Deputy Commissioner of Income-tax, V. M/s. magarpatta Township Development & Construction Cp. Ltd., Pune

ITA 1851/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2443 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S SINGH
• Assessee Lawyers: SUNIL PATHAK SHRI SUNIL PATHAK
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 1 851 /PN/201 4 / ASSESSMENT YEAR : 20 1 0 - 1 1 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, PUNE . / APPELLANT VS. M/S. MAGARPATTA TOWNSHIP M/S. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION COMPANY LIMITED, 13 MEGA SPACE, S HOLAPUR BAZAAR, OFF EAST STREET, PUNE 411001 . / RESPONDENT PAN: AABCM2461K / APPELLANT BY : SHRI A.S. SINGH / RESPONDENT BY : SHRI SUNIL PATHAK / RESPONDENT BY : SHRI SUNIL PATHAK / DATE OF HEARING : 28 . 0 3 .201 6 / DATE OF PRONOUNCEMENT: 31 . 0 3 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - II , PUNE , DATED 27 . 0 6 .20 1 4 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN HOLDING THAT THE INCOME DERIVED BY THE ASSESSEE FROM THE LETTING O UT OF PREMISES OF THE 'CYBER CITY' HAS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME UNDER THE HEAD 'HOUSE PROPERTY' AS HAD BEEN TAKEN IN THE ASSESSMENT. 'HOUSE PROPERTY' AS HAD BEEN TAKEN IN THE ASSESSMENT. ITA NO. 1851 /PN/20 1 4 M/S. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. LTD. 2 2 . THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN FAILING TO APPRECIATE THAT THE PRIMA RY OBJECT OF THE ASSESSEE WAS TO LET OUT THE PROPERTIES IN ORDER TO DERIVE INCOME THERE FROM AND NOT TO EXPLOIT THEM COMMERCIALLY AND IN ORDER TO DERIVE INCOME THERE FROM AND NOT TO EXPLOIT THEM COMMERCIALLY AND MERELY BECAUSE CERTAIN INFRASTRUCTURE HAS BEEN PROVIDED TO FACILITATE SUCH LETTING OUT, SUCH PROVISION CAN BY NO MEANS AMO UNT TO CARRYING ON COMPLEX COMMERCIAL ACTIVITIES. 3 . THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN ATTACHING UNDUE IMPORTANCE TO A CLAUSE IN THE AGREEMENT AS PER WHICH THE COST INVOLVED IN THE SERVICES IS BUILT INTO THE COST PER SQ.FT. AS PER T HE TENANCY AGREEMENT AND WITHOUT APPRECIATING THAT THE INFRASTRUCTURE AND SERVICES PROVIDED BY THE ASSESSEE WERE INCIDENTAL TO THE LETTING OUT OF THE PROPERTIES AND THAT SUBSTANTIAL INCOME AS PER THE AGREEMENT WAS TOWARDS RENT AND NOT TOWARDS PROVISION OF SERVICES. 4 . THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND AN Y OR ALL THE GROUNDS OF APPEAL. APPEAL. 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDE RS OF TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FAIRLY AGREED THAT THE ISSUE IN THE PRESENT APPEAL HAS BEEN DECIDED BY THE TRIBUNAL IN EARLIER THAT THE ISSUE IN THE PRESENT APPEAL HAS BEEN DECIDED BY THE TRIBUNAL IN EARLIER YEARS. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A DEVELOPER AND HAD DEVELOPED INTEGRATED TOWNSHIP KNOWN AS MAGARPATTA CITY AT HADAPSAR, PUNE. THE TOWNSHIP DEVELOPED BY THE ASSESSEE INCLUDED IT PARKS, COMMERCIAL COMPLEXES, SCHOOLS AND RESIDENTIAL COMPLEXES, ETC. THE BUILDING OF IT P ARK WHICH WAS DEVELOPED BY THE ASSESSEE IS OWNED BY IT AND IS KNOWN AS CYBER CITY. THE ASSESSEE HAD GIVEN THE BUILDINGS IN IT PARK TO VARIOUS SOFTWARE AND OTHER COMPANIES AND WAS ALSO PROVIDING OTHER SERVICES ALONG WITH SPACE MADE AVAILABLE FOR USE TO THE SAID COMPANIES. THE ASSESSEE IN TURN, EARNED LICENCE FEES AND THE SAME WAS DECLARED AS BUSINESS INCOME BY THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAME IS ASSESSABLE AS INCOME FROM ITA NO. 1851 /PN/20 1 4 M/S. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. LTD. 3 HOUSE PROPERTY FOLLOWING THE SIMILAR STAND BEING TAK EN IN THE HANDS OF ASSESSEE FROM ASSESSMENT YEAR S 2007 - 08 ONWARDS. 