ITO (OSD), CHENNAI V. M/s. RR Industries Ltd., CHENNAI

ITA 2196/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52074 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 29-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B JENA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER I.T.A. NOS. 2194, 2195, 2196, 2197, 2198 & 2199/MDS /2010 (ASSESSMENT YEARS : 2002-03 TO 2007-08) THE INCOME TAX OFFICER (OSD), COMPANY CIRCLE V(4), CHENNAI 600 034. (APPELLANT) V. M/S RR INDUSTRIES LTD., THIRUVIKA ESTATE, GUINDY, CHENNAI 600 032. PAN : AAACR5694H (RESPONDENT) APPELLANT BY : SHRI B. JENA, CIT-D R RESPONDENT BY : SHRI SR IRAM SESHADRI, CA DATE OF HEARING : 08.11.2011 DATE OF PRONOUNCEMENT : 18.11.2011 O R D E R PER BENCH : ALL THESE SIX APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST THE COMMON ORDER DATED 04.10.2010 OF COMMISSIONER O F INCOME TAX (APPEALS)-V, CHENNAI, FOR ASSESSMENT YEARS 2002-03 TO 2007-08. I.T.A. NOS. 2194 TO 2199/MDS/10 2 2. IN ALL THE SIX APPEALS, REVENUE HAS RAISED FOLLO WING COMMON GROUNDS:- 2.1. THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE ASSESSEES APPEAL AGAINST THE A.O.S ACTION IN TREATMENT OF RENTAL INCOME FROM INDUSTRIAL PARK BUILDINGS AS INCOME FROM HOUSE PROPERTY AND DIRECTED THE A.O. TO TREAT THE INCOME DERIVED FROM LETTING OUT OF IT INDUSTRIAL PARK AS INCOME FROM BUSINESS. 2.2. IT IS SUBMITTED THAT IN THE TDS CERTIFICATE FURNISHED BY THE ASSESSEE, THE NATURE OF PAYMENT MENTIONED IS SHOWN AS THE CATEGORY FOR WHICH TDS TO BE EFFECTED U/S 1941 OF THE INCOME-TAX ACT. THE RESPECTIVE S.1941 DEAL PURELY WITH DEDUCTION OF TAX ON PAYMENT OF RENT AT A SPECIFIED RATE. IN THIS CONTEXT, RELIANCE IS PLACED ON THE ITAT CHENNAIS DECISION IN THE CASE OF M/S ANANDA ENTERPRISE ITA NO.254/10/MDS/ A BENCH DATED 26.5.2010 WHERE THE HON'BLE ITAT HAS HELD THAT WHEN THE RENT PAID BY TENANT IS DEDUCTED AT SOURCE AT THE RATES APPLICABLE TO RENT, THE INCOME RECEIVED SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY, BUT NOT INCOME FROM BUSINESS OR PROFESSION AS CLAIMED BY THE ASSESSEE. 2.3. THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE ASSESSEE NEITHER ENGAGES IN ANY TRADE, COMMERCE NOR INDULGES IN ANY MANUFACTURING ACTIVITY NOR INVOLVES IN ANY ADVENTURE NOR CONCERNS IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE AS PER DEFINITION U/S 2(13) OF THE ACT. THE ADDITIONAL FACILITIES OR AMENITIES PROVIDED TO THE TENANTS ARE MAINLY FOR THE PURPOSE OF CHARGING HIGHER RENT AS I.T.A. NOS. 2194 TO 2199/MDS/10 3 WELL AS ATTRACTION OF TENANTS. MERE GETTING LOAN FROM BANKS AND FINANCIAL ORGANIZATION AGAINST MORTGAGE OF THE PROPERTY AND THE FUTURE RENT RECEIVABLE WILL NOT AMOUNT TO GETTING INTO RISK OR INVOLVES IN SOME ADVENTUROUS ACTIVITIES. 2.4. THE REVENUE RELIED ON THE FOLLOWING JUDGEMENTS WHICH HAVE CONFIRMED THE TREATMENT OF RENT RECEIVED FROM SIMILAR PROPERTY IN THE SIMILAR SITUATIONS AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME. - A) THE RECENT DECISION OF ITAT CHENNAI IN THE CASE OF ANANDA ENTERPRISES IN ITA NO.254/MDS/10 A BENCH DATED 26.5.2010. B) SHAMBU INVESTMENTS (P) LTD. VS CIT(SC) 23 ITR 143. C) THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS CHENNAI PROPERTIES & INVESTMENTS LTD. 266 ITR 685 (MAD) D) SUPREME COURT DECISION IN 51 ITR 353 (SC), IN THE CASE OF SULTAN BROS LTD.; IN CIT VS VIKRANT COTTON MILLS LTD (169 ITR 597 (SC) AND CEPT VS SHRI LAKSHMI SILK MILLS LTD. (20 ITR 451 (SC): CIT VS CALCUTTA NATIONAL BANK LTD 37 ITR 171 (SC). E) KARNANI PROPERTIES (82 ITR 547 (SC) F) UNIVERSAL PLAST LTD (237 ITR 454 (SC) G) HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS VEERABHADRA INDUSTRIES 240 ITR 5 (AP) H) THE HON'BLE ITATS DECISION IN THE CASE OF SUBHRA MOTEL (P) LTD. VS CIT (64 ITD 134) I.T.A. NOS. 2194 TO 2199/MDS/10 4 I) THE HON'BLE MADRAS HIGH COURTS DECISION IN CIT VS BABA ESTATE (24 ITR 415 (MAD) AND NEW INDIA MARITIME AGENCIES (P) LTD (256 ITR 513 (MAD). 2.5 IT IS HELD BY THE HON'BLE MADRAS HIGH COURT [CIT VS BABA ESTATE (244 ITR 413 (MAD) AND NEW INDIA MARITIME AGENCIES (P) LTD. (256 ITR 513 (MAD)] THAT SUCH RENTAL INCOME WAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY WHEN THOSE ASSETS HAD NOT BEEN USED IN THE BUSINESS OF THE ASSESSEE BUT THEY WERE ONLY LET OUT. IT WAS FURTHER HELD THAT NO PART OF THE PREMISES FROM WHICH THE ASSESSEE RECEIVED RENT IN THE ASSESSMENT YEAR WAS USED FOR THE BUSINESS PURPOSES. 3. HOWEVER, THE SOLE ISSUE INVOLVED IS THESE APPEAL S IS THAT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT THE INCOME DERIVED FROM LETTING OUT OF INDUSTRIAL PARK BUILDINGS AS INCOME FROM BUSINESS AS AGAINST THE TREATMENT BY THE ASSESSING OFFICER OF THE SAME AS INCOME FROM HOUSE PROPERTY . 4. THE ASSESSING OFFICER HAS OBSERVED IN HIS ORDER AS UNDER: 5.5 THE ASSESSEE SUBMITTED THAT IN THE CASE OF CIT VS SANMAR HOLDINGS LTD., (272 ITR 341), THE JURISDICTIONAL HI GH COURT OF THE ASSESSEE IS ABLE TO ESTABLISH THAT THE PROPERTY IN QUESTION WAS A COMMERCIAL ASSET, THEN THE INCOME DE RIVED FROM SUCH ASSET CAN BE TREATED AS 'BUSINESS INCOME' . I.T.A. NOS. 2194 TO 2199/MDS/10 5 THEN THE ASSESSEE WENT ON TO ELABORATE THE FACILITI ES AVAILABLE IN EACH BUILDING WHICH IT HAS LET OUT TO THE TENANT NAMELY, CAR PARKING SPACE, GENERAL LIGHTING ON ALL SIDES, LANDSCAPE GARDEN, RAIN WATER DRAIN, SEWAGE CONNECTI ON, TOILETS, LIFT, STORAGE SPACE, LIGHTS AND FANS ETC. HENCE, IT IS REQUESTED TO TREAT ITS PROPERTY AS A COMMERCIAL ASS ET AND THE INCOME AS BUSINESS INCOME. 