TMI Blog2018 (8) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted certain position relating to a particular issue over a period of time, the same cannot be disturbed in a subsequent year unless there are material differences in fact. - Taxable as business income - Decided in favor of assessee. Additions u/s 40A(2)(b) - excessive payment of salary to the directors - AO found that no such remuneration was paid in the earlier assessment years. He, therefore, called upon the assessee to justify the reasonableness of payment made to them. - Held that:- The CIT(A) after considering the submissions of the assessee allowed assessee’s claim on the reasoning that the leasing out of I.T Park and other properties were a business activity of the assessee and the Directors had undertaken all the activities themselves and the remuneration paid to them was commensurate with their inputs. He further observed that the disallowance at the hands of the company would amount to double taxation as Directors have offered the amount received by them as income in the return of income filed by them. - No disallowance - Decided against the revenue. Genuineness of payment made as commission towards providing services to the company - reasonable amount - Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Further, it has appointed M/s. Salarpuria Property Management Pvt Ltd. to provide maintenance services. It was submitted, the assessee developed the property to be used as I.T.Park in Bangalore keeping the need of I.T Sector in Bangalore and office premises of several I.T Companies are located in the I.T.Park. It was submitted, the development and maintenance of I.T.Park is a very complex commercial activity, which requires continuous and considerable efforts so as to provide services round the clock. It was submitted, as per section 80 IA of the Act, development and maintenance of I.T.Park is regarded as a business activity. It was submitted by the assessee that in A.Y. 2006-07 to A.Y.2010-11, the income received from I.T.Park was offered as Business income and the department has also accepted it. Therefore, it was submitted, the income offered by the assessee should not be assessed as Income from House Property , The Assessing Officer after considering the submissions of the assessee however, did not find merit in them and referring to certain clauses of the agreement and relying upon some case laws, ultimately concluded that the income derived by the assessee from letting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the income derived by the assessee from lease rentals has to be assessed as Business Income . In support of such contention the learned AR relied upon the decision of the Tribunal in the case of DCIT vs. M/s. E-City Project Construction Pvt. Ltd. in ITA No 8390/Mum/2010 and Ors dated 30.07.2014 and the decision of Hon ble Bombay High Court in the case of CIT vs. M/s. E City Project Construction Pvt. Ltd. in Income Tax Appeal No. 149 of 2015 Ors dated 18.07.2017. 6. We have considered rival submissions and perused the material on record. As could be seen from the facts on record, the assessee has entered into a joint development agreement with Salarpuria Properties Pvt Ltd on 11.08.2003 and 15.04.2004 for development of I.T.Park. As per the terms of the agreement, the assessee is entitled to 23% of the saleable area along with proportionate number of car parking and common areas and terrace space in lieu of 77% undivided share in the developed property. Thus, as could be seen from the terms of the agreement, the assessee though may not have constructed the I.T.Park, however, the assessee had jointly developed the I.T.Park with Salarpuria Properties Pvt Ltd. Further, it is ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure facilities including I.T.Parks is recognized as a business activity and even deduction u/s. 80 IA(4) of the Act is allowed. In fact, CBDT vide notification No.134/2006 dated 07.07.2006 has recognised the I.T.Park jointly developed by the assessee with SPPL as a infrastructure project. Further, the CBDT Circular No.16/2017 dated 25.04.2017 has clarified that income from letting out of premises/developed space along with other amenities in an industrial park/SEZ is to be charged under the head Profits and Gains of Business . It has further been clarified in the said Circular that appeals filed by the department on the aforesaid issue may be withdrawn or not pressed upon. In the case of DCIT vs. E-City Project Construction Pvt. Ltd. (supra), the co-ordinate Bench, applying the rule of consistency has held that the rent received from malls has to be considered as Business Income . The aforesaid decision of the co-ordinate Bench was upheld by the Hon ble Jurisdictional High Court in the decision cited before us by the learned AR. Thus, on overall consideration of facts and material on record, we are of the view that the order passed by the CIT(A) in allowing assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence has established that payment to M/s Shirolkar Associates was for services actually rendered by them. Therefore, the CIT(A) was justified in deleting the addition. As regards remuneration paid to Directors, the learned AR submitted, once the income of the assessee is assessed as Business Income , the expenditure in relation to such activity has to be allowed. He submitted that apart from the leasing activities the assessee has other business activities as well. Therefore, the Assessing Officer was wrong in holding that assessee has no business activities. He submitted that the CIT(A) has also allowed other expenditure but the department has not challenged them. He submitted that the payment made to the Directors are in the nature of salary and only for applying 36(1)(ii) of the Act the Assessing Officer has termed it as commission. As regards applicability of section 40A(2)(b) of the Act, the learned AR submitted, the Assessing Officer before applying the said provisions, was to establish that the payment made by the assessee is unreasonable. For that, the Assessing Officer must ascertain the fair market value of the services rendered before concluding that the payment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unreasonable. As recorded by the learned CIT(A), the assessee has factually established before him that the Directors were handling all activities as there were no management level employees in the assessee company. Thus, the claim of the assessee that the remuneration was paid to the Directors for the services rendered by them cannot be overlooked or ignored with some general observations. If the Assessing Officer was of the view that the remuneration paid by the assessee to the Directors are unreasonable, he should have brought facts and materials on record to establish the actual fair market value of the services rendered. Without bringing any material on record, the Assessing Officer cannot disallow assessee s claim merely on presumptions and surmises. Even otherwise also, undisputedly, the Directors have offered the remuneration received by them to tax. It is also not disputed before us that the Directors are paying tax at the maximum rate. Therefore, in effect, whether the income is assessed at the hands of the Directors or the hands of the Company will have very little impact on the Revenue. Thus, on overall consideration of facts and material on record, we do not find a ..... 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