ACIT, CHENNAI V. M/s. Khivraj Motors Pvt. Ltd., CHENNAI

ITA 3098/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4690 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 02-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 07-11-2016
• Court: TRIBUNAL
• Department Lawyers: AJITH KUMAR CHORADIA
• Assessee Lawyers: A V SREEKANTH JT
• Keywords: Business income; Search and seizure
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , . , ! ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ITA NO.874/2013 ! # $# / ASSESSMENT YEARS : 2009-10 KHIVRAJ MOTORS PVT. LTD. 623, ANNA SALAI, CHENNAI 600 006. [PAN: AAACK 2572Q] VS. DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II (4), 121, UTHAMAR GANDHI SALAI, NUNGAMBAKKAM, CHENNAI 600 034. ( /APPELLANT ) ( / RESPONDENT ) ./ITA NO.3098/2016 ! # $# / ASSESSMENT YEARS : 2012-13 ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-4 (2), CHENNAI 600 034. VS. KHIVRAJ MOTORS PVT. LTD. 623, ANNA SALAI, CHENNAI 600 006. [PAN: AAACK 2572Q] ( /APPELLANT ) ( / RESPONDENT ) %& ( ) / APPELLANT BY : SHRI AJITH KUMAR CHORADIA, CA *+%& ( ) / RESPONDENT BY : SHRI A.V. SREEKANTH, JT. CIT ( , / DATE OF HEARING : 02.02.2017 -$ ( , / DATE OF PRONOUNCEMENT : 02.05.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS A SET OF TWO APPEALS, I.E., BY THE ASSESSEE AND THE REVENUE, FOR ASSESSMENT YEARS (AYS.) 2009-10 AND 2012-13 RESPECT IVELY, CONTESTING THE PART ALLOWANCE OR, AS THE CASE MAY BE, ALLOWANCE OF THE ASSESSEES APPEALS CONTESTING 2 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. ITS ASSESSMENTS U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE RELEVANT YEARS BY THE FIR ST APPELLATE AUTHORITY VIDE SEPARATE ORDERS. THE ISSUE ARISING FOR CONSIDERATI ON AND ADJUDICATION BEING COMMON, THE APPEALS WERE POSTED FOR HEARING, AND WE RE ACCORDINGLY HEARD TOGETHER, AND ARE BEING DISPOSED OF VIDE A COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE, A COMPANY OPERATING AS A DEALER OF MARUTI VEHICLES, ALSO SERVICING THE SAME, FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 17.09.2009, ADMITTING AN INCOME OF .7,43,34,181/-, CLAIMING DEDUCTION U/S. 80IA(4)(III ) OF THE ACT AT . 439.74 LACS. THE SAID DEDUCTION, IT WAS FOUND DUR ING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TO BE IN RESPECT OF REN T FROM FOUR CONCERNS (REFER PARA 4.3) TO WHOM BUILT-UP SPACE HAD BEEN LET OUT. THE ASSESSEE CLAIMED THE SAME TO BE A BUSINESS RECEIPT IN-AS-MUCH AS THE LET TING OF BUILDING WAS ALONG WITH THE PROVISION OF CERTAIN FACILITIES, SO THAT I T WAS IN THE NATURE OF BUSINESS INCOME. IN VIEW OF THE ASSESSING OFFICER (AO), HOWE VER, THE SAME WAS ONLY RENT, AS EVIDENCED BY THE DEDUCTION OF TAX AT SOURC E THEREON BY THE PAYERS U/S. 194I OF THE ACT AND, IN ANY CASE, DID NOT CHANGE TH E CHARACTER OF THE INCOME AS INCOME FROM HOUSE PROPERTY. NO SEPARATE DOCUMENT HA D IN FACT BEEN EXECUTED IN RESPECT OF THE FACILITIES. HE, ACCORDINGLY, ASSESSE D THE RENTAL INCOME U/S. 22, AS INCOME FROM HOUSE PROPERTY, RELYING ON THE DECISION IN THE CASE OF SHAMBHU INVESTMENTS (P.) LTD. V. CIT [2003] 263 ITR 143 (SC). FURTHER, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80-IA(4)(III) AS TH E SAME COULD BE ONLY AFTER THE NOTIFICATION OF THE INDUSTRIAL PARK BY CENTRAL BOAR D OF DIRECT TAXES (CBDT), AND WHICH IT HAD NOT. IN APPEAL, THE LD. CIT(A) CON FIRMED THE IMPUGNED ASSESSMENT FOR, PRINCIPALLY, THE SAME REASONS. IN H IS VIEW, IT WAS A CASE OF COMPOSITE LETTING, SATISFYING THE TESTS LAID DOWN F OR THE PURPOSE BY THE APEX COURT IN SULTAN BROTHERS (P.) LTD. V. CIT [1964] 51 ITR 343 (SC), SO THAT THE INCOME WAS LIABLE TO BE ASSESSED, AS AGAINST INCOME FROM BUSINESS, ONLY AS 3 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. INCOME FROM HOUSE PROPERTY. THE ASSESSEES CONTENTI ON THAT ITS OBJECT WAS TO DEVELOP, OPERATE AND MAINTAIN AN INDUSTRIAL PARK CO ULD NOT BE ACCEPTED AS IT WAS AN OLD COMPANY ENGAGED AS AN AUTOMOBILE DEALER, SEL LING SPARES AND SERVICING VEHICLES. FOR AY 2012-13, THE FIRST APPELLATE AUTHO RITY ALLOWED THE ASSESSEE ITS CLAIM FOR DEDUCTION U/S. 80 IA(4)(III) FOLLOWING TH E DECISION BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AYS. 2010-11 AND 2011-1 2, REPRODUCING THERE-FROM. 3. IN FURTHER APPEAL BEFORE US, WHILE THE ASSESSEE REITERATED ITS CASE, CONTENDING THAT THERE HAS BEEN SINCE, I.E., W.E.F. 08.04.2013, A CHANGE IN ITS MEMORANDUM OF ASSOCIATION (MOA), SPECIFICALLY INCOR PORATING OBJECT CLAUSES 57 AND 58, READING AS UNDER, WHICH CLEARLY AUTHORIZ E IT TO ACQUIRE, ON FREE-HOLD OR LEASE-HOLD BASIS, OR IN ANY OTHER MANNER, LAND, BUILDINGS, STRUCTURES, ETC., AND TO TURN THEM OUT AS INDUSTRIAL TOWNSHIPS, PARKS, ET C: 57. TO PURCHASE, ACQUIRE, TAKE ON LEASE OR EXCHANG E OR IN ANY OTHER LAWFUL MANNER IN ANY AREA, LAND, BUILDINGS, S TRUCTURES AND TO TURN OUT THE SAME AS INDUSTRIAL TOWNSHIP, INDUSTRIA L PARK, INFORMATION TECHNOLOGY PARK OR INDUSTRIAL ESTATE OR PROMOTE INDUSTRIAL AND COMMERCIAL ACTIVITY FOR INLAND AND F OREIGN TRADE AND TO PREPARE FACTORY LAYOUT / INDUSTRIAL PLOTS OF DIFFERENT SIZES AND TO MAINTAIN THE SAME, TO CONSTRUCT BUILDINGS FOR RESIDENTIAL, INDUSTRIAL AND COMMERCIAL OR CONVENIENCES THERE ON AND TO EQUIP THE SAME OR PART THEREOF WITH ALL OR ANY AMENITIES OR CONVENIENCES, WATER SUPPLY, WAREHOUSING FACILITIES, DRAINAGE FACILITY, ELECTRIC POWER SUPPLY AND TELEPHONE / TEL EPHONE, TELEVISION INSTALLATIONS, LIGHTING SECURITY SYSTEM AND TO TRANSFER TO THE FOREIGN OR INDIAN TENANTS / INVESTORS TO DEV ELOP INDUSTRIAL AND COMMERCIAL ACTIVITY EITHER ON SALE OR LEASE BAS IS. 58. TO CONSTRUCT, ERECT, BUILD, REPAIR, REMODEL, DE MOLISH, DEVELOP, IMPROVE, CURVE, PAVE, MACADAMIZE AND MAINT AIN BUILDINGS, STRUCTURES, FACTORIES, HOUSES, APARTMENT S, COMMERCIAL BLOCKS, SHOPPING COMPLEX, HOSPITALS, SCHOOLS, TRAIN ING CENTRE, TESTING LABORATORY, WORKER HOUSING, CONVENTION CENT RES, CANTEENS, HOTELS, RESTAURANTS, RECREATION FACILITIES, PLACES OF WORSHIP, HIGHWAYS, ROADS, WEIGH BRIDGES, TRANSPORT TERMINALS, PETROL BUNKS, PATHS, STREETS, SIDEWAYS, AIR CONDITI ONING SYSTEMS, POWER GENERATION PLANTS INCLUDING THOSE OPERATING W ITH RENEWABLE ENERGY SOURCES LIKE WIND, PAVEMENTS, OPEN AREA DEVELOPMENT WITH HORTICULTURE AND TO DO OTHER SIMIL AR 4 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. CONSTRUCTION, LEVELLING OR PAVING WORK IN THE INDUS TRIAL TOWNSHIP, INDUSTRIAL PARK OR INDUSTRIAL ESTATE, DEV ELOPED BY THE COMPANY FOR THE USE OF THE COMPANY OR FOR THE USE O F INDIAN AND / OR FOREIGN INVESTORS / TENANTS. THE LD. DR WOULD STRONGLY OBJECT, STATING THAT SUC H A PLEA WAS NOT ASSUMED BEFORE THE REVENUE AUTHORITIES, SO THAT IT IS NOT MAINTAINABLE. IN ANY CASE, IT IS OF NO CONSEQUENCE IN-AS-MUCH AS THE OBJ ECTS STAND INSERTED ONLY IN APRIL, 2013, WHICH SHALL, THEREFORE, HAVE EFFECT ON LY FOR THE PERIOD ON OR AFTER THE SAID AMENDMENT. ACTS DONE WITHOUT THE AUTHORITY OF ITS CHARTER ARE ULTRA VIRES THE COMPANY, AND THE SAME CANNOT BE RATIFIED EVEN BY THE WHOLE BODY OF THE SHAREHOLDERS. ALL ACTS AND MATTERS CONSEQUENT A ND PURSUANT THERETO, AS FOR EXAMPLE, THE APPLICATION TO THE DEPARTMENT OF IND USTRIAL POLICY & PROMOTION (DIPP) FOR APPROVAL OF THE INDUSTRIAL PARK OR TO TH E CENTRAL BOARD OF DIRECT TAXES (CBDT) FOR ITS NOTIFICATION (04.03.2006), ARE TO BE DISREGARDED, WITH NO SANCTITY IN THE EYES OF LAW. THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESS EES COUNSEL, WOULD IN REJOINDER DRAW OUR ATTENTION TO OBJECT CLAUSES 7, 4 1 AND 46 OF THE UNAMENDED MOA, WHICH READ AS UNDER, CONTENDING, ON THAT BASIS , THAT THE ASSESSEES ACTIVITY OF LEASING WAS IN ANY CASE COVERED BY THES E CLAUSES: 7. A. TO CARRYON BUSINESS AS REAL ESTATE AGENTS AN D DEALERS, BUSINESS IN BUYING AND SELLING LANDS AND BUILDINGS, AUCTIONEER; CONTROLLER AND BUILDERS. B. TO CARRYON BUSINESS IN FINANCING IN ALL TYPES IN CLUDING HIRE PURCHASE OF MOTOR VEHICLES, AUTOMOBILES ETC. 41. TO DEVELOP AND TURN TO ACCOUNT ANY LAND ACQUIR ED BY THE COMPANY OR IN WHICH IT IS INTERESTED AND IN PARTICULAR BY L AYING OUT AND PREPARING THE SAME FOR BUILDING PURPOSE. 46. TO ERECT, CONSTRUCT, ENLARGE, ALTER OR MAINTAI N BUILDING AND STRUCTURES OF EVERY KIND, NECESSARY, OR CONVENIENT FOR THE COMPAN YS BUSINESS. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. 4.1 THE RELEVANT PART OF THE TRIBUNALS ORDER, RELI ED UPON BY THE ASSESSEE, READS AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE APPELLA NT ADMITTEDLY DEVELOPED A TECHNOLOGY PARK BYNAME OLYMPIA TECH PARK, WHICH I S EXCLUSIVELY MEANT FOR DEVELOPING SOFTWARE AND I.T ENABLED SERVICES. THE APPELLANT, APART FROM THE BUILDING, HAS ALSO PROVIDED INFRASTRUCTURE FACI LITIES SUCH AS SPECIALIZED AIR-CONDITIONERS, SPECIALIZED ELECTRICAL FITTINGS, SPECIALIZED FURNITURE IN THE FORM OF BUSINESS MODULES, ETC. THEREFORE, THE CIT ( APPEALS) HAS RIGHTLY PLACED RELIANCE ON THE JUDGMENT OF MADRAS HIGH COUR T IN ELNET TECHNOLOGIES LTD (SUPRA). AS RIGHTLY SUBMITTED BY T HE LEARNED REPRESENTATIVE FOR THE ASSESSEE THE JUDGMENT OF MAD RAS HIGH COURT IN CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) WAS R EVERSED BY THE APEX COURT. THE APEX COURT FOUND THAT WHEN THE APPELLAN T LET OUT THE PROPERTY AS BUSINESS, THE RENTAL INCOME HAS TO BE ASSESSED A S INCOME FROM BUSINESS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE CIT (APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THI S TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUT HORITY AND ACCORDINGLY THE SAME IS CONFIRMED. THE TRIBUNALS DECISION SUPRA, AS SHALL BE APPARENT , IS BASED ON THE SPECIFIC FINDING OF A COMPLEX (COMPOSITE) LETTING, I.E., THE INSEPARABLE LETTING OF THE SPECIALIZED FURNITURE IN THE FORM OF BUSINESS MODUL ES, ALONG WITH THE BUILDING, FURTHER RELYING ON THE DECISION IN THE CASE OF CIT V. ELNET TECHNOLOGIES LTD . [2013] 213 TAXMAN 129 (MAD). WHILE THE ELECTRICAL F ITTINGS, ALSO STATED THEREIN, WOULD FORM AN INTEGRAL PART OF THE BUILDING AND, FU RTHER, THE AIR CONDITIONING EQUIPMENT, THOUGH SEPARATE AND DISTINCT FROM THE BU ILDING, IS ONLY TOWARD ENABLING THE PROPER USER OF THE BUILDING ITSELF, WI THOUT DOUBT, THE BUSINESS MODULES, IN THE FORM OF CUBICLES AND WORKSTATIONS, ARE PART OF THE FURNITURE, LET INSEPARABLY ALONG WITH THE BUILDING, SO THAT, EVEN AS FOUND BY THE FIRST APPELLATE AUTHORITY (IN THE ASSESSEES APPEAL FOR AY 2009-10) , IT IS A CASE OF INSEPARABLE LETTING. INCOME