2021 (7) TMI 967 - 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 - 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 the assessee.

Summary

Issues Involved:
Challenge to orders passed by Income Tax Appellate Tribunal on the classification of lease rent income under Section 80IA of the Income Tax Act.

Analysis:
1. The main issue in the appeals was whether the lease rent income from letting out modules of a Software Technology park constitutes income from business and is eligible for deduction under Section 80IA of the Income Tax Act. The Revenue challenged the Tribunal's decision on this classification.

2. The substantial questions of law admitted for consideration included whether the income from letting out a building can be considered as 'income from business' under Section 28 of the Income Tax Act. Additionally, the Tribunal's decision on whether the services rendered by the landlord should be classified as 'business' income was questioned.

3. The Revenue's counsel acknowledged that similar issues had been previously decided against the Revenue in other judgments. Specifically, a judgment dated 14.06.2021 in T.C.A.No.16 of 2014 held that income derived from letting out property for running a software technology park is considered 'income from business'. This decision was based on a circular issued by the CBDT and previous court rulings.

4. The judgment referred to a previous Division Bench decision which clarified 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 circular issued by the CBDT also supported this interpretation.

5. The Division Bench emphasized that when considering the nature of the business, income from letting out property with amenities should be classified as business income and not under other categories like income from house property or other sources. The appeal against this decision was dismissed by the Supreme Court.

6. Following the precedent set by previous judgments and the circular issued by the CBDT, the Court ruled against the Revenue in the present case. The Tax Case Appeals were dismissed, and the substantial questions of law were answered in favor of the assessee. No costs were awarded in this matter.