THE COMMISSIONER OF INCOME TAX V. M/S. INFORMATION TECHNOLOGY PARK LTD.,

ITA/76/2012

AI Insights

The case involves two Income Tax Appeals (ITA No.76/2012 and ITA No.78/2012) filed by the Commissioner of Income Tax and the Income-Tax Officer against M/s Information Technology Park Ltd. The appeals challenged the ITAT's decision which classified the rental income from properties in a Software Technology Park as 'business income' instead of 'income from house property'. The primary legal question was whether the rental income should be taxed under the head 'income from business' or 'income from house property'. The court referenced the judgment in the case of COMMISSIONER OF INCOME TAX-III v/s VELANKANI INFORMATION SYSTEMS (P) LTD. to support its decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729038 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 30-04-2014
• Assessment Year: misc
• Other Referred Cases: COMMISSIONER OF INCOME TAX-III v/s VELANKANI INFORMATION SYSTEMS (P) LTD., Bhoopalam Commercial Complex & Industries v. East India Housing & Land Development Trust Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T SURYANARAYANA
• Assessee Lawyers: K V ARAVIND
• Keywords: Business income; Income from house property; Income Tax; Lease Rent; Software Technology Park
• Section: 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 30TH DAY OF APRIL 2014 PRESENT THE HON'BLE MR.JUSTICE DILIP B.BHOSALE AND THE HON'BLE MR.JUSTICE B.MANOHAR I.T.A. No.76/2012 C/w ITA.No.78/2012 BETWEEN: 1. The Commissioner of Income Tax, C.R.Building, Queens Road, Bangalore. 2. The Income-Tax Officer, Ward -11(2), C.R.Building, Queens Road, Bangalore. …Common Appellants (By Sri.K.V.Aravind, Advocate) AND: M/s.Information Technology Park Ltd., ITPL , Whitefield Road, Bangalore . ….Common Respondent (By Sri.T.Suryanarayana, Adv for M/s King & Partridge) 2 ITA.NO.76/2012 This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of Order dated 30-11-2011 passed in ITA.No.1152/Bang/2010, for the Assessment Year 2004-2005, praying that this Hon’ble Court may be pleased to: i formulate the substantial questions of law stated therein. ii allow the appeal and set aside the order dated 30/11/2011 passed by the ITAT, Bangalore in ITA.No.1152/Bang/2010, confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, Ward-11(2), Bangalore, in the interest of justice and equity. ITA.NO.78/2012 This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of Order dated 30-11-2011 passed in ITA.No.1147/Bang/2010, for the Assessment Year 1999-2000, praying that this Hon’ble Court may be pleased to: i formulate the substantial questions of law stated therein. ii allow the appeal and set aside the orders passed by the ITAT, Bangalore in ITA.No.1147/Bang/2010 dated 30/11/2011 confirming the order of the Appellate Commissioner and confirm the order passed by the Income Tax Officer, Ward-11(2), 3 Bangalore, in the interest of justice and equity. These appeals coming for hearing this day, B.MANOHAR.J., delivered the following: J U D G M E N T These Income Tax appeals are filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’), being aggrieved by the order dated 30-11-2011 in ITA.Nos.1147-1152/Bang/2010 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘B’ (for short ‘the Tribunal’) whereby the Tribunal dismissed the appeals filed by the revenue and confirmed the order dated 23-07-2010 passed by the Commissioner of Income Tax (Appeals)-IV, Bangalore, (hereinafter referred to as ‘the First Appellate Authority’), wherein the First Appellate Authority held that rental income received by the assessee from letting out buildings along with other amenities in Software Technology Park falls under the head of ‘business income’ and not under the ‘Income from house 4 property’ while setting aside the order passed by the Assessing Authority for the assessment years 1999- 2000 to 2004-05. 2. Since the common question of law and facts are involved in these two appeals and a common order passed by the Tribunal has been challenged, these two appeals are clubbed together and disposed of by this common order. 3. The above appeals are admitted to consider the following substantial question of law: Whether the Tribunal was correct in holding that the lease rent received by the assessee from letting out buildings along with other amenities in a Software Technology Park is chargeable to tax under the head ‘income from business’ and not under the head ‘income from house property’ as held by this Hon’ble Court in Bhoopalam Commercial Complex & Industries and by the Apex Court in East India Housing & Land Development Trust Ltd.? 5 4. Learned counsel appearing for the parties submitted that the substantial question of law raised in these appeals are fully covered by the judgment reported in (2013) 218 Taxman 88 (Karnataka) in the case of COMMISSIONER OF INCOME TAX-III v/s VELANKANI INFORMATION SYSTEMS (P) LTD. 5. Division Bench of this Court in the above said judgment at paragraph 26 has clearly held as under: 26…………… If the intention is to exploit commercial property by putting up construction and letting it out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building fall under the head ‘income from house property’. But if the assessee is in the business of taking land, putting up commercial buildings thereon and letting out such buildings with all furniture as his profession or business, then notwithstanding the fact that he has constructed a building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the heading of income from house property. Therefore, firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect 6 of each of them is to be seen. Thirdly it is to be found out whether it is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying at complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession.” 6. We are in respectful agreement with the judgment of the Division Bench of this Court. In the instant cases the assessee-company engaged in the business of developing, operating and maintaining an industrial park and providing infrastructure facilities to different companies as its business. In view of that, the substantial question of law is held against the Revenue. Accordingly, these two appeals are dismissed. Sd/- JUDGE Sd/- JUDGE mpk/-* "