TMI Blog2012 (11) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... CHITRA VENKATARAMAN AND MR. K. RAVICHANDRABAABU JJ. For Appellant : Mr. T. Ravikumar For Respondent : Mr. C.V. Rajan JUDGMENT CHITRA VENKATARAMAN,J. ) The above Tax Case (Appeals) are at the instance of the Revenue against the order of the Tribunal relating to assessment years 2001-02, 1995-96 and 1996-97 respectively by raising the following substantial questions of law:- "1.Whether in the facts and in the circumstances of the case the Tribunal was right in holding that the income derived from letting out of property to the tenants for the purpose of running a software technology park as 'income from business' in the hands of the owner of the property? 2.Whether in the facts and circumstances of the case, the Appellate Tribunal was right in holding that the income from letting out of building comprising separate modules with uplinking facility with VSNL as income from business assessable under Section 28?" 2. T.C.(A).No. 2336 of 2006 was admitted on the above stated two questions of law, whereas, T.C.(A).Nos. 2623 of 2006 and 2169 of 2008 were admitted only on the second substantial question of law. The Tribunal followed the order made for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of 3500 sq.ft. which contained high tech infrastructural facilities. In respect of income received on such licence, the assessee claimed that the said income was assessable as business income. The assessee's claim was however rejected by the Assessing Officer holding that the said income was assessable as income from the property. Aggrieved by the assessment, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who held that the income from the leasing of property, at best, be treated as only income from other sources and not as income from house property nor could be treated as income from business. Referring to the decisions reported in 202 ITR 370 ORIENTAL COTTON CORPORATION AND MILLS LTD. v. CIT, 205 ITR 314 - GUJARAT GINNING AND MANUFACTURING COMPANY LIMITED v. CIT and 237 ITR 454 UNIVERSAL PLAST LIMITED v. CIT., Commissioner of Income Tax (Appeals) held that the objects of the company never spoke about the assessee using the module by itself, but it only allowed others to use the facilities on payment. The income was from investment made on modules. Hence, he reasoned out that the income from the assessment could be assessed as income from other sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention that the income received on leasing of the property with all the facilities could not be taken otherwise as income from other sources or as income from business. 6. Per contra, learned counsel for the assessee supporting the order of the Tribunal pointed out that when the Commissioner of Income Tax (Appeals) had held that the income had to be assessed only as income from other sources, admittedly, the Revenue had not challenged the reasoning of the Commissioner of Income Tax (Appeals) and it was the assessee, who preferred the appeal to the Tribunal. Thus, as far as the Revenue is concerned, the reasoning of the Tribunal is binding and in the event of this Court not upholding the order of the Tribunal, the income would be assessable as income from other sources. 7. Leaving that aspect aside, admittedly, the objects of the company clearly pointed out that the purpose of formation of the company was for establishing and providing facilities so as to lease it out to others for running a computer software company. Going by the objects, the irresistible conclusion is that the income earned is only business income and no fault could be found on the decision of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly be covered by another head will not make the income taxable under the latter head. Thus, holding the Supreme Court held that the paramount consideration which would weigh is whether the acquisition of the property was by way of investment and whether the property was let out because of the assessee having a title in the same or whether the acquisition and letting out of the property constituted the business and trading activity of the assessee. 11. In considering whether the income arising on the leasing of the property was business of the assessee, one has to get into the nature of the business of the assessee to find out the receipts are assessable under the head of income from house property or as business income and if receipts does not fall in any of those classified heads, would fall consideration under the residuary head of income as income from other sources. 12. In the decision reported in 266 ITR 685 CIT v. CHENNAI PROPERTIES INVESTMENTS LTD., this Court elaborately considered the decisions on the subject and on facts, came to the conclusion that as the owner of the building, the rental income received by the assessee on exploiting the property by letting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties is part of the business of the assessee. Clause 1 of part A of the memorandum of Association is specific and relevant clause. 15. To achieve the object of Clause 1 of Part A, Clause 1 of Part B provides for objects which are incidental or ancillary to the attainment of the main objects. Clause 1 of Part B enables the company to take on lease, acquire, hire, construct, erect, build, repair, demolish and reconstruct, develop, improve and maintain buildings, structures, apartments and to do other similar constructions and for these purposes purchase, take on lease or otherwise acquire and hold any lands and prepare layout thereon and prepare lands for building purposes and preparing building sites by consolidating or connecting or sub-dividing properties or buildings of any tenure or descriptions wherever situated or rights or interests therein or connected therewith and advancing money to and entering into contracts and arrangements of all kind with builders, tenants, occupiers and others for the purpose of achieving the objects mentioned herein. 16. Thus, read in the context of Clause 1 of Part B and Clause 1 of Part A, we hold that when the company had taken lands on 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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