5.6 THE ASSESSEE'S SUBMISSIONS WERE CAREFULLY CONSI DERED. THE ASSESSEE NEVER TRIED TO MAKE OUT A CASE AS TO WHY R ENTAL INCOME SHOULD BE TREATED AS 'BUSINESS INCOME'. THE LIST OF FACILITIES WHICH WERE PROVIDED TO THE TENANTS AS ME NTIONED IN THE ASSESSEE'S REPLY DATED 09.02.2005 NO WAY HELPS TO CHANGE THE CHARACTERISTICS OF THE ACTIVITY OF THE ASSESSEE . ANY MODEM PROPERTY WHICH IS LET OUT WILL CONTAIN ALL THESE FA CILITIES. 5.7 THE FACTS OF THE CASE LAW CITED BY THE ASSESSEE IN THE CASE OF CIT VS SANMAR HOLDINGS LTD., [272 ITR 341] ARE DIFFERENT FROM THAT OF THE ASSESSEE'S OWN. IN THE CASE, THE C OURT RELIED ON THE DECISION IN THE CASE OF 'KAMAPURA DEVELOPMEN T CO. LTD., VS CIT 1962 [44 ITR 362] WHICH LAID DOWN THE LAW AS UNDER: 'EARLIER, ON A CONSIDERATION OF THE MEMORANDUM OF ASSOCIATION RELATING TO THE MAIN OBJECT OF THE COMP ANY, IT HAS BEEN FOUND THAT ITS OBJECT IS TO ACQUIRE AND PO SSESS PROPERTY. WHAT IS SIGNIFICANT IS THAT IN THE MOA, T HERE IS I.T.A. NOS. 2194 TO 2199/MDS/10 6 NO INDICATION THAT THE ASSESSEE COMPANY INTENDED TO SELL THOSE PROPERTIES OR EVEN TURN THEM TO ACCOUNT BY WA Y OF LEASING THEM AS PART OF ITS BUSINESS ACTIVITIES. WE MAY MENTION IN PASSING THAT IN THE COURSE OF THE ORDER OF THE APPELLATE ASST. COMMISSIONER, A CLEAR FINDING HAD B EEN RECORDED TO THE EFFECT THAT ON A PERUSAL OF THE REC ORDS OF THE ASSESSEE-COMPANY, THE ASSESSEE-COMPANY HAD NOT CARRIED ON ANY BUSINESS IN REAL ESTATE. WE, THEREFO RE, HOLD THAT THE ASSESSEE COMPANY CANNOT BE REGARDED A S HAVING ACQUIRED THE PROPERTIES AS COMMERCIAL ASSETS FOR THE PURPOSE OF ANY BUSINESS CAN BE DONE BY IT, AND, THEREFORE, THE RECEIPT OF INCOME FROM THE PROPERTIE S HELD BY THE ASSESSEE-COMPANY CANNOT BE REFERRED TO A SUBSTITUTED USER OF THE COMMERCIAL ASSET BY THE ASS ESSEE COMPANY AS CLAIMED BY IT, SO AS TO CONSTITUTE THE I NCOME FROM THE PROPERTIES 'PROFITS AND GAINS OF THE BUSIN ESS' CARRIED ON BY THE ASSESSEE COMPANY- IN AS MUCH AS W E HAVE COME TO THE CONCLUSION THAT THE PROPERTIES WERE NOT HELD BY THE ASSESSEE COMPANY AS PART OF ITS BUSINES S ASSETS, IT FOLLOWS THAT THE INCOME FROM THOSE PROPE RTIES WERE RIGHTLY ASSESSED UNDER THE HEAD 'INCOME FROM PROPERTY', SUBJECT TO THE DEDUCTION PROVIDED U/S. 2 4 OF THE ACT. IN THE VIEW WE HAVE TAKEN, IT IS UNNECESSA RY TO REFER TO THE SEVERAL DECISIONS RELIED ON BY COUNSEL ON BOTH SIDES. WE, THEREFORE, ANSWER THE COMMON QUESTI ON I.T.A. NOS. 2194 TO 2199/MDS/10 7 REFERRED TO US IN THE AFFIRMATIVE AND AGAINST THE A SSESSEE COMPANY'. THERE, THE ASSESSEE WAS ENGAGED IN PURCHASE AND SAL E OF PROPERTIES. THE COURT REFERRED ONLY THOSE PROPERTIE S WHICH WERE PURCHASED AND SOLD IN THE REAL ESTATE BUSINESS AS ' COMMERCIAL PROPERTY' AND NOT THE PROPERTY WHICH WAS LET OUT FOR COMMERC IAL PURPOSES. IN THIS CASE, ASSESSEE IS NOT INVOLVED IN REAL-ESTATE BUSINESS. HOWEVER, IN THE ASSESSEE'S CASE, IT DEVEL OPED ITS PROPERTY WITH THE SOLE OBJECT OF LETTING IT OUT AND EARNING RENTAL INCOME. HENCE, THE ABOVE RATIO IS INAPPLICABLE TO THIS CAS E. THE FOLLOWING CASE LAWS ARE APPLICABLE TO THE FACT S OF THIS CASE AND HENCE THEY ARE RELIED. 1. CIT VS CHENNAI PROPERTIES & INVESTMENTS LTD. (26 6 U1R 685) - COMPANY WAS - FORMED WITH THE OBJECT OF DEALING IN PROPERTY - INCOME FROM LETTING OUT BUILDINGS BELONG ING TO IT ASSESSABLE AS INCOME FROM PROPERTY. 2. INDIAN OVERSEAS BANK LTD . VS CIT (246 ILR 206-M DSL - PORTION OF THE BUILDING OWNED BY THE COMPANY LET OU T TO TENANTS - RENT RECEIVED FROM TENANTS - NO LINK BETW EEN TENANTS AND BANKING-BUSINESS CARRIED ON BY THE ASSE SSEE - INCOME FROM PROPERTY RIGHTLY ASSESSED UNDER HEAD 'I NCOME I.T.A. NOS. 2194 TO 2199/MDS/10 8 FROM HOUSE PROPERTY' 3. M/S. SHAMBU INVESTMENTS P LTD . VS CIT (263 ITR 143-SC) - THE SUPREME COURT HAS HELD THAT INCOME FROM PROPERT IES LET OUT TO OCCUPANTS .WITH FURNITURE AND FIXTURES AND L IGHTS AND AIR-CONDITIONERS AND PROVIDING SERVICE LIKE WARD AR ID WARD, STAFF, ELECTRICITY AND WATER AND OTHER COMMON AMENI TIES WAS ASSESSABLE IN THE HANDS OF THE ASSESSEE AS INCOME F ROM HOUSE PROPERTY AND NOT BUSINESS. THE FACTS OF THIS CASE A RE EXACTLY SIMILAR TO THE FACTS OF THE ASSESSEE. 5.8 SIMILAR VIEW IN THE ASSESSEE'S OWN CASE IS UP HELD BY THE CIT(A)-V IN ITA NO. 51/2003-04 FOR THE A.Y. 1999-00 . 5.9 THE ASSESSEE SUBMITTED THAT IT HAS OBTAINED THE APPROVAL FROM THE MINISTRY OF COMMERCE & INDUSTRY FOR CONSTR UCTION OF AN INDUSTRIAL PARK AND STATED THAT IT IS ELIGIBLE T O CLAIM DEDUCTION U/S 80-IA. IT IS NECESSARY AT THIS JUNCTU RE TO REITERATE THAT THE ASSESSEE WAS ALLOTTED PLOTS INSI DE THIRU-VI- KA INDL ESTATE, GUINDY BY THE STATE GOVERNMENT FOR SETTING UP INDUSTRIAL UNIT AS EARLY AS IN 1990S. LATER ON, THE ASSESSEE COULD NOT CONTINUES ITS BUSINESS FOR VARIOUS REASON S AND CEASED ITS BUSINESS OF LEATHER EXPORTS. IN ORDER TO UTILIZE THE BUILDING & AND THE VACANT PLOT, THE ASSESSEE CONSTR UCTED ANOTHER BUILDING AND LET IT OUT TO WS. ALCATEL DEVE LOPMENT I.T.A. NOS. 2194 TO 2199/MDS/10 9 CENTRE (CHENNAI) P LTD., THE LOCATION OF THE SUBJEC T PROPERTY IS ALREADY INSIDE THE INDUSTRIAL PARK. FU THAT CASE IT IS STRANGE TO UNDERSTAND HOW THE ASSESSEE'S CLAIM THAT IT WILL DEVELOP AN INDUSTRIAL PARK. THE IDEA BEHIND DEVELOPING AN INDUSTRIAL PARK IS TO DEVELOP INFRASTRUCTURE FACILITIES LIKE ROADS, STREET LIGHTS AND, OTHER AMENITIES INVOLVED IN TOWN PLANNING. IN THIS CASE, THE ASSESSEE JUST CONSTRUCTED A BUILDING WITH REQUI RED FIXTURES AND LET IT OUT TO ITS TENANT. HENCE THE A SSESSEES CLAIM THAT IT IS ELIGIBLE TO CLAIM DEDUCTION U/S 80 IA IS NOT ACCEPTABLE. FURTHER, THE ASSESSEE CAN CLAIM THIS D EDUCTION ONLY WHEN THERE IS AN INCOME UNDER THE HEAD BUSINE SS. 5. IN APPEAL, THE LD. CIT(A) HELD AS UNDER: 9.28 I HAVE ANALYZED THE CASES AND THE FACTS PRESE NTED BEFORE ME AND I OBSERVE THE FOLLOWING IN THE OVERAL L CONDUCT OF THE APPELLANT: 1. THE APPELLANT HAS BORROWED LARGE SUMS OF MONIES FRO M TIME TO TIME FROM THE FINANCIAL INSTITUTIONS AGAINST MORTGA GE OF THE PROPERTY AND ALSO AGAINST THE FUTURE RENT RECEIVABL ES. THIS DEMONSTRATES THAT THE APPELLANT HAS UNDERTAKEN LARG E CREDIT RISKS IN ITS VENTURE. 2. THE APPELLANT HAS INVESTED THESE MONIES IN TO DEVEL OPING STATE I.T.A. NOS. 2194 TO 2199/MDS/10 10 OF THE ART INFRASTRUCTURE WHICH GOES MUCH BEYOND TH E BUILDING- IN PROVIDING A 'PLUG AND PLAY' ENVIRONMENT FOR THE SOFTWARE COMPANIES - WHERE THE LESSEE COULD START ITS OPERAT IONS WITH THEIR COMPUTERS. IN OTHER WORDS, IT IS CARRYING ON AN ACTIVITY IN THE REALM OF INFRASTRUCTURE DEVELOPMENT. IT HAS PUR CHASED SEVERAL CAPITAL ITEMS FOR THIS PURPOSE AND DEVELOPE D THIS INFRASTRUCTURE. THIS DEMONSTRATES THAT THE APPELLAN T WAS NOT MERELY EXPLOITING A PROPERTY AS AN OWNER, BUT WAS V ENTURING INTO THE REALM OF BUSINESS BY PROVIDING AN ENVIRONM ENT FOR SOFTWARE COMPANIES TO WORK. IT IS A FACILITY SERVIC E PROVIDER AND NOT A LANDLORD. 3. IT HAS APPLIED AND OBTAINED RECOGNITION FOR ITS INF RASTRUCTURE UNDER THE INDUSTRIAL PARK, SCHEME OF THE GOVERNMENT OF INDIA. THIS SCHEME WAS NOTIFIED BY THE MINISTRY OF COMMERC E AND INDUSTRY IN DECEMBER 1999 IN EXERCISE OF ITS POWER UNDER SECTION 80IA(4)(III) OF THE ACT FOR THE PURPOSE OF INFRASTR UCTURE DEVELOPMENT IN THE COUNTRY. THIS SCHEME HAS DEFINED THE 'UNDERTAKING' TO MEAN ANY UNDERTAKING WHICH IS ENGA GED IN THE BUSINESS OF DEVELOPING ' DEVELOPING AND OPERATING O R MAINTAINING AND OPERATING AN INDUSTRIAL PARK NOTIFIED BY THE CE NTRAL GOVERNMENT IN ACCORDANCE WITH THIS SCHEME. IN OTHER WORDS, THE MINISTRY' OF COMMERCE EMPOWERED UNDER THE ACT ITSEL F RECOGNIZES THE ACTIVITY AS BUSINESS ACTIVITY. I.T.A. NOS. 2194 TO 2199/MDS/10 11 9.29 IN VIEW OF THE ABOVE DECISIONS AND CONSIDERING THE AMOUNT OF INVESTMENT MADE BY THE APPELLANT, LOANS BORROWED FR OM THE BANKS AND FINANCIAL INSTITUTIONS THE NATURE OF THE BUILDI NG, THE KIND OF FACILITIES, AMENITIES AND SERVICES PROVIDED BY THE APPELLANT, WHICH ARE EVIDENT FROM THE LEASE AGREEMENTS, APPROVAL LET TER FROM MINISTRY OF COMMERCE AND OTHER RECORDS FILED BY THE APPELLANT, IT IS CLEAR THE APPELLANT IS ENGAGED IN THE BUSINESS O F DEVELOPMENT AND OPERATION OF INDUSTRIAL PARK, WHICH IS A COMMER CIAL ASSET, LET OUT WITH A VIEW TO EARN PROFITS. THE LD. D.R. OF THE REVENUE SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT AS THE PAYER OF THE AMOUNT ON DEDUCTED TDS U/S 194(1) OF THE ACT AND THEREFORE, THE INCOME IN THE HANDS OF THE ASSESSEE WAS INCOME FROM RENT AND ASSESSABLE UN DER THE HEAD INCOME FROM HOUSE PROPERTY. 7. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT T HE LD. CIT(A) HAS RIGHTLY HELD THE INCOME EARNED BY THE ASSESSEE FROM I.T. TECHNOLOGY PART AS BUSINESS INCOME IN VIEW OF THE F ACT THAT THE ASSESSEE HAS CONSTRUCTED A PROPERTY PROVIDING ALL K INDS OF FACILITIES AND AMENITIES FOR ITS USE AS I.T. SOFTWARE DEVELOPM ENT BY THE I.T.A. NOS. 2194 TO 2199/MDS/10 12 PERSONS TO WHOM THEY HAVE BEEN LET OUT. THE ACTION OF THE LD. CIT(A) IS SUPPORTED BY THE DECISION OF THE BANGALOR E B BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. M/S GOLFLINK S OFTWARE PARK P. LTD. REPORTED IN 2011-TIOL-660-ITAT-BANG AND ANOTHE R DECISION OF THE BANGALORE A BENCH OF THE TRIBUNAL IN THE CASE OF GLOBAL TECH PARK [P] LTD VS. ACIT REPORTED IN 2008-(ID2)-GJX-03 63-TBAN. PHOTOCOPIES OF THESE ORDERS HAVE BEEN FILED BEFORE US. 8. FURTHER, REGARDING THE SUBMISSION OF THE LD. D.R . THAT TDS WAS DEDUCTED FROM PAYMENTS MADE TO THE ASSESSEE BY PAYE ES U/S 194(1) OF THE ACT AND THEREFORE, THE INCOME WAS INCOME FRO M HOUSE PROPERTY. HE RELIED ON THE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. TEJMALBHAI & CO. RE PORTED IN 2005- (ID2)-GJX-0577-TRJK AND SUBMITTED THAT THE TRIBUNAL IN THAT CASE HAS HELD THAT EVENTHOUGH THE CUSTOMERS MAKING PAYME NT TO ASSESSEE BOOKED THE EXPENDITURE IN THEIR BOOKS OF A CCOUNT UNDER THE HEAD RENTAL EXPENDITURE /PAYMENT AND DEDUCTED TDS THEREON U/S 194(1), YET THE INCOME SO RECEIVED IS ASSESSABL E IN THE ASSESSEES HAND AS INCOME FROM BUSINESS AND NOT AS INCOME FROM I.T.A. NOS. 2194 TO 2199/MDS/10 13 RENT OR INCOME FROM HOUSE PROPERTY BECAUSE, IRRESPE CTIVE OF THE HEAD UNDER WHICH THE PERSONS MAKING PAYMENT BOOK SU CH