SHALL, ON THAT BASIS, STAND TO BE A SSESSED AS BUSINESS INCOME. THE LD. FIRST APPELLATE AUTHORITY, WE MAY CLARIFY, MISD IRECTS HIMSELF (FOR AY 2009- 10) IN LAW WHEN HE HOLDS THAT THE RENTAL INCOME IN SUCH A CASE WOULD BE ASSESSABLE U/S. 22. THIS, HOWEVER, IS OF LITTLE IMP ORT AS THE INCOME, IN ANY CASE, 6 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. I.E., INDEPENDENT OF THE HEAD OF INCOME UNDER WHICH IT STANDS TO BE CLASSIFIED OR IS ASSESSABLE, WOULD BE ELIGIBLE FOR DEDUCTION U/S. 80-IA(4)(III) (REFER PARA 4.2). 4.2 WE, NEXT, DISCUSS IF THE LEASING ACTIVITY IS, A S CLAIMED, INDEED OUTSIDE THE AMBIT OF THE ASSESSEES POWERS. BEGINNING CLAUSE WI SE (REFER PARA 3), WITH REFERENCE TO CL. 7 (A), IT IS SO AS SURELY A DEALER IN HOUSE PROPERTY CAN ONLY BE REGARDED AS ONE WHO DEALS IN IT AS STOCK-IN-TRADE. USER OF HOUSE PROPERTY FOR THE PURPOSE OF ONES OWN BUSINESS (OR PROFESSION), WHIC H CERTAINLY ANY ONE IS ENTITLED TO, I.E., EVEN WHERE NOT SPECIFICALLY MENT IONED IN THE MOA OF A COMPANY, BEING ONLY AN OBJECT ANCILLARY OR INCIDENT AL TO THE MAIN OBJECTS, IS A DIFFERENT MATTER ALTOGETHER. THE WORD SAME IN CL AUSE 41 REFERS TO ANY LAND ACQUIRED BY THE COMPANY. THERE IS NO WHISPER OF ANY BUILDING OR SUPER-STRUCTURE IN THE SAID CLAUSE, MUCH LESS OF LEASING IT WITH A VIEW TO DERIVE INCOME THERE- FROM, OR OTHERWISE. OBJECT CLAUSE 46 AGAIN ONLY SAN CTIONS THE COMPANY TO, ON ANY LAND ACQUIRED BY IT, CONSTRUCT OR OTHERWISE MAN IPULATE STRUCTURES THEREON AS NECESSARY OR CONVENIENT FOR THE COMPANYS BUSINESS, WHICH (BUSINESS) WOULD ONLY IMPLY THOSE DEFINED IN ITS OBJECT CLAUSES, AS FOR EXAMPLE, AUTO BUSINESS (VIDE OBJECT CLAUSE 1). THE SAID OBJECT IS IN FACT IN THE NATURE OF AN OBJECT ANCILLARY OR INCIDENTAL TO THE MAIN OBJECTS IN-AS-M UCH AS IT ENABLES THE COMPANY TO ERECT, OR OTHERWISE WORK ON, BUILDINGS FOR THE P URPOSES OF ITS BUSINESS. THE SAID CLAUSES WOULD THUS BE OF NO ASSISTANCE TO THE ASSESSEE IN THE MATTER. THE SAID LETTING IS OUTSIDE THE SCOPE OF THE POWERS AND OBJECTS OF THE COMPANY. THIS, HOWEVER, WOULD NOT DETRACT FROM THE FACT THAT THE ASSESSEE HAS EARNED INCOME ONLY BY MAKING AVAILABLE BUILT-UP SPACE, ALO NG WITH OTHER ASSETS, AS A SINGLE LETTING, FOR A CONSIDERATION, TO ENTERPRISES ENGAGED IN THE RELEVANT BUSINESSES. THAT THE AMOUNT STANDS RECEIVED ON OWN ACCOUNT, IS NOT ON CAPITAL ACCOUNT AND, FURTHER, WITHOUT ANY OBLIGATION TO REP AY, IS ALSO ADMITTED, SO THAT IT IS ONLY IN THE REVENUE FIELD AND IN THE NATURE OF I NCOME. THIS IN FACT IS ADMITTED. THE ONLY CONSEQUENCE OF THE ASSESSEE BEING NOT AUTH ORIZED TO ENGAGE IN THE SAID 7 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. ACTIVITY AS A PART OF ITS BUSINESS, WOULD BE THAT THE SAME WOULD STAND TO BE ASSESSED IN ITS HANDS AS INCOME FROM OTHER SOURCES . AS AFORE-STATED, THE SAME WOULD NOT IMPACT ITS ELIGIBILITY FOR DEDUCTION U/S. 80-IA(4)(III), WHICH READS AS UNDER (IN ITS RELEVANT PART), INASMUCH AS THE SAME DOES NOT ALTER THE NATURE OF THE RECEIPT: DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM IND USTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTU RE DEVELOPMENT, ETC. 80-IA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRIS E FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSEC UTIVE ASSESSMENT YEARS. (4) THIS SECTION APPLIES TO (I) TO (II) . ( III ) ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPER ATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK OR SPECIAL ECONOMIC