TaxTMI 
TaxTMI 
2012 (6) TMI 653
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of tax on payment of Rent at a specified rate. In this context, reliance is placed on the ITAT Chennai's decision in the case of M/s Ananda Enterprise ITA No.254/10/Mds/ 'A' Bench dated 26.5.2010 where the Hon'ble ITAT has held that when the rent paid by tenant is deducted at source at the rates applicable to "Rent", the income received should be treated as income from House property, but not "Income from Business or Profession" as claimed by the assessee. 2.3 The learned CIT(A) has failed to note that the assessee neither engages in any trade, commerce nor indulges in any manufacturing activity nor involves in any adventure nor concerns in the nature of trade, commerce or manufacture as per definition u/s 2(13) of the Act. The additional facilities or amenities provided to the tenants are mainly for the purpose of charging higher rent as well as attraction of tenants. Mere getting loan from banks and financial organization against mortgage of the property and the future rent receivable will not amount to getting into risk or involves in some adventurous activities. 2.4 The revenue relied on the following judgements which have confirmed the treatment of rent received fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as let out to the tenant namely, car parking space, general lighting on all sides, landscape garden, rain water drain, sewage connection, toilets, lift, storage space, lights and fans etc. Hence, it is requested to treat its property as a commercial asset and the income as business income. 5.6 The assessee's submissions were carefully considered. The assessee never tried to make out a case as to why rental income should be treated as 'business income'. The list of facilities which were provided to the tenants as mentioned in the assessee's reply dated 09.02.2005 no way helps to change the characteristics of the activity of the assessee. Any modem property which is let out will contain all these facilities. 5.7 The facts of the case law cited by the assessee in the case of CIT v. Sanmar Holdings Ltd., [272 ITR 341] are different from that of the assessee's own. In the case, the court relied on the decision in the case of 'Kamapura Development Co. Ltd., v. CIT 1962 [44 ITR 362] which laid down the law as under: 'Earlier, on a consideration of the memorandum of association relating to the main object of the company, it has been found that its object is to acquire and possess ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... building owned by the company let out to tenants - Rent received from tenants - No link between tenants and banking-business carried on by the assessee - income from property rightly assessed under head 'income from House Property' 3. M/s. Shambu Investments P Ltd. v. CIT (263 ITR 143-SC) -The Supreme Court has held that income from properties let out to occupants with furniture and fixtures and lights and air-conditioners and providing service like ward arid ward, staff, electricity and water and other common amenities was assessable in the hands of the assessee as income from house property and not business. The facts of this case are exactly similar to the facts of the assessee. 5.8 Similar view in the assessee's own case is upheld by the CIT(A)-V in ITA No. 51/2003-04 for the A.Y. 1999-00. 5.9 The assessee submitted that it has obtained the approval from the Ministry of Commerce & Industry for construction of an Industrial Park and stated that it is eligible to claim deduction u/s 80-IA. It is necessary at this juncture to reiterate that the assessee was allotted plots inside Thiru-Vi- Ka Indl Estate, Guindy by the State Government for setting up industrial Unit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....80IA(4)(iii) of the Act for the purpose of infrastructure development in the Country. This scheme has defined the "undertaking" to mean any undertaking which is engaged in the business of developing ' developing and operating or maintaining and operating an industrial park notified by the Central Government in accordance with this scheme. In other words, the Ministry' of Commerce empowered under the Act itself recognizes the activity as business activity. 9.29 In view of the above decisions and considering the amount of investment made by the appellant, loans borrowed from the banks and financial institutions the nature of the building, the kind of facilities, amenities and services provided by the appellant, which are evident from the lease agreements, approval letter from Ministry of Commerce and other records filed by the appellant, it is clear the appellant is engaged in the business of development and operation of industrial park, which is a commercial asset, let out with a view to earn profits." The ld. D.R. of the Revenue supported the order of the Assessing Officer and argued that as the payer of the amount on deducted TDS u/s 194(1) of the Act and therefore, the inco....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ld. CIT(A). Therefore, the appeal filed by the Revenue has no tax deducted and is only an academic exercise because irrespective of the head under which the income is assessed the assessee is entitled to deduction u/s 80IA of the Act. 9. We have heard the rival submissions and perused the orders of lower authorities and material on record. In the instant case, the assessee company earned rent income from letting out premises RR Tower - I comprising of 35,975 sq.ft. and RR Tower - II comprising of 70,000 sq.ft. to Alcatel Development Centre Pvt. Ltd. Such rent income earned was Rs. 2,88,17,608/- in the assessment year 2002-03, Rs. 2,55,22,103/- in the assessment year 2003-04. In the assessment year 2004-05, the rent income was earned from namely Alcatel Development Centre, Chennai P. Ltd. Rs. 2,29,84,099/-, Aithent Technologies P. Ltd. Rs. 7,96,935/-, Lapiz Digital Services Rs. 48,66,518/- totaling to Rs. 2,79,30,311/-. In the assessment year 2005-06, the assessee earned rent income of Rs. 4,53,43,205/-. In the assessment year 2006-07, the assessee earned rent income of Rs. 9,61,11,439/-. In the assessment year 2007-08, the assessee earned rent income of Rs. 11,76,03,103/-. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the Ministry unequivocally has stated that the assessee was eligible for deduction under section 80IA(4)(iii) of the Act, which specifically refers to developing, operating and maintaining of an Industrial Park and that the scheme recognizes the activity of an undertaking engaged in development of infrastructural facilities or built-up space with common facilities in any area allotted or earmarked for software development as an eligible Industrial Park and also regards such activity as business activity, held the income in question as business income of the assessee. 12. Before us, the Revenue disputed the findings of the ld. CIT(A) to the extent the ld. CIT(A) held that the rental income derived by the assessee is to be assessed under the head "profit and gains of business". Thus, the only issue, which requires adjudication by us is that the rental income derived by the assessee from letting out is to be assessed under the head "income from House Property" or under the head "Profit and Gains of business or profession". 13. The ld. DR relied upon the order of the Assessing Officer and submitted that the facilities provided by the assessee were provided by any owner of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the aforesaid letter dated 01.08.2001 is placed at page 1 to 2 of the paper book filed by the assessee. The said letter reads as under: No. 15(8)/2001-IP & ID Government of India Ministry of Commerce and Industry Department of Industry Policy & Promotion Secretariat for Industrial Assistance Investment Promotion and Infrastructure Development Cell Udyog Bhavan, New Delhi - 110 011 Dated: August 01, 2001 To, M/s R.R. Industries limited, 94-95, Block- VI, Thiru-VI-KA-Industrial Estate, Guindy, Chennai - 600 032. Sub: Application for setting up of Industrial Park (SIA Regn No. 08/SIA/IP/2001 dated 25.06.2001) under the scheme notified by this Ministry (S.O. No. 1201 (E) dated 01.12.99). Ref: Your application dated 21.06.2001 acknowledged vide SIA Ref. No. No.08/SIA/IP/2001 dated 25.06.2001 and subsequent clarifications vide letters dated 02.07.2001, 12.07.2001 and 16.07.2001. Sir, I am directed to refer to your application on the above mentioned subject and to convey the approval of the Government of India to your proposal for setting up of an Industrial park, in terms of the scheme notified by this Ministry in exercise of the pow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ditions mentioned in para I above, are as per the proposal made by the undertaking and are within the provisions of the scheme notified by this Department vide S.O.No. 1201(E) dated 01.12.1999. The conditions in para I and others included in this letter should be adhered to. The Government may withdraw the above approval in case of failure to comply with any of the conditions. 6. You are requested to confirm acceptance of the above terms & conditions to the undersigned within one months of the issuance of this letter. Yours faithfully, Signed/- (Ashish Sharma) Desk officer Tel: No: 011- 3018356 Fax No: 011- 301 1770 Copy to: 1. Joint Secretary (TPL-II). C.B.D.T., Ministry of Finance, Department of Revenue, North Block, New Delhi (2 copies), along with a copy of the original application dated 21.06.2001 and subsequent letters as detailed on page I. 2. Chief Secretary. Govt. of Tamil Nadu. Fort St. George, Chennai - 600 009. 3. Guard File. Signed/- (Ashish Sharma) Desk officer 16. Thus, a perusal of the above shows that the assessee was only granted approval for setting up of an industrial park. From ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....constructed vaults of special design and special doors and electric fittings, but it also rendered other services to the vault-holders. It installed fire alarm and was incurring expenditure for the maintenance of fire alarm by paying charges to the municipality. Two railway booking offices were opened in the premises for the dispatch and receipt of film parcels. This, it appears to us, is a valuable service. It also maintained a regular staff consisting of a secretary, a peon, a watchman and a sweeper, and apart from that it paid for the entire staff of the Indian Motion Picture Distributors' Association an amount of Rs. 800 per month for services rendered to the licensees. These vaults could only be used for the specific purpose of storing of films and other activities connected with the examination, repairs, cleaning, waxing and rewinding of the films.' 9.2.1 Further, an identical issue to that of the present one had cropped up before the earlier Hon'ble Bangalore Bench in the case of Global Tech Park (P) Ltd. v. ACIT - reported in (2008) 119 IT) (Bang) 421 - wherein it was observed that - 'The assessee having been incorporated with the sole intention of developing Technolo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tries Pvt. Ltd. [262 ITR 517 (Kar)]. In that case, the issue, in brief, was that the assessee was a Private Limited Company and one of its directors had taken certain extent of lands situated at Bangalore on a longterm lease of 36 years under a registered lease-deed and executed a registered deed of transfer In favour of the assessee-company transferring his leasehold rights. Subsequently, the assessee-company built a commercial complex on the said land and allotted the same to various parties and earned income there-from. For the year 1985-86 and 86-87, the assessee filed its returns of income showing losses for which the AO completed the assessments making minor adjustments in computing the losses. The CIT initiated suo motto proceedings u/s 263 and after such proceedings directed the AO to make fresh assessments computing the income from rentals received from the commercial complex under the head "Income 'from house property." On an appeal by the assessee, the Tribunal held that the income derived by the assessee could have been assessed only as income from business and not under the head "Income from house property". According to the Tribunal, since the land over which th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t footing, namely, the assessee had developed about 4.7 million square foot of a technology park in a sprawling area of more than 55 acres by providing various amenities such as roads, street lights, drainage facilities, gardens, high connectivity facilities such as telecommunication towers, sewerage and water treatment tanks, water treatment plants to attain the status of a Soft-ware Technology Park whereas in the case of Shambhu Investment P. Ltd., the immovable was a tiny property and the so called amenities provided to the occupants only as against the amenities provided In a STP to feed a special purpose. Letting out of a building In a STP is incidental whereas the fact in the case of Sambhu Investment was rather predominant and, thus, Sambhu Investment case cannot, at any stretch of Imagination, be equated with that of the present assessee. 9.4 Taking into account the facts and circumstances of the issue, we are, therefore, of the firm view that the case laws on which the Revenue placed reliance cannot come to its rescue." 19. Thus, from the reading of the aforesaid decisions, we find that the decision of the Hon'ble Supreme Court in the case of Sambhu Investment (P.) L....