M/s Mudhol Land Holding Company Pvt. Ltd, Pune V. CIT-1, Pune

ITA 987/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84943 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: S N DOSHI
• Keywords: Business income; Depreciation; Opportunity of being heard; Assessment record; Unabsorbed depreciation
• Section: 143(3); 142(1); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.987/PN/2013 (ASSESSMENT YEAR : 2008-09) M/S MUDHOL LAND HOLDING COMPANY PVT. LTD., 506, CITY POINT, 17 BOAT CLUB ROAD, PUNE 411 001. PAN : AADCM6515E . APPELLANT VS. COMMISSIONER OF INCOME TAX-I, PUNE. . RESPONDENT ASSESSEE BY : MR. S. N. DOSHI DEPARTMENT BY : MR. S. K. SINGH ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX-I, PUNE (IN SHORT T HE COMMISSIONER) DATED 28.03.2013 PASSED U/S 263 OF THE INCOME TAX ACT, 19 61 (IN SHORT THE ACT) WHEREBY THE ASSESSMENT ORDER MADE BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT DATED 11.10.2010 HAS BEEN HELD TO BE ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN T HE MEANING OF SECTION 263 OF THE ACT. 2. IN BRIEF, THE PERTINENT DISPUTE RAISED BY THE AS SESSEE IN THIS APPEAL IS TO THE EFFECT THAT THE COMMISSIONER ERRED IN INVOKING SECTION 263 OF THE ACT AND HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE ASS ESSING OFFICER WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE RELEVANT FACTS ARE AS FOLLOWS. THE APPELLANT IS A COMPANY INCORPORATED U NDER THE PROVISIONS OF THE COMPANIES ACT, 1956, WITH THE OBJECT OF CARRYING ON ACTIVITY OF BUILDERS, DEVELOPERS, CONTRACTORS AND ACQUIRED LAND, ETC. FOR THE SAME. IN PURSUANCE OF ITA NO.987/PN/2013 A. Y. : 2008-09 ITS OBJECTS, IT SETUP AN INFRASTRUCTURE FACILITY SE RVICE UNDER THE SOFTWARE TECHNOLOGY PARK SCHEME IN PUNE KNOWN AS CYBERNEX. THE INFRASTRUCTURE FACILITY SETUP BY THE ASSESSEE FOR THE SOFTWARE TEC HNOLOGY PARK (STP) UNITS WAS DULY APPROVED BY THE MINISTRY OF COMMUNICATION AND INFORMATION TECHNOLOGY, GOVERNMENT OF INDIA UNDER THE ELECTRONI CS HARDWARE TECHNOLOGY PARK SCHEME IN 2006. AS PER THE APPROVAL, ASSESSEE WAS ALLOWED TO SETUP INFRASTRUCTURE FOR STP UNITS CALLED CYBERNEX AT P UNE. THE CYBERNEX BUILDING COMPRISED OF 55000 SQ.FT. AREA AND THE SPA CE HAS BEEN LEASED OUT TO VARIOUS LESSEES WHO ARE ENGAGED IN IT/IT ENABLED SE RVICES. THE UNITS LOCATED IN THE CYBERNEX I-T PARK WERE DULY REGISTERED WITH DIRECTORATE OF INDUSTRIES, GOVERNMENT OF MAHARASHTRA. THE LEASE CHARGES EARNE D BY THE ASSESSEE WERE DISCLOSED AS BUSINESS INCOME IN THE RETURN OF INCOME FILED. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED A RETURN OF INCOME ON 23.09.2008 DECLARING NIL INCOME WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT BY THE ASSESSING OFFICER, WHE REIN VIDE ORDER DATED 11.10.2010, THE INCOME SHOWN BY THE ASSESSEE BY WAY OF LEASE CHARGES AS BUSINESS INCOME WAS ACCEPTED. WHILE DETERMINING GROSS TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION, ASSESSING OFFICER ALL OWED ASSESSEES CLAIM FOR CURRENT YEARS DEPRECIATION RS.10,79,238/-; AND, TH E BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION RELATING TO PAST YEARS AGGR EGATING TO RS.8,42,556/-, WAS ALSO ALLOWED TO BE SET-OFF. THE TOTAL INCOME W AS COMPUTED AT RS.6,000/-, BUT AS THE TAX COMPUTED IN TERMS OF SECTION 115JB O F THE ACT WAS HIGHER, THE FINALLY DETERMINED INCOME WAS RS.6,76,658/- AS PER SECTION 115JB OF THE ACT. 3. SUBSEQUENTLY, THE COMMISSIONER EXAMINED THE RECO RDS AND FOUND THAT THE ASSESSING OFFICER ADMITTED THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD BUSINESS WITHOUT EXAMINING THE NATURE OF THE LEASE AGREEMENT AND THUS THE NATURE OF THE LEASE CHARGES EARNED REMAINE D TO BE EXAMINED. AS PER THE COMMISSIONER, LEASE CHARGES EARNED BY THE ASSES SEE AND OFFERED FOR TAX UNDER THE HEAD BUSINESS INCOME OUGHT TO HAVE BEEN ASSESSED UNDER THE ITA NO.987/PN/2013 A. Y. : 2008-09 HEAD INCOME FROM HOUSE PROPERTY. FURTHER, AS PER THE COMMISSIONER, SINCE THERE WAS NO OTHER ACTIVITY IN THE NATURE OF BUSINE SS, THE BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION AMOUNTING TO RS.8,48,55 6/- COULD NOT BE SET-OFF AGAINST THE CURRENT YEARS INCOME. ON THE AFORESAI D LINES, THE COMMISSIONER SHOW-CAUSED THE ASSESSEE AS TO WHY THE ASSESSMENT O RDER DATED 11.10.2010 BE NOT CONSIDERED TO BE ERRONEOUS IN SO FAR AS IT I S PREJUDICIAL TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. 4. BEFORE THE COMMISSIONER, ASSESSEE VEHEMENTLY POI NTED OUT THAT THE ASSESSING OFFICER HAD DULY EXAMINED THE NATURE OF R ENTAL INCOMES BY MAKING ENQUIRIES WITH REGARD TO THE NATURE OF ACTIVITIES C ARRIED OUT BY THE ASSESSEE AND THE COPIES OF LEASE AGREEMENTS WERE DULY FURNIS HED. SECONDLY, ASSESSEE POINTED OUT THAT ASSESSABILITY OF RENTAL INCOME UND ER THE HEAD BUSINESS INCOME OR UNDER THE HEAD INCOME FROM HOUSE PROPER TY IS A DEBATABLE ISSUE AND THE ASSESSING OFFICER HAVING ADOPTED A PERMISSI BLE VIEW THE SAME CANNOT BE TERMED AS ERRONEOUS OR PREJUDICIAL TO THE INTERE STS OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. THIRDLY, AS SESSEE POINTED OUT THAT THE LEASE AGREEMENT CLEARLY POINTED OUT THAT ASSESSEE W AS NOT RENTING OUT THE SPACE SIMPLICITOR BUT IT WAS PROVIDING VARIOUS OTHE R SERVICES TO THE LESSEES