ASHIM KUMAR BANERJEE,J. - (1.) IN compliance with the direction of this Court under S. 256(2) of the IT Act, 1961, the following question has been referred by the Tribunal for our consideration : (a) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that there was no relationship of landlord and tenant between the assessee and the persons who hired office accommodation from the assessee is based on any relevant evidence or authority ? (b) Whether, the finding of the Tribunal that considering the services and facilities offered by the assessee to the hirers of the office space the income should be assessed as business income is based on any relevant evidence or arbitrary ? (c) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessment made by the ITO was not erroneous and prejudicial to the interest of the Revenue and thereby cancelling the order under S. 263 of the IT Act, 1961, passed by the CIT ?
(2.) M /s Shambhu Investment (P) Ltd., the assessee above named, is the owner of a building at Raheja Chambers, Nariman Point, Mumbai. The said premises has been furnished by the assessee and has been let out to various persons and/or firms and/or organizations with all furniture, fixtures, light, air-conditioners for being used as "table space". The said assessee under the agreement with those occupiers are to provide service like watch and ward staff, electricity, water and other common amenities. Copy of one of such agreement has been filed in the Court in course of hearing and the same has been kept on record. The income derived by the assessee from the said office premises was offered for taxation as business income and the some was assessed accordingly by the AO. The CIT perused the same in detail and held that the income derived from the said property were actually rent received from the occupiers and not to be regarded as service charges and maintenance and cannot be termed as business income. According to the CIT the assessment made under S. 143(3) was erroneous and prejudicial to the interest of the Revenue. Accordingly, a notice was issued to the assessee under S. 263 of the said Act as to why the assessment should not be set aside and fresh assessment should not be made by assessing the said income as rental income. The CIT after giving hearing to the assessee remanded the matter back to the AO with a direction to assess the said income as property income. Being aggrieved by the order of the CIT the assessee preferred an appeal before the Tribunal and the Tribunal after considering the facts and circumstances came to a conclusion that the order of the AO was (sic-not) erroneous and prejudicial to the interest of the Revenue and cancelled the order of the CIT passed under S. 263. Moot question involved herein is whether the income derived from the said premises is rental income or business income.
(3.) MR . Ram Chandra Prasad, learned Advocate appearing for the Revenue authority, has submitted that on a plain reading of the agreement it appears that although the occupiers were allotted table space in effect the right given to this occupiers were to enjoy furnished accommodation in the said immovable property. The other amenities like providing watch and ward staff, electricity and water were consequential to the principal right given to those occupiers under the said agreement. Hence, according to Shri Prasad the income derived from the said property by way of realization of the license fees from the various occupiers should be assessed as rental income and not as business income.;