Lease rental income from IT park qualifies as business income under sec.80IA

The Tribunal held that the lease rental income derived from letting out a building for commercial exploitation as a technology park constitutes business income under sec.80IA of the Act. The Commissioner upheld this decision, emphasizing the functional facilities provided for software tenants. Consequently, the Tribunal dismissed the Revenue's appeal and the assessee's cross objection, affirming the treatment of lease rental income as business income in running an IT park.

---

---

Issues:
1. Whether lease rental income should be treated as business income.
2. Whether the disallowance of expenditure made by the Assessing Officer is justified.

Analysis:
1. The main issue in this case is whether the lease rental income should be treated as business income. The Revenue contended that the income derived from letting out a building should be assessed under the head "income from house property" and not as business income. The Revenue relied on previous court decisions to support their argument. However, the Tribunal considered the object clause of the assessee company, which indicated that the company's main object was to commercially exploit the property by developing and maintaining a technology park. The Tribunal held that the income from such activities constitutes business income, as recognized under sec.80IA of the Act and the industrial park scheme. Therefore, the Tribunal agreed with the Commissioner of Income-tax(Appeals) that the lease amount collected is in the nature of business income.

2. The second issue pertains to the disallowance of expenditure made by the Assessing Officer. The Commissioner of Income-tax(Appeals) considered various decisions by different Benches of the Tribunal, which consistently held that running an IT park is a business activity, and thus, the lease amount collected is considered as business income. The Commissioner also distinguished the facts of previous court cases cited by the Revenue, emphasizing that the present case involves running an industrial park as a business proposition with functional facilities necessary for the smooth working of the software tenants. The Commissioner concluded that the Revenue's cases were not applicable to the facts of the present case. Therefore, the Commissioner upheld the treatment of lease rental income as business income and deleted the disallowance of expenditure made by the Assessing Officer.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue and the cross objection filed by the assessee, upholding the decision of the Commissioner of Income-tax(Appeals) that the lease rental income is to be treated as business income. The Tribunal found that the activities of the assessee company in running an IT park constituted a business activity, as recognized under the relevant provisions of the Income Tax Act.

---