AND THEREFORE THE LEASE INCOME WAS TO BE ASSESSED AS B USINESS INCOME. THE CLAIM OF THE ASSESSEE WAS THAT IT HAS BEEN IN THE B USINESS OF LEASING OUT SPACE TO THE STP UNITS AND THAT SUCH LEASING IS IN THE NATURE OF EXPLOITING ASSET FOR COMMERCIAL CONSIDERATIONS THUS THE SAME W AS TO BE ASSESSED AS BUSINESS INCOME. IN SUPPORT, ASSESSEE FURNISHED COPY OF ITS MEMORANDUM OF ASSOCIATION & ARTICLES OF ASSOCIATION HIGHLIGHTING THAT ITS OBJECTS WERE TO IMPROVE, HOLD, LEASE, LET OR GIVE OR LICENSE OR OTH ERWISE TO DISPOSE IT OFF . THUS, AS PER THE ASSESSEE, RENTING OR LEASING WAS NOT AN INCIDENTAL OBJECT BUT, WAS THE MAIN OBJECT OF THE ASSESSEE COMPANY. ITA NO.987/PN/2013 A. Y. : 2008-09 5. IT WAS FURTHER CONTENDED THAT THE ASSESSEE WAS A PPROVED AS AN INFRASTRUCTURE SERVICE PROVIDER BY THE STP (SOFTWAR E TECHNOLOGY PARK OF INDIA) AND, MOREOVER, THE DIRECTORATE OF INDUSTRIES , MAHARASHTRA, HAS REGISTERED THE UNIT AT CYBERNEX AS AN INFORMATION TECHNOLOGY (IT) PARK. IT WAS EXPLAINED THAT CYBERNEX WAS PUNES ONLY IT PARK THAT DELIVERED 90% FLOOR EFFICIENCY, WHICH ENABLED CLIENTS TO OPTIMIZE FLOOR AREA FOR MAXIMIZING NUMBER OF WORK-STATIONS/EMPLOYEES. THE BUILDING WA S DESIGNED INSIDE-OUT, AND BUILT WITH ADVANCED TECHNOLOGY SPECIFICATIONS M EANT FOR THE IT PARK. THE LESSEES, AXIX BANK AND HDFC BANK, WERE USING THE TE NEMENTS AS OUTBOUND/ INBOUND CALL CENTRES AND BACK OFFICE SERVICES, WHIC H ARE IT ENABLED, WHILE M/S SMS CONCAST IS INTO CAD/CAM DESIGNING OF STEEL PLAN TS. IT WAS ALSO CONTENDED THAT ALL THE LESSEES ARE CERTIFIED BY THE DIRECTORATE OF INDUSTRIES TO OCCUPY/ LEASE AND USE SPACE AT CYBERNEX. 6. APART FROM THE ABOVE, ASSESSEE CONTENDED BEFORE THE COMMISSIONER THAT THE LEASE ARRANGEMENT ALSO INVOLVED PROVIDING OF ADDITIONAL SERVICES/END- TO-END SOLUTIONS TO VARIOUS LESSEES BY ASSESSEE IN THE SHAPE OF (A) CYBERNEX ENERGY MANAGEMENT SERVICE, (B) CYBERNEX INFORMATION TECHNOLOGY SERVICES, (C) HIGH & LOW SIZE AIR-MONITORING SYSTEMS, AND (D) BASE BUILDING SPECIFICATIONS (BBS). ACCORDING TO THE ASSESSEE, I T WAS PROVIDING SUPPORT SERVICES TO LESSEES ALONGWITH THE LEASING OF SPACE AND THE PREMIUM OF SUCH SERVICES AND FACILITIES WAS BUILT INTO THE LEASE CH ARGES EARNED. THUS, AS PER THE ASSESSEE, LEASE CHARGES WERE HIGHER AS COMPARED TO NORMAL RENTALS IN THE VICINITY OF ASSESSEES BUILDING. 7. FURTHER, ASSESSEE SUBMITTED THAT IT WAS PROVIDIN G LIFT SERVICES, SECURITY, POWER BACK-UP AND CAFETERIA SPACE TO THE CLIENTS. THE ASSESSEE BILLS SEPARATELY FOR SUPPORT SERVICE LIKE ADDITIONAL PARK ING CHARGES, MONTHLY CAFETERIA FEES AND SERVICE CHARGES IN CYBERNEX ENER GY MANAGEMENT SERVICES (CEMS) ETC. ON A MONTHLY BASIS AND THE INCOME IS SH OWN UNDER THE HEAD ITA NO.987/PN/2013 A. Y. : 2008-09 BUSINESS. FOR ALL THE ABOVE REASONS, ASSESSEE AS SERTED THAT LEASE CHARGES WERE NOT EARNED FROM PURE LEASING OF SPACE BUT IT W AS A COMPOSITE CHARGE FOR SPACE AND SERVICES PLUS FACILITIES, MAKING IT AS B USINESS INCOME. 8. THE COMMISSIONER HAS NOT ACCEPTED THE PLEA OF TH E ASSESSEE. ACCORDING TO THE COMMISSIONER, THE ASSESSING OFFICE R DID NOT RAISE ANY QUERY AS REGARDS THE HEAD OF INCOME UNDER WHICH THE RENTA L INCOMES RETURNED BY THE ASSESSEE HAS TO BE ASSESSED. ACCORDING TO THE COMM ISSIONER, THE ASSESSING OFFICER DID CALL FOR A NOTE ON THE NATURE OF BUSINE SS ACTIVITY BUT THERE WAS NO SPECIFIC QUERY RAISED AS TO THE HEAD OF INCOME UNDE R WHICH SUCH INCOME WAS TO BE ASSESSED, THEREFORE, ACCORDING TO THE COMMISS IONER, THE ASSESSING OFFICER DID NOT APPLY HIS MIND TO THE IMPUGNED ISSU E. 9. WITH REGARD TO ASSESSEES CLAIM THAT THE INCOME DERIVED BY IT FROM LEASING OF CYBERNEX HAS BEEN RIGHTLY ASSESSED AS BU SINESS INCOME, THE SAME WAS NOT ACCEPTED BY THE COMMISSIONER. HOWEVER , IN CONCLUSION, THE COMMISSIONER HAS NOT GIVEN A POSITIVE FINDING THAT THE INCOME WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY BUT HAS REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER TAKING INTO CONSIDERATION THE RELEVANT FACTS AND EVIDENCE. THE CONCLUDING PART OF ORDER OF THE COMMISSIONER IN THIS REGARD IS CONTAINED IN PAR A 6.3.6 OF HIS ORDER, WHICH READS AS UNDER :- 6.3.6 IN VIEW OF THE FOREGOING DISCUSSION, TH E VARIOUS CONTENTIONS RAISED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM THAT THE RENT RECEIVED BY IT DURING THE RELEVANT PREVIOUS YEAR FROM THE LEASING OUT OF FLOORS IN THE CYBERNEX IS ASSESSABLE AS BUSINESS INCOME ARE NOT FOUND TO BE ACCEPTABLE. NEVERTHELESS, I WOULD REFRAIN FROM DECIDING ON THE ISSUE RAISED IN THE NOTICE U/S 263 CONCLUSIVELY AT THIS END AND, INSTEAD, WOUL D BE INCLINED TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DEC IDING ON THE SAME AFRESH AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS AN D EVIDENCES. THIS COURSE IS BEING PREFERRED BECAUSE EVEN THOUGH THE LEASE AGREE MENTS DO NOT SPEAK OF ANY COMPLEX SPECIAL SERVICES, IT IS NECESSARY THAT THE SERVICES ACTUALLY PROVIDED BY THE ASSESSEE ARE ASCERTAINED ON DUE ENQ UIRY. IT IS ALSO NECESSARY TO ASCERTAIN, ON THE BASIS OF FACTS AND E VIDENCES, IF THE ASSESSEE WAS CARRYING ON ITS ACTIVITIES OF LEASING THE PREMI SES DURING THE RELEVANT PREVIOUS YEAR IN A CONTINUOUS AND SYSTEMATIC MANNER THROUGH A SERIES OF ITA NO.987/PN/2013 A. Y. : 2008-09 ACTIVITIES AND TRANSACTIONS AS WOULD DISTINGUISH IT FROM LEASING OF LETTING OF A SIMPLE KIND. ACCORDINGLY, THE ASSESSMENT IS SET AS IDE WITH DIRECTION TO THE ASSESSING OFFICER TO DO IF AFRESH AFTER COLLECTING, APPRAISING AND EVALUATING ALL RELEVANT FACTS AND EVIDENCES AND ALSO AFTER GIVING ASSESSEE AN OPPORTUNITY OF BEING HEARD. 