Pr. CIT v. Khivraj Motors (P) Ltd.

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The Tax Publishers2020 TaxPub(DT) 3050 (Mad-HC) : (2020) 427 ITR 0113 : (2020) 317 CTR 0184 : (2020) 274 TAXMAN 0308

INCOME TAX ACT, 1961

Section 80-IA

By no stretch of imagination, could a software park developed with the special facilities and amenities for software companies, be described or believed to be a property created for earning rental income as income from house property, where the main business of assessee was to earn rental income as its business income, the income would be taxable under the head “Income” entitling assessee to have the deduction under section 80-IA.

Deduction under section 80-IA - Rental income from Industrial Park - Taxable under the head “Income From Business” or house property -

Assessee claimed deduction under section 80-IA(4) on rent received from renting of IT park and assessee claimed the same to be a business receipt, in as much as the letting of building was along with the provision of certain facilities, so that it was in the nature of business income. AO held that the same was only rent and did not change the character of the income as income from house property. CIT(A) directed AO to treat the rental income from the letting out of property as “Income from business” and to allow the claim on deduction under section 80-IA(4)(iii). Held: The burden of the argument of Revenue, perhaps, emanated from only the name of the company, forgetting that the main business activity of the company from its motor business had been diversified into developing a special kinds of property and earning lease rental income as its main business income. By no stretch of imagination, could a software park developed with the special facilities and amenities for software companies, be described or believed to be a property created for earning rental income as Income from house property. Where the main business of the company was to earn rental income as its business income, the income would be taxable under the head “Income” entitling assessee to have the deductions of notional expenses like depreciation and special deductions like section 80-IA.

Followed:M/s. PSTS Heavy Lift & Shift Ltd. v. Dy. CIT [Tax Case Appeal Nos.2193 to 2195 of 2008 & 979 of 2009, dt. 30-1-2020] M/s. Keyaram Hotels P. Ltd. v. Dy. CIT (2015) 63 taxmann.com 301 (SC) CIT v. M/s. Elnet Technologies Ltd. (2012) 213 Taxman 129 (Mad) : 2013 TaxPub(DT) 0684 (Mad-HC) Dy. CIT v. M/s Khivraj Motors Pvt. Ltd. [ITA Nos. 1179 & 1180/Mds/2015 & C.O. No.80/Mds/2015 (in I.T.A. No.1179/Mds/2015), dt. 5-8-2016] M/s. Keyaram Hotels P. Ltd. v. Dy. CIT (2015) 373 ITR 494 (Mad) : 2015 TaxPub(DT) 0564 (Mad-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11 & 2011-12

IN THE MADRAS HIGH COURT