EXPENDITURE/PAYMENT IN ITS BOOKS OF ACCOUNT OR THE NATURE OR TREATMENT GIVEN BY HIM IS NOT NECESSARILY REQUIRED TO BE SAME IN THE HANDS OF THE RECIPIENT OF INCOME OR PAYMENT OF INCO ME. HE FURTHER ARGUED THAT THE LD. CIT(A) HAS HELD THAT EVEN IF TH E INCOME IS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80I OF THE ACT IN VIE W OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KOKONAD A RADHASWAMY REPORTED IN 57 ITR 306 [SC] WHERE IT HAS BEEN HELD THAT THE HEAD OF INCOME UNDER WHICH AN INCOME IS ASSESSED IS NOT REL EVANT FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER THE HEAD. HE S UBMITTED THAT THE REVENUE IN THE PRESENT APPEALS HAS NOT CHALLENG ED THIS FINDING OF THE LD. CIT(A). THEREFORE, THE APPEAL FILED BY THE REVENUE HAS NO TAX DEDUCTED AND IS ONLY AN ACADEMIC EXERCISE BE CAUSE IRRESPECTIVE OF THE HEAD UNDER WHICH THE INCOME IS ASSESSED THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA OF THE A CT. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL ON RECORD. IN THE IN STANT CASE, THE I.T.A. NOS. 2194 TO 2199/MDS/10 14 ASSESSEE COMPANY EARNED RENT INCOME FROM LETTING OU T PREMISES RR TOWER I COMPRISING OF 35,975 SQ.FT. AND RR TOWER II COMPRISING OF 70,000 SQ.FT. TO ALCATEL DEVELOPMENT CENTRE PVT. LT D. SUCH RENT INCOME EARNED WAS ` .2,88,17,608/- IN THE ASSESSMENT YEAR 2002-03, ` .2,55,22,103/- IN THE ASSESSMENT YEAR 2003-04. IN T HE ASSESSMENT YEAR 2004-05, THE RENT INCOME WAS EARNED FROM NAMEL Y ALCATEL DEVELOPMENT CENTRE, CHENNAI P. LTD. ` .2,29,84,099/-, AITHENT TECHNOLOGIES P. LTD. ` .7,96,935/-, LAPIZ DIGITAL SERVICES ` .48,66,518/- TOTALING TO ` .2,79,30,311/-. IN THE ASSESSMENT YEAR 2005-06, THE ASSESSEE EARNED RENT INCOME OF ` .4,53,43,205/-. IN THE ASSESSMENT YEAR 2006-07, THE ASSESSEE EARNED RENT I NCOME OF ` .9,61,11,439/-. IN THE ASSESSMENT YEAR 2007-08, THE ASSESSEE EARNED RENT INCOME OF ` .11,76,03,103/-. THE ASSESSEE TREATED THE ABOVE RENT INCOME AS ITS BUSINESS INCOME AND ALSO C LAIMED DEDUCTION UNDER SECTION 80IA(4)(III) OF THE ACT OF SUCH INCOME. ON A SHOW CAUSE FROM THE ASSESSING OFFICER THAT WHY THIS INCOME SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY, THE A SSESSEE RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SANMAR HOLDING PVT. LTD. 272 ITR 341, WHERE IT WAS HELD THAT IF I.T.A. NOS. 2194 TO 2199/MDS/10 15 THE ASSESSEE IS ABLE TO ESTABLISH THAT THE PROPERTY WAS A COMMERCIAL ASSET, THEN THE INCOME DERIVED FROM SUCH ASSET CAN BE TREATED AS BUSINESS INCOME. THE ASSESSEE SUBMITTED THAT IN ITS CASE ALSO THE FACILITIES MADE AVAILABLE TO THE TENANTS IN EACH OF THE BUILDING NAMELY, CAR PARKING SPACE, GENERAL LIGHTING ON ALL SIDES, LANDSCAPE GARDEN, RAIN WATER DRAIN, SEWAGE CONNECTION, TOILET S, STORAGE SPACE, LIGHTS AND FANS, ETC. MAKES THE BUILDING A COMMERCI AL ASSET AND HENCE INCOME THERE FROM WAS BUSINESS INCOME. 10. ACCORDING TO THE ASSESSING OFFICER, THE ASSESS EE HAD NOT MADE OUT A CASE FOR TREATING RENT INCOME AS BUSINESS INC OME. THE LIST OF FACILITIES PROVIDED TO TENANTS DOES NOT CHANGE THE CHARACTER OF THE ACTIVITIES OF THE ASSESSEE IN AS MUCH AS ANY MODERN PROPERTY LET OUT WILL CONTAIN ALL THESE FACILITIES. THE ASSESSING OF FICER DISTINGUISHED THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF SANMAR HOLDINGS PVT. LTD. (SUPRA) RELIED ON BY THE ASSESS EE OBSERVING THAT IN THAT CASE THE ASSESSEE WAS ENGAGED IN PURCHASE A ND SALE OF PROPERTIES AND COURT REFERRED TO ONLY THOSE PROPERT IES, WHICH WERE PURCHASED AND SOLD IN THE REAL ESTATE BUSINESS AS C OMMERCIAL PROPERTIES AND NOT THE PROPERTY WHICH WAS LET OUT F OR COMMERCIAL I.T.A. NOS. 2194 TO 2199/MDS/10 16 PURPOSES. THE ASSESSING OFFICER RELIED ON THE DECIS ION IN THE CASE OF CIT VS. CHENNAI PROPERTIES & INVESTMENTS LTD. 226 I TR 685; INDIAN OVERSEAS BANK LTD. V. CIT 246 ITR 206 (MAD); SAMBHU INVESTMENTS P LTD. V. CIT 263 ITR 143 (SC) AND HELD THAT THE INCO ME IN QUESTION WAS INCOME FROM HOUSE PROPERTY OF THE ASSESSEE. 11. ON APPEAL, THE LD. CIT(A), REFERRING TO THE LE TTER NO. 15(8)/2001-IP & ID OF GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRY POLICY & PROMO TION, SECRETARIAT FOR INDUSTRIAL ASSISTANCE, INVESTMENT P ROMOTION AND INFRASTRUCTURE DEVELOPMENT CELL DATED 1 ST AUGUST, 2001 HELD THAT THE MINISTRY UNEQUIVOCALLY HAS STATED THAT THE ASS ESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4)(III) OF THE ACT , WHICH SPECIFICALLY REFERS TO DEVELOPING, OPERATING AND MA INTAINING OF AN INDUSTRIAL PARK AND THAT THE SCHEME RECOGNIZES THE ACTIVITY OF AN UNDERTAKING ENGAGED IN DEVELOPMENT OF INFRASTRUCTUR AL FACILITIES OR BUILT-UP SPACE WITH COMMON FACILITIES IN ANY AREA A LLOTTED OR EARMARKED FOR SOFTWARE DEVELOPMENT AS AN ELIGIBLE I NDUSTRIAL PARK AND ALSO REGARDS SUCH ACTIVITY AS BUSINESS ACTIVITY , HELD THE INCOME IN QUESTION AS BUSINESS INCOME OF THE ASSESSEE. I.T.A. NOS. 2194 TO 2199/MDS/10 17 12. BEFORE US, THE REVENUE DISPUTED THE FINDINGS O F THE LD. CIT(A) TO THE EXTENT THE LD. CIT(A) HELD THAT THE RENTAL I NCOME DERIVED BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD PROF IT AND GAINS OF BUSINESS. THUS, THE ONLY ISSUE, WHICH REQUIRES ADJ UDICATION BY US IS THAT THE RENTAL INCOME DERIVED BY THE ASSESSEE FROM LETTING OUT IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPE RTY OR UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSIO N. 13. THE LD. DR RELIED UPON THE ORDER OF THE ASSESS ING OFFICER AND SUBMITTED THAT THE FACILITIES PROVIDED BY THE ASSES SEE WERE PROVIDED BY ANY OWNER OF THE HOUSE PROPERTY AND WERE INCIDEN TAL TO THE LETTING OUT OF THE PROPERTY AND THEREFORE, THE RENT AL INCOME SHOULD BE HELD AS ASSESSABLE UNDER THE HEAD INCOME FROM H OUSE PROPERTY. THE LD. DR ALSO SUBMITTED THAT THE DEDUC TION OF TAX AT SOURCE ON THE RENTAL INCOME DERIVED BY THE ASSESSEE WAS MADE UNDER SECTION 194 I OF THE ACT AND THEREFORE, SUCH RENTAL INCOME ARE TO BE ASSESSED UNDER THE HEAD HOUSE PROPERTY. 14. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE DECI SION OF THE LD. CIT(A) FINDS SUPPORT FROM THE DECISION OF THE BANGA LORE BENCH OF THE I.T.A. NOS. 2194 TO 2199/MDS/10 18 TRIBUNAL IN THE CASE OF GLOBAL TECH PARK (P.) LTD. V. ACIT 2008- (199)-TTJ-0421-TBAN AND IN THE CASE OF DCIT VS. M/S . GLOFLINK SOFTWARE PARK P. LTD. 2011-TIOL-660-ITAT-BANG. HE ALSO POINTED OUT THAT UNDER THE SCHEME OF THE INCOME TAX ACT, RE NTAL INCOME CAN BE ASSESSED AS BUSINESS INCOME AS EVIDENT FROM THE PROVISIONS OF SECTION 80IA(4)(III) OF THE ACT. WE FIND THAT SE CTION 194 I PROVIDES FOR DEDUCTION OF TAX AT SOURCE WHEN RENT AS DEFINED IN THAT SECTION IS PAID BY THE PERSON SPECIFIED IN THAT SECTION EXC EEDING THE LIMIT PRESCRIBED IN THAT SECTION. AS PER THE PROVISIONS O F SECTION 194 I, THE TDS IS TO BE MADE NOT ONLY IN RESPECT OF RENT OF HO USE PROPERTY, BUT ALSO FOR RENT OF MACHINERY OR EQUIPMENTS, ETC. THER EFORE, WE DO NOT FIND ANY FORCE IN THE ARGUMENTS OF THE LD. DR THAT AS TAX WAS DEDUCTED UNDER SECTION 194 I OF THE ACT ON THE RENT AL INCOME DERIVED BY THE ASSESSEE AND THEREFORE, SUCH RENTAL INCOME MUST BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 15. WE ARE IN AGREEMENT WITH THE SUBMISSIONS OF TH E LD. AR OF THE ASSESSEE TO THE EXTENT THAT INCOME DERIVED BY DEVEL OPING AND OPERATING OR MAINTAINING AN INDUSTRIAL PARK IS ASSE SSABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION AS CAN BE INFERRED I.T.A. NOS. 2194 TO 2199/MDS/10 19 FROM THE PROVISIONS OF SECTION 80IA(4)(III). HOWEVE R, WE FIND THAT THE LD. CIT(A) HAS OPINED THAT THE GOVERNMENT OF IN DIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRY POLIC Y & PROMOTION, SECRETARIAT FOR INDUSTRIAL ASSISTANCE IN VESTMENT PROMOTION AND INFRASTRUCTURE DEVELOPMENT CELL DATED 1 ST AUGUST, 2001 HAS HELD THAT THE ASSESSEE IS ELIGIBLE TO DEDU CTION UNDER SECTION 80IA(4)(III) ON ITS INCOME DERIVED FROM LET TING OUT OF THE PROPERTY IN QUESTION AS THE PROPERTY IN QUESTION IS AN INDUSTRIAL PARK WITHIN THE MEANING OF SECTION 80IA(4)(III) OF THE A CT. WE FIND THAT THE COPY OF THE AFORESAID LETTER DATED 01.08.2001 I S PLACED AT PAGE 1 TO 2 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE SAID LETTER READS AS UNDER: NO. 15(8)/2001-IP & ID GOVERNMENT OF INDIA MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF INDUSTRY POLICY & PROMOTION SECRETARIAT FOR INDUSTRIAL ASSISTANCE INVESTMENT PROMOTION & AND INFRASTRUCTURE DEVELOPME NT CELL UDYOG BHAVAN, NEW DELHI 110 011 DATED: AUGUST 01, 2001 TO, M/S R.R.LNDUSTRIES LIMITED, 94-95, BLOCK- VI, THIRU-VI-KA-INDUSTRIAL ESTATE, GUINDY, CHENNAI - 600 032. SUB: APPLICATION FOR SETTING UP OF INDUSTRIAL PARK (SIA REGN NO.08/SIA/IP/2001 DATED 25.06.2001) UNDER THE SCHEM E NOTIFIED BY I.T.A. NOS. 2194 TO 2199/MDS/10 20 THIS MINISTRY (S.O. NO. 1201 (E) DATED 01.12.99). REF: YOUR APPLICATION DATED 21.06.2001 ACKNOWLEDGE D VIDE SIA REF. NO. NO.08/SIA/IP/2001 DATED 25.06.2001 AND SUBSEQUENT C LARIFICATIONS VIDE LETTERS DATED 02.07.2001, 12.07.2001 AND 16.07.2001 . SIR, I AM DIRECTED TO REFER TO YOUR APPLICATION ON THE ABOVE MENTIONED SUBJECT AND TO CONVEY THE APPROVAL OF THE GOVERNMENT OF INDIA TO YOUR PROPOSAL FOR SETTING UP OF AN INDUSTRIAL PARK, IN T ERMS OF THE SCHEME NOTIFIED BY THIS MINISTRY IN EXERCISE OF THE POWERS UNDER SE CTION 80 IA, SUB SECTION 4(III) OF THE INCOME-TAX ACT, 196/, SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS: 1. (I) NAME OF THE INDUSTRIAL UNDERTAKING : M/S. R. R. INDUSTRIES LIMITED ( II) PROPOSED LOCATION ADDRESS : 94-95, BLOCK-VI, THIRU-VI-KA-INDUSTRIAL ESTATE GUINDY, CHENNAI 600 032, TAMIL NADU. (III) PROPOSED AREA OF INDUSTRIAL PARK : 8593.46 SQ .M. (IV) PROPOSED ACTIVITIES: NATURE OF INDUSTRIAL ACTIVITY WITH NIC CODE NIC CODE DESCRIPTION S.NO. SECTION DIVISION GROUP CLASS A 8 89 892 - DATA PROCESSING, SOFTWARE DEVELOPMENT AND COMPUTER CONSULTANCY SERVICES. B 8 89 893 - BUSINESS AND MA NAGEMENT CONSULTANCY ACTIVITIES C 8 89 895 - TECHNICAL TESTING AND ANALYSIS SERVICES D 6 60 609 - WHOLESALE TRADE IN TEXTILES AND TEXTILE PRODUCTS. (V) PERCENTAGE OF ALLOCABLE AREA : 100% PROPOSED FOR INDUSTRIAL USE (VI) PERCENTAGE OF LAND EAR-MARKED FOR : 0% COMMERCIAL USE (VII) PROPOSED NO. OF INDUSTRIAL UNITS : 30 UNITS (VIII) TOTAL INVESTMENT PROPOSED : ` .7.0 CRORES (IX) INVESTMENT ON BUILT UP SPACE FOR : ` .4.0 CRORES INDUSTRIAL USE I.T.A. NOS. 2194 TO 2199/MDS/10 21 (X) INVESTMENT ON INFRASTRUCTURE : ` .6.5 CRORES DEVELOPMENT INCLUDING INVESTMENT ON BUILT UP SPACE FOR INDUSTRIAL USE 2. NECESSARY APPROVALS INCLUDING THAT FOR FOREIGN D IRECT INVESTMENT/NON- RESIDENT INDIAN INVESTMENT BY THE FOREIGN INVESTMEN T PROMOTION BOARD/ RESERVE BANK OF INDIA, SHALL BE TAKEN SEPARATELY AS PER THE POLICY AND PROCEDURES IN FORCE. 