K Raheja IT Park (hyderabad) Pvt.Ltd., Hyd, Hyderabad V. DCIT, Circle-2(1), Hyderabad, Hyderabad

ITA 727/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6362 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: ARVIND SONDE
• Keywords: Business income; Depreciation; Capital receipt
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.1774/HYD/2014 ASSESSMENT YEAR 2010-2011 K. RAHEJA IT PARK (HYDERABAD) P. LTD., HYDERABAD 500 081. PAN AACCK1914G VS. DCIT-CIRCLE-2(1) HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.727/HYD/2015 ASSESSMENT YEAR 2010-2011 K. RAHEJA IT PARK (HYDERABAD) P. LTD., HYDERABAD 500 081. PAN AACCK1914G VS. DCIT-CIRCLE-2(1) HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.728/HYD/2015 ASSESSMENT YEAR 2010-2011 M/S. INTIME PROPERTIES LTD., HYDERABAD. PAN AABCI5676A VS. DCIT - CIRCLE - 2(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A RVIND SONDE FOR REVENUE : SMT. G. APARNA RAO DATE OF HEARING : 11 .0 4 .2016 DATE OF PRONOUNCEMENT : 11 .0 7 .2016 2 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. ORDER PER SMT. P. MADHAVI DEVI, J.M. ALL THESE APPEALS ARE FILED BY THE ASSESSEE FOR T HE A.Y. 2010-2011. ITA.NO.1774/HYD/2014 : 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY TH E ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE A.O. IN DENYING THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IA(4) (III) OF THE I.T. ACT, 1961 ON THE GROUND THAT THE ASSESSEE HAS OFFER ED THE INCOME FROM LEASING/LICENSING OF THE INDUSTRIAL PR OJECT IN HYDERABAD AS INCOME FROM HOUSE PROPERTY AND NOT A S INCOME OR PROFITS & GAINS FROM BUSINESS OR PROFESSION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY IS IN THE BUSINESS OF DEVELOPMENT AND MAINT ENANCE OF INFRASTRUCTURE FACILITIES. FOR THE A.Y. 2010-2011, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME AT RS.1 5,96,24,114 AND CLAIMED DEDUCTION UNDER SECTION 80IA TO THE TUN E OF RS.13,02,62,800. DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT, THE A.O. PERUSED TH E PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND OBSERVED THAT THE ASSES SEE HAD INCOME FROM HOUSE PROPERTY AND ALSO BUSINESS INCOME . HE OBSERVED THAT THE ASSESSEE HAS GOT APPROVAL FROM TH E GOVERNMENT OF INDIA, MINISTRY OF FINANCE VIDE NOTIF ICATION DATED 29 TH AUGUST, 2006 WHEREBY THE GOVERNMENT ALLOCATED 8 BU ILDINGS FOR SETTING-UP OF INDUSTRIAL PARK WITH THE BUILT-UP AREA OF 1,32,851.81 SQ. METRES AND LEASE RENT RECEIVED FROM THE TENANTS OF THESE BUILDINGS HAS BEEN CLAIMED AS DEDUCTION UN DER SECTION 3 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. 80IA(4) OF THE ACT. HE OBSERVED THAT THE ASSESSEE H AS ALSO DERIVED INCOME FROM OTHER BUILDINGS WHICH WAS OFFER ED AS INCOME FROM HOUSE PROPERTY BUT THE ASSESSEE DID NOT CLAIM DEDUCTION UNDER SECTION 80IA(4)(III) OF THE ACT ON THE SAID INCOME. ON PERUSAL OF THE PROVISIONS OF SUB-SECTIO N (1) OF SECTION 80IA, THE A.O. OBSERVED THAT THE DEDUCTION UNDER SECTION 80IA IS ALLOWABLE ONLY WITH REGARD TO BUSINESS INCO ME AND NOT THE INCOME FROM HOUSE PROPERTY. HE, THEREFORE, DISA LLOWED THE CLAIM OF THE ASSESSEE AND BROUGHT IT TO TAX. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) REITERATING THE CONTENTIONS MADE BEFORE THE A.O. THE CIT(A), HOWEVER, CONFIRMED THE ASSESSMENT ORDER AND FURTHER DIRECTED THE A.O. TO RE-EXAMINE THE ASSESSEES CLAI M OF DEDUCTION UNDER SECTION 80IA OF THE ACT IN THE A.Y. 2009-2010 BEING THE FIRST ASSESSMENT YEAR AND TO TAKE SUITABLE ACTION W ITH REGARD TO THE SAME. AGGRIEVED BY THE FINDINGS OF THE CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 80IA(4) ARE APPLICABLE TO THE ASSESSEE SINCE THE PROJECT OF THE ASSESSEE WAS GRANTED APPROVAL BY THE GOVERNMENT OF INDIA. ACCORDING TO HIM, IRRESPECTIVE OF THE HEAD OF INCOME UNDER WHICH THE ASSESSEE HAS OFFERED THE INCOME FROM THE INDUSTRIAL PARK, THE ASSESSEE IS ELIGIBLE FOR D EDUCTION OF THE SAME UNDER SECTION 80IA. ACCORDING TO HIM, THE HEAD S OF INCOME ARE PRESCRIBED ONLY TO CLASSIFY THE INCOME UNDER DI FFERENT SOURCES BUT NOT TO DENY THE LEGITIMATE CLAIM OF AN ASSESSEE. FURTHER, IN SUPPORT OF HIS CONTENTION THAT IRRESPEC TIVE OF HEAD OF INCOME, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDE R SECTION 4 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. 80IA(4), THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING DECISIONS : [[ 1. RYAL L V. HOARE, AND V. HONEYWILL (1923) 8 TC 52 1 2. KILBURN PROPERTIES LTD., VS. CIT 17 ITR 134 (CAL.) (HC) 3. EZRA PROPRIETARY ESTATES LTD. VS. CIT 18 ITR 762 (C AL.) (HC) 4. INDRA SINGH & SONS LTD., VS. CIT 33 ITR 341 (CAL.) (HC) 5. CIT VS. CHUGANDAS & CO., 55 ITR 17 (SC) 6. O.RM.M.SP.SV. FIRM VS. CIT 63 ITR 404 (SC) 7. CIT VS. SMT. INDERMANI JATIA 77 ITR 133 (ALL.) (HC) 8. E.D.SASOON & CO. LTD., VS. CIT 86 ITR 757 (SC ) 9. CIT VS. COCANADA RADHASWAMI BANK LTD., 57 ITR 306 ( SC) 10. CIT VS. SHRIKISHAN CHANDMAL 60 ITR 303 (MP) (HC) 11. CIT VS. BHAVNAGAR TRUST CORPORATION (P.) LTD., 69 I TR 278 (GUJRAT) (HC) 12. WESTERN STATES TRADING CO. P. LTD., VS. CIT 80 ITR 21 (SC) 13. CIT VS. R. DALMIA 96 ITR 463 (DEL.) (HC) 14. BROOK BOND & CO. LTD., VS. CIT 162 ITR 373 (SC) 15. CIT VS. RAMNATH GOENKA 259 ITR 26 (MAD.) 16. ACIT VS. SOLAR CHEMICALS P. LTD., 190 ITR 216 (ALL. ) 17. ACIT VS. M/S. ANNAPURNA BUILDERS ITA.NO.1177/HYD/2011 18. JANAPRIYA PROPERTIES P. LTD., VS. DCIT ITA.NOS.1594 & 1595/HYD/2012 19. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD., VS. C IT 123 ITR 669 (GUJ.) (HC). 20. CIT VS. PAUL BROTHERS 216 ITR 548 (BOM.) 21. CIT VS. MODI INDUSTRIES LTD., 327 ITR 570 (DEL.) 22. CIT VS. WESTERN OUTDOOR INTERACTIVE P. LTD., 349 IT R 309 (BOM.) 23. ACIT VS. M/S. APEX PACKING PRODUCTS P. LTD., ITA.NO S.145 TO 150/PNJ/2013 24. ITO VS. INFORMATION TECHNOLOGY PARK LTD., (2012) 17 TAXMANN.COM 208 (BANG.) 25. ITO VS. RR INDUSTRIES LTD., (2012) 21 TAXMANN.COM 4 48. 26. GLOBAL TECH PARK (P) LTD., VS. ACIT (2009) 28 SOT 4 5 (BANG.) (URO) 27. DCIT VS. GOLFINK SOFTWA RE PARK P. LTD., ITA.NO.40 & 41/BANG/2010 5 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. 28. CHENNAI PROPERTIES & INVESTMENT LTD., 373 ITR 673 ( SC) 29. SHREEJI EXHIBITORS VS. ACIT AND SHREEJI ENTERPRISES VS. ACIT - ITA.NO.640/M/2013 & ITA.NO.2196/M/2013. 30. KRISHNA LAND DEVELOPERS P. LTD., VS. DCIT ITA.NO.1057/MUM/2010 DATED 12 TH AUGUST, 2011. 31. JANAPRIYA PROPERTIES P. LTD., VS. DCIT ITA.NOS.1595 & 1595/HYD/2012 DATED 29 TH NOVEMBER, 2013 6. THE LD. D.R. ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS BY ITSELF OFFERED THE INCOME UNDER THE HEAD IN COME FROM HOUSE PROPERTY AND THEREFORE, IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA AS THE PROVISION ITSELF MENTIONS PROF ITS AND GAINS DERIVED BY AN UNDERTAKING TO BE ELIGIBLE FOR THE DE DUCTION (EMPHASIS PROVIDED BY US). HE SUBMITTED THAT THE DE CISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE ARE ALL ON THE HEAD OF INCOME UNDER WHICH A PARTICULAR INCOME IS T O BE BROUGHT TO TAX AND NOT ON THE ISSUE OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. FURTHER, THE LD. D.R. SUBMITTED THAT THOUGH THE ASSESSEE HAS CLAIMED THE DEDUCTION UNDER SECTION 80IA FOR THE FIRST TIME IN A.Y. 2009-2010, IT IS NOT CLEAR AS TO WHETHER THE A.O. HAS EXAMINED WHETHER THE ASS ESSEE HAS FULFILLED THE REQUIRED CONDITIONS UNDER SECTION 80I A. THEREFORE, ACCORDING TO HIM, THE CIT(A) WAS RIGHT IN DIRECTING THE A.O. TO EXAMINE THE ELIGIBILITY OF THE ASSESSEE FOR CLAIMIN G DEDUCTION FOR THE A.Y. 2009-2010 AND TAKE SUITABLE ACTION, IF NEC ESSARY. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. WE FIND THAT UNDISPUTEDLY, ASSE SSEE HAS GOT THE APPROVAL FROM THE GOVERNMENT OF INDIA TO SET-UP AND MAINTAIN THE INDUSTRIAL PARK. FOR CLAIMING THE DEDU CTION UNDER 6 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. SECTION 80IA, SUB-SECTION (4) ENUMERATES THE ENTERP RISES WHICH ARE ELIGIBLE FOR SUCH DEDUCTION. CLAUSE-(III) OF SU B-SECTION(4) OF SECTION 80IA PRESCRIBES THE ELIGIBLE UNDERTAKING TO BE AN UNDERTAKING WHICH DEVELOPS AND OPERATES OR MAINTAIN S AND OPERATES AN INDUSTRIAL PARK (OR SPECIAL ECONOMIC ZO NE) NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SC HEME FRAMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERI OD BEGINNING 1 ST DAY OF APRIL, 1997 AND ENDING OF 31 ST MARCH, 2006. THE SECOND PROVISO THERETO PROVIDES THAT THE PROVISIONS OF THIS CLAUSE SHALL HAVE EFFECT AS IF FOR THE FIGURES, LETTERS AN D WORDS 31 ST MARCH, 2006, THE FIGURES, LETTERS AND WORDS 31 ST DAY OF MARCH, 2011 HAD BEEN SUBSTITUTED. THIS SECOND PROVISO HAS BEEN INSERTED BY THE FINANCE ACT, 2006 W.E.F. 01.04.2007 . IN THE CASE BEFORE US, THE APPROVAL BY THE GOVERNMENT OF INDIA HAS BEEN GRANTED VIDE NOTIFICATION DATED 29 TH AUGUST, 2006. THEREFORE, THE CASE OF THE ASSESSEE FALLS UNDER THE SECOND PROVISO TO CLAUSE (III) OF SUB-SECTION (4) OF SECTION 80IA OF THE ACT. SUB- SECTION (1) OF SECTION 80IA READS THAT WHERE THE GROSS TOTAL INCO ME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFE RRED TO IN SUB-SECTION (4), THERE SHALL, IN ACCORDANCE WITH AN D SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMP UTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQ UAL TO 100% OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR 10 CONSECUTIVE ASSESSMENT YEARS. IT IS THE CASE OF THE ASSESSEE THAT THE A.Y. 2009-2010 IS THE FIRST YEAR IN WHICH THE A SSESSEE HAS CLAIMED THE DEDUCTION AND THE A.O. HAS ALLOWED THE SAME. THUS, ACCORDING TO HIM, WHERE THE A.O. HAS ALLOWED THE CL AIM IN THE FIRST YEAR, THE YEAR IN WHICH HE WAS SUPPOSED TO EX AMINE THE 7 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. ELIGIBILITY OF THE CLAIM OF THE ASSESSEE, HE CANNOT THEREAFTER DISALLOW THE SAME. 8. NOW THE QUESTION BEFORE US IS, WHETHER THE INCOME FROM APPROVED INDUSTRIAL PARK, THOUGH OFFERED BY TH E ASSESSEE AS INCOME FROM HOUSE PROPERTY IS ELIGIBLE FOR DEDUC TION UNDER SECTION 80IA(4) OF THE ACT. FOR THIS PURPOSE, WHAT CONSTITUTES THE PROFITS AND GAINS OF AN UNDERTAKING HAS TO BE EXAMINED. 9. THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPO N A CATENA OF DECISIONS TO DEMONSTRATE THAT INCOME FRO M HOUSE PROPERTY ALSO IS PART OF PROFITS AND GAINS OF TH E UNDERTAKING. HE SUBMITTED THAT THE HONBLE COURTS HAVE BEEN CONS ISTENT IN HOLDING THAT INCOMES DECLARED UNDER VARIOUS HEADS O F INCOME ALSO HAS TO BE TREATED AS INCOME FROM BUSINESS. 10. THE LD. D.R. HAS PLACED MUCH EMPHASIS ON THE W ORD BUSINESS OCCURRING THE SUB-SECTION (1) OF SECTION 80IA OF THE ACT TO ARGUE THAT ONLY INCOME DECLARED UNDER THE HE AD BUSINESS INCOME IS ELIGIBLE FOR DEDUCTION. LET US THEREFORE EXAMINE THE DEFINITION AND MEANING OF THE WORDS PROFITS AND GA INS. 11. THE FIRST CASE RELIED UPON BY THE ASSESSEE IS RYALI V. HOARE, AND V. HONEYWILL (CITED SUPRA) WHICH IS A DE CISION OF THE ENGLISH COURTS. IN THIS CASE, THE QUESTION WAS WHET HER TWO GENTLEMEN, WHO WERE DIRECTORS OF A COMPANY, AND WHO RECEIVED A COMMISSION FOR GUARANTYING THE COMPANYS OVERDRAFT WITH A BANK, ARE LIABLE TO BE ASSESSED TO INCOME TAX IN RE SPECT OF THOSE COMMISSIONS. IT WAS THE CASE OF THE RESPONDENTS THE REIN THAT THE COMMISSION WERE NOT PROFITS OF A TRADE, PROFESSION; EMPLOYMENT OR VOCATION CARRIED ON BY THEM AND FURTHER THAT THE Y AROSE FROM 8 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. CASUAL UNSOUGHT AND EXCEPTIONAL TRANSACTIONS AND WE RE NOT CHARGEABLE TO INCOME TAX. ROWLETT J., UNDER THE CIR CUMSTANCES OF THE SAID CASE, EXAMINED WHETHER COMMISSION IS AN ANNUAL PROFIT OR GAIN WITHIN THE MEANING OF THE CASE AND HELD THAT PROFIT OR GAINS MEAN SOMETHING WHICH IS IN THE NA TURE OF INTEREST OR FRUIT, AS OPPOSED TO PRINCIPAL OR TREE, THUS BRINGING OUT THE DIFFERENCE BETWEEN A REVENUE RECEIPT AND A CAPITAL RECEIPT. HE FURTHER HELD THAT WHERE AN EMOLUMENT IS RECEIVED OR RATHER, WHERE AN EMOLUMENT ACCRUES, BY VIRTUE OF SO ME SERVICE RENDERED BY WAY OF ACTION OR PERMISSION, OR BOTH, A T ANY RATE THAT IS INCLUDED WITHIN THE WORDS PROFITS OR GAINS . THEREFORE, HE PROCEEDED TO EXAMINE WHETHER IT IS ANNUAL PROFI T OR GAIN AND EXPLAINED THAT IT DOES NOT REQUIRE THE ACTIVITY GIVING RISE TO THE PROFITS TO LAST A YEAR, OR TO BE RECURRING. THU S, IT CAN BE SEEN THAT THE HONBLE COURT HELD THAT THE COMMISSION REC EIVED BY THE DIRECTORS FALLS UNDER THE TERM ANNUAL PROFITS AND GAINS AND IS CHARGEABLE TO INCOME TAX. 12. IN THE CASE OF KILBURN PROPERTIES LIMITED, CAL CUTTA; THE ONLY SOURCE OF INCOME OF THE ASSESSEE COMPANY T HEREIN, IS HOUSE PROPERTY. THE QUESTION BEFORE THE HONBLE HIG H COURT WAS- 'WHETHER IN VIEW OF THE FACT THAT THE ENTIRE INCOME OF THE ASSESSEE WAS DERIVED FROM PROPERTY ASSESSABLE UNDER SECTION 9 OF THE INDIAN INCOME-TAX ACT, THE PROVISIONS OF SECTION 23A WERE AT ALL APPLICABLE TO THE CASE ?' THE HONBLE HIGH COURT HAS HELD AS UNDER: (ONLY THE RELEVANT PARAS ARE REPRODUCED) 9 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. MR. MITRA, LEARNED COUNSEL APPEARING FOR THE ASSES SEE, CONTENDED THAT THE WORDS PROFITS AND GAINS USED I N SECTION 23A (1) HAVE REFERENCE TO A COMPANY CARRYING ON BUSINE SS AND CANNOT APPLY TO A COMPANY WHOSE ONLY SOURCE OF INCOME IS DERIVED FROM PROPERTY. HE, THEREFORE, SUBMITTED THAT THE QUESTION REFERRED TO THIS COURT SHOULD BE ANSWERED IN THE NEGATIVE. IN OUR OPINION, THIS CONTENTION CANNOT BE ACCEPTED FOR THE FOLLOWING REASONS. IT WOULD APPEAR FROM A RESUME OF THE ACT THAT THE E XPRESSION 'PROFIT AND GAINS' IS NOT LIMITED TO BUSINESS ONLY; IT HAS BEEN USED IN OTHER CASE ALSO; AGAIN THE WORD 'INCOME' AN D NOT PROFITS AND GAINS HAS BEEN USED IN CASE OF BUSINESS , SEE SECTION (6A) , 4(3)(IA) , 4(3)(III) , 10(IV) , 23A , 24(1) AND 24(2) . WE MAY PARTICULARLY REFER TO SECTION 24(1) AND 24(2) WHICH SPEAK OF LOSS OF PROFITS AND GAINS UNDER ANY OF THE HEADS MENTIONED IN SECTION 6 , VIZ., SALARY, INTEREST ON SECURITIES, PROPERTY, ETC. SIMILARLY THE SECOND PROVISO TO SECTION 55 USES THE EXPRESSION 'PROFITS AND GAINS' GENERALLY IN REL ATION TO INCOME FROM ALL SOURCES, VIZ., SALARY, INTEREST ON SECURITIES, PROPERTY, ETC., OF AN UNREGISTERED FIRM OR ASSOCIAT ION OF INDIVIDUALS. IN SECTION 23A(1) , (3)(II), AND (4) WE FIND THAT BOTH THE EXPRESSION 'UNDISTRIBUTED PORTION OF THE ASSESSABLE INCOME' AND 'UNDISTRIBUTED PORTION OF PROFITS AND GAINS' HA VE BEEN USED. SECTION 6 OF THE ACT CLASSIFIES THE 'INCOME', 'PROFITS AND GAINS' UNDER SEVERAL HEADS, E.G., SALARY, INTEREST ON SECURITIES, PROPERTY, PROFITS AND GAINS FROM THE BU SINESS, PROFESSION OR VOCATION, AND 'OTHER SOURCES'. THIS CLASSIFICATION WAS INTENDED FOR THE PURPOSE OF CALC ULATION OF ASSESSABLE INCOME AFTER DEDUCTIONS, AS WOULD APPEAR FROM SECTION 7 , 8 , 9 , 10 AND 11 . RELIANCE WAS PLACED ON THE FOLLOWING OBSERVATIONS OF MULLICK, J., IN IN RE RAJ A JYOTIPRASAD SINGH DEO, VIZ., 'THE ACT MAKES A DIFFE RENCE BETWEEN INCOME AND PROFITS. PROFITS ARE INCLUDED WI THIN THE TERM INCOME BUT PROFITS ARE NOT SYNONYMOUS WITH INC OME.' 10 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. THE OBSERVATIONS ARE OBITER AND WERE MADE IN A DIFF ERENT CONNECTION, VIZ., THE DECISION OF CESS FROM RENTS A ND ROYALTIES UNDER SECTION 11 AND MUST BE LIMITED TO THE FACTS OF THAT CASE. THE OBSERVATIONS OF COURTNEY-TERRELL, C.J., IN COMMISSIONER OF INCOME-TAX V. GOPAL SHARAN NARAIN SINGH , TO THE EFFECT THAT 'THERE IS NO DEFINITION OF INCOME IN THE ACT A ND THE WORDS PROFITS AND GAINS ARE AN APPLICATION AND NOT A LIMITATION UPON THE WORD INCOME', DOES NOT, OUT OPI NION, HELP THE ASSESSEE IN ANY WAY IN THE PRESENT CASE. MR. MI TRA STRONGLY RELIED ON THE OBSERVATIONS OF PAGE. C.J., IN COMMISSIONER OF INCOME-TAX, BURMA V. BENGALI URBAN CO- OPERATIVE CREDIT SOCIETY LTD., VIZ., 'PRIMA FACIE, THEREFORE, NEITHER INTEREST FROM SECURITIES NOR INCOME DERIVED FROM PROPERTY ARE PROFITS WITHIN THE MEANING OF THAT TER M AS USED IN THE NOTIFICATION.' THE QUESTION THERE TURNED ON THE INTENTION AND PURPOSE AS EXPRESSED IN THE NOTIFICAT ION AND AS SUCH THE OBSERVATIONS ARE NOT A USEFUL GUIDE IN CONSTRUING THE WORDS 'PROFITS AND GAINS' OCCURRING IN SECTION 23A . NO USEFUL PURPOSE WOULD BE SERVED BY A REFERENCE TO ENGLISH DECISIONS ON CONSTRUCTING THE SECTION UNDER CONSIDE RATION. IT MAY BE NOTED THAT IN SECTION 21 OF THE FINANCE ACT (12 AND 13 GEO. 5, C. 17) THE WORDS ARE 'ACTUAL INCOME'. IN COMMISSIONER OF INCOME-TAX, BANGLE V. SHAW WALLA CE AND COMPANY, IT WAS POINTED OUT THAT 'THE INDIAN ACT IS NOT IN PAIR MATERIA WITH THE ENGLISH ACT , IT IS LESS ELABORATE IN MANY WAYS, SUBJECT TO FEWER REFINEMENTS, AND IN ARRANGEMENT AND LANGUAGE IT DIFFERS GREATLY FROM TH E PROVISIONS WITH WHICH THE COURTS IN ENGLAND HAVE HA D TO DEAL. UNDER SUCH CONDITIONS LITTLE CAN BE GAINED BY ATTEMPTING TO REASON FROM ONE TO THE OTHER.' IN OUR OPINION, THE WORD 'PROFIT AND GAINS' USED IN SECTION 23A (1) HAVE TO BE CONSTRUED ON THE TERMS USED IN THE INDIAN ACT WITHOUT REFERENCE TO ENGLISH DECISIONS, BEARING IN MIND THE RULE OF CONSTRUCTION LAID DOWN BY LORD SELBORNE , L.C., IN CALEDONIAN RAILWAY COMPANY V. NOTCH BRITISH RAILWAY CO. : 'THE MORE LITERAL CONSTRUCTION OUGHT NOT TO PREVAIL , IF (AS THE COURT BELOW HAS THOUGHT) IT IS OPPOSED TO THE INTEN TIONS OF THE LEGISLATURE, AS APPARENT BY THE STATUTE; AND IF THE WORDS ARE 11 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. SUFFICIENTLY FLEXIBLE TO ADMIT OF SOME OTHER CONSTR UCTION BY WHICH THAT INTENTION WILL BE BETTER EFFECTUATED.' MR. MITRA CONTENDED THAT THE WORDS 'PROFITS AND GAI NS' HAVE A TECHNICAL MEANING, WHICH LIMITS IT TO BUSINESS PR OFITS AND GAINS AND THAT THIS TECHNICAL MEANING SHOULD BE APP LIED TO BE WORDS OCCURRING IN SECTION 23A OF THE ACT ON THE PRINCIPAL LAID DOWN IN COMMISSIONER FOR SPECIAL PURPOSES OF I NCOME TAX V. PEMSEL. FOR THE REASON ALREADY STATED WE CANNOT ACCEPT THE CONTENTION OUT FORWARD ON BEHALF OF THE ASSESSEE AN D GIVE THE WORDS 'PROFITS AND GAINS' A LIMITED MEANING. IN THE SECOND PLACE, MR. MITRA CONTENDED THAT WHERE THE ON LY ASSETS OF A COMPANY ARE DERIVED FROM PROPERTY, THE ASSESSABLE INCOME OF THE COMPANY WOULD, UNDER SECTION 9 OF THE ACT, BE THE NOTIONAL INCOME OF THE PROPERTY HEL D BY THE COMPANY, SUCH NOTIONAL INCOME MAY BE UNREALIZABLE O R IN FACT NOT REALIZED, IN SUCH A CASE, IF THE COMPANY I S COMPELLED TO DISTRIBUTE 60 PER CENT. OF THE ASSESSABLE INCOME , IT WILL HAVE TO DRAW ON THE CAPITAL OF THE COMPANY, WHICH I S AN IMPOSSIBLE POSITION FOR A COMPANY. THIS ARGUMENT IS PLAUSIBLE BUT DOES NOT BEAR EXAMINATION. THIS DECIS ION WAS CONSIDERED AND FOLLOWED IN THE CASE OF EZRA PROPRI ETARY ESTATES LTD. VS. CIT (CITED SUPRA) IN SIMILAR SET F ACTS. 13. IN THE CASE OF INDRA SINGH & SONS LTD., VS. C IT (CITED SUPRA), THE HONBLE CALCUTTA HIGH COURT WAS DEALING WITH THE CASE OF AN ASSESSEE WHOSE MAIN BUSINESS IS ACTING A S PROMOTERS AND FINANCIERS OF COMPANIES. ACCORDING TO THE P & L A/C OF THE ASSESSEE THEREIN, THE ASSESSEE HAD MADE A NET PROFI T OF RS. 8.32,487 WHICH INCLUDED INCOME FROM BUSINESS ASSESS ABLE UNDER SECTION 10 BUT IT ALSO INCLUDED INCOME FROM I NTEREST ON SECURITIES ASSESSABLE UNDER SECTION 8, INCOME FROM PROPERTY ASSESSABLE UNDER SECTION 9 AND INCOME FROM DIVIDEND S ASSESSABLE UNDER SECTION 12. THE QUESTION BEFORE TH E HONBLE HIGH COURT WAS - 12 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. 'WHETHER THE EXPRESSION SMALLNESS OF THE PROFITS MA DE OCCURRING IN SECTION 23A(1) MEANS ONLY TRADING OR B USINESS PROFIT ASSESSABLE UNDER SECTION 10 OF THE INCOME-TAX ACT OR IT ALSO INCLUDES INCOME FROM INTEREST ON SECURITIES AS SESSABLE UNDER SECTION 8 , INCOME FROM PROPERTY ASSESSABLE UNDER SECTION 9 , AND INCOME FROM DIVIDEND ASSESSABLE UNDER SECTION 12 .' 13.1. AFTER CONSIDERING THE ABOVE TWO DECISIONS, A ND THE FACTS OF THE CASE BEFORE IT, IT WAS HELD AS UNDER: IN MY VIEW, HAVING REGARD TO THE SCHEME OF SECTION 23A(1) AND THE RELATION WHICH THE SIZE OF THE PROFIT AT T HE DISPOSAL OF THE COMPANY BEARS TO THE QUESTION WHICH THE INCOME-TAX OFFICER IS TO DECIDED, THERE CAN BE NO D OUBT THAT THE PROFIT CONTEMPLATED IS NOT LIMITED TO PROFIT FR OM BUSINESS OR PROFIT FROM ANY PARTICULAR SOURCE AT ALL, BUT IT COMPRISES THE WHOLE OF THE PROFITS OF THE COMPANY DISTRIBUTAB LE AS DIVIDEND. I CAN SEE NO ANSWER TO THIS CONSTRUCTION OF THE PHRASE AND MR. MITRA AT THE END VERY FAIRLY CONCEDE D THAT HE WAS UNABLE TO FIND ANY REASON FOR DISAGREEING. 