10. IN THE AFORESAID MANNER, THE ASSESSMENT ORDER D ATED 11.10.2010 (SUPRA) HAS BEEN SET-ASIDE BY THE COMMISSIONER WITH DIRECTIONS TO MAKE AN ASSESSMENT AFRESH AFTER COLLECTING, APPRAISING AND EVALUATING ALL RELEVANT FACTS AND EVIDENCES TO BE FURNISHED BY THE ASSESSEE. AGA INST THE AFORESAID DIRECTIONS OF THE COMMISSIONER, ASSESSEE IS IN APPE AL BEFORE US. 11. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE NATURE OF ACTIVITIES CARRIED OUT BY THE ASSESSE E, WHICH ARE DULY SUPPORTED BY THE COPIES OF LEASE AGREEMENTS HAVE BEEN EXAMINE D BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. I N THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL HAS FURNISHED A PHOT OCOPY OF THE ORDER-SHEET ENTRIES DATED 12.07.2010, 21.07.2010, 20.09.2010 AN D 08.10.2010 FROM THE RECORD OF THE ASSESSMENT FOLDER TO POINT OUT THAT T HE ASSESSING OFFICER RAISED THE RELEVANT QUERIES WITH REGARD TO THE IMPUGNED IS SUE. THE LEARNED COUNSEL POINTED OUT THAT THOUGH THE ASSESSMENT ORDER DATED 11.10.2010 (SUPRA) IS QUITE BRIEF BUT THE ASSESSING OFFICER HAS DISCUSSED THAT THE BUSINESS ACTIVITY OF THE ASSESSEE COMPRISES OF LEASING OUT OF THE FLOOR SPACE IN THE INFRASTRUCTURE FACILITY CYBERNEX TO VARIOUS PARTIES FROM WHOM IN COME BY WAY OF RENTALS WAS BEING EARNED. ON THAT BASIS, IT IS SOUGHT TO B E POINTED OUT THAT MERELY BECAUSE THERE IS ABSENCE OF A DETAILED DISCUSSION I N THE ASSESSMENT ORDER, IT COULD NOT BE SAID THAT THE ASSESSING OFFICER HAS NO T MADE RELEVANT ENQUIRIES ESPECIALLY, AFTER CONSIDERING THAT THE OTHER MATERI AL ON RECORD OF THE ASSESSING OFFICER, NAMELY, QUERIES RAISED BY THE ASSESSING OF FICER AS WELL AS REPLIES FURNISHED BY THE ASSESSEE, DEMONSTRATE DUE APPLICAT ION OF MIND BY THE ASSESSING OFFICER. IN SUPPORT, RELIANCE HAS BEEN P LACED ON THE FOLLOWING DECISIONS OF THE HONBLE HIGH COURTS :- ITA NO.987/PN/2013 A. Y. : 2008-09 (I) CIT VS. LEISURE WARE EXPORTS LTD., 46 DTR 97 (D ELHI); (II) CIT VS. DESIGN AUTOMATION ENGG., 323 ITR 632 ( BOM); (III) CIT VS. VIKAS POLYMAS, 194 TAXMANN.COM 57 (DE LHI); (IV) CIT VS. ASHISH RAJPAL, 320 ITR 674 (DELHI); (V) CIT VS. DEVELOPMENT CREDIT BANK LTD., 323 ITR 2 06 (BOM); AND, (VI) CIT VS. ANIL KUMAR SHARMA, 335 ITR 83 (DELHI). 12. FURTHER, IT IS POINTED OUT THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER BY ACCEPTING THE ASSESSMENT OF RENTAL INCOM ES AS BUSINESS INCOME IS POSSIBLE VIEW AND FOR THAT MATTER REFERRED TO A REC ENT DECISION OF THE PUNE BENCH OF TRIBUNAL IN THE CASE OF DCIT VS. MAGARPATT A TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. VIDE ITA NO.822/PN/2011 DATED 18 .09.2012 WHEREBY INCOME DERIVED BY WAY OF RENTALS FROM LETTING OUT O F PREMISES IN AN IT PARK HAS BEEN HELD TO BE ASSESSABLE AS BUSINESS INCOME. IT WAS THEREFORE CONTENDED THAT THE ASSESSING OFFICER HAS TAKEN A POSSIBLE VIE W AND THEREFORE THE COMMISSIONER WAS NOT JUSTIFIED IN INVOKING SECTION 263 OF THE ACT. 13. THIRDLY, IT IS POINTED OUT THAT THE BUILDING CY BERNEX IS, UNDISPUTEDLY A COMMERCIAL ASSET AND THEREFORE EXPLOITATION OF COMM ERCIAL ASSET, BY GIVING IT ON RENT WOULD AMOUNT TO BUSINESS ACTIVITY. IN SUPP ORT, RELIANCE HAS BEEN PLACED ON THE JUDGEMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF SHAMBHU INVESTMENT (P) LTD. VS. CIT, (2003) 263 ITR 143 (SC). IN THE COURSE OF HEARING, THE LEARNED COUNSEL HAS ALSO FURNISHED A NOTE WITH REGARD TO THE DETAILS OF INFRASTRUCTURE SERVICES PROVIDED IN TERM S OF THE LEASE AGREEMENT WITH THE LESSEE. 14. ON THE OTHER HAND, THE LEARNED CIT-DR APPEARING FOR THE REVENUE HAS DEFENDED THE ORDER OF THE COMMISSIONER BY POINTING OUT THAT THE ASSESSING OFFICER MERELY CONDUCTED ROUTINE ENQUIRIES BY CALLI NG FOR A NOTE ON THE NATURE OF BUSINESS ACTIVITY AND ALSO THE COPIES OF LEASE A GREEMENT. ACCORDING TO THE ITA NO.987/PN/2013 A. Y. : 2008-09 LEARNED CIT-DR, THE ASSESSING OFFICER DID NOT EXAMI NE THE IMPUGNED POINT AS TO WHETHER THE RENTAL INCOME WAS LIABLE TO BE ASSES SED UNDER THE HEAD BUSINESS INCOME OR UNDER THE HEAD INCOME FROM HO USE PROPERTY. IN THIS CONTEXT, ACCORDING TO THE LEARNED CIT-DEPARTMENTAL REPRESENTATIVE, THE COMMISSIONER CAME TO A CORRECT FINDING THAT THE ORD ER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IN THE ABSENCE OF ANY ENQUIRY IN THIS REGARD. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE CRUX OF THE CONTROVERSY BEFORE US IS WITH REGARD TO THE ACTION OF THE COMMISSIONER OF INVOKING SECTION 263 OF THE ACT IN ORDER TO HOLD TH AT THE ASSESSMENT ORDER DATED 11.10.2010 IS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF TH E ACT. NOTABLY, SECTION 263 OF THE ACT EMPOWERS THE COMMISSIONER TO CALL FO R AND EXAMINE RECORD OF ANY PROCEEDINGS UNDER THE ACT, AND IF HE CONSIDERS ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE A N OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH E NQUIRIES, AS HE MAY DEEM NECESSARY PASS SUCH ORDER THEREON, INCLUDING A N ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSME NT AND DIRECTING A FRESH ASSESSMENT. THE PHRASEOLOGY OF SECTION 263 OF THE ACT BRINGS OUT THAT THE COMMISSIONER IS COMPETENT TO INVOKE HIS REVISIONARY JURISDICTION ONLY UPON SATISFACTION OF TWO CONDITIONS, NAMELY, THAT (I) TH E ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND, (II ) SUCH ORDER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS QUITE A WELL-S ETTLED PROPOSITION THAT AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW OR AN ASSESSMENT ORDER MADE WITHOUT APPLICATION OF MIND B Y THE ASSESSING OFFICER ARE LIABLE TO BE CONSTRUED AS ERRONEOUS WITHIN THE MEANING OF SECTION 263 OF THE ACT. IN THIS CONTEXT, A GAINFUL REFERENCE CAN BE MADE TO THE JUDGEMENT OF ITA NO.987/PN/2013 A. Y. : 2008-09 THE HONBLE SUPREME COURT IN THE CASE OF MALABAR IN DUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 (SC). 16. IN THE PRESENT CASE, AS OUR DISCUSSION IN THE E ARLIER PARAS SHOW, THE PRIMARY CHARGE MADE OUT BY THE COMMISSIONER IS THAT THE ASSESSMENT ORDER DATED 11.10.2010 (SUPRA) HAS BEEN PASSED BY THE ASS ESSING OFFICER WITHOUT APPLICATION OF MIND INASMUCH AS THE ASSESSING OFFIC ER FAILED TO RAISE A SPECIFIC QUERY AS TO THE CORRECT HEAD OF INCOME UNDER WHICH THE LEASE CHARGES (RENTALS) EARNED BY THE ASSESSEE WERE LIABLE TO BE ASSESSED. BEFORE DWELLING FURTHER ON THIS, IT WOULD BE APPROPRIATE TO NOTE TH AT WHETHER OR NOT AN ASSESSMENT ORDER IS PASSED WITHOUT APPLICATION OF M IND IS AN ASPECT WHICH IS REQUIRED TO BE EXAMINED HAVING REGARD TO THE PARTIC ULAR FACTS AND CIRCUMSTANCES OF EACH CASE. FURTHERMORE, IT WOULD BE RELEVANT TO OBSERVE THAT IT IS NOT ONLY THE ASSESSMENT ORDER BUT THE ENTIRE ASSESSMENT RECORD WHICH HAS TO BE EXAMINED BEFORE ARRIVING AT A CONCLUSION AS T O WHETHER OR NOT THE ASSESSING OFFICER HAS APPLIED HIS MIND ON AN ISSUE. AS PER THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL IN DIA LTD., 203 ITR 108 (BOM) AN ASSESSMENT ORDER COULD NOT BE HELD TO BE E RRONEOUS SIMPLY BECAUSE THERE IS ABSENCE OF AN ELABORATE DISCUSSION IN RESP ECT OF A PARTICULAR POINT IF THE RECORD OTHERWISE SHOWED THAT THE ASSESSING OFFI CER HAD MADE ENQUIRIES WITH REGARD TO THE POINT RAISED BY THE COMMISSIONER AND THAT ASSESSEE HAD MADE DETAILED EXPLANATIONS IN WRITING IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ENQUIRIES BY THE ASSESSING OFFICE R AS WELL AS THE REPLIES OF THE ASSESSEE WERE HELD TO BE A PART OF THE RECORD OF THE PROCEEDINGS UNDER REVISION, THOUGH AN ELABORATE DISCUSSION IN THE ASS ESSMENT ORDER WAS NOT PRESENT. AS PER THE HONBLE HIGH COURT, UNDER THE AFORESAID CIRCUMSTANCES, THE ASSESSMENT ORDER COULD NOT BE HELD TO BE ERRONE OUS SIMPLY BECAUSE IT DID NOT CONTAIN AN ELABORATE DISCUSSION ON THE PARTICUL AR ISSUE. ITA NO.987/PN/2013 A. Y. : 2008-09 17. TO THE SAME EFFECT IS THE JUDGEMENT OF THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARI IRON TRADING CO. VS. CIT (2003) 263 ITR 437 (P&H). AS PER THE HONBLE HIGH COURT, SECTION 263( 1) OF THE ACT REQUIRES THE COMMISSIONER TO EXERCISE HIS POWER ONLY AFTER EXAMI NING THE RECORD OF ANY PROCEEDING UNDER THE ACT. FURTHER, THE EXPRESSION RECORD IN SECTION 263(1) OF THE ACT HAS ALSO BEEN DEFINED IN CLAUSE (B) OF T HE EXPLANATION THEREOF TO INCLUDE ALL RECORDS RELATING TO ANY PROCEEDING UNDE R THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THEREFORE , AS PER THE HONBLE HIGH COURT, IT IS NOT ONLY THE ASSESSMENT ORDER BUT THE ENTIRE MATERIAL AVAILABLE ON RECORD WHICH HAS TO BE EXAMINED BEFORE ARRIVING AT A CONCLUSION AS TO WHETHER OR NOT THE ASSESSING OFFICER HAS EXAMINED AN ISSUE. EXPLAINING FURTHER, THE HONBLE HIGH COURT NOTED THAT THE AFORESAID EXERCIS E WAS NECESSARY BECAUSE ASSESSEE HAS NO CONTROL OVER THE WAY AN ASSESSMENT ORDER IS DRAFTED AND THEREFORE MERE NON-MENTIONING IN THE ASSESSMENT ORD ER CANNOT BE SINGULARLY DETERMINATIVE OF THE ISSUE OF NON-APPLICATION OF MI ND BY THE ASSESSING OFFICER. THEREFORE, IN ORDER TO DETERMINE WHETHER OR NOT THE ASSESSING OFFICER HAS APPLIED HIS MIND ON AN ISSUE, A MERE PERUSAL OF ASS ESSMENT ORDER WOULD NOT SUFFICE, RATHER THE ENTIRE RECORD IS LIABLE TO BE E XAMINED BEFORE ARRIVING AT A CONCLUSION AS TO WHETHER OR NOT THE ASSESSING OFFIC ER HAS APPLIED HIS MIND. 18. IN THIS BACKGROUND, WE MAY EXAMINE THE EFFICACY OF THE CHARGE MADE BY THE COMMISSIONER THAT THE ASSESSING OFFICER FAILED TO APPLY HIS MIND WHILE COMPLETING THE ASSESSMENT BECAUSE OF HIS FAILURE TO RAISE A QUERY AS REGARDS THE HEAD OF INCOME UNDER WHICH THE LEASE CHARGES (R ENTALS) EARNED BY THE ASSESSEE SHOULD BE ASSESSED. THE STAND OF THE ASSE SSEE IS THAT THE MANNER OF EARNING OF LEASE CHARGES HAS BEEN ENQUIRED INTO BY THE ASSESSING OFFICER. IT HAS BEEN SUBMITTED THAT ASSESSEE WAS CALLED UPON TO FURNISH A NOTE ON THE NATURE OF BUSINESS ACTIVITIES CARRIED ON ALONGWITH THE DETAILS OF BUSINESS RECEIPTS. IT HAS ALSO BEEN POINTED OUT THAT THE LE ASE AGREEMENTS ENTERED WITH THE VARIOUS LESSEE STP UNITS IN CYBERNEX, WERE CA LLED FOR BY THE ITA NO.987/PN/2013 A. Y. : 2008-09 ASSESSING OFFICER. IN THIS REGARD, IN THE COURSE O F HEARING, THE LEARNED COUNSEL FURNISHED A COPY OF NOTICE DATED 15.06.2010 ISSUED U/S 142(1) OF THE ACT WHICH WAS ACCOMPANIED BY A QUESTIONNAIRE. THE SAID QUEST IONNAIRE, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK, REVEALS TH AT ASSESSEE WAS, INTER- ALIA, REQUIRED TO FURNISH A BRIEF NOTE ON THE NATUR E OF ACTIVITIES UNDERTAKEN DURING THE YEAR UNDER CONSIDERATION AND THE STATUS OF THE ACTIVITIES UNDERTAKEN IN THE EARLIER YEARS. APART FROM OTHER QUERIES, AS SESSEE ALSO REQUIRED TO GIVE THE DETAILS OF ASSETS PURCHASED DURING THE YEAR ON WHICH DEPRECIATION HAS BEEN CLAIMED, ETC.. APART THEREFROM, IN THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER ON 12.07.2010, ASSESSEE WAS CALLE D UPON TO FURNISH ALL THE RENTAL AGREEMENTS, NATURE OF BUSINESS ACTIVITIES AN D THE DETAILS OF BUSINESS RECEIPTS. SUBSEQUENTLY, ALL SUCH DETAILS WERE FURN ISHED BY THE ASSESSEE. ON THE AFORESAID BASIS, THE CASE SETUP BY THE APPELLAN T IS THAT THE RECORD OF PROCEEDINGS BEFORE THE ASSESSING OFFICER REVEALED T HAT THE ASSESSING OFFICER EXAMINED THE ISSUE OF THE NATURE OF EARNINGS HAVING REGARD TO THE LEASE AGREEMENTS WHICH RESULTED IN EARNING OF IMPUGNED LE ASE CHARGES (RENTALS) FROM LEASING OUT OF FLOOR SPACE IN THE INFRASTRUCTU RE FACILITIES TO CYBERNEX TO VARIOUS PARTIES. 19. PER CONTRA, THE COMMISSIONER HAS ASSERTED THAT THE DETAILS FURNISHED BY THE ASSESSEE CONTAINING NATURE OF BUSINESS ACTIVITI ES, LEASE AGREEMENTS, ETC. WERE ROUTINELY ACCEPTED AS RESULTING IN RENTAL IN COMES BEING ASSESSED AS BUSINESS INCOME, AND THEREFORE IT COULD NOT BE SAID THAT THE ASSESSING OFFICER DULY APPLIED HIS MIND TO THE IMPUGNED ISSUE. 20. NO DOUBT, THE ASSESSMENT ORDER BY ITSELF DOES N OT EXPLICITLY BRING OUT THAT THE ASSESSING OFFICER EXAMINED THE ISSUE REGAR DING THE HEAD OF INCOME UNDER WHICH THE LEASE CHARGES (RENTALS) RETURNED BY THE ASSESSEE SHOULD BE ASSESSED. SO HOWEVER, AS NOTICED BY US IN THE EARL IER PARAGRAPHS, A MERE PERUSAL OF THE ASSESSMENT ORDER WOULD NOT SUFFICE R ATHER THE ENTIRE RECORD IS ITA NO.987/PN/2013 A. Y. : 2008-09 LIABLE TO BE EXAMINED BEFORE COMING TO CONCLUDE WHE THER OR NOT THE ASSESSING OFFICER HAS APPLIED HIS MIND. IN THIS CONTEXT, IN OUR CONSIDERED OPINION, THE ISSUE AS TO WHETHER IMPUGNED RENTAL LEASE CHARGES ( RENTALS) IS LIABLE TO BE ASSESSED AS BUSINESS INCOME OR AS INCOME FROM HO USE PROPERTY IS AN ISSUE WHICH IS DEPENDENT UPON THE MODE AND MANNER IN WHIC H THE ACTIVITIES HAVE BEEN CARRIED OUT BY THE ASSESSEE IN ORDER TO EARN S UCH LEASE CHARGES (RENTALS). OSTENSIBLY, IT IS A SETTLED PROPOSITION THAT WHERE THE INTENTION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX CO MMERCIAL ACTIVITIES, IN THAT EVENT THE RENTAL INCOME MUST BE HELD AS A BUSI NESS INCOME. THE AFORESAID PROPOSITION HAS BEEN APPROVED BY THE HON BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENTS (P) LTD. VS. CIT, 263 I TR 143 (SC) WHEREIN THE JUDGEMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE SAME CASE REPORTED IN 249 ITR 47 HAS BEEN APPROVED. THE MATERIAL ON RECO RD BEFORE THE ASSESSING OFFICER, NAMELY, LEASE ARRANGEMENTS WITH THE LESSEE S, THE NATURE OF ACTIVITIES UNDERTAKEN BY THE ASSESSEE AND THE DETAILS OF BUSIN ESS RECEIPTS FORM THE BASIS TO EXAMINE WHETHER OR NOT THE IMPUGNED INTENT ION OF THE ASSESSEE WAS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES. ALL SUCH MATERIAL WAS BEFORE THE ASSESSING OFFICER AS H E HAD DULY CALLED FOR SUCH MATERIAL. HOWEVER, THE DIFFICULTY IS THAT THERE IS NO SPECIFIC FINDING BY THE ASSESSING OFFICER IN THIS CONTEXT AND THEREFORE AS PER THE REVENUE, SUCH AN ASSESSMENT ORDER IS LIABLE TO BE TREATED AS ERRONEO US WITHIN THE MEANING OF SECTION 263 OF THE ACT. IN OUR CONSIDERED OPINION, HAVING REGARD TO THE FACTS OF THE PRESENT CASE, IT IS DIFFICULT TO SUPPORT THE PR OPOSITION SOUGHT TO BE CANVASSED BY THE COMMISSIONER. WE SAY SO FOR THE R EASON THAT AFTER HAVING CALLED FOR AND EXAMINED THE RELEVANT MATERIAL, THE ASSESSING OFFICER HAS NOTED IN THE ASSESSMENT ORDER THE BUSINESS ACTIVITIES OF THE ASSESSEE. THE BUSINESS ACTIVITIES OF THE ASSESSEE HAS BEEN SPECIFICALLY ID ENTIFIED AS LEASING OUT FLOOR SPACE IN THE INFRASTRUCTURE FACILITY, NAMED AS CYBE RNEX. THOUGH THE DISCUSSION CONTAINED IN THE ASSESSMENT ORDER IS QUI TE SHORT, BUT ONCE THE SAME IS READ IN THE BACKGROUND OF THE MATERIAL WHIC H WAS AVAILABLE WITH THE ITA NO.987/PN/2013 A. Y. : 2008-09 ASSESSING OFFICER AS A RESULT OF HIS ENQUIRIES DURI NG THE ASSESSMENT PROCEEDINGS, IT CANNOT ESCAPE CONCLUSION THAT THE A SSESSING OFFICER DID APPLY HIS MIND VIS--VIS THE MANNER IN WHICH ASSESSEE WAS EARNING THE IMPUGNED LEASE CHARGES (RENTALS). THEREFORE, ON FACTS, WE A RE UNABLE TO CONCUR WITH THE COMMISSIONER THAT THE IMPUGNED ASSESSMENT ORDER HAS BEEN PASSED WITHOUT APPLICATION OF MIND. THOUGH THE COMMISSIONER HAS S ET-UP A CASE THAT THE ASSESSMENT IS BASED ON NON-APPLICATION OF MIND BY T HE ASSESSING OFFICER, BUT INEFFECT WHAT THE COMMISSIONER HAS SOUGHT TO SHOW I S THAT THERE WAS LACK OF ADEQUATE AND PROPER ENQUIRIES BY THE ASSESSING OFFI CER. NEEDLESS TO SAY, LACK OF ADEQUATE ENQUIRY IS A CHARGE WHICH IS QUITE DISTINCT AND SEPARATE FROM THE CHARGE OF LACK OF ENQUIRY. AS PER THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LEISURE WEAR EXPORTS LTD. (SUPRA) AND BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DESIGN AUTOMATION ENGG. (SUPRA ) LACK OF ADEQUATE ENQUIRIES CANNOT BE A GROUND TO HOLD AN ASSESSMENT ORDER ERRONEOUS WITHIN THE MEANING OF SECTION 263 OF THE ACT. THEREFORE, HAVING REGARD TO ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE UNABLE TO UPHOLD THE IMPUGNED CHARGE MADE BY THE COMMISSIONER AGAINST THE ASSESSM ENT ORDER DATED 11.10.2010 (SUPRA). 