3. YOU SHALL CONTINUE TO OPERATE THE INDUSTRIAL PA RK DURING THE PERIOD IN WHICH THE BENEFITS UNDER SUB SECTION 4(III) OF SECT ION 80 I A OF THE INCOME-TAX ACT ARE TO BE AVAILED BY YOU. 4. YOU SHALL SUBMIT A HALF-YEARLY REPORT ON THE 1 ST JANUARY & 1 ST JULY OF THE YEAR TO THE UNDERSIGNED IN THE IPS-II FORM ENCLOSED WITH THIS LETTER. 5. THE CONDITIONS MENTIONED IN PARA I ABOVE, ARE AS PER THE PROPOSAL MADE BY THE UNDERTAKING AND ARE WITHIN THE PROVISIONS OF TH E SCHEME NOTIFIED BY THIS DEPARTMENT VIDE S.O.NO. 1201(E) DATED 01.12.1999. T HE CONDITIONS IN PARA I AND OTHERS INCLUDED IN THIS LETTER SHOULD BE ADHERE D TO. THE GOVERNMENT MAY WITHDRAW THE ABOVE APPROVAL IN CASE OF FAILURE TO C OMPLY WITH ANY OF THE CONDITIONS. 6. YOU ARE REQUESTED TO CONFIRM ACCEPTANCE OF THE ABOVE TERMS & CONDITIONS TO THE UNDERSIGNED WITHIN ONE MONTHS OF THE ISSUANCE OF THIS LETTER. YOURS FAITHFULLY, SIGNED/- (ASHISH SHARMA) DESK OFFICER TEL: NO: 011- 3018356 FAX: NO: 011- 301 1770 COPY TO: I. JOINT SECRETARY (TPL-II). C.B.D.T., MINISTRY OF FIN ANCE, DEPARTMENT OF REVENUE, NORTH BLOCK, NEW DELHI (2 COPIES), ALONG WITH A COPY OF THE ORIGINAL APPLICATION DATED 21.06.2001 AND SUBSEQUEN T LETTERS AS DETAILED ON PAGE I. 2. CHIEF SECRETARY. GOVT. OF TAMIL NADU. FORT ST. GEOR GE, CHENNAI - 600 009. 3. GUARD FILE. SIGNED/- (ASHISH SHARMA) DESK OFFICER I.T.A. NOS. 2194 TO 2199/MDS/10 22 16. THUS, A PERUSAL OF THE ABOVE SHOWS THAT THE AS SESSEE WAS ONLY GRANTED APPROVAL FOR SETTING UP OF AN INDUSTRIAL PA RK. FROM THE ABOVE LETTER IT CANNOT BE HELD THAT THE ESTABLISHME NT OR INFRASTRUCTURE CREATED BY THE ASSESSEE WAS ACTUALLY HELD AS AN INDUSTRIAL PARK WITHIN THE MEANING OF SECTION 80IA( 4)(III) OF THE ACT BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AN D INDUSTRY, DEPARTMENT OF INDUSTRY POLICY & PROMOTION, SECRETAR IAT FOR INDUSTRIAL ASSISTANCE INVESTMENT PROMOTION AND INFR ASTRUCTURE DEVELOPMENT CELL. THE ABOVE LETTER ALSO DOES NOT PR OVIDE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(4)(III) OF THE ACT AND THE SAID LETTER MERELY CONVEYS ITS APPROVAL OF THE PROPOSAL OF THE ASSESSEE TO SET UP AN INDUSTRIAL PARK. 17. FURTHER, WE FIND THAT RULE 18C OF THE INCOME T AX RULES PROVIDES THAT THE UNDERTAKING AND THE INDUSTRIAL PA RK SHALL BE NOTIFIED BY THE CENTRAL GOVERNMENT UNDER THE INDUST RIAL PARK SCHEME 2008 AND THE UNDERTAKING SHALL CONTINUE TO F ULFILL THE CONDITIONS ENVISAGED IN THE INDUSTRIAL PARK SCHEME 2008. THUS, IN OUR CONSIDERED OPINION, MERELY ON THE BASIS OF THE ABOVE APPROVAL LETTER, IT CANNOT BE CONCLUDED AS TO WHETHER THE AS SESSEES I.T.A. NOS. 2194 TO 2199/MDS/10 23 PREMISES WAS AN INDUSTRIAL PARK WITHIN THE MEANING OF SECTION 80IA(4)(III) OR NOT. 18. WE FIND THAT IN THE CASE OF DCIT VS. M/S. GOLF LINK SOFTWARE PARK P LTD. (SUPRA), THE TRIBUNAL FOUND THAT THE TA X PAYER WAS NOT ONLY LETTING OUT ITS BUILDING FOR RENT, BUT ALSO CA RRIED ON A COMPLEX COMMERCIAL ACTIVITY OF SETTING UP OF SOFTWARE TECHN OLOGY PARK IN WHICH VARIOUS AMENITIES HAD BEEN PROVIDED. THE TRIB UNAL HAS HELD AS UNDER: 9.1 IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD DEVELOPED A TECHNOLOGY PARK WHEREIN A NUMBER OF ELITE I.T. COMP ANIES HAVE BEEN HOUSED. IT WAS ALSO A FACT THAT THE ASSESSEE H AD NOT MERELY LET-OUT ITS BUILDINGS FOR RENT, BUT ALSO CARRIED ON A COMPLEX COMMERCIAL ACTIVITY OF SETTING UP A SOFTWARE TECHNO LOGY PARK IN WHICH VARIOUS AMENITIES AND FIT-OUTS HAVE BEEN P ROVIDED. 9.2. IN THIS CONNECTION WE RECALL THE RULING OF THE HIGHEST JUDICIARY OF THE LAND IN DISTINGUISHING V THE SIGNI FICANCE OF MERELY LETTING OUT A BARE BUILDING AND A BUILDING BR ACED UP WITH VARIOUS AMENITIES IN THE CASE OF CIT , BOMBAY CITY 1 V. NATIONAL STORAGE PVT. LTD. REPORTED IN 66 ITR 596 ( SC) WHEREIN AFTER ANALYZING THE ISSUE AT LENGTH, THE HON'BLE CO URT HAD VISUALIZED THAT 'IN OUR VIEW, THE HIGH COURT WAS RIGHT IN HOLDING T HAT THE ASSESSEE WAS CARRYING ON AN ADVENTURE OR CONCER N IN THE NATURE OF TRADE. THE ASSESSEE NOT ONLY CONSTRUC TED VAULTS OF SPECIAL DESIGN AND SPECIAL DOORS AND ELEC TRIC FITTINGS, BUT IT ALSO RENDERED OTHER SERVICES TO TH E VAULT- HOLDERS. IT INSTALLED FIRE ALARM AND WAS INCURRING EXPENDITURE FOR THE MAINTENANCE OF FIRE ALARM BY PAY ING CHARGES TO THE MUNICIPALITY. TWO RAILWAY BOOKING OF FICES I.T.A. NOS. 2194 TO 2199/MDS/10 24 WERE OPENED IN THE PREMISES FOR THE DISPATCH AND RECEIPT OF FILM PARCELS. THIS, IT APPEARS TO US, IS A VALUABLE SERVICE. IT ALSO MAINTAINED A REGULAR STAFF CONSISTING OF A SECRETARY, A PEON, A WATCHMAN AND A SWEEPER, AND APART FROM THAT IT PAID FOR THE ENTIRE STAFF OF THE INDIAN MOTION PICTURE DISTRIBUTORS' ASSOCIAT ION AN AMOUNT OF RS. 800 PER MONTH FOR SERVICES RENDERED T O THE LICENSEES. THESE VAULTS COULD ONLY BE USED FOR THE SPECIFIC PURPOSE OF STORING OF FILMS AND OTHER ACTI VITIES CONNECTED WITH THE EXAMINATION, REPAIRS, CLEANING, WAXING AND REWINDING OF THE FILMS.' 