ORDER

Per N.L. Dash, Judicial Member. - These two appeals of the assessee - one is directed against the order dated 24-1-2006 of the Ld. CIT, Kol.-III passed under section 263 for assessment year 2001-02 and the other is directed against the order dated 11-10-2006 of Ld. CIT(A)-VIII, Kolkata for assessment year 2003-04 - are disposed of by this common order since the principal issue agitated in both these appeals is substantially the same.

ITA No. 435/K/06 - Assessment year 2001-02 (Against order of CIT under section 263) :

2. This appeal by the assessee is directed against the order of the Ld. CIT, Kol.-III, passed under section 263 of the Act for the assessment year 2001-02. All the grounds originally taken by the assessee are in respect of cancellation of assessment under section 263, and issuance of direction to assess the income of Rs. 1,75,20,000 under the head of 'Income from house property'. Subsequently the assessee had taken an additional ground challenging the assumption of jurisdiction under section 263 of the Act by the Ld. C.I.T. We shall take up the original grounds first, which are as under:—

(1) For that on the facts and in the circumstances of the case, Ld. CIT, Kolkata-III erred in cancelling the assessment framed by the Assessing Officer holding the same to be erroneous and prejudicial to the interest of revenue. (2) For that the Ld. CIT, Kolkata-III erred in holding that the Mall management/business centre charges, which was offered and assessed to tax as business income, was taxable under the head 'Income from house property'. (3) For that the Ld. CIT, Kolkata-III erred in holding that the finance charges paid in respect of loan taken for acquiring the property at Ahmedabad should have been considered under the head "Income from house property" and not as "business expenditure".

3. The assessee-company (previously known as Kishore Taxtile Mills Pvt. Ltd.) is engaged in the business of construction and management of shopping malls, departmental stores and business centres at Mumbai, Ahmedabad and Kolkata. The assessment in this case was completed under section 143(3) by the Income-tax Offcer, 7(1)(3), Mumbai on 4-12-2003 on a total income of Rs. 5,55,630. Subsequently, the case of the assessee was transferred to Kolkata. The learned CIT, Kol.-III reviewed the aforesaid assessment. On such review it, prima facie, appeared to her that the said assessment was erroneous and prejudicial to the interest of revenue. She therefore, assumed jurisdiction under section 263 of the Act, and passed an order under the said section dated 24-1-2006, cancelling the assessment made under section 143(3) of the Act and directing the Assessing Officer to revise the original assessment by assessing the amount of Rs. 1,75,20,000 being mall management and business centre charges, as income from house property instead of as business income. The reasons why prima facie it appeared to the Ld. CIT that the assessment made under section 143(3) was erroneous and prejudicial to the interest of revenue necessitating action under section 263, are as under :

(a) The mall management and business centre charges were assessed as business income against which business expenditure of Rs. 1.5 crores was claimed though the receipts should have been taxed as income from house property. (b) In the Profit and Loss Account, the assessee claimed deduction of interest of Rs. 69,04,530 out of which Rs. 53,82,041 was paid in respect of loan taken for acquiring the property at Ahmedabad. The Assessing Officer allowed the said amount as business expenditure instesd of considering it for computing assessee's income from house property. (c) The taxability of an amount is determined by its true nature and not by the name given to it by the assessee. The receipt from letting out mall space should have been assessed as property income.

The Ld. CIT relied upon the decision of the Hon'ble Supreme Court in the case of Sambbu Investment (P.) Ltd. v. CIT [2003] 263 ITR 143 .

4. The learned counsel of the assessee submitted that the case was selected for scrutiny and the assessment was completed after due serutiny. The Assessing Officer had observed in the order of assessment that the return of income was accompanied by audited Profit & Loss Account, Balance Sheet etc. as well as Audit Report in Form No. 3CA. At the hearing stage the assessee produced books of account, i.e. cash book/bank book, ledger, purchase/sales register etc. along with bills. The assessee had also furnished details of various expenses. These documents were examined by the Assessing Officer with a view to ascertain the veracity of the claim made by the assessee for allowance of deduction of various expenses debited to the Profit & Loss Account. Only thereafter he completed the assessment. Thus it can be said that the assessee had furnished the requisite information/evidences, and the Assessing Officer after considering the records before him and satisfying himself about the correctness of the evidences filed, proceeded to complete the assessment. From the above facts, it necessarily follows that there was proper application of mind on the part of the Assessing Officer in framing the assessment. In other words, the decision that he had taken to assess the receipt of Rs. 1,75,20,000 being mall management/business centre charges, as business income and to allow deduction of Rs. 1.50 crores, inclusive of interest of Rs. 69,04,530 as business expenditure, was a conscious decision taken after conducting necessary inquiries and on due appreciation of relevant facts and law.

