Classification of enterprises:
Facts of the case:
Assessee, M/s Prestige Estate Project Private Limited is a company carrying on the business of the real estate. Return of income for the assessment year came to be filed, declaring total income. The return was processed under Section 142(1) of the Income Tax Act, 1961 and rectified under Section 154 of the Act. During assessment proceedings, Assessing Officer has recorded a finding that rental income received from Forum Mall and rental income received from fit outs were recorded as ‘income from business’ and ‘income from other sources’ and not as income from house property and accordingly passed the order. Hence assesse filed an appeal against this order.
Full text of the High Court order / Judgement
Whether tribunal was correct in holding rental income received from Forum Mall should be considered as “Income from business” and not “Income from house property”, though agreement between landlord and tenant contemplating relationship of landlord and tenant and as such it would partake character of rental income.
Assessing Officer has also recorded a finding that rental income received from Forum Mall and rental income received from fit outs were ‘income from business’ and ‘income from other sources’ and not as income from house property. Accordingly, assessment order came to be passed on 31.12.2007 (Annexure-A).
Assessee filed an appeal before Income Tax Appellate Tribunal, Bangalore Bench ‘B’ in ITA No. 218/Bang/09. Tribunal, by order dated 11.09.2009 partly allowed the appeal and held that assessing rental income received from Forum Mall should be brought to tax under the head “profits and gains from business” and income from fit outs should be brought to tax under the head ‘income from other sources. Hence, revenue is in appeal.
The Tribunal committed an error in holding that rental income received from Forum Mall should be treated as ‘income from business’ and not as ‘income from house property’ though agreement between landlord and tenant establish said relationship and the fact that rent was being paid every month. He would also contend that rentals received from fit outs namely, bare super structure of building was liable to be brought to tax under the head ‘income from other sources’ and not under the head ‘income from house property’. Hence, allowing the appeal by answering substantial questions of law in favour of the revenue
As said issue involved is no longer res integra in view of law laid down by this Court in 5/6 the matter of COMMISSIONER OF INCOME TAX-III VS. VELANKANI INFORMATION SYSTEMS (P) LTD., reported in (2014) 265 CTR 250 (Karnataka), where under it has been held if assesses is in the business of taking land, putting up commercial building thereon, letting out such building with all furniture as his profession or his business then notwithstanding the fact that he has constructed building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the income from house property and as such, against revenue and in favour of the assessee.
VERDICT OF THE COURT
The order dated 11.09.2009 passed by Income Tax Appellate Tribunal, Bangalore Bench ‘B’ in ITA No.218/Bang/09 for the assessment year 2005-06 is hereby affirmed.
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