9.2.1. FURTHER, AN IDENTICAL ISSUE TO THAT OF THE P RESENT ONE HAD CROPPED UP BEFORE THE EARLIER HONBLE BANGALORE BENCH IN THE CASE OF GLOBAL TECH PARK (P) LTD. V. ACIT - REP ORTED IN (2008) 119 IT) (BANG) 421 - WHEREIN IT WAS OBSERVED THAT 'THE ASSESSEE HAVING BEEN INCORPORATED WITH THE SOL E INTENTION OF DEVELOPING TECHNOLOGY PARK FOR WHICH I T OBTAINED LEASEHOLD LAND FROM KIDC AND ALSO OBTAINED LOAN FROM BANK FOR CONSTRUCTING SUPERSTRUCTURE THER EON, IT COULD NOT BE CONSIDERED AS HAVING MADE INVESTMEN T IN A PROPERTY FOR EARNING RENTAL INCOME ONLY. THE LEASE OF THE PROPERTY WAS SHOWN AS PART OF THE BUSINESS ACTI VITY, THUS, THE INCOME RECEIVED THERE FROM CANNOT BE SAID AS INCOME RECEIVED AS A LAND OWNER BUT AS A TRADER THE ACTIVITY WAS DONE BY THE ASSESSEE AS A BUSINESS VENTURE AND WAS IN ACCORDANCE WITH THE MAIN OBJECT OF THE COMPANY. THE INTENTION OF ANY PRUDENT BUSINESSM AN IS TO EARN; PROFIT AT A MAXIMUM LEVEL AND INVESTMENT MADE IN THE BUSINESS NEVER LOST ITS MAIN INTENTION FOR WHICH IT WAS INCORPORATED.THE ASSESSEE IS PROVIDING WARD AND WATCH, MAINTENANCE OF COMMON AREA, MAINTENANCE OF LIGHT IN THE COMMON AREA, SUPP LY OF WATER, PROVIDING LIFT, INSTALLATION OF ELECTRIC TRANSFORMER, POWER TO THE LESSEES, PROVIDING GENERA TOR, OVER-HEAD WATER TANKS, MAINTENANCE OF DRAINAGE ETC. , THIS CLEARLY ESTABLISHES THAT THE ENTIRE ACTIVITY I S IN ORGANIZED MANNER TO EARN PROFIT OUT OF INVESTMENT M ADE BY THE ASSESSEE AS A COMMERCIAL VENTURE. IN VIEW I.T.A. NOS. 2194 TO 2199/MDS/10 25 THEREOF, THE AO IS DIRECTED TO ASSESS THE RENTAL IN COME AS FROM BUSINESS .....' 9.2.2. AS THE ISSUE BEFORE THE EARLIER BENCH WAS SI MILAR TO THAT OF THE PRESENT CASE WHEREIN THE HON'BLE BENCH TOOK COGNIZANCE OF THE FACT THAT 'THE ASSESSEE IS PROVID ING WARD AND WATCH, MAINTENANCE OF COMMON AREA, MAINTENANCE OF LIGHT IN THE COMMON AREA, SUPPLY OF WATER, PROVIDIN G LIFT, INSTALLATION OF ELECTRIC TRANSFORMER, POWER TO THE LESSEES, PROVIDING GENERATOR, OVER-HEAD WATER TANKS, MAINTEN ANCE OF DRAINAGE ETC., THIS CLEARLY ESTABLISHES THAT THE EN TIRE ACTIVITY IS IN ORGANIZED MANNER TO EARN PROFIT OUT OF INVEST MENT MADE BY THE ASSESSEE AS A COMMERCIAL VENTURE' AND, ACCOR DINGLY, ARRIVED AT A CONCLUSION THAT THE RENTAL RECEIPTS OF THE ASSESSEE IS TO BE ASSESSED AS 'BUSINESS INCOME'. IN CONFORMITY WITH THE FINDING OF THE EARLIER BENCH AS WELL AS RU LING OF THE HON'BLE APEX COURT CITED SUPRA, WE ARE OF THE CONSI DERED VIEW THAT THE LD. CIT (A) WAS JUSTIFIED IN ARRIVING AT SUCH A CONCLUSION. IT IS ORDERED ACCORDINGLY. 9.2.3. BEFORE PARTING WITH THE ISSUE, WE WOULD LIKE TO EMPHASIS THAT WE HAVE DULY PERUSED THE CASE LAWS ON WHICH TH E REVENUE HAD PLACED ITS STRONG RELIANCE, CHIEFLY, IN THE CAS E OF CIT V. BHOOPALAM COMMERCIAL COMPLEX AND INDUSTRIES PVT. LT D. [262 ITR 517 (KAR)]. IN THAT CASE, THE ISSUE, IN BRIEF, WAS THAT THE ASSESSEE WAS A PRIVATE LIMITED COMPANY AND ONE OF I TS DIRECTORS HAD TAKEN CERTAIN EXTENT OF LANDS SITUATE D AT BANGALORE ON A LONGTERM LEASE OF 36 YEARS UNDER A R EGISTERED LEASE-DEED AND EXECUTED A REGISTERED DEED OF TRANSF ER IN FAVOUR OF THE ASSESSEE-COMPANY TRANSFERRING HIS LEASEHOLD RIGHTS. SUBSEQUENTLY, THE ASSESSEE-COMPANY BUILT A COMMERCI AL COMPLEX ON THE SAID LAND AND ALLOTTED THE SAME TO V ARIOUS PARTIES AND EARNED INCOME THERE-FROM. FOR THE YEAR 1985-86 AND 86-87, THE ASSESSEE FILED ITS RETURNS OF INCOME SHOWING LOSSES FOR WHICH THE AO COMPLETED TH E ASSESSMENTS MAKING MINOR ADJUSTMENTS IN COMPUTING T HE LOSSES. THE CIT INITIATED SUO MOTTO PROCEEDINGS U/S 263 AND AFTER SUCH PROCEEDINGS DIRECTED THE AO TO MAKE FRESH ASSESSMEN TS COMPUTING THE INCOME FROM RENTALS RECEIVED FROM THE I.T.A. NOS. 2194 TO 2199/MDS/10 26 COMMERCIAL COMPLEX UNDER THE HEAD 'INCOME 'FROM HOU SE PROPERTY.' ON AN APPEAL BY THE ASSESSEE, THE TRIBUNAL HELD THA T THE INCOME DERIVED BY THE ASSESSEE COULD HAVE BEEN ASSE SSED ONLY AS INCOME FROM BUSINESS AND NOT UNDER THE HEAD 'INC OME FROM HOUSE PROPERTY'. ACCORDING TO THE TRIBUNAL, SINCE T HE LAND OVER WHICH THE PROPERTY HAD BEEN BUILT IS A LEASEHOLD LA ND, THE ASSESSEE CANNOT BE TREATED AS THE OWNER OF THE LAND WHICH IS A CONDITION PRECEDENT FOR TREATING THE INCOME AS INCO ME FROM HOUSE PROPERTY UNDER SECTION 22 OF THE ACT. THE HON'BLE COURT, TAKING CUE FROM THE RULING OF TH E HON'BLE SUPREME COURT IN THE CASE OF CIT V. PODAR CEMENT (P.) LTD. [1997J 226 ITR 625 = (2002-TIOL-445-SC-IT) , HAD HELD THAT THE INCOME DERIVED BY THE COMPANY FROM SHOPS AND STALLS IS INCOME RECEIVED FROM PROPERTY AND FALLS U NDER THE SPECIFIC HEAD DESCRIBED IN SECTION 9. 9.2.4. WE WOULD LIKE TO POINT OUT THAT THE CASE LAW RELIED ON BY THE REVENUE IS CLEARLY DISTINGUISHABLE TO THE FACTS OF THE ISSUE ON HAND IN THE SENSE THAT THE PRESENT ASSESSEE, APA RT FROM PROVIDING BARE BUILDING, HAD ALSO PROVIDED VARIOUS AMENITIES SUCH AS FIT-OUTS, CENTRAL AIR CONDITIONING, GENERAT OR BACK UPS, STREET LIGHTS, ROADS, DRAINAGE FACILITIES, GARDEN, SECURITY, WATER FACILITIES, SEWERAGE AND WATER TREATMENT PLANT, SUB -STATION FOR ELECTRICITY, WATER TREATMENT PLANT ETC., WHICH WERE NOT MADE AVAILABLE TO THE TENANTS IN THE CASE BHOOPALAM COMM ERCIAL COMPLEX CASE CITED SUPRA. 