Commissioner of Income Tax vs Faith Real Estate (P.) Ltd.

The revenue is aggrieved by an order dated 4-5-2005 passed by the Income Tax Appellate Tribunal, Delhi Bench "SMC", New Delhi (the Tribunal) in ITA No. 4341/Delhi/2004 relevant for the assessment year 2001-02.

The assessee is in the business of developing real estate and owns some properties in and around Delhi. The assessee had given out on rent premises owned by it in sector 18, Noida to M/s. Ebony Retail Holdings Ltd. The agreement entered into between the assessee and M/s. Ebony Retail Holdings Ltd. was to the effect that the assessee would receive 2 percent commission on the sales made by M/s. Ebony Retail Holdings Ltd. for use of the premises.

The question that arose before the assessing officer was whether the amount received by the assessee was to be treated as income from house property or income from business. According to the assessing officer, the assessee had merely let out the property to M/s. Ebony Retail Holdings Ltd. and the amount received by it was to be treated as income from house property.

The view taken by the assessing officer was set aside by the Commissioner (Appeals) (Commissioner (Appeals))( who was of the opinion that on a consideration of the terms of the agreement it was not simply an agreement for renting out of premises, but in the nature of a joint venture or business agreement whereby the assessee was involved in day-to-day functioning of the store run by M/s. Ebony Retail Holdings Ltd. Apart from other things, the assessee was required to perform the upkeep of the building and also participate in the management by giving suggestions on the display of items and pricing of goods. The Commissioner (Appeals) noted that this was not disputed by the assessing officer, who had not been able to bring on record any material to suggest that the business agreement entered into by the assessee with M/s. Ebony Retail Holdings Ltd. is a sham. It was further held that it cannot be said that the agreement was a rent agreement simplicitor, therefore, the amount cannot be treated as income from house property.

The Tribunal accepted the view taken by the Commissioner (Appeals) and noted the fact that the business agreement was not a sham and it involved day-to-day administration of the assessee in the management of the store run by M/s. Ebony Retail Holdings Ltd. It appears that the arrangement arrived at between the assessee and M/s. Ebony Retail Holdings Ltd. was only to exploit the property in this manner due to a recession in the market.

We are of the opinion that essentially a finding of fact has been arrived at concurrently by both the Commissioner (Appeals) and the Tribunal that the arrangement was not a sham and it was not a mere rent agreement but in fact required involvement of the assessee in the management of the store also, therefore, the amount received by the assessee cannot be treated as income from house property and it should be treated as business income.

In our opinion on these facts, no substantial question of law arises for consideration

The appeal is dismissed.