2021 (7) TMI 302 - HC - Income Tax

Correct head of income - Income derived from letting out of property to the tenants for the purpose of running a software technology park - business income or house property - HELD THAT - M/S. TIDEL PARK LIMITED 2020 (7) TMI 339 - 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 involved:
Challenge to order of Income Tax Appellate Tribunal regarding classification of income derived from property letting for software technology park as 'income from business'.

Analysis:
The High Court considered the appeal challenging the Income Tax Appellate Tribunal's order regarding the classification of income derived from letting out property for a software technology park as 'income from business'. The substantial question of law before the court was whether such income should be classified as business income. The court referred to a previous judgment by a Division Bench of the same court, which held that income from letting out property in an industrial park/SEZ, along with amenities, should be considered business income. This interpretation was supported by a circular issued by the CBDT. The court emphasized that the income from letting out property with facilities in an industrial park/SEZ falls under the head 'Profits and Gains of Business'. The court also cited previous decisions highlighting that income from letting out property with amenities should be classified as income from business and not under other categories like income from house property or other sources.

The court acknowledged that the issue had been previously considered by the Supreme Court, which dismissed the appeal on the ground of low tax effect. The court, in line with the previous Division Bench judgment and the CBDT circular, ruled that the substantial question of law must be answered against the revenue and in favor of the assessee. The Tax Case Appeals were dismissed, and the substantial questions of law were answered against the revenue, with no costs imposed. Both the Senior Standing Counsel for the appellant/Revenue and the counsel for the respondent agreed that the appeal should be decided based on the precedent set by the Division Bench judgment. Consequently, the court, following the ratio laid down in the previous Division Bench judgment, decided the questions of law against the appellant/Revenue and in favor of the respondent/assessee, resulting in the dismissal of the Tax Case Appeal without any costs incurred.