAC) more particularly defined inANNEXURE-'B'. iii. Installation of good & reputed brand elevators forvertical movement.vertical movement. iv. Installation of electronic security system in thecommon areas, atrium and surrounding the mainShopping Mall within the plot boundaries.common areas, atrium and surrounding the mainShopping Mall within the plot boundaries. v. Installation of Customized Fire Hydrant & Sprinklersystem.system. vi. Installing the central garbage collection & disposalsystem.system. vii. Provision of separate area for garbage collection,loading/unloading docks and logistics area.loading/unloading docks and logistics area. viii. Installation of common dining arrangement for 4 / 6 03-ITXA-282-17.odt occupants, their staff & workers with tables, chairs,benches, etc. ix. Installation of common water purifier and dispensingsystem to provide clean & hygienic potable water. x. Installation of common rest room facilities." v. Installation of Customized Fire Hydrant & Sprinklersystem.system. vi. Installing the central garbage collection & disposalsystem.system. vii. Provision of separate area for garbage collection,loading/unloading docks and logistics area.loading/unloading docks and logistics area. viii. Installation of common dining arrangement for 4 / 6 03-ITXA-282-17.odt occupants, their staff & workers with tables, chairs,benches, etc. ix. Installation of common water purifier and dispensingsystem to provide clean & hygienic potable water. x. Installation of common rest room facilities." 3. The tribunal also noted that the charges for thefacilities and utilization were included in license fees charge forleasing the shop space. The additional charges towards the costsof electricity consumed would be payable by the licensees. Theperiod of license was for 60 months. The tribunal also noted thatno space in the shopping mall was given on rent simplicitor. Thetribunal therefore held that the object of the assessee to exploitthe building as a business is established. The assessee had alsotaken loan facility from bank for such shopping mall project. 4. We find that the conclusions of the tribunal areperfectly valid and legal. Whether the assessee’s income fromimmovable property is income derived from business or fromhouse property is always a mixed question of law and facts. The 5 / 6 03-ITXA-282-17.odtanswer has to be gathered from range of facts and attendancecircumstances. In the present case, the significant features arethat the assessee had obtained loan from the bank for its mall-complex project. That the assessee had entered into lease andlicense agreement with individuals for letting out commercialspace. Majority of these licensees was for a period of 60 months.In addition to providing such commercial space on lease, theassessee also provided range of common amenities. List of whichis reproduced earlier. These facilities included installation ofelevators, installation for Fire Hydrant & Sprinkler system,installation of central garbage collections and disposal system,installation of common dining arrangement for occupants andthe staff, common water purifier and dispensing system, lightingarrangement for common areas etc. 5. In plain terms thus, the assessee did not simply rent acommercial space without any additional responsibilities. Theassessee executed lease and license agreements and alsoprovided range of common facilities and amenities upon which 6 / 6 03-ITXA-282-17.odt the occupiers could run their business from the leased outpremises. The charges for such amenities were also broken down in two parts. Charges for several common amenities wasincluded in the rentals. Only on the consumption based amenitysuch as electricity, the occupant would be charged separately. 6. All factors thus clearly indicate that assessee desired toenter into a business of renting out commercial space tointerested individuals and business houses. The revenuehowever strongly relied on the decision of Supreme Court incase of Raj Dadarkar & Associates Vs. Assistant Commissionerof Income-tax, reported in (2017) 81 taxmann.com 193. Itwas however case in which on facts the Supreme Court held thatthe assessee was not engaged in systematic activity of providingservice to occupiers of the shops so as to constitute the receipt asbusiness income. 7. In the result the Income Tax Appeal is dismissed. (SARANG V. KOTWAL, J.) (AKIL KURESHI, J.)