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2012 (6) TMI 653 - AT - Income TaxDeduction u/s 80IA - Rental income - letting out of Industrial park buildings - Income from House Property or of business income Held that - when various amenities provided by an industrial park or software technology park is predominant in letting out of the housing unit, then the rental income is to be assessed under the head profit and gains of business or profession and in a case where letting out of building is predominant and the other amenities are merely incidental to such letting out then the rental income is to be assessed under the head income from house property . From the facts available on record, it is not clear that whether the letting out of the building was predominant in the transaction between the assessee and the tenants or whether predominant was of the industrial park comprised of various amenities and letting out of a building, as such park was merely incidental. Matter remanded to Assessing Officer for proper verification.
Issues Involved:
1. Treatment of rental income from Industrial Park buildings as 'Income from house property' or 'Income from business'. 2. Eligibility for deduction under section 80IA of the Income-tax Act. Detailed Analysis: Issue 1: Treatment of Rental Income The Revenue challenged the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] who directed the Assessing Officer (AO) to treat the rental income from letting out Industrial Park buildings as 'income from business' rather than 'income from house property'. The AO argued that the facilities provided by the assessee were standard for any modern property and did not change the nature of the income to business income. The AO relied on several precedents, including CIT v. Chennai Properties & Investments Ltd., Indian Overseas Bank Ltd. v. CIT, and Shambhu Investments (P.) Ltd. v. CIT, which supported the treatment of rental income as income from house property. The CIT(A) countered this by noting the significant investments and risks undertaken by the assessee, the state-of-the-art infrastructure provided, and the recognition under the Industrial Park scheme by the Ministry of Commerce and Industry. The CIT(A) concluded that the assessee was engaged in the business of developing and operating an industrial park, thus the income should be treated as business income. The Tribunal reviewed the arguments and found that the AO's reliance on TDS certificates under section 194I was not sufficient to determine the nature of the income. The Tribunal agreed with the CIT(A) that income derived from developing and operating an industrial park can be treated as business income, as inferred from section 80IA(4)(iii) of the Act. However, the Tribunal noted that the approval letter from the Ministry of Commerce and Industry only granted permission to set up an industrial park and did not confirm the establishment as an industrial park under section 80IA(4)(iii). The Tribunal also referred to the case of Golflink Software Park (P) Ltd., where the income from a technology park with various amenities was treated as business income. The Tribunal emphasized that if the amenities provided are predominant, the income should be treated as business income. Conversely, if letting out the building is predominant, the income should be treated as income from house property. Issue 2: Eligibility for Deduction under Section 80IA The Revenue did not challenge the CIT(A)'s finding that the assessee was entitled to deduction under section 80IA, irrespective of the head under which the income was assessed. The Tribunal acknowledged this point but noted that the records did not clearly establish whether the alleged industrial park was notified by the Central Government as required under Rule 18C of the Income Tax Rules. Conclusion: The Tribunal concluded that the case required further verification to determine whether the facilities developed by the assessee were indeed treated as an industrial park by any authority and whether the predominant activity was letting out the building or providing comprehensive amenities. The Tribunal restored the issue to the file of the Assessing Officer for proper verification and re-adjudication, ensuring a fair opportunity for the assessee to present their case. Result: All appeals of the Revenue were allowed for statistical purposes.
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