2021 (7) TMI 786 - HC - Income Tax

Deduction u/s 80IA - lease rent income received from letting out modules of Software Technology park to various lessees would constitute income from business - HELD THAT - As decided in M/S. TIDAL PARK LTD. 2021 (7) TMI 302 - MADRAS HIGH COURT against the Revenue and in favour of the assessee 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 for deduction under Section 80IA of the Act.
2. Claim of interest under Section 36(1)(iii) as business expenditure.

Analysis:
1. The main issue in the appeals was whether the income received from letting out modules of a Software Technology park should be considered as business income eligible for deduction under Section 80IA of the Act. The Revenue challenged the Tribunal's decision that the lease rent income constituted income from business. The substantial questions of law included whether the income from letting out a building could be classified as income from business assessable under Section 28 of the Income Tax Act. The Tribunal's decision was supported by a previous judgment that established income from letting out property for a software technology park as business income. The Circular No.16 of 2017 issued by CBDT clarified the treatment of income from letting out premises in an industrial park/SEZ as business income, following the amenities provided, which was considered settled law. The emphasis was on the facilities provided along with the premises, and the Tribunal's decision was in line with earlier court rulings.

2. Another issue raised was the claim of interest under Section 36(1)(iii) as business expenditure. The Tribunal's decision to allow the interest claim for business purposes was challenged. However, the judgment cited a previous decision where income derived from letting out property with amenities and facilities was considered income from business and not from house property or other sources. The appeal against this decision was dismissed by the Supreme Court due to low tax effect. Considering the circular issued by CBDT and the precedent set by the Division Bench, the substantial question of law was answered against the Revenue and in favor of the assessee. The Tax Case Appeals were dismissed, and no costs were awarded.

In conclusion, the High Court of Madras upheld the Tribunal's decision regarding the classification of income from letting out modules of a Software Technology park as business income eligible for deduction under Section 80IA of the Act. Additionally, the claim of interest under Section 36(1)(iii) as business expenditure was also supported based on previous judgments and the circular issued by CBDT. The appeals filed by the Revenue were dismissed, and the substantial questions of law were decided against the Revenue in favor of the assessee, following established legal principles and precedents.