Tidel Park Limited, CHENNAI V. ACIT, CHENNAI

ITA 49/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95947 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S SANKARALINGAM
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO . 49/MDS/2015 ( / ASSESSMENT YEAR: 2010-11) M/S. TIDEL PARK LTD. 4, RAJIV GANDHI SALAI, TARAMANI,CHENNAI-600 113. VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(2), CHENNAI-34. PAN:AABCT0666R ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO . 465/MDS/2015 ( / ASSESSMENT YEAR: 2010-11) ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(1), CHENNAI-34. VS. M/S. TIDEL PARK LTD. 4, RAJIV GANDHI SALAI, TARAMANI,CHENNAI-600 113. PAN:AABCT0666R ( /APPELLANT) ( /RESPONDENT) ASSESSEE BY : MR. R.VIJAYARAGHAVAN, ADVOCATE REVENUE BY : MR. S.SANKARALINGAM, CIT /DATE OF HEARING : 6 TH JULY, 2015 /DATE OF PRONOUNCEMENT : 26 TH AUGUST, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AN D REVENUE RESPECTIVELY AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS)-III, CHENNAI DATED 20.10.2 014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS T HAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT 2 ITA NOS.49 & 465 /MDS/2015 LEASE RENT INCOME RECEIVED FROM LETTING OUT MODULES OF SOFTWARE TECHNOLOGY PARK TO VARIOUS LESSEES WOULD CONSTITUTE INCOME FROM BUSINESS AND ELIGIBLE FOR DEDUCTION UND ER SECTION 80IA OF THE ACT. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 2104 & 2122/MDS/2011 & C.O NO.18/MDS/2012 DATED 27 TH SEPTEMBER, 2013, A COPY OF THE ORDER IS PLACED ON R ECORD. 4. IN THE ASSESSEES APPEAL, THE ASSESSEE CONTENDS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IA OF THE ACT IN RESPECT OF INTEREST INCOME AND TREATING IT UNDER THE HEAD OTHER SOURCES AS AGAINST THE CLAIM OF THE AS SESSEE AS INCOME FROM BUSINESS. 5. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS ALSO COVERED BY THE CO-ORDINATE BENCH DECISION IN ASSESS EES OWN CASE WHEREIN THE TRIBUNAL DECIDED THE ISSUE AGAINST THE 3 ITA NOS.49 & 465 /MDS/2015 ASSESSEE HOLDING THAT INTEREST AND OTHER INCOME SHO ULD BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE AC T. COUNSEL FOR THE ASSESSEE SUBMITS THAT OUT OF INTEREST INCO ME OF ` 12,84,98,175/- INTEREST OF ` 38,83,769/- REPRESENTS INTEREST FROM DEBTORS AND THIS SHOULD BE CONSIDERED AS INCOM E FROM BUSINESS IN VIEW OF THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. MADRAS MOTORS LTD. / M.M.FORGIN GS LTD. (257 ITR 60). 6. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF THE LOWER AUTHORITIES. 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09. ON GOING THROUGH THE ORDER OF THE CO-ORDINATE BENCH, WE FIND THAT THE ISSUES IN B OTH THE APPEALS OF THE ASSESSEE AND REVENUE HAVE BEEN DECID ED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2008-09 HOLDING THAT LEASE RENT INCOME FROM MODULES / BUILT UP SPACE OF INDUSTRIAL PARK IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AND INTEREST INCOME AND OTH ER 4 ITA NOS.49 & 465 /MDS/2015 INCOME IS TO BE ASSESSED UNDER THE HEAD INCOME FRO M OTHER SOURCES. WHILE HOLDING SO, THE TRIBUNAL OBSERVED AS UNDER:- 9. HEARD BOTH SIDES. PERUSED THE ORDERS OF LOWER AUTHORITIES AND CASE LAWS RELIED ON BY THE PARTIES. INSOFAR AS THE LEASE RENT FROM INDUSTRIAL PARK I.E. INCOME FROM PROVIDING MODULES CONSISTING OF BUILT-UP SPACE WITH COMMON INFRASTRUCTURE FACILITIES IS CONCERNED, THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE AND THE VARIOUS AGREEME NTS AND APPROVALS ENTERED INTO BY THE ASSESSEE FOR THE PURPOSE OF SETTING UP OF INDUSTRIAL PARK HELD THAT THE SAID INCOME IS TO BE ASSESSED AS PROFITS AND GAINS FROM BUSINESS OR PROFESSION ELIGIBLE FOR DEDUCTION UNDE R SECTION 80IA OF THE ACT. WHILE HOLDING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER: - 6.10. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ID. AR. I HAVE ALSO PERUSED THE APPROVAL AND THE NOTIFICATION ISSUED BY THE MINISTRY OF INDUSTRY AND CBDT. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE /\O AND AR. DEDUCTION U/S 80LA IS AVAILABLE TO AN ASSESSEE FOR THE PROFITS AND GAINS OF AN UNDERTAKING ENTERPRISE DERIVED FROM ELIGIBLE BU SINESS. THE ELIGIBLE BUSINESS IN THIS CASE IS AN UNDERTAKING WHICH DEVELOPS, DEVELOPS & OPERATES OR MAINTAINS & OPERATE AN INDUSTRIAL PARK NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE GOVERNMENT DURING THE PERIOD 01.04.1997 TO 31.3.2006 (NOW UP TO 2011). THE QUANTUM OF DEDUCTION IS 100% FOR TEN CONSECUTIVE YEARS IN A BLOCK OF FIFTEEN YEARS. THE INITIAL YEAR IS WHEN THE INDUSTRIAL PARK IS DEVELOPED. IN CASE WHERE AN UNDERTAKING DEVELOPS AN INDUSTRIAL PARK AND TRANSFER THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK TO ANOTHER UNDERTAKING (TRANSFEREE UNDERTAKING), THE DEDUCTION IS AVAILABLE TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE YEARS. THE APPELLANT HAS BEEN GRANTED THE APPROVAL OF THE GOVERNMENT OF INDIA, MINISTRY OF INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION TO SET UP AN INDUSTRIAL PARK IN TERMS OF THE SCHEME NOTIFIED BY THE MINISTRY IN EXERCISE OF THE POWERS U/S 80LA OF THE I. T. ACT, 1961 READ WITH RULE L8C OF THE L.T. RULES, 1962 VIDE LETTER 5 ITA NOS.49 & 465 /MDS/2015 NO.9(10)/99-IP&ID DATED 24.5.1999. THE CENTRAL BOARD OF DIRECT TAXES, MINIST:RY OF FINANCE, GOVERNMENT OF INDIA VIDE NOTIFICATION DATED 20.12.1999 IN S.O.NO.1251(E) HAS NOTIFIED THE ASSESSEE COMPANY AS AN INDUSTRIAL PARK UNDER CLAUSE (III) OF SUB SECTION (4) OF SECTION 80IA OF THE FOR THE PURPOSE OF DEDUCTION U/S 80IA( 1). THE INCOME DERIVED BY THE APPELLANT COMPANY WAS FROM PROVIDING MODULES CONSISTING OF BUILT UP SPACE WITH COMMON INFRASTRUCTURE FACILITIES LIKE 110/33 KV DEDICATED SUB-STATION FOR POWER, CENTRALIZED AIR CONDITIONING SYSTEM OF 6000 TR CAPACITY, TELECOMMUNICATION INSTALLATIONS, 100% DG SET BACK-UP, 10.5 MVA CAPACITY ETC. IN THE INDUSTRIAL PARK AND OTHER ANCILLARY SERVICES TO THE USERS. THUS, THE APPELLANT HAS CARRIED OUT REAL, SUBSTANTIAL, SYSTEMATIC AND ORGANIZED ACTIVITY. SINCE THE WORD BUSINESS IS ONE OF WIDE IMPORT AND IN FISCAL STATUTE, IT MUST BE CONSTRUED IN A BROAD RATHER THAN A RESTRICTED SENSE (MAZGAON DOCK LTD. VS. CIT 34 ITR 368 (SC), IT WOULD NOT BE IMPROPER TO RECOGNIZE THE ACTIVITY OF THE APPELLANT AS A BUSINESS ACTIVITY. IN CASE OF THE APPELLANT THE ELIGIBLE BUSINESS IS DEVELOPMENT, DEVELOPMENT & OPERATION OR MAINTENANCE & OPERATION OF AN INDUSTRIAL PARK. THE BUSINESS OF INDUSTRIAL PARK OF THE APPELLANT, TIDEL PARK LTD, IS NOT SIMILAR TO THAT OF AN INDUSTRIAL UNDERTAKING WHICH PRODUCES ARTICLES OR THINGS WHICH CAN BE SOLD IN THE MARKET AND PROFIT CAN BE EARNED THERE FROM. THE CORE BUSINESS OF THE APPELLANT IS TO LET OUT ALLOCABLE BUILT-UP SPACE ALONG WITH INFRASTRUCTURAL FACILITIES AND DEVELOP, DEVELOP & OPERATE OR MAINTAIN & OPERATE AN INDUSTRIAL PARK. THEREFORE, THE INCOME EARNED FROM SUCH ELIGIBLE BUSINESS IN THE FORM OF LEASE RENT IS ELIGIBLE FOR DEDUCTION U/S 80IA( 4 )(III). FURTHER , THE DECISIONS RELIED ON BY THE AO ARE NOT DIRECTLY ON THE ISSUE AND HAVE BEEN RENDERED UNDER DIFFERENT FACT SITUATIONS IN THE SENSE THAT IN THOSE CASES, IT WAS LETTING OUT OF PROPERTY SIMPLICITOR AND EXPLOITATION OF OWNERSHIP OF PROPERTY. THE OWNERS OF THE PROPERTIES WERE NOT EXEMPTED UNDER ANY PROVISION OF THE ACT, WHEREAS TIOEL PARK LTD IS EXEMPTED U/S B(1)\ VIDE CBOT NOTIFICATION DATED 20.12.1999. HENCE, THE RATIO OF THOSE DECISIONS ARE NOT APPLICABLE TO THE APPELLANT. AS PER THE TERMS OF APPROVAL GRANTED BY THE ABOVE NOTIFICATION, NOTIFYING THE APPELLANT AS AN INDUSTRIAL PARK FOR 6 ITA NOS.49 & 465 /MDS/2015 THE PURPOSE OF SECTION 80LA OF THE ACT, IT IS CLEAR THAT THE APPELLANT CAN PROVIDE BUILT-UP SPACE FOR INDUSTRIAL USE WHICH MEANS THE APPELLANT CAN LEASE THE BUILT-UP SPACE FOR INDUSTRIAL USE WHICH MEANS THE APPELLANT CAN LEASE THE BUILT-UP SPACE IN THE INDUSTRIAL PARK DEVELOPED, MAINTAINED AND OPERATED BY IT. FURTHER, IT IS NOTICED THAT THE LEASE RENT COLLECTED FROM THE LESSEES IS FOR LAND, BUILDING AND PLANT & MACHINERY AND OTHER BUILT IN INFRASTRUCTURAL FACILITIES IN THE MODULES LEASED OUT. IN OTHER WORDS, IT IS A COMPOSITE LEASE RENT. SINCE THE APPELLANT HAS DEVELOPED INDUSTRIAL PARK FOR INFORMATION TECHNOLOGY/SOFTWARE TECHNOLOGY AND SINCE THE INDUSTRIAL PARK WAS NOTIFIED BY THE CENTRAL GOVERNMENT UNDER CLAUSE (III) OF SUB-SECTION (4) OF SECTION 801A, WHICH IS AN ELIGIBLE BUSINESS FOR THE PURPOSE OF SECTION 80LA(1), I AM OF THE CONSIDERED OPINION THAT THE LEASE RENT RECEIVED FROM PROVIDING BUILT-UP SPACE (MODULE) FOR INDUSTRIAL USE TO VARIOUS LESSEES IS INCOME FROM BUSINESS ELIGIBLE FOR DEDUCTION U/S 801A OF THE ACT. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO ASSESS THE LEASE RENT INCOME OF THE INDUSTRIAL PARK UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND ALLOW DEDUCTION U/S 80LA FOR SUCH PROFITS. 