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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
O R D E R PER RAJESH KUMAR, A.M:
These two appeals filed by the Revenue are directed against the order(s) of the Commissioner of Income Tax(Appeals)-8, Mumbai, dated 21-03-2016, for the AYs.2011- 12 & 2012-13. Since common issues are involved in both these appeals, except the amounts mentioned therein, these appeals are heard together and decided by this common order. For the sake of convenience, (AY.2012-13) is taken up first.
In this appeal, Revenue has raised the following Grounds:
: 2 : & 4262/Mum/2016 “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in treating the income of the assessee from operation and maintenance of Information Technology Park amounting to Rs.25,72,92,631/- as income under the head 'Profits and Gains of business or profession' without appreciating the fact that the assessee had fulfilled all the conditions prescribed in section 22 and leasing out of premises or renting out of property is not the object clause of the MOD of the assessee company and hence, the income arisen from the property should be brought to tax under the head 'Income from House Property.”
"Whether on the facts and circumstances of the case in law, the CIT(A) erred in allowing operating expenses of Rs.4,00,96,685/-, administrative expenses of Rs.2,65,79,716/- and depreciation of Rs.33,27,33,080/- as deduction u/s.37 of the I.T.Act without appreciating the fact that the assessee's income has been treated as 'income from house property'.
The appellant prays that the order of CIT (A) on the above ground be set aside and that of Assessing Officer be restored.
The issue raised in Ground No.1 by the Revenue in this appeal is against the order of CIT(A) directing the AO to treat the income of assessee from operation and maintenance of Information Technology Park amounting to Rs.25,72,92,631/- as income under the head ‘Profits and Gains of business or profession by reversing the order of AO wherein it has been held that assessee has fulfilled the conditions prescribed u/s.22 of the Income Tax Act (Act) and also that leasing out of property is not in the object clause of the Memorandum and Articles of Association of the assessee-company.
3.1. The fact in brief are that assessee-company is engaged in the business of development of properties. During the year it filed its return of income on 28-09-2012 declaring loss at Rs.62,30,66,774/-. The case of the assessee was selected for scrutiny and notices were duly issued and served on the : 3 : & 4262/Mum/2016 assessee. Upon perusal of the P&L A/c, AO observed that assessee has income by way of lease and maintenance charges aggregating to Rs.25,72,92,631/-, which was treated as ‘business income by the assessee’. The AO observed that the letting out is not of business of the assessee-company and assessee-company is following Project Completion Method and as a result, the assessee capitalized all the expenses incurred in connection with developmental activities and thus, called upon the assessee to show cause as to why the lease rentals and maintenance charges should not be brought to tax under the head ‘house property’, which was replied by assessee vide letter dt.02-02-2015. The AO also observed that the leasing out of property or letting out is not appearing in the main object in the Memorandum of Association of the assessee- company and ultimately rejected the contentions of assessee, and assessed the same as ‘income from house property’ by allowing deduction @30% u/s.24(a) of the Act.
3.2. In the appellate proceedings, Ld. CIT(A) allowed the appeal of assessee, by observing and holding as under:
5.2. Even a cursory glance to the section 22 makes it abundantly clear that as soon as the parameters prescribed in section 22 of the I.T.Act are satisfied or complied, the income requires to brought to tax under the head ‘income from House Property’. Now let us see what the criteria’s are prescribed by the section 22 for this purpose in nutshell. Following are the criteria prescribed by Section 22 i. There should be house, ii. It should be owned by the assessee and iii. Such house should not be used by the assessee for his own business purpose.
3.3. Ld. DR vehemently argued that the income received by assessee in the nature of property income as it falls within : 4 : & 4262/Mum/2016 the four corners of the provisions of Section 22 of the Act. The AO has comprehensively discussed the issue and came to the reasonable and correct view that income is to be assessed u/s.23 of the Act. Ld.DR, relied heavily on the order of AO and in the case of CIT Vs. Shambhu Investment Pvt. Ltd., [249 ITR 7], East India Housing & Development Trust Ltd., Vs. CIT [42 ITR 49] (SC) and CIT Vs. Ansal Housing Finance & Leasing Co. Ltd., [29 taxmann.com 303] (Del) and thus prayed for the Bench that the order of CIT(A) may kindly be reversed that of AO may be restored.
3.4. Ld.AR, on the other hand, submitted that assessee has developed an Information Technology Park in Chennai. Ld.AR also referred to the Memorandum of Association and Articles of Association of the assessee and pointed out that under the object clause, it has been mentioned that it is the business of assessee to buy, sell, lease, let-out or sub-let or acquire tenancy and/or development rights in relation to any construction or development of buildings, other properties, estates or other moveable or immoveable properties and in any right title or interest therein. Ld.AR submitted that Ld.AO while deciding the issue, has reproduced only one part of the main object, leaving the second part and therefore the order passed by the Ld.AO is without application of mind. Ld.AR also referred to the Lease Deed entered into with M/s. Amazon Development Centre India Private Limited, and pointed out that – it has been stated that the lessor is the owner, developer and promoter of building namely S.P.Infocity situated at MGR, Kandnchavadi, Perungudi, Chennai and lessee is in the development of Information Technology Park in : 5 : & 4262/Mum/2016 Chennai. Ld.AR took the Bench to various terms and conditions as contained in the Lease Deed. Similarly, Ld. AR took us to the copy of the Balance Sheet, showing the expenditure incurred on the said Technology Park and also capitalization done during the year. Similarly, Ld.AR referred to the copies of Maintenance Agreements filed in the Paper Book. Ld.AR submitted that the entire asset is for business purpose of the assessee and not in the nature property as envisaged u/s.22 of the Act. Ld.AR relied heavily on the decision of the Hon'ble Karnataka High Court in the case of CIT VS. Velankani Information Systems (P.) Ltd., [265 CTR 0250 / 218 Taxman 0088 / 94 DTR 0357] (Karnataka), wherein the Hon'ble Court has held that rental income received by the assessee falls under the head on profits and gains of business and profession and any other interpretation will defeat the very object of introduction of Section 80-IA as well as the scheme, which is framed by the Government in developing the industrial park in the country. In this case also assessee was engaged in the business of developing, operating and maintaining an Industrial Park and providing infrastructure facilities to different companies as its business, the lease rent received by the assessee from letting out building along with other amenities to IT industries. Similarly, the agreements were entered into with in respect of service amenities provided in that deduction, the Hon'ble Court has held as to state herein above. Ld.AR also referred to Circular No.16/2017 issued by the Govt. of India, Ministry of Finance, Department of CBDT dt.25-04-2015 in which it has been clarified about lease rent from letting out of : 6 : ITA Nos. 4261 & 4262/Mum/2016 building/Space developed along with amenities in the industrial park/SEZ are to be treated as ‘business income’. Therefore, Ld.AR prayed that the Ld.CIT(A) has passed the order by following the earlier year’s order, in which all these aspects were taken care of and passed a very reasoned and speaking order, which may kindly be upheld.
3.5. After hearing both the parties and perusing the material on record, we observe that the assessee is engaged in the business of developing properties and specially developed Information Technology Park in Chennai. The assessee has leased out the building to M/s. Amazon Development Centre India Private Limited and others by way of lease agreements and also entered into a special agreement for providing for amenities and facilities, which have been treated as ‘business income’. We further observe from the perusal of Object Clause in the Memorandum of Association and Articles of Association that it has been clearly stated that it is the business of assessee to buy, sell, construct and lease-out the properties. Ld.CIT(A) has passed a very reasoned order after following the orders of coordinate benches. We therefore do not find any infirmity in the order of CIT(A) and the same is affirmed by dismissing the ground of Revenue. This Ground of appeal raised by Revenue is dismissed.
4. Ground No.2 raised by Revenue is against the order of CIT(A) in allowing the operating expenses of Rs.4,00,96,685/-, administrative expenses of Rs.2,65,79,716/- and depreciation of Rs.33,27,33,080/- u/s.37 of the Act, without appreciating : 7 : & 4262/Mum/2016 the fact that AO has treated the income as ‘income from house property.’ 4.1. Since we already uphold the order of CIT(A) by dismissing the ground raised by Revenue, wherein the Revenue has challenged the findings of Ld. CIT(A) in treating the income of assessee from operation and maintenance of Technology Park of Rs.25,72,92,631/- as income under the head ‘profit and gains of business or profession’. Hence, the ground raised in Ground No.2 is infructuous and not to be adjudicated. In other words, the order of CIT(A) is upheld.
In the result, this appeal of Revenue is dismissed.
As far as the for the AY.2011- 12, filed by Revenue is concerned, the facts and issues are common in this appeal as decided by us in ITA No. 4261/Mum/2016, the Grounds raised in this appeal of Revenue are also dismissed. Hence, this appeal of Revenue is also dismissed.
To sum-up both the appeals of Revenue are dismissed.
Order pronounced in the open court on 19.08.2019 (MAHAVIR SINGH) (RAJESH KUMAR) "याियक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER मुंबई/Mumbai; "दनांक/Dated : 19.08.2019 TNMM