2020 (8) TMI 21 - HC - Income Tax

Deduction u/s 80IA - Rental income from the I.T. Park - taxable under the head Income From Business OR under the head income from house property - HELD THAT - The burden of the argument of Revenue, perhaps emanated from only the name of the company, forgetting that the main business activity of the company from its motor business had been diversified into developing a special kinds of property and earning lease rental income as its main business income. By no stretch of imagination, could a software park developed with the special facilities and amenities for software companies, be described or believed to be a property created for earning rental income as income from house property. The Tribunal not only relied upon an earlier decision of Madras High Court in the case of CIT v. Elnet Technologies Ltd. 2012 (11) TMI 671 - MADRAS HIGH COURT but also having considered all these aspects in great detail, the Division Bench of this Court to which one of us (VKJ) was a member, in M/s. PSTS Heavy Lift and Shift Ltd. 2020 (2) TMI 213 - MADRAS HIGH COURT had clearly held that where the main business of the company is to earn rental income as its business income, the income would be taxable under the head Income entitling the petitioner Assessee to have the deductions of notional expenses like depreciation and special deductions like Section 80IA etc. Just to take a contrary view in favour of the Revenue, the authorities unneccesarily create a forum for litigation for the assessee by taking different and divergent views, despite there being binding precedents from the jurisdictional high Court. This tendency of the revenue authorities not to follow the judgments of superior Constitutional Courts deserves to be strongly deprecated by imposition of suitable costs on them. - Decided against revenue.

Summary

Issues involved:
1. Determination of taxability of rental income from a property under "Income From Business" or "Income from House Property."
2. Interpretation of provisions related to deduction under Section 80IA of the Income Tax Act.
3. Application of legal precedents in determining the taxability of rental income.

Issue 1: The primary issue in this case revolved around the taxability of rental income from a property, specifically the Olympia Tech Park, under the heads of "Income From Business" or "Income from House Property." The Revenue challenged the order of the Income Tax Appellate Tribunal, which upheld the Commissioner of Income Tax (Appeals)'s decision to treat the rental income under the head "Income From Business" and "Income from house property."

Issue 2: The Revenue raised substantial questions of law regarding the correct treatment of rental income and the eligibility for deduction under Section 80IA of the Income Tax Act. The questions focused on whether the Tribunal correctly upheld the CIT(A)'s order directing the Assessing Officer to treat the rental income as "income from business" and allow the deduction under Section 80IA(4)(iii).

Issue 3: The Court analyzed the facts and circumstances of the case in light of legal provisions and precedents. The Court referred to a recent judgment of the Division Bench in a similar case, emphasizing that when the main business of the Assessee is earning rental income, such income should be taxed under the head "Income from Business" rather than "Income from House Property." The Court highlighted that the authorities erred in not following binding precedents and unnecessarily creating litigation for the Assessee.

The Court dismissed the appeals, emphasizing that the rental income, derived from the Olympia Tech Park, was rightly treated as "Income from Business" due to the Assessee's main business activity being the earning of rental income. The Court criticized the Revenue authorities for not following established legal principles and emphasized the importance of applying judgments truthfully. The Court refrained from imposing costs on the Revenue but highlighted the need for adherence to legal precedents.