21. APART FROM THE AFORESAID, IT MAY ALSO BE PERTIN ENT TO NOTE THAT AFTER COMMISSIONER SHOW-CAUSED THE ASSESSEE, THE ASSESSEE MADE DETAILED SUBMISSIONS JUSTIFYING THE TREATMENT OF LEASE CHARG ES (RENTALS) RECEIVED FROM LEASING OUT OF FLOOR SPACE IN CYBERNEX AS BUSINESS INCOME. THE ENTIRE SUBMISSIONS PUT-FORTH BY THE ASSESSEE HAVE BEEN REP RODUCED BY THE COMMISSIONER IN HIS ORDER. THE COMMISSIONER CONSID ERED SUCH SUBMISSIONS BUT ESCHEWED FROM DECIDING AS TO WHETHER OR NOT THE STAND OF THE ASSESSEE WAS CORRECT. IN ONE BREATH, AS PER DISCUSSION CONT AINED IN PARA 6.3 OF HIS ORDER, THE COMMISSIONER FINDS THAT THE RENT RECEIVE D BY THE ASSESSEE BEING ASSESSED AS BUSINESS INCOME IS NOT FOUND TO BE ACCEPTABLE AND AT THE SAME TIME HE GOES ON TO SAY THAT HE WOULD REFRAIN FROM DECIDING THE ISSUE RAISED . ITA NO.987/PN/2013 A. Y. : 2008-09 IN TURN, HE REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTIONS TO RE-APPRAISE THE MATERIAL AND EVIDENCE AND THEREAFTER DEICIDE THE ISSUE AFRESH. IN OUR CONSIDERED OPINION, UNDER THE CIRCUMSTANCES, THE COMMISSIONER OUGHT TO HAVE MADE A CLEAR CUT FINDING AS TO HOW THE ORDER WAS UNSUSTAINABLE IN THE EYES OF LAW SO AS TO BE PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. THE AFORESAID WAS EVEN MORE NECESSARY WHE N ASSESSEE SUCCEEDED IN DEMONSTRATING THAT THE ASSESSING OFFIC ER HAD COMPLETE DETAILS OF THE MODE AND MANNER IN WHICH THE IMPUGNED INCOME WA S EARNED. CONSIDERING THE AFORESAID DISCUSSION, IN OUR VIEW, THE CONDITIONS PRECEDENT FOR INVOKING JURISDICTION U/S 263 OF THE ACT DID NOT EX IST IN THE PRESENT CASE AND THEREFORE THE COMMISSIONER EARED IN SETTING-ASIDE T HE ASSESSMENT ORDER DATED 11.10.2010 (SUPRA) 22. BEFORE PARTING, WE MAY ALSO REFER TO ANOTHER AR GUMENT SET-UP BY THE ASSESSEE BASED ON DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. VIDE ITA NO.822/PN/2011 DATED 18.09.2012. THE CASE SET- UP BY THE ASSESSEE IS THAT IN THE CASE OF MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO. (SUPRA), ASSESSEE WAS EARNING LICENSE FEE FROM LETT ING OUT OF PREMISES IN AN IT PARK, WHICH IS QUITE SIMILAR TO THE ACTIVITIES UNDE RTAKEN BY THE ASSESSEE IN THE PRESENT CASE. AS PER THE APPELLANT, THE TRIBUNAL V IDE ITS ORDER DATED 18.19.2012 (SUPRA) CONSIDERED SUCH ACTIVITIES AND C AME TO CONCLUDE THAT THE INCOME FROM SUCH ACTIVITIES WAS LIABLE TO BE ASSESS ED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY AS SOUGHT T O BE CANVASSED BY THE REVENUE. AT THE TIME OF HEARING, THE LEARNED DEPAR TMENTAL REPRESENTATIVE HAS NOT DISPUTED THAT THE FACTS AND CIRCUMSTANCES I N THE PRESENT CASE STAND ON SIMILAR FOOTING TO THAT IN THE CASE OF MAGARPATTA T OWNSHIP DEVELOPMENT & CONSTRUCTION CO. (SUPRA). ITA NO.987/PN/2013 A. Y. : 2008-09 23. IN THE ABOVE CONTEXT, WE HAVE PERUSED THE FOLLO WING DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 18.09.2012 (SUPRA) :- 10. COMING TO THE LICENSE FEE EARNED FROM LETTING OUT OF PREMISES IN I.T. PARK WAS A CONTINUOUS/SYSTEMATIC ACTIVITY WHIC H WAS IN THE NATURE OF COMPLEX COMMERCIAL ACTIVITY. SINCE LICENSEE WERE E NGAGED IN THE I.T./SOFTWARE BUSINESS, THE SERVICES WERE PROVIDED BY THE ASSESSEE ROUND THE CLOCK, BECAUSE THE LICENSEES WERE WORKING ACCORDING TO THE TIMINGS IN THE USA/WESTERN COUNTRIES. THE ASSESSEE HAS SPECIFIED A S TO HOW THE NORMAL RENTING OF PREMISES WAS DIFFERENT FROM THE GIVING O F PREMISES TO I.T. COMPANIES FOR I.T./SOFTWARE WORK ALONGWITH THE NUMEROUS SERVI CES AND FACILITIES IN THESE PREMISES. ALL THE PREMISES WERE PROVIDED WITH HUGE AIRCONDITIONING PLANTS FOR CENTRAL AIRCONDITIONING, SPECIAL ELECTRIFICATION, U NINTERRUPTED POWER SUPPLY, ETC. DUE TO THE PECULIAR NATURE OF WORK AND ODD HOURS OF WORK, THERE WERE ARRANGEMENTS FOR RESTAURANTS, GYMNASIUM, BANKING FA CILITIES IN THE PREMISES, SECURITY SERVICE WITH DOG SQUAD, ETC. ATTENTION WA S DRAWN TO THE LEASE AGREEMENT WITH ONE OF THE SOFTWARE COMPANY EXL. SER VICES.COM (INDIA) LTD., WHEREIN PARA 15 OF THE SAID AGREEMENT READS AS UNDE R: THE LESSOR SHALL ALSO PROVIDE TO THE LESSEE CERTAI N ADDITIONAL AMENITIES IN THE DEMISED PREMISES, AS DETAILED IN S CHEDULE-II HEREIN. THE COST OF PROVIDING SUCH ADDITIONAL AMENITIES HAS ALREADY BEEN INCLUDED IN THE MONTHLY RENT AND THE LESSEE SHALL N OT BE REQUIRED TO PAY TO THE LESSER ANY ADDITIONAL AMOUNT(S) TOWARDS IT. THIS SHOWS THAT MONTHLY LEASE RENT/LICENSE FEE OF R S.14.30 PER SQ.FT. INCLUDED COST OF PROVIDING SUCH ADDITIONAL SERVICES AND AMEN ITIES AS HAS BEEN GIVEN IN DETAIL IN SCHEDULE-II OF THE LICENSE AGREEMENT AND NOTHING EXTRA HAS BEEN CHARGED FROM THE LESSEE FOR THIS. IT IS EVIDENT FR OM SCHEDULE-II OF THE AGREEMENT THAT THE AMENITIES/SERVICES PROVIDED WERE ALSO TECHNICAL ONE AND OF A MAJOR NATURE, E.G. PROVISION OF INDEPENDENT AC PLANT WITH MULTIPLE COMPRESSORS, CHILLED