2021 (8) TMI 46 - HC - Income Tax

Deduction u/s 80IA - lease rent income received from letting out modules of Software Technology park to various lessees - allowable income from business - HELD THAT - Issue decided against the appellant/Revenue and in favour of the respondent/assessee in M/S. TIDAL PARK LTD. 2021 (7) TMI 302 - MADRAS HIGH COURT wherein held that 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 income from letting out modules of Software Technology park as business income under Section 80IA of the Act.

Analysis:
The High Court of Madras addressed the appeal filed by the Revenue challenging the order passed by the Income Tax Appellate Tribunal regarding the Assessment Year 2005-06. The main issue was whether the lease rent income received from letting out modules of a Software Technology park constituted income from business and was eligible for deduction under Section 80IA of the Act. The substantial questions of law raised included the classification of income derived from letting out property to tenants as 'income from business' and whether such income qualifies as business income assessable under Section 28 of the Act. Additionally, the Tribunal's decision was questioned concerning the treatment of lease rental income received by the assessee as income from house property based on a previous decision.

In the judgment, the Court referred to a previous decision where it was established that income derived from letting out property in an industrial park/SEZ, along with amenities and facilities, should be considered business income in the hands of the property owner. This interpretation was supported by a circular issued by the CBDT, emphasizing that income from letting out premises in an industrial park/SEZ should be taxed under the head 'Profits and Gains of Business.' The Court also highlighted the importance of considering all amenities and facilities provided along with the leased property in determining the nature of the income. The decision was further reinforced by citing relevant case law and emphasizing that income from letting out property with amenities should be classified as income from business rather than as income from house property or other sources.

Ultimately, the Court dismissed the Tax Case Appeals, ruling against the Revenue and in favor of the assessee based on the precedent set by previous judgments and the interpretation of relevant legal provisions. The questions of law were decided in alignment with the principles established in earlier cases and the circular issued by the CBDT. The judgment emphasized the importance of considering the nature of the business and the facilities provided in determining the classification of income derived from letting out property in industrial parks/SEZs, affirming that such income should be treated as business income.