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Income Tax Appellate Tribunal, B Bench, Mumbai
Before: Shri R.C. Sharma & Shri Ravish Sood
These are cross appeals filed by the assessee and Revenue against the order of the CIT(A) for A.Y. 2010-11 in the matter of order passed under Section 143(3) of the Income Tax Act (hereinafter “the Act”).
2. The common grievance of both assessee and Revenue relates to treating the income from operation and maintenance of industrial park as income from house property in place of income from business. The AO treated the entire income from industrial part as income from house property. By the impugned order the CIT(A) treated the income from facility
2 & 2588/Mum/2016 M/s. NV Realty Pvt. Ltd. charges, CMA charges, etc. as income from business but treated the remaining receipt as income from house property. The CIT(A) also disallowed part of the expenditure. Against the order of the CIT(A), both assessee and Revenue are in further appeal before us.
At the outset the learned A.R. placed on record CBDT circular No.16/2017 dated 25th April, 2017, wherein it was held that no re- characterisation of the lease rental from the letting property with other amenities in an industrial park/SEZ was required. We have carefully gone through the CBDT circular, which reads as under: -
“F.No. 279/Misc./140/2015/ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes
New Delhi, 25th April, 2017
SUBJECT: Lease rent from letting out buildings/developed space along with other amenities in an Industrial Park/SEZ- to be treated as business income.
The issue whether income arising from letting out of premises/ developed space along with other amenities in an Industrial Park/SEZ is to be charged under head 'Profits and Gains of Business' or under the head 'Income from House Property' has been subject matter of litigation in recent years. Assessees claim the letting out as business activity, the income arising from which to be charged to tax under the head 'Profits and Gains of Business', whereas the Assessing Officers hold it to be chargeable under the head 'Income from House Property'.
The matter has been considered by the Board. Income from the Industrial Parks/SEZ established under various schemes framed and notified under section 80IA(4)(iii) of the Income-tax Act, 1961 ('Act') is liable to be treated as income from business provided the conditions prescribed under the schemes are met. In the case of Velankani Information Systems Pvt Ltd, the Hon'ble Karrtataka High Court observed that any other interpretation would defeat the object of section 80IA of the Act and government schemes for development of Industrial Parks in the country. SLPs filed in this case by the Department have been dismissed by the Hon'ble Supreme Court.
3 & 2588/Mum/2016 M/s. NV Realty Pvt. Ltd. In a subsequent judgment dated 30.04.2014 in ITA No 76 & 78/2012 in the case of CIT vs. Information Technology Park Ltd, the Karnataka High Court has reaffirmed its-earlier views. It has held that, since the assessee-company 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 die assessee from letting out buildings along with other amenities in a software technology park would be chargeable to tax under the head "Income from Business" and not under the head "Income from House Property". The judgement has been accepted by the Board.
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'.
4. Accordingly, henceforth, appeals may not be filed by the Department on the above settled issue and those already filed may be withdrawn/not pressed upon.
5. The above may be brought to the notice of all concerned.”
Accordingly, it was argued by the learned A.R. that the Department should be directed to withdraw the appeals, if any, filed with respect to such re-characterisation. In the instant case we find that the Department is in appeal against re-characterisation of lease rental from industrial park. Following the circular, we do not find any merit in the same. With respect to the appeal filed by the assessee we restore the matter back to the file of the AO for deciding allocation of various expenses after treating the entire receipts as income under the head income from business.
In the result, the appeal filed by Revenue is dismissed whereas the appeal of the assessee is allowed for statistical purposes.