DCIT, Pune V. Magarpatta Township Development & Construction Co Ltd., Pune

ITA 1130/PUN/2012

• Counselvise Citation: 113024514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADARSH KUMAR MODI
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1130/PN/2012 (ASSESSMENT YEAR : 2008-09) DY. COMMISSIONER OF INCOME TAX CIRCLE 3, PUNE . APPELLANT VS. MAGARPATTA TOWNSHIP DEVELOPMENT AND CONSTRUCTION COMPANY LTD., 13 MEGA SPACE, SHOLAPUR BAZAR ROAD, OFF EAST STREET, CAMP, PUNE 411 001 PAN : AABCM2461K . RESPONDENT APPELLANT BY : MR. ADARSH KUMAR MODI RESPONDENT BY : MR. NIKHIL PATHAK DATE OF HEARING : 30-07-2013 DATE OF PRONOUNCEMENT : 30-07-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE DATED 30.01.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 30.12.2010 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE SOLITARY GRIEVANCE IS AGA INST THE ACTION OF THE CIT(A) IN ACCEPTING THE ASSESSEES PLEA THAT TH E EARNING OF LICENSE FEE FROM LETTING OUT OF PREMISES OF THE CY BER CITY IS ASSESSABLE AS BUSINESS INCOME AND NOT AS INCOME UND ER THE HEAD HOUSE PROPERTY, AS TAKEN BY THE ASSESSING OFFICER . ITA NO.1130/PN/2012 A.Y. 2008-09 3. IN BRIEF, THE FACTS ARE THAT THE RESPONDENT-ASSE SSEE IS A COMPANY WHICH HAS UNDERTAKEN DEVELOPMENT OF INTEGRA TED TOWNSHIP KNOWN AS MAGARPATTA CITY AT HADAPSAR, PUNE. THE D EVELOPMENT OF THE TOWNSHIP INCLUDED IT PARKS, COMMERCIAL COMPLEXE S, SCHOOLS AND RESIDENTIAL COMPLEXES, ETC.. THE BUILDING OF THE IT PARK DEVELOPED BY THE ASSESSEE IS OWNED BY THE ASSESSEE. THE CYBER C ITY, CONTAINING BUILDINGS IN THE IT PARK, WAS GIVEN FOR USE TO VARI OUS SOFTWARE/OTHER COMPANIES AND ASSESSEE EARNED LICENSE FEE IN RETURN . THE ASSESSEE EXPLAINED THAT ITS ACT OF RENTING OUT THE PREMISES IN CYBER CITY IS NOT A SIMPLE LEASE AS IT WAS PROVIDING A PACKAGE OF SERVICES TO ITS LICENSEES ALONG WITH MAKING THE PREMISES AVAILABLE FOR USE. THE EARNING OF THE LICENSE FEE WAS CLAIMED TO BE TAXABL E AS BUSINESS INCOME. THE ASSESSING OFFICER, HOWEVER, WAS OF THE VIEW THAT THE INCOME ON ACCOUNT OF SUCH LICENSE FEE IS TO BE TREA TED AS INCOME FROM HOUSE PROPERTY AS IT WAS EARNED FROM RENTING OF PREMISES. THE CIT(A) HAS ACCEPTED THE PLEA OF THE ASSESSEE FO LLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 DATED 29.03.2011 ON IDENTICAL ISSUE. T HE ISSUE WAS CARRIED IN APPEAL BY THE REVENUE BEFORE THE TRIBUNA L VIDE ITA NO.822/PN/2011 DATED 18.09.2012, THE TRIBUNAL H AS UPHELD THE ORDER OF THE CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE. 4. IT WAS ALSO A COMMON POINT BETWEEN THE PARTIES T HAT THE DISPUTE IN THE PRESENT APPEAL STANDS ON IDENTICAL F OOTING TO THE ISSUE CONSIDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CA SE FOR ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 18.09.2012 (SUPRA), A COPY OF THE SAID ORDER HAS ALSO BEEN PLACED ON RECO RD AT THE TIME OF HEARING BEFORE US. ITA NO.1130/PN/2012 