Case Law Details
Case Name : DCIT vs. M/s. Alexandria Knowledge Park Pvt. Ltd. (ITAT Hyderabad)
Appeal Number : I.T.A. No. 142/HYD/2015
Date of Judgement/Order : 29.04.2016
Related Assessment Year : 2011-12
CA Saurabh Chokhra
Brief of the case:
The ITAT Hyderabad bench in the above cited case held that when the object of assessee’s business is to develop and let out the properties then even when it is also providing other facilities to tenants still the assessee’s income will be assessable as business income.
Facts of the case:
- Assessee had let out its premises in Biotechnology Park and offered its rental income under the head “Income from Business”. AO assessed the rental income under “Income from House Property” whereas income from maintenance under the head “Income from Other Sources”.
- Accordingly recomputed the income of the assessee which was assessed as Rs. .2,40,87,912/- against a loss declared of Rs. . 2,92,49,023/-.
- CIT(A) on appeal held the same to be business income by placing reliance on the decision of Hon’ble Karnataka HC in the case of CIT vs. Venlankani Information Systems Private Limited (218 Taxman 88) held that if the assessee is in the business of taking land, putting up commercial buildings thereon and letting out such buildings with all furniture as his profession or business, then notwithstanding the fact that he has constructed a building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the heading of income from house property.
- Aggrieved revenue is in appeal before ITAT.
Contention of the Assessee:
- The learned counsel for the assessee contended that assessee was formed as a joint venture between Shapoorji Pallomji Company Limited and the Government of Andhra Pradesh with an objective of developing the Biotech Park in the state of Andhra Pradesh for providing necessary infrastructure facilities to users that intend to set up Biotech based industries.
- The assessee’s activity of leasing out the premises alongwith the activity of providing specialized maintenance services constitute business activity as it is complex and well organized activity which is also the object of forming joint venture.
Contention of the Revenue:
Revenue contended that there are no complex commercial activities so as to consider the lease rentals as business income, but only has a primary object of constructing buildings to let out, which comes under the head income from house property.
Held by ITAT Hyderabad:
- ITAT observed that AO assessed rental income as income from house property whereas income from maintenance as income from house property. Thus, AO has accepted that assessee’s incomes are not exploiting the property alone.
- The ITAT also relied on the decision of Hon’ble Karnataka HC in the case of CIT vs. Venlankani Information Systems Private Limited wherein the HC held that in order to examine whether the income is from House Property or from business three aspects need to be checked : firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it, is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying a complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession.
- Further, Hon’ble Supreme Court in the case of Chennai Properties & Investments Ltd., 373/673 held that when the assessee’s object of the business as stated in Memorandum of Association is to acquire/construct properties and letting out the same, the same to be considered as business activity and therefore, income arising assessable as business income.
- Since, assessee-company has come into existence as joint venture with Government of Andhra Pradesh for development of a Biotechnology Park and its objects and activities are commercial in nature the rental income is assessable as Income from Business.
- In result the appeal of revenue was dismissed.