6. THE CIT(A) ON THE OTHER HAND, ACCEPTED THE CLAIM OF ASSESSEE IN VIEW OF DECISION TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASE. 7. WE FIND THAT THE ISSUE RAISED BEFORE US IS IDENTICAL T O THE ISSUE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 822/PN/2011, RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 18.09.2012 REPORTED IN 141 ITD 682 (PUNE) . FURTHER, THE TRIBUNAL HAS APPLIED THE SAID RATIO IN ITA NO. 1130/PN/2012 AND ITA NO.21 14/PN/2012 , RELATING TO ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 VIDE SEPARATE ORDERS DATED 30.07.2013 AND 27.05.2014 RESPECTIVELY. THE RELEVANT FINDING OF THE TRIBUNAL IN ASSESSMENT YEAR 2007 - 08 VIDE ORDER DATED 18.09.2012 IS AS UNDER: - '5. WE HAVE CAREFULL Y CONSIDERED THE RIVAL STANDS AND ALSO THE PRECEDENT IN '5. WE HAVE CAREFULL Y CONSIDERED THE RIVAL STANDS AND ALSO THE PRECEDENT IN THE ASSESSEE'S OWN CASE DATED 18.09.2012(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 WIT H THE I .T. C OM PANY. THE SERVICES ARE VAST AND THE AMENITIES PROVIDED WERE IN THE NATURE OF PLANT AND MACH INERY AS CONTENDED BY THE ASSESSEE AND IT HAS BEEN E STABLISHED BY THE CLAUSES OF THE AGREEMENTS THAT THE COST OF PROVIDING THESE SERVICES WAS ALSO INCLUDED IN THE LEASE RENT OF RS.14.30 PER SQ. FT. THE ASSESSEE ALSO CLARIFIED THAT COST INVOLVED IN THE SERVICES PROVIDED TO THE PARTICULAR COMPANY I.E. EXLSERV ICES.COM WAS RS.2.83 CRORES WHICH WAS ALMOST 40% OF THE LAND AND BUILDING COST OF THAT TOWER. BY NO STRETCH OF IMAGINATION SUCH EXTENSIVE AND SPECIALIZED SERVICES WOULD COULD ONLY BE UTILIZED BY THE IT / SOFTWARE / BPOS BUSINESSES TO BE LOCATED IN THE I.T. P ART COULD BE TREATED AS FORMING PART OF INCOME FROM HOUSE PROPERTY. IT IS CERTAINLY A CONSTITUTION OF ORGANIZED STRUCTURE FOR C ARRYING OUT BUSINESS ACTIVITIES. SECTION 22 PROVIDES ONLY FOR RENTAL INCOME OUT OF BUILDING OR LAND APPURTENANT THERETO, WHEREAS IN THE CASE BEFORE US, COMPLEX AND VARIED SERVICES PROVIDED AND THE HUGE INVESTMENT THEREIN WERE IN THE NATURE OF PLANT AND MACHINERY WHICH COULD BE INCLUDED WITHIN THE EXPRESSION B UILDING OR LAND APPURTENANT THERETO. THUS, THE ASSESSEE HAS CONDUCTED S YS TE MATIC ACTIVITY 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 SCHEDULE - II OF THE AGREEMENT ENTERED WITH THE I.T. COMPANY, CIT(A ) WAS JUSTIFIED IN HOLDING THAT IN ASSESSEE'S CASE THE SAID INCOME WAS TO BE ASSESSED AS BUSINESS INCOME. THIS REASONED FACTUAL FINDING NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. ITA NO. 1851 /PN/20 1 4 M/S. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. LTD. 4 6. FOLLOWING THE AFORESAID DISCUSSION MADE BY THE TRIBUNAL IN T HE ASSESSEE'S OWN CASE ON AN IDENTICAL ISSUE, WE HEREBY AFFIRM THE ORDER OF THE CIT(A) IN HOLDING THAT THE INCOME EARNED BY WAY OF LICENSE FEE ON LETTING OUT OF THE PREMISES 'CYBER CITY' IS LIABLE TO BE ASSESSED AS BU SINESS INCOME' AND NOT UNDER THE HEAD 'HOUSE PROPERTY' AS HELD BY THE ASSESSING OFFICER. THUS, FOLLOWING THE AFORESAID PRECEDENT, THE PRESENT APPEAL OF THE REVENUE IS ........ 8. FOLLOWING THE SAME RATIO, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THAT THE LICENCE FEES RECEIVED BY THE ASSESSE E ON ACCOUNT OF LETTING OUT THE PREMISES OF CYBER CITY WAS LIABLE TO BE ASSESSED AS BUSINESS INCOME AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY . IN VIEW THEREOF, GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 31 ST MARCH , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - II , PUNE ; 4. / THE CIT - II, PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE