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K. Raheja IT Park (Hyderabad) P. Ltd., M/s. Intime Properties Ltd. Versus DCIT-Circle-2 (1) Hyderabad

2016 (7) TMI 571 - ITAT HYDERABAD

Deduction under section 80IA(4)(iii) - denial of claim on the ground that the assessee has offered the income from leasing/licensing of the “Industrial Project” in Hyderabad as ‘Income from House Property’ and not as ‘Income or Profits & Gains from Business or Profession’ - Held that:- The assessee has been allowed deduction in the first year and it is the bounden duty of the A.O. to examine the eligibility of the assessee to claim the deduction under section 80IA(4) of the Act at the time of al .....

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ake suitable action. This direction, in our opinion, is not sustainable. The CIT(A) can only deal with the appeal before him and cannot give a direction with regard to another assessment year not before him. Therefore, such direction is not sustainable and is hereby quashed. - Revision u/s 263 - A.O. has accepted the lease rentals from I.T. Park as “Income from house property” though denied the claim of the assessee under section 80IA of the Act on the ground that deduction cannot be given u .....

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view adopted by the A.O. For a revision order to be sustained, the assessment order should be both erroneous as well as prejudicial to the interests of the Revenue. In the case before us, as we have already held that there is no prejudice caused to the Revenue and further since we have also held in assessee’s appeal against the assessment order denying the claim of deduction under section 80IA(4), that the assessee is eligible for deduction under section 80IA even if the income is returned unde .....

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2. In this appeal, the assessee is aggrieved by the order of the CIT(A) confirming the action of the A.O. in denying the assessee s claim of deduction under section 80IA(4)(iii) of the I.T. Act, 1961 on the ground that the assessee has offered the income from leasing/licensing of the Industrial Project in Hyderabad as Income from House Property and not as Income or Profits & Gains from Business or Profession . 3. Brief facts of the case are that the assessee- company is in the business of de .....

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proval from the Government of India, Ministry of Finance vide notification dated 29th August, 2006 whereby the Government allocated 8 buildings for setting-up of industrial park with the built-up area of 1,32,851.81 sq. metres and lease rent received from the tenants of these buildings has been claimed as deduction under section 80IA(4) of the Act. He observed that the assessee has also derived income from other buildings which was offered as income from house property but the assessee did not c .....

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he assessment order and further directed the A.O. to re-examine the assessee s claim of deduction under section 80IA of the Act in the A.Y. 2009-2010 being the first assessment year and to take suitable action with regard to the same. Aggrieved by the findings of the CIT(A), the assessee is in second appeal before us. 5. The Ld. Counsel for the assessee submitted that the provisions of section 80IA(4) are applicable to the assessee since the project of the assessee was granted approval by the Go .....

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on 80IA(4), the assessee has placed reliance upon the following decisions : 1. Ryall v. Hoare, and v. Honeywill (1923) 8 TC 521 2. Kilburn Properties Ltd., vs. CIT 17 ITR 134 (Cal.) (HC) 3. Ezra Proprietary Estates Ltd. vs. CIT 18 ITR 762 (Cal.) (HC) 4. Indra Singh & Sons Ltd., vs. CIT 33 ITR 341 (Cal.) (HC) 5. CIT vs. Chugandas & Co., 55 ITR 17 (SC) 6. O.RM.M.SP.SV. Firm vs. CIT 63 ITR 404 (SC) 7. CIT vs. Smt. Indermani Jatia 77 ITR 133 (All.) (HC) 8. E.D.Sasoon & Co. Ltd., vs. CIT .....

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lders ITA.No.1177/Hyd/2011 18. Janapriya Properties P. Ltd., vs. DCIT ITA.Nos.1594 & 1595/Hyd/2012 19. Saurashtra Cement & Chemical Industries Ltd., vs. CIT 123 ITR 669 (Guj.) (HC). 20. CIT vs. Paul Brothers 216 ITR 548 (Bom.) 21. CIT vs. Modi Industries Ltd., 327 ITR 570 (Del.) 22. CIT vs. Western Outdoor Interactive P. Ltd., 349 ITR 309 (Bom.) 23. ACIT vs. M/s. Apex Packing Products P. Ltd., ITA.Nos.145 to 150/PNJ/2013 24. ITO vs. Information Technology Park Ltd., (2012) 17 Taxmann.com .....

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erties P. Ltd., vs. DCIT ITA.Nos.1595 & 1595/Hyd/2012 dated 29th November, 2013 6. The Ld. D.R. on the other hand, relied upon the orders of the authorities below and submitted that the assessee has by itself offered the income under the head Income from House Property and therefore, is not eligible for deduction under section 80IA as the provision itself mentions profits and gains derived by an undertaking to be eligible for the deduction (emphasis provided by us). He submitted that the dec .....

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fore, according to him, the CIT(A) was right in directing the A.O. to examine the eligibility of the assessee for claiming deduction for the A.Y. 2009-2010 and take suitable action, if necessary. 7. We have heard the rival submissions and the material on record. We find that undisputedly, assessee has got the approval from the Government of India to set-up and maintain the industrial park. For claiming the deduction under section 80IA, sub-section (4) enumerates the enterprises which are eligibl .....

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s if for the figures, letters and words 31st March, 2006, the figures, letters and words 31st day of March, 2011 had been substituted. This second proviso has been inserted by the Finance Act, 2006 w.e.f. 01.04.2007. In the case before us, the approval by the Government of India has been granted vide notification dated 29th August, 2006. Therefore, the case of the assessee falls under the second proviso to clause (iii) of sub-section (4) of section 80IA of the Act. Sub-section (1) of section 80I .....

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0 is the first year in which the assessee has claimed the deduction and the A.O. has allowed the same. Thus, according to him, where the A.O. has allowed the claim in the first year, the year in which he was supposed to examine the eligibility of the claim of the assessee, he cannot thereafter disallow the same. 8. Now the question before us is, whether the income from approved industrial park, though offered by the assessee as Income from House Property is eligible for deduction under section 8 .....

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on the word Business occurring the sub-section (1) of Section 80IA of the Act to argue that only income declared under the head Business income is eligible for deduction. Let us therefore examine the definition and meaning of the words Profits and Gains . 11. The first case relied upon by the assessee is Ryali v. Hoare, and v. Honeywill (cited supra) which is a decision of the English Courts. In this case, the question was whether two gentlemen, who were Directors of a company, and who received .....

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ofit or gain within the meaning of the case and held that Profit or Gains mean something which is in the nature of interest or fruit, as opposed to principal or tree, thus bringing out the difference between a revenue receipt and a capital receipt. He further held that where an emolument is received or rather, where an emolument accrues, by virtue of some service rendered by way of action or permission, or both, at any rate that is included within the words Profits or Gains . Therefore, he proce .....

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Hon ble High court was- "Whether in view of the fact that the entire income of the assessee was derived from property assessable under Section 9 of the Indian Income-tax Act, the provisions of Section 23A were at all applicable to the case ?" The Hon ble High Court has held as under: (Only the relevant paras are reproduced) Mr. Mitra, learned counsel appearing for the assessee, contended that the words Profits and gains used in Section 23A (1) have reference to a company carrying on bu .....

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used in case of business, see Section (6A), 4(3)(ia), 4(3)(iii), 10(iv), 23A, 24(1)and 24(2). We may particularly refer to Section 24(1) and 24(2) which speak of loss of profits and gains under any of the heads mentioned in Section 6, viz., salary, interest on securities, property, etc. Similarly the second proviso to Section 55 uses the expression "profits and gains" generally in relation to income from all sources, viz., salary, interest on securities, property, etc., of an unregiste .....

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ification was intended for the purpose of calculation of assessable income after deductions, as would appear from Section 7, 8, 9, 10 and 11. Reliance was placed on the following observations of Mullick, J., in In re Raja Jyotiprasad Singh Deo, viz., "the Act makes a difference between income and profits. Profits are included within the term income but profits are not synonymous with income." The observations are obiter and were made in a different connection, viz., the decision of ces .....

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commissioner of Income-tax, Burma v. Bengali Urban Co- operative Credit Society Ltd., viz., "prima facie, therefore, neither interest from securities nor income derived from property are profits within the meaning of that term as used in the notification." The question there turned on the intention and purpose as expressed in the notification and as such the observations are not a useful guide in construing the words "profits and gains" occurring in Section 23A. No useful pu .....

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from the provisions with which the Courts in England have had to deal. Under such conditions little can be gained by attempting to reason from one to the other." In our opinion, the word "profit and gains" used in Section 23A (1) have to be construed on the terms used in the Indian Act without reference to English decisions, bearing in mind the rule of construction laid down by Lord Selborne, L.C., in Caledonian Railway Company v. Notch British Railway Co. : "The more litera .....

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n Section 23A of the Act on the principal laid down in Commissioner for Special Purposes of Income Tax v. Pemsel. For the reason already stated we cannot accept the contention out forward on behalf of the assessee and give the words "profits and gains" a limited meaning. In the second place, Mr. Mitra contended that where the only assets of a company are derived from property, the assessable income of the company would, under Section 9 of the Act, be the notional income of the property .....

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ngh & Sons Ltd., vs. CIT (cited supra), the Hon ble Calcutta High Court was dealing with the case of an assessee whose main business is acting as promoters and financiers of companies. According to the P & L A/c of the assessee therein, the assessee had made a net profit of ₹ 8.32,487 which included income from Business assessable under section 10 but it also included income from interest on securities assessable under section 8, income from property assessable under section 9 and .....

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two decisions, and the facts of the case before it, it was held as under: In my view, having regard to the scheme of section 23A(1) and the relation which the size of the profit at the disposal of the company bears to the question which the Income-tax Officer is to decided, there can be no doubt that the profit contemplated is not limited to profit from business or profit from any particular source at all, but it comprises the whole of the profits of the company distributable as dividend. I can .....

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It must therefore be held that even if an item of income is earned in the course of carrying on a business, it will not necessarily fall within the head "profits and gains of business" within the meaning of s. 10 read with s. 6(iv). If securities constitute stock-in-trade of the business of an assessee, interest received from those securities will for the purpose of determining the taxable income be shown under the head "interest on securities" under s. 8 read with s. 6(ii) .....

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its and gains of business will be that amount alone which is earned in the business, and does not all under any other specific head. Tendolkar J., in the judgment under appeal was of the opinion that income of the business to be computed under s. 10 alone could be admitted to the exemption: the ,majority of the Court held that all income earned by carrying on business qualified for the exemption. Now cl. (3) of s. 25 expressly provides that income of a business, profession or vocation which was .....

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usiness, profession or vocation is not a unit of assessment. When, therefore, s. 25(3) enacts that tax was charged at any time on any business, it is intended that the tax was at any time charged on the owner of any business. If that condition be fulfilled in respect of the income of the business under the Act of 1918, the owner or his successor in-interest qua the business, will be entitled to get the benefit of the exemption under it if the business, is discontinued. The section in terms refer .....

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ssion or vocation". The Legislature has made no such express reservation, and there is no warrant for reading into sub-s. (3) such a restricted meaning. Sub- section (3) it may be noticed does not refer to chargeability of income to tax under a particular head as a condition of obtaining the benefit of the exemption. 14.1. This decision was followed by the Apex Court in the case of O.RM.M.SP.SV.FIRM vs. CIT (cited supra) and also in the case of E.D. Sassoon & Co. Ltd., vs. CIT (cited su .....

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the business The assessee claimed that the shares and immovable properties had been shown as assets of the business in his balance- sheets all along by the late Ganga Sagar Jatia As already pointed out, it was common ground before the Tribunal that the shares and the immovable properties were held by the assessee as assets of the business That being so, the entire income earned by the assessee by exploitation of the assets of the business, profession or vocation should be entitled to the exempt .....

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section 12 of the 1922 Income Tax Act could be set-off against the brought forward business losses. The Hon ble Supreme Court held that income from interest on securities which form part of the trading asset is income from business and therefore, the business loss of earlier years could be set-off against the income from securities. It was held that the nature of a particular income is to be decided not on the basis of the provisions of section but on commercial principles. On an analysis of si .....

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ase of CIT vs. Bhavnagar Trust Corporation and CIT vs. R. Dalmia respectively also have expressed similar view. 17. The Hon ble Madras High Court, while considering the question as to whether business loss carried forward can be set-off against the dividend income from shares held as stock-in- trade under section 72 of the I.T. Act, held that the amount of dividend income would be income from business even if assessed under the head Other Sources . Similar view was expressed by the Hon ble Allah .....

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though the income of the assessee is computed under different heads of income, in effect, they are all part of the business profits. Classification of income under different heads of income will not entitle or disentitle the same to be considered as part of business income and its allowability as deduction. Therefore, we find strength in the contentions of the assessee that even though the income has been returned and assessed under the head Income from house property , the assessee is eligible .....

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ion under section 80IA is allowable to the assessee. 19. Further, we also find that this is the second year of the claim of deduction under section 80IA of the I.T. Act. The Coordinate Bench of this Tribunal in the cases of ACIT vs. Annapurna Builders and Janapriya Properties P. Ltd., vs. DCIT (cited supra), has held that as long as the approval given by the Central Government is valid and not withdrawn by it, the assessee would be entitled to deduction under section 80IA(4)(iii) of the Act. Fur .....

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. to examine the eligibility of the assessee to claim the deduction under section 80IA(4) of the Act at the time of allowing such deduction. Since the claim has been allowed, it is to be presumed that the A.O. is satisfied about the allowability of the claim. This being the second year, unless there are distinguishing facts and circumstances for taking a different view and deny the claim of deduction, the A.O. cannot take a contrary stand. The CIT(A) has in fact, directed the A.O. to examine the .....

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/Commercial properties/Shopping Mall is assessable as business income. He has placed reliance upon the various decisions of the Coordinate Benches of the Tribunal at Bangalore and Chennai to this effect. However, we find that the assessee has not raised any ground of appeal seeking the income to be treated as business income. He has also placed reliance upon the decision of Hon ble Supreme Court of India in the case of Chennai Properties & Investments Ltd., (cited supra) to contend that the .....

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ome such as Income from house property and more particularly since the only business of the assessee is the development and maintenance of infrastructure facilities, we do not see any reason to adjudicate the alternate ground of appeal more particularly when the assessee itself has not raised such ground of appeal before us. 22. In the result, ITA.No.1774/Hyd/2014 of the assessee is allowed. ITA.No.727/Hyd/2015 23. This is assessee s appeal against the order of the CIT passed under section 263 o .....

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g the income from lease rentals from the infrastructure facilities as income from house property. The CIT vide his powers vested in him under section 263 of the I.T. Act called for the assessment record of the assessee-company and observed that the A.O. has accepted the lease rentals from I.T. Park as Income from house property though denied the claim of the assessee under section 80IA of the Act on the ground that deduction cannot be given under the head Income from House Property . He observed .....

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ise the assessment order under section 263 of the I.T. Act. He accordingly, issued a show cause notice to the assessee. 25. After considering the assessee s submissions at length the CIT held the assessment order to be erroneous and also prejudicial to the interests of the Revenue and directed the A.O. to bring the income to tax under the head Business income . Against this order of the CIT, the assessee is in appeal before us raising the following grounds of appeal : Ground 1: Erroneous and Pre .....

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prejudicial to the interest of the revenue although the Appellant did not make any such claim in its return of income nor this formed the basis of the show cause notice invoking jurisdiction under section 263 of the Act. Ground 2: Business Income vs Income from House Property. 2.1. The learned PCIT erred in holding that rental income earned on letting out the immovable property is to be assessed as 'Business Income' and not as 'Income from House Property' as returned by the Appel .....

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dated March 31, 2013 is not erroneous and prejudicial to the interest of the revenue and hence the PCIT was not justified in exercising the jurisdiction under section 263 of the Act. (b) The Hon ble Tribunal be pleased to hold that rental receipts are assessable as Income from House Property and not as Business Income . (c) Without prejudice to (b) above, if the rental receipts are assessable as 'Business Income' then, the Hon'ble Tribunal be pleased to hold that the Appellant ought .....

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Income from House Property . He also made an alternative plea that if the income is to be treated as business income, then the depreciation on the assets is to be allowed. 27. The Ld. D.R. on the other hand, supported the orders of the CIT. 28. Having regard to the rival contentions and the material on record, we find that the stand of the A.O. has been that since the income is not offered as business income, the deduction under section 80IA cannot be allowed. If the stand of the CIT is accepted .....

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prejudice caused to the Revenue and further since we have also held in assessee s appeal against the assessment order denying the claim of deduction under section 80IA(4), that the assessee is eligible for deduction under section 80IA even if the income is returned under the head Income from house property , the revision order is not sustainable. 29. In the result, ITA.No.727/Hyd/2015 of the assessee is allowed. ITA.No.728/Hyd/2015 : 30. Brief facts of the case are that the assessee-company is .....

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T by exercising his powers under section 263 of the Act, perused the assessment record and found that the assessee-company had admitted the income under the head Income from house property . He observed that M/s. Raheja I.T. Park Limited had transferred certain industrial park units to the assessee company leasing to maintain and operate it. Observing that such income should be offered under the head Business income , the CIT was of the opinion that the assessment order is erroneous and prejudic .....

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