S. 28(i) — Letting out of property used to run business centre — Whether rent income or business income.

The assessee was running two business centres. One of the
properties in which a business centre was functioning was owned by the assesee,
while the other was taken on lease. The spaces in the property were given to
various customers on short-term basis and customers kept on changing from time
to time.
Additionally, other common services/facilities like receptionist, telephone
operator, house-keeping staff, common waiting rooms, etc. were also provided.

The receipts and expenditure incurred in running the business
centres were routed through profit & loss account. The assessee declared income
as business income. The Assessing Officer treated the receipts from business
centre situated in the property owned by the assessee as income from house
property. According to him, the assessee was the owner of the said property and
this property was let out by the assessee. Hence the receipt out of it shall be
treated as income from house property. In the case of business centre situated
in property taken on lease by the assessee, the receipt from the same was
treated as ‘income from other sources’. As far as the service charges are
concerned, the same were treated as ‘income from other sources’.

On appeal to the CIT(A), the CIT(A) confirmed the assessment
order.

Relying on the decision of the Apex Court in the case of
Shambhu Investment (P.) Ltd. (2003) (263 ITR 143), the Tribunal held that the
fact whether a receipt is a business receipt or a receipt from mere letting out
of property, depends on the facts of the case and intention of the assessee.

Further in the present case, various facilities like
receptionist, telephone operator, common waiting rooms, etc. are also provided.
The ultimate control over the premises is with the assessee. There is
no intention of mere letting out the property and earn the rental income.
Business centres have
peculiar characteristics wherein space is provided for temporary period along
with other business-like facilities.

The intention of the assessee is thus to run the
business centre by exploiting the property and not mere letting out the
property. Hence the receipts are business receipts.