DCIT, Circle-10(1), Hyd, Hyderabad V. Vijay Infotech Venutres, Sec'bad, Secunderabad

ITA 1212/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5884 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 15-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Business income; Depreciation; Business expenditure; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1. 1199/H/15 2011-12 VIJAY INFOTECH VENTURES, SECUNDERABAD. PAN AAFFV6464Q COMMISSIONER OF INCOME-TAX (OSD), RANGE- 10, HYDERABAD 2. 1200/H/15 2012-13 -DO- -DO- 3. 1211/H/15 2011-12 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 10(1), HYD. VIJAY INFOTECH VENTURES, SECUNDERABAD. PAN AAFFV6464Q 4 1212/H/15 2012-13 -DO- -DO- ASSESSEE BY : SHRI LAXMINIWAS SHARMA REVENUE BY : SMT. U. MINICHANDRAN DATE OF HEARING : 21-11-2016 DATE OF PRONOUNCEMENT : 30-12-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THESE APPEALS ARE CROSS APPEALS FILED BY THE ASSES SEE AS WELL AS REVENUE DIRECTED AGAINST THE ORDERS OF CIT(A)- VI, HYDERABAD, DATED 15/07/2015 FOR AYS 2011-12 AND 2012-13. AS ID ENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE CLUBBED AN D HEARD TOGETHER, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE O F CONVENIENCE. 2. TO DISPOSE OF THESE APPEALS, WE REFER TO THE FAC TS FROM AY 2011-12 BEING ITA NO. 1199/H/15. 2 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FIRM WHICH DERIVES INCOME FROM OWNING A SOFTWARE PARK AT KONDA PUR, HYDERABAD FILED ITS RETURN OF INCOME ON 22/07/2011, DECLARING LOSS OF RS. 2,98,73,840/-. THE AO MADE AN ASSESSMENT ON A TOTAL INCOME OF RS. 2,28,73,150/- BY DETERMINING THE RECEIPTS TOWARDS L EASE RENTALS AS INCOME FROM HOUSE PROPERTY AND DISALLOWED DEPRECI ATION AND OTHER BUSINESS EXPENDITURE. 3.1 DURING SCRUTINY PROCEEDING IT WAS SEEN THAT TH E ASSESSEE-FIRM HAD SHOWN A RECEIPT OF RS.16,30,06,552/- TOWARDS LE ASE RENTALS FROM SOFTWARE TECHNOLOGY PARK, RS.1,16,81,004/- TOWARDS OPERATIONS AND MAINTENANCE OF THE SAME, BESIDES OTHER INCOME OF RS .49,24,626/-. IT CLAIMED INTEREST EXPENSES OF RS.10,61,00,409/- ON T ERM LOAN, RS. 7,63,60,6.48/- TOWARDS DEPRECIATION, RS.47,45,790/- TOWARDS SECURITY EXPENSES, RS.54,23,712/- TOWARDS FINANCE PROCESSING CHARGES AND RS.46,01,863/- TOWARDS ANNUAL MAINTENANCE CHARGES B ESIDES OTHER EXPENSES. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT, AS PER THE SCHEDULER SYSTEM OF TAXATION, THE ANNUAL VALUE OF A HOUSE PROPERTY WAS LIABLE TO BE T AXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. CONSEQUENTLY, HE COMPUTED THE INCOME ACCORDINGLY AND, DID NOT ALLOW DEDUCTION FOR DEPRECIATION OF RS. 7,63,60,648/ - AND OTHER EXPENSES CLAIMED IN TH E PROFIT AND LOSS ACCOUNT. HE CHARGED RENTAL INCOME UNDER THE HEAD 'I NCOME FROM HOUSE PROPERTY'. FOR THE REASONS DISCUSSED IN THE A SSESSMENT ORDER (REFER PARA 7), HE ASSESSED THE RECEIPT OF MAINTENA NCE CHARGES OF RS.1,16,81,004/- AND INTEREST INCOME OF RS.45,38,42 7/- UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 4. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFF ICER, THE ASSESSEE HAS PREFERRED THE APPEAL BEFORE THE CIT(A ). 5. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE ISS UE WAS COVERED IN ASSESSEES FAVOUR BY THE DECISION OF THE ITAT IN ITS OWN CASE FOR 3 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD AYS 2008-09, 2009-10 AND 2010-11. THE ASSESSEE ALSO RELIED ON VARIOUS DECISIONS OF ITAT, WHICH WERE MENTIONED AT PAGE 4 BY THE CIT(A) IN HIS ORDER AND ALSO THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTM ENTS LTD. VS. CIT TO SUBMIT THAT THE INCOME/LOSS SHOULD BE COMPUTED U NDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT THE DECISION WAS RENDERED BY THE ITAT ON CONSIDERATION OF THE FACT THAT THE ASSESSEE WAS MAINTAINING AND O PERATING AN INDUSTRIAL PARK WHICH HAD BEEN APPROVED BY THE COMP ETENT AUTHORITY FOR PURPOSES OF DEDUCTION U/S 80-IA OF THE ACT. THE APPROVAL TO THE PARK HAD BEEN ACCORDED TO THE DEVELOPER, NAMELY, ME ENAKSHI INFRASTRUCTURE PVT. LTD. FROM WHOM THE ASSESSEE HAD ACQUIRED IT AND THE TRANSFER HAD ALSO BEEN APPROVED BY THE COMPETEN T AUTHORITY. HE OBSERVED THAT THE ARGUMENT OF THE ASSESSEE BEFORE T HE HON'BLE ITAT WAS THAT, SINCE THE DEDUCTION U/S 80-IA IS AVAILABL E IN RESPECT OF THE PROFIT DERIVED FROM AN ELIGIBLE BUSINESS AND, SINCE INDUSTRIAL PARK IS TREATED AS ELIGIBLE BUSINESS, THE PROFIT/LOSS FROM THE SAME IS REQUIRED TO BE COMPUTED UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION'. THAT LOGIC HAD FOUND FAVOUR WITH THE H ON'BLE ITAT. IT IS, HOWEVER, NOTICED THAT THE INITIAL APPROVAL GIVEN TO M/S. MEENAKSHI INFRASTRUCTURE PRIVATE LIMITED STANDS RESCINDED WIT H EFFECT FROM THE DATE IT WAS GIVEN, I.E. 31.08.2006. THE APPROVAL WA S RESCINDED BECAUSE 'THE UNDERTAKING HAS FAILED TO ADHERE TO TH E TERMS AND CONDITIONS AS LAID DOWN IN THE INDUSTRIAL PARK SCHE ME AND BY THE CENTRAL GOVERNMENT VIDE THE MINISTRY OF FINANCE, DE PARTMENT OF REVENUE'S NOTIFICATION NUMBER S.O.NO.3466, DATED TH E 21 ST AUGUST, 2006 PUBLISHED IN THE GAZETTE 01. INDIA, PART II, S ECTION 3, SUB- SECTION (II) AND MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION'S APPROVAL LETTER N O.15/12/2006- ID DATED 10'' APRIL, 2007' (REF. CBDT NOTIFICATION NO. 37/2015, DT.10.04.2015). HENCE, ACCORDING TO HIM, ANY ARGUME NT TO THE EFFECT 4 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD THAT THE INCOME SHOULD BE TREATED AS PROFITS FROM B USINESS BECAUSE THE UNDERTAKING HAD BEEN APPROVED BY THE COMPETENT AUTHORITY FOR PURPOSES OF DEDUCTION U/S 80IA(4) [WHICH MAY HAVE F OUND FAVOUR IN THE PAST] DOES NOT HOLD GOOD ANYMORE. FOR THE SAME REASON, HE HELD THAT THE DECISION OF THE HON'BLE ITAT IN ASSESSEE'S FAVOUR IN THE PAST IS NOT APPLICABLE. 6.1 AS REGARDS THE OTHER DECISIONS RELIED ON BY TH E ASSESSEE, THE CIT(A) OBSERVED THAT THE COMMON RATIO OF THOSE DECI SIONS IS THAT, IF THE MAIN OBJECT OF THE COMPANY HOLDING A PROPERTY I S TO LEASE IT OUT AND EARN RENTAL INCOME, SUCH INCOME MAY BE TREATED AS PROFIT OF BUSINESS, THE ASSESSEE HAS CITED THESE DECISIONS BU T HAS NOT SHOWN THAT ITS MAIN OBJECT IS THAT UNLESS THE FACTS OF TH E CASE ARE SHOWN TO BE IDENTICAL TO THE FACTS ON CONSIDERATION OF WHICH THOSE DECISIONS WERE RENDERED, THE RATIO OF THOSE DECISIONS CANNOT BE APPLIED AND BENEFIT OF THE SAME CANNOT BE GIVEN TO THE ASSESSEE . 