What did the Tribunal hold?

The Tribunal held that the income from the exploitation of the premises should be treated as business income, following the principle of consistency and the company's main objects. The department's earlier consistent stand was not justified to be departed from without a change in facts.

The assessee offered income as business income, but the AO treated it as income from house property. The assessee presented a chart showing consistent acceptance of this income as business income by the department in previous assessment years.

What were the issues?

Whether the income from providing business premises and related facilities should be treated as business income or income from house property, considering past precedents and the company's objects.

Saphire Management Services P.Ltd vs ITO | ITAT Mumbai 2016

Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI

Before: SHRI R.C.SHARMA

Hearing: 02/08/2016Pronounced: 02/08/2016

O R D E R These are the appeals filed by the assessee against the order of CIT(A)-Mumbai, for the assessment year 2006-2007, wherein the assessee is aggrieved for treating income offered as business income but treated by the AO as income from house property.

At the outset, ld. AR placed on record a chart indicating factual position accepted by the department from assessment year 2000-2001 to 2005-06, wherein claim of assessee regarding some income having been taxed under head “business and profession” has been accepted by the department. Ld. AR placed on record decision of Mumbai Tribunal in the case of Sapphire Management Services Private Ltd., in order dated 27-5-2015, wherein under the principle of consistency, the Tribunal held as under :-

2 “5. We have heard the rival contentions of the Ld. Representatives of both the parties and have also gone through the records. The Ld. A.R. of the assessee, before us, has produced a chart to show that since the year 2000-01 the income from the letting out of the different portions of the business centre in question has always been treated by the assessee as business income. For the assessment year 2001-02, the return was processed under section 143(3) of the Income Tax Act and the income from the business centre was accepted as business income. Even for the assessment year 2005-06, the AO had treated the income as income from other sources. However, in appeal, the Ld. CIT(A) accepted the claim of the assessee that the same was business income. The Ld. A.R. has further explained that even for assessment year 2006-07 and 2007-08, the return of the assessee showing the income from the premises as business income was accepted though under section 143(1) of the Act. He has further stated that for the year under consideration i.e. A.Y. 2008-09, it is for the first time that the income from the premises has been treated by the AO as income from house property. He has further submitted that on the basis of the treatment of income as income from house property for the year under consideration, the assessment for the A.Y. 2006-07 & 2007- 08 has also been reopened. The Ld. A.R. of the assessee has brought our attention to the 'Memorandum of Association' of the assessee company wherein the main object of the assessee company has been mentioned as under: "MAIN OBJECTS OF THE COMPANY TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION:

To acquire land, building and to develop business premises, commercial complexes, office premises, industrial plots, sheds, factories, warehouses, garages, shops, showrooms, business centres, restaurants, hotels and to carry on the business of providing and maintaining commercial centre and provide office space and other commercial facilities like communication facilities, desk-top- publishing services, document duplicating (Xerox) services and other marketing and other services in India or any part of the world."

6. He has further brought our attention to the copies of membership agreement entered into by the assessee with the various parties to whom it has been offering the facilities of its business centre to show that as per the clauses of the agreement, the assessee has been offering various services such as mail, message, secretarial assistance, operated telephone service, services of peon, sweeper etc. which services were to be provided in a furnished cabin for the restricted period of 10 A.M. to 7 P.M. during week days only. As per the clause of the agreement, the cabins offered by the assessee would be opened and closed by the peon of the assessee only and even there was no fixed cabin rented out or provided to any party and the assessee has the right to change the cabin to be offered to any party from time to time without any notice. The facts on the file clearly establish that though the assessee had taken the premises

SAPHIRE MANAGEMENT SERVICES P.LTD,MUMBAI vs. ITO 2(3)(2), MUMBAI

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