2021 (7) TMI 846 - HC - Income Tax

Deduction u/s 80IA - Correct head of income - Income derived from letting out of property - whether lease rent income received from letting out modules of Software Technology park to various lessees would constitute income from business and eligible for deduction - HELD THAT - As decided in M/S. TIDAL PARK LTD. 2021 (7) TMI 302 - MADRAS HIGH COURT income derived from letting out of the property with all amenities and facilities would be income from business and cannot be assessed either as income from house property or as income from other sources. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of income from letting out modules of Software Technology Park as business income eligible for deduction under Section 80IA of the Act.

Analysis:
The High Court of Madras dealt with the challenge against the orders passed by the Income Tax Appellate Tribunal regarding the Assessment Year 2006-07 & 2009-10. The primary issue revolved around whether the lease rent income received from letting out modules of Software Technology Park to various lessees would constitute income from business and be eligible for deduction under Section 80IA of the Act. The appeals were admitted based on substantial questions of law related to the characterization of the income derived from letting out property to tenants as 'income from business' assessable under Section 28 of the Act.

The Court considered precedents and circulars issued by the CBDT to determine the nature of income derived from letting out property in an industrial park/SEZ. It was noted that income from letting out premises along with other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business'. The emphasis was placed on the combination of letting out premises and associated facilities in such locations. The Court referenced previous decisions to establish that income from letting out property with amenities and facilities constitutes business income, not falling under the categories of income from house property or other sources.

The judgment highlighted a specific case where the revenue's appeal was dismissed by the Supreme Court on the grounds of Low Tax Effect. Considering the legal principles, circulars, and precedents, the Court concluded that the income derived from letting out property with amenities and facilities qualifies as income from business. Consequently, the substantial questions of law were answered against the revenue and in favor of the assessee. The Tax Case Appeals were dismissed, following the precedent set by the Division Bench of the Court in a related case.

In light of the arguments presented by both parties and the legal framework established by previous judgments, the Court decided the questions of law against the Revenue and in favor of the respondent/assessee. The appeals were dismissed based on the ratio laid down in the earlier judgment cited in the case. The Court upheld the position that income from letting out property with associated facilities constitutes business income, aligning with the decisions of the Division Bench in similar cases.

Overall, the judgment provides a comprehensive analysis of the interpretation of income derived from letting out property in specific contexts, emphasizing the classification of such income as business income eligible for certain deductions under the Income Tax Act.