TMI Blog2017 (5) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... of income under which the said income is assessable, which is on the basis of the source – from amongst the specified sources under the Act, most appropriate for the said income, so that it is not assessable as business income but as income from house property, would not be a limiting or debilitating factor. We decide accordingly, and the assessee succeeds qua it’s alternate ground, i.e., in principle. The assessee’s eligibility for deduction u/s. 80 IAB, to which the house property income of a developer of a SEZ has been opined by us as exigible. In this regard, we observe no finding by the assessing authority on the assessee satisfying the condition/s of s. 80-IAB. True, it has been allowed deduction in assessment in respect of the income assessable as business income, so that the said conditions are impliedly met. We yet consider it necessary that a definite finding in the matter should precede the allowance of the said deduction/s. The reason is that, firstly, the units in the info tech park should presumably be set up by firms engaged in IT/IT enabled services, while one of them, as afore noted, is a bank (SBI). Two, the lease period as per the SEZ Rules, 2006 (r. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esides, it collects another Rs..5 (per sq.ft. per month) for operating and maintenance of the common area utilities, air conditioning, etc., and also provides car parking space (both open and covered) for a monthly charge. It claimed deduction u/s. 80-IAB of the Act on the entire income from the Tejomaya building leased to three entities during the relevant year. The same was however denied in respect of the lease income, assessing the same at Rs..31,20,761/- under the head Income from house property . The assessee s income was, accordingly, assessed at Rs.. 32,08,558/-, the balance Rs..87,797/- being income from other sources and capital gains . In appeal, the ld. CIT(A), following the decision in Coimbatore Hitech Infrastructure Pvt. Ltd . 53 SOT 9 (Chennai) and by the Hon'ble Karnataka High Court in Global Tech Park Pvt. Ltd . (in ITA no.1038/2008 dated 09.09.2014), reproducing there-from, held the lease rental income to be assessable u/s. 28, i.e., under the head income from business or profession and, secondly, allowed deduction u/s. 80- IAB thereon. Aggrieved, the Revenue is in appeal, relying on the decisions in the case of Shambhu Investments (P) Ltd. v. CIT [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Heat Recovery Wheel 4 08 Transformers - 2000k V A 2 09 DG Set -1500 KVA 2 10 Electrical Distribution System 1 11 Fire Fighting System - Sprinklers All floors 12 Fire Hidrants 1 Set 13 Portable Fire Extinguishers 300 14 Staircase pressurisation Unit 4 15 Sewage Treatment Plant 1 16 Lifts - Mitsubishi 8 17 Building Management System 1 18 Building Surveillance System 1 19 A V System - Auditorium 1 20 Intercom Facilities 1 Set Without prejudice, it was submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m house property . Section 23 defines the annual value of the property, which is the subject matter of charge u/s. 22, as well as provides the manner of its determination. Incomes not falling under any of the specified sources would fall under the residuary head, i.e., Income from other sources (Chapter IV-F), which specifies certain categories of incomes as well, viz., dividend income; income from letting of house property by a person who is not the owner thereof; where the same is let along with other assets, i.e., furniture, plant or machinery, under the condition of the two lettings being inseperable, etc. In this context, it may be clarified that, for the purpose of s. 22, the owner is the person who can exercise the rights of the owner, i.e., not on behalf of another, but in his own right. In other words, is a person who is entitled to receive income from house property in his own right ( R.B. Jodhamal Kuthiala v . CIT [1971] 82 ITR 570, 575, 578-9 (SC); CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625, 647, 653 (SC)). Again, it is the owner of the structure and not of the land who is eligible to tax ( CIT v. Madras Cricket Club [1934] 2 ITR 209 (Mad); Tinsukia De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 9 only and cannot be taken to section 10 on the ground that the business of the assessee was to exploit property and earn income or because the income was obtained by a trading concern in the course of its business. 5. House-owning, however profitable, cannot be a business or trade under the Income-tax Act. Where income is derived from house property by the exercise of property rights properly so called, the income falls under the head 'income from property' chargeable under section 9. It is the nature of the operations and not the capacity of the owner that must determine whether the income is from property or from trade. Where the operations involved in the activity of earning income from house property are not different from those of an ordinary house-owner turning to profitable account the property of which he is the owner, the income derived is income from property chargeable under section 9 irrespective of whether the operations are carried on by a company one of whose objects or even the sole object is to indulge in the activity of earning income from house property. Thus, where house property is given on lease or licence basis for earning income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the object of developing and setting up of markets. The Apex Court had earlier, per its larger bench decision in East India Housing Land Development Trust Ltd. [1961] 42 ITR 49 (SC), clarified that the character of income is not altered because it was received by a company formed with the object of developing landed properties and setting up of markets. This aspect, i.e., the company being registered with the sole object to acquire land, build houses and let premises to tenants, was again found of no moment, as the income continued to be from property, and the mere fact that the owner is a company would not be relevant ( Commercial Properties Ltd ., In re, AIR [1928] Cal 456 (also, Indian City Properties Ltd. v. CIT [1965] 55 ITR 262 (Cal)). We cannot help but refer again to the decision in Sultan Brothers (P.) Ltd. (supra), wherein, among others, the concept of complex letting, i.e., the inseparable letting of a house property belonging to the assessee, along with furniture, plant or machinery, is explained, and in which case the income would be assessable as either income from other sources (u/s. 56(2)(iii)) or as business income u/s. 28. This is as, as explained, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir business (of IT/IT enabled services). Cases falling under such category would be as in the case of a hotel, lodge etc., where the building is used as an instrument of the commercial activity, so that it was thus a different, new source from which the income is derived. Surely, the income from such activity would form a separate source in itself. 3.3 We, accordingly, find little merit in the assessee s case, even as that of the Revenue is, in this regard, supported by well-settled law on the subject and toward which we have cited a number of decisions, including by the larger benches of the Apex Court, which continue to hold the field, being judicially binding, with that in the case of Keyaram Hotels Pvt. Ltd. (supra) being the latest; the Apex Court dismissing the SLP against the decision by the Hon ble jurisdictional High Court (reported at [2015] 373 ITR 494 (Mad)) (reference here may also be made to Keyaram Hotels Pvt. Ltd. v. Asst. CIT [2008] 300 ITR 118 (Mad). 3.4 We may next consider the assessee s alternate claim (refer para 2), and for which, the assessee being not in appeal, reference is made to the decisions in Hukumchand Mills Ltd v. CIT [1967] 63 ITR 232 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is only turning into account it s investment in the house property, being a building and land appurtenant thereto. It is, in fact, this - the construction of a building suitable for the firms operating in the IT sector, that qualifies it as a developer of an Info-park, approved as a SEZ. That the said activity, i.e., developing real estate and leasing it, which is, broadly speaking, and in common parlance, only a business, is not regarded as so for the purpose of assessment of income there-from, being derived from a house property, a defined source of income for which a specific head of income is provided under the Act, is another matter. This is so even where it is carried in an organized manner, i.e., as a business, as in the present case. It shall, however, not cease, for that reason, to be profits and gains derived from the activity of developing a SEZ. The word business - even otherwise a word of wide and indefinite import, as occurring in section 80-IAB(1), is to be, accordingly, construed in a broad rather than a strict sense, as conveying the gamut of activities, including activities subservient and incidental to developing a SEZ and turning it into account. Now, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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