ACIT, CHENNAI vs. TICEL BIO PARK LIMITED, CHENNAI

This appeal of the revenue is directed against the order of CIT(A)-11, Chennai dated 13.10.2015 and pertains to assessment year 2007-08.

Shri Supriyo Pal, the learned department representative submitted that the assessee let out the premise and received the rental income. The rental income has to be classified as ‘income from house property’. Referring to Section 80IA of the Act, the department representative submitted that the assessee is eligible for deduction under Section 80IA only in respect of the profit derived from development of infrastructure facilities. In this case, the assessee has let out the premise and received rental income. Therefore, the income which was classified as income from house property is not eligible for deduction under Section 80IA of the Act. However, on appeal by the assessee, the CIT(A) found that the income from letting out of the lab premise is to be classified as “income from business”, therefore, eligible for deduction under Section 80IA. According to the learned representative, even if the lab was let out, the rental income from lab was to be classified as “income from house property”, therefore, not eligible for deduction under Section 80IA of the Act.

On the contrary, Shri Saroj Kumar Parida, the learned counsel for the assessee submitted that the assessee established a bio park for research and development. The laboratory facilities available in the bio park were let out to various biotech industries in the State of Tamil Nadu for research and development. The object and business of the assessee is only to develop the laboratory facilities and let out the same to various biotech industries in the state. Therefore, the rental income from letting out of laboratory of biotech industries has to be necessarily classified as ‘income from business’. Hence, the assessee is eligible for deduction under Section 80IA of the Act.

Referring to the order of the Tribunal in the learned counsel for the assessee submitted that on identical situation, this Tribunal by placing its reliance on the judgment of the Madras High Court in the case of CIT Vs. Elnet Technologies Ltd. in Tax Case (Appeal) No.391 and 392 of 2007 dated 15.10.2012 confirmed the order of the similar CIT(A).

We have considered the rival submissions on either side and also perused the material available on record. The assessee was promoted by TIDCO, TIDEL Park Ltd., Indian Bank, Indian Overseas Bank and Karur Vysya Bank jointly. The state government declared the assessee company as research and development institution. From the material available on record, the state government has also provided concessional power tariff to the assessee. The assessee in fact, developed laboratory facilities and offered the same to various biotech industries for research and development. It is not in dispute that the business of the assessee company is to develop laboratory facilities and let out the same to the various biotech industries in the state. When the assessee develop laboratory facilities and let out the same to various biotech industries, this Tribunal is of the considered opinion that such activity of letting out the various biotech industries has to be necessarily considered as business activity.

In the result, the appeal of the revenue stands dismissed.