TaxTMI 
TaxTMI 
2026 (5) TMI 323
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....the facts relating to this issue are, the assessee is a resident corporate entity stated to be engaged in various activities including the business of development of real estate, lease of properties, etc. 4. For the assessment years under dispute, the assessee had filed its returns of income u/s. 139(1) of the Act. The assessee had developed Information Technology (IT) Parks at Pune and Hyderabad named 'Commerzone'. The concerned IT parks are also recognized as Special Economic Zone (SEZ)/Industrial Parks under the respective SEZ schemes. During the assessment years under dispute, the assessee had derived two streams of income from IT parks: i) Rent from lease of space; ii) Rent from lease of furniture and fit-out and facility management charges towards maintenance and upkeep of premises let out. 5. So far as income at Item no.(i) is concerned, in the returns of income filed u/s. 139(1) of the Act, the assessee had offered them as 'income under the head house property'. Subsequently, on 30.11.2017, a search and seizure operation u/s. 132 of the Act was carried out in case of the assessee. On the date of search and seizure operation, assessments for the impug....
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....al received from the IT Parks recognized as SEZ is assessable under the head 'income from business and profession'. Thus, he allowed assessee's claim. 8. Before us, ld. DR, strongly relied upon the reasoning of the A.O. and submitted that once the assessee itself has recognized the income under the head 'income from house property', it cannot be permitted to change the head of income. 9. Per contra, ld. Counsel appearing for the assessee strongly relied upon the observations of the first appellate authority. Further, he submitted that the issue is no more res integra in view of the ratio laid down in the following decisions: a) ACIT vs. Gigaplex Extate Pvt. Ltd. (in ITA No. 2506/Mum/2021 vide order dated 31.01.2023) b) DCIT vs.Mindscpase Business Park Pvt. Ltd. (in ITA No. 433 & 434/Mum/2022 vide order dated 29.08.2022) 10. We have considered rival submissions in light of the judicial precedents cited before us and perused the materials on record. As could be seen from the discussions made herein before, there are two aspects to the issue. Firstly, whether in a proceeding u/s. 153A of the Act, the assessee can make a fresh claim beneficial to it and, seco....
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.... the Act, was also initiated against that assessee (M/s. Mindspace Business Park Pvt. Ltd. for AY. 2015-16 & AY. 2016-17) and like in the present assessee's case on the date of search these assessment years were abated assessments; and that assessee (M/s. Mindspace) was also letting out premises situated at SEZs and offering the rental income under the head "house property" and pursuant to the notice u/s 153A of the Act while filing the return of income had claimed the rental income under the head "Income from Business and Profession". The AO did not accept the claim made by the assessee by changing the head of income and assessed it under the income from "house property" as similarly done in the present assessee's case. This action of AO was challenged before the Ld. CIT(A) in (M/s. Mindspace case) wherein the Ld. CIT(A) taking note of the CBDT Circular No. 16/2017 dated 25.04.2017 which clarified that the income arising from letting out of premises/developed space along with amenities in an Industrial Park/SEZ need to be charged to tax under head "Profit and Gains from Business", was pleased to allow the claim of that assessee. Aggrieved, the revenue preferred an appeal before th....
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....ore, he vehemently supported the findings of assessing officer. 14. Ld. Counsel for the assessee reiterated the submissions made before the Ld.CIT(A). Ld. AR submitted that the years under consideration i.e A.Y. 2015-16 and A.Y. 2016-17 represent abated years. He submitted the below chart with the relevant dates: Particulars AY. 2015-16 AY. 2016-17 Original return under section 139(1) 28.11.2015 30.11.2016 Revised return under section 139(5) 22.03.2016 28.03.2018 Notice under section 143(2) of the Act 30.11.2017 Notice under section 153A 01.08.2018 01.08.2018 15. Ld AR submitted that from the above table, it can be concluded that during the years under consideration, proceedings under section 143(3) of the Act were initiated but the same were never completed on account of search action under section 132 of the Act. Accordingly, the years under consideration represents abated years. Ld. AR of the assessee submitted that the said fact was also acknowledged by the Assessing Officer in the assessment orders for A.Y.2015-16 and A.Y.2016-17. 16. With respect to the legal position, Ld. AR placed reliance on the judgement....
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.... it is submitted that the merits are covered by the CBDT Circular No.16/2017 dated 25.04.2017. In the instant circular, it has been clarified that the income arising from letting out of premises/ developed space along with amenities in an Industrial Park/SEZ will be charged to tax under head "Profit and Gains from Business" 20. Further, with respect to Ground No. 3, wherein the department has contested the Ld. CIT(A)'s jurisdiction in respect to the claim of depreciation, Ld AR submitted that once the years under consideration are held as "abated years", it becomes open for an assessee to make a fresh claim which needs to be considered on merits. Thus, the Ld.CIT(A) was well within his jurisdiction while allowing the assessee the claim of depreciation. However, he submitted that the said ground is consequential to the adjudication of the other grounds raised by the revenue. 21. Considered the rival submissions and material placed on record. We observe that the assessee is earning income from the let of out of the premises situated in the SEZs and offered to tax in the original return of income filed by the assessee under the head income from House property. Ho....
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.... of the return consequent to notice, the provision of the Act will apply to the return of income so filed. Consequently, the return filed under Section 153A(1) of the Act is a return furnished under Section 139 of the Act. Consequently, the assessee-assessee is being assessed in respect of abated assessment for the first time under the Act. Therefore the provisions of the Act which would be otherwise applicable in case of return filed in the regular course under Section 139(1) of the Act would also continue to apply in case of return filed under Section 153A of the Act and the case laws on the provision of the Act would equally apply." 22. We observe that similar view was expressed by Hon'ble Bombay High Court while adjudicating similar issues in the case of JSW Steel Ltd (supra) and held as under: - "13. In the present case, search was conducted on the assessee on 30-11-2010. At that point of time assessment in the case of assessee for the assessment year 2008-09 was pending scrutiny since notice under section 143(2) of the Act was issued and assessment was not completed. Therefore, in view of the second proviso to section 153A of the said Act, once assessment go....
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.... been brought to our notice that the revenue had challenged similar issue before the Hon'ble Bombay High Court in the case of CIT-II, Pune Vs. Magarpatta Township Development and Construction Co. Ltd., (ITA. No. 318 of 2015) wherein the Hon'ble High Court by order dated 19.11.2017 framed the relevant question of law as under: - "(b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that income derived from letting out of the premises of the I. T. Park was to be assessed as 'Business Income' when the true character of the income derived is income from property?" 9. And the Hon'ble High Court noted as under: - "4. Reg. Question No.2 (a) Mr. Tejveer Sing, learned Counsel appearing for the revenue states that he is not pressing this question in view of the CBDT Circular No. 16 of 2017 dated 25th April, 2017. The above circular has clarified that income arising form the letting out of the premises in an Industrial Park/SEZ, are to be charged under the head "Profits and gains of business" and not under the head "Income from House Property". It further directs the department to withdraw/not press....
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....of the Act, is unacceptable. Now adverting back to the merits of the issue, undisputedly, in the return filed u/s. 153A of the Act, the assessee has treated the lease rental income from IT park as income under the head 'business and profession'. While doing so, the assessee has relied upon the CBDT Circular No. 16 of 2017. At this stage, it is necessary to take note of the said Circular. "CIRCULAR NO.16/2017 [F.NO.279/MISC./ 130/2015/ITJ], DATED 25-4-2017 The issue whether income arising from letting out of premises/developed space along with other amenities in an Industrial Park/SEZ is to be charged under head 'Profits and Gains of Business' or under the head 'Income from House Property' has been subject matter of litigation in recent years. Assessee's claim the letting out as business activity, the income arising from which to be charged to tax under the head 'Profits and Gains of Business', whereas the Assessing Officers hold it to be chargeable under the head 'Income from House Property'. 2. The matter has been considered by the Board. Income from the Industrial Parks/SEZ established under various schemes framed and not....
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....the appeals already filed on the issue. In our considered opinion, the aforesaid Circular issued by CBDT since, simply clarifies the legal position, it will apply retrospectively. Further, the materials available on record suggest that while deciding the appeal arising out of original assessment completed u/s. 143(3) of the Act in A.Y. 2015-16 in assessee's case, the ITAT had directed the A.O. to consider assessee's claim of taxability of rental income received from IT parks under the head 'income from business and profession'. While giving effect to the order of the Tribunal, the A.O. examined the issue independently and accepted assessee's claim in the order passed u/s. 143(3) of the Act r.w.s. 254 of the Act with the following observations: "9. The under-signed has carefully perused the arguments raised by the assessee and finds them to be in order. As submitted by the assessee, there was a significant dispute with respect to the head of income under which lease rentals from developing and operating of IT Parks/ Industrial Parks/SEZ ought to be assessed. Such a controversy has been put to rest by the CBDT Circular 16/2017 and various Hon'ble Supreme Court decisions ....
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....sallowed. Accordingly, he has restricted the disallowance to that extent. 17. Having considered rival submissions and perused the materials on record, we find that identical issue has been decided in assessee's case in A.Ys. 2012-13 and 2015-16. Since, the view expressed by learned first appellate authority is in conformity with the settled legal position, we uphold the decision by dismissing the grounds. 18. In ground no. 6 of ITA Nos. 6203/Mum/2025, the department has challenged partial relief granted by ld. First appellate authority in the matter of addition on account of deemed annual letting value of unsold flats/units. 19. Briefly the facts are, in course of assessment proceedings, the A.O. noticed that though the assessee was in possession of some unsold stock of flats/units, however, it has not offered income towards the ALV of such flats /units. Accordingly, he proceeded to compute ALV in terms with section 23(1)(a) of the Act. While doing so, he estimated the deemed ALV @ 8.5 % of the cost of construction of the property. In this context, he also referred to sub section (5) of section 23 of the Act introduced to the statute vide Finance Act, 2017. While deciding ....
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....alue of such property will be considered as Nil for a period up to one year now two years from the end of the financial year in which a completion certificate is obtained from the competent authority. 9.6. After considering all these judicial precedents and amendments to law, Coordinate Bench gave its finding by holding that since the assessee is a builder and developer and the year under consideration is Assessment Year 2014-15 and the issue is in respect of taxability with regard to unsold flats, in view of the amendment to section 23 by insertion of sub-section (5) w.e.f. 01.04.2018, assessment of unsold inventory to be assessed as income from house property is not applicable to the impugned Assessment Year 2014-15. 9.7. Ld. Counsel thus, asserted that case of the assessee falls on the similar factual pattern, where year under consideration is Assessment Year 2015-16 and the issue relates to taxability of unsold shops/flats on which Id. Assessing Officer has adopted 8.5% of the value to arrive at annual lettable value to tax it under the head 'income from house property'. He also referred to the decision of Co-ordinate Bench in the case of Dy. CIT v. In....
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....ion would be different for years when the amendment to section 23(5) became effective from Assessment Year 2018-19 when legislature in its wisdom brought the income to be taxed under the head 'income from house property. Accordingly, ground raised by the assessee is allowed. 21. Respectfully following the aforesaid decision of the co-ordinate bench, we hold that the addition made on account of deemed ALV on purely estimate basis relying upon the provisions of section 23(5) of the Act cannot be sustained. Hence, even the additions partially sustained by ld. First appellate authority has to be deleted. Accordingly, we direct the A.O. to delete the entire additions in both the A.Ys. under dispute. 21. In the result, the appeals are dismissed. CO Nos. 15 & 38/Mum/2026 (A.Ys. 2014-15 & 2016-17) 23. The only issue raised in the cross objections relates to the addition on account of deemed ALV partially sustained by ld. First appellate authority. While deciding ground no. 6 of ITA Nos. 6203/Mum/2025, in the foregoing paragraphs we have held that no addition on account of deemed ALV can be made. Hence, cross objections are allowed. ITA No. 6971/Mum/2025 (A.Y. 2015-16) ....
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.... order dated 25.10.2021, the Hon'ble ITAT Mumbai granted relief on the following grounds: 1. The addition under Section 14A read with Rule BD of the Act, was restricted upto the extent of exempt dividend income earned by the appellant under normal provisions. 1. The addition under Section 14A was deleted under MAT provisions. 2. Deletion of the disallowance of Rs. 2,09,73,057/- on account of Deemed to be let out property u/s 22 of the Act 3. The additional ground of appeal, w.r.t the taxability of lease rental income from SEZ/ IT Park were allowed to be taxed under the head PGBP instead of IFHP on account of Circular No. 16 of 2017. 6.5 Pursuant to the Hon'ble ITAT Mumbai order, an order u/s 143(3) r.w.s. 254 of the Act dated 30.03.2023 was passed, wherein the AO has made the following adjustments: 1. Allowed the stand change of lease rental income from IFHP to PGBP, 2. Restricting the disallowance u/s 14A r.w.r BD of the Act while computing income under Normal Provisions to Rs 1,43,78,946. 3. Deleted the disallowance under Section 14A read with Rule 8D in the computation of income under Section 115JB; ....