M/S RAO COMPUTER CONSULTANTS PVT LTD., V. THE DEPUTY COMMISSIONER

ITA/849/2018

AI Insights

The case involves M/s Rao Computer Consultants Pvt. Ltd., the appellant, challenging the order of the Income Tax Appellate Tribunal which treated the income from letting out buildings in an industrial park as 'income from house property' rather than business income. The appellant argued that the income derived from complex commercial activities should not be classified under house property income, referencing a precedent set by the High Court in the case of Velankani Information Systems. The respondent, Deputy Commissioner of Income Tax, supported the Tribunal's classification. The High Court, referencing its earlier decision and the cited precedent, ruled in favor of the appellant for the first two substantial questions of law, thereby allowing the appeal in part.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 691565 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 30-08-2021
• Assessment Year: misc
• Other Referred Cases: CIT vs. VELANKANI INFORMATION SYSTEMS PVT LTD.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: VANI
• Keywords: Brokerage; Business income; Depreciation; Income from house property; Industrial park; Insurance; Letting out buildings; Complex commercial activity
• Section: 260-A

Judgement Text

"IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF AUGUST, 2021 PRESENT THE HON’BLE MRS.JUSTICE S.SUJATHA AND THE HON’BLE MR. JUSTICE RAVI V. HOSMANI I.T.A.No.849/2018 BETWEEN : M/s RAO COMPUTER CONSULTANTS PVT. LTD., NEIL RAO TOWERS, PLOT NO.118, ROAD NO.3, EPIP I PHASE, WHITEFIELD BANGALORE - 560 066 REP BY ITS DIRECTOR SRI DHANUNJAYA VAYUGUNDLA RAO S/O LATE BASAVAIAH AGED ABOUT 53 YEARS PAN NO. AAACR 8427R ...APPELLANT (BY SMT.VANI H., ADV.) AND : THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(4), BANGALORE …RESPONDENT (BY SRI K.V.ARAVIND, ADV.) 2 THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 28.09.2018 PASSED IN ITA NO.2622/BANG/2017, FOR THE ASSESSMENT YEAR 2009- 2010 PRAYING THIS HON'BLE COURT TO (A) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (B) ALLOW THE APPEAL AND SET-ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL PASSED IN ITA NO.2622/BANG/2017 RELATING TO ASSESSMENT YEAR 2009-2010. THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING: J U D G M E N T This appeal is filed under Section 260-A of the Income Tax Act, 1961 (‘the Act’ for short) by the assessee challenging the order dated 28-09-2018 passed in ITA 2622/Bang/2017 by the Income Tax Appellate Tribunal, Bengaluru Bench ‘A’, Bengaluru, relating to the assessment years 2008-09 to 2010-11, raising the following substantial questions of law:- “1. Whether on the facts and circumstances of the case, the findings of the Appellate Tribunal that income earned by the appellant from complex commercial activity of letting out of the building along with other amenities in the industrial park shall be treated 3 as ‘income from house property’ are perverse and illegal? 2. Whether on the facts and circumstances of the case, the authorities below erred in treating the business income derived from complex commercial activities of letting out buildings along with the other amenities in an industrial park as income from house property ignoring the law laid down by this Hon’ble Court in the case of Velankani Information Systems and the Circular issued by the Department? 3. Whether on the facts and circumstances of the case, the authorities below erred in disallowing the expenditure towards insurance, brokerage and depreciation incurred wholly and exclusively for the purposes of the business of complex commercial letting out services and whether the findings of the Appellate Tribunal in this regard are perverse?” 2. The learned counsel appearing for the parties submitted ad-idem that substantial questions of law Nos.1 and 2 raised herein, are squarely covered by the decision 4 of the coordinate Bench of this Court in the case of M/s. RAO COMPUTERS CONSULTANTS PRIVATE LTD., vs. THE JOINT COMMISSIONER OF INCOME TAX (OSD), O/O CIT-III, BANGALORE,, ITA No.711/2017 (D.D.26-05-2021), wherein the coordinate Bench placing reliance on the Judgment of this Court in the case of CIT vs.VELANKANI INFORMATION SYSTEMS PVT LTD., reported in (2014)2 ITR-OL 138 KAR has answered the substantial questions of law framed in the appeal in favour of the assessee and against the revenue quashing the order of the Income Tax Appellate Tribunal relating to the relevant assessment year therein, allowing the appeal filed by the assessee. 3. In view of the aforesaid ruling of this Court, the substantial question of law Nos. 1 and 2 are answered against the revenue and in favour of the assessee. 4. As regards the substantial question of law No.3 is concerned, there is no finding by the assessing authority inasmuch as disallowing the expenditure referred to 5 therein. In view of the finding given by this Court relating to the substantial question of law Nos. 1 and 2 as aforesaid, the assessing authority is directed to re- examine the issue inasmuch as expenditure/deductions towards insurance, brokerage and depreciation incurred for the purposes of the business of complex commercial letting out services, in an expedite manner. The appeal is partly allowed to the extent indicated above. Sd/- JUDGE Sd/- JUDGE Rsk/- "