THE COMMISSIONER OF INCOME TAX vs. M/S. INFORMATION TECHNOLOGY PARK LTD.,

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ITA/79/2012HC KarnatakaKAHC01021490201221 September 2016Bench: ARAVIND KUMAR,JAYANT PATEL9 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial question of law is answered against the Revenue. The Court respectfully agreed with the Division Bench's judgment in Commissioner of Income Tax-III v/s Velankani Information Systems (P) Ltd. The reasoning was 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 of 'profits and gains of business or profession' and not 'income from house property'. The appeals filed by the Revenue were dismissed.

What were the facts?

These appeals by the Revenue, the Commissioner of Income-Tax and the Income-Tax Officer, are against the common order of the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2000-2001 to 2003-2004. The assessee is M/s. Information Technology Park Ltd. The ITAT had confirmed the order of the Commissioner of Income Tax (Appeals), which in turn had set aside the Assessing Officer's order. The core issue concerned the classification of rental income received by the assessee from letting out buildings along with other amenities in a Software Technology Park. The Assessing Officer had treated it as 'Income from house property', while the appellate authorities held it to be 'business income'. A previous High Court decision in similar appeals for Assessment Years 1999-2000 to 2004-05 had dismissed the Revenue's appeals.

What were the issues?

1. Whether the Tribunal was correct in holding that the lease rent received by the assessee from letting out buildings along with other amenities in a Software Technology Park is chargeable to tax under the head ‘income from business’ and not under the head ‘income from house property’? This question turns on the interpretation of provisions related to the heads of income under the Income Tax Act, 1961. The Revenue argued that the rental income should be taxed under 'Income from house property'. The Assessee contended that the income arises from its business of developing, operating, and maintaining an industrial park and providing infrastructure facilities, thus falling under 'business income'. The Revenue relied on the High Court's decision in Bhoopalam Commercial Complex & Industries and the Apex Court in East India Housing & Land Development Trust Ltd. The assessee relied on the High Court's decision in Commissioner of Income Tax-III v/s Velankani Information Systems (P) Ltd.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 21ST DAY OF SEPTEMBER 2016

PRESENT

THE HON’BLE MR.JUSTICE JAYANT PATEL AND THE HON’BLE MR.JUSTICE ARAVIND KUMAR ITA NO.74/2012 C/W ITA NO.79/2012 C/W ITA NO.80/2012 C/W ITA NO.81/2012 IN ITA NO.74/2012: BETWEEN:

1.

THE COMMISSIONER OF INCOME-TAX C R BUILDING, QUEENS ROAD, BANGALORE.

2.

THE INCOME-TAX OFFICER, WARD-11(2), C R BUILDING, QUEENS ROAD, BANGALORE.

... APPELLANTS

(BY SRI.K V ARAVIND, ADVOCATE) AND:

M/S. INFORMATION TECHNOLOGY PARK LTD., ITPL, WHITEFIELD ROAD, BANGALORE.

... RESPONDENT

(BY SMT.TANMAYEE RAJKUMAR, ADVOCATE FOR M/S. KING & PARTRIDGE)

THIS APPEAL IS FILED U/S.260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-11-2011 PASSED IN ITA NO.1148/BANG/2010, FOR THE ASSESSMENT YEAR 2000-2001, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED 30/11/2011 PASSED BY THE ITAT, BANGALORE IN ITA NO.1148/BANG/2010 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(2), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY.

IN ITA NO.79/2012: BETWEEN:

1.

THE COMMISSIONER OF INCOME-TAX C R BUILDING, QUEENS ROAD, BANGALORE.

2.

THE INCOME-TAX OFFICER, WARD-11(2), C R BUILDING, QUEENS ROAD, BANGALORE.

... APPELLANTS

(BY SRI.K V ARAVIND, ADVOCATE)

AND:

M/S. INFORMATION TECHNOLOGY PARK LTD., ITPL, WHITEFIELD ROAD, BANGALORE.

... RESPONDENT

(BY SMT.TANMAYEE RAJKUMAR, ADVOCATE FOR M/S.KING AND PARTRIDGE)

THIS ITA IS FILED U/S.260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-11-2011 PASSED IN ITA NO.1149/BANG/2010, FOR THE ASSESSMENT YEAR 2001-2002, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED 30/11/2011 PASSED BY THE ITAT,

3 BANGALRE IN ITA NO.1149/BANG/2010 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(2), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY.

IN ITA NO.80/2012: BETWEEN:

1.

THE COMMISSIONER OF INCOME-TAX, C R BUILDING, QUEENS ROAD, BANGALORE.

2.

THE INCOME-TAX OFFICER, WARD – 11(2), C R BUILDING, QUEENS ROAD, BANGALORE.

... APPELLANTS

(BY SRI.K.V.ARAVIND, ADVOCATE)

AND:

M/S. INFORMATION TECHNOLOGY PARK LTD., ITPL,. WHITEFIELD ROAD, BANGALORE.

... RESPONDENT

(BY SRI.TANMAYEE RAJKUMAR, ADVOCATE FOR M/S. KING AND PARTRIDGE)

THIS ITA IS FILED U/S.260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-11-2011 PASSED IN ITA NO.1150/BANG/2010, FOR THE ASSESSMENT YEAR 2002-2003, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED 30/11/2011 PASSED BY THE ITAT, BANGALORE IN ITA NO.1150/BANG/2010 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(2), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY.

4 IN ITA NO.81/2012: BETWEEN:

1.

THE COMMISSIONER OF INCOME-TAX, C R BUILDING, QUEENS ROAD, BANGALORE.

2.

THE INCOME-TAX OFFICER, WARD-11(2), C R BUILDING, QUEENS ROAD, BANGALORE.

... APPELLANTS

(BY SRI.K.V.ARAVIND, ADVOCATE)

AND:

M/S. INFORMATION TECHNOLOGY PARK LTD., ITPL, WHITEFIELD ROAD, BANGALORE.

... RESPONDENT

(BY SMT.TANMAYEE RAJKUMAR, ADVOCATE FOR M/S. KING AND PARTRIDGE)

THIS ITA IS FILED U/S.260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30-11-2011 PASSED IN ITA NO.1151/BANG/2010, FOR THE ASSESSMENT YEAR 2003-2004, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED 30/11/2011 PASSED BY THE ITAT, BANGALORE IN ITA NO.1151/BANG/2010 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(2), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY.

THESE APPEALS COMING ON FOR HEARING THIS DAY, JAYANT PATEL J., DELIVERED THE FOLLOWING:

JUDGMENT These matters arise from the common Judgment and order passed by the Tribunal in ITA No.1147 to 1152/Bang/2010.

2.

It has been brought to our notice by the learned counsel appearing for the appellant that one of the matters being ITA 1152/Bang/2010 was carried before this Court in ITA No.76/2012 C/w ITA No.78/2012 and this Court for the reasons recorded in the order dated 30.4.2014 has not interfered with the view taken by the Tribunal and the appeals were dismissed.

3.

We may record that this Court in the decision rendered in ITA 76 & 78 of 2012 has observed thus: “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 30-11-2011 in ITA.Nos.1147- 1152/Bang/2010 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘B’ (for short ‘the Tribunal’) whereby the Tribunal dismissed the appeals filed by the revenue and confirmed the order dated 23-07-2010 passed by the Commissioner of Income Tax (Appeals)-IV, Bangalore, (hereinafter referred to as ‘the First

6 Appellate Authority’),

wherein the First Appellate Authority held that rental income received by the assessee from letting out buildings along with other amenities in Software Technology 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 1999-2000 to 2004-05.

2.

Since the common question of law and facts are involved in these two appeals and a common order passed by the Tribunal has been challenged, these two 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 Tribunal was correct in holding that the lease rent received by the assessee from letting out buildings along with other amenities in a Software Technology Park is chargeable to tax under the head ‘income from business’ and not under the head ‘income from house property’ as held by this Hon’ble Court in Bhoopalam Commercial Complex & Industries and by the Apex Court in East India Housing & Land Development Trust Ltd.?

7 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

8 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 two appeals are dismissed.”

4.

As all the appeals arise from the common order of the Tribunal in respect of the very assessee but for the different assessment year, question of law has been answered in favour of assessee, the same should be the view as has been taken by this Court in the above referred matter.

9 5. Hence, the question shall stand answered against the Revenue. Appeals shall stand dismissed.

Sd/- JUDGE

Sd/- JUDGE

Sk/-

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