6.2 THE CIT(A) OBSERVED THAT THE GENERAL PROPOSITI ON OF THE LAW IS THAT, IN SCHEDULER SYSTEM OF COMPUTATION OF INCOME, HEADS OF INCOME ARE MUTUALLY EXCLUSIVE AND, IF AN INCOME CAN BE COM PUTED UNDER A SPECIFIED HEAD, IT MUST BE COMPUTE UNDER THAT HEAD . INCOME FROM HOUSE PROPERTY IS A SPECIFIED HEAD OF INCOME AND IT TAKES WITHIN ITS AMBIT 'THE ANNUAL VALUE OF PROPERTY CONSISTING OF A NY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUP Y FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON B Y HIM' (REF. SECTION 22 OF THE I.T. ACT). THE RENTAL INCOME EARN ED BY THE ASSESSEE BY LEASING OUT THE PREMISES IN QUESTION FALLS SQUAR ELY UNDER THAT HEAD. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND THAT INCOME SHOULD BE TREATED AS PROFITS FROM BUSINESS ON THE G ROUNDS OF CONSISTENCY. THAT ARGUMENT IS NOT ACCEPTABLE BECAUS E, AS DISCUSSED ABOVE, THE DECISION OF THE HON'BLE ITAT IN THIS CAS E IN THE PAST IS NOT APPLICABLE ANY MORE IN VIEW OF THE MATERIAL CHANGE IN THE RELEVANT 5 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD FACTS AND THE OTHER EXCEPTIONAL CONSIDERATION FOR W HICH THE INCOME/LOSS COULD BE COMPUTED UNDER THE HEAD 'PROFI T AND GAINS OF BUSINESS OR PROFESSION' IS NOT SHOWN TO APPLY IN TH IS CASE. IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) HELD THAT THE I NCOME IS CHARGEABLE AS 'INCOME FROM HOUSE PROPERTY' AND CONF IRMED THE AOS ACTION. 6.3 AS REGARDS THE RECEIPT BY WAY OF OPERATION AND MAINTENANCE CHARGES, CIT(A) OBSERVED THAT THE SAME MAY NOT BE P ART OF THE RENTAL INCOME PER SE, MORE SO BECAUSE THE ASSESSEE MAY BE RENDERING SPECIFIC SERVICES TO THE LESSEES. IT WOULD THEREFOR E, BE APPROPRIATE TO TREAT SUCH RECEIPT AS RECEIPT OF BUSINESS AND ASSES SEE THE INCOME/LOSS ARISING THEREFROM AFTER MAKING ALLOWANC E FOR THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR PUR POSES OF PROVISION OF SUCH SERVICES. IT NEEDS TO BE CLARIFIED THAT DED UCTION FOR DEPRECIATION CANNOT BE ALLOWED BECAUSE THAT RELATES TO OWNERSHIP OF THE ASSET AND THE INCOME ATTRIBUTABLE TO THE OWNERS HIP, I.E. RENT IS TO BE ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPE RTY' AFTER ALLOWING FLAT DEDUCTION OF 30% OF THE ANNUAL VALUE. IT ALSO NEEDS TO BE CLARIFIED THAT THE FLAT, DEDUCTION U/S 24 TAKES CAR E OF REPAIRS AND MAINTENANCE OF THE PREMISES AND, HENCE, ANY EXPENDI TURE OF THAT NATURE SHOULD NOT BE ALLOWED AS DEDUCTION SEPARATEL Y AGAINST THE RECEIPT BY WAY OF OPERATION AND MAINTENANCE. IT IS ONLY THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR PUR POSES OF RENDERING SPECIFIC SERVICES TO THE LESSEES IN COURSE OF THEIR OCCUPATION OF THE PREMISES THAT SHOULD BE ALLOWED AS DEDUCTION AGAINS T SUCH RECEIPT. HE, THEREFORE, DIRECTED THE AO TO COMPUTE PROFIT AN D GAINS OF BUSINESS FOLLOWING HIS OBSERVATIONS. 