Krishna Land Developers (P) Ltd. v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 1834 (Mum-Trib) : (2013) 052 (II) ITCL 0341 Income Tax Act, 1961 --Head of income--Business income or property income IT Park given on leave and Licence basis--Assessee being contractor and builder, was engaged in the business of construction work. It filed return of income on 28-10-2005, declaring a loss of Rs. 64,29,510. The assessee-company purchased a property situated at Corporate Centre, I.T. Park, CTS No. 271. Infrastructure and equipments were installed in the said I.T. Park as per the requirements. The I.T. Park was duly notified by the Ministry of Commerce and Industries, New Delhi, vide Notification S.O. No. 354 (E) dated 1-4-2002, which was later amended vide letter dated 5-1-2005. The IT Park was also notified by CBDT, vide Notification No. 61 dated 22-7-2010. The assessee-company had purchased the property along with the infrastructure, equipment and facilities, which were prescribed both by the Ministry of Commerce as well as the CBDT. Assessee had given the premises on leave and license basis to M/s. i-Flex for a period of 33 months on certain terms and conditions. The income was offered under the head 'Income From Business or Profession'. assessing officer, while relying on the judgment of Supreme Court in Shambhu Investments (P) Ltd. v. CIT 2003 TaxPub(DT) 948 (SC) : (2003) 263 ITR 143 (SC), held that the income is assessable under the 'Income From House Property'. Thereafter, assessing officer determined the annual value in accordance with section 23(1)(a) and made the addition. The annual value was fixed at Rs. 69,47,100. Assessee, being aggrieved by the stand so taken by assessing officer, carried the matter in first appeal, but without any success. *Held:* In the present case, assessee is offering complex services by way of providing operation place in a notified I.T. Park, with all services and amenities such as infrastructure facilities, waiting room, conference room, valet parking, reception, canteen, 24 hours securities, internal facilities, high speed lift, power back-up, etc. Just because a sister concern incurred this expenditure and claims reimbursement from assessee, it cannot be said that the facilities are not provided by assessee. Whoever maintains them, the fact remains that it is assessee who ultimately bears such expenditure for the services and undertakes to provide such services. The facilities are made available by assessee to the person occupying the premises. The undisputed fact is that the property in question is an I.T. Park, with all infrastructure facilities and services. This is not a simple building. The Ministry of Commerce and Industries, notifies certain building as I.T. Park only if various facilities and infrastructure, as specified by the Department, are provided. It is an undisputed fact that all the technical requirements, infrastructures, facilities and services are being provided in this building and it was only for this reason that not only the Ministry of Commerce & Industries, but also the CBDT notified the same as an I.T. Park which entitles the assessee to earn certain incentives. The intention of the assessee while purchasing the property is to participate in the I.T. Park and it cannot be said that the intention is only to invest in property. The Hon'ble Supreme Court in Shanbhu Investments (P) Ltd., clearly lays down that what is to be seen was the primary object of the assessee while exploiting the property. If it is found by applying such test, that the main intention is to let out the property, it must be considered as rental income or income from property. In case it is found that the main intention is to exploit the property by way of complex commercial activities, in that event, it must be held as business income. In the present case, the assessee is offering complex services by way of providing operation place in a notified I.T. Park, with all services and amenities such as infrastructure facilities, waiting room, conference room, valet parking, reception, canteen, 24 hours securities, internal facilities, high speed lift, power back-up, etc. Just because a sister concern incurred this expenditure and claims reimbursement from the assessee, it cannot be said that the facilities are not provided by the assessee. Whoever maintains them, the fact remains that it is the assessee who ultimately bears such expenditure for the services and undertakes to provide such services. The facilities are made available by the assessee to the person occupying the premises. The property can be used only for a specific purpose i.e., I.T. operation and the assessee has provided complex service facilities and infrastructure for operating such business and on this factual matrix, the contention of the assessee is upheld that the income in question should be assessed under the head 'Income From Business & Profession'. Consequently, the order passed by the Commissioner (Appeals) is set aside and allow the ground raised by the assessee. [Para 13] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1834 (Mum-Trib) : (2013) 052 (II) ITCL 0341

