THE COMMISSIONER OF INCOME TAX vs. M/S TOYOTA TECHNO PARK INDIA PVT LTD

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ITA/32/2009HC KarnatakaKAHC01009434200918 March 2014Bench: B.MANOHAR,DILIP B.BHOSALE7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, in respectful agreement with the Division Bench judgment in COMMISSIONER OF INCOME TAX-III v/s VELANKANI INFORMATION SYSTEMS (P) LTD., held that the substantial question of law is against the Revenue. The Court noted that the assessee-company is engaged in the business of developing, operating, and maintaining an industrial park and providing infrastructure facilities to different companies as its business. Therefore, the rental income derived from such activities falls under the head 'Income from Business'. The appeals filed by the Revenue were dismissed.

What were the facts?

The Revenue (Commissioner of Income Tax and Assistant Commissioner of Income-Tax) filed these appeals under Section 260-A of the Income Tax Act, 1961, against the common order dated 29th August 2008 passed by the Income Tax Appellate Tribunal (ITAT), Bangalore Bench. The ITAT had dismissed the Revenue's appeals and confirmed the order of the Commissioner of Income Tax (Appeals). The First Appellate Authority had held that rental income received by the assessee, M/s. Toyota Techno Park India (P) Ltd., from letting out its building to tenants within the Toyota Technical Park should be treated as 'business income' and not 'income from house property'. This decision set aside the order of the Assessing Authority for assessment years 2000-01 to 2004-05.

What were the issues?

1. Whether the Appellate Authorities were correct in holding that the rental income earned by the assessee should be brought to tax under the head ‘Income from Business’ and not under the head ‘Income from House Property’ as held by the Assessing Officer? The Revenue contended that the rental income should be taxed under the head 'Income from House Property'. The Assessee argued that the rental income is business income. Both sides relied on the judgment of the Karnataka High Court in the case of COMMISSIONER OF INCOME TAX-III v/s VELANKANI INFORMATION SYSTEMS (P) LTD. (2013) 218 Taxman 88.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 18TH DAY OF MARCH 2014

PRESENT

THE HON'BLE MR.JUSTICE DILIP B.BHOSALE

AND

THE HON'BLE MR.JUSTICE B.MANOHAR

ITA.NO.30/2009 C/W ITA.31/09, ITA.32/09, ITA.33/09,

BETWEEN:

1.

The Commissioner of Income Tax, No.55/1, Shilpashree, Vidyaranya Complex, Vishveshwaranagar, Mysore – 570 008.

2.

The Assistant Commissioner of Income-Tax, Circle -2(1), Vidyaranya Complex, Vishveshwaranagar, Mysore – 570 008.

…Common Appellants

(By Sri.K.V.Aravind, Advocate)

AND:

M/s.Toyota Techno Park India (P) Ltd., Plot No.20, Bidadi Industrial Area,

Ramanagaram Taluk, Bangalore Rural District. ….Common Respondent

(By Smt.Vani.H, Advocate)

This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of Order dated 29-08-2008 passed in ITA.No.214/Bng/2008, for the Assessment Year 2000-01, praying that this Hon’ble Court may be pleased to:

i. formulate the substantial questions of law stated therein. ii. allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA.No.214/Bng/2008, dated 29-08-2008 confirm the orders of the Assistant Commissioner of Income Tax, Circle -2(1), Mysore in the interest of justice and equity.

ITA.No.31/2009

This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of Order dated 29-08-2008 passed in ITA.No.215/Bng/2008, for the Assessment Year 2001-02, praying that this Hon’ble Court may be pleased to:

i formulate the substantial questions of law stated therein. ii allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA.No.215/Bng/2008, dated 29-08-2008 confirm the orders of the Assistant Commissioner of Income Tax, Circle -2(1), Mysore in the interest of justice and equity.

ITA.No.32/2009

This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of Order dated 29-08-2008 passed in ITA.No.216/Bng/2008, for the Assessment Year 2003-04, praying that this Hon’ble Court may be pleased to:

i formulate the substantial questions of law stated therein. ii allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA.No.216/Bng/2008, dated 29-08-2008 confirm the orders of the Appellate Commissioner and confirm the order passed by the Assistant Commissioner of Income Tax, Circle-2(1), Mysore in the interest of justice and equity.

ITA.No.33/2009

This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of Order dated 29-08-2008 passed in ITA.No.217/Bng/2008, for the Assessment Year 2004-05, praying that this Hon’ble Court may be pleased to:

i formulate the substantial questions of law stated therein. ii allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA.No.217/Bng/2008, dated 29-08-2008 confirm the orders of the Appellate Commissioner and confirm the order passed by the Assistant Commissioner of Income Tax, Circle-2(1), Mysore in the interest of justice and equity.

These appeals coming on for Hearing this day, B.MANOHAR J., delivered the following:

J U D G M E N T

These Income Tax appeals are filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’), being aggrieved by the order dated 29th August 2008 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘A’ (for short ‘the Tribunal’) made in ITA Nos.214-217/2008 whereby the Tribunal dismissed the appeal and confirmed the order dated 23-11-2007 passed by the Commissioner of Income Tax (Appeals), Mysore, (hereinafter referred to as ‘the First Appellate Authority’), wherein the First Appellate Authority held that rental income received by letting out the building to the tenants in Toyoto Technical Park falls under the head of ‘business income’ and not under the ‘Income from house property’ while setting aside the order passed by the Assessing Authority for the assessment years 2000-01 to 2004-05.

2.

Since the common question of law and facts are involved in these appeals and the common order passed by the Tribunal has been challenged, all these appeals are clubbed together and disposed of by this common order.

3.

The above appeals are admitted to consider the following substantial question of law: Whether the Appellate Authorities were correct in holding that the rental income earned by the assessee should be brought to tax under the head ‘Income from Business’ and not under the head ‘Income from House Property’ as held by the Assessing Officer?

4.

Learned counsel appearing for the parties submitted that the substantial question of law raised in these appeals are fully covered by the judgment reported in (2013) 218 Taxman 88 (Karnataka) in the case of COMMISSIONER OF INCOME TAX-III v/s VELANKANI INFORMATION SYSTEMS (P) LTD.

5.

Division Bench of this Court in the above said judgment at paragraph 26 has clearly held as under: 26…………… If the intention is to exploit commercial property by putting up construction and letting it out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building fall under the head ‘income from house property’. But if the assessee is in the business of taking land, putting up commercial buildings thereon and letting out such buildings with all furniture as his profession or business, then notwithstanding the fact that he has constructed a building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the heading of income from house property. Therefore, firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying at complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession.”

6.

We are in respectful agreement with the judgment of the Division Bench of this Court. In the instant cases the assessee-company engaged in the business of developing, operating and maintaining an industrial park and providing infrastructure facilities to different companies as its business. In view of that, the substantial question of law is held against the Revenue. Accordingly, these appeals are dismissed.

Sd/-

JUDGE

Sd/-

JUDGE

mpk/-*

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