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2011 (11) TMI 391 - AT - Income TaxIncome from Lease Rentals is taxable under Income from business OR Income from House Property - Assessee engaged in developing maintaining operating technology park - CIT(A) held as business Income in view of Golf Link Software Park (P) Ltd. - Held That - In view of Global Tech Park (P.) Ltd. VS Asst. CIT (2008 - TMI - 72026 - ITAT BANGALORE-A) lease rental income arising from a complex commercial activity will be classified as income from business . Period of Limitation - Appeal to be filed within 60 days - Held That - Order of CIT(A) was received on 17.8.10 and calculating 60 days from therein order was not time barred. Interest Income from Surplus Funds as Income From Other Source OR Business Income - Held That - Assessee in its written submission conceded that the interest income earned by it was from surplus funds not immediately required for the purpose of business. It makes abundantly clear that the sole intention of the assessee was to earn interest from its surplus funds and thus such surplus funds cannot be classified as incidental to the business of the assessee.
Issues Involved:
1. Taxability of income from lease rentals. 2. Timeliness of the revenue's appeal. 3. Validity of reopening of assessments. 4. Classification of interest income from surplus funds. Detailed Analysis: 1. Taxability of Income from Lease Rentals: The primary issue in the revenue's appeal was whether the CIT(A) was justified in allowing the claim of the assessee that its income from lease rentals should be taxable under the head "income from business" rather than "income from house property" and allowing depreciation on such buildings. - Background: The assessee, a company engaged in the development, operation, and maintenance of a technology park, had its lease rentals treated by the AO as income from "house property" instead of "business income." - CIT(A) Decision: The CIT(A) ruled in favor of the assessee, treating the rental income and maintenance charges as "business income" and allowing related expenditures such as municipal tax and depreciation as deductions. This decision was based on a similar case, Golf Link Software Park (P.) Ltd. - Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, noting that the assessee's activities involved a complex commercial activity of setting up a technology park with various amenities, which went beyond mere property leasing. The Tribunal cited the Bangalore Tribunal's decisions in Global Tech Park (P.) Ltd. and Golflink Software Park (P.) Ltd., which supported the classification of such income as "business income." The Tribunal dismissed the revenue's appeal. 2. Timeliness of the Revenue's Appeal: In the cross objection, the assessee contended that the revenue's appeal before the Tribunal was time-barred and should be struck down as invalid. - Assessee's Argument: The appeal was filed beyond the stipulated period of sixty days from the date on which the order sought to be appealed against was communicated to the revenue authorities. - Revenue's Response: The date of receipt of the impugned order by the revenue authorities was incorrectly mentioned as 10/8/2010 in the Form No.36A, but the correct date was 17/8/2010, making the appeal timely. - Tribunal's Decision: The Tribunal found that the appeal was filed within the stipulated period of sixty days from the correct date of receipt of the order. Therefore, the first ground raised by the assessee in the cross objection was dismissed. 3. Validity of Reopening of Assessments: The second ground in the cross objection was the validity of the reopening of assessments for assessment years 1999-2000 to 2002-03. - Assessee's Argument: The reassessment was invalid as there were no new facts or evidence justifying the initiation of reassessment proceedings. The AO was attempting to conduct a regular assessment under the guise of reassessment. - Tribunal's Decision: The Tribunal held that the AO had tangible information from the assessment of a subsequent year that indicated income had escaped assessment for the previous years. The Tribunal cited the Supreme Court's decision in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd., which stated that the AO needs only a "reason to believe" that income had escaped assessment. The Tribunal dismissed the ground raised by the assessee. 4. Classification of Interest Income from Surplus Funds: The final issue was whether the interest received from surplus funds should be classified as "income from other sources" or "business income." - Assessee's Argument: The interest income was from surplus funds not immediately required for business purposes and should be regarded as "business income." - Tribunal's Decision: The Tribunal noted that the interest income was earned from surplus funds deposited in banks with the sole intention of earning interest. This did not constitute a business activity. The Tribunal referenced the Supreme Court's decision in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT, which held that interest income from surplus funds is chargeable under "income from other sources." The Tribunal dismissed the assessee's ground. Conclusion: The appeals filed by the revenue and the cross objections raised by the assessee were dismissed. The Tribunal upheld the CIT(A)'s decision to classify the lease rental income as "business income" and confirmed the timeliness and validity of the revenue's appeal and the reopening of assessments. The interest income from surplus funds was correctly classified as "income from other sources."
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