Lulu Tech Park Pvt. Ltd. v. Principal Commissioner of Income-tax-4, Chennai
[Citation -2020-LL-0902-22]

Citation 2020-LL-0902-22
Appellant Name Lulu Tech Park Pvt. Ltd.
Respondent Name Principal Commissioner of Income-tax-4, Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 02/09/2020
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags income from house property • software technology park • income from business
Bot Summary: Is the finding of the Tribunal that the appellant's income from the technology park owned, developed and maintained by it is assessable under the head 'income from house property' and not under the head 'income from business', not perverse iii. Further, the Bombay High Court in the case of Godrej Boyce Manufacturing Company Limited, Mumbai Vs. Deputy Commissioner of Income Tax, reported in 328 ITR 0081, has elaborated the procedure to be followed by the Assessing Officer under Section 14A in the following terms : The following principles would emerge from s. 14A : the mandate of s. 14A is to prevent claims for deduction of expenditure in relation to income which does not form part of the total income of the assessee; sec. All expenditure incurred in relation to income which does not form part of the total income under the provisions of the Act has to be disallowed under s. 14A. Income which does not form part of the total income is broadly adverted to as exempt income as an abbreviated appellation. So far as Substantial Question of Law No.1 is concerned, it has to be seen as to whether the income derived from letting out of the property in an industrial park/SEZ including the amenities and the income received by the owners for such property and the amenities therein would be business income in the hands of the owner of the property. In considering whether the income arising on the leasing of the property was business of the assessee, one has to get into the nature of the business of the assessee, to find out the receipts are assessable under the head of income from house property or as business income and if receipts does not fall in any of those classified heads, would fall consideration under the residuary head of income as income from other sources. 886/2018 derived from letting out of the property with all amenities and facilities would be income from business and cannot be assessed either as income from house property or as income from other sources. The decision of the Hon'ble Supreme Court in the case of Chennai Properties Investments Ltd. Vs. CIT reported in 373 ITR 673 will also come to the aid and assistance of the assessee wherein it was held that where, in the terms of memorandum of association, the main object of the assessee given was to acquire properties and earn income by letting out the same, such income was brought to books as business income and not as income from house properties.


TCA.No.886/2018 In High Court of Judicature at Madras Dated : 02.9.2020 Coram : Honourable Mr.Justice T.S.SIVAGNANAM and Honourable Mrs.Justice PUSHPA SATHYANARAYANA Tax Case Appeal No.886 of 2018 Lulu Tech Park Pvt. Ltd., Kochi-682402 Appellant Vs Principal Commissioner of Income Tax-4, No.121, Uthamar Gandhi Salai, Chennai-34 ...Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 01.5.2017 made in ITA.No.593/Mds/2016 on file of Income Tax Appellate Tribunal, Chennai 'C' Bench for assessment year 2008-09. For Appellant: Mr.N.V.Balaji For Respondent: Mr.Karthik Ranganathan, SC Judgment was delivered by T.S.Sivagnanam,J We have heard Mr.N.V.Balaji, learned counsel appearing for 1/11 http://www.judis.nic.in TCA.No.886/2018 appellant assessee and Mr.Karthik Ranganathan, learned Standing Counsel appearing for respondent Revenue. 2. This appeal, filed by Revenue under Section 260A of Income Tax Act, 1961 (for brevity, Act), is directed against the order dated 01.5.2017 made in ITA.No.593/Mds/2016 file of Income Tax Appellate Tribunal, Chennai 'C' Bench (for short, Tribunal) for assessment year 2008-09. 3. appeal was admitted on 05.12.2018 on following substantial questions of law : i. Whether, under facts and circumstances of case, Tribunal was right in holding that income of appellant from software technology park developed by it is to be assessed as income from house property and not under head 'income from business'? ii. Is finding of Tribunal that appellant's income from technology park owned, developed and maintained by it is assessable under head 'income from house property' and not under head 'income from business', not perverse ? iii. Whether, on facts and circumstances of case, Tribunal was right in remitting 2/11 http://www.judis.nic.in TCA.No.886/2018 back matter to Assessing Officer to examine whether appellant qualifies for deduction under Section 80IAB after holding it is eligible for deduction under Section 80IAB even if income is assessable under head 'income from house property'? and iv. Under facts and circumstances of case, is appellant not eligible for deduction of expenditure incurred by it in its organised business of owning, developing and maintaining software technology park in computing its business income, even if lease rental income is to be assessed under head 'income from house property? 4. above extracted substantial questions of law were considered by Division Bench of this Court, to which, one of us (TSSJ) was party, in case of CIT Vs. Tidel Park Ltd. [TCA.Nos.732 & 733 of 2018 dated 07.7.2020] wherein Court took note of various decisions and answered substantial questions of law against Revenue and in favour of assessee. It is not in dispute that said decision squarely covers issue in case on hand. relevant portions of said judgment reads as follows : 5. It is relevant to point out that in said decision Division Bench of Delhi 3/11 http://www.judis.nic.in TCA.No.886/2018 High Court referred decision in case of Commissioner of Income Tax VI Vs. Taikisha Engineering India Limited [ITA No.115/2014 decided on 25.11.2014] 6. Further, Bombay High Court in case of Godrej & Boyce Manufacturing Company Limited, Mumbai Vs. Deputy Commissioner of Income Tax, reported in (2010) 328 ITR 0081, has elaborated procedure to be followed by Assessing Officer under Section 14A in following terms : following principles would emerge from s. 14A : (a) mandate of s. 14A is to prevent claims for deduction of expenditure in relation to income which does not form part of total income of assessee; (b) sec. 14A(1) is enacted to ensure that only expenses incurred in respect of earning taxable income are allowed; (c) principle of apportionment of expenses is widened by s. 14A to include even apportionment of expenditure between taxable and non-taxable income of indivisible business; (d) basic principle of taxation is to tax net income. This principle applies even for purposes of s. 14A and expenses towards non-taxable income 4/11 http://www.judis.nic.in TCA.No.886/2018 must be excluded; (e) once proximate cause for disallowance is established which is relationship of expenditure with income which does not form part of total income disallowance has to be effected. All expenditure incurred in relation to income which does not form part of total income under provisions of Act has to be disallowed under s. 14A. Income which does not form part of total income is broadly adverted to as exempt income as abbreviated appellation. Under sub-s. (2), AO is required to determine amount of expenditure incurred by assessee in relation to such income which does not form part of total income under Act in accordance with such method as may be prescribed. method, having regard to meaning of expression 'prescribed' in s. 2(33), must be prescribed by rules made under Act. What merits emphasis is that jurisdiction of AO to determine expenditure incurred in relation to such income which does not form part of total income, in accordance with prescribed method, arises if AO is not satisfied with correctness of claim of assessee in respect of expenditure 5/11 http://www.judis.nic.in TCA.No.886/2018 which assessee claims to have incurred in relation to income which does not form part of total income. Moreover, satisfaction of AO has to be arrived at, having regard to accounts of assessee. Hence, sub-s. (2) does not ipso facto enable AO to apply method prescribed by rules straightaway without considering whether claim made by assessee in respect of expenditure incurred in relation to income which does not form part of total income is correct. AO must, in first instance, determine whether claim of assessee in that regard is correct and determination must be made having regard to accounts of assessee. satisfaction of AO must be arrived at on objective basis. It is only when AO is not satisfied with claim of assessee, that legislature directs him to follow method that may be prescribed. Sub-s. (3) of s. 14A provides for application of sub-s. (2) also to situation where assessee claims that no expenditure has been incurred by him in relation to income which does not form part of total income under Act. 7. above legal position has been 6/11 http://www.judis.nic.in TCA.No.886/2018 rightly followed by tribunal while deciding assessee's case and therefore, rightly dismissed appeal filed by revenue. Thus, we find that Substantial Question of Law No.2 has to be answered against revenue and in favour of assessee. 8. So far as Substantial Question of Law No.1 is concerned, it has to be seen as to whether income derived from letting out of property in industrial park/SEZ including amenities and income received by owners for such property and amenities therein would be business income in hands of owner of property. 9. We need not labour much on this issue, on account of circular No.16 of 2017 issued by CBDT dated 25.04.2017. CBDT after taking note of two decisions of Karnataka High Court held that it is now settled position that in case of undertaking which develops, develops and operates or maintains and operates industrial park/SEZ notified in accordance with scheme framed and notified by Government, income from letting out premises / developed space along with other 7/11 http://www.judis.nic.in TCA.No.886/2018 facilities in industrial park/SEZ is to be charged to tax under head 'Profits and Gains of Business'. 10. As rightly pointed out by Mr.R.Vijaya Raghavan, emphasis is on not only letting out of premises / developed space but along with other facilities in industrial park/SEZ. tribunal in this regard followed decision of Division Bench of this Court in case of CIT Vs. Elnet Technologies Limited, reported in (2013) 30 Taxmann.com 63 (Mad). In said decision, at paragraph No.11, Division Bench, has held as follows: "11. In considering whether income arising on leasing of property was business of assessee, one has to get into nature of business of assessee, to find out receipts are assessable under head of income from house property or as business income and if receipts does not fall in any of those classified heads, would fall consideration under residuary head of income as income from other sources." 11. After referring to decision in case of CIT Vs. Chennai Properties and Investments Limited, reported in (2005) 274 ITR 117, it was pointed out that income 8/11 http://www.judis.nic.in TCA.No.886/2018 derived from letting out of property with all amenities and facilities would be income from business and cannot be assessed either as income from house property or as income from other sources. said decision of Hon'ble Division Bench was appealed against by revenue before Hon'ble Supreme Court in SLP No.11638 of 2013 and we are informed that appeal was dismissed on 27.01.2020 on ground of Low Tax Effect. 12. Considering all those facts as wells as circular issued by CBDT, substantial question of law No.1, has to be answered against revenue and in favour of assessee. Tax Case Appeals are dismissed and Substantial Questions of Law are answered against revenue. 5. Furthermore, decision of Hon'ble Supreme Court in case of Chennai Properties & Investments Ltd. Vs. CIT [reported in (2015) 373 ITR 673] will also come to aid and assistance of assessee wherein it was held that where, in terms of memorandum of association, main object of assessee given was to acquire properties and earn income by letting out same, such income was brought to books as business income and not as income from house properties. 9/11 http://www.judis.nic.in TCA.No.886/2018 6. For above reasons, above appeal has to be allowed and substantial questions of law are to be answered in favour of assessee. 7. Accordingly, above tax case appeal is allowed, order of Tribunal is set aside and substantial questions of law are answered in favour of assessee. No costs. 02.9.2020 To 1.The Income Tax Appellate Tribunal, Chennai 'C' Bench. 2.The Principal Commissioner of Income Tax-4, No.121, Uthamar Gandhi Salai, Chennai-34. RS 10/11 http://www.judis.nic.in TCA.No.886/2018 T.S.SIVAGNANAM,J AND PUSHPA SATHYANARAYANA,J RS TCA.No.886 of 2018 02.9.2020 11/11 http://www.judis.nic.in Lulu Tech Park Pvt. Ltd. v. Principal Commissioner of Income-tax-4, Chennai
Report Error