ACIT Vs Akrutismc Joint Venture (ITAT Mumbai)
Commercial Complex on MSRTC Land Generates Business Income, Not House Property Income: Mumbai ITA
No Ownership, No House Property Tax: ITAT Treats MSRTC Commercial Complex Rentals as Business Income.
The Mumbai ITAT dismissed the Revenue’s appeal and held that lease rentals and allied receipts earned by Akruti SMC Joint Venture from a commercial complex developed on MSRTC land were taxable as business income and not as income from house property.
The assessee was formed as a joint venture specifically for developing a bus station and commercial complex on land belonging to MSRTC. Under the development agreement, the assessee constructed the project at its own cost and, in consideration thereof, was granted the right to commercially exploit the commercial portion by leasing it for a period of 30 years. However, ownership of both the land and the building continued to remain with MSRTC throughout the arrangement.
The Assessing Officer treated rental receipts of about ₹9.88 crore as income from house property, relying on the fact that the assessee was receiving rent from tenants. The CIT(A), however, followed earlier appellate orders in the assessee’s own case and held that the receipts constituted business income.
Upholding the CIT(A)’s order, the Tribunal observed that the assessee was neither the owner nor the deemed owner of the property for the purposes of sections 22 and 27 of the Act. It merely possessed a contractual right to commercially exploit the property for a limited period. Since ownership remained vested with MSRTC and the assessee’s very purpose was to develop and commercially exploit the project, the rental receipts arose from carrying on its business activity rather than from ownership of property.
The Tribunal further noted that the issue had already been decided in favour of the assessee in earlier years on identical facts. Following the principle of consistency and finding no change in facts or contractual arrangements, it reaffirmed that lease rentals from the commercial complex, as well as related service receipts, were assessable as business income.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
