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TMI Blog2012 (6) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Jena for the Appellant. Sriram Seshadri for the Respondent. ORDER 1. All these six appeals filed by the Revenue are directed against the common order dated 04.10.2010 of Commissioner of Income Tax (Appeals)-V, Chennai, for assessment years 2002-03 to 2007-08. 2. In all the six appeals, Revenue has raised following common grounds:- "2.1 The learned CIT(A) has erred in allowing the assessee's appeal against the A.O.'s action in treatment of rental income from Industrial park buildings as 'Income from house property' and directed the A.O. to treat the income derived from letting out of IT industrial park as 'income from business'. 2.2 It is submitted that in the TDS certificate furnished by the assessee, the nature of payment mentioned is shown as the category for which TDS to be effected u/s 1941 of the Income-tax Act. The respective S.1941 deal purely with deduction of tax on payment of Rent at a specified rate. In this context, reliance is placed on the ITAT Chennai's decision in the case of M/s Ananda Enterprise ITA No.254/10/Mds/ 'A' Bench dated 26.5.2010 where the Hon'ble ITAT has held that when the rent paid by tenant is deducted at source at the rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises from which the assessee received rent in the assessment year was used for the business purposes." 3. However, the sole issue involved is these appeals is that the ld. CIT(A) erred in directing the Assessing Officer to treat the income derived from letting out of Industrial park buildings as 'income from business' as against the treatment by the Assessing Officer of the same as 'Income from house property'. 4. The Assessing Officer has observed in his order as under: "5.5 The assessee submitted that in the case of CIT v. Sanmar Holdings Ltd., (272 ITR 341), the jurisdictional High Court of the assessee is able to establish that the property in question was a commercial asset, then the income derived from such asset can be treated as 'business income'. Then the assessee went on to elaborate the facilities available in each building which it has let out to the tenant namely, car parking space, general lighting on all sides, landscape garden, rain water drain, sewage connection, toilets, lift, storage space, lights and fans etc. Hence, it is requested to treat its property as a commercial asset and the income as business income. 5.6 The assessee's submissions we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was engaged in purchase and sale of properties. The court referred only those properties which were purchased and sold in the real estate business as 'commercial property' and not the property which was let out for commercial purposes. In this case, assessee is not involved in real-estate business. However, in the assessee's case, it developed its property with the sole object of letting it out and earning rental income. Hence, the above ratio is inapplicable to this case. The following case laws are applicable to the facts of this case and hence they are relied. 1. CIT v. Chennai Properties Investments Ltd. (266 U1R 685) - company was - formed with the object of dealing in property - income from letting out buildings belonging to it assessable as income from property. 2. Indian Overseas Bank Ltd. v. CIT (246 ITR 206-Mdsl - Portion of the building owned by the company let out to tenants - Rent received from tenants - No link between tenants and banking-business carried on by the assessee - income from property rightly assessed under head 'income from House Property' 3. M/s. Shambu Investments P Ltd. v. CIT (263 ITR 143-SC) -The Supreme Court has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the building-in providing a 'plug and play' environment for the software companies - where the lessee could start its operations with their computers. In other words, it is carrying on an activity in the realm of infrastructure development. It has purchased several capital items for this purpose and developed this infrastructure. This demonstrates that the appellant was not merely exploiting a property as an owner, but was venturing into the realm of business by providing an environment for software companies to work. It is a facility service provider and not a landlord. 3. It has applied and obtained recognition for its infrastructure under the Industrial Park, scheme of the Government of India. This scheme was notified by the Ministry of Commerce and Industry in December 1999 in exercise of its power under section 80IA(4)(iii) of the Act for the purpose of infrastructure development in the Country. This scheme has defined the "undertaking" to mean any undertaking which is engaged in the business of developing ' developing and operating or maintaining and operating an industrial park notified by the Central Government in accordance with this scheme. In other words, the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from rent or income from house property because, irrespective of the head under which the persons making payment book such expenditure/payment in its books of account or the nature or treatment given by him is not necessarily required to be same in the hands of the recipient of income or payment of income. He further argued that the ld. CIT(A) has held that even if the income is assessed under the head income from house property, the assessee was entitled to deduction u/s 80I of the Act in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Cocanada Radhaswami [1965] 57 ITR 306 where it has been held that the head of income under which an income is assessed is not relevant for the purpose of claiming exemption under the head. He submitted that the Revenue in the present appeals has not challenged this finding of the ld. CIT(A). Therefore, the appeal filed by the Revenue has no tax deducted and is only an academic exercise because irrespective of the head under which the income is assessed the assessee is entitled to deduction u/s 80IA of the Act. 9. We have heard the rival submissions and perused the orders of lower authorities and material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only those properties, which were purchased and sold in the real estate business as commercial properties and not the property which was let out for commercial purposes. The Assessing Officer relied on the decision in the case of CIT v. Chennai Properties Investments Ltd. [2004] 266 ITR 685/136 Taxman 202 (Mad.); Indian Overseas Bank Ltd. v. CIT [2000] 246 ITR 206/[2002] 121 Taxman 16 (Mad); Shambhu Investments (P.) Ltd. v. CIT [2003] 263 ITR 143/129 Taxman 70 (SC) and held that the income in question was income from house property of the assessee. 11. On appeal, the ld. CIT(A), referring to the letter No. 15(8)/2001-IP ID of Government of India, Ministry of Commerce and Industry, Department of Industry Policy Promotion, Secretariat for Industrial Assistance, Investment Promotion and Infrastructure Development Cell dated 1st August, 2001 held that the Ministry unequivocally has stated that the assessee was eligible for deduction under section 80IA(4)(iii) of the Act, which specifically refers to developing, operating and maintaining of an Industrial Park and that the scheme recognizes the activity of an undertaking engaged in development of infrastructural fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from house property". 15. We are in agreement with the submissions of the ld. AR of the assessee to the extent that income derived by developing and operating or maintaining an industrial park is assessable under the head Profit and Gains of business or profession as can be inferred from the provisions of section 80IA(4)(iii). However, we find that the ld. CIT(A) has opined that the Government of India, Ministry of Commerce and Industry, Department of Industry Policy Promotion, Secretariat for Industrial Assistance Investment Promotion and Infrastructure Development Cell dated 1st August, 2001 has held that the assessee is eligible to deduction under section 80IA(4)(iii) on its income derived from letting out of the property in question as the property in question is an industrial park within the meaning of section 80IA(4)(iii) of the Act. We find that the copy of the aforesaid letter dated 01.08.2001 is placed at page 1 to 2 of the paper book filed by the assessee. The said letter reads as under: No. 15(8)/2001-IP ID Government of India Ministry of Commerce and Industry Department of Industry Policy Promotion Secretariat for Industrial Assistance Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial units : 30 Units ( viii ) Total investment proposed : Rs. 7.0 Crores ( ix ) Investment on built up space for Industrial use : Rs. 4.0 Crores ( x ) Investment on Infrastructure : Rs. 6.5 Crores Development including investment on built up space for industrial use 2. Necessary approvals including that for Foreign Direct Investment/Non- Resident Indian Investment by the Foreign Investment Promotion Board/Reserve Bank of India, shall be taken separately as per the policy and procedures in force. 3. You shall continue to operate the Industrial park during the period in which the benefits under Sub Section 4(iii) of Section 80IA of the Income-tax Act are to be availed by you. 4. You shall submit a half-yearly report on the 1st January 1st July of the year to the undersigned in the IPS-II form enclosed with this letter. 5. The conditions mentioned in para I above, are as per the proposal made by the undertaking and are within the provisions of the scheme notified by this Department vide S.O.No. 1201(E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h various amenities had been provided. The Tribunal has held as under: "9.1 It is an undisputed fact that the assessee had developed a technology park wherein a number of elite I.T. companies have been housed. It was also a fact that the assessee had not merely let-out its buildings for rent, but also carried on a complex commercial activity of setting up a software technology park in which various amenities and fit-outs have been provided. 9.2 In this connection we recall the ruling of the highest judiciary of the land in distinguishing V the significance of merely letting out a bare building and a building braced up with various amenities in the case of CIT, Bombay City 1 v. National Storage Pvt. Ltd. reported in 66 ITR 596 (SC) wherein after analyzing the issue at length, the Hon'ble Court had visualized that - 'In our view, the High Court was right in holding that the assessee was carrying on an adventure or concern in the nature of trade. The assessee not only constructed vaults of special design and special doors and electric fittings, but it also rendered other services to the vault-holders. It installed fire alarm and was incurring expenditure for the maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, over-head water tanks, maintenance of drainage etc., This clearly establishes that the entire activity is in organized manner to earn profit out of investment made by the assessee as a commercial venture' and, accordingly, arrived at a conclusion that the rental receipts of the assessee is to be assessed as 'business income'. In conformity with the finding of the earlier Bench as well as ruling of the Hon'ble Apex Court cited supra, we are of the considered view that the Ld. CIT (A) was justified in arriving at such a conclusion. It is ordered accordingly. 9.2.3 Before parting with the issue, we would like to emphasis that we have duly perused the case laws on which the Revenue had placed its strong reliance, chiefly, in the case of CIT v. Bhoopalam Commercial Complex and Industries Pvt. Ltd. [262 ITR 517 (Kar)]. In that case, the issue, in brief, was that the assessee was a Private Limited Company and one of its directors had taken certain extent of lands situated at Bangalore on a longterm lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and fixtures and lights and air conditioners. The assessee provided services like watch and ward staff, electricity, water and other common amenities. The monthly rent payable was inclusive of all charges. The assessee had also recovered by way of security from the occupants. The Hon'ble High Court of Calcutta [249 ITR 47 (Cal)] held that the Income from the property was assessable in the hands of the assessee as Income from house property. When the issue came up on appeal before the Hon'ble Highest Judiciary of the land, the appeal was dismissed, holding that there was no reason to Interfere with the conclusion arrived at by the High Court. 9.3.1 We would like to point out that the Issue before the Hon'ble High Court was that the occupants were allowed to use a portion of property as 'table space' with furniture and fixtures, lights, air-conditioners etc., and the monthly rent payable was Inclusive of all charges whereas the Issue on hand is entirely on different footing, namely, the assessee had developed about 4.7 million square foot of a technology park in a sprawling area of more than 55 acres by providing various amenities such as roads, street lights, drainage facilities, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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