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TMI Blog2016 (5) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Ld. Commissioner of Income Tax (Appeals)-II, Hyderabad dated 12-11-2014 on the issue whether assessee s lease receipts are to be assessed under the head business or house property ? 2. Assessee had let out its premises in Biotechnology Park and offered its rental income under the head Income from Business . Assessing Officer (AO) assessed the rental income from premises under the head Income from House Property and the income from maintenance under the head Income from Other Sources . Assessee had filed its return of loss of ₹ 2,98,63,725/- on 30-09-2011. The loss was revised to ₹ 2,92,49,023/- in revised return filed on 02-10-2012. The total income assessed in scrutiny assessment was ₹ 2,40,87,912/-. 3. The facts of the case are, assessee has its premises located in Biotechnology Park developed by Government of Andhra Pradesh. It has leased its premises to the following lessees: Sl.No Name of the Tenant Property leased out Lab No./Suite No. Lease rent collected per annum Maintenance collected per annum 1. Finoso Phar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parks and wet-labs Fire and safety maintenance As the above facilities are being provided, the assessee is claiming the income as business income , but the facilities like filtered water, waste management, sewerage maintenance, fire and safety, parks maintenance, etc., are common to all multi-storied buildings, complexes, malls and there is nothing special about these facilities. b) Regarding the provision of lab space, compressed airline, vacuum line, nitrogen gas pipeline to the tenants, the assessee has only laid pipelines which are fixed to the structure for the use of tenants. But the compressed air, nitrogen gas are provided by others not by assessee. c) Assessee merely constructed a permanent concrete structure suitably modified and called it Technology Park and gave it on rent. Therefore, the income thereon should be treated as income from house property . d) Assessee's alternative claim that activity should be considered as adventure in the nature of trade as defined in section 2(13) cannot be considered as the assessee has not constructed and sold any other complex or building. It has simply constructed a structure and then let it out to the tenant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. e) The entire complex was developed and was approved as the industrial park therefore income cannot be considered as rental income. f) That the word business defined u/s.2(13) of Income Tax Act 1961 includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture is an inclusive definition and not exhaustive. The word business is a wide import and must be construed in a broad sense. g) That the comments of the Assessing Officer that the premises were leased to non biotechnology, non-healthcare companies are not correct. A small place was provided to Tata Communication Services to establish its server for the benefit of all companies in the premises. Similarly small place was provided to HDFC Bank to set up ATM. Similarly, lab space was leased to ITC Co. for Research and Development activity on Palm oil of its Bio Division. 5. Ld. CIT(A) decided the issue against Revenue stating as under: 6. The information on record is carefully considered. The appellant has its premises in Biotechnology Park, Shamirpet Mandai, Ranga Reddy District, Andhra Pradesh, approved by Government of Andhra Pradesh. It is also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in industrial park is to be assessed as income from business. Though this decision was rendered in connection with the deduction u/s.80IA(4), still the principle remains the same' that income from units located in Industrial Park approved by the Central Government is to be treated as business income. Further, in the case of Global Tech Park Pvt. Ltd. vs. ACIT (2009) 28 SOT 45 (Bangalore), the Hon'ble Tribunal in exactly identical circumstances of that of the appellant held that the entire activity was carried out in an organized manner to earn profit from investment made by the assessee as a commercial venture. Therefore, the income earned was held as business income. Further, the Hon'ble Karnataka High Court in the case of CIT vs. Venlankani Information Systems Private Limited (218 Taxman 88) held that if the intention is to exploit commercial property by putting up construction and letting it out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building fall under the head 'income from house property'. But if the assessee is in the business of tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to the agreements entered to submit that there is no provision for separate services. Relying on the principles laid down by the Hon'ble Supreme Court in the case of Shambhu Investments Ltd263 ITR 143(SC) it was submitted that there are no complex commercial activities so as to consider the lease rentals as business income , but only has a primary object of constructing buildings to let out, which comes under the head income from house property . DR also refers to Section 22 of the Act to rely on AO s order. 8. Ld. Counsel submitted that it is not a simple activity as contended by Ld. DR. It was submitted that assessee had entered into a joint venture with Government of Andhra Pradesh (then) for development of a Biotechnology Park in about 150 acres of land and has taken the risks and responsibilities as such. Ld. Counsel also referred to the lab equipment for necessary research and supply of compressed gas and nitrogen, necessary filters and providing environment which is a specialized activity. Ld. Counsel relied on the decision of Hon'ble High Court of Karnataka in the case of CIT Vs. Venlankani Information Systems Private Limited [265 CTR 250] and also on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is necessary for carrying on the business, then the income derived therefrom cannot be separated based on the separate agreement entered into between the parties. What has to be seen is, what was the primary object of the assessee while exploiting the property. If it is found applying such principle that the intention is for letting out the property or any portion thereof, the same may be considered as rental income or income from properties. In case, if it is found that the main intention is to exploit immoveable property by way of complex commercial activities, in that event it must be held as business income. 26. Sub-s (1) of S. 56 makes it clear that income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources , if it is not chargeable to income-tax under any of the heads specified in s. 14, items A to E. Sub-s (2) of s. 56 specifically states that the incomes shall be chargeable to income-tax under the head 'Income from other sources'. Clause (ii) of s. 56(2) provides that income from machinery, plant or furniture belonging to the assessee and let on hire, if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the country. In that view of the matter, the finding recorded by the appellate authority as well as the Tribunal is in accordance with law and does not suffer from any legal infirmity which calls for interference. Accordingly, the substantial questions 1 and 2 are answered in favour of the assessee and against the Revenue . 11. The disputes on the issue were set at rest by the recent decision of the Hon'ble Supreme Court in the case of M/s. Chennai Properties Investments Ltd., 373/673 (SC) (supra). On considering the facts and law on the issue, the apex court has held as under: We have heard the learned counsel for the parties on the aforesaid issue. Before we narrate the legal principle that needs to applied to give the answer to the aforesaid question, we would like to recapitulate some seminal features of the present case. The Memorandum of Association of the appellant-company which is placed on record mentions main objects as well as incidental or ancillary objects in clause III. (A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as Chennai House and Firhavin Estate both in Chennai and le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and succinctly by this Court in Karanpura Development Co. Ltd., V. Commissioner of Income Tax, West Bengal [44 ITR 362 (SC)]. That was also a case where the company, which was the assessee, was formed with the object, inter alia, of acquiring and disposing of the underground coal mining rights in certain coal fields and it had restricted its activities to acquiring coal mining leases over large areas, developing them as coal fields and then sub-leasing them to collieries and other companies. Thus, in the said case, the leasing out of the coal fields to the collieries and other companies was the business of the assessee. The income which was received from letting out of those mining leases was shown as business income. Department took the position that it is to be treated as income from the house property. It would be thus, clear that in similar circumstances, identical issue arose before the Court. This Court first discussed the scheme of the Income Tax Act and particularly six heads under which income can be categorized/classified. It was pointed out that before income, profits or gains can be brought to computation, they have to be assigned to one or the other head. These hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature . We are conscious of the aforesaid dicta laid down by the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treated as income from the house property . We, accordingly, allow this appeal and set aside the judgment of the High Court and restore that of the Income Tax Appellate Tribunal. No orders as to costs . 12. Since, assessee-company has come into existence as joint venture with Government of Andhra Pradesh for development of a Biotechnology Park and its objects and activities are commercial in n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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