D. MANMOHAN (Vice-President) and R. C. SHARMA (Accountant Member)

Firoze Andhyarujina for the appellant.
Love Kumar for the respondent.

The order of the Bench was delivered by

The order of the Bench was delivered by

1. R. C. Sharma (Accountant Member).-This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals), Mumbai dated February 18, 2013, for the assessment year 2009-10, in the matter of order passed under section 143 of the Income-tax Act, 1961.

2. In this appeal, the grievances of the assessee against the action of the Commissioner of Income-tax (Appeals) are-

(i) in confirming the disallowance made on account of business promotion, club expenses, sub-lease expenses and depreciation as per the Income-tax Act amounting to Rs. 58,89,825 ; and

(ii) in confirming the disallowance made on account of repair and maintenance expenses, security service charges and administrative expenses amounting to Rs. 29,86,443.

3. Rival contentions have been heard and record perused. Facts in brief are that the assessee claimed certain expenses relating to earning of rental income as other business expenses. As per the Assessing Officer income of the assessee was assessable under the head "Income from house property" or "other sources". Under the head "Income from house property", the Assessing Officer has allowed the statutory deduction and held that there is no reason for allowing any other expenses on account of such flats. In appeal, the Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer against which the assessee is in further appeal before us.

4. It was contended by the learned authorised representative that the main object of the assessee was to commercially exploit the business assets, therefore, income received therefrom is liable to be assessed as business income resulting into allowing the expenditure so claimed. He placed reliance on the decision of the hon'ble Supreme Court in the case of Chennai Properties and Investments Ltd. v. CIT Civil Appeal No. 4494 of 2004, dated April 9, 2015 [2015] 373 ITR 673 (SC).

5. We have considered the rival contentions, carefully gone through the orders of the authorities below and found from the record that the assessee filed return of income claiming rental income as business income and the same was processed under section 143(1) on December 20, 2005, whereas, during the assessment proceedings for the assessment year 2007-08, the Assessing Officer found that rental income received by the assessee is taxable as income from house property. Therefore, the Assessing Officer reopened the assessment year under consideration on the plea that instead of standard deduction under section 24, the assessee had claimed business expenses. Thereafter in the assessment framed under section 143(3) read with section 147, the Assessing Officer assessed income under the head of "Income from house property" and declined the assessee's claim of various expenses. From the record we found that the company was incorporated on October 13, 2000 with the object of dealing in house property including letting out to sophisticated customers like foreigners consultants and expatriates, etc., the properties dealt with the company were previously in possession of Union of India since 1942 for over 58 years. Hence, at the time of taking possession by the assessee-company these properties were in a terrible dilapidated and inhabitable condition. The company had to remodel, redesign and redecorate to suit commercial exploitation and to attract sophisticated customers by way of extravagant interior works including fixing electrical gadgets like air conditions, refrigerator, geysers, washing machines, dryers, dishwashers, expensive light fittings and furniture items, including fire safety mechanisms and around the clock professional security and maintenance team. During the year under consideration the assessee was in receipt of the following income :

6. For earning these income the assessee has claimed expenses on account of security charges, repairs and maintenance, business promotion expenses, sub-lease expenses and administrative expenses, etc., which was disallowed by the Assessing Officer and he assessed the income offered as business income, under the head income from house property. The hon'ble Supreme Court in the case of Chennai Properties and Investments Ltd. v. CIT C. A. No. 4494 of 2004 [2015] 373 ITR 673 (SC), by considering its earlier judgment of the Supreme Court in the case of Sultan Brothers (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC), and Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC) held that holding of property and earning of income by letting out those property is the main business of the assessee, the income arising thereon is liable to be assessed under the head "Income from business" and cannot be treated as income from house property.

7. In view of the decision of the hon'ble Supreme Court in the case of Chennai Properties and Investments Ltd. v. CIT [2015] 373 ITR 673 (SC), we restore the matter back to the file of the Assessing Officer for deciding afresh after considering the proposition of law laid down by the hon'ble Supreme Court in the case of Chennai Properties (supra). We direct accordingly.

8. In the result, the appeal of the assessee is allowed in part for statistical purposes.

The order pronounced in the open court on this August 14, 2015.