Income Tax Act, 1961

--Head of income--Business income or property income IT Park given on leave and Licence basis--Assessee being contractor and builder, was engaged in the business of construction work. It filed return of income on 28-10-2005, declaring a loss of Rs. 64,29,510. The assessee-company purchased a property situated at Corporate Centre, I.T. Park, CTS No. 271. Infrastructure and equipments were installed in the said I.T. Park as per the requirements. The I.T. Park was duly notified by the Ministry of Commerce and Industries, New Delhi, vide Notification S.O. No. 354 (E) dated 1-4-2002, which was later amended vide letter dated 5-1-2005. The IT Park was also notified by CBDT, vide Notification No. 61 dated 22-7-2010. The assessee-company had purchased the property along with the infrastructure, equipment and facilities, which were prescribed both by the Ministry of Commerce as well as the CBDT. Assessee had given the premises on leave and license basis to M/s. i-Flex for a period of 33 months on certain terms and conditions. The income was offered under the head 'Income From Business or Profession'. assessing officer, while relying on the judgment of Supreme Court in Shambhu Investments (P) Ltd. v. CIT 2003 TaxPub(DT) 948 (SC) : (2003) 263 ITR 143 (SC), held that the income is assessable under the 'Income From House Property'. Thereafter, assessing officer determined the annual value in accordance with section 23(1)(a) and made the addition. The annual value was fixed at Rs. 69,47,100. Assessee, being aggrieved by the stand so taken by assessing officer, carried the matter in first appeal, but without any success. Held: In the present case, assessee is offering complex services by way of providing operation place in a notified I.T. Park, with all services and amenities such as infrastructure facilities, waiting room, conference room, valet parking, reception, canteen, 24 hours securities, internal facilities, high speed lift, power back-up, etc. Just because a sister concern incurred this expenditure and claims reimbursement from assessee, it cannot be said that the facilities are not provided by assessee. Whoever maintains them, the fact remains that it is assessee who ultimately bears such expenditure for the services and undertakes to provide such services. The facilities are made available by assessee to the person occupying the premises.

The undisputed fact is that the property in question is an I.T. Park, with all infrastructure facilities and services. This is not a simple building. The Ministry of Commerce and Industries, notifies certain building as I.T. Park only if various facilities and infrastructure, as specified by the Department, are provided. It is an undisputed fact that all the technical requirements, infrastructures, facilities and services are being provided in this building and it was only for this reason that not only the Ministry of Commerce & Industries, but also the CBDT notified the same as an I.T. Park which entitles the assessee to earn certain incentives. The intention of the assessee while purchasing the property is to participate in the I.T. Park and it cannot be said that the intention is only to invest in property. The Hon'ble Supreme Court in Shanbhu Investments (P) Ltd., clearly lays down that what is to be seen was the primary object of the assessee while exploiting the property. If it is found by applying such test, that the main intention is to let out the property, it must be considered as rental income or income from property. In case it is found that the main intention is to exploit the property by way of complex commercial activities, in that event, it must be held as business income. In the present case, the assessee is offering complex services by way of providing operation place in a notified I.T. Park, with all services and amenities such as infrastructure facilities, waiting room, conference room, valet parking, reception, canteen, 24 hours securities, internal facilities, high speed lift, power back-up, etc. Just because a sister concern incurred this expenditure and claims reimbursement from the assessee, it cannot be said that the facilities are not provided by the assessee. Whoever maintains them, the fact remains that it is the assessee who ultimately bears such expenditure for the services and undertakes to provide such services. The facilities are made available by the assessee to the person occupying the premises. The property can be used only for a specific purpose i.e., I.T. operation and the assessee has provided complex service facilities and infrastructure for operating such business and on this factual matrix, the contention of the assessee is upheld that the income in question should be assessed under the head 'Income From Business & Profession'. Consequently, the order passed by the Commissioner (Appeals) is set aside and allow the ground raised by the assessee. [Para 13]