- Vide Decision of High Court Of Kerala in Commissioner of Income-tax v. Oberon Edifices & Estates (P.) Ltd.
Facts of the case:
1. Assessee is a company engaged in the business of construction and promotion of residential and commercial complexes. The assessee constructed a shopping mall by name 'Oberon Mall' in Kochi in the property owned by its sister concern and let out the shop rooms. For the Assessment Year 2009-10, the assessee has shown the income on letting out the shop rooms as income from business.
2. The assessing officer treated this amount as income from house property and after deducting municipal taxes and statutory benefit of 30%, computed tax on the balance amount.
3. The assessee challenged the same before the Commissioner of Income Tax (Appeals). But the appeal was dismissed.
4. The assessee challenged the aforesaid order before the Income Tax Appellate Tribunal. The Tribunal found that the disputed amount is business income of the assessee and allowed the appeal.
5. Moving further, the revenue has come up in appeal challenging the
order of the Tribunal.
6. Revenue contended that the assessee had let out the rooms in the shopping mall and the rental charges received by the assessee are liable to be treated as income from house property and not business income.
7. On the other hand, the assessee contended that amount received by the assessee by letting out rooms in the shopping mall cannot be considered as income from house property. Letting out the shop rooms in the mall amounts to commercial exploitation of the building constructed by the assessee and it is a part of the business activity of the assessee company.
8. Judgement of Calcutta High Court in Commissioner of Income Tax v.
Shambhu Investment Private Limited: "What has to be seen is what is the
primary object of the assessee while exploiting the property. If it is found applying such test that the main intention is for letting out the property or any portion thereof, the same must be considered as rental income or income from property. In case it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event it must be held as business income"
9. In the instant case, Honorable High Court of Kerala has observed that it is not mere letting out of property. A host of services are being provided by the assessee at the shopping mall. The basic purpose is commercial exploitation of the property. The assessee has earned the income not merely by letting out the shop rooms but also by providing amenities and facilities at the shopping mall.
Judgement: The Honorable High Court has held that the amount received by the assessee on letting out the shop rooms has to be treated as business income and it has to be assessed to tax under the head ''Profits and Gains of Business'' and not under the head ''Income from House Property''.