4.1 The learned counsel further submitted that the Hon'ble Supreme Court, in the case of Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 very succinctly enunciated the unique charac-teristics of a business activity. The Apex Court has laid down precise tests that are necessary to determine whether the ser- vices rendered by an assessee to its tenants/recipients of service, are in the nature of business activities and income generated therefrom assessable as business income, or not. The Hon'ble Court expressed the view that if the services rendered by the assessee are the results of its activities carried on continuously in an organised manner, with a set purpose and with a view to earn profits, those activities would constitute business activities and the income arising therefrom would be assessable under section 10 (of the 1922 Act, i.e. as business income under section 28 of the 1961 Act). In the context of the order under appeal, it is pertinent to apply the above tests to the facts of the instant case. The various services rendered by the assessee-company in the shopping malls/business centres owned by it at Mumbai, Ahmedabad and Kolkata, as may be noticed from the agreements reached in this respect with the users, viz., (i) Pantaloon Industries Ltd., (ii) Pantaloon Retail (India) Ltd., and (iii) PFH Entertainment Ltd., are as under :

A. Services & Facilities :

1. Security system - manual as well as electronic 2. Providing of cleaning and maintenance staff 3. Providing adequate lighting 4. Installation and maintenance of lifts/escalators/elevators 5. Provision and management of parking space 6. Provision of fire fighting equipments 7. Provision of diesel generator set 8. Insurance of property

B.Other amenities :

1. Providing tiled flooring 2. Providing rolling shutters 3. Electrical connected load 4. Air handling units 5. Telephone lines 6. Fax lines 7. Signage boxes 8. Computers 9. Internet lines

A perusal of the agreements would show that the activities involved in providing the above services/facilities/amenities meet all the aforesaid four requirements laid down by the Hon'ble Supreme Court to qualify as business activities. To elaborate further, the assessee has taken up a project for establishing a retail chain at various metros of India and already shopping malls started functioning at Mumbai, Ahmedabad and Kolkata. So all these activities constitute ingredients of an organised business venture. The agreements with the users have been made operative for a period of 6 to 10 years, thus signifying that the services are being rendered continuously during the said period. For acquisition/construction of the shopping malls/business centres the assessee had taken loans from banks. For providing the various services as stated above, it had to arrange for/obtain permissions/clearances/facilitations from various Government and other organisations. It had to maintain staff and managers and take various administrative measures to ensure smooth running of the shopping malls/business centres. All these are continuous organised activities undertaken for a set purpose, the purpose being to carry on trade or business as managers and maintainers of shopping malls, which is one of the objectives for which the assessee-company was incorporated, as mentioned in the Memorandum of Association. The very fact that the assessee received a sum of Rs. 1,75,20,000 and incurred various expenses, including interest expenditure by way of pursuing this activity, is proof enough that the said activity was carried on to earn profits. Therefore all the four criteria preseribed by the Hon'ble Supreme Court are satisfied in the case of the assessee, for its aforesaid activities to qualify as business activities. Consequently the income derived from such activities can only be assessed as business income. Viewed from another angle, the learned counsel submitted, that in Karnani Properties, the tenants had to make a monthly payment which included charges for electric current, for use of lifts, for the supply of hot and cold water, for the arrangement for scavenging, for providing watch and ward facilities as well as other amenities. The company further provided for the benefit of tenants, electric lifts working day and night. It also maintained a separate water pump-house and a boiler for the supply of hot and cold water to the tenants. For all these purposes the company had to maintain a large number of permanent staff. If may be noticed that the services rendered by the present assessee to the users of its shopping malls/business centres are very similar in nature to those rendered by Karnani Properties Ltd. Therefore, following the decision of the Hon'ble Apex Court, the earnings made by the assessee by rendering the aforesaid services can legally be assessed only as business income under section 28 of the Act. On the question that in the case of Karnani Properties Ltd. ( supra) a portion of the receipt was found assessable as rental income. Shri Tulsiyan submitted that the nature and assessability of the said part of the receipt was not before the Hon'ble Supreme Court for abjudication. Besides, he argued that the rental income presupposes existence of an owner-tenant relationship between the receiver and the payer of the rent. One of the principal characteristics of such relationship is that the tenant must enjoy tenancy rights, which he acquires the moment he becomes a tenant. Section 55(2)(a) of the Act even speaks of the cost of acquisition of such tenancy rights for the purpose of computation of capital gains on transfer thereof. In the agreements that the assessee-company entered with the aforesaid three companies it has been specifically provided that the user of the services provided by the owner shall not have any tenancy rights. The relevant clause in the agreements states as under :

"The benefits granted to the User of availing of the services provided as set out in this Agreement shall not be construed as creating or vesting any right or title or interest of any kind whatsoever in the User to any of the said services aforesaid or any machinery or equipment or articles in the Business Centre. The said Business Centre and all machinery equipment and articles therein belong exclusively to the Owner and are in sole control and possession of the Owner. The User is hereby granted only permissive use of the said services being provided therein. Any right contemplated in the future by any statute is hereby deemed to have been waived by the User."