WATER SYSTEM AND DOUBLE SKIN A HUS (TO TAKE CARE OF NOISE), AIRCONDITIONING CHILLER CONFIGURATION WITH ADEQUATE AHUS, WHICH INCLUDED ADEQUATE PROVISION FOR GETTING FRESH AIR I NTO THE PREMISES VIA MECHANICAL SYSTEM, AND TWO CHILLER UNITS; A 100% PO WER BACK UP WITH AUTO SWITCHERS FOR THE ENTIRE POWER GIVEN ON LEASE ON A 24 HOURS BASIS, INCLUSIVE OF GENERATORS ETC.; INDEPENDENT TRANSFORMERS OF 600 KW PER FLOOR TO THE LESSEE FOR SOLE USE OF ITS REQUIREMENT IN THE TOWER, 24 HO URS MANNED CCTV IN COMMON AREAS AND BASEMENT AREA, FIBRE AND SATELLITE CONNECTIVITY AND A RADIO MICROWAVE TOWER WHICH WOULD BE PROVIDED BY THE STPI , CELL PHONE BOOSTERS, AND UNLIMITED ACCESS TO THE PREMISES 24 X 7, AND IN 365 DAYS IN A YEAR, WITH SUPPORT SERVICES LIKE SECURITY AND PARKING. APART FROM THESE A SUBSTANTIAL PARKING AREA WERE ALSO PROVIDED FOR 50-CAR PARKING AND 20 TWO-WHEELER PARKING AND 60 CABS PARKING ETC., FOR THE TOWER BUI LDING. SUCH SERVICES WERE INDEED OF A COMPLEX COMMERCIAL NATURE AND CANNOT BE TREATED AS MERELY INCIDENTAL TO MERE LETTING OUT OF THE PREMISES. IN SCHEDULE-II AND THE EARLIER MENTIONED PARA 15 OF THE LEASE AGREEMENT THAT FOR P ROVISION OF THESE SPECIALIZED SERVICES, THE COST/RENT WERE INCLUDED I N THE PER SQ.FT. LEASE RENTAL AMOUNT OF RS.14.30. THEREFORE, THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN STATING THAT THIS AMOUNT OF RS.14.30 PER SQ.FT. MER ELY REPRESENTS LETTING OUT OF THE SPACE. SO FAR AS THE AMOUNT OF RS.0.50 PER SQ. FT. TOWARDS MAINTENANCE CHARGES IS CONCERNED, IT WAS BASICALLY FOR MAINTAIN ING AND CLEANING OF THE PREMISES, TOILETS, DRAINAGE ETC. THE AGREEMENT ALS O MAKES IT CLEAR THAT THIS AMOUNT OF RS.0.50 PER SQ.FT. WAS FOR MAINTENANCE OF WATER LINES, AND FOR DRAINS, GARBAGE DISPOSAL, COMMON AREAS ETC., WHEREA S THE SPECIALISED SERVICES AND INFRASTRUCTURE AS INCORPORATED IN SCHE DULE-II IS INCLUDED IN THE ITA NO.987/PN/2013 A. Y. : 2008-09 MONTHLY LEASE RENT AMOUNT AS SPECIFIED IN CLAUSE 15 OF THE AGREEMENT AS STATED ABOVE. THUS, IT WAS MADE CLEAR AS TO HOW TH ESE SPECIALISED SERVICES FOR I.T. COMPANIES WERE OF COMPLEX NATURE AND THERE FORE, THE INTENTION AND OBJECT OF THE COMPANY WAS TO DEVELOP I.T. PARK AS A SYSTEMATIC COMMERCIAL ACTIVITY TO EARN PROFIT AND NOT JUST EARNING OF REN TAL INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT PVT . LTD., (SUPRA) HAS LAID DOWN THAT IF THE PROPERTY WHETHER FURNISHED OR UNFU RNISHED WAS LET OUT WITH AN INTENTION TO HAVE RENTAL INCOME, IT WOULD BE ASSESS ABLE AS INCOME FROM HOUSE PROPERTY. ON THE OTHER HAND, IF THE PRIMARY OBJECT IS TO EXPLOIT THE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, THE INCOME FR OM THE SAME WAS TO BE CONSIDERED AS BUSINESS INCOME. THE CASE OF SHAMBHU INVESTMENT (SUPRA) DOES NOT GO AGAINST THE ASSESSEE. ONE POINT WHICH WAS EMPHASISED IN SAID CASE IS THAT THE ASSESSEE HAS RECOVERED THE ENTIRE COST OF THE PROPERTY LET OUT TO THE OCCUPIER BY WAY OF INTEREST FREE ADVANCE REC EIVED FROM THEM. THEREFORE, IT WAS HELD THAT IN SUCH A CASE THE ASSE SSEE WAS NOT EXPLOITING THE PROPERTY FOR COMMERCIAL BUSINESS ACTIVITY AND THE P ROVISIONING OF SOME FURNISHING WAS MERELY INCIDENTAL TO THE BARE LETTIN G OUT OF THE PROPERTY. IN CASE BEFORE US, THE ASSESSEE HAS NOT RECOVERED MAJOR COS T OF THE BUILDING AND INFRASTRUCTURE AND PROVIDING A HOST OF SERVICES WIT H RECURRING OPERATING COST AS DISCUSSED ABOVE. 11. THE DECISION OF ITAT PUNE BENCH IN THE CASE OF NUTAN WAREHOUSING PVT. LTD. (SUPRA) RELIED ON BY THE ASSE SSING OFFICER HAS BEEN SET ASIDE AND REMANDED TO THE ASSESSING OFFICER FOR REC ONSIDERATION BY THE HON'BLE BOMBAY HIGH COURT. THE HON'BLE BOMBAY HIGH COURT HAS SET ASIDE THE MATTER TO EXAMINE THE PRIME OBJECT OF THE ASSES SEE WHETHER IT WAS TO SIMPLY LET OUT THE PROPERTY OR TO EXPLOIT A COMMERC IAL ASSET BY CARRYING ON A COMMERCIAL ACTIVITY OF WAREHOUSING. THE HON'BLE AL LAHABAD HIGH COURT IN THE CASE OF CIT VS. GOEL BUILDERS (2010) 235 CTR 472 (A LL.) WHEREIN THE ASSESSEE WAS OPERATING THE COMMERCIAL COMPLEX NAMED GOEL COM PLEX AND IT WAS HELD THAT FROM THE VERY BEGINNING THE CONSTRUCTION OF TH E BUILDING ITSELF WAS FOR COMMERCIAL PURPOSES AND THEREFORE, THE RENTAL INCOM E WAS HELD TO BE ASSESSABLE AS BUSINESS INCOME. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MOHIDDIN HOTELS (2006) 284 ITR 229 (BOM), HAS HE LD THAT WHEN THE SUBJECT MATTER THAT IS LET OUT IS NOT A BARE TENEMENT, BUT THE COMPLEX ONE WITH INFRASTRUCTURE FACILITIES, THE INCOME DERIVED THERE FROM WHICH IS NOT SEPARABLE FROM LETTING OUT OF THE BUILDING, SUCH INCOME SHALL NOT BE TREATED AS INCOME FROM HOUSE PROPERTY. ITAT MUMBAI BENCH IN THE CASE OF GESCO CORPORATION LTD. (2009) 31 SOT 32 (MUM) WHEREIN ASSESSEE HAS LE T OUT COMMERCIAL PREMISES AS BUSINESS CENTRE AND A LARGE NUMBER OF S PECIALISED SERVICES AND FACILITIES WERE PROVIDED IN THESE BUSINESS CENTRES, LIKE AIRCONDITIONING, POWER BACKUP, WATER FILTRATION PLANT, SECURITY SYSTEM THR OUGH CCTV, STATE OF ART COMPUTER-TELEPHONE INTEGRATION, VIDEO CONFERENCING FACILITIES, SECRETARIAL SERVICES, THE TRIBUNAL HELD AS UNDER: IT WAS CLEARLY DISCERNIBLE FROM THE AGREEMENTS THA T THE PARTIES HAD ENTERED INTO THE ARRANGEMENT WITH THE ASSESSEE WITH THE