A.Y. 2008-09 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL STANDS AN D ALSO THE PRECEDENT IN THE ASSESSEES OWN CASE DATED 18.09.20 12 (SUPRA). THE RELEVANT OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL DATED 18.09.2012 (SUPRA) IS AS UNDER :- IN THIS BACKGROUND, IT IS CLEAR THAT ASSESSEE HAS PROVIDED VARIOUS COMPLEX INTEGRATED SERVICES AS MENTIONED IN SCHEDULE-II TO THE LEASE AGREEMENT WITH THE I.T. COMPANY. THE SERV ICES ARE VAST AND THE AMENITIES PROVIDED WERE IN THE NATURE OF PL ANT AND MACHINERY AS CONTENDED BY THE ASSESSEE AND IT HAS B EEN ESTABLISHED BY THE CLAUSES OF THE AGREEMENTS THAT T HE COST OF PROVIDING THESE SERVICES WAS ALSO INCLUDED IN THE L EASE RENT OF RS.14.30 PER SQ.FT.. THE ASSESSEE ALSO CLARIFIED TH AT COST INVOLVED IN THE SERVICES PROVIDED TO THE PARTICULAR COMPANY I.E ., EXL SERVICES.COM WAS RS.2.83 CRORES WHICH WAS ALMOST 40 % OF THE LAND AND BUILDING COST OF THAT TOWER. BY NO STRETCH OF I MAGINATION SUCH EXTENSIVE AND SPECIALIZED SERVICES WHICH COULD ONLY BE UTILIZED BY THE IT/SOFTWARE/BPOS BUSINESSES TO BE LOCATED IN TH E I.T. PART COULD BE TREATED AS FORMING PART OF INCOME FROM HOU SE PROPERTY. IT IS CERTAINLY A CONSTITUTION OF ORGANIZED STRUCTURE FOR CARRYING OUT BUSINESS ACTIVITIES. SECTION 22 PROVIDES ONLY FOR R ENTAL INCOME OUT OF BUILDING OR LAND APPURTENANT THERETO, WHEREAS IN THE CASE BEFORE US, COMPLEX AND VARIED SERVICES PROVIDED AND THE HU GE INVESTMENT THEREIN WERE IN THE NATURE OF PLANT AND MACHINERY W HICH COULD BE INCLUDED WITHIN THE EXPRESSION BUILDING OR LAND APP URTENANT THERETO. THUS, THE ASSESSEE HAS CONDUCTED SYSTEMATIC ACTIVIT Y TO EARN PROFIT AND ACCORDINGLY INCOME WAS TO BE ASSESSED AS INCOME FROM BUSINESS. IN VIEW OF THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, AND ANALYSIS OF VARIOUS CLAUSES AND SCHED ULE-II OF THE AGREEMENT ENTERED WITH THE I.T. COMPANY, CIT(A) WAS JUSTIFIED IN HOLDING THAT IN ASSESSEES CASE THE SAID INCOME WAS TO BE ASSESSED AS BUSINESS INCOME. THIS REASONED FACTUAL FINDING N EED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6. FOLLOWING THE AFORESAID DISCUSSION MADE BY THE T RIBUNAL IN THE ASSESSEES OWN CASE ON AN IDENTICAL ISSUE, WE HEREB Y AFFIRM THE ORDER OF THE CIT(A) IN HOLDING THAT THE INCOME EARN ED BY WAY OF LICENSE FEE ON LETTING OUT OF THE PREMISES CYBER C ITY IS LIABLE TO BE ASSESSED AS BUSINESS INCOME AND NOT UNDER THE HEA D HOUSE PROPERTY AS HELD BY THE ASSESSING OFFICER. THUS, F OLLOWING THE ITA NO.1130/PN/2012 A.Y. 2008-09 AFORESAID PRECEDENT, THE PRESENT APPEAL OF THE REVE NUE IS LIABLE TO BE DISMISSED. WE HOLD SO. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ABOVE DECISION WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF BOTH THE PARTIES AT THE TIME OF CONCLUS ION OF THE HEARING ON 30 TH JULY, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH JULY, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE