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Income Tax Appellate Tribunal, “B”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A) for the assessment year 2011-12, in the matter of order passed u/s. 143(3) of the IT Act. 2. First grievance of assessee relates to treatment of receipts earned from the operation and maintenance of an IT park under the head “Income from house property”. 3. Assessee is also aggrieved for disallowance of various expenses. 4. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in the business of operating and maintaining an Income Tax Park at Pune. During the year under 2 NV Projects Pvt. Ltd., consideration, the appellant owned one building - Block "C" - was fully licenced out and one building - Block "B" which was under construction. The assessee returned a loss of Rs.3,86,93,45S/- under the head "business" in respect of the said "C". No expenditure was debited or claimed in respect of Block "B" and all expenses incurred on Block "B" till the end of the year were debited to "Capital Work In progress"
In the impugned order AO assessed income from IT Park under head Income from House property and also declined claim of expenses. By the impugned order CIT(A) confirmed the action of the AO against which assessee is in further appeal before us.
We have considered rival contentions and carefully gone through the order of the authorities below. The issue under consideration as to whether income from IT Park has to be assessed as income from business and profession or income from house property has been settled by various judicial pronouncements. Karnataka High Court in the case of Velankani Informations Systems (P) Ltd., 265 CTR 250 held as under:- I. Section 28(i), 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 specialised 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.
3 NV Projects Pvt. Ltd., 7. Similar view has been taken by Karnataka High Court in the case of Tayota Techno Park India (P) Ltd., I.T.A.No.73/2014 vide order dated 01/04/2014 and held that the assessee-company engaged in the business of developing, operating and maintaining an industrial park and providing infrastructure facilities to different companies, income was assessable under the head Income from business and profession and not under the head income from house property.
Similar view has been taken by the ITAT-Bangalore Bench in case of Global Tech Park (P) Ltd., 119 TTJ 421.
In the instant case before us, we found that assessee company had been formed to carry on business to build, manage and maintain an Industrial / software park. The main object Clause of the assessee reads as under:- "To carry on the business in India and abroad of development of real estate and in that respect to conceive, design, invest, construct, build, manage, set up and maintain, either on its own or under a strategic alliance or joint venture or any other arrangement townships, housing, built-up infrastructure and construction- development projects including but not limited to housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, industrial parks, special economic zones, city and regional level infrastructure, inclusive or exclusive of such infrastructural facilities / amenities such as roads, water supply, street lighting, drainage, sewerage, roads and bridges, mass rapid transit systems and other conveniences, an integrated techno township, technology parks, software parks, electronic and Hardware Technology parks, cybercity and infocity, property including residential flats, office premises, houses, buildings, sheds and other fixtures on lands and buildings and any rights or privileges.”
Assessee had constructed specially furnished buildings, had provided for special electrical connections, special arrangements for 4 NV Projects Pvt. Ltd., antennae and dish, excellent net connectivity for data transmission - in short, the premises had been built to cater to requirements of an Information Technology Industrial park. As the clients of software companies were generally multinational corporations, the assessee had incurred substantial expenditure on landscaping the areas around the building to enhance the aesthetic appeal, and with a view to create a high-class ambience. We found that the entire building was designed under international Building Management System norms whereunder a special computer linked the air conditioning system, the fire fighting system, all electronic equipments, access and security controls. The assessee provided sweeping, cleaning, washing all external areas, daily maintenance of the garden areas, regular cleaning of the external facade of the building.
It is clear from the above that this was not a case of bare letting, so as to fall within the realm of "income from house property". The main intention of the assessee was commercial exploitation of immovable property by way of complex commercial activities. The object of granting the license and earning license fees was purely a business. objective to earn a revenue stream from carrying out the above mentioned complex commercial activities.
Applying the proposition of law laid down by various High Courts as discussed above, we do not find any merit in the action of lower authorities for treating the income under the head income from house property.
5 NV Projects Pvt. Ltd., 13. Accordingly, we direct the AO to treat income of IT park as income from business and profession.
In Ground No. 4,5 & 6, assessee has challenged the disallowance of claim of depreciation, property tax and interest expenditure. As we have already held that income of IT park is assessable as income from business and profession, accordingly, we direct the AO to consider the allowability of all these expenditure under the head income from business and profession as per law.
In Ground No.7, assessee has allowed disallowance of various expenditure like water charges, Rates, Duties and Taxes, Repairs and Maintenance etc., we direct AO to consider the allowability of these expenditure which appears to have been incurred for earning the income from business. The AO should verify the actual incurring of these expenditure and supporting vouchers for the same and to decide the issue afresh as per law.
In the result, appeal of the assessee is allowed in part in terms indicated herein above.