1 All these Appeals are based on similar set of facts and involve common questions of Law. So as to avoid rigmarole, they are decided together.
2 The Commissioner (Appeals) and the Tribunal arrived at a concurrent finding that the income received by the Respondent/Assessee by way of rent is a business income. Aggrieved thereby, the Revenue has filed the present Appeals.
3 Mr.Pinto, the learned counsel for the Appellant strenuously contends that the Tribunal was not right in applying the principle of consistency in dismissing the Appeals ignoring the fact that during the instant year, the original Company has demerged and this was the first year of assessment of the demerged Companies. The Assessing Officer was entitled to consider the issue afresh. The learned counsel submits that the principle of res judicata would not apply to these proceedings. The learned counsel further submits that the Assessee Company was the owner of the property and the income received from the property leased out to various parties are to be assessed as house properties. To substantiate his contention, the learned counsel relies on the Judgment of the Apex Court in the case of Sultan Brothers Pvt. Ltd. Bombay v. Commissioner of Income Tax, Bombay City II, Bombay reported in (1964)5 SCR 807, so also on the another Judgment of the Apex Court in Shambhu Investment (P) Ltd. v. Commissioner of Income Tax reported in (2003) 263 ITR 143 (SC). The learned counsel also relies on the Judgment of the Apex Court in the caseof Raj Dadarkar & Associates v. Assistant Commissioner of Income Tax, CC-46 reported in 2017 OnLine SC 658. According to the learned counsel, each case will have to be considered on the basis of the facts existing therein. The predominant object and the intention will have to be considered while arriving at a conclusion as to whether a particular income is a property or business income. If the said test is applied, then the income derived by the Respondent/Assessee Company will have to be held as a house rent income.
4 The learned counsel for the Respondent submits that both the Authorities i.e. Commissioner (Appeals) and the Tribunal, on appreciation of facts, have arrived at the concurrent conclusion that the income derived by way of rent is a business income. According to the leaned counsel, even the object clause in the Memorandum of Association makes it clear that the business of the Respondent/Assessee is to construct malls/commercial complex and lease it. The entire income of the Respondent/Assessee is rent income except the other paltry sum received by the interest on fixed deposits and sale of scrap. According to the learned counsel, the Commissioner (Appeals) and the Tribunal have applied the various tests such as the intention and the object and have arrived at correct conclusion. The leaned counsel further submits that for the earlier years also, the income of the Respondent/Assessee by way of rent was assessed as 'business income'. One Company namely ECity Entertainment has demerged and its properties are divided between the present Respondent Companies from which also the income is by way of rent. In respect of ECity Entertainment also for the earlier years, prior to its demerger, the income from rent was assessed as 'business income'. The learned counsel further submits that even in the present Appeals, the Appellant has not, in any manner, objected to the observations of the Tribunal being incorrect. It is also accepted in the Appeals, more particularly in paragraph 5.1, that the Respondent is primarily engaged in the business of leasing and rentals of property and other types of leasing business inter alia accepting that the business of the Respondent/Assessee is to lease out the properties on rent.
5 The learned counsel relied on the Judgment of the Apex Court in Chennai Properties and Investments Limited, Chennai v. Commissioner of Income Tax, Central III, Tamil Nadu, reported in (2015) 14 Supreme Court Cases 793, so also in case of Rayala Corporation Pvt. Ltd. v. Assistant Commissioner of Income Tax, reported in (2016) 15 SCC 201.
6 With the assistance of learned counsel for the respective parties, we have gone through the Judgments of the Tribunal and the Authorities, so also, have considered their submissions.
7 No straitjacket formula can be laid down to conclude as to an income being a 'income from the house property' or 'business income'. The same will have to be decided based on facts existing in each case.
8 It does not appear to be a matter of debate that prior to the Assessment Year 2006-07, consistently the Assessing Officer has accepted that the income derived to the Respondent/Assessee by way of rent is a business income. The deviation is from the Assessment Year 2007-08. One of the ground raised is that there is demerger of the Company and that is why the Assessing Officer has right to revisit the facts and arrive at an independent conclusion.
9 The Company which is demerged is ECity Entertainment Pvt.Ltd. The properties of the said demerged Company are divided in the present Assessing Companies. It is not disputed that ECity Entertainment was assessed till the Assessment Year 2005-06 and the income derived by the said Company by way of rent was always assessed as 'business income'.
10 There is no dispute with the proposition that the principle of res judicata would not apply, however principle of consistency has to be considered.
11 Even in a case of Sultan Brothers (referred to supra), the Apex Court has observed that a small entry in the object clause showing a particular object would not be a determinative factor to arrive at a conclusion, whether the income is to be treated as 'income from business' and as such a question would depend upon the circumstances of each case i.e. whether particular business is letting or not.
12 The said Judgment was considered by the Apex Court in the case of Chennai Properties and Investments Limited, Chennai (referred to supra) The Apex Court, after considering the Judgment in case of Sultan Brothers (supra) in the facts and circumstances of the said case, has held the 'rent income' to be a 'business income'. In the said case, the main object, as culled out in the Memorandum of Association of the said Assessee Company, was to acquire the properties in the City of Madras and to let out those properties. The Assessee has rented two properties and the rental income received thereby was shown as income received from business in the return filed by the Assessee. The Apex Court observed that there is no other income of the Assessee except the income from letting out these two properties. Upon considering the main object of the Company, the Apex Court held that the income from rent ought to be treated as 'business income'.
13 In the case of Raj Dadarkar & Associates (refereed to supra), the income of the Assessee therein from rent was not the sole income. It was observed by the Apex Court, in the said case, that the Assessee has not established that he was engaged in any systematic or organized activity of providing service to the occupiers of the shops/stalls so as to constitute the receipts from them as business income. It was for the Appellant to produce sufficient material on record to show that its entire income or substantive income was from letting out of the property, which was the principal business activity of the Assessee.
14 In the present case, the facts are otherwise. The substantive income of the Assessee is from leasing out the shop/stalls.
15 The Tribunal in its Judgment, while appreciating the facts, has observed that the various malls are built by Assessee and are operated from the year 2001. The operational income received from the said activity, in the form of rent, and other service charges was consistently offered to tax as its business income in the earlier years and the same was accepted by the Department as a business income. After demerger, both the Assessee Companies took over the assets and liabilities of the demerged Company and continued the same business of operating and running the malls. The Tribunal has considered the nature of the business activities of the Assessee Company, as well as, terms and conditions of the relevant agreements, under which the commercial space in the mall was given on hire by the Assessee Companies to the concerned parties. It also considered the various services provided by the Assessing Companies during the course of operation and running of the Family Entertainment Centre-cum-malls. On appreciation of facts, the Commissioner (Appeals) and the Tribunal have concurrently arrived at a conclusion that the intention of the Assessing Companies was to commercially exploit the property by way of complex commercial activities and it was not a case of letting out the property simplicitor. The rental income and the service charges thus were received by the Assessee Company as business income during the course of business carried out by them of operating and running a Mall as a commercial activity. The facts of the present case are much similar to the case of Chennai Properties and Investments Limited, Chennai (referred to supra).
16 We find that the appreciation of evidence by the Commissioner (Appeals) and Tribunal is not perverse and the finding arrived at by them is plausible one.
17 In the light of above, no substantial question of Law arises. The Appeals stand dismissed, however, with no order as to costs.