14. IN THE CASE OF CIT VS. CHUGANDAS & CO., (CITED SUPRA), THE HONBLE SUPREME COURT OF INDIA WAS DEALING WITH THE QUESTION WAS TO WHETHER THE INTEREST ON SECURITIES FORMED PART OF THE ASSESSEES BUSINESS INCOME FOR THE PURPOSE OF T HE EXEMPTION FROM TAX UNDER SECTION 25(3) OF THE INDIAN INCOME T AX OF 1922. THE HONBLE APEX COURT HELD AS UNDER: IT MUST THEREFORE BE HELD THAT EVEN IF AN ITEM OF INCOME IS EARNED IN THE COURSE OF CARRYING ON A BUSINESS, IT WILL NOT NECESSARILY FALL WITHIN THE HEAD 'PROFITS AND GAINS OF BUSINESS' WITHIN THE MEANING OF S. 10 READ WITH S. 6(IV) . IF SECURITIES CONSTITUTE STOCK-IN-TRADE OF THE BUSINES S OF AN ASSESSEE, INTEREST RECEIVED FROM THOSE SECURITIES W ILL FOR THE PURPOSE OF DETERMINING THE TAXABLE INCOME BE SHOWN UNDER THE HEAD 'INTEREST ON SECURITIES' UNDER S. 8 READ WITH S. 6(II) OF THE ACT. SIMILARLY DIVIDENDS FROM SHARES WILL B E SHOWN UNDER S. 12(1A) AND NOT UNDER S. 10 . IF AN ASSESSEE CARRIES ON BUSINESS OF PURCHASING AND SELLING BUILD INGS, THE 13 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. PROFITS AND GAINS EARNED BY TRANSACTIONS IN BUILDIN GS WILL BE SHOWN UNDER S. 10 , BUT INCOME RECEIVED FROM THE BUILDINGS SO LONG AS THEY ARE OWNED BY THE ASSESSEE WILL BE S HOWN UNDER S. 9 READ WITH S. 6 (III). INCOME EARNED BY AN ASSESSEE CARRYING ON BUSINESS WILL IN EACH CASE BE BROKEN UP , AND TAXABLE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS WILL BE THAT AMOUNT ALONE WHICH IS EARNED IN THE BU SINESS, AND DOES NOT ALL UNDER ANY OTHER SPECIFIC HEAD. TEN DOLKAR J., IN THE JUDGMENT UNDER APPEAL WAS OF THE OPINION THA T INCOME OF THE BUSINESS TO BE COMPUTED UNDER S. 10 ALONE COULD BE ADMITTED TO THE EXEMPTION: THE ,MAJORITY OF THE COU RT HELD THAT ALL INCOME EARNED BY CARRYING ON BUSINESS QUAL IFIED FOR THE EXEMPTION. NOW CL. (3) OF S. 25 EXPRESSLY PROVIDES THAT INCOME OF A BUSINESS, PROFESSION OR VOCATION WHICH WAS CHARGED AT ANY TIME UNDER ACT 7 OF 1918 TO TAX IS, ON DISCONTINUANCE OF THAT BUSINESS. PROFESSION OR VOCA TION, EXEMPT FROM LIABILITY TO TAX UNDER ACT 11 AT 1922 F OR THE PERIOD BETWEEN THE END OF THE PREVIOUS YEAR AND THE DATE OF SUCH DISCONTINUANCE. TAX IS CHARGED UNDER THE INCOME-TAX ACT S ON SPECIFIC UNITS, SUCH 51 S.C.-22 AS, INDIVIDUAL S, HINDU UNDIVIDED FAMILIES, COMPANIES LOCAL AUTHORITI ES, FIRMS AND ASSOCIATIONS OF PERSONS OR PARTNERS OF FI RMS AND MEMBERS OF ASSOCIATIONS INDIVIDUALLY, AND BUSINESS, PROFESSION OR VOCATION IS NOT A UNIT OF ASSESSMENT. WHEN, THEREFORE, S. 25(3) ENACTS THAT TAX WAS CHARGED AT ANY TIME ON ANY BUSINESS, IT IS INTENDED THAT THE TAX WAS AT ANY TIME CHARGED ON THE OWNER OF ANY BUSINESS. IF THAT CONDI TION BE FULFILLED IN RESPECT OF THE INCOME OF THE BUSINESS UNDER THE ACT OF 1918, THE OWNER OR HIS SUCCESSOR IN-INTEREST QUA THE BUSINESS, WILL BE ENTITLED TO GET THE BENEFIT OF TH E EXEMPTION UNDER IT IF THE BUSINESS, IS DISCONTINUED. THE SECT ION IN TERMS REFERS TO TAX CHARGED ON ANY BUSINESS, I.E., TAX CH ARGED ON ANY PERSON IN RESPECT OF INCOME EARNED BY CARRYING ON THE BUSINESS. UNDOUBTEDLY IT IS NOT ALL INCOME EARNED B Y A PERSON WHO CONDUCTED ANY BUSINESS, WHICH IS EXEMPT UNDER SUB-S. (3) OF S. 25: NON-BUSINESS INCOME WILL CERTA INLY NOT QUALIFY FOR THE PRIVILEGE. BUT THERE IS NO REASON T O RESTRICT THE CONDITION OF THE APPLICABILITY OF THE EXEMPTION ONL Y TO INCOME ON WHICH THE TAX WAS PAYABLE UNDER THE HEAD 'PROFIT S AND GAINS OF BUSINESS, PROFESSION OR VOCATION'. THE LEG ISLATURE HAS MADE NO SUCH EXPRESS RESERVATION, AND THERE IS NO WARRANT FOR READING INTO SUB-S. (3) SUCH A RESTRICT ED MEANING. SUB- SECTION (3) IT MAY BE NOTICED DOES NO T REFER TO 14 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. CHARGEABILITY OF INCOME TO TAX UNDER A PARTICULAR H EAD AS A CONDITION OF OBTAINING THE BENEFIT OF THE EXEMPTION . 14.1. THIS DECISION WAS FOLLOWED BY THE APEX COURT IN THE CASE OF O.RM.M.SP.SV.FIRM VS. CIT (CITED SUPRA) AND ALSO IN THE CASE OF E.D. SASSOON & CO. LTD., VS. CIT (CITED SUPRA). 15. IN THE CASE OF CIT VS. SMT. INDERMANI JATIA (C ITED SUPRA), THE HONBLE ALLAHABAD HIGH COURT HAS GIVEN A SIMILAR FINDING BY OBSERVING AS UNDER: IN THE WIDER SENSE ALL INCOME, PROFITS OR GAINS RE SULTING FROM THE EXPLOITATION OF ASSETS OF THE BUSINESS MIGHT BE REGARDED AS INCOME, PROFITS OR GAINS OF THE BUSINESS ASSETS NOT ONLY INCLUDE THE STOCK-IN-TRADE, OR THE CIRCULATING CAPI TAL BUT ALSO FIXED ASSETS INCLUDING INVESTMENTS SUCH ASSETS ARE SHOWN ON THE ASSETS SIDE OF THE BALANCE-SHEET OF THE BUSI NESS THE ASSESSEE CLAIMED THAT THE SHARES AND IMMOVABLE PROP ERTIES HAD BEEN SHOWN AS ASSETS OF THE BUSINESS IN HIS BAL ANCE- SHEETS ALL ALONG BY THE LATE GANGA SAGAR JATIA AS A LREADY POINTED OUT, IT WAS COMMON GROUND BEFORE THE TRIBUN AL THAT THE SHARES AND THE IMMOVABLE PROPERTIES WERE HELD B Y THE ASSESSEE AS ASSETS OF THE BUSINESS THAT BEING SO, T HE ENTIRE INCOME EARNED BY THE ASSESSEE BY EXPLOITATION OF TH E ASSETS OF THE BUSINESS, PROFESSION OR VOCATION SHOULD BE E NTITLED TO THE EXEMPTION UNDER SECTION 25(4) OF THE ACT ALTHOU GH THE DIFFERENT ITEMS OF INCOME DERIVED FROM THE DIFFEREN T ASSETS MIGHT BE ASSESSABLE UNDER DIFFERENT HEADS 16. IN THE CASE OF CIT VS. COCANADA RADHASWAMY BAN K LTD., (CITED SUPRA), THE HONBLE SUPREME COURT WAS DEALING WITH THE PROVISIONS OF SECTION 6, SECTION 8 AND SECTION 10 AND SECTION 24(2) OF THE 1922 INCOME TAX ACT WHICH ARE CORRESPO NDING TO SECTIONS 14, 18 AND 72 OF 1961 INCOME TAX ACT AND A S TO WHETHER THE INCOME ASSESSED UNDER SECTION 8 OR UNDE R SECTION 12 OF THE 1922 INCOME TAX ACT COULD BE SET-OFF AGAI NST THE BROUGHT FORWARD BUSINESS LOSSES. THE HONBLE SUPREM E COURT 15 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. HELD THAT INCOME FROM INTEREST ON SECURITIES WHICH FORM PART OF THE TRADING ASSET IS INCOME FROM BUSINESS AND THERE FORE, THE BUSINESS LOSS OF EARLIER YEARS COULD BE SET-OFF AGA INST THE INCOME FROM SECURITIES. IT WAS HELD THAT THE NATURE OF A P ARTICULAR INCOME IS TO BE DECIDED NOT ON THE BASIS OF THE PRO VISIONS OF SECTION BUT ON COMMERCIAL