According to the learned counsel, the only conclusion that can be reached from perusal of this clause of the agreements is that, the users of the shopping malls/business centres of the assessee are not its tenants. The service charges paid by them therefore cannot be construed as payments of rent. Thus, following the principles of law as enunciated by the Hon'ble Supreme Court in the case of Karnani Properties Ltd. (supra), in the case of the assessee the entire receipts from shopping malls/business centres are assessable only as business income.

4.2 The learned counsel of the assessee thereafter drew our attention to the judgment of the Hon'ble Calcutta High Court in the case of Everest Hotels Ltd. v. Commissioner Of Income-Tax, West Bengal [1978] 114 ITR 779 wherein the Court had occasion to deliberate on a similar issue. The facts in the said case in a nutshell, are that the appellant, since 1927 has been carrying on the business of a hotel under the name and style of "Hotel Mount Everest" at Darjeeling. On the 23rd October, 1952 the appellant executed an indenture of lease in favour of Messrs Hotels [1938] private Ltd. with effect from 1st November, 1952, at a consolidated leasehold rent of Rs. 75,000 per annum for a period of 5 years. The entire business of Hotel Everest, its goodwill, buildings, furniture, equipments, etc., were let out to Messrs Hotels (1938) Pvt. Ltd. under this indenture. The question was whether the assessee's rental income should be taxed as property income under section 9 of the Act of 1922 or as business income under section 10 of the said Act. On the above facts, after an elaborate discussion taking into account the relevant judicial pronouncements, the court held that the rental income derived from the lease is assessable as business income under section 10 of the 1922 Act. The learned counsel argued that the main consideration of the court in the said case was whether the lease rent received was from commercial utilisation of the property. Because only then the income would be assessable as business income. He submitted that there are a lot of similarities in both the purpose as well as the activities concerning the running of a shopping mall and a hotel. Both malls and hotels constitute building or group of buildings providing accommodation for commercial use thereof. Just as utilisation of accommodation for providing customers with board and lodging is a commercial activity utilisation of space for providing shopping facilities to customers is also an out and out commercial activity. In the management of both shopping mall and hotel the predominant activity consists in commercial exploitation of the property, either directly by its owner or through some other person. So, the income arising therefrom has necessarily to be assessed as business income. He further submitted that the question as to whether income from a business centre should be treated as business or property income was resolved with reference to the facts in Assistant Commissioner Of Income-Tax v. Saptarshi Services Ltd. [2004] 265 ITR 379 (Guj.) where it was found after review of the various case laws on the subject, that the income from developing the propery as a business centre and providing various services like provision of lift, services as those of receptionist besides secretarial services, data processing conference room, etc. with many facilities, has necessarily to be assessed as business income. Special leave against this decision has also since been refused by the Supreme Court [264 ITR (St.) 36]. Referring to the observation of the Hon'ble Madras High Court in the case of Commissioner Of Income-Tax v. Kongarar Spinners Pvt. Ltd. [1994] 208 ITR 645 he submitted that income derived from only letting out of a property simpliciter, without anything more, will fall under the category of "income from house property". Since in the instant case there is much more than mere letting out of the property simpliciter inasmuch as a host of services are being provided to the user by the assessee, the income arising therefrom cannot be considered as income from house property. Shri Tulsiyan further submitted that the consensus of all these judicial pronouncements point to the truism that wherever the basic purpose, as evidenced by various related activities, is commercial exploitation of the property and letting out is only incidental to carrying on such business, the income earned is necessarily to be treated as business income. The facts and circumstances show that the basic intention of the appellant company is commercial exploitation of the properties at Mumbai, Ahmedabad and Kolkata by developing these as shopping malls/business centres, and all the related activities are geared towards that purpose. So the income derived can only be assessed under the business head.

