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M/s. Mack Soft Tech Private Limited Versus Dy. Commissioner of Income Tax, Circle 16 (2) Hyderabad

2016 (12) TMI 1397 - ITAT HYDERABAD

Nature of Rental income - Assessment of income derived from the business of operation and maintenance of information Technology Park as "Income from house property"- Held that:- The main business of the assessee is to create the infrastructure and let out the same to earn income therefrom. Therefore, the decisions in the cases of CIT vs. Chennai Properties & Investments Ltd [2015 (5) TMI 46 - SUPREME COURT ] and Rayala Corporation (P) Ltd [2016 (8) TMI 522 - SUPREME COURT ] are clearly applicabl .....

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R ORDER Per Smt. P. Madhavi Devi, J. M. This is assessee s appeal for the A.Y 2010-11. This appeal is against the order of the CIT (A)-4, Hyderabad dated 30.01.2015 confirming the assessment order passed u/s 143(3) r.w.s. 92CA r.w.s. 144C of the I.T. Act. The assessee has raised the following grounds of appeal: 1. The order of the Learned C.I.T (Appeals) is against law, weight of evidence and probabilities of the case. 2. The Learned C.I.T (Appeals) erred in upholding the assessment of income de .....

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en exploited as a commercial asset in the business carried on by it and accordingly, the learned C.I.T(Appeals) ought to have held that the income derived by the assessee from the IT park is assessable as income from business. 4. The learned CIT erred in not appreciating the fact that the said facility was entitled for deduction U/s.80IA from business income arising from the facility, in respect of which the company had made an application for being recognized as an Industrial Park U/s.80IA to C .....

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The appellant craves leave to ad to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary . 2. Brief facts of the case are that the assessee company engaged in the business of Operation & Maintenance of Information Technology Park, filed its return of income for the A.Y 2010-11 on 28.09.2010 admitting income of Rs. Nil under the normal provisions of the I.T. Act and book profit of Rs."Nil" under the provisi .....

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g the assessment proceedings the assessee produced the detailed break up of income from the lease and operation credited to the P&L a/c treating it as income from business . The AO however, asked the assessee to explain as to why such income should not be treated as income from house property . The assessee replied that the assessee is in the business of maintenance and operation of the software infrastructure development facility and therefore, the income from letting out of the commercial .....

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Thereafter, the AO also proceeded to disallow the claim of depreciation and expenses debited to the P&L A/c and the business loss carried forward from the earlier year. Aggrieved, the assessee preferred an appeal before the CIT (A), who confirmed the order of the AO and the assessee is in second appeal before us. 4. The learned Counsel for the assessee, while reiterating the submissions made before the authorities below, have drawn our attention to the main objects of the assessee which is .....

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e treated as income from business. He also placed reliance upon the judgment of the Hon'ble Supreme Court in the cases of Rayala Corporation P Ltd (2001) 72 Taxmann.com 149 (S.C) and Chennai Properties & Investments Ltd (cited Supra). Copies of the said orders are also filed before us. 5. The learned DR, however, supported the orders of the authorities below. 6. Having regard to the rival contentions and the material on record, we find that the AO has followed the judgment of the Hon' .....

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rs (P.) Ltd. (supra), we would be well advised to discuss the law laid down authoritatively and succinctly by this Court in 'Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC). That was also a case where the company, which was the assessee, was formed with the object, inter alia, of acquiring and disposing of the underground coal mining rights in certain coal fields and it had restricted its activities to acquiring coal mining leases over large areas, developing them as coal fields .....

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ed the scheme of the Income Tax Act and particularly six heads under which income can be categorised / classified. It was pointed out that before income, profits or gains can be brought to computation, they have to be assigned to one or the other head. These heads are in a sense exclusive of one another and income which falls within one head cannot be assigned to, or taxed under, another head. Thereafter, the Court pointed out that the deciding factor is not the ownership of land or leases but t .....

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ion with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned.&q .....

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an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words: - "We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or t .....

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s are commercial assets in their very nature." 11. We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treate .....

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