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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 ..... 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 applicable to "Rent", the income received should be treated as income from House property, but not "Income from Business or Profession" as claimed by the assessee. 2.3 The learned CIT(A) has failed to note that the assessee neither engages in any trade, commerce nor indulges in any manufacturing activity nor involves in any adventure nor concerns in the nature of trade, commerce or manufacture as per definition u/s 2(13) of the Act. The additional facilities or amenities provided to the tenants are mainly for the purpose of charging higher rent as well as attraction of tenants. Mere getting loan from banks and financial organization against mortgage of the property and the future rent receivable will not amount to getting into risk or involves in some adventurous activities. 2.4 The revenue relied on the following judgements which have confirmed the treatment of rent received from similar property in the similar situations as " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides, 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 were carefully considered. The assessee never tried to make out a case as to why rental income should be treated as 'business income'. The list of facilities which were provided to the tenants as mentioned in the assessee's reply dated 09.02.2005 no way helps to change the characteristics of the activity of the assessee. Any modem property which is let out will contain all these facilities. 5.7 The facts of the case law cited by the assessee in the case of CIT v. Sanmar Holdings Ltd., [272 ITR 341] are different from that of the assessee's own. In the case, the court relied on the decision in the case of 'Kamapura Development Co. Ltd., v. CIT 1962 [44 ITR 362] which laid down the law as under: 'Earlier, on a consideration of the memorandum of association relating to the main object of the company, it has been found that its object is to acquire and possess property. What is significant is that in the MOA, there is no indication that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween 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 that income from properties let out to occupants with furniture and fixtures and lights and air-conditioners and providing service like ward arid ward, staff, electricity and water and other common amenities was assessable in the hands of the assessee as income from house property and not business. The facts of this case are exactly similar to the facts of the assessee. 5.8 Similar view in the assessee's own case is upheld by the CIT(A)-V in ITA No. 51/2003-04 for the A.Y. 1999-00. 5.9 The assessee submitted that it has obtained the approval from the Ministry of Commerce & Industry for construction of an Industrial Park and stated that it is eligible to claim deduction u/s 80-IA. It is necessary at this juncture to reiterate that the assessee was allotted plots inside Thiru-Vi- Ka Indl Estate, Guindy by the State Government for setting up industrial Unit as early as in 1990s. Later on, the assessee could not continues its business for various reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Ministry' of Commerce empowered under the Act itself recognizes the activity as business activity. 9.29 In view of the above decisions and considering the amount of investment made by the appellant, loans borrowed from the banks and financial institutions the nature of the building, the kind of facilities, amenities and services provided by the appellant, which are evident from the lease agreements, approval letter from Ministry of Commerce and other records filed by the appellant, it is clear the appellant is engaged in the business of development and operation of industrial park, which is a commercial asset, let out with a view to earn profits." The ld. D.R. of the Revenue supported the order of the Assessing Officer and argued that as the payer of the amount on deducted TDS u/s 194(1) of the Act and therefore, the income in the hands of the assessee was income from rent and assessable under the head 'income from house property' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. In the instant case, the assessee company earned rent income from letting out premises RR Tower - I comprising of 35,975 sq.ft. and RR Tower - II comprising of 70,000 sq.ft. to Alcatel Development Centre Pvt. Ltd. Such rent income earned was Rs. 2,88,17,608/- in the assessment year 2002-03, Rs. 2,55,22,103/- in the assessment year 2003-04. In the assessment year 2004-05, the rent income was earned from namely Alcatel Development Centre, Chennai P. Ltd. Rs. 2,29,84,099/-, Aithent Technologies P. Ltd. Rs. 7,96,935/-, Lapiz Digital Services Rs. 48,66,518/- totaling to Rs. 2,79,30,311/-. In the assessment year 2005-06, the assessee earned rent income of Rs. 4,53,43,205/-. In the assessment year 2006-07, the assessee earned rent income of Rs. 9,61,11,439/-. In the assessment year 2007-08, the assessee earned rent income of Rs. 11,76,03,103/-. The assessee treated the above rent income as its business income and also claimed deduction under section 80IA(4)(iii) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 facilities or built-up space with common facilities in any area allotted or earmarked for software development as an eligible Industrial Park and also regards such activity as business activity, held the income in question as business income of the assessee. 12. Before us, the Revenue disputed the findings of the ld. CIT(A) to the extent the ld. CIT(A) held that the rental income derived by the assessee is to be assessed under the head "profit and gains of business". Thus, the only issue, which requires adjudication by us is that the rental income derived by the assessee from letting out is to be assessed under the head "income from House Property" or under the head "Profit and Gains of business or profession". 13. The ld. DR relied upon the order of the Assessing Officer and submitted that the facilities provided by the assessee were provided by any owner of the house property and were incidental to the letting out of the property and therefore, the rental income should be held as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: No. 15(8)/2001-IP & ID Government of India Ministry of Commerce and Industry Department of Industry Policy & Promotion Secretariat for Industrial Assistance Investment Promotion and Infrastructure Development Cell Udyog Bhavan, New Delhi - 110 011 Dated: August 01, 2001 To, M/s R.R. Industries limited, 94-95, Block- VI, Thiru-VI-KA-Industrial Estate, Guindy, Chennai - 600 032. Sub: Application for setting up of Industrial Park (SIA Regn No. 08/SIA/IP/2001 dated 25.06.2001) under the scheme notified by this Ministry (S.O. No. 1201 (E) dated 01.12.99). Ref: Your application dated 21.06.2001 acknowledged vide SIA Ref. No. No.08/SIA/IP/2001 dated 25.06.2001 and subsequent clarifications vide letters dated 02.07.2001, 12.07.2001 and 16.07.2001. Sir, I am directed to refer to your application on the above mentioned subject and to convey the approval of the Government of India to your proposal for setting up of an Industrial park, in terms of the scheme notified by this Ministry in exercise of the powers under section 80 IA, Sub section 4(iii) of the Income-tax Act, 196/, subject to the following terms and conditions: 1. (i) Name of the Industrial Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. 6. You are requested to confirm acceptance of the above terms & conditions to the undersigned within one months of the issuance of this letter. Yours faithfully, Signed/- (Ashish Sharma) Desk officer Tel: No: 011- 3018356 Fax No: 011- 301 1770 Copy to: 1. Joint Secretary (TPL-II). C.B.D.T., Ministry of Finance, Department of Revenue, North Block, New Delhi (2 copies), along with a copy of the original application dated 21.06.2001 and subsequent letters as detailed on page I. 2. Chief Secretary. Govt. of Tamil Nadu. Fort St. George, Chennai - 600 009. 3. Guard File. Signed/- (Ashish Sharma) Desk officer 16. Thus, a perusal of the above shows that the assessee was only granted approval for setting up of an industrial park. From the above letter it cannot be held that the establishment or infrastructure created by the assessee was actually held as an industrial park within the meaning of section 80IA(4)(iii) of the Act by the Government of India, Ministry of Commerce and Industry, Department of Industry Policy & Promotion, Secretariat for Industrial Assistance Investment Promotion and Infrastructure Development Cell. The above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also maintained a regular staff consisting of a secretary, a peon, a watchman and a sweeper, and apart from that it paid for the entire staff of the Indian Motion Picture Distributors' Association an amount of Rs. 800 per month for services rendered to the licensees. These vaults could only be used for the specific purpose of storing of films and other activities connected with the examination, repairs, cleaning, waxing and rewinding of the films.' 9.2.1 Further, an identical issue to that of the present one had cropped up before the earlier Hon'ble Bangalore Bench in the case of Global Tech Park (P) Ltd. v. ACIT - reported in (2008) 119 IT) (Bang) 421 - wherein it was observed that - 'The assessee having been incorporated with the sole intention of developing Technology Park for which it obtained leasehold land from KIDC and also obtained loan from bank for constructing superstructure thereon, it could not be considered as having made investment in a property for earning rental income only. The lease of the property was shown as part of the business activity, thus, the income received there from cannot be said as income received as a land owner but as a trader............ The ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial complex on the said land and allotted the same to various parties and earned income there-from. For the year 1985-86 and 86-87, the assessee filed its returns of income showing losses for which the AO completed the assessments making minor adjustments in computing the losses. The CIT initiated suo motto proceedings u/s 263 and after such proceedings directed the AO to make fresh assessments computing the income from rentals received from the commercial complex under the head "Income 'from house property." On an appeal by the assessee, the Tribunal held that the income derived by the assessee could have been assessed only as income from business and not under the head "Income from house property". According to the Tribunal, since the land over which the property had been built is a leasehold land, the assessee cannot be treated as the owner of the land which is a condition precedent for treating the income as income from house property under section 22 of the Act. The Hon'ble Court, taking cue from the ruling of the Hon'ble Supreme court in the case of CIT v. Podar Cement (P.) Ltd. [1997J 226 ITR 625 = (2002-TIOL-445-SC-IT), had held that the income derived by the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment P. Ltd., the immovable was a tiny property and the so called amenities provided to the occupants only as against the amenities provided In a STP to feed a special purpose. Letting out of a building In a STP is incidental whereas the fact in the case of Sambhu Investment was rather predominant and, thus, Sambhu Investment case cannot, at any stretch of Imagination, be equated with that of the present assessee. 9.4 Taking into account the facts and circumstances of the issue, we are, therefore, of the firm view that the case laws on which the Revenue placed reliance cannot come to its rescue." 19. Thus, from the reading of the aforesaid decisions, we find that the decision of the Hon'ble Supreme Court in the case of Sambhu Investment (P.) Ltd. (supra) was found distinguishable from the facts before the Tribunal in the above cases in as much as in the case of Sambhu Investment (P.) Ltd. (supra) letting out was found to be predominant and in the case before the Tribunal letting out of a building in an IT Park was only incidental. It was found that the assessee developed 4.7 million sq.ft. of IT Park in a sprawling area of more than 55 acres by providing various amenities s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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