ZONE NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FR AMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL, 1997 AND ENDING ON THE 31ST DAY OF MARCH, 2006 : PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELOPS AN IND USTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL, 1999 OR A SP ECIAL ECONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL, 2001 AND TRANSFER S THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE, AS THE CASE MAY BE, TO ANOTHER UNDERTAKING (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING), THE DED UCTION UNDER SUBSECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANCE WERE NOT SO TRANSFERRED T O THE TRANSFEREE UNDERTAKING : PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK, THE PROVISIONS OF THIS CLAUSE SHALL HAVE EFFECT AS IF F OR THE FIGURES, LETTERS AND WORDS 31ST DAY OF MARCH, 2006, THE FIGURES, LETTE RS AND WORDS 31ST DAY OF MARCH, 2009' HAD BEEN SUBSTITUTED; 8 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. IN ASST. CIT V. LULU TECH PARK (P.) LTD . (ITA NO. 593/MDS/2016 DATED 01/5/2017), THE TRIBUNAL FOUND THAT INCOME, THOUGH ASSESSABLE UNDER SECTION 22, I.E., AS INCOME FROM HOUSE PROPERTY, IS NEVERTHELES S ELIGIBLE FOR DEDUCTION U/S. 80-IAB, A PARI MATERIA PROVISION. WE MAY PROFITABLY REPRODUCE THE RELEVAN T PART OF THE SAID ORDER: THE ASSESSEE CLAIMS THAT IRRESPECTIVE OF THE HEAD O F INCOME, THE (HOUSE PROPERTY) LEASE RENTAL INCOME SHALL CONTINUE TO BE ELIGIBLE FOR DED UCTION UNDER SECTION 80-IAB. THE SAID SECTION, IN ITS RELEVANT PART, READS AS UNDER : DEDUCTIONS IN RESPECT OF PROFITS AND GAINS BY AN U NDERTAKING OR ENTERPRISE ENGAGED IN DEVELOPMENT OF SPECIAL ECONOMIC ZONE. 80-IAB. ( 1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE, BEI NG A DEVELOPER, INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS OF DEVELOPING A SPECIAL ECONOMIC ZONE, NOTIFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 UNDER THE SPECIAL ECONOMIC ZONES ACT, 2005, THERE S HALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO ONE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIV E ASSESSMENT YEARS. THE ASSESSEE IS WITHOUT DOUBT A DEVELOPER OF A SEZ, HAVING BEEN IN FACT ALLOWED DEDUCTION U/S.80-IAB ON ITS OTHER INCOME/S, AS FRO M SERVICE AGREEMENTS, CHARGEABLE U/S.28. THAT THE SAID INCOME IS ASSESSABLE AS BUSIN ESS INCOME, AND ONLY RIGHTLY SO, INASMUCH AS THE SOURCE THEREOF IS THE COMMERCIAL AC TIVITY OF PROVIDING A RANGE OF SERVICES, IS BESIDES THE POINT. WE HAVE IN FACT FOUND THE SAI D SERVICES AS ONLY ENABLING SERVICES, I.E., ENABLING THE ENJOYMENT AND THE USER OF THE HOUSE PR OPERTY, DEVELOPED BY THE ASSESSEE AS A DEVELOPER THEREOF A TERM DEFINED UNDER SEZ ACT, 2 005. BY LETTING THE BUILT-UP SPACE, THE ASSESSEE IS ONLY TURNING INTO ACCOUNT ITS INVESTME NT IN THE HOUSE PROPERTY, BEING A BUILDING AND LAND APPURTENANT THERETO. IT IS, IN FA CT, THIS - THE CONSTRUCTION OF A BUILDING SUITABLE FOR THE FIRMS OPERATING IN THE IT SECTOR, THAT QUALIFIES IT AS A DEVELOPER OF AN INFO- PARK, APPROVED AS A SEZ. THAT THE SAID ACTIVITY, I. E., DEVELOPING REAL ESTATE AND LEASING IT, WHICH IS, BROADLY SPEAKING, AND IN COMMON PARLANCE, ONLY A BUSINESS, IS NOT REGARDED AS SO FOR THE PURPOSE OF ASSESSMENT OF INCOME THERE-FR OM, BEING DERIVED FROM A HOUSE PROPERTY, A DEFINED SOURCE OF INCOME FOR WHICH A SP ECIFIC HEAD OF INCOME IS PROVIDED UNDER THE ACT, IS ANOTHER MATTER. THIS IS SO EVEN WHERE IT IS CARRIED IN AN ORGANIZED MANNER, I.E., AS A BUSINESS, AS IN THE PRESENT CASE . IT SHALL, HOWEVER, NOT CEASE, FOR THAT REASON, TO BE PROFITS AND GAINS DERIVED FROM THE AC TIVITY OF DEVELOPING A SEZ. THE WORD BUSINESS - EVEN OTHERWISE A WORD OF WIDE AND INDE FINITE IMPORT, AS OCCURRING IN SECTION 80-IAB(1), IS TO BE, ACCORDINGLY, CONSTRUED IN A BR OAD RATHER THAN A STRICT SENSE, AS CONVEYING THE GAMUT OF ACTIVITIES, INCLUDING ACTIVI TIES SUBSERVIENT AND INCIDENTAL TO DEVELOPING A SEZ AND TURNING IT INTO ACCOUNT. NOW, SURELY, LEASING OF HOUSE PROPERTY, INASMUCH AS THE LESSEES (WHO ARE TO BE, OR PRESUMAB LY SO, IN INFO-TECH BUSINESS) WOULD BE ABLE TO UNDERTAKE THEIR BUSINESSES ONLY ON THE DEVE LOPED PROPERTY BEING MADE AVAILABLE TO THEM, COULD NOT THEREFORE BUT BE REGARDED AS THE PR INCIPAL ACTIVITY YIELDING INCOME FROM THE DEVELOPMENT OF A SEZ. IN FACT, EVEN THE INCOME (TO THE ASSESSEE) FROM PROVIDING 9 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. ANCILLARY AND MAINTENANCE SERVICES TO THESE BUSINES SES ARISES OR STANDS TO ARISE ONLY ON ACCOUNT OF, OR BY VIRTUE OF, THEIR BEING LESSEES. T HE LEASE RENTAL INCOME, ON THE LEASE OF THE HOUSE PROPERTY THERETO, WOULD THUS, IN OUR VIEW, NO TWITHSTANDING THE USE OF THE WORDS PROFITS AND GAINS AND BUSINESS IN SECTION 80-IA B(1), QUALIFY TO BE ELIGIBLE FOR DEDUCTION THERE-UNDER. THAT IS, THE LEASE RENTAL IS WITHIN THE CONTEMPLATION OF THE PROFITS DERIVED BY A DEVELOPER OF A SEZ FROM THE BUSINESS OF DEVELOPING IT, ELIGIBLE FOR DEDUCTION U/S. 80-IAB. IT IS IN FACT THIS THAT FORM S THE BASIS OF THE DECISIONS IN COIMBATORE HITECH INFRASTRUCTURE (P.) LTD . (SUPRA) AND GLOBAL TECH PARK PVT. LTD . (SUPRA). THE HEAD OF INCOME UNDER WHICH THE SAID INCOME IS ASSESSABLE , WHICH IS ON THE BASIS OF THE SOURCE FROM AMONGST THE SPECIFIED SOURCES UNDER THE ACT, M OST APPROPRIATE FOR THE SAID INCOME, SO THAT IT IS NOT ASSESSABLE AS BUSINESS INCOME BUT AS INCOME FROM HOUSE PROPERTY, WOULD NOT BE A LIMITING OR DEBILITATING FACTOR. WE DECIDE ACCORDINGLY, AND THE ASSESSEE SUCCEEDS QUA ITS ALTERNATE GROUND, I.E., IN PRINCIPLE. 4.3 WE, NEXT, DISCUSS THE REVENUES OBJECTIONS TO D EDUCTION U/S. 80- IA(4)(III), I.E., APART FROM THAT WITH REFERENCE TO THE CLASSIFICATION AND ASSESSABILITY OF THE LEASE RENTAL INCOME UNDER THE ACT. THE ASSESSEES OBJECTIONS IN THIS REGARD, I.E., APART FROM THE HEAD OF THE IN COME UNDER WHICH IT IS ASSESSABLE, AND WHICH WE HAVE FOUND AS IRRELEVANT O N ACCOUNT OF THE NATURE OF THE RECEIPT, ARE AS FOLLOWS: A) ONLY A PART OF THE BUILDING IS LET TO THE CONCERNS IN THE SOFTWARE BUSINESS: B) THE ASSESSEES BUILDING, CHRISTENED AS OLYMPIA TECH NOLOGY PARK IS NOT NOTIFIED BY THE CENTRAL GOVERNMENT, I.E., CENTRAL B OARD OF DIRECT TAXES (CBDT). WE SHALL TAKE UP BOTH OBJECTIONS IN SERIATIM. WITH REGARD TO THE FIRST, THE SAME IN NOT MAINTAINABLE AS THE APPROVAL LETTER DAT ED 03/3/2009 (PB PGS. 14-16) RECORDS THE PROPOSED NUMBER OF UNITS IN THE PARK AS 3, WHILE ADMITTEDLY FOUR UNITS, AS UNDER (ALONG WITH THE CORRESPONDING RENT) , ARE HOUSED IN THE BUILDING DURING THE PREVIOUS YEAR RELEVANT TO AY 2009-10: (R EFER PG.1 OF THE ASSESSMENT ORDER) THE BREAK-UP OF THE INCOME IS SHOWN BELOW : VISTEON POWER TRAIN CONTROLS RS. 1,57,216/- MERRIL TECHNOLOGIES LTD RS. 1,80,72,120/- ABN AMRO CENTRAL ENTERPRISES RS. 1,27,63,079/- MINDTREE SOLUTIONS RS. 89,65,069/- 10 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. WITH REGARD TO THE SECOND OBJECTION, IT WAS INFORME D THAT, IN TERMS OF RULE 18C OF THE INCOME TAX RULES, 1962, CBDT ONLY IS AUTHORI ZED TO NOTIFY THE SCHEME U/S. 80-IA(4)(III), APPLICATION TO WHICH, I.E., FOR NOTIFICATION, MADE U/R. 18C (4), VIDE LETTER DATED 18.04.2009 (RECEIVED ON 06.05.200 9), IS OUTSTANDING TILL DATE, AND DESPITE REMINDERS VIDE LETTERS DATED 15.12.2010 AND 25.05.2013. THE READING OF THE RULE 18C ALONG WITH THE S. 80-IA (4)(III), WHICH ARE IN HARMONY, MAKES IT ABUNDANTLY CLEAR THAT THE APPROVA L BY THE DIPP, WHICH IS A PART OF THE CENTRAL GOVERNMENT IN THE MINISTRY OF C OMMERCE, IS BY THE CENTRAL GOVERNMENT ONLY. SO HOWEVER, THE SAME, THOUGH A PAR T OF THE ENVISAGED PROCEDURE (R. 18C(2)), DOES NOT ENTITLE DEDUCTION, WHICH IS SUBJECT TO NOTIFICATION BY THE CBDT, MINISTRY OF FINANCE, GOVERNMENT OF IND IA (SEE R. 18C(4)). THE APPROVAL BY THE DIPP IS THUS AN IN-PRINCIPLE APPROV AL. IN THE INSTANT CASE IT ITSELF CLARIFIES THAT THE BENEFIT U/S. 80-IA(4)(III) SHALL BE SUBJECT TO THE NOTIFICATION OF THE PARK BY CBDT. WHAT THEN, WE WONDER, IS THE CONTROVERSY ABOUT ? CONTINUING FURTHER, AN INDUSTRIAL PARK IS EITHER N OTIFIED BY THE NOTIFYING AUTHORITY (CBDT) OR NOT SO. A NOTIFICATION BY THE C ENTRAL GOVERNMENT IS TO BE AT THE INSTANCE OF THE NOTIFYING AUTHORITY ONLY, AN D NOT IN PURSUANCE TO AN APPLICATION BY THE ASSESSEE. THE APPLICATION BY THE ASSESSEE IN THE MATTER IS SUPERFLUOUS, AND CAN AT BEST BE REGARDED AS A REPRE SENTATION BY IT FOR NOTIFICATION. IT IS ONLY WHERE THE ACTION IS REQUIR ED TO BE TAKEN UNDER THE ACT, THAT, WHERE NOT TAKEN, AN INDEPENDENT SUPERIOR FORU M CAN INTERFERE TO DIRECT ITS DISPOSAL ON MERITS, EITHER WAY, SO THAT THE PROVISI ON/S OF THE ACT CAN HAVE EFFECT. THE PROCESS OF NOTIFICATION OF AN INDUSTRIAL PARK B Y THE CENTRAL GOVERNMENT IS AN ACT DECIDEDLY OUTSIDE THE PURVIEW OF THE ACT. UR GING US TO DIRECT SO, OR PRESUME SO, IS, THEREFORE, MISCONCEIVED. THE REMEDY FOR AN ASSESSEE WHERE IT CONSIDERS THE NON-NOTIFICATION IN ITS CASE AS ARBI TRARY, IS TO MOVE THE HONBLE HIGH COURT UNDER ITS WRIT JURISDICTION, AS WE FIND HERE. IN FACT, OFFICE MEMORANDUM (OM) DATED 10.02.2016 BY DIPP, GOVERNMEN T OF INDIA, REFERRED 11 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. TO IN THE GROUNDS OF THE REVENUES APPEAL, AND COPY OF WHICH IS PLACED ON RECORD BY THE LD. DR, EXPLAINS THE MATTER, I.E., TH E NON-NOTIFICATION OF THE INDUSTRIAL PARK IN THE CASE OF THE ASSESSEE, WHICH IS TO BE UNDER THE INDUSTRIAL PARK SCHEME, 2002. PARA 4 THEREOF READS AS UNDER: IT IS INDISPUTABLE THAT THE INFRASTRUCTURE FACILIT IES FOR PROPOSED NO. OF UNITS WERE NOT AVAILABLE IN THE INDUSTRIAL PARK PRIOR TO 31.03.2005 ON THE BASIS OF LETTER WRITTEN BY IT DEPT., CHENNAI TO CBDT. M/S. KHIVRAM MOTORS PVT. LTD. OWN 4 TH , 5 TH AND 6 TH FLOORS AND M/S. KHIVRAJ TECH PARK PVT. LTD. ARE OW NERS OF 1 ST , 2 ND , 3 RD , 7 TH AND 8 TH FLOOR OF THE BUILDING, AND ALL THE INSTALLATION AN D HANDING OVER CERTIFICATES ARE ALSO IN THE NAME OF M /S. KHIVRAJ TECH PARK PVT. LTD. IN VIEW OF THIS THERE IS NO SUPPORTING MATERI AL ON RECORD TO STATE THAT M/S. KHIVRAJ MOTORS PVT. LTD. IS DEVELOPING A SEPAR ATE INDUSTRIAL PARK TO BE ENTITLED FOR AVAILING DEDUCTIONS UNDER THE IT ACT. IN SUMMATION 5. THE TRIBUNAL FOR THE EARLIER YEARS HAS FOUND LEA SING OF HOUSE PROPERTY BY THE ASSESSEE AS BEING A CASE OF COMPOSITE LETTING A LONG WITH OTHER ASSETS, WHICH FINDING HAS NOT BEEN DISPUTED BEFORE US BY THE REVE NUE. THE (COMPOSITE) LEASE RENTAL INCOME WOULD, IN