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"That M/s. Rentworks India Pvt. Ltd. provided some Racking systems as per specific request of H.L.L. It is true that the warehouse used by the H.L.L. consists of Racking systems containing G+6 Racking arrangements. But, these Racking Systems are not owned by the assessee. Those Racking systems are taken on lease (hire) from the M/s. Racking Works India Pvt. Ltd. Mumbai and whatever bills raised by them (hire charges) are being reimbursed by H.L.L. The assessee merely acts as a mediator between M/s. Racking Works India Ltd. (the owner of equipment) and the tenant-HLL. The assessee neither derives profit nor incurring loss in arranging racking systems. Further, lease agreement entered by the assessee with H.L.L. does not mention any thing about the Racking systems. No receipts were credited to the P & L account on account of lease rentals from Racks. In any case the assessee being neither owner of Racking systems nor lessor of racks, the role of assessee in this transaction is nominal.

3. The Assessing Officer held that it is clear that the assessee acted as mediator between the Racks India Ltd. and HLL for letting the racks on hire. Irrespective of role played by the assessee in these transactions, as the income credited to profit and loss account being the lease rentals for the civil structure (building), the income is liable to tax under the head 'Income from House Property' only. The A.O. ITA.No.1230 & 1298/Hyd/2013 M/s. Egwood Industries (P) Ltd. Hyderabad further observed that the assessee itself credited the rental income under the head 'Other Income' instead of under the head 'Income from business' in the accounts prepared under the Companies Act. The A.O. pointed out that this act of the assessee in treating the rental income as income from 'Other Sources' proves that there was no business activity. Therefore, the A.O. concluded that the assessee as a landlord merely let out the property and the assessee is not rendering other services such as loading or unloading for considering it as business income. The A.O. opined that it was clear that the assessee as a owner of building was only exploiting the property as a owner by leasing out the same and realizing income by way of rent. The A.O. observed that the fact that one of the object of the company was to construct and let out of godown or the land was taken on lease or that the third party (Racking Works) provided Racking systems to the lessee does not help the assessee's case and involvement of the assessee in arranging the Rack systems and also the role played by it for regular collection of rents does not affect the nature of rent received by it. Hence, A.O. held such rental income derived out of letting the godown is liable to be assessed under the head 'Income from House Property' only. Accordingly, the lease rentals are brought to tax under the head 'House Property' only. The A.O. held that rent of Rs.74,99,916/- and Rs.4,32,010/- received towards main building and green belt respectively totaling to Rs.79,31,926/- pertains to civil structures is brought to tax under the head 'Income from House Property'. The A.O. further observed as follows :

ITA.No.1230 & 1298/Hyd/2013 M/s. Egwood Industries (P) Ltd. Hyderabad "Without prejudice the above view, if the assessee still insists upon that lease rentals be brought to tax under the head 'Income from Business or Profession', and if any judicial authority upheld such view, the amounts paid (routed through the assessee) to M/s. Rack India Pvt. Ltd. towards lease rents of Racking systems are liable for disallowance u/s. 40(a)(ia) as the assessee did not deduct tax at source under section 194C/194I".