ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), INDORE., INDORE vs. MP ENTERTAINMENT AND DEVELOPERS PRIVATE LIMITED, INDORE

The A.O. determined Rs.50,21,35,712/- (rupees fifty crore twenty one lakhs thirty five thousand seven hundred twelve only) as "house property income" for the Assessment Year 2013-14 and determined "business / professional income" at Rs.6,63,59,504/- (rupees six crore sixty three lakhs fifty nine thousand five hundred four only) for the same Assessment Year. The CIT(A) has held that rental income derived by the respondent - assessee from leasing out the properties in the mall falls under the head of "income from business" and not under the head of the "income from the house properties". It has been held so because all the properties including the right of leasing were owned by the appellant. The same were put to use for the purpose of business or ready to put to use, as the main business of the assessee. Thereafter, in revenue appeals filed by the Department, learned ITAT has discussed this issue in detail after considering the documents filed by the respondent - assessee. The learned ITAT found that the main object of the assessee is the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc. as per Memorandum of Article and Association, which is liable to be categorized as income derived from the shopping mall under the head of "income from business" under Section 28 of the Income Tax Act. The assessee owned a building in the name of Mall and getting it furnished and thereafter let out to various persons with all furniture,

In the case of Sultan Brothers Private Limited v. CIT reported in (1964) 5 SCR 807, the Apex Court held that each case has to be looked at from the businessman's point of view to find out whether the letting was the doing of business or exploitation of the property by the owner, it is not possible to say that particular activity is a business because it is concerned with an asset with which the trade is commonly carried on. In case of Chennai Properties and Investments Limited (supra), the Apex Court found that the entire income of the appellant was through letting out of the two properties it owned and there was no other income of the assessee except the income from letting out the said properties, which was the business of the assessee.

The same situation was in the case of Rayala Corporation Private Limited (supra). The Apex Court while holding that the income shall be treated as "income from the house property", rested its decision in the context of main object of the company and took noted the fact that letting out the property was not the object of the company at all. Hence, the character of the income which was from the house property had not been altered, because it was received by the Company form the object of the developing and setting up of the properties. The aforesaid two judgments were distinguished in the case of Raj Dadarkar and Associates (supra), because the assessee therein did not produce sufficient material on record to show its entire income or substantial income was from letting out the properties which was the principal business activities of the appellant i.e. Raj Dadarkar and Associates.

In the present case, the A.O. did not find any material against the respondent-assessee to come to the conclusion that sub-leasing of the premises was only a part of its predominant object of the assessee. The respondent's right from the construction of mall till the matter was taken into scrutiny had been offering income from the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc., sub- licence by it under the head "profit and gain of business or profession" of the Income Tax Act. Therefore, the CIT (A) as well as ITAT have rightly set aside the order of A.O.

The Apex Court in case of Raj Dadarkar and Associates (supra) has held that ITAT being a last forum in so far as factual determination is concerned, these findings have attained finality. No material has been produced even before us to show how the aforesaid findings are perverse. The order passed by learned A.O. nowhere shows that the entire income or substantial income of the assessee was from letting out of the properties, which is admittedly not the principal business activity of the assessee. Therefore, we do not find any perversity in the findings recorded by the ITAT as well as the CIT(A) and also do not find any substantial question of law involve in these appeals.”