2019 (8) TMI 1619 - AT - Income Tax

Characterization of income - income of assessee from operation and maintenance of Information Technology Park - as income under the head Profits and Gains of business or profession or Income from house property - HELD THAT - Assessee is engaged in the business of developing properties and specially developed Information Technology Park in Chennai. The assessee has leased out the building to M/s. Amazon Development Centre India Private Limited and others by way of lease agreements and also entered into a special agreement for providing for amenities and facilities which have been treated as business income . We further observe from the perusal of Object Clause in the Memorandum of Association and Articles of Association that it has been clearly stated that it is the business of assessee to buy sell construct and lease-out the properties. Ld.CIT(A) has passed a very reasoned order after following the orders of coordinate benches. We therefore do not find any infirmity in the order of CIT(A) and the same is affirmed by dismissing the ground of Revenue. This Ground of appeal raised by Revenue is dismissed.

Summary

Issues Involved:
Appeal against order of CIT(A) treating income from IT Park as business income and allowing certain expenses under IT Act.

Issue 1 - Treatment of Income from IT Park:
The Revenue appealed against CIT(A)'s order treating income from operation and maintenance of Information Technology Park as 'Profits and Gains of business or profession' instead of 'Income from House Property'. The AO initially assessed the income as 'income from house property' due to the absence of leasing out in the object clause of the company's Memorandum of Association. However, CIT(A) reversed this decision, emphasizing compliance with Section 22 criteria. The AR argued that the company's main object clause included leasing activities, supported by lease agreements and balance sheet details. The AR referenced relevant case law and circulars to assert that the income should be classified as business income. The Tribunal upheld CIT(A)'s decision, noting the business nature of the company, lease agreements, and compliance with Section 22 criteria.

Issue 2 - Allowance of Operating Expenses:
The Revenue also challenged CIT(A)'s allowance of operating expenses, administrative expenses, and depreciation under Section 37 of the IT Act, considering the income as 'income from house property'. However, since the Tribunal upheld CIT(A)'s decision on the classification of income as business income, the challenge on the allowance of expenses became infructuous. Consequently, the Tribunal dismissed the appeal on this ground as well.

Conclusion:
Both appeals by the Revenue against the CIT(A)'s order were dismissed by the Tribunal, affirming the treatment of income from the IT Park as business income and the allowance of related expenses. The Tribunal emphasized the company's business nature, lease agreements, and compliance with Section 22 criteria in determining the classification of income.