2020 (12) TMI 799 - 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 - As decided in own case 2019 (8) TMI 1619 - ITAT MUMBAI 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:
1. Treatment of income from operation and maintenance of Information Technology Park under the head 'Profits and Gains of business or profession'.
2. Allowance of operating expenses, administrative expenses, and depreciation as deduction under section 37 of the Income Tax Act.

Issue 1: Treatment of Income from IT Park:
The appeal revolved around the treatment of income from operation and maintenance of an Information Technology Park. The Revenue contended that the income should be treated as income from house property, while the Assessee argued that it should be considered under the head 'Profits and Gains of business or profession'. The Tribunal referred to a previous order for A.Yrs 2011-12 and 2012-13 where a similar issue was addressed. The Tribunal upheld the Assessee's position, emphasizing that the Assessee was engaged in the business of developing properties and had leased out the building as part of its business activities. The Tribunal noted that the Object Clause in the Memorandum of Association clearly stated the business activities of the Assessee, including buying, selling, constructing, and leasing out properties. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the treatment of the income under the head 'Profits and Gains of business or profession'.

Issue 2: Allowance of Expenses and Depreciation:
The second issue raised by the Revenue was regarding the allowance of operating expenses, administrative expenses, and depreciation as deductions under section 37 of the Income Tax Act. However, since the Tribunal upheld the treatment of the income from the IT Park under the head 'Profits and Gains of business or profession', the second issue became infructuous. The Tribunal stated that since the earlier decision on the treatment of income was upheld, the grounds raised by the Revenue regarding the allowance of expenses and depreciation were also dismissed. Consequently, the Tribunal affirmed the order of the Commissioner of Income Tax (Appeals) in allowing the deductions, leading to the dismissal of the Revenue's appeal in its entirety.

In conclusion, the judgment by the Appellate Tribunal ITAT Mumbai addressed the issues surrounding the treatment of income from an Information Technology Park and the allowance of expenses and depreciation. The Tribunal's detailed analysis and reference to previous decisions provided a comprehensive understanding of the legal principles applied in determining the appropriate classification of income and deductions under the Income Tax Act.