TMI Blog2016 (7) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under the head “Income from House Property” - Held that:- 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, and the income is brought to tax under the head “business income”, then the deduction under section 80IA(4) would be allowable whereby the income of the assessee would not be exigible to tax. Therefore, it is clear that there is no prejudice caused to the revenue by the 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 80IA, the A.O. observed that the deduction under section 80IA is allowable only with regard to business income and not the income from house property. He, therefore, disallowed the claim of the assessee and brought it to tax. 4. Aggrieved, assessee preferred an appeal before the CIT(A) reiterating the contentions made before the A.O. The CIT(A), however, confirmed the 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 Government of India. According to him, irrespective of the head of income under which the assessee has offered the income from the industrial park, the assessee is eligible for deduction of the same under section 80IA. According to him, the heads of income are prescribed only to classify the income under different s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 208 (Bang.) 25. ITO vs. RR Industries Ltd., (2012) 21 Taxmann.com 448. 26. Global Tech Park (P) Ltd., vs. ACIT (2009) 28 SOT 45 (Bang.) (URO) 27. DCIT vs. Golfink Software Park P. Ltd., ITA.No.40 41/Bang/2010 28. Chennai Properties Investment Ltd., 373 ITR 673 (SC) 29. Shreeji Exhibitors vs. ACIT and Shreeji Enterprises vs. ACIT - ITA.No.640/M/2013 ITA.No.2196/M/2013. 30. Krishna Land Developers P. Ltd., vs. DCIT ITA.No.1057/Mum/2010 dated 12th August, 2011. 31. Janapriya Properties 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 Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in sub-section (4), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100% of the profits and gains derived from such business for 10 consecutive assessment years. It is the case of the assessee that the A.Y. 2009-2010 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 80IA(4) of the Act. For this purpose, what constitutes the Profits and Gains of an undertaking has to be examined. 9. The Ld. Counsel for the assessee has relied upon a catena of decisions to demonstrate that Income from house property also is part of Profits and Gains of the undertaking. He submitted that the Hon ble Courts have been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 business and cannot apply to a company whose only source of income is derived from property. He, therefore, submitted that the question referred to this Court should be answered in the negative. In our opinion, this contention cannot be accepted for the following reasons. It would appear from a resume of the Act that the expression profit and gains is not limited to business only; it has been used in other case also; again the word income and not profits and gains has been 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 source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in many ways, subject to fewer refinements, and in arrangement and language it differs greatly 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 literal construction ought not to prevail, if (as the court below has thought) it is opposed to the intentions of the Legislature, as apparent by the statute; and if the words are sufficiently flexible to admit of some other construction by which that intention will be better effectuated. Mr. Mitra contended that the words profits and gains have a technical meaning, which limits it to business profits and gains and that this technical meaning should be applied to be words occurring in Section 23A of the Act on the principal laid down in Commissioner for Special Purposes of Income Tax v. Pemsel. For the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the phrase and Mr. Mitra at the end very fairly conceded that he was unable to find any reason for disagreeing. 14. In the case of CIT vs. Chugandas Co., (cited supra), the Hon ble Supreme Court of India was dealing with the question was to whether the interest on securities formed part of the assessee s business income for the purpose of the exemption from tax under section 25(3) of the Indian Income Tax of 1922. The Hon ble Apex Court held as under: 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) of the Act. Similarly dividends from shares will be shown under s. 12(1A) and not under s. 10. If an assessee carries on business of purchasing and selling buildings, the profits and gains earned by transactions in buildings will be shown under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 supra). 15. In the case of CIT vs. Smt. Indermani Jatia (cited supra), the Hon ble Allahabad High Court has given a similar finding by observing as under: In the wider sense all income, profits or gains resulting from the exploitation of assets of the business might be regarded as income, profits or gains of the business assets not only include the stock-in-trade, or the circulating capital but also fixed assets including investments Such assets are shown on the assets side of the balance-sheet of 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough included under the head Other Sources and not under the head Business Income would be covered by section 10(4) of I.T. Act. Section 10(4) of I.T. Act, has since been omitted from the statute. 18. In all the above decisions, it has been held that even 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 for deduction u/s 80IA (4) of the Act as the business of the assessee is only to develop and maintain infrastructural facilities and though the income from such facility has been offered under the income from house property, it is in fact business income of the assessee. The project from which the assessee has realized lease rentals has also been approved by the Government of India as an eligible project under section 80IA(4)(iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 letting of the properties was the business of the company and therefore, the rental income is to be assessed as business income. He has drawn our attention to the memorandum of association of the company to demonstrate that the assessee s business was also letting out of the property and therefore, the income ought to have been treated as business income. However, since we have already held that the words profits and gains used in the provisions of section 80IA(4) includes the other heads of income 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 of the I.T. Act da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since the Appellant is not entitled to a deduction under section 32(iia) of the Act, the assessment order is 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 Appellant and accepted in the assessment proceedings. Ground 3: Depreciation on assets 3.1 Without prejudice to Ground 2, in case the income of the Appellant is classified as 'Business Income' instead of 'Income from House Property', the Appellant ought to have been allowed depreciation in respect of its assets, including the buildings and fittings and machinery therein. The appellant prays for the following relief (a) The Hon ble Tribunal be pleased to hold that the assessment order dated March 31, 2013 is not erroneous and prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.No.728/Hyd/2015 : 30. Brief facts of the case are that the assessee-company is engaged in real estate development and leasing of properties. It filed its return of income for the A.Y. 2010-2011 on 14.10.2010 admitting loss of ₹ 25,88,98,030 which consists of house property loss amounting to ₹ 23,32,62,838 and business loss of ₹ 2,56,35,192. During the assessment proceedings under section 143(3) of the I.T. Act, the A.O. made an addition of ₹ 5,46,281 on account of sale of scrap and reduced the total loss to ₹ 25,83,51,749. Subsequently, the CIT 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 prejudicial to the interests of Revenue. Further, he also found certain discrepancies in the leased rentals received and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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