ITO 8(2)-4, MUMBAI vs. NISHA MALL MANAGEMENT CO. P. LTD, MUMBAI

This is an appeal filed by the revenue against the order of CIT(A), Mumbai, dated 13-4-2010, for the assessment year 2006-07, in the matter of order passed u/s.143(3) of the I.T.Act, wherein following grounds have been taken by the revenue :- “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that Business Centre Service Charges of Rs.52,89,000/- should be treated as “Business Income” instead of “Income from House Property” without appreciating the facts of the case.”

Rival contentions have been heard and record perused. Facts in brief are that the assessee company was incorporated in 16.08.2004 with the main object to acquire, develop, improve, build, sell, lease, manage, commercially exploit and/or otherwise deal in real estate, building relating to shopping malls and commercial complex. Income derived according to the object clause was to be treated as business income. The income from business centre was offered by the assessee as income from business and profession, however, the AO did not accept assessee’s contention and treated the same as income from house property.

By the impugned order the CIT(A) accepted the contention of assessee that the income so received by the assessee was income from business after having the following observations :- “ 3.7 the submission has been considered. The Assessing Officer has given importance to the words used in documents furnished to bank to conclude that the receipts were rent. The appellant’s submission that this cannot be the sole criterion is accepted. Where a receipt is a business receipt or a receipt from mere letting out of an immovable property would depend on facts of the case. Applying the ratio laid down by the Hon’ble Supreme Court in the case of Shambhu Investment Private Limited, 263 ITR 143(SC), if property is let out with the intention to have rental income it would be assessable as income from house property. On the other hand if the primary objection is to exploit the property by complex commercial activities, the income from the same should be considered as business income. The Business Conducting Agreement dated 18.02.2005 between the appellant and PRIL is operative for a period of 9 years. During this period the conductor is granted permissive use of the services and facilities provided in the premises by the assessee. The Conductor has no right of occupancy, but only limited access for the purposes of business activities during hours of day fixed in the agreement. The premises are in the control of the appellant. The appellant had to provide services as per the agreement for which personnel on permanent basis were to be employed. Hence, management and administration of the mall vested with the appellant. Thus, the appellant was a property manager rather than a passive owner. The property was treated as a business asset which was exploited by rendering commercial services in a systematic and organized 3 ITA No.5882/2010 manner. Following decisions in PFH Mall & Retail Management Ltd. Vs. ITO[110 ITD 337] (Kol), Gesco Corporation Ltd. Vs. ACIT [31 SOT 131] (Mum), Harvindarpal Mehta (HUF) Vs. DCIT [122 TTJ 163] (Mum) it is held that the business centre receipts of Rs.52,89,000/- has to be treated as business income.”