VIEW OF SECTION 56(2)(III) OF THE ACT, STAND TO BE ASSESSED AS BUSINESS INCOME U/S. 28; THE ASSESSEE U NDERTAKING THE SAME IN AN ORGANIZED, SYSTEMATIC MANNER, ON COMMERCIAL BASIS, IN A REGULAR MANNER. THIS, AS EXPLAINED IN SULTAN BROS. (P.) LTD. V. CIT [1964] 51 ITR 353 (SC), IS FOR THE REASON THAT IT THEN BECOMES A NEW SOURCE OF INCOME. IN THE PRESENT CASE, THE REVENUE HAS, HOWEVER, WITH REFERENCE TO THE EXTANT OBJECT CLAUSES OF ITS CHARTER (MOA), PLEADED THE SAID ACTIVITY AS OUTSIDE THE PUR VIEW OF THE ASSESSEE- COMPANY. THE EXAMINATION OF THE REVENUES OBJECTION WITH REFERENCE TO THE ASSESSEES OBJECT CLAUSES, AS OBTAINING, SHOWS THE SAME TO BE VALID. THE INCOME, HOWEVER, HAVING BEEN EARNED, THE QUESTION BOILS DOW N TO THE CORRECT HEAD OF INCOME UNDER WHICH THE SAME IS ASSESSABLE, I.E., CO ULD IT BE REGARDED AS BUSINESS INCOME OR AS INCOME FROM OTHER SOURCES, WITH WE FIN DING IT TO BE THE LATTER IN VIEW OF IT BEING OUTSIDE THE ASSESSEE-COMPANYS LEG AL COMPETENCE, I.E., TO TRANSACT BUSINESS, SO THAT IT COULD NOT BE ASSESSED U/S. 28(I). THIS, HOWEVER, SHALL 12 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. NOT IMPACT THE ASSESSEES CLAIM FOR DEDUCTION U/S. 80-IA(4)(III) EVEN AS FOUND BY THE TRIBUNAL IN THE CASE OF LULU TECH PARK (P.) LTD . (SUPRA). THE REVENUES OBJECTION TO THIS CLAIM, I.E., ON MERITS, INDEPENDE NT OF THE CLASSIFICATION OF THE HEAD OF INCOME, IS AGAIN TWO-FOLD. THAT IN RESPECT OF THE PART OCCUPATION OF THE BUILDING HAS BEEN FOUND BY US AS WITHOUT MERIT WITH REFERENCE TO THE ASSESSEES APPROVAL BY THE DIPP (VIDE LETTER DATED 03/3/2009); THE ASSESSEE SATISFYING THE TEST AS TO THE NUMBER OF OCCUPANTS. THE SECOND AND THE PRINCIPAL OBJECTION, IS OF THE ASSESSEES INDUSTRIAL PARK BEING NOT NOTIFIED B Y THE CENTRAL GOVERNMENT. BESIDES DRAWING SUPPORT FROM THE TERMS OF THE RELEV ANT PROVISION (S.80- IA(4)(III)), THE REVENUE DOES ON THE O.M. DATED 10/ 2/2016 BY DIPP, GOI, STATING THE REASONS FOR THE NON-NOTIFICATION OF THE ASSESSEES INDUSTRIAL PARK BY CBDT, I.E., THE RELEVANT WING (DEPARTMENT) IN THE C ENTRAL GOVERNMENT, WHICH IS TO NOTIFY THE SAME. THERE IS, WE ARE AFRAID TO SAY, NO REFERENCE TO THE SATISFACTION OF THE CONDITIONS OF SECTION 80-IA(4)(III) IN THE O RDER BY THE TRIBUNAL FOR AYS. 2010-11 & 2011-12 (ALSO SEE R.18C(3)). THIS, I.E., THE NON-NOTIFICATION BY THE CBDT, HAS IN FACT BEEN CHALLENGED BY THE ASSESSEE B EFORE THE HONBLE JURISDICTIONAL HIGH COURT (REFER GDS. 2.2 TO 2.4 OF THE REVENUES APPEAL, AND AS ALSO ADMITTED BY THE LD. AR BEFORE US), SO THAT OUR ORDER, AS THAT BY THE TRIBUNAL FOR THE EARLIER YEARS, WOULD, AND WHICH IS EVEN OTH ERWISE THE CASE, SUBJECT TO THE DIRECTIONS AND THE FINDINGS BY THE HBLE COURT. WE, ACCORDINGLY, FIND NO INFIRMITY IN THE REVENUES SECOND OBJECTION, WHICH SHALL OPERATE TO FAIL THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80-IA( 4)(III), AND WHICH HAS THEREFORE BEEN RIGHTLY DENIED BY THE REVENUE, WHOSE CASE IS THUS SUSTAINABLE IN LAW. IN THE RESULT, THE ASSESSEE FAILS. 13 ITA NOS.879 /MDS/2013 & 3098/MDS/2016 KHIVRAJ MOTORS PVT. LTD. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D AND THE REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED ON MAY 02, 2017 AT CHENNAI . SD/- SD/- ( . ) (G. PAVAN KUMAR) ! /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, . /DATED, MAY 2, 2017. EDN / ( *!,01 21$, /COPY TO: 1. %& /APPELLANT 2. *+%& /RESPONDENT 3. 3, ( )/CIT(A) 4. 3, /CIT 5. 145 *!,! /DR 6. 56# 7 /GF