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TMI Blog2018 (8) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... During the assessment proceedings, the Assessing Officer noticed that the assessee has declared income received by lease rent as 'Business income' and called upon the assessee to explain as to why it should not be assessed under the head 'Income from house property'. In response, the assessee furnishing the details of the commercial properties given on lease submitted that the I.T.Park was developed by M/s. Salarpuria Properties Pvt Ltd (SPPL) on the land belonging to the assessee, wherein, the assessee had 23% undivided share of the total developed area. It was submitted, the assessee had developed I.T.Park with the intention of using the premises as I.T.Park by giving the licenses not only for premises but also for supporting infrastructure facilities. It was submitted, in addition to the premises given on rent the assessee has provided power, DG backup, air conditioning, fully completed toilets, car parking and water treatment plant. Further, it has appointed M/s. Salarpuria Property Management Pvt Ltd. to provide maintenance services. It was submitted, the assessee developed the property to be used as I.T.Park in Bangalore keeping the need of I.T Sector in Bangalore and office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructed I.T.Park but fact remains that the assessee along with SPPL has developed the I.T.Park, wherein, the assessee had 23% undivided share over the total developed area. The learned AR submitted that the assessee has also demonstrated with documentary evidence that it is operating and maintaining the I.T.Park. Further, the I.T.Park has been recognised by the CBDT. In this context, he drew our attention to CBDT Circular issued recognizing the building as a I.T.Park. The learned AR submitted the assessee is in the business of developing and leasing out commercial properties, I.T.Parks etc. Therefore, the income derived from such activities has to be treated as 'Business income'. The learned AR submitted, in the preceding assessment years, the income received by the assessee from lease rentals have been offered under the head 'Business Income' and the department has also accepted it. Therefore, applying the rule of consistency, the income derived by the assessee from lease rentals has to be assessed as 'Business Income'. In support of such contention the learned AR relied upon the decision of the Tribunal in the case of DCIT vs. M/s. E-City Project Construction Pvt. Ltd. in ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer has even accepted the fact that the assessee is in the business of leasing of technology parks and estates. Thus, from the aforesaid fact it is clear that in the preceding assessment years the Assessing Officer has accepted the income derived from the leasing out of properties as 'Business Income' of the assessee. Though principle of res judicata is not strictly applicable to income tax proceedings, each assessment year being an independent unit, however, rule of consistency cannot also be ignored. Once both the parties have accepted certain position relating to a particular issue over a period of time, the same cannot be disturbed in a subsequent year unless there are material differences in fact. In the present case, the department has failed to bring to our notice any material difference in facts so as to deviate from the view taken by the department in the preceding assessment years. Moreover, development of infrastructure facilities including I.T.Parks is recognized as a business activity and even deduction u/s. 80 IA(4) of the Act is allowed. In fact, CBDT vide notification No.134/2006 dated 07.07.2006 has recognised the I.T.Park jointly developed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged the disallowance before the CIT(A). 8. The CIT(A) after considering the submissions of the assessee allowed assessee's claim on the reasoning that the leasing out of I.T Park and other properties were a business activity of the assessee and the Directors had undertaken all the activities themselves and the remuneration paid to them was commensurate with their inputs. He further observed that the disallowance at the hands of the company would amount to double taxation as Directors have offered the amount received by them as income in the return of income filed by them. As regards the payment made to M/s. Shirolkar & Associates, learned CIT(A) allowed the said expenditure as it was towards services rendered by them 9. The learned DR relied on the observations of the Assessing Officer. 10. The learned AR relying upon the findings of the CIT(A) submitted that the assessee through documentary evidence has established that payment to M/s Shirolkar & Associates was for services actually rendered by them. Therefore, the CIT(A) was justified in deleting the addition. As regards remuneration paid to Directors, the learned AR submitted, once the income of the assessee is assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained. As regards the payment made to the Directors, the Assessing Officer has disallowed them primarily for two reasons - firstly, the assessee has not carried out any business activities and secondly, the payment made is unreasonable. The first reasoning of the Assessing Officer has lost its force considering the fact that the income derived by the assessee has been held to be business income. Even otherwise also, as rightly urged before us by the learned AR, besides leasing out of properties, the assessee has other business activities also. That being the case, the disallowance of expenditure on the ground of no business activity is totally wrong. As regards the applicability of section 40A(2)(b) of the Act is concerned, the Assessing Officer has not established on record what is the fair market value of the services rendered by the Directors before concluding that the payment made by the assessee is unreasonable. As recorded by the learned CIT(A), the assessee has factually established before him that the Directors were handling all activities as there were no management level employees in the assessee company. Thus, the claim of the assessee that the remuneration was paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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