7. AGGRIEVED BY THE ORDER OF THE CIT(A) BOTH ASSESS EE AS WELL AS REVENUE ARE IN APPEAL BEFORE US RAISING THE FOLLOWI NG GROUNDS OF APPEAL, WHICH ARE COMMON IN BOTH THE YEARS UNDER CO NSIDERATION: 6 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD ASSESSEES GROUNDS OF APPEAL: 1. THE LEARNED CIT (A)-VI ERRED IN FACTS AND LAW WH ILE PASSING ASSESSMENT ORDER. 2. THE LEARNED CIT (A)-VI ERRED IN MAKING THE ASSES SMENT UNDER HEAD INCOME FROM HOUSE PROPERTY WHEN THE INCOME IS FROM BUSINESS AND DEPRECIATION & OTHER EXPENDITURE ARE A LLOWABLE. 3. THE LEARNED CIT (A)-VI ERRED IN NOT APPRECIATING THAT OPERATION AND MAINTENANCE OF INFRASTRUCTURE PROJECT IS ELIGIB LE FOR DEPRECIATION AND OTHER EXPENSES. 4. THE LEARNED CIT (A)-VI ERRED IN IGNORING THE ORD ER PASSED BY HONORABLE ITAT ON SIMILAR ISSUES IN ASSESSES OWN CA SE FOR A Y 08-09, 09-10 & 10-11 ON THE GROUNDS THAT THIS DECIS ION OF THE ITAT IS NOT APPLICABLE ANYMORE DUE TO THE FACT THAT 80-IA DEDUCTION HAS BEEN WITHDRAWN AND CIT(A) ERRED IN NO T CONSIDEREING THE CASE LAW SUBMITTED IN CASE. 5. THE LEARNED CIT (A)-VI ERRED IN SEPARATING THE R ECEIPTS FROM OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE PRO JECT WITHOUT TAKING INTO CONSIDERATION THAT THESE SERVICES ARE R ENDERED ONLY IN CONNECTION WITH THE BUSINESS OF LETTING OUT. 6. THE LEARNED CIT (A)-VI ERRED IN NOT CONSIDERING THE MAIN OBJECT OF THE ASSESSEE IS TO LEASE OUT THE PROPERTY TO EARN RENTAL INCOME AS STATED IN ITS PARTNERSHIP DEED. 7. FOR THESE & OTHER GROUND WHICH MAY BE RAISED DUR ING OR BEFORE THE APPEAL IS HEARD, IT IS PRAYED THAT THE RELIEF B E GRANTED. 7.1 THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROU ND BEFORE US, WHICH IS AS UNDER: CIT(A) ERRED IN IGNORING THE PRINCIPLE OF CONSISTEN CY WHEREIN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AS INC OME FROM BUSINESS FROM AY 2006-07 TO AY 2010-11. REVENUES GROUNDS OF APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, W HETHER THE CIT(A) IS CORRECT IN HOLDING THAT THE INCOME DERIVE D FROM OPERATION AND MAINTENANCE IS ASSESSABLE UNDER THE H EAD 'INCOME FROM BUSINESS WHEN THE A.O'S TREATMENT OF T HE INCOME EARNED FROM LETTING OUT, WHICH IS THE MAIN INCOME O F THE 7 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD ASSESSEE, AS INCOME FROM HOUSE PROPERTY HAS BEEN UP HELD BY THE CIT(A). 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, W HETHER THE CIT(A) HAS NOT ERRED IN TREATING THE INCIDENTAL INC OME AS 'INCOME FROM BUSINESS', WHILE HOLDING THE MAIN INCOME FROM LETTING OUT AS INCOME FROM 'HOUSE PROPERTY' AFTER REJECTING THE AS SESSEE'S CLAIM THAT IT IS ASSESSABLE AS 'INCOME FROM BUSINES S'. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 8. LD. AR SUBMITTED THAT UPTO AY 2010-11, THE INCOM E OF THE ASSESSEE WAS ASSESSED AS BUSINESS INCOME. THE ASSE SSEE IS IN THE SAME BUSINESS OF LETTING OUT THE PROPERTY AND THERE IS NO CHANGE IN THE METHOD OF OPERATION OF THE ASSESSEE. HE SUBMITT ED THAT IN THE AY 2008-09, 2009-10 AND 2010-11, THE DEPARTMENT RAISED SIMILAR ISSUE AND ALSO DENIED THE BENEFIT U/S 80IA. ASSESSEE CARR IED THE MATTER TO ITAT, THE ITAT HAS ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE FURTHER SUBMITTED THAT IN THE GIVEN AYS. 2011-12 AND 2012-13, THE ASSESSEE HAS CARRIED ON THE SAME ACTIVITY BUT DUE T O NON-COMPLIANCE OF TERMS OF APPROVAL FOR DEDUCTION U/S 80IA, THE MI NISTRY OF FINANCE HAS RESCINDED THE APPROVAL ACCORDINGLY, THE ASSESSE E ALSO NOT CLAIMED ANY BENEFIT. HE SUBMITTED THAT THESE FACTS WERE BROUGHT TO THE NOTICE OF CIT(A), WHO FAILED TO APPRECIATE THE FACTS IN THIS CASE AND ADJUDICATED THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT ELIGIBLE BUSINESS, HENCE, IT COULD BE ASSESSED UNDER THE HEA D INCOME FROM HOUSE PROPERTY. 8.1 LD. AR BROUGHT TO OUR NOTICE THE PARTNERSHIP DE ED IN WHICH THE OBJECTIVE CLAUSE OF THE PARTNERSHIP IS TO CARRY ON THE BUSINESS VENTURES IN SOFTWARE TECHNOLOGY PARKS, INDUSTRIAL P ARKS, ALL TYPES OF INFRASTRUCTURE DEVELOPMENT, OPERATING AND MAINTENAN CE (REFER PAGES 65-70 OF PAPER BOOK). HE SUBMITTED THAT THE ASSESSE E IS DOING BUSINESS OF LETTING THE SAID PROPERTY AND DOING ELI GIBLE BUSINESS. HE FURTHER SUBMITTED BEFORE US THE DECISIONS OF HONBL E SUPREME COURT IN THE CASE OF RAYALA CORPORATION PVT. LTD. VS. ACIT ( CIVIL APPEAL NO. 6437 OF 2016, DT. 11/08/16) AND M/S CHENNAI PROPERT IES & 8 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD INVESTMENTS LTD., (CIVIL APPEAL NO. 4494 OF 2004, D T. 09/04/2015) TO SUBMIT THAT WHEN THE ASSESSEE CARRIES ON THE ELIGIB LE BUSINESS, THE INCOME SHOULD BE ASSESSED ONLY AS BUSINESS INCOME N OT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 8.2 LD. AR FURTHER SUBMITTED THAT THE ASSESSEE WAS FOLLOWING THE ACTIVITIES CONSISTENTLY AND THE INCOME SHOULD BE AS SESSED AS BUSINESS INCOME AS THE ASSESSEE WAS FOLLOWING THE S AME ACTIVITIES CONSISTENTLY OVER THE YEARS. 9. LD. DR RELIED ON THE FINDINGS OF CIT(A) IN PARA 8 OF THE ORDER. HE SUBMITTED THAT IN CONSEQUENT TO RESCINDMENT OF A PPROVAL GRANTED TO CARRY ON THE OPERATION OF INDUSTRIAL PARK, THE A SSESSEE DOES NOT HAVE ANY OTHER BUSINESS, THE INCOME EARNED AND EXP ENDITURE SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURC ES. HE FURTHER RELIED ON THE ORDERS OF LOWER AUTHORITIES. 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ASSESSEE WAS RECEIVING LEASE RENTALS FROM SOFTWARE TECHNOLOGY PARK AND INCOME FROM OPERATIONS AND MAIN TENANCE OF SOFTWARE PARK. APART FROM RENT, IT HAS RECEIVED MAI NTENANCE AND INTEREST INCOME. ASSESSEE HAD TREATED THE RENTAL IN COME AND MAINTENANCE CHARGES AS BUSINESS INCOME. AO TREATED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AS THE SAME WA S CHARGED TO TAX BY FOLLOWING THE SCHEDULER SYSTEM OF TAXATION SPECIFIED IN THE INCOME TAX ACT. AO TREATED THE OTHER INCOME AS INCO ME FROM OTHERS SOURCES. LD. CIT(A) CONFIRMED THE SCHEDULER SYSTEM OF TAXATION BY OBSERVING THAT THE ASSESSEE WAS GETTING BENEFIT U/S 80IA IN THE EARLIER YEARS AND SUBSEQUENT TO RESCINDMENT OF APPROVAL TO CLAIM DEDUCTION U/S 80IA, HE CONSIDERED THAT THE ASSESSEE LOOSES TO BE ELIGIBLE UNDERTAKING. THE INCOME WAS TREATED AS PROFIT FROM BUSINESS BECAUSE THE UNDERTAKING WAS APPROVED BY COMPETENT AUTHORITY FOR THE PURPOSE OF DEDUCTION U/S 80IA. SUBSEQUENT TO RESCINDMENT OF APPROVAL, THE UNDERTAKING DOES NOT HOLD TO BE CARRYING ON ELIGIBL E BUSINESS. 