ACIT Vs K Raheja Corp Private Limited (ITAT Mumbai)
SEZ Lease Rentals Are Business Income, Not House Property: ITAT Rejects Revenue’s Repeated Challenge Against K Raheja
The Mumbai ITAT reaffirmed that lease rentals from SEZ/IT Parks are taxable as “business income” and not as “income from house property”, while also holding that in abated Section 153A assessments, an assessee is entitled to make fresh beneficial claims even if a different stand was taken in the original return.
K Raheja Corp had originally offered rental income from its IT parks under the head “house property”, but in returns filed pursuant to Section 153A search proceedings, claimed the same as “business income”. The Revenue objected by relying upon the Supreme Court ruling in Sun Engineering Works, arguing that fresh claims cannot be raised in post-search proceedings.
Rejecting the Department’s stand, the Tribunal held that once assessments abate under Section 153A, the return filed pursuant to notice under Section 153A substitutes the original return and the entire assessment becomes open. Therefore, legitimate fresh claims are permissible. The ITAT relied heavily on Bombay High Court rulings in B.G. Shirke Construction Technology Pvt. Ltd. and JSW Steel Ltd., clarifying that the restriction laid down in Sun Engineering Works applies to reassessment proceedings under Section 147 and not to abated Section 153A proceedings.
On merits, the Tribunal relied upon CBDT Circular No. 16/2017, which expressly clarifies that income from letting out premises in an Industrial Park/SEZ along with amenities is assessable as profits and gains of business. The Tribunal also noted that the Department itself had accepted this position in the assessee’s own subsequent assessment years.
The ITAT further granted relief on several connected issues, including:
