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TMI Blog2017 (5) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s. 80-IAB.The head of income under which the said income is assessable, which is on the basis of the source – from amongst the specified sources under the Act, most appropriate for the said income, so that it is not assessable as business income but as income from house property, would not be a limiting or debilitating factor. We decide accordingly, and the assessee succeeds qua it’s alternate ground, i.e., in principle.’ Eligibility for deduction u/s. 80-IA(4)(iii) - Held that:- Besides drawing support from the terms of the relevant provision (s.80- IA(4)(iii)), the Revenue does on the O.M. dated 10/2/2016 by DIPP, GOI, stating the reasons for the non-notification of the assessee’s industrial park by CBDT, i.e., the relevant wing (Department) in the Central Government, which is to notify the same. There is, we are afraid to say, no reference to the satisfaction of the conditions of section 80-IA(4)(iii) in the order by the tribunal for AYs. 2010-11 & 2011-12 (also see r.18C(3)). This, i.e., the non-notification by the CBDT, has in fact been challenged by the assessee before the Hon’ble jurisdictional High Court (refer Gds. 2.2 to 2.4 of the Revenue’s appeal, and as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as income from house property, relying on the decision in the case of Shambhu Investments (P.) Ltd. v. CIT [2003] 263 ITR 143 (SC). Further, the assessee is not eligible for deduction u/s. 80-IA(4)(iii) as the same could be only after the notification of the industrial park by Central Board of Direct Taxes (CBDT), and which it had not. In appeal, the ld. CIT(A) confirmed the impugned assessment for, principally, the same reasons. In his view, it was a case of composite letting, satisfying the tests laid down for the purpose by the Apex Court in Sultan Brothers (P.) Ltd. v. CIT [1964] 51 ITR 343 (SC), so that the income was liable to be assessed, as against income from business, only as income from house property. The assessee s contention that it s object was to develop, operate and maintain an industrial park could not be accepted as it was an old company engaged as an automobile dealer, selling spares and servicing vehicles. For AY 2012-13, the first appellate authority allowed the assessee it s claim for deduction u/s. 80 IA(4)(iii) following the decision by the Tribunal in the assessee s own case for AYs. 2010-11 and 2011-12, reproducing there-from. 3. In further appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd inserted only in April, 2013, which shall, therefore, have effect only for the period on or after the said amendment. Acts done without the authority of its charter are ultra vires the company, and the same cannot be ratified even by the whole body of the shareholders. All acts and matters consequent and pursuant thereto, as for example, the application to the Department of Industrial Policy Promotion (DIPP) for approval of the industrial park or to the Central Board of Direct Taxes (CBDT) for its notification (04.03.2006), are to be disregarded, with no sanctity in the eyes of law. The ld. Authorized Representative (AR), the assessee s counsel, would in rejoinder draw our attention to object clauses 7, 41 and 46 of the unamended MOA, which read as under, contending, on that basis, that the assessee s activity of leasing was in any case covered by these clauses: 7. a. To carryon business as Real Estate Agents and dealers, business in buying and selling lands and buildings, auctioneer; controller and builders. b. To carryon business in financing in all types including hire purchase of Motor Vehicles, Automobiles etc. 41. To develop and turn to account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, so that, even as found by the first appellate authority (in the assessee s appeal for AY 2009-10), it is a case of inseparable letting. Income shall, on that basis, stand to be assessed as business income. The ld. first appellate authority, we may clarify, misdirects himself (for AY 2009- 10) in law when he holds that the rental income in such a case would be assessable u/s. 22. This, however, is of little import as the income, in any case, i.e., independent of the head of income under which it stands to be classified or is assessable, would be eligible for deduction u/s. 80-IA(4)(iii) (refer para 4.2). 4.2 We, next, discuss if the leasing activity is, as claimed, indeed outside the ambit of the assessee s powers. Beginning clause wise (refer para 3), with reference to cl. 7 (a), it is so as surely a dealer in house property can only be regarded as one who deals in it as stock-in-trade. User of house property for the purpose of one s own business (or profession), which certainly any one is entitled to, i.e., even where not specifically mentioned in the MOA of a company, being only an object ancillary or incidental to the main objects, is a different matter altogether. The w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gains derived from such business for ten consecutive assessment years. (4) This section applies to- (i) to (ii) . ( iii ) any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006 : Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under subsection (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking : Provided further that in the case of any undertaking which develops, develops and operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veloper of an Infopark, approved as a SEZ. That the said activity, i.e., developing real estate and leasing it, which is, broadly speaking, and in common parlance, only a business, is not regarded as so for the purpose of assessment of income there-from, being derived from a house property, a defined source of income for which a specific head of income is provided under the Act, is another matter. This is so even where it is carried in an organized manner, i.e., as a business, as in the present case. It shall, however, not cease, for that reason, to be profits and gains derived from the activity of developing a SEZ. The word business - even otherwise a word of wide and indefinite import, as occurring in section 80-IAB(1), is to be, accordingly, construed in a broad rather than a strict sense, as conveying the gamut of activities, including activities subservient and incidental to developing a SEZ and turning it into account. Now, surely, leasing of house property, inasmuch as the lessees (who are to be, or presumably so, in info-tech business) would be able to undertake their businesses only on the developed property being made available to them, could not therefore but be regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrols ₹ 1,57,216/- Merril Technologies Ltd ₹ 1,80,72,120/- ABN Amro Central Enterprises ₹ 1,27,63,079/- Mindtree Solutions ₹ 89,65,069/- With regard to the second objection, it was informed that, in terms of rule 18C of the Income Tax Rules, 1962, CBDT only is authorized to notify the scheme u/s. 80-IA(4)(iii), application to which, i.e., for notification, made u/r. 18C (4), vide letter dated 18.04.2009 (received on 06.05.2009), is outstanding till date, and despite reminders vide letters dated 15.12.2010 and 25.05.2013. The reading of the rule 18C along with the s. 80-IA(4)(iii), which are in harmony, makes it abundantly clear that the approval by the DIPP, which is a part of the Central Government in the Ministry of Commerce, is by the Central Government only. So however, the same, though a part of the envisaged procedure (r. 18C(2)), does not entitle deduction, which is subject to notification by the CBDT, Ministry of Finance, Government of India (see r. 18C(4)). The approval by the DIPP is thus an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing along with other assets, which finding has not been disputed before us by the Revenue. The (composite) lease rental income would, in view of section 56(2)(iii) of the Act, stand to be assessed as business income u/s. 28; the assessee undertaking the same in an organized, systematic manner, on commercial basis, in a regular manner. This, as explained in Sultan Bros. (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC), is for the reason that it then becomes a new source of income. In the present case, the Revenue has, however, with reference to the extant object clauses of it s charter (MOA), pleaded the said activity as outside the purview of the assesseecompany. The examination of the Revenue s objection with reference to the assessee s object clauses, as obtaining, shows the same to be valid. The income, however, having been earned, the question boils down to the correct head of income under which the same is assessable, i.e., could it be regarded as business income or as income from other sources, with we finding it to be the latter in view of it being outside the assessee-company s legal competence, i.e., to transact business, so that it could not be assessed u/s. 28(i). This, however ..... X X X X Extracts X X X X X X X X Extracts X X X X
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