9 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD 10.1 THE MUTE QUESTION BEFORE US IS WHETHER THE ACT IVITIES CARRIED ON BY THE ASSESSEE IS ELIGIBLE BUSINESS FOR THE PURPOS E OF TREATING THE PROFIT AS BUSINESS PROFIT OR NOT. THE ASSESSEE WA S CARRYING THE SAME ACTIVITIES OF LEASING THE BUILDING FOR SOFTWARE TEC HNOLOGY AND EARNING MAINTENANCE CHARGES BEFORE RESCINDMENT OF APPROVAL FOR DEDUCTION U/S 80IA AND LATER YEARS. THERE IS NO CHANGE IN THE ACTIVITIES DURING THE YEAR OF DEDUCTION U/S 80IA AND LATER YEARS. MER ELY, BECAUSE THE DEDUCTION U/S 80IA WITHDRAWN, WHETHER THE ACTIVITIE S CAN BE REGARDED AS DIFFERENT (?). LD. AR BROUGHT TO OUR NOTICE THE PARTNERSHIP DEED, AS PER WHICH, THE MAIN OBJECT OF RUNNING THE BUSINESS IS TO VENTURE IN SOFTWARE TECHNOLOGY PARKS, ALL NATURE OF REAL ESTAT E BUSINESS. IT IS EVIDENT FROM THE FINANCIAL STATEMENT OF THE ASSESSE E THAT THE MAIN INCOME IS FROM LEASING OUT OF THE PROPERTY AND RELA TED INCOME FROM MAINTENANCE OF THE PROPERTY. IN CASE, THE MAIN OBJE CT OF THE ASSESSEE IS TO LEASE OUT THE PROPERTY, THEN, IT CAN BE REGAR DED AS THE BUSINESS INCOME. THIS IS INFERRED FROM THE JUDGMENT OF THE H ONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMEN TS LTD. (SUPRA) AND RAYALA CORPORATION PVT. LTD. (SUPRA). THE ABOVE TWO CASES ARE RELATING TO COMPANY, WHEREAS THE CASE IN QUESTION, RELATES TO PARTNERSHIP FIRM. THE OBJECTS OF CREATING THE COMPA NY AND PARTNERSHIP FIRM ARE SIMILAR. HENCE, THE CONCLUSION CAN BE DRAW N THAT BOTH ARE CREATED TO CARRY ON THE BUSINESS OF LEASING OUT THE PROPERTIES TO MAKE PROFIT. IN OUR CONSIDERED VIEW, THE OBJECT OF RUNNI NG BUSINESS TO MAKE PROFIT BY LEASING OUT THE PROPERTY WILL BE CHARGED TO TAX ONLY UNDER THE HEAD INCOME FROM BUSINESS AND NOT INCOME FROM HOUS E PROPERTY. THE ASSESSEE HAS ESTABLISHED THE BUSINESS ONLY TO EARN INCOME FROM LEASING OUT THE PROPERTY, HENCE, ASSESSEE IS ELIGIB LE TO TREAT THE RENTAL INCOME AS BUSINESS INCOME AND ELIGIBLE TO CLAIM THE RELATED EXPENDITURE AS BUSINESS EXPENDITURE. ACCORDINGLY, T HE GROUNDS RAISED BY THE ASSESSEE IS ALLOWED IN BOTH THE YEARS UNDER CONSIDERATION AND SINCE WE HAVE ADJUDICATED THE GROUND RAISED BY THE ASSESSEE IN ITS FAVOUR, CONSEQUENT TO THAT THE GROUND RAISED BY REV ENUE IN BOTH THE YEARS UNDER CONSIDERATION IS DISMISSED. 10 ITA NO. 1199/H/15 AND OTHERS VIJAY INFOTECH VENTURES, SECBAD 11. IN THE RESULT, BOTH THE ASSESSEES APPEALS ARE ALLOWED AND REVENUE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 30 TH DECEMBER, 2016 KV COPY TO:- 1) M/S VIJAY INFOTECH VENTURES, 402, GROUND FLOOR, SURYA TOWERS, S.P. ROAD, SECUNDERABAD 500 003. 2) CIT (OSD) RANGE 10, HYDERABAD 3) CIT(A) VI, HYDERABAD 4 PR. CIT 6, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE