Asst. Commissioner of Income Tax, Hyderabad V. M/s. Vijay Infotech Ventures, Secunderabad

ITA 1388/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5586 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 24-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Business income; Depreciation; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1388/HYD/2013 A.Y. 2008-09 ITA NO. 1389/HYD/2013 A.Y. 2009-10 ITA NO. 1390/HYD/2013 A.Y. 2010-11 THE ASST. CIT CIRCLE-10(1) HYDERABAD VS. M/S. VIJAY INFOTECH VENTURES, SECUNDERABAD PAN: AAFFV6464Q [APPELLANT] [RESPONDENT] APPELLANT BY: SRI P. SOMA SEKHAR REDDY RESPONDENT BY: SRI LAXMINIWAS SHARMA DATE OF HEARING: 19.02.2014 DATE OF PRONOUNCEMENT: 19.02.2014 ORDER PER CHANDRA POOJARI, AM: THE ABOVE THREE APPEALS BY THE REVENUE ARE DIRECTE D AGAINST THE COMMON ORDER OF THE CIT(A)-VI, HYDERABA D DATED 29.7.2013 FOR A.YS. 2008-09 TO 2010-11. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE LEA RNED CIT (A) ERRED BOTH ON FACTS AND IN LAW . 2. WHETHER THE CIT (A) WAS CORRECT IN FACT AND IN LAW IN ACCEPTING THE CONTENTION OF THE ASSESSEE-FIRM THAT ITS MAIN OBJECT WAS TO DERIVE BUSINESS INCOME. WHEREAS THE F ACTS EMERGE THAT THE PROPERTY WAS ACQUIRED BY OUTRIGHT P URCHASE WITH AN INTENTION TO DERIVE PROPERTY INCOME. 3. WHETHER THE CIT(A) WAS CORRECT IN FACT AND IN LAW I N ACCEPTING THE CONTENTION OF THE ASSESSEE-FIRM THAT ITS MAIN OBJECT WAS TO DERIVE BUSINESS INCOME, WHEREAS THE A O HAS GIVEN A CLEAR FINDING THAT THE ASSESSEE-FIRM IS DIS CLOSING RECEIPTS OF 'RENT, MAINTENANCE CHARGES' AND 'INTERE STS' ON ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 2 DEPOSITS FROM TENANTS' - ITEMS WHICH CLEARLY DETERM INE RENTAL/ HOUSE PROPERTY INCOME. 4. WHETHER THE CIT(A) WAS CORRECT IN FACT AND IN LAW I N ACCEPTING THE CONTENTION OF THE ASSESSEE-FIRM THAT ITS MAIN OBJECT WAS TO DERIVE BUSINESS INCOME, AS THE PROPER TY WAS GIVEN PUT ON LEASE AND LICENSE BASIS, AND WHETHER, THE AO WAS CORRECT IN TREATING THE SAME AS INCOME FROM HOU SE PROPERTY, AS THE SAID CHARACTER OF THE TRANSACTION WOULD NOT CHANGE ON ACCOUNT OF CERTAIN INCIDENTAL EXPENSES WH ICH MAY HAVE BEEN INCURRED I PROVIDED FOR BY THE ASSESS EE-FIRM TO MEET THE SPECIFIC REQUIREMENTS OF THE TENANTS. 5. WHETHER THE CIT(A) WAS CORRECT IN FACT AND IN LAW I N ADJUDICATING THAT THE OTHER GROUND(S) RAISED BY THE APPELLANT AS REGARDS THE CARRY FORWARD OF LOSSES, A LLOWANCE OF DEPRECIATION AGAINST INCOMES ELIGIBLE FOR DEDUCT ION U/S. 80IA ETC, EXAMINED THEM AT ALL. BEFORE ALLOWING SUC H DEDUCTION, THE AO IS REQUIRED TO EXAMINE THE ELIGIB ILITY AND FULFILLING OF THE CONDITIONS INTRINSIC TO CLAIMING SUCH AN EXEMPTION. THEREFORE, .ON THIS MATTER, THE ITAT OUG HT TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER FOR EXAMINING AND DECIDING THE MATTER AFRESH. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM FILED ITS RETURNS OF INCOME FOR THE A.YS. 2008-09 TO 2010-11, ADMITTING THE FOLLOWING LOSSES FROM BUSINESS, FOR THE RESPECT IVE YEARS. A.Y. RS. 2008-09 1,39,60,719 2009-10 1,94,94,579 2010-11 73,73,439 4. THE AO COMPLETED THE ASSESSMENT BY TREATING THE REN TAL INCOME DERIVED FROM LETTING OUT OF E-PARK AS 'INCOM E FROM HOUSE PROPERTY' AND DISALLOWING THE FOLLOWING AMOUN TS OF DEPRECIATION CLAIMED. ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 3 A.Y. RS. 2008-09 10,08,70,681 2009-10 9,08,70,327 2010-11 8,39,07,135 5. AFTER DISALLOWING THE DEPRECIATION CLAIMED, THE AO HAD ARRIVED AT THE FOLLOWING NET LOSSES, FROM PROPERTY INCOME, AFTER SETTING OFF WITH THE INCOME FROM OTHER SOURCE S TO THE EXTENT OF RS. 3,51,434/-, RS. 51,27,590/- AND RS. 6 1,90,380/- FOR THE YEARS UNDER CONSIDERATION: A.Y. RS. 2008-09 1,39,60,719 2009-10 1,94,94,579 2010-11 73,73,439 6. THE MAIN ISSUE INVOLVED IS TREATMENT OF INCOME DERI VED FROM THE BUSINESS OPERATION AND MAINTENANCE OF SOFT WARE PARK, WHICH WAS APPROVED FOR DEDUCTION U/S. 80IA, A S INCOME FROM PROPERTY. THE ASSESSEE MADE OUTRIGHT PURCHASE OF INDUSTRIAL PARK (E-PARK), LOCATED AT KONDAPUR, HYDE RABAD DEVELOPED BY M/S. MEENAKSHI INFRASTRUCTURE (P) LTD., DURING A.YS. 2006-07 AND 2007-08 AND LET OUT THE PREMISES TO VARIOUS ORGANISATIONS SUCH AS TATA CONSULTANCY SERV ICES LTD., COGNIZANT TECHNOLOGY SOLUTIONS INDIA (P) LTD., DMV BUSINESS AND MARKET RESEARCH (P) LTD ETC. AND RECEIVED THE F OLLOWING RENTS AND MAINTENANCE CHARGES FOR THE ASST. YEARS U NDER CONSIDERATION. ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 4 A.Y. RENTS RECEIVED (RS.) MAINTENANCE CHARGES (RS.) 2008-09 14,32,92,997 8,24,760 2009-10 14,43,81,311 32,99,040 2010-11 15,69,90,286 32,99,040 7. THE ASSESSEE COMPUTED THE INCOME UNDER THE HEAD 'INCOME FROM BUSINESS & PROFESSION', AND FOR THE YE ARS UNDER REFERENCE, THE FOLLOWING NET LOSSES WERE ARRIVED AF TER CLAIMING VARIOUS EXPENSES INCLUDING THE FOLLOWING DEPRECIATI ON: A.Y. NET LOSS (RS.) DEPRECIATION (RS.) 2008-09 7,80,60,417 10,08,07,681 2009-10 7,60,47,478 (REVISED) 9,08,70,327 2010-11 5,57,40,187 8,39,07,135 8. THE AO HAS PROPOSED TO TREAT THE RECEIPTS AS 'INCOM E FROM HOUSE PROPERTY' AND A SHOW CAUSE NOTICE WAS IS SUED TO THE EXTENT, WHILE PROPOSING TO DISALLOW THE DEPRECI ATION CLAIMED. THE OBJECTIONS OF THE ASSESSEE THAT (1) TH E SAID PROPERTY WAS APPROVED BY THE CONCERNED AUTHORITIES, FOR THE PURPOSE OF DEDUCTION U/S. 80IA WHICH IS AVAILABLE ON LY TO BUSINESS INCOME AND (2) THE SAME INCOMES WERE TREAT ED AS INCOME FROM BUSINESS, IN THE EARLIER YEARS, WERE NO T CONSIDERED BY THE AO, AND MADE THE FOLLOWING OBSERV ATIONS: 'THE E-PARK WHICH WAS PURCHASED FROM MEENAKSHI INFRASTRUCTURE PVT. LTD. WAS NOTIFIED (VIDE NOTIFIC ATION NO. 216 COMMITTEE OF THE MINISTRY OF COMMERCE VIDE A LETTER IN NO. 15/12/2006-ID DATED 10.04.2007. ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 5 (II) MEENAKSHI INFRASTRUCTURE PVT. LTD. TRANSFERRED THE OPERATION AND MAINTENANCE OF THE ABOVE E-PARK TO VI JAY INFOTECH VENTURES AND THE DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION HAD APPROVED THE ABOVE TRANSFER VIDE A LE TTER NO. 15.12.06/IP AND ID, DATED 03.08.2007, AND THE TRANS FER OF OPERATION AND MAINTENANCE OF ABOVE E-PARK WAS TAKEN ON RECORD AS PER THE PROVISIONS OF SECTION 80IA OF IT ACT, 1961. IN VIEW OF THE ABOVE, VIJAY INFOTECH VENTURES IS ENTIT LED FOR DEDUCTION U/S. 80IA FOR THE UNEXPIRED PORTION OF TA X HOLIDAY. (III) AFTER CAREFUL CONSIDERATION OF THE ABOVE SUB MISSIONS OF THE ASSESSEE, IT IS FOUND THAT THEY ARE NOT ACCEPTA BLE FOR THE FOLLOWING REASONS: (I) AS PER SCHEDULER SYSTEM OF TAXATION, A SPECIFIC HEA D OF CHARGE IS PROVIDED FOR 'INCOME FROM HOUSE PROPERTY'. THE ANNUAL VALUE OF HOUSE PROPERTY CANNOT BE BROUGHT TO TAX UNDER ANY OTHER HEAD OF INCOME. THE INCOME HAS TO BE ASSESSED UNDER THE HEAD 'HOUSE PROPERTY' EVEN IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LETTING OUT OF PROPERTY ON RENT AND EVEN IF THE PROPERTY IS HELD AS STOCK IN TRADE BY THE ASSESSEE. (II) ON PERUSAL OF PROFIT & LOSS ACCOUNT, IS FOUND THAT THE ASSESSEE DERIVED RENTAL INCOME AND MAINTENANCE CHARGES AND A FURTHER AMOUNT TOWARDS INTEREST. THE ASSESSEE'S MAIN SOURCE OF INCOME IS FROM RENTS AND THE ASSESSEE DERIVED THIS RENTAL INCOME BY EXPLOITI NG THE ASSET (E-PARK) ACQUIRED FROM MEENAKSHI INFRASTRUCTURE PVT. LTD. 9. ACCORDINGLY, THE ASSESSING OFFICER HAS TREATED THE AMOUNTS RECEIVED AS RENT AS 'INCOME FROM HOUSE PROP ERTY' AND THE MAINTENANCE CHARGES, INTEREST ALONG WITH TH E REBATE ON ELECTRICITY CHARGES AS 'INCOME FROM OTHER SOURCE S', WHILE QUANTIFYING THE NET LOSS FOR THE RESPECTIVE ASSESSM ENT YEARS. 10. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE'S INCOME IS TO BE COMPUTED UNDER THE HEAD 'INCOME FRO M ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 6 BUSINESS', THEREAFTER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80I OF THE ACT AND ACCORDINGLY, CARRIED FORWARD LOSSES, ALLOWANCE OF DEPRECIATION, IF ANY, BE SET OFF AGAIN ST THE INCOME ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 11. THE LEARNED DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE'S INCOME IS TO BE COMPU TED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND THE REAFTER ASSESSEE IS NOT ENTITLED FOR SET OFF OF CARRIED FOR WARD LOSSES OR DEPRECIATION. 12. THE LEARNED AR RELIED ON THE ORDER OF THE CIT(A) AN D ALSO ON THE FOLLOWING CASE-LAW: (A) MAGARPATHA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. VS. DCIT, ITA NO. 822/PN/2011 (BENCH B, PUNE). (B) GLOBAL TECH PARK (P) LTD. VS. ACIT, ITA NO. 1021/BA NG/2007 (BANG.) (C) GOLFLINK SOFTWARE P. LTD. VS. DCIT, ITA NOS. 52 & 5 3/BANG/2010 (BANG.) (D) HARVINDERPAL MEHTA HUF VS. ACIT, 122 TTJ (MUM) 163. (E) MAHINDRA GESCO DEVELOPERS LTD., ITA NO. 3404/MUM/06 (MUM) (F) KRISHNA LAND DEVELOPERS PVT. LTD. VS. DCIT, ITA NO. 1057/MUM/10. (MUM) (G) KRISHNA LAND DEVELOPERS PVT. LTD. VS. DCIT, ITA NO. 5045/MUM/11. (MUM) (H) INFORMATION TECHNOLOGY PARK VS. ITO, ITA NOS. 1147 TO 1152/BANG/2010. (BANG) (I) M/S. KENTORN LEISURE SERVICES P. LTD. VS. DCIT, ITA NO. 171/COCH/2009 & ITA NO. 291/COCH/2010 (COCHIN) (J) RR INDUSTRIES VS. ITO, 356 ITR 97 (MAD) (K) MOHIDDIN HOTELS, 284 ITR 229 (BOM) (L) JESCO CORPORATION LTD., 31 SOT 32 (MUM) (M) SAPTARSHI SERVICES, 265 ITR 379 (GUJ) (N) ACIT VS. ANNAPURNA BUILDERS,, ITA NO. 1177/HYD/2011 (HYD) (O) JANAPRIYA ENGINEERS VS. DCIT, ITA NO. 1250/HYD/2012 & ORS. (HYD). ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 7 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. PROVISIONS OF SECTION 80IA(4)( I) READ AS UNDER: 80-IA(4) - THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (II I) DEVELOPING, OPERATING AND MAINTAINING]ANY INFRASTRU CTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS , NAMELY: (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA O R BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY O R A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR C ONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENT RAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR (I)DEVELOPING OR (II)OPERA TING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAIN TAINING A NEW INFRASTRUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAI NING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRE D ON OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRIS E WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER R EFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTH ER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANS FEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTA INING THE INFRASTRUCTURE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERN MENT, LOCAL AUTHORITY OR STATUTORY BODY, THE PROVISIONS O F THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT W ERE THE ENTERPRISE TO WHICH THIS CLAUSE APPLIES AND THE DED UCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSF EREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH TH E TRANSFEROR ENTERPRISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTIO N, IF THE TRANSFER HAD NOT TAKEN PLACE. 14. AS SEEN FROM THE ABOVE PROVISO TO SECTION 80IA(4)(I )(C) WHEN THE INFRASTRUCTURE FACILITIES ARE TRANSFERRED BY ONE ASSESSEE TO ANOTHER ASSESSEE AND IF THE OTHER ASSES SEE I.E., ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 8 TRANSFEREE, OPERATES AND MAINTAINS THE INFRASTRUCTU RE FACILITIES IN ACCORDANCE WITH THE SCHEME OF CENTRAL GOVERNMENT/STATE GOVERNMENT/LOCAL AUTHORITY, THEN THE INCOME OF THE SAID TRANSFEREE FROM PROFITS AND GAIN S OF SUCH BUSINESS IS ENTITLED FOR DEDUCTION U/S. 80IA(4) OF T HE ACT. IN THE PRESENT CASE, ORIGINALLY M/S. MEENAKSHI INFRASTR UCTURE PVT. LTD., WAS DULY APPROVED BY THE MINISTRY OF COM MERCE, GOVT. OF INDIA AS AN INDUSTRIAL PARK IN TERMS OF IN DUSTRIAL PARK SCHEME, 2002 NOTIFIED BY THE DEPARTMENT OF INDUSTRI AL POLICY & PROMOTION, MINISTRY OF COMMERCE AND THAT ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80IA(4)(III) OF THE INCO ME-TAX ACT, 1961. THEREAFTER, M/S. MEENAKSHI INFRASTRUCTURE PVT . LTD., HAS TRANSFERRED THE OPERATION AND MAINTENANCE OF INDUST RIAL PARK 'E-PARK', SY. NOS. 5, 15, 17, KONDAPUR VILLAGE, SER ILINGAMPALLY, RANGA REDDY DISTRICT, AP TO THE PRESENT ASSESSEE. THIS TRANSFER WAS DULY NOTED BY THE DEPARTMENT OF INDUST RIAL POLICY & PROMOTION AND INTIMATED TO BOTH TRANSFEROR AND TRANSFEREE VIDE MINISTRY'S LETTERS DATED 9 TH AUGUST, 2006 AND 3 RD AUGUST, 2007. BEING SO, IN PRINCIPLE, THE ASSESSE E IS ENTITLED FOR DEDUCTION U/S. 80IA(4)(III) OF THE ACT FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERP RISE WOULD HAVE BEEN ENTITLED FOR DEDUCTION IF THE TRANS FER HAD NOT TAKEN PLACE. HOWEVER, WE MAKE IT CLEAR THAT THE OT HER ASSESSEE I.E., M/S. MEENAKSHI INFRASTRUCTURE PVT. LT D., CANNOT ITA NO. 1388 1389/HYD/2013 M/S. VIJAY INFOTECH VENTURES ========================= 9 CLAIM DEDUCTION U/S. 80IA(4) ON THE SAME INCOME. TH ERE CANNOT BE OVERLAPPING CLAIM BY EACH OTHER. 15. FURTHER, IN THIS CASE, THE AO STRAIGHTAWAY DISALLOW ED THE CLAIM OF DEDUCTION U/S. 80IA(4) AND NOT GONE INT O THE QUANTIFICATION OF DEDUCTION, SUCH AS WHETHER COMPUT ATION IS PROPER OR NOT. THE LEARNED CIT(A) ACCEPTED THE ENT IRE CLAIM OF THE ASSESSEE AS IT IS AND HE HAS ALSO NOT GONE I NTO THE COMPUTATION ASPECT. IN VIEW OF THIS, WE DIRECT THE AO TO GO INTO THE COMPUTATION ASPECT OF DEDUCTION U/S. 80IA(4 ) OF THE ACT. HE SHALL DECIDE THE ISSUE AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 19 TH FEBRUARY, 2014 TPRAO COPY FORWARDED TO: 1. THE ASST. CIT, CIRCLE-10(1), ROOM NO. 515, 5 TH FLOOR, 'A' BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. M/S. VIJAY INFOTECH VENTURES, 1-7-4 TO 10/A/7, 104, GROUND FLOOR, SURYA TOWERS, SP ROAD, SECUNDERABAD. 3. THE CIT(A)-VI, HYDERABAD. 4. THE CIT-V, HYDERABAD 5. THE DR BENCH 'A', ITAT, HYDERABAD