The Income Tax Appellate Tribunal (ITAT) Ahmedabad has held that income received from Film Exhibition Business that has been leased out to another party should be treated as business income for taxation.
The assessee Deep Multiplexes Pvt. Ltd. is engaged in the business of film exhibition. It had filed its return of income on 19.9.2012 declaring a total loss of Rs.30,24,753/-. The Assessing Officer (AO) has noticed that though the assessee stated to be engaged in the business of film exhibition, no film exhibition business income activity was carried out. The source of its income was from leasing out multiplex to M/s.PVR Ltd., and M/s.Jubilant Food Works Ltd. In the year under consideration, the assessee has shown total receipts of Rs.1,09,61,877/- and profit before tax of Rs.34,03,249/-. According to the AO, since the lessees have deducted TDS under section 194I of the Act, the income it has earned was like rental income, the same was to be treated under the head “income from house property” but and not under “business income: as claimed by the assessee.
On Appeal The Commissioner of Income Tax (Appeals) found that assessee was, in fact, running multiplex, but due to the stoppage of its activity, premises along with machinery & furniture were given on lease to aforesaid ventures. These assets were reflected in the block of assets mentioned in the lease agreement. He observed that assessee has stopped its business activity, and given its properties on lease to the above parties. He, however, observed that since letting out of the property was inseparable from the letting out of the furniture & fixtures and plants & pieces of machinery, therefore, such rental income was to be taxable under the head “income from other sources” instead of “income from house property”
Vice President Rajpal Yadav while allowing the appeal held, “On an analysis of all these facts, in the light of authoritative pronouncements of Hon’ble Gujarat High Court as well as Hon’ble Supreme Court in the case of Excel Industries (supra), I find that there is no justifiable reason for the AO to deviate from view taken in earlier years, in this year. Neither the AO nor the ld.CIT(A) has pointed out what are the changes in the facts and circumstances from the earlier years. Even otherwise, if looked from angle of Revenue sharing from the operation of multiplex as well as other liabilities of the assessee, it would demonstrate that it was business exploitation by the assessee, and it has only given a portion of the complex for a period of ten years to PVR. Therefore, its income ought to be assessed under the head business income. I allow the appeal of the assessee and set aside the finding of both the Revenue authorities. The ld.AO shall assess the income of the assessee under the head ‘business income’.”