Case Law Details

Case Name : Gesco Corpn. Ltd. Vs Assistant Commissioner of Income-tax (ITAT Mumbai)
Appeal Number : ITA No. 3404/m/06
Date of Judgement/Order : 06/04/2009
Related Assessment Year : 2001- 2002
Courts : All ITAT (6924) ITAT Mumbai (2014)


15. Therefore, in our view, the issue involved in the present appeals is essentially a question of fact and once this question is answered, the application of appropriate legal principles should not present much difficulty. We find considerable strength in the submission of the assessee that facts in its case were distinguishable from those in the case of Shambhu Investments (supra). Separate agreements for provision of services and amenities clearly spell out intention to render commercial services to the occupiers. Further, advance received for the hiring of services for a period of 12 months was a normal commercial arrangement and bore no relationship with the cost of the property. Further thee factum of the services rendered and the facilities provided to the occupiers was not in dispute at all. Agreement for hiring out the space and agreements for the services and the facilities were inextricably linked with similar tenures. It is clearly discernable for these agreements that the parties entered into the arrangement with the assessee with the intention of using the bundled services and amenities. Assessee was giving space with services and facilities which were varied and wide and such activities together would definitely constitute an organized structure for making profits, and would necessarily constitute a business. Thus, in our view the assessee had created a commercial infrastructure and the services rendered were complex commercial/ business activity. As aforesaid a perusal of the agreements and the stipulations contained therein would not leave any doubt about the commercial character of ‘the relationship between the parties as distinguished from that merely of a landlord and*his tenant. Occupation of space was inseparable from the provision of services and amenities. In fact, the undisputed facts on record do demonstrate that assessee was’ a property manager rather than a passive owner of the property. The responsibilities entrusted to the outsourced agency, extracted hereunder from pages 151 and 152 of the paper book, bring out this facet of the case.

“Scope of work of the Property Manager –

1. Security of Common Areas

2. Cleaning and Maintenance of Common Areas.

3. Maintenance and operation of all machinery and equipment including lifts, pumps, generator, security and access control system equipment, fire fighting, detection and alarm system equipments, water filtration and treatment plant, electricity substation and electricity distribution system, telephone, automation/control system, HVAC system, water cascade system, etc

4. Proper upkeep and maintenance of all common areas such as painting, waterproofing, repairs of leakage, plaster repairs, flooring, paved roads and other civil, electrical and plumbing works pertaining to these areas.

5. Cleaning and maintenance of water tanks, both underground and overhead.

6. Pest Control of Common Areas.

7. The Property Manager will be responsible for collection from the owner/occupant all the common outgoings i.e. municipal bills, water charges, electricity bills, telephone bills, insurance charges; all revenue & service bills and depositing the same with requisite authority.

8. The Property Manager will take necessary legal action to prevent any encroachment on the subject property or its immediate enviros.

9. The Property Manager shall keep arid maintain records, log books, register as required to maintain the operation/maintenance data, laboratory/site test reports, etc. for all plants and machinery and shall also maintain all regular books of accounts showing all expenses and collections, etc. and make all such books available in the Property Manager office for inspection of the Developer and/or the Owner or the occupant of the building.

10. That it will be the responsibility of the Property Manager to prevent any encroachment in the said property or any part thereof and in the event there is any such attempt the Property Manager should immediately bring the same to the notice of the Owner.

11. Property manager shall render all necessary services to the owner for co-ordinating with all Government Agencies/Authorities and for all matters related to the smooth functioning of the said property.

12. Property Manager shall be responsible implementation and co-ordination for all common statutory property outgoings such as Municipal taxes, deposit of electricity bill, ground rem, insurance, etc. and will also be responsible for augmenting the water and electricity required for the said building.

13. That all legal expenses in the event of any dispute on account of work responsibility handled by the Property Manager will be -the sole responsibility of the property manager including the cost of arbitration for setting such disputes.

Aforesaid terms spell out that the commercial complexes and business centers required continuous management monitoring and attention for provision of complex services. Thus, the facts on record lead to the finding that the properties in question were business assets of the assessee and these assets were exploited by the assessee for the purpose of business by rendering complex commercial and business services as property managers; in a systematic and organized manner ; and therefore, the case of the assessee merits acceptance.

16. Accordingly, we hold as under:

1. Assessee’s appeal in ITA No. 3404/M/2006 is partially allowed due to the withdrawal of the third ground by the assessee itself. Apropos the first two grounds of appeal, the AO is directed to treat the entire receipts from the properties as business income and allow depreciation thereon as claimed. In view of these findings, the modified ground of appeal is rendered infructuous.

II Both grounds in Revenue’s appeal No. ITA No. 3418/M/06 are dismissed First ground is dismissed for the same reasons mentioned at paras 14 and 15 above. As for the second ground, it is dismissed for the reason that, once the receipts are considered as under the head `Profits and Gains of business or profession’, there can be no dis allowance of any administrative expenses.

III Co No 138/M/06 of the assessee, has as a result become in fructuous and therefore, stands dismissed.


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