TaxTMI 
TaxTMI 
2020 (4) TMI 720
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..... 2. We shall first take up the appeal filed by the assessee in ITA No.202/Bang/2019 concerning the AY 2011-12 for adjudication. 2.1 Briefly stated, the assessee undertaking is engaged in the development of Special Economic Zone (SEZ) and is eligible for claiming deduction u/s. 80IAB of the Income-tax Act, 1961 [the Act]. The assessee has derived lease/rental income from development of SEZ. The lease/rental income from SEZ was declared by the assessee under the head 'income from house property'. The assessee also claimed deduction from such income u/s. 80IAB while filing the return of income. The lease income so declared by the assessee under the head 'income from house property' was accepted by the AO as such and deduction claimed u/s. 80IAB thereon was also allowed at the time of framing assessment u/s. 143(3) of the Act. The assessment was accordingly completed after allowing deduction of Rs. 1,14,54,343 u/s. 80IAB of the Act. After the completion of assessment, the AO initiated rectification proceedings u/s. 154 of the Act whereby deduction allowed u/s. 80IAB against the lease income declared under the head 'income from house property' was sought to be withdrawn on the gr....
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....ence to the Circular, it was pointed out that the issue whether income arising from letting out of premises/developing space along with other amenities in an industrial park/SEZ is chargeable under the head 'profits & gains of business' or under the head 'income from house property' has admittedly been the subject matter of litigation all along. On the face of such admission, the CBDT has opined that income generated from SEZ is chargeable under the head 'business income' after taking cognizance of decisions rendered by the jurisdictional High Court of Karnataka in the case of Velankani Information Systems Pvt. Ltd. and CIT v. Information Technology Park Ltd. In this backdrop, the ld. AR stridently submitted that the express CBDT Circular clearly spells out that letting out of building/developing the space in SEZ is chargeable under the head 'business income'. Thus, on the face express assertions made in CBDT circular towards raging controversy on nature and character of lease income, eligibility of deduction u/s. 80IAB cannot be denied without indulging in long drawn debate. 3.2 In the circumstances, it was contended that the rectification action of the AO is beyond the scope o....
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.... 25.4.2017 squarely on the point was made and relied upon together with judicial precedents noted above. 6. On perusal of CBDT Circular mentioned above, we observe that the CBDT Circular issued is squarely on the point of taxability of lease rentals and consequent eligibility of deduction available under the Act. Keeping in mind the object of beneficial provision, the CBDT has directed the field officers to allow eligible deduction to the taxpayers in respect of lease rent from let out buildings/developed space in an industrial park/SEZ. The CBDT has clearly directed the Officers to treat such lease rent as business income. Thus, in the light of CBDT Circular, the benefit of deduction available u/s. 80IAB of the Act could not have been denied to the assesse on the pretext the income has been offered for taxation under the head 'income from house property'. At this juncture, we further take note of the decision of the Hon'ble Supreme Court in the case of Cocanada Radhaswami Bank Ltd. (supra) and Chugandas & Co. (supra) for the proposition that nature of income has to be decided on commercial principles and a wrong classification would not alter the true character of income. The t....
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....ssessee on the sole ground that assessee itself has offered income from letting out of SEZ property under the head 'income from house property' and consequently deduction u/s. 80IAB cannot be allowed with reference to income reported under the head 'house property'. 10. We have heard the rival submissions on the issue. We have dealt with an identical issue in ITA No.202/Bang/2019 for AY 2011-12 hereinabove and held that CBDT Circular No.16/2017 clearly addresses the issue in favour of assessee. The CBDT has taken note of the decisions of the jurisdictional High Court while directing the field officers to adjudicate the issue in favour of assessee in similar circumstances. We thus find considerable merit in the plea of assessee for allowability of deduction claimed from income derived by way of letting out of properties. The assessee is entitled to benefit of deduction notwithstanding wrong classification of income under the head 'income from house property'. The AO was under duty to examine the true nature and character of income while framing assessment regardless of error committed by the assessee in this regard. The claim of assessee under S. 80IAB thus deserves to be allowed....