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TMI Blog2017 (1) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... from leasing out the property, hence, assessee is eligible to treat the rental income as business income and eligible to claim the related expenditure as business expenditure. Accordingly, the grounds raised by the assessee is allowed - ITA No. 1199/H/15, 1200/H/15, 1211/H/15, 1212/H/15 - - - Dated:- 30-12-2016 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Shri Laxminiwas Sharma For The Revenue : Smt. U. Minichandran ORDER PER S. RIFAUR RAHMAN, A.M.: These appeals are cross appeals filed by the assessee as well as revenue directed against the orders of CIT(A)- VI, Hyderabad, dated 15/07/2015 for AYs 2011-12 and 2012-13. As identical issues are involved in these appeals, they were clubbed and heard together, therefore, a common order is passed for the sake of convenience. 2. To dispose of these appeals, we refer to the facts from AY 2011-12 being ITA No. 1199/H/15. 3. Briefly the facts of the case are that the assessee firm which derives income from owning a software park at Kondapur, Hyderabad filed its return of income on 22/07/2011, declaring loss of ₹ 2,98,73,840/-. The AO made an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r purposes of deduction u/s 80-IA of the Act. The approval to the park had been accorded to the developer, namely, Meenakshi Infrastructure Pvt. Ltd. from whom the assessee had acquired it and the transfer had also been approved by the competent authority. He observed that the argument of the assessee before the Hon'ble ITAT was that, since the deduction u/s 80-IA is available in respect of the profit derived from an eligible business and, since industrial park is treated as eligible business, the profit/loss from the same is required to be computed under the head 'Profit and gains of business or profession'. That logic had found favour with the Hon'ble ITAT. It is, however, noticed that the initial approval given to M/s. Meenakshi Infrastructure Private Limited stands rescinded with effect from the date it was given, i.e. 31.08.2006. The approval was rescinded because the undertaking has failed to adhere to the terms and conditions as laid down in the Industrial Park Scheme and by the Central Government vide the Ministry of Finance, Department of Revenue's Notification number S.O.No.3466, dated the 21st August, 2006 published in the Gazette 01. India, Part II, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the head 'profit and gains of business or profession' is not shown to apply in this case. In view of the above observations, the CIT(A) held that the income is chargeable as 'Income from House Property and confirmed the AO s action. 6.3 As regards the receipt by way of operation and maintenance charges, CIT(A) observed that the same may not be part of the rental income per se, more so because the assessee may be rendering specific services to the lessees. It would therefore, be appropriate to treat such receipt as receipt of business and assessee the income/loss arising therefrom after making allowance for the expenditure incurred wholly and exclusively for purposes of provision of such services. It needs to be clarified that deduction for depreciation cannot be allowed because that relates to ownership of the asset and the income attributable to the ownership, i.e. rent is to be assessed under the head 'Income from House Property' after allowing flat deduction of 30% of the annual value. It also needs to be clarified that the flat, deduction u/s 24 takes care of repairs and maintenance of the premises and, hence, any expenditure of that nature shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from operation and maintenance is assessable under the head Income from business when the A.O's treatment of the income earned from letting out, which is the main income of the assessee, as income from house property has been upheld by the CIT(A). 2. Under the facts and circumstances of the case, whether the CIT(A) has not erred in treating the incidental income as 'Income from business , while holding the main income from letting out as income from House property after rejecting the assessee's claim that it is assessable as Income from business . 3. Any other ground that may be urged at the time of hearing. 8. Ld. AR submitted that upto AY 2010-11, the income of the assessee was assessed as business income. The assessee is in the same business of letting out the property and there is no change in the method of operation of the assessee. He submitted that in the AY 2008-09, 2009-10 and 2010-11, the department raised similar issue and also denied the benefit u/s 80IA. Assessee carried the matter to ITAT, the ITAT has adjudicated the issue in favour of the assessee. He further submitted that in the given AYs. 2011-12 and 2012-13, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system of taxation specified in the income tax Act. AO treated the other income as income from others sources. Ld. CIT(A) confirmed the scheduler system of taxation by observing that the assessee was getting benefit u/s 80IA in the earlier years and subsequent to rescindment of approval to claim deduction u/s 80IA, he considered that the assessee looses to be eligible undertaking. The income was treated as profit from business because the undertaking was approved by competent authority for the purpose of deduction u/s 80IA. Subsequent to rescindment of approval, the undertaking does not hold to be carrying on eligible business. 10.1 The mute question before us is whether the activities carried on by the assessee is eligible business for the purpose of treating the profit as business profit or not. The assessee was carrying the same activities of leasing the building for software technology and earning maintenance charges before rescindment of approval for deduction u/s 80IA and later years. There is no change in the activities during the year of deduction u/s 80IA and later years. Merely, because the deduction u/s 80IA withdrawn, whether the activities can be regarded as differe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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