Income Tax Appellate Tribunal - Hyderabad
Paharpur Pragnya Tech Park Private ... vs Acit, Cirlce-16(2), Hyd, Hyderabad on 10 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER
AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA Nos. 589, 590, 591 & 592/Hyd/2016
Assessment Years: 2009-10, 2010-11, 2011-12 & 2012-13
Paharpur Pragnya Tech Park vs. Asst. Commissioner of
(P) Ltd., Kolkata Income-tax, Circle - 16(3),
Hyderabad.
PAN - AABCL0590N
(Appellant) (Respondent)
Assessee by : Shri S. Raghunathan
Revenue by : Shri A. Sitarama Rao
Date of hearing 27-02-2017
Date of pronouncement 10-03-2017
O RDE R
PER S. RIFAUR RAHMAN, A.M.:
These appeals are preferred by the assessee against separate orders of the learned Commissioner of Income-tax(A) - 4, Hyderabad, for AYs 2009-10 to 2012-13. As common issue is involved in these appeals, they are clubbed and heard together and, therefore, a common order is passed for the sake of convenience.
2. To dispose of these appeals, we refer to the facts from AY 2009-10 being ITA No. 589/Hyd/16.
3. Briefly the facts of the case are that the assessee company is a special purpose vehicle of L&T Infocity ltd. for development of custom built facility centre for HDPI Ltd. It filed return of income for the AY 2009-10 on 30/09/2009 admitting total income of Rs. 98,80,171/- and the book profit was admitted u/s 115JB at Rs. 2,43,10,321/-.
2ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota Subsequently, the assessee filed revised return declaring a total income at Rs. 96,60,274/-. The AO completed the assessment u/s 143(3) by assessing the total income at Rs. 2,07,00,280/-.
3.1. The assessee company was earning income by way of lease rentals. Although the articles of association of the company indicated that it was in the business of development and operation of industrial park/software technology parks, however, the Assessing Officer noticed that during the year the company received only lease rent from M/s HDPI Limited to whom it had