2012 (8) TMI 1015 - AT - Income Tax

Treating the Business Centre(I.T Park) Income as Income From House Property instead of Business Income - disallowing the claim of all expenses - disallowing the claim of deduction u/s 80IA(4)(iii) - adding on ad hoc basis the interest earned on the deposit taken from the IT company client who was occupying the premises of the appellant as Income From House Property

Summary

Issues:
1. Treatment of Business Centre Income as Income From House Property
2. Disallowance of all expenses
3. Disallowance of deduction under section 80IA(4)(iii) of Income Tax Act, 1961
4. Addition of interest earned on deposit as Income From House Property

Analysis:

Issue 1: Treatment of Business Centre Income as Income From House Property
The appellant contested the treatment of Business Centre Income as Income From House Property instead of Business Income. The Tribunal referred to the primary intention of the assessee in exploiting the property. It was noted that the property was an I.T. Park with various facilities and services, and the assessee provided complex services by offering operation place in a notified I.T. Park. Several case laws were cited to support the contention that income earned from a business center should be assessed under the head "Income From Business & Profession." The Tribunal upheld the appellant's argument, setting aside the Commissioner (Appeals)'s order and allowing ground no.1 raised by the assessee.

Issue 2: Disallowance of all expenses
The Tribunal found that the disallowance of expenses was based on the premise that the income was assessable under the head "House Property." However, following the decision on Issue 1, the Tribunal directed the Assessing Officer to allow the claim of expenses and the deduction under section 80IA(4)(iii). Consequently, the Tribunal set aside the Commissioner (Appeals)'s order and allowed grounds no.2 and 3 raised by the assessee.

Issue 3: Disallowance of deduction under section 80IA(4)(iii) of Income Tax Act, 1961
This issue was addressed in conjunction with Issue 2, where the Tribunal directed the Assessing Officer to allow the claim for deduction under section 80IA(4)(iii) following the decision that the income was assessable under the head "Income From Business & Profession."

Issue 4: Addition of interest earned on deposit as Income From House Property
The Tribunal clarified that notional interest on deposits cannot be considered for determining the annual letting value. As the income in question was held to be assessable under the head "Income From Business," the addition made under section 23(1)(a) was deemed unnecessary and was deleted. Consequently, the Tribunal allowed ground no.4 raised by the assessee.

In conclusion, the Tribunal allowed the appellant's appeal based on the findings and decisions made regarding each of the issues raised, ultimately setting aside the Commissioner (Appeals)'s order and ruling in favor of the assessee.