PRINCIPLES. ON AN ANALYSI S OF SIMILAR PROVISIONS, THE HONBLE MADHYA PRADESH HIGH COURT I N THE CASE OF CIT VS. SHRIKISHAN CHANDMAL (CITED SUPRA) HAS HE LD THAT BUSINESS LOSS CARRIED FORWARD FROM EARLIER YEARS CA N BE SET-OFF AGAINST THE DIVIDEND INCOME DERIVED FROM SHARES HEL D AS STOCK- IN-TRADE. SIMILAR VIEWS HAVE BEEN EXPRESSED BY THE HONBLE SUPREME COURT IN THE CASE OF WESTERN STATE TRADING CO. P. LTD., VS. CIT AND BROOKE BOND & CO. LTD., (CITED SUPRA). THE HONBLE GUJARAT HIGH COURT AND HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHAVNAGAR TRUST CORPORATION AND CIT VS. R. DALMIA RESPECTIVELY ALSO HAVE EXPRESSED SIMILAR VIEW. [ 17. THE HONBLE MADRAS HIGH COURT, WHILE CONSIDERI NG THE QUESTION AS TO WHETHER BUSINESS LOSS CARRIED FO RWARD CAN BE SET-OFF AGAINST THE DIVIDEND INCOME FROM SHARES HEL D AS STOCK-IN- TRADE UNDER SECTION 72 OF THE I.T. ACT, HELD THAT T HE AMOUNT OF DIVIDEND INCOME WOULD BE INCOME FROM BUSINESS EVEN IF ASSESSED UNDER THE HEAD OTHER SOURCES. SIMILAR VIEW WAS EX PRESSED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ACI T VS. SOLAR CHEMICALS P. LTD., WHILE DEALING WITH THE PROVISION S OF SECTION 10(4) OF I.T. ACT RELATING TO SUPER TAX AND HELD TH AT ADDITIONS IN THE ASSESSMENT ON ACCOUNT OF HUNDI LOANS AND UNEXPL AINED CAPITAL THOUGH INCLUDED UNDER THE HEAD OTHER SOURC ES AND NOT UNDER THE HEAD BUSINESS INCOME WOULD BE COVERED B Y SECTION 16 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. 10(4) OF I.T. ACT. SECTION 10(4) OF I.T. ACT, HAS S INCE BEEN OMITTED FROM THE STATUTE. 18. IN ALL THE ABOVE DECISIONS, IT HAS BEEN HELD T HAT EVEN THOUGH THE INCOME OF THE ASSESSEE IS COMPUTED UNDE R DIFFERENT HEADS OF INCOME, IN EFFECT, THEY ARE ALL PART OF TH E BUSINESS PROFITS. CLASSIFICATION OF INCOME UNDER DIFFERENT H EADS OF INCOME WILL NOT ENTITLE OR DISENTITLE THE SAME TO BE CONSI DERED AS PART OF BUSINESS INCOME AND ITS ALLOWABILITY AS DEDUCTION. THEREFORE, WE FIND STRENGTH IN THE CONTENTIONS OF THE ASSESSEE TH AT EVEN THOUGH THE INCOME HAS BEEN RETURNED AND ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE ASSESSEE IS ELIGI BLE FOR DEDUCTION U/S 80IA (4) OF THE ACT AS THE BUSINESS O F THE ASSESSEE IS ONLY TO DEVELOP AND MAINTAIN INFRASTRUCTURAL FAC ILITIES AND THOUGH THE INCOME FROM SUCH FACILITY HAS BEEN OFFER ED UNDER THE INCOME FROM HOUSE PROPERTY, IT IS IN FACT BUSINESS INCOME OF THE ASSESSEE. THE PROJECT FROM WHICH THE ASSESSEE HAS R EALIZED LEASE RENTALS HAS ALSO BEEN APPROVED BY THE GOVERNMENT OF INDIA AS AN ELIGIBLE PROJECT UNDER SECTION 80IA(4)(III) OF THE I.T. ACT. THEREFORE, WE ARE OF THE OPINION THAT THE DEDUCTION UNDER SECT ION 80IA IS ALLOWABLE TO THE ASSESSEE. 19. FURTHER, WE ALSO FIND THAT THIS IS THE SECOND YEAR OF THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE I. T. ACT. THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF A CIT VS. ANNAPURNA BUILDERS AND JANAPRIYA PROPERTIES P. LTD. , VS. DCIT (CITED SUPRA), HAS HELD THAT AS LONG AS THE APPROVA L GIVEN BY THE CENTRAL GOVERNMENT IS VALID AND NOT WITHDRAWN BY IT , THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER SECTI ON 80IA(4)(III) OF THE ACT. FURTHER, VARIOUS HIGH COURTS SUCH AS GU JRAT HIGH 17 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. COURT, BOMBAY HIGH COURT AND DELHI HIGH COURT IN TH E CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE (CI TED SUPRA) HAVE HELD THAT WHERE DEDUCTION HAS BEEN ALLOWED UND ER SECTIONS 80HH AND 80J IN THE EARLIER YEAR, THERE IS NO PROVI SION FOR WITHDRAWAL OF SUCH DEDUCTION FOR THE SUBSEQUENT YEA RS FOR BREACH OF CERTAIN CONDITIONS. 20. IN THE CASE BEFORE US, THE ASSESSEE HAS BEEN A LLOWED DEDUCTION IN THE FIRST YEAR AND IT IS THE BOUNDEN D UTY OF THE A.O. TO EXAMINE THE ELIGIBILITY OF THE ASSESSEE TO CLAIM THE DEDUCTION UNDER SECTION 80IA(4) OF THE ACT AT THE TIME OF ALL OWING SUCH DEDUCTION. SINCE THE CLAIM HAS BEEN ALLOWED, IT IS TO BE PRESUMED THAT THE A.O. IS SATISFIED ABOUT THE ALLOW ABILITY OF THE CLAIM. THIS BEING THE SECOND YEAR, UNLESS THERE ARE DISTINGUISHING FACTS AND CIRCUMSTANCES FOR TAKING A DIFFERENT VIEW AND DENY THE CLAIM OF DEDUCTION, THE A.O. CANN OT TAKE A CONTRARY STAND. THE CIT(A) HAS IN FACT, DIRECTED TH E A.O. TO EXAMINE THE ASSESSMENT ORDER FOR A.Y. 2009-2010 AND TO SEE WHETHER THE A.O. HAS EXAMINED THE ELIGIBILITY OF TH E ASSESSEE AND TO TAKE SUITABLE ACTION. THIS DIRECTION, IN OUR OPI NION, IS NOT SUSTAINABLE. THE CIT(A) CAN ONLY DEAL WITH THE APPE AL BEFORE HIM AND CANNOT GIVE A DIRECTION WITH REGARD TO ANOTHER ASSESSMENT YEAR NOT BEFORE HIM. THEREFORE, SUCH DIRECTION IS N OT SUSTAINABLE AND IS HEREBY QUASHED. 21. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO MADE AN ALTERNATE CLAIM THAT THE LEASING INCOME OF I.T. PAR K/COMMERCIAL PROPERTIES/SHOPPING MALL IS ASSESSABLE AS BUSINESS INCOME. HE HAS PLACED RELIANCE UPON THE VARIOUS DECISIONS OF T HE COORDINATE BENCHES OF THE TRIBUNAL AT BANGALORE AND CHENNAI TO THIS EFFECT. 