INTENTION OF USING THE SERVICES AND AMENITIES. THE ASSESSEE WAS GIVING SPACE WITH SERVICES AND FACILITIES WHICH WERE VARIED AND WIDE AND SUCH ACTIVITIES TOGETHER WOULD DEFINITELY CONSTITUTE AN ORGANIZED STRUCTURE FOR MAKING PROFITS AND WOULD NECESSARILY CONSTITUTE A B USINESS. THUS THE ASSESSEE HAD CREATED A COMMERCIAL INFRASTRUCTURE AN D THE SERVICES RENDERED WERE COMPLEX COMMERCIAL/BUSINESS ACTIVITIE S. A PERUSAL OF AGREEMENTS AND THE STIPULATIONS CONTAINED THEREIN W OULD NOT LEAVE ANY DOUBT ABOUT THE COMMERCIAL CHARACTER OF THE RELATIO NSHIP BETWEEN THE PARTIES, AS DISTINGUISHED FROM THAT MERELY OF A LAN DLORD AND HIS TENANT. OCCUPATION OF SPACE WAS INSEPARABLE FROM THE PROVIS ION OF SERVICES AND AMENITIES. ITA NO.987/PN/2013 A. Y. : 2008-09 IN GESCO CORPORATION LTD., ITAT MUMBAI BENCH HAS DI STINGUISHED THE FACTS FROM SHAMBHU INVESTMENTS PVT. LTD. (SUPRA). IN CAS E OF PRESTIGE ESTATE PROJECTS (P) LTD. (2010) 129 TTJ 680 (BANGALORE), F OLLOWING THE DECISION OF GESCO CORPORAITON LTD., AND HARVINDARPAL MEHTA (HUF ) VS. DCIT (2009) 122 TTJ 163 (MUM), HAS DECIDED THE SIMILAR ISSUE IN FAV OUR OF ASSESSEE. IN THE SAID DECISION, THE PREMISES WAS RELATED TO A BUSINE SS CENTRE WITH MULTIFARIOUS FACILITIES LIKE CENTRAL AIRCONDITIONING SERVICES, A TTENDANTS, SWEEPERS, FAX MACHINE, FURNITURE, RECEPTIONISTS, TELEPHONE OPERAT ORS, COMMON WAITING/GUEST ROOM WITH ATTACHED TOILETS, ETC. AND IT WAS HELD TH AT THE RECEIPTS FROM SUCH ACTIVITIES ALONGWITH THESE FACILITIES WAS TO BE ASS ESSED UNDER THE HEAD INCOME FROM BUSINESS RATHER THAN THE INCOME FROM HOUSE PRO PERTY OR INCOME FROM OTHER SOURCES, AS THE OBJECT OF THE ASSESSEE WAS TO RUN THE BUSINESS CENTRE BY EXPLOITING THE PROPERTY AND NOT MERELY LETTING O UT THE PROPERTY. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAPTARSHI SERVICES 265 ITR 379 (GUJ), WHICH ALSO RELATED TO THE LEASING OUT A BUSI NESS CENTRE WITH VARIOUS SERVICES, HAS DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE AND THE SLP FILED ON BEHALF OF THE REVENUE WAS DISMISSED BY THE HON'BLE SUPREME COURT AS REPORTED IN 264 (ST) 36. IN THIS BACKGROUND, IT IS CLEAR THAT ASSESSEE HAS PROVIDED VARIOUS COMPLEX INTEGRATED SERVICES AS MEN TIONED IN SCHEDULE-II TO THE LEASE AGREEMENT WITH THE I.T. COMPANY. THE SER VICES ARE VAST AND THE AMENITIES PROVIDED WERE IN THE NATURE OF PLANT AND MACHINERY AS CONTENDED BY THE ASSESSEE AND IT HAS BEEN ESTABLISHED BY THE CLA USES OF THE AGREEMENTS THAT THE COST OF PROVIDING THESE SERVICES WAS ALSO INCLUDED IN THE LEASE RENT OF RS.14.30 PER SQ.FT. THE ASSESSEE ALSO CLARIFIED TH AT COST INVOLVED IN THE SERVICES PROVIDED TO THE PARTICULAR COMPANY I.E., E XL SERVICES.COM WAS RS.2.83 CRORES WHICH WAS ALMOST 40% OF THE LAND AND BUILDING COST OF THAT TOWER. BY NO STRETCH OF IMAGINATION SUCH EXTENSIVE AND SPECIALIZED SERVICES WHICH COULD ONLY BE UTILISED BY THE IT/SOFTWARE/BPO S BUSINESSES TO BE LOCATED IN THE I.T. PARK COULD BE TREATED AS FORMING PART O F INCOME FROM HOUSE PROPERTY. IT IS CERTAINLY A CONSTITUTION OF ORGANI SED STRUCTURE FOR CARRYING OUT BUSINESS ACTIVITIES. SECTION 22 PROVIDES ONLY FO R RENTAL INCOME OUT OF BUILDING OR LAND APPURTENANT THERETO, WHEREAS IN THE CASE BE FORE US, COMPLEX AND VARIED SERVICES PROVIDED AND THE HUGE INVESTMENT TH EREIN WERE IN THE NATURE OF PLANT AND MACHINERY WHICH COULD BE INCLUDED WITH IN THE EXPRESSION BUILDING OR LAND APPURTENANT THERETO. THUS, THE ASSESSEE HA S CONDUCTED SYSTEMATIC ACTIVITY TO EARN PROFIT AND ACCORDINGLY INCOME WAS TO BE ASSESSED AS INCOME FROM BUSINESS. IN VIEW OF THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, AND ANALYSIS OF VARIOUS CLAUSES AND SCHEDULE-II OF THE AGREEMENT ENTERED WITH THE I.T. COMPANY, CIT(A) WAS JUSTIFIED IN HOLDING T HAT IN ASSESSEES CASE THE SAID INCOME WAS TO BE ASSESSED AS BUSINESS INCOME. THIS REASONED FACTUAL FINDING NEED NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. 24. IN VIEW OF THE AFORESAID PRECEDENT ALSO WE DO N OT FIND ANY SUPPORT FOR THE STAND OF THE COMMISSIONER THAT THE INCOME FROM THE IMPUGNED LEASE RENTALS WAS LIABLE TO BE ASSESSED AS INCOME FROM HO USE PROPERTY. BE THAT AS IT MAY, IT IS QUITE CLEAR THAT A POSSIBLE VIEW ON T HE ISSUE HAS BEEN TAKEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 11. 10.2010 (SUPRA) AND THEREFORE EVEN ON THIS COUNT THERE DOES NOT APPEAR TO BE SUFFICIENT GROUND FOR THE COMMISSIONER TO ASSUME JURISDICTION U/S 263 OF THE ACT MERELY BECAUSE HE HELD A DIFFERENT VIEW. IN THIS CONTEXT, WE MAY REF ER TO THE JUDGEMENT OF THE ITA NO.987/PN/2013 A. Y. : 2008-09 HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DLF POWER LTD., 329 ITR 289 (DEL) AND THAT THE HONBLE MADRAS HIGH COURT IN TH E CASE CIT VS. MEPCO INDUSTRIES LTD., (2007) 294 ITR 121 (MAD). 25. IN THE RESULT, WE SET-ASIDE THE IMPUGNED ORDER OF THE COMMISSIONER AND RESTORE THE ASSESSMENT ORDER DATED 11.10.2010 (SUPR A). THUS, ASSESSEE SUCCEEDS IN ITS APPEAL. 26. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLO WED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 28 TH AUGUST, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT-I, PUNE; 4) THE DR B BENCH, I.T.A.T., PUNE; 5) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE