2021 (7) TMI 997 - HC - Income Tax

Deduction u/s 80IA - lease rent income received from letting out modules of Software Technology park to various lessees - whether Tribunal was right in holding that the income derived from letting out of property to the tenants as 'income from business in the hands of the owner of the property? - HELD THAT - Issue 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.

Summary

Issues:
1. Interpretation of lease rent income from letting out modules of Software Technology park for deduction under Section 80IA of the Income Tax Act.

Analysis:
The High Court of Madras addressed the appeal challenging the order passed by the Income Tax Appellate Tribunal regarding the Assessment Year 2010-11. The main issue was whether the lease rent income received from letting out modules of a Software Technology park to various lessees would constitute income from business and be eligible for deduction under Section 80IA of the Act. The appeal was admitted based on substantial questions of law related to the nature of income derived from letting out property and facilities. The court considered previous judgments, including one where it was held that income from letting out property in an industrial park/SEZ, along with amenities, should be treated as business income in the hands of the property owner.

The court referred to Circular No.16 of 2017 issued by the CBDT, which clarified the tax treatment of income from letting out premises in an industrial park/SEZ. It emphasized that such income should be charged under the head 'Profits and Gains of Business.' The court also highlighted a decision where it was established that income derived from letting out property with amenities and facilities constitutes business income and not income from house property or other sources. The appeal was dismissed based on the precedent set by previous judgments and the interpretation of relevant legal provisions and circulars.

The court considered the arguments presented by both parties and relied on the ratio laid down in previous judgments to decide the case against the Revenue and in favor of the assessee. The appeal was dismissed, and no costs were awarded. The decision was based on the established legal principles regarding the characterization of income from letting out property in industrial parks/SEZs and the applicability of relevant provisions of the Income Tax Act. The court's ruling was consistent with previous interpretations and circulars issued by the CBDT, providing clarity on the tax treatment of such income.