18 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. HOWEVER, WE FIND THAT THE ASSESSEE HAS NOT RAISED A NY GROUND OF APPEAL SEEKING THE INCOME TO BE TREATED AS BUSINESS INCOME. HE HAS ALSO PLACED RELIANCE UPON THE DECISION OF HONB LE SUPREME COURT OF INDIA IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD., (CITED SUPRA) TO CONTEND THAT THE LETTING OF THE PROPERTIES WAS THE BUSINESS OF THE COMPANY AND THEREFORE, THE RENTAL INCOME IS TO BE ASSESSED AS BUSINESS INCOME. HE HAS DRAWN OUR ATTENTION TO THE MEMORANDUM OF ASSOCIATION OF THE C OMPANY TO DEMONSTRATE THAT THE ASSESSEES BUSINESS WAS ALSO L ETTING OUT OF THE PROPERTY AND THEREFORE, THE INCOME OUGHT TO HAV E BEEN TREATED AS BUSINESS INCOME. HOWEVER, SINCE WE HAVE ALREADY HELD THAT THE WORDS PROFITS AND GAINS USED IN THE PROV ISIONS OF SECTION 80IA(4) INCLUDES THE OTHER HEADS OF INCOME SUCH AS INCOME FROM HOUSE PROPERTY AND MORE PARTICULARLY SINCE THE ONLY BUSINESS OF THE ASSESSEE IS THE DEVELOPMENT AN D MAINTENANCE OF INFRASTRUCTURE FACILITIES, WE DO NOT SEE ANY REASON TO ADJUDICATE THE ALTERNATE GROUND OF APPEAL MORE PARTICULARLY WHEN THE ASSESSEE ITSELF HAS NOT RAISE D SUCH GROUND OF APPEAL BEFORE US. 22. IN THE RESULT, ITA.NO.1774/HYD/2014 OF THE ASS ESSEE IS ALLOWED. ITA.NO.727/HYD/2015 23. THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE I.T. ACT DATED 30 TH MARCH, 2015. 24. BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT WA S COMPLETED ON 31.03.2013 ACCEPTING THE TOTAL INCOME DECLARED AS STATED IN THE ABOVE APPEAL I.E., ITA.NO.1774/HYD/20 14 FOR THE 19 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. VERY SAME ASSESSMENT YEAR. ASSESSEE FILED ITS RETUR N OF INCOME FOR THE A.Y. 2010-2011 ON 30.09.2011 ADMITTING INCO ME OF RS.15,96,24,114 AND CLAIMED DEDUCTION UNDER SECTION 80IA TO THE TUNE OF RS.13,02,62,800. THE A.O. ACCEPTED THE RETURNED INCOME OF THE ASSESSEE BY ACCEPTING THE INCOME FROM LEASE RENTALS FROM THE INFRASTRUCTURE FACILITIES AS INCOM E FROM HOUSE PROPERTY. THE CIT VIDE HIS POWERS VESTED IN HIM UND ER SECTION 263 OF THE I.T. ACT CALLED FOR THE ASSESSMENT RECOR D OF THE ASSESSEE-COMPANY AND OBSERVED THAT THE A.O. HAS ACC EPTED THE LEASE RENTALS FROM I.T. PARK AS INCOME FROM HOUSE PROPERTY THOUGH DENIED THE CLAIM OF THE ASSESSEE UNDER SECTI ON 80IA OF THE ACT ON THE GROUND THAT DEDUCTION CANNOT BE GIVE N UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE OBSERVED THAT FOR THE A.YS. 2006-07, 2007-08 AND 2009-10, THE CIT HAD PAS SED REVISIONARY PROCEEDINGS UNDER SECTION 263 ON 28.03. 2014 AND DIRECTED THE A.O. TO TREAT THE INCOME FROM LEASE RE NTALS AS INCOME FROM BUSINESS OBSERVING THAT THE CIT(A) HA S ALREADY DISMISSED THE APPEAL OF THE ASSESSEE AGAINST THE AS SESSMENT ORDER DATED 31.03.2013 AND THAT THE ISSUE OF THE HE AD OF INCOME UNDER WHICH THE LEASED INCOME HAS TO BE BROUGHT TO TAX WAS NOT SUBJECT MATTER OF APPEAL BEFORE THE CIT(A), THE CIT SOUGHT TO REVISE THE ASSESSMENT ORDER UNDER SECTION 263 OF TH E I.T. ACT. HE ACCORDINGLY, ISSUED A SHOW CAUSE NOTICE TO THE ASSE SSEE. 25. AFTER CONSIDERING THE ASSESSEES SUBM ISSIONS AT LENGTH THE CIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS A ND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND DIR ECTED THE A.O. TO BRING THE INCOME TO TAX UNDER THE HEAD BUSINESS INCOME. 20 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. AGAINST THIS ORDER OF THE CIT, THE ASSESSEE IS IN A PPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL : GROUND 1: ERRONEOUS AND PREJUDICIAL ORDER 1.1. THE LEARNED PCIT ERRED IN HOLDING THAT THE ASSESSME NT ORDER DATED MARCH 31,2013, PASSED BY THE ASSESSING OFFICER ('AO') UNDER SECTION 143(3) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE ALTHOUGH THE TWIN CONDITIONS REQUIRED TO BE FULFILL ED FOR EXERCISING THE JURISDICTION ARE NOT SATISFIED. 1.2. THE LEARNED PCIT ERRED IN OBSERVING THAT SINCE THE APPELLANT IS NOT ENTITLED TO A DEDUCTION UNDER SECT ION 32(IIA) OF THE ACT, THE ASSESSMENT ORDER IS PREJUDI CIAL TO THE INTEREST OF THE REVENUE ALTHOUGH THE APPELLANT DID NOT MAKE ANY SUCH CLAIM IN ITS RETURN OF INCOME NOR THIS FORMED THE BASIS OF THE SHOW CAUSE NOTICE INVOKING JURISDICTION UNDER SECTION 263 OF THE ACT. GROUND 2: BUSINESS INCOME VS INCOME FROM HOUSE PROP ERTY. 2.1. THE LEARNED PCIT ERRED IN HOLDING THAT RENTAL INCOME EARNED ON LETTING OUT THE IMMOVABLE PROPERTY IS TO BE ASSESSED AS 'BUSINESS INCOME' AND NOT AS 'INCOME FROM HOUSE PROPERTY' AS RETURNED BY THE APPELLANT A ND ACCEPTED IN THE ASSESSMENT PROCEEDINGS. GROUND 3: DEPRECIATION ON ASSETS 3.1 WITHOUT PREJUDICE TO GROUND 2, IN CASE THE INC OME OF THE APPELLANT IS CLASSIFIED AS 'BUSINESS INCOME' INSTEA D OF 'INCOME FROM HOUSE PROPERTY', THE APPELLANT OUGHT T O HAVE BEEN ALLOWED DEPRECIATION IN RESPECT OF ITS ASSETS, INCLUDING THE BUILDINGS AND FITTINGS AND MACHINERY THEREIN. THE APPELLANT PRAYS FOR THE FOLLOWING RELIEF 21 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. (A) THE HONBLE TRIBUNAL BE PLEASED TO HOLD THAT THE ASSESSMENT ORDER DATED MARCH 31, 2013 IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND HENCE THE PCIT WAS NOT JUSTIFIED IN EXERCISING THE JURISDICTION UNDER SECTION 263 OF THE ACT. (B) THE HONBLE TRIBUNAL BE PLEASED TO HOLD THAT RENTAL RECEIPTS ARE ASSESSABLE AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. (C) WITHOUT PREJUDICE TO (B) ABOVE, IF THE RENTAL RECEI PTS ARE ASSESSABLE AS 'BUSINESS INCOME' THEN, THE HON'BLE TRIBUNAL BE PLEASED TO HOLD THAT THE APPELLANT OUGH T TO HAVE BEEN ALLOWED DEPRECIATION IN RESPECT OF ITS ASSETS, INCLUDING THE BUILDINGS AND FITTINGS AND MACHINERY THEREIN. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, OMIT OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEA L, AT ANY TIME BEFORE OR AT THE TIME OF THE APPEAL, TO EN ABLE THE LEARNED INCOME-TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDING TO LAW. 26. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THERE WAS NO PREJUDICE CAUSED TO THE REVENUE BY ASS ESSING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE ALSO MADE AN ALTERNATIVE PLEA THAT IF THE INCOME IS TO B E TREATED AS BUSINESS INCOME, THEN THE DEPRECIATION ON THE ASSET S IS TO BE ALLOWED. 27. THE LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE CIT. 28. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE STAND OF THE A .O. HAS BEEN THAT SINCE THE INCOME IS NOT OFFERED AS BUSINESS IN COME, THE DEDUCTION UNDER SECTION 80IA CANNOT BE ALLOWED. IF THE STAND OF THE CIT IS ACCEPTED, AND THE INCOME IS BROUGHT TO T AX UNDER THE 22 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. HEAD BUSINESS INCOME, THEN THE DEDUCTION UNDER SECTION 80IA(4) WOULD BE ALLOWABLE WHEREBY THE INCOME OF TH E ASSESSEE WOULD NOT BE EXIGIBLE TO TAX. THEREFORE, IT IS CLEA R THAT THERE IS NO PREJUDICE CAUSED TO THE REVENUE BY THE VIEW ADOPTED BY THE A.O. FOR A REVISION ORDER TO BE SUSTAINED, THE ASSESSMEN T ORDER SHOULD BE BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE CASE BEFORE US, AS WE HAVE A LREADY HELD THAT THERE IS NO PREJUDICE CAUSED TO THE REVENUE AN D FURTHER SINCE WE HAVE ALSO HELD IN ASSESSEES APPEAL AGAINS T THE ASSESSMENT ORDER DENYING THE CLAIM OF DEDUCTION UND ER SECTION 80IA(4), THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80IA EVEN IF THE INCOME IS RETURNED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE REVISION ORDER IS NOT SUSTAINA BLE. 29. IN THE RESULT, ITA.NO.727/HYD/2015 OF THE ASSE SSEE IS ALLOWED. ITA.NO.728/HYD/2015 : 30. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-COMPANY IS ENGAGED IN REAL ESTATE DEVELOPMENT AND LEASING O F PROPERTIES. IT FILED ITS RETURN OF INCOME FOR THE A.Y. 2010-201 1 ON 14.10.2010 ADMITTING LOSS OF RS.25,88,98,030 WHICH CONSISTS OF HOUSE PROPERTY LOSS AMOUNTING TO RS.23,32,62,838 AN D BUSINESS LOSS OF RS.2,56,35,192. DURING THE ASSESSMENT PROCE EDINGS UNDER SECTION 143(3) OF THE I.T. ACT, THE A.O. MADE AN ADDITION OF RS.5,46,281 ON ACCOUNT OF SALE OF SCRAP AND REDUCED THE TOTAL LOSS TO RS.25,83,51,749. SUBSEQUENTLY, THE CIT BY E XERCISING HIS POWERS UNDER SECTION 263 OF THE ACT, PERUSED THE AS SESSMENT RECORD AND FOUND THAT THE ASSESSEE-COMPANY HAD ADMI TTED THE 23 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE OBSERVED THAT M/S. RAHEJA I.T. PARK LIMITED HAD TRA NSFERRED CERTAIN INDUSTRIAL PARK UNITS TO THE ASSESSEE COMPA NY LEASING TO MAINTAIN AND OPERATE IT. OBSERVING THAT SUCH INCOME SHOULD BE OFFERED UNDER THE HEAD BUSINESS INCOME, THE CIT W AS OF THE OPINION THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. FURTHER, HE ALSO FOUND CERTAIN DISCREPANCIES IN THE LEASED RENTALS RECEIVED AND AD MITTED BY THE ASSESSEE AND ALSO ON THE COMPLIANCE OF TDS PROVISIO NS. HE, THEREFORE, ISSUED A SHOW CAUSE NOTICE TO THE ASSESS EE SEEKING ASSESSEES EXPLANATION AS TO WHY THE ASSESSMENT ORD ER SHOULD NOT BE REVISED. THE ASSESSEE FILED DETAILED EXPLANA TION STATING THAT THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THAT THE ASSESSEE IS IN THE LINE OF BUSINESS OF LETTING AND THEREFORE, THE INCOME WO ULD FALL UNDER THE HEAD HOUSE PROPERTY. THE CIT WAS HOWEVER, NOT CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE AND HOLDING TH AT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE, HE DIRECTED THE A.O. TO GIVE EFFECT TO HIS DIRECTIONS. WITH REGARD TO OTHER TWO ISSUES ON WHICH THE REVISI ON WAS SOUGHT TO BE MADE, HE VERIFIED THE FACTS AND HELD T HAT NO REVISION IS REQUIRED ON THESE TWO ISSUES. AGGRIEVED BY THE O RDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 31. SINCE THE FACTS IN THE PRESENT CASE ARE SIMILA R TO THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE CASE OF M/S. RAHEJA I.T. PARK HYDERABAD LTD., FOR THE DETAILED REASONS GIVEN THEREIN, WE HOLD THAT THE REVISION ORDER IN THIS CASE IS ALS O NOT SUSTAINABLE AND THERE IS NO PREJUDICE CAUSED TO THE REVENUE. 24 ITA.NO.1774/H/2014 & 727/H/2015 K. RAHEJA IT PARK ( HYDERABAD) P. LTD., HYDERABAD & ITA.NO.727/H/2015 INTIME PROPERTIES LT D., HYDERABAD. 32. IN THE RESULT, ITA.NO.728/HYD/2015 OF THE ASSE SSEE IS ALLOWED. 33. TO SUM-UP, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.07.2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI ) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 11 TH JULY, 2016 VBP/- COPY TO : 1. K. RAHEJA IT PARK (HYDERABAD) P. LTD., MINDSPACE, CYBERABAD, SURVEY NO.64 (PART), APIIC SOFTWARE LAYOUT, 1 ST FLOOR, TITUS TOWERS, BUILDING 10, MADHAPUR, HYDERABAD 500 081. 2. INTIME PROPERTIES LTD., (FORMERLY KNOWN AS INTIME PROPERTIES P. LTD., ) MINDSPACE, CYBERABAD, SURVEY NO.64 (PART), APIIC SOFTWARE LAYOUT, 1 ST FLOOR, TITUS TOWERS, BUILDING 10, MADHAPUR, HYDERABAD. 3. CIT(A) - III, HYDERABAD 4. CIT - II, HYDERABAD. 5. PRINCIPAL CIT - II, HYDERABAD. 6. ADDL. CIT, RANGE - 2, HYDERABAD. 7. D.R. ITAT B BENCH, HYDERABAD. 8. GUARD FILE