DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-I, NOIDA, NOIDA vs. M/S ADVANT IT PARK PRIVATE LIMITED, DELHI

3. Noida has erred in deleting the addition of Rs. 12,06,08,781/- and Rs. 6,49,86,381/ made by the Assessing Officer under the heads "Income from House Property" and "Income from Other Sources", respectively, by reclassifying the same as "Business Income", ignoring the nature of receipts to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. and the fact that the assessee was primarily engaged in passive leasing activities.

2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in admitting additional evidence during appellate proceedings in contravention of Rule 46A of the Income Tax Rules, 1962, on the incorrect premise that the same did not constitute additional evidence, thereby violating the principles of natural justice and rendering the appellate order perverse.

3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the objects narrated in MOA while coming to the conclusion that such narration of object clauses leads to the conclusion of systematic and organized activity of services provided by the assessee ignoring the fact that Hon'ble Supreme Court in the case of Sultan Brothers has clearly held that a mere entry in the object clause showing a particular object would not be the determinative factor to arrive at a conclusion whether the income is to be treated as income from business.

4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in misinterpreting the CBDT Circular No. 16/2017, which applies only to notified SEZ/IT Parks/Industrial Parks, whereas the assessee’s project was never notified under any such government scheme, and thus, the benefit under the Circular could not have been extended to the assessee.

5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the assessee has failed to furnish any notification/approval from the competent authority recognizing the project as SEZ/Industrial Park, and therefore reliance on CBDT Circular No. 16/2017 was factually and legally untenable.

6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the predominant source of income of the assessee was lease rental from immovable property and not from any systematic or organized business activity, thereby ignoring the judgment of the Hon'ble Supreme Court in the case of Raj Dadarkar & Associates [2017] 81 taxmann.com 193 (SC).

7. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating incidental and compulsory services such as power backup, security, lifts, etc., as "complex commercial support services without establishing independent or standalone business character, which are in fact inherent in property leasing activity and not constituting business per se.

8. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in applying the principle of consistency based on past assessments, whereas it is settled law that each assessment year is separate and the rule of res judicata does not apply to income-tax proceedings, particularly when the AO has applied correct legal principles in the year under appeal as held by Hon'ble Supreme Court in Raja Bahadur Visheshwara Singh v. CIT(1961) 41 ITR 685 (SC), Installment Supply (P.) Ltd. vs Uol 1962 AIR 53 (SC). to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd.

9. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that a mistake committed in one year need not be rectified in the assessment proceedings of subsequent years, by overlooking the fact that it is a settled proposition that there is no heroism that an error in one year cannot be corrected in the assessment of subsequent years.

10. That the order of CIT(A) being erroneous in law and facts be set aside and order of the A.O. be restored.

11. That the above grounds are without prejudice to each other and appellant craves leave to add, alter or amend any ground or grounds on or before the date of hearing of appeal.”

to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. CIT DR submits that CBDT issued circular No.16/2017 wherein it is provided that if the company is engaged in the business of developing, operating and maintaining and industrial park and provide infrastructure facilities to different companies as its business, the lease rent received by the assessee from letting out building along with other amenities in an Industrial Park/SEZ in software development technologies would be chargeable under the head income from house property. However, since the assessee company was not registered as the Industrial Park/ SEZ by the board, the benefit of the said circular could not be extended to the assessee. In the case of the assessee, it had only applied for notification u/s 80IA of the Act under the Industrial Park Scheme 2008, but as per assessee’s own admission, the IT park has not been got notified. The Ld. CIT-DR submitted that entire receipts of the assessee are predominantly containing the rental income from the tenants and, therefore, as per section 22 of the Act, any income arising to the letting out property whether from residential or commercial has to be assessed under the head “Income from House Property”. Ld. CIT-DR submits that the Ld. AO has rightly treated the income of the assessee as rental income and income from other sources and he requested for the confirmation of the said order.

to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. communication, and any other services required by the occupants” and accordingly, assessee has carried its business activities in terms of the objects and income received from lease rent as well as hire charges and maintenance charges was shown under the head “Income from Business or Profession”. Ld. AR submits that lower authorities have placed reliance on the judgment of the Hon’ble Supreme Court in the case of Sultan Brothers Pvt. Ltd. reported in [1994] 51 ITR 353 (SC) and CBDT Circular No.16/2017 for treating the business income as income from house property and income from other sources. Ld. AR submits that aforesaid judgment of Hon’ble Supreme Court has been discussed and distinguished by the apex court in the case of Chennai Properties & Investments Ltd. vs. CIT, Central-III, Tamil Nadu [2015] 56 taxmann.com 456 (SC) wherein the Hon’ble Supreme Court concluded that the question of identifying the income as income from ‘business or profession’, depend on situation of each case whether particular business is letting out or not. Ld. AR submits that Ld. CIT(A) has considered all the facts and thereafter held the income of the assessee as Income from business or profession which order deserves to be confirmed. Ld. AR also filed a written submission which is placed on record.

to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd.

to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. “6. In the light of the above submissions and documents filed by the AR during the course of appellate proceedings, the various grounds of appeal are adjudicated as below: 6.1 Various Grounds of Appeal: In various grounds of appeal, the appellant has contested the treatment of the income earned by the assessee as rental income by the AO rather than business income as shown by the appellant. During the course of assessment proceedings, the AO noted that the assessee is deriving income from following heads: a. Maintenance Income b. Lease Rent The AO noted that the main sources of assessee’s income is rental income received from constructed portion of property given on rent and receipt of maintenance income. The AO further noted that the assessee offered the entire receipts from the above activities under the head "business & profession" rather than "house property" or "income from other sources". The AO further noted that CBDT Circular No. 16 of 2017 dated 25.04.2017 on the subject of "lease rent from buildings in an Industrial Park/SEZ" clearly outlines that income from letting out of premises along with other facilities in an Industrial Park/SEZ is to be charged under the head "Profits & Gains of Business". The AO held that only those assessees who are located in an Industrial Park/SEZ are covered under the above Circular. Accordingly, Toner the AO directed the assessee to justify whether the appellant is recognized as an Industrial Park/SEZ. The AO from the reply of the assessee filed during the course of assessment proceedings held that the assessee is neither an Industrial Park nor SEZ and hence, is not covered under Circular No. 16 of 2017 issued by CBDT. The AO accordingly held that as the assessee does not fall under the category of recognized Industrial Park/SEZ, the lease rental income would be assessed as Income from House Property. Similarly, the maintenance income was treated as income from other sources. The appellant during the appellate proceedings reiterated the contentions as filed before the AO. The contentions of the appellant are summarized as under: a. The appellant company was incorporated on 25.11.2004. As per the MOA, the main object of the company includes "to build, set-up, develop, maintain and/or operate software technology park, IT Park, Industrial Park, SEZ and to rent out the space and provide infrastructure and other facilities to the occupants. b. The appellant applied for allotment for an Institutional plot to NOIDA which was allotted on 17.02.2006. As per the appellant, the lease deed of the said plot stipulates that the same has to be used only for software IT Units/ITES Units. to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. c. As per the appellant, the construction and setting up of the IT Park has been done as per the norms of NOIDA. Further, as per appellant, the construction of the facilities was in accordance with the policies and procedures for institutional property management issued by the NOIDA. As per the said policy, 10% of the said FAR would be permitted for institutional facilities and rest 90% has to be used for IT/ITES Services. The Institutional facilities permitted have also been highlighted by the appellant and the same has been made part of the submissions in paper book. d. Hence, as per appellant, following the policy of the NOIDA, the appellant allocated 90% of the total space for core activities and 10% for various other commercial facilities. The appellant further stated that approval of Ministry of Communication and Information Technology Government of India was received for setting-up of infrastructure facilities under the software technology park scheme. e. Further, as per appellant, the leading customers of the appellant include Bharat Heavy Electricals Limited, KPMG, Samsung Engineering Pvt. Ltd. and Hexaware Technologies Limited etc. The appellant further highlighted the nature of activities of various customers who had applied for space at the facility of the assessee. Further, as per appellant, perusal of the agreements executed with various customers reveal that the assessee was supposed to provide the operational and maintenance services including supply of electricity, operation & maintenance of lifts, common areas, firefighting equipment, manning of guard room, pest control, security, driver rooms and other common facilities including cafeteria, Food court, ATMs, Private Desks, Health Club and Common Reception. f. The appellant further stated that the assessee has to employ a large number of people for rendering services to its customers. As per appellant, the assessee had more than 150 full time employees to manage the affairs of the IT Park apart from hundreds of contractual manpower. g. The appellant further stated that the assessee is maintaining an IT Park and the observations of the AO that the assessee has not set-up an IT Park are incorrect. Moreover, as per AR, the AO is not correct in holding that the assessee is not registered under the Industrial Park Scheme, 2008. As per appellant, the assessee has applied for the said scheme but the above criteria cannot be the sole deciding factor in changing the head of income of the assessee. As per appellant, the notification under Industrial Park Scheme, 2008 can have consequences with respect to tax benefits u/s 801A and not on the issues which have been adjudicated by the AO. h. Further, as per appellant, the tenants are involved in activities related to software or information technology. Moreover, as per appellant, the 10% space used for providing various facilities is as per the norms of the NOIDA to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. as the balance 90% space has been used for core activities. The appellant further stated that the observations of the AO with respect to the nature of work of Connaught Plaza Restaurants Pvt. Ltd. (Macdonalds) and Jubilant Foodworks Limited (Dominoz) are incorrect for the reasons that the said entities are providing facilities to the software clients housed in the other parts of the building. i. The appellant further stated that the scope of IT and ITES services is given by the CBDT in its Notification No. 11521 dated 26.09.2000 and the same have been placed in the paper book. As per the appellant, the customers operating from the core 90% area are carrying out one or the other activities as listed in the above said notification. The appellant has highlighted the nature of work carried out by the entities in the core area including India Mart Intermesh Limited, Samsung Engineering India Pvt. Ltd., KPMG, Bharat Heavy Electricals Limited etc. to justify its position that the entities are operating in IT/ITES Services. Accordingly, as per AR, the appellant has developed an IT Park and has also been operating the same. Accordingly; the AR stated that the assessee carried out the complex commercial activities and hence, its income has to be characterized as business income and not income from house property/income from other sources. Conclusion Perusal of the assessment order reveals that the AO has treated the income of the assessee from leasing out of space and maintenance income from common facilities provided to the lessees as rental income and income from other sources respectively. The basic premise of the AO in doing the said alteration in the heads of income is based on CBDT Circular No. 16 of 2017 wherein, it has been directed that, Income from letting out of premises in an Industrial Park/SEZ is to be charged under profits & gains of business. As per AO, only an entity located in Industrial Park/SEZ can claim benefit of treatment of income from leasing out of property as Toner Blysiness income and not any other assessee. Also, the AO has noted that activities Sofia number of clients on the premise of the assessee were not related to IT Odented Services. The appellant on the other hand stated that the reliance of the AO on the CBDT Circular No. 16 of 2017 dated 25.04.2017 is misplaced for the reason that though the said circular extends specific benefit to entities operating in an IT Park/SEZ but it nowhere denies the said benefit to entities not operating in a notified IT Park. Further, as per appellant, the activities of all the clients are IT Oriented and the observations of the AO are incorrect viz a viz the nature of the activities being carried out on the premises of the assessee. It needs to be highlighted that the assessee has built an institutional premises as per the norms of the NOIDA. As per the policy document for institutional premises, 90% of the space is to be used for core activities and 10% can be used for providing various services like food courts, ATM etc. to the clients occupying to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. the core 90% of the space. The observations of the AO viz a viz the outlets of Dominos and MacDonalds, that the said entities are not into IT related services, are incorrect to the extent that said entities fell into the category of facility providers occupying 10% of the space as ordained by the policy document of the NOIDA. On the issue of other entities occupying the premises of the assessee including KPMG, BHEL, Samsung etc.; the appellant has provided an exhaustive list of activities which shall fall in the category of IT enabled services as per CBDT Notification No. 11521 dated 26.09.2000. The said notification is reproduced below for ready reference: "In exercise of the powers conferred by clause (b) of item (i) of Explanation 2 of section 10A, clause (b) of item (i) of Explanation 2 of section 10B and clause (b) of Explanation to section 80HHE of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby specifies the following information technology enabled products or services, as the case may be, for the purpose of said clauses, namely: (1) Back-office Operations, (ii) Call Centers (iii) Content Development or Animation (iv) Data Processing, (v) Engineering and Design: (vi) Geographic Information System Services; (vii) Human Resource Services; (viii) Insurance Claim Processing (ix) Legal Databases; (x) Medical Transcription; (xi) Payroll; (xii) Remote Maintenance; (xiii) Revenue Accounting (xiv) Support Centers, and (xv) Web-site Services [F. No. 142/49/2000-TPL] From the reading of the above Notification, it is apparent that the scope of IT/ITES Services is exhaustive and as per the appellant, the various clients operating from the premise of the assessee fall in one or another of the activities as cited above. Hence, no adverse inference can be drawn viz a viz the nature of activities being carried out on the premise of the assessee which can cast a shadow on the claim of its income under various heads as shown in the return. Now coming to the core issue of treatment of the income derived from the letting out of the premises and maintenance charges as business income by the assessee and the action of the AO in changing the head of the said income into income from house property and income from other sources. Perusal of assessment order shows that in Para 2, the AO has clearly noted that the assessee is mainly deriving to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. income from lease rent and maintenance operations. The AO in Para 2.1 has further noted that the maintenance income shown by the asseesee is from operation and maintenance of services in common areas like elevators, DG sets, AC plants, fire fighting equipment, O & M of car parking space, O & M of open spaces, security services, insurance of complex, cost of petrol and diesel for common facilities, cost of administrative and maintenance staff, cost of consumables and annual fee to various authorities. It needs to be emphasized here that the assessee in its Memorandum of Association has clearly stated in the main objective at No. 6 as under: "To build, set up, develop, maintain and/or operate Software Technology Park, IT Park, Industrial Parks, Special Economic Zone (SEZ) and to rent out space and provide infrastructure and other facilities to the occupants of the Software Technology Park, IT Park, Industrial Park, Special Economic Zone (SEZ) including 100% power back-up, Air conditioning, furnishing, data communication and any other services required by the occupants” From the reading of the above clause of MOA it is clear that the assessee has specifically mentioned that renting out of space and providing various services to the occupants is one of the main objectives of the assessee company. The above issue has been further clarified by the Hon'ble Supreme Court in the case of Raj Dadarkar & Associates reported at [2017] 81 taxmann.com 193 (SC) wherein it has been held that apart from the mentioning in the Memorandum in Association of an object clause, it also needs to be seen whether the assessee was engaged in any systematic or organized activity of providing service to occupiers of shops/stalls. So, apart from the Memorandum of Association mentioning the nature of activities of the assessee, it also needs to be examined, how the assessee is involved in providing various services to the occupants. The Hon'ble High Court of Allahabad in the case of Meeraj Estate & Developers v. CIT reported at [2020] 113 taxmann.com 231/269 Taxman 134/418 ITR 681 has held that to claim income from letting out of a premises as business income, there should be recurrent, organized and systematic business activity. Perusal of the submissions of the appellant reveal that the assessee provided following services to the occupants of the leased premises: a. Furniture, fixtures and utilities so that premises is fully ready for occupation. b. Maintenance of common areas (Including corridors, passage, stairway, open space, basement, etc.). c. Maintain business center will all facilities including meeting rooms. d. Maintain lifts and air conditioning system. e. Maintain uninterrupted supply of electricity along with 100% power back-up facility and maintain DG Sets. f. Maintain cafeteria/food court. g. Maintain manned and secured parking facility and traffic management and security in the whole complex. h. Maintain complete fire-fighting system along with all fire-fighting equipment in the whole complex and obtain all required licenses/ approval and to ensure compliance in relation to fire prevention and fire safety. i. Maintain uninterrupted supply of soft water. J. Provide space/ facility for installation of satellite antenna/ dish and/or other telecommunication/ wireless equipment. k. Maintain the entire sanitation system and electrical fittings. l. Maintain STP/WTP/effluent treatment system and rain water harvesting facility m. Provide façade cleaning services. n. To provide Pest Control in all common areas. o. To provide and maintain common driver room facility in the compound. p. To provide and maintain ATM facility, Travel Desk, Health Club cum Gym. q. Maintain common reception area. r. Maintain washrooms in the whole of the building.

The above submissions of the appellant reveal that apart from the object clause in the Memorandum of Association, the assessee is also doing a systematic and organized activity to provide various services to the occupants of the premises. The above has also been confirmed by the AO in assessment order. The assessee is involved in a systematic and recurring activity in providing various services and as per the additional evidences submitted during the course of appellate proceedings, 150 regular employees and hundreds of contractual employees were engaged to provide various services at the premises. In above circumstances, it is obvious that apart from the object clause in the MOA mentioning about the activities of the e assessee, the actual activities carried out by the assessee point towards a very systematic, recurrent and organized support system being provided to the occupants of the premises leading to a fair conclusion that the nature of income of the assessee is business income rather than rental income. On the above issue, the Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd. vs. Commissioner of Income-tax, Central -III, Tamil Nadu reported at [2015] 56 taxmann.com 456 (SC) has held as under: to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. Section 28(1), read with section 22, of the Income-tax Act. 1961 Business income Chargeable as (Letting out of properties) Whether where in terms of memorandum of association, main object of assessee-company was to acquire properties and earn income by letting out same, said income was to be brought to tax as business income and not as income from house property - Held, yes (Paras 5 and 11) (In favour of assessee) …………………….. The Memorandum of Association of the assessee-company mentions that main object of the company is to acquire and hold the properties and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. It may further be noted that in the return that was filed, entire income which accrued and was assessed in the said return was from letting out of these properties. It is so recorded and accepted by the assessing officer himself in his order. [Para 5] In aforesaid circumstances, it is concluded that 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 treated as 'income from the house property Accordingly, Instant appeal is allowed and order of the High Court is set aside. [Para 11] Further, the Hon'ble Supreme Court of India in the case of Principal. Commissioner of Income-tax vs. M.P. Entertainment and Developers (P.) Ltd. reported at [2024] 169 taxmann.com 139 (SC) has held as under: SLP dismissed against impugned order of High Court that where assessee- company's main object was business of constructing, owning, acquiring, developing, managing running, hiring, letting out, selling out or leasing shopping mall, rental income derived by letting out properties in mall, was to be taxed as income from business and not as income from house property Further, the Hon'ble Supreme Court of India in the case of Rayala Corporation (P.) Ltd. vs. Assistant Commissioner of Income-tax reported at [2016] 72 taxmann.com 149 (SC) has held as under: "Where assessee-company was engaged in business of leasing out its house properties to earn rent, income so earned as rent should be treated as 'business income', and not as 'income from house property" Further, the Hon'ble High Court of Madras in the case of Commissioner of Income-tax vs. G.V. Foundations (P.) Ltd. reported at [2022] 138 taxmann.com 168 (Madras) has held as under: to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. "Where assessee-company had let-out its business premises along with other amenities and received certain rental income, since only commercial space was given by assessee on a license basis, rental income received thereon was to be assessed under head business income and not income from house property" Further, the Hon'ble High Court of Kerala in the case of Commissioner of Income-tax, Thiruvananthapuram vs. Oberon Edifices & Estates (P.) Ltd. reported at [2019] 103 taxmann.com 413 (Kerala) has held as under: “Where primary intention of assessee by letting out shops in mall was commercial exploitation of property, income so derived from same would be assessed as income from business and not as income from house property" Further, the Hon'ble High Court of Karnataka in the case of Commissioner of Income-tax -III vs. Velankani Information Systems (P.) Ltd. reported at (2013) 35 taxmann.com 1 (Karnataka) has held as under: Section 28(1), read with sections 22 and 56, of the income-tax Act, 1961- Business income -Chargeable as [Rental income) - Assessment year 2005- 06-Assessee-company let out specialized buildings in STP and provided comprehensive facilities to IT industry Whether, where agreements for letting out of building and provision of services were entered into contemporaneously and object was to enjoy entire property as a whole, which was necessary for carrying on business, income could not be separated on basis of separate agreements Held, yes Whether, therefore, income from letting out was assessable as business income and not as income from house property or income from other sources - Held, yes [Para 26] [in favour of assessee) Further, the Hon'ble High Court of Karnataka in the case of Rao Computers Consultants (P.) Ltd. vs. Joint Commissioner of Income-tax, Bangalore reported at [2021] 130 taxmann.com 399 (Karnataka) has held as under; Section 28(1), read with sections 22 and 56, of the Income-tax Act, 1961- Business income -Chargeable as (Rental income) Assessment year 2011- 12 Whether rental income received by assessee from letting out building along with other amenities in an industrial park would be chargeable to tax under head 'income from business and profession and not as 'income from house property - Held, yes [Paras 2 to 5] [In favour of assessee] Further, the Hon'ble High Court of Bombay in the case of National Leasing Ltd. vs. Assistant Commissioner of Income reported at [2024] 168 taxmann.com 39 (Bombay) has held as under: to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. Where assessee-company was engaged in business of purchasing and renting properties and it had no other source of income, assessee was correct in accounting income derived from letting out properties under head 'income from profits and gains of business, and not as income from house property Further, the Ld. Tribunal Bench of Allahabad in the case of Rajesh Kumar Jaiswal vs. DC/ACIT(CENTRAL) Income-tax Department reported at [2025] 174 taxmann.com 276 (Allahabad - Trib.) has held as under: “Where assessee, engaged in trading of liquor and other goods, rented out his property on a day-to-day basis and also provided certain facilities to those who would be taking premises on rent, it would be an organized activity of a composite nature and, thus, income from renting of properties was to be treated as business income and not as income under head 'income from house property” Further, the Ld. Tribunal Bench of Delhi in the case of Active Securities Ltd. vs. Income-tax Officer reported at [2024] 163 taxmann.com 714 (Delhi - Trib.) has held as under: "Where assessee-company, engaged in business of construction of commercial complex had earned rental income for letting out same along with all facilities and amenities to occupants, same was taxable as business income and not rental income" CIRCULAR No. 16/2017 The AO has relied upon above circular while making addition in case of assessee. It shall be important to understand the intent of circular no 16/2017. Perusal of para of Circular No. 16/2017 dated 25.04.2017 reads as under: 3. In view of the above, it is now a settled position that in the case of an undertaking which develops, develops and operates or maintains and operates an industrial park/SEZ notified in accordance with the scheme framed and notified by the Government the income from letting out of premises/developed space along with other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business’. Perusal of the above circular makes it clear that the Department has accepted the judgment of the Hon'ble High Court of Karnataka in the case of CIT vs. Information Technology Park Ltd. and it has been affirmed that in case of an undertaking which develops, operates and maintains and Industrial Park/SEZ in accordance with the scheme framed by the Government, the income from letting out of the premises shall be charged to tax under profits & gains of business. The above circular is not an exclusionary circular, wherein, the businesses located to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. outside notified area have to treat lease money income as rental income. On the contrary, the said circular specifies that in the case of notified SEZs, the income from leasing out of premises has to be treated only as business income. The import of the above circular is not to deny benefit to the assessees who are not notified in a particular scheme but to definitely give benefit to the ones notified under the scheme. This means that in case the assessee is not located in a notified SEZ/Industrial Park, then to determine whether the income from leasing out of properties and maintenance of the same is under the category of business or rental income, the nature of its income has to be analyzed by looking into the memorandum of association, the nature of business activities, the complexity involved in the business and whether the income from leasing out of the properties also includes income from other systematic, recurrent and organized facilities being provided to the clients of the assessee. The Ld. ITAT Bench of Jaipur in the case of Agrani Build estate vs. Principal Commissioner of Income-tax reported at [2023] 153 taxmann.com 300 (Jaipur -Trib.) on the issue of Circular No. 16/2017 dated 25.04.2017 has held as under: "However, Id. PCIT while invoking the provisions of Section 263 of the Act erred in placing a restrictive interpretation to CBDT Circular No. 16/2017 dated 25-04-2017 wherein the Id. PCIT has missed the principal enumerated in the said circular. The said circular emphasizes that lease rent received by the assessee from letting out the building alongwith other amenities in a Software Technology Park would be chargeable to tax under the head "Income from House Property". Therefore, in this way every case of "letting out buildings alongwith other amenities" would automatically fall in the income from business and it will not be merely restricted to Software Technology Park only as has been wrongly understood by Id. PCIT. It is important to mention here that the AO after detailed enquiries and verification on completed the assessment u/s 143(3) dated 15-02-2021 at the return income of Rs. 6,68,250/-. However, the assessment order was revised by the id. PCIT by placing restrictive interpretation to CBDT Circular No. 16/17 dated 25-04-2017 by holding that the said circular is only applicable in the case of Software Technology Park. We also noticed that during the course of proceedings u/s 263 of the Act before Id of the PCIT, the decision of Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd. (supra) was brought to the notice of the ld. PCIT wherein the Hon’ble Supreme Court in this case has held that where object as per object clause of the company was to do business of letting out, the same has to be taxed under the head income from business and profession. It was further held. "Il was highlighted and stressed that the objects of the company must also be kept in view to interpret the activities (Para 8 of the order). Finally, in Para-11 of the order, Hon'ble SC taking into consideration the fact that as per object clause of memorandum of association of the company, its object was to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. letting out of properties held that....."letting of the properties is in fact is the business of the assessee".ld. PCIT has neither distinguished in the case of Hon'ble SC nor has followed the same. The order of Id. PCIT is contrary to the low laid down by the Hon'ble Supreme Court. Thus from the totality of the discussion, we are of the view that in the present case since the assessment was completed by the AO on the basis of exhaustive enquiries and detailed submissions filed by the assessee firm and even otherwise Explanation 2 to Section 263 inserted vide Finance Act, 2015 cannot override the basic requirements of Sub-section (1) of Section 263. In view of the above discussion, the treatment of the income from leasing of properties and income from maintenance of properties by the assessee is held to be in the nature of business income. Also, the AR has submitted that the AO has not followed the rules of consistency as the characterization of income by the appellant was duly accepted in the assessment orders passed u/s 143(3) for AYs 2012-13 dated 11.03.2015, A.Y. 2013-14 dated 08.02.2016 and AY 2014-15 dated 23.08.2016 and for AY 2013-14 under section 148 dated 31.03.2025 and for AY 2023-24 under section 148 dated 31.03.2025. It is seen from the above assessment orders that no change in the character of business income from leasing out of properties has been done by the AO. The above facts reveal that the AO has not been inconsistent in his approach during framing the assessments in the cases of appellant wherein, the same issue has been handled differently in different years. Accordingly, in view of the above discussion and stated judicial pronouncements, the contentions of the appellant are found to be correct and hence various grounds of appeal are allowed.”

14. From the above, it is seen that ld. CIT(A) has observed that the nature of income of the assessee has to be analyzed by looking into the MOU, business activities carried out, the complexity involved in the business and whether the income from leasing out of the properties also includes income from other systematic and organized activity provided to the tenants by the assessee. As observed above in this case, the main object of the assessee is to build, set up, develop, maintain and/ or operate Software Technology Park, IT Park, Industrial Parks, special Economic Zone (SEZ). The Hon’ble Supreme Court in the case of Chennai Properties & Investments Ltd. vs. CIT (supra) has followed the judgement of the Apex court in the case of Karanpura Development Co. Ltd Vs. CIT reported in (1962) 44 ITR 362(SC) wherein the hon’ble court has held that “……deciding factor is not the to 5334 /Del/2025 C.O. Nos.221 to 223/Del/2025 DCIT vs. M/s Advant It Park Pvt. Ltd. ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them….”. It was stressed upon by the Hon’ble Court that the object of the company also kept in view in judge the nature of activities. The Hon’ble Supreme Court after considering the judgment of Sultan Brothers (P.) Ltd. (supra) relied upon by the revenue in the present case held the rental income as income from Business or profession by making following observations: “4. We have heard the learned counsel for the parties on the aforesaid issue. Before we narrate the legal principle that needs to be applied to give the answer to the aforesaid question, we would like to recapitulate some seminal features of the present case.

5. The Memorandum of Association of the appellant-company which is placed on record mentions main objects as well as incidental or ancillary objects in clause III. (A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as "Chennai House" and "Firhavin Estate" both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. What we emphasise is that holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. It may further be recorded that in the return that was filed, entire income which accrued and was assessed in the said return was from letting out of these properties. It is so recorded and accepted by the assessing officer himself in his order.

for Assessment Years 2017-18 & ITA No.5334/Del/2025 for Assessment Years 2018-19 19. As stated above, the facts involved in Ay 2016- 17 are identical to the facts in both of these appeals. Before us, both the parties have made same arguments, thus, by following the observations made hereinabove in for Assessment Year 2016-17 which are mutatis mutandis applied in both appeals i.e. ITA No.5333/Del/2025 for Asst. Year 2017-18 and ITA No.5334/Del/2025 for Asst. Year 2018-19, accordingly, both the appeals of the Revenue are dismissed.

Order pronounced in open Court on 22.01.2026.