10. WE ALSO FIND THAT AN IDENTICAL ISSUE CAME UP BEFORE THE HONBLE JURISIDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ELNET TECHNOLOGIES LTD. IN TAX CASE APPE AL NOS.391 & 392 OF 2007, WHEREIN THE HIGH COURT FOLLO WING ITS EARLIER ORDER IN TCA NOS.2336 AND 2623 OF 2006 AND 2169 OF 2008 DATED 9.10.2012 HELD THAT THE INCOME RECEIVED FROM LEASING OUT OF THE PROPERTY WITH ALL AMENITIES AND FACILITIES WOULD BE ONLY INCOME FROM BUSINESS AND NOT TO BE ASSESSED EITHER AS INCOME F ROM HOUSE PROPERTY OR AS INCOME FROM OTHER SOURCES. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I N HOLDING THAT LEASE RENT INCOME FROM MODULES/ BUILT- UP SPACE OF THE INDUSTRIAL PARK IS ASSESSABLE UNDER TH E HEAD INCOME FROM BUSINESS AND SUCH INCOME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 11. FURTHER, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. TICEL BIO PARK LTD. (SUPRA) A FFIRMING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) HELD THAT RENTAL INCOME, OPERATION AND MAINTENANCE 7 ITA NOS.49 & 465 /MDS/2015 INCOME, A/C. CHARGES, ELECTRICITY CHARGES ARE ELIG IBLE FOR DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. 12. FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF ELNET TECHNOLGIES PVT.LTD (SUPRA) AND THE DECISION OF THE CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF TICEL BIO PARK LTD. (SUPRA ), WE HOLD THAT EXCEPT THE INTEREST INCOME OF ` 7,74,19,358/- AND OTHER INCOME OF ` 21,29,999/- REST OF THE INCOMES ARE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS FO R THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THEREFORE, WE DIRECT THE ASSES SING OFFICER TO TREAT INTEREST INCOME AND OTHER INCOME O NLY UNDER THE HEAD INCOME FROM OTHER SOURCES AND ALLO W DEDUCTION UNDER SECTION 80IA ON REST OF THE INCOMES I.E. RENT FROM PREMISES, OPERATION AND MAINTENANCE INCOM E, REVENUE SHARING INCOME, COMMON FACILITIES SUCH AS R ENT FROM AUDITORIUM AND RENT FROM OTHERS. 8. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPH OLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 9. AS FAR AS THE CONTENTION OF THE ASSESSEE THAT IN TEREST ON DEBTORS SHOULD BE CONSIDERED AS INCOME FROM BUSINES S IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT I N MADRAS MOTORS LTD. (SUPRA), WE FIND THAT THE DECISION IS DISTINGUISHABLE ON FACTS. IN THAT DECISION, IT WAS THE CASE OF THE ASSESSEE WHERE THE ASSESSEE, AN EXPORT ORIENTED COMPANY, IS MANUFACTURING FORGINGS DERIVED INTEREST ON DELAYED PAYMENT OF SALE PROCEEDS. IN THE CASE OF TH E ASSESSEE INTEREST WAS NOT RECEIVED ON EXPORT OF SAL E 8 ITA NOS.49 & 465 /MDS/2015 PROCEEDS BUT IT WAS DELAY IN PAYING THE RENTAL INCO ME TO THE ASSESSEE. THEREFORE THE DECISION RELIED ON BY THE A SSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THUS, THE RATIO OF THE DECISION OF THE HONBLE HIGH COURT CAN NOT BE APPLIED TO THE FACTS OF THE ASSESSEES CASE. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2015. SD/- SD/- ( ! ) ( $ '! ) ( CHANDRA POOJARI ) ( CHALLA NAGENDRA PRASAD ) ) / ACCOUNTANT MEMBER ' ) / JUDICIAL MEMBER ' /CHENNAI, + /DATED 26 TH AUGUST, 2015 SOMU -. /. /COPY TO: 1. ASSESSEE 2. ASSESSING OFFICER 3. 0 () /CIT(A) 4. 0 /CIT 5. . 4 /DR 6. /GF .