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TMI Blog2011 (11) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the assessee was to earn interest from its surplus funds and thus such surplus funds cannot be classified as incidental to the business of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... TTJ 421/[2009] 28 SOT 45 (Bang.)(URO) and Dy. CIT v. Golflink Software Park P Ltd. (IT Appeal Nos.40, 41, 52 & 53/Bang/2010). The assessee has also filed a paper book containing 88 pages consisting inter alia of the written submissions, various orders of the Tribunal, copy of Memorandum of Association etc. 5.6 We have heard the rival submissions and perused the material on record. No doubt, the assessee had developed a technology park wherein sizeable illustrious giants have established their hubs. It is also an undisputed fact that the assessee had let out its buildings on rental basis and also carrying on a complex commercial activity of setting up a software technology park backed with various amenities. The arrangement between the assessee and the lessees is not for mere use of the property simplicitor but for the use of property along with other amenities and facilities. The agreement described as a lease agreement cannot be viewed in isolation. It has to be viewed along with the service agreement. An extract of the main objects of the Company in the Memorandum of Association ('MOA') are provided below which indicates that the company has been formed with the intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained loan from Union Bank of India for constructing superstructure thereon which could not be considered as investment in a property for earning rental income only…….. In other words, if the property is taken on lease thereafter developed on, lease is part of the business activity of the assessee as an owner, then the income has to be treated as business income. The activity was done by the assessee as a business venture and was in accordance with the main object of the company……….The assessee is providing ward and watch, maintenance of common area, maintenance of light in the common area, supply of water, providing lift, installation of electric transformer, power to the lessees, providing generator, overhead water tanks, maintenance of drainage, etc., clearly establish that the entire activity is in organized manner to earn profit out of investment made by the assessee as a commercial venture". [Emphasis applied]. 5.11 The Bangalore Tribunal in the case of Golflink Software Park (P.) Ltd. (supra) has held that lease rental income arising from a complex commercial activity will be classified as 'income from business'. The Banga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 It is submitted that the order passed u/s 143(3) rws 147 of the Act be struck down as invalid, null and void ab initio, as the jurisdictional condition precedent for a valid assumption of jurisdiction u/s 148 were not fulfilled. It was submitted that from the date of filing of the return up to the date of issuance of notice u/s 148, no new evidence/fact has come to the notice of the AO which can justify initiation of reassessment proceedings. It is contended that the AO in the guise of reopening of the assessment has actually tried to do a regular assessment, which was otherwise time barred by virtue of section 143(2) of the Act. It was further submitted that the AO is empowered under the Act to do a reassessment u/s 147 of the Act only if he has reason to believe that any income chargeable to tax has escaped assessment. Referring to Explanation 2(b) to section 147 of the Act, it was submitted that when a return of income has been filed by the assessee and no assessment has been made, the AO, in order to initiate reassessment proceedings, it has to be noticed by the AO on the basis of fresh facts that income chargeable to tax has escaped assessment. For the above proposition, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 148 of the Act. Reading the above provision, it is clear that the AO should have reason to believe that income chargeable to tax has escaped assessment and subject to the provisions of section 148 to 153, he can assess or reassess such income. The AO in his remand report to the first appellate authority had listed out the reasons recorded for the various asst. years in question. The reasons recorded for all the asst. years concerned clearly spells out that there is understatement of income by changing the head of income from 'house property' to 'business', by claiming excessive depreciation and capital loss. It is also stated that interest income from bank deposits were shown under the head 'business' whereas it is to be assessed under the head 'income from other sources'. 7.6 The expression 'reason to believe' in section 147 would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty are justified and correct. For the above said reasons, we dismiss ground no.3 raised in the cross objections filed by the assessee for the asst. years 1999-2000 to 2002-03. It is ordered accordingly. 8. The assessee's last cross objection for all the AYs under challenge being that the Ld. CIT (A) erred in upholding the fact that the interest received from surplus funds was to be assessed as 'income from other sources' as against 'business income' as claimed by the assessee. It was submitted by the Ld. A R that: (i) the interest income earned by the assessee was from surplus funds not immediately required for the purpose of business; that the funds available with the assessee prior to utilization for actual business purposes were incidental to the business activity and interest on such funds should be regarded as income under the head 'profits and gains from business or profession'; (ii) that the assessee was engaged in infrastructure development and provision for services which requires a great deal of capital investments; that the assessee had to maintain surplus funds for its business needs and there was a time lag between receipt/generation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were invested in short term deposits with banks, would be chargeable to tax under the head 'income from other sources'. This view was followed in CIT v. Coromandal Cements Ltd. [1998] 234 ITR 412 (SC). 8.2 With due respects, we have perused the case laws on which the assessee has placed its reliance. (i) The issue before the Hon'ble Bombay High Court in the case of Paramount Premises (P.) Ltd. (supra) was that the assessee was engaged in the business of building construction and during the relevant period under dispute, the assessee received deposits from some of the prospective purchasers while the work of construction was under-way. The amounts so received as deposits by the assessee were substantial and the idle amounts with it were deposited with the bank or given on temporary loans until such time as they were required for construction. The assessee was also required to give a guarantee to the bank in respect of the land taken on lease for construction work. For that purpose certain amounts were kept in FDs on which the assessee earned interest. In these circumstances, the Tribunal had given a finding that the entire interest sprang from the business activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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