9.3. IN THE CASE OF SHAMBHU INVESTMENT P. LTD. V. C IT REPORTED IN (2003) 263 ITR 143 (SC), THE ISSUE, IN BRIEF, WA S THAT THE ASSESSEE OWNED AN IMMOVABLE PROPERTY, A PORTION OF WHICH WAS IN ITS POSSESSION AND LET OUT THE REST TO BE USED A S 'TABLE SPACE' TO OCCUPANTS WITH FURNITURE AND FIXTURES AND LIGHTS AND AIR CONDITIONERS. THE ASSESSEE PROVIDED SERVICES LIKE W ATCH AND WARD STAFF, ELECTRICITY, WATER AND OTHER COMMON AME NITIES. THE MONTHLY RENT PAYABLE WAS INCLUSIVE OF ALL CHARG ES. THE ASSESSEE HAD ALSO RECOVERED BY WAY OF SECURITY FROM THE OCCUPANTS. THE HON'BLE HIGH COURT OF CALCUTTA [249 ITR 47 I.T.A. NOS. 2194 TO 2199/MDS/10 27 (CAL)] HELD THAT THE INCOME FROM THE PROPERTY WAS A SSESSABLE IN THE HANDS OF THE ASSESSEE AS INCOME FROM HOUSE PROP ERTY. WHEN THE ISSUE CAME UP ON APPEAL BEFORE THE HON'BLE HIGH EST JUDICIARY OF THE LAND, THE APPEAL WAS DISMISSED, HO LDING THAT THERE WAS NO REASON TO INTERFERE WITH THE CONCLUSIO N ARRIVED AT BY THE HIGH COURT. 9.3.1. WE WOULD LIKE TO POINT OUT THAT THE ISSUE BE FORE THE HON'BLE HIGH COURT WAS THAT THE OCCUPANTS WERE ALLO WED TO USE A PORTION OF PROPERTY AS 'TABLE SPACE' WITH FURNITU RE AND FIXTURES, LIGHTS, AIR-CONDITIONERS ETC., AND THE MO NTHLY RENT PAYABLE WAS INCLUSIVE OF ALL CHARGES WHEREAS THE IS SUE ON HAND IS ENTIRELY ON DIFFERENT FOOTING, NAMELY, THE ASSES SEE HAD DEVELOPED ABOUT 4.7 MILLION SQUARE FOOT OF A TECHNO LOGY PARK IN A SPRAWLING AREA OF MORE THAN 55 ACRES BY PROVID ING VARIOUS AMENITIES SUCH AS ROADS, STREET LIGHTS, DRAINAGE FA CILITIES, GARDENS, HIGH CONNECTIVITY FACILITIES SUCH AS TELEC OMMUNICATION TOWERS, SEWERAGE AND WATER TREATMENT TANKS, WATER T REATMENT PLANTS TO ATTAIN THE STATUS OF A SOFT-WARE TECHNOLO GY PARK WHEREAS IN THE CASE OF SHAMBHU INVESTMENT P. LTD., THE IMMOVABLE WAS A TINY PROPERTY AND THE SO CALLED AME NITIES PROVIDED TO THE OCCUPANTS ONLY AS AGAINST THE AMENI TIES PROVIDED IN A STP TO FEED A SPECIAL PURPOSE. LETTIN G OUT OF A BUILDING IN A STP IS INCIDENTAL WHEREAS THE FACT IN THE CASE OF SAMBHU INVESTMENT WAS RATHER PREDOMINANT AND, THUS, SAMBHU INVESTMENT CASE CANNOT, AT ANY STRETCH OF IM AGINATION, BE EQUATED WITH THAT OF THE PRESENT ASSESSEE. 9.4. TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCE S OF THE ISSUE, WE ARE, THEREFORE, OF THE FIRM VIEW THAT THE CASE LAWS ON WHICH THE REVENUE PLACED RELIANCE CANNOT COME TO ITS RESCUE.' 19. THUS, FROM THE READING OF THE AFORESAID DECISI ONS, WE FIND THAT THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF SHAMBHU INVESTMENTS P. LTD. (SUPRA) WAS FOUND DISTI NGUISHABLE FROM THE FACTS BEFORE THE TRIBUNAL IN THE ABOVE CASES IN AS MUCH AS IN THE I.T.A. NOS. 2194 TO 2199/MDS/10 28 CASE OF M/S. SHAMBHU INVESTMENT LETTING OUT WAS FOU ND TO BE PREDOMINANT AND IN THE CASE BEFORE THE TRIBUNAL LET TING OUT OF A BUILDING IN AN I T PARK WAS ONLY INCIDENTAL. IT WAS FOUND THAT THE ASSESSEE DEVELOPED 4.7 MILLION SQ.FT. OF IT PARK IN A SPRAWLING AREA OF MORE THAN 55 ACRES BY PROVIDING VARIOUS AMENITIE S SUCH AS ROADS, STREETS, LIGHTS, ETC. ON THE ABOVE FACTS, THE TRIBU NAL HELD THAT THE LETTING OUT OF BUILDING ALONG WITH SUCH AMENITIES A MOUNTED COMPLEX COMMERCIAL VENTURE OF THE TAX PAYER AND HAD TO BE T AXED UNDER HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. 20. THUS, READING OF THE AFORESAID DECISIONS SHOWS THAT WHEN VARIOUS AMENITIES PROVIDED BY AN INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK IS PREDOMINANT IN LETTING OUT OF TH E HOUSING UNIT, THEN THE RENTAL INCOME IS TO BE ASSESSED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION AND IN A CASE WHER E LETTING OUT OF BUILDING IS PREDOMINANT AND THE OTHER AMENITIES ARE MERELY INCIDENTAL TO SUCH LETTING OUT THEN THE RENTAL INCO ME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 21. COMING TO THE FACTS OF THE PRESENT CASE, WE FI ND THAT BOTH THE PARTIES HAVE NOT BROUGHT ANY MATERIAL BEFORE US TO SHOW THAT THE I.T.A. NOS. 2194 TO 2199/MDS/10 29 FACILITIES DEVELOPED BY THE ASSESSEE AFTER COMPLETI ON OF THE DEVELOPMENT WAS TREATED AS AN INDUSTRIAL PARK BY AN Y AUTHORITY. FROM THE RECORDS BEFORE US, IT IS NOT CLEAR WHETHER THE ALLEGED INDUSTRIAL PARK WAS SO NOTIFIED BY THE CENTRAL GOVE RNMENT OR NOT. FURTHER, FROM THE FACTS AVAILABLE ON RECORD, IT IS NOT CLEAR THAT WHETHER THE LETTING OUT OF THE BUILDING WAS PREDOMI NANT IN THE TRANSACTION BETWEEN THE ASSESSEE AND THE TENANTS OR WHETHER PREDOMINANT WAS OF THE INDUSTRIAL PARK COMPRISED OF VARIOUS AMENITIES AND LETTING OUT OF A BUILDING, AS SUCH PA RK WAS MERELY INCIDENTAL. IN THE ABOVE CIRCUMSTANCES, IN OUR CONS IDERED OPINION, IT SHALL BE FAIR AND IN THE INTEREST OF JUSTICE TO RES TORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR PROPER VER IFICATION IN THE LIGHT OF THE DISCUSSION MADE HEREINABOVE AND TO REA DJUDICATE THE ISSUE AFRESH AS PER LAW. WE ORDER ACCORDINGLY. NEED LESS TO MENTION THAT PROPER OPPORTUNITY OF HEARING SHALL BE ALLOWED TO THE ASSESSEE BEFORE READJUDICATING THE ISSUE AFRESH. 22. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 2194 TO 2199/MDS/10 30 THE ORDER WAS PRONOUNCED IN THE COURT ON 18.11.201 1. SD/- SD/- (HARI OM MARATHA) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 18 TH NOVEMBER, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI (5) D.R. (6) GUARD FILE