4.3. Referring to the reliance of the CIT on the Supreme Court decision in the case of Shambhu Investment (P.) Ltd. v. CIT [2003] 263 ITR 143 to justify her contention that the income in question should have been taxed under the head of 'Income from house property', the learned counsel of the assessee submitted that the said judgment only stated that the court saw no reason to interfere with the conclusion arrived by the High Court on the question as framed under section 256(2) of the Act. Even the question framed has not been quoted in the judgment of the Hon'ble Supreme Court. The order also does not contain any further elaboration about the facts of the case. So, mere reference to the above quoted judgment of the Hon'ble Apex Court in paragraph 4 of the order under appeal is of little use insofar as the ascertainment of relevance of the same for deciding the issue in question is concerned. Therefore, the learned counsel drew our attention to the decision of the Hon'ble Calcutta High Court in the case of the said assessee CIT v. Shambhu Investment (P.) Ltd. [2000] 249 ITR 47 which has been affirmed by the Hon'ble Supreme Court in the aforesaid judgment. He submitted that in the said case the assessee had let out the furnished office to the occupants on a monthly rental which was inclusive of all charges to the assessee. The entire cost of the property let out to the occupants had been recovered as and by way of interest-free advance by the assessee. Therefore, the Court held, that it could not be said that he was exploiting the property for its commercial business activities. The learned counsel argued that apparently one of the principal factors that persuaded the court to hold that the receipts in Shambhu Investment (P.) Ltd.'s case (supra) were assessable as rental income is that the entire cost of the said property was recovered from the occupants by way of interest-free advance. He submitted that in the appellant's case investment in shopping malls/business centres were made by borrowing of funds from banks. Besides he pointed out that in Shambhu Investment (P.) Ltd.'s case (supra) the court also found that there was a relationship of landlord and tenant between the assessee and the persons who hired the office accommodation, whereas in the instant case no such relationship exists between the assessee (owner) and the user. He further submitted that in Shambhu Investment (P.) Ltd.'s case (supra) the Hon'ble Calcutta High Court, after considerintg the ratio of the decisions in the cases of (i) Sultan Bros. (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC) , (ii ) CIT v. National Storage (P.) Ltd. [1967] 66 ITR 596 (SC) , (iii) Commissioner Of Income-Tax, Tamil Nadu-Iv v. Admiralty Flats Motel. [1982] 133 ITR 895 (Mad.) , (iv)Commissioner Of Income-Tax, Bombay City-I v. Associated Building Co. Ltd. [1982] 137 ITR 339 (Bom.), (v) Commissioner Of Income-Tax v. K.L Puri (Huf)) [1998] 233 ITR 43 (Delhi) , (vi) Saswad Mali Sugar Factory Ltd. v. CIT [1999] 236 ITR 706 (Bom.), (vii) Commissioner Of Income-Tax v. Halai Nemon Association [2000] 243 ITR 439 (Mad.) and (viii) Mukherjee Estate (P.) Ltd. v. Commissioner Of Income-Tax [2000] 244 ITR 1 (Cal.) came to the conclusion that the mere fact of attachment of income to any immovable property cannot be the sole factor for assessment of such income as income from property. It is necessary to find out the primary object of the assessee while exploiting the property. If it is found that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from property. In case it is found that the main intention is to exploit the immovable property by way of complex commercial activities, in that event it must be held as business income. He argued that if the above test is applied to the facts and circumstances of the instant case, there would be no room for doubting that the main intention of the assessee is to exploit its immovable properties, i.e. shopping malls/business centres, by engaging in complex commercial activities. It cannot be denied that right from the planning stage and arranging finance for its investments, every subsequent activity of the assessee has been geared towards taking up mall and business centre management as a viable business proposition for earning profit. The gradual liberalisation of the economy during the last decade and a half and the resultant emergence of a powerful consumer base especially in the retail sector, empowered with the availability of increasing liquidity, provided excellent opportunity for the assessee to augment its profitability. All that the assessee has done is to grab the opportunity in both hands like a prudent businessman and embark on a new commercial venture that held promise for higher profits in less time. That was the primary object of the assessee in exploiting the immovable properties. So the income arising from such commercial exploitation of the assets concerned can only be assessed as business income. The learned counsel contended that in the facts and circumstances of the case, the ratio of the Calcutta High Court decision (subsequently affirmed by the Hon'ble Supreme Court) in the case of Shambhu Investment (P.) Ltd. (supra) is of little help to the Department and actually supports the stand of the assessee.

5. The Ld. Senior Departmental Representative, on the other hand, strongly supported the order under section 263 passed by the learned CIT, cancelling the assessment made under section 143(3) and directing the Assessing Officer to assess the income from shopping malls/ business centres under the head of 'Income from house property'. He submitted that the claim of so-called commercial activity of the assessee is only a facade to disguise its real intention, which is to earn rental income from the immovable properties. He echoed the observation of the Commissioner that the particular head, within the meaning of section 14 of the Act, under which any income is taxable, is not determined by the nomenclature given to it by the assessee but by its true nature. He relied on the Hon'ble Supreme Court decision in the case of Shambhu Investment (P.) Ltd. ( supra).

6. We have carefully considered the relevant facts, the arguments advanced by the rival parties and the decisions cited. In our view, before arriving at any conclusion about the particular head under which the income derived by the assessee is required to be assessed, it is necessary to examine the relevant provisions of the agreements that the assessee had entered into with the users. In all the agreements the assessee is shown as the owner of the premises in which the shopping malls/business centres are located and the other party to the agreement is shown as the user. The assessee, as owners of the premises, has the responsibility of providing security, communication and other services as specified in the agreements. The agreements with Pantaloon Industries Ltd., PFH Entertainment Ltd. and Pantaloon Fashions (India) Ltd., are operative for a period of six years commencing from 1-4-1999 and that with Pantaloon Retail (India) Ltd. is made operative for a period of seven years commencing from the date of official launch of the mall, or, in any case, on or before 15-3-2000, by which time the owner would endeavour to provide the user with all the services and facilities as mentioned in the agreement. The agreements provide inter alia that the owner, i.e. the assessee, would keep open the business centres from 9 A.M. to 10 P.M. [(10 A.M. to 10 P.M. as per the agreement with Pantaloon Retail (India) Ltd.)] every day. During this period the assessee would provide the services as mentioned in the agreements and would permit the employees of the user free access to the said services. It has been clarified in the agreements that similar services are provided to the other clients also. The owner would determine the precise hours during which the stock-in-trade or wares may be brought into the business centres to obviate any inconvenience to the use of the said business centre and to facilitate free movement of the visitors within the said building. As per the agreements the users are not permitted to allow any person to sleep or stay in any part of the building nor to use the same for residential puposes. The agreements specifically stipulate that the user is only granted permissive use of the services and facilities provided in the premises by the assessee. The user would not be vested with or enjoy any right, title or interest of any kind in the services and facilities provided by the assessee, any machinery, equipments and articles in the business centre or any part or portion of the building. The agreements also provide that any right contemplated by any statute in future is also deemed to have been waived by the user. Thus the users do not enjoy even any tenancy right as per the agreements. The service charges payable by the users have been determined at a fixed rate. Failure to make payments of service charges in time would attract charge of interest at a steep rate (21% and 24% compounded quarterly). The fixed service charges do not include charges for telephone and FAX facilities and electricity charges or charges for any other similar facilities provided by the owner to the users. These are to be paid by the users on actual basis. The assessee is responsible for the payment of ground rent/lease rent, maintenance charges, municipal and other taxes, rates and cesses as well as other such outgoings. However, in case of increase in assessee's liabilities on account of increase in taxes, charges, dues or liabilities payable to any governmental body or authority, the fees payable by the users for enjoying services and facilities provided by the assessee may be proportionately increased at the discretion of the assessee. Thus the assessee has contractual obligation for providing services to its customers (users) like electricity, telephone, watch and ward, etc. As per the terms of the agreement the customers had no right of occupancy. They have only limited access to use the space for the purpose of their business, and that too, in respect of certain activities, during the specific hours of the day only. Furthermore the keys of the premises are kept by the assessee meaning thereby that the premises are fully in control of the assessee.

6.1 At this juncture it would be pertinent to focus our attention to some undisputed facts pertaining to this case. The assessee has given up its business of trading in textiles and embarked on setting up shopping malls/business centres at various metros in India in a big way. For this purpose it had secured loans from the banks, observed various formalities and obtained necessary permissions. Apart from providing various services, in subsequent years it has also taken up, as part and parcel of its mall management activities, the job of marketing as well as that of selling agency of ready-made garments and other articles. No doubt in the changing economic scenario of the country the assessee correctly recognised the immense opportunity that the retail shopping malls would provide for making big money. That is why it lost no time in discarding its earlier business to venture into this new field. The Hon'ble Supreme Court in Karnani Properties Ltd.'s case (supra) had observed :

"From the facts found by the Tribunal it follows that the services rendered by the assessee to its tenants were the result of its activities carried on continuously in an organized manner, with a set purpose and with a view to earn profits. Hence, those activities have to be considered as business activities."

Applying the above test to the facts of the present case we find that the assessee has directed all its activities in an organised manner for the purpose of developing the properties as shopping malls/business centres. From the agreements it is apparent that the management and administration of the shopping malls is the sole responsibility of the assessee. Obviously the assessee is required to employ a good number of personnel on a permanent basis to discharge such responsibility. The various arrangements that the assessee has to make on a daily basis, to ensure availability of the services and amenities to the users in accordance with the agreements, reflect a clear manifestation of organised activity. The duration of the agreements and various legal and other commitments that each party to the agreement(s) are required to honour, indisputably show that the activities are continuous. So clearly the activities of the assessee that generated the income from shopping malls/business centres can be categorized as continuous organised activities for a set purpose. There is also no doubt that the assessee engaged in such activities with a view to earn profit. Clearly the assessee is engaged in a complex set of activities, the purpose of which cannot be regarded as merely earning of rental income. The various features of the agreements, as stated above, also indicate that there is much more than letting out of the properties simpliciter for earning rental income.

6.2 The Hon'ble Bombay High Court in the case of CIT v. National Storage (P.) Ltd. [1963] 48 ITR 577 , while laying down the principles to be followed in determining the particular head under which an income is to be assessed, observed :

"In cases where the income received is not from the bare letting of the tenement or from the letting accompanied by incidental services or facilities, but the subject hired out is a complex one and the income obtained is not so much because of the bare letting of the tenement but because of the facilities and services rendered, the operations involved in such letting of the property may be of the nature of business or trading operations and the income derived may be of the nature of business or trading operations and the income derived may be income not from exercise of property rights properly so-called so as to fall under section9 but income from operations of a trading nature falling under section 10 of the Act;"

The facts in the instant case undoubtedly show that the income obtained is not merely because of the bare letting of the premises but also because of the facilities and services rendered. Thus the income derived by the assessee cannot be regarded as simply from the exercise of property rights. Rather the income is derived by the assessee from complex operations of a trading nature.

6.3 In the case of Everest Hotels Ltd. (supra) it has been held by the Hon'ble Calcutta High Court that the running of hotel being a commercial activity, the income derived from lease rent by letting out the hotel premises is assessable as business income. This is because the lease rent received was from commercial utilisation of the property. The Hon'ble Calcutta High Court enunciated the following principles in this respect :

"(1) In order to be a business income within the meaning of section 10 there must be evidence of exploitation of a commercial asset. (2) Exploitation of a commercial asset does not necessarily mean exploitation by the assessee himself at all material times. The assessee may temporarily cause it to be exploited by another person against payment of consideration and for this purpose may also execute a lease for a fixed period even with clauses of option to renew. (3) But in order that the income derived from the lease may be taxable under section 10 it must be shown that the lessor's intention was that during the period of the lease the asset leased out must remain and be treated as a commercial asset and exploited as such. (4) This intention of the lessor referred to above has to be ascertained from the cumulative effect of all the terms of the lease and other material circumstances."

6.4 We agree with the learned counsel of the appellant that there are a lot of similarities in both the purpose as well as the activities concerning the running of a hotel and that of shopping mall. Indeed both malls and hotels constitute building or group of buildings providing accommodation for commercial use thereof. In the management of both hotels and shopping malls the predominant activity is commercial exploitation of the property. We feel that there is a lot of sense in the contention of the learned counsel of the appellant that just as utilisation of accommodation for providing customers with board and lodging is a commercial activity, utilisation of space for providing shopping facilities to customers is also a commercial activity. So applying the above principles laid down by the court the irresistible conclusion would be that the income derived by the assessee from the shopping malls/business centres is to be assessed as business income.

6.5 In the case of Saptarshi Services Ltd. (supra), the Hon'ble Gujarat High Court summarily dismissed the appeal of the revenue against the decision of the Tribunal that the income from developing the property as business centre constitutes business income. The decision of the Tribunal is based on the finding that the assessee is providing a number of services, e.g. having an EPABX machine facilitating telephone services to the occupants of the business centre, services of lift, services of receptionists, secretarial services, data processing, conference room, etc. Thus what the assessee is providing in reality happens to be a working place along with the aforesaid facilities. It is apparent that the various services and facilities provided by the present assessee are very similar in nature. Therefore, it can be justifiably inferred that here too the assessee is actually providing a working place for doing business with the attendant facilities. In this view of the matter, the irresistible conclusion is that what the appellant has earned is business income and the same should be assessed under the head of 'Profits and gains from business and profession'.

6.6 In the case of Kongarar Spinners (P.) Ltd. (supra), the Hon'ble Madras High Court held that only letting out of a property simpliciter without anything more will fall under the category income from house property. But where the assessee is already running a factory and has built another factory and gives it on rent for running it, it is not a case of letting out the property simpliciter. From the nature of the services provided by the appellant coupled with some of the provisions of the agreements (notably the one regarding denial of any kind of right to the user) it can be said with certainty that the instant case also is not one of letting out of the property simpliciter.

6.7 The revenue relied heavily on the decision of the Hon'ble Supreme Court in the case of Shambhu Investment (P.) Ltd. (supra). The said judgment consists only of the operative portion, affirming the decision of the Hon'ble Calcutta High Court in CIT v. Shambhu Investment (P.) Ltd. [2000] 249 ITR 47 . In the said decision the Calcutta High Court observed:

"Taking a sum total of the aforesaid decisions it clearly appears that merely because income is attached to any immovable property that cannot be the sole factor for assessment of such income as income from property. What has to be seen is what was the primary object of the assessee while exploiting the property. If it is found applying such test that the main intention is for letting out the property or any portion thereof the same must be considered as rental income or income from property. In case it is found that the main intention is to exploit the immovable property by way of complex commercial activities in that event it must be held as business income."

Clearly, in the instant case the primary object of the assessee is to earn income by commercial exploitation of the property. From the planning stage and arranging finance for its investments, every subsequent activity of the assessee has been directed towards developing the properties as shopping malls/business centres and taking up the business of the management of the same. The way the agreements have been drafted gives ample evidence of such intention of the assessee. The fact that the Apex Court held that the income earned by Shambhu Investment Pvt. Ltd. is assessable as property income has no relevance in the facts and circumstances of the present case. Because in that case the facts showed that the main intention was to earn rental income. That was why the entire cost of the property was recovered from the tenants by way of interest-free advance. In the instant case, on the other hand, the assessee had taken bank loans to finance his projects like any other businessman. As discussed hereinabove, every action of the present assessee appears to be with the sole object of commercial exploitation of the premises.

6.8 After carefully analysing the facts of the instant case, and following the consensus of judicial opinion on the issue, our considered view is that, the mere fact that the income is attached to immovable property, cannot be the sole criterion for assessment of such income as income from house property. It is necessary to dig further to find out what is the primary object of the assessee while exploiting the property. If it is found, that the main intention is for simply letting out of property or any portion thereof, the resultant income must be assessed as income from house property. If, on the other hand, the main intention is found to be the exploitation of the immovable property by way of commercial activities, then the resultant income must be held as business income. In the instant case, we found that services rendered by the assessee were the result of its activities carried on continuously in an organized manner with a set purpose and with a view to earn profit. Hence, all these activities are in the nature of commercial activities. Accordingly we hold that the income derived by the assessee from shopping malls/business centres is to be assessed as business income and not as income from house property.

7. The appellant has prayed for admission of the following additional ground :—

"That on the facts and in the circumstances of the case the learned CIT Kolkata-III erred in wrongly assuming jurisdiction under section 263 of the Income-tax Act, 1961, and hence, the order passed by him under the said section is bad in law and a nullity."

7.1 The learned Departmental Representative did not seriously oppose the admission of the Additional Ground. Clearly the Additional Ground relates to a legal issue that has arisen from the facts, which are on record. Keeping in view the provisions of rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 and the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. v. CIT [1998] 229 ITR 383 , we deem it proper to admit this Ground.

7.2 As may be noticed, in the additional ground the appellant has challenged the legal validity of the assumption of jurisdiction by the CIT under section 263 of the Act. The learned counsel of the assessee submitted that that if on any issue two views are possible, the Commissioner cannot substitute the view of the Assessing Officer by imposing his own through assumption of jurisdiction under section 263, merely because the view taken by the Assessing Officer would result in loss of revenue. Unless there is infirmity in the order of the Assessing Officer resulting in loss of revenue, no order can be revised by taking recourse to section 263. He submitted that having regard to the facts of the case and the ratio of the various decisions referred to earlier, the view that the income from shopping malls/business centres are assessable as business income is also not only quite possible, but, in fact, the more appropriate view. Referring to the decision of the Cuttack Bench of the Tribunal in the case of T.K. International Ltd. v. Asstt. CIT [2005] 275 ITR (AT) 101 he submitted that section 263 of the Act does not visualise a case of substitution of judgment of the Commissioner for that of the Assessing Officer who passed the order, unless the decision is held to be erroneous. Where the Assessing Officer has exercised the quasi-judicial powers vested in him in accordance with the law and arrived at a conclusion such a conclusion cannot be termed to be erroneous, simply because the Commissioner does not feel satisfied with the conclusion. In such a case the fact that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement namely that the order is erroneous is absent. In order to clothe the Commissioner with the power of exercising jurisdiction under section 263, an order has to be both erroneous as well as prejudicial to the interest of revenue. The learned counsel also relied on the decision of the Kolkata Bench of the Tribunal in the case of J.K. Industries Ltd. v. Asstt. CIT [2006] 283 ITR (AT) 101 to argue that merely because it results in loss of revenue, the Commissioner cannot revise an order, unless he proves that the order resulting in such loss was also erroneous. The proceedings under section 263 can only be invoked if the basis adopted by the Assessing Officer is patently wrong or the deduction or relief was allowed in contravention of the statutory provisions. On any issue where more than one view or course are permissible, and the Assessing Officer follows one of the permissible views, the order of the Assessing Officer cannot be held to be erroneous unless the view or course adopted by the Assessing Officer is unsustainable in law. The learned counsel also referred to the decisions of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 , the ITAT, Chennai in the case of First Leasing Co. of India Ltd. v. Asstt. CIT [2001] 250 ITR (AT) 1 (SB) and the Gujarat High Court in the case of CIT v. Mehsana District Co-operative Milk Producers Union Ltd. [2003] 263 ITR 645 in this connection. Relying on the judgment of the Hon'ble Gauhati High Court, in the case of Bongaigaon Refinery & Petrochemicals Ltd. v. Union of India [2006] 287 ITR 120 he contended that the jurisdiction exercisable under section 263 of the Act being supervisory in nature, permitting suo motu review of any assessment already made, the statutorily enjoined sanctions circumscribing it have to be rigorously construed. The learned counsel further submitted that the assessment order would reveal that in the instant case the assessee furnished all the relevant documents and did give necessary explanation regarding its claim that income from shopping malls/business centres is assessable as business income. By its letter dated 30-9-2003 the assessee explained to the Assessing Officer that during the relevant year of account it shifted its business focus from textile trading to mall management. On the other hand, it is apparent from the order under appeal, purportedly passed under section 263 of the Act that the Commissioner did not base her decision to revise the assessment made under section 143(3), on any specific material on record. She was merely influenced by the Supreme Court judgment in the case of Shambhu Investment (P.) Ltd. (supra). Referring to the decision of the Madhya Pradesh High Court in the case of Commissioner Of Income-Tax v. (1) Associated Food Products P. Ltd. [2006] 280 ITR 377 the learned counsel contended that the exercise of power under suo motu revision is not merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion on the basis of adequate material that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interests of the Revenue. The expression "prejudicial to the interests of the Revenue" applies only to an order that has not been passed in consonance with the principles of law which has affected realisation of lawful revenue by the State. Shri Tulsiyan submitted that no material has been brought on record to show that the order under section 143(3) was not passed in consonance with the principles of law and that has affected the realisation of lawful revenue by the State.

8. The learned Departmental Representative submitted that the assessment order of the Assessing Officer is cryptic. It is based on incorrect assumption of fact and law. Hence the assessment order is erroneous and prejudicial to the interest of revenue. In reply, the learned counsel for the assessee, relying on the decision of the ITAT, Mumbai in the case of Dhruv N. Shah v. Dy. CIT [2005] 273 ITR (AT) 59 (TM) submitted that even in cases where the Assessing Officer had not elaborated the reason for his taking a particular view in the body of the order, still the assumption of jurisdiction under section 263 by the Commissioner would be unsustainable in law, unless there is material to show that the view so taken is erroneous insofar it is prejudicial to the interest of revenue. The Tribunal in the said case held that where the assessee had given a detailed explanation regarding his claim and the Assessing Officer passed an order in which he did not make an elaborate discussion, the Commissioner would not have the power to exercise revisionary jurisdiction under section 263.

9. We have carefully considered the relevant facts, the arguments advanced and the decisions cited. In our view, the Hon'ble Supreme Court very succinctly enunciated the principles of law on this issue in the case of Malabar Industrial Co. Ltd. (supra). The Court observed :

"A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the Revenue. The Commissioner has to he satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law."

On an analysis of the relevant facts we have to hold that this is a case where conceivably two views are possible. We have also to hold that the view taken by the Assessing Officer cannot be considered as unsustainable in law. As a matter of fact, on merits, we have already held that the income derived by the assessee from shopping malls/business centres is required be assessed as business income. Under the circumstances we hold that assumption of jurisdiction under section 263 of the Act by the learned Commissioner of Income-tax is without the sanction of law. The order under section 263 is accordingly cancelled.

9.1 In the result, the appeal of the assessee is allowed.

10. to 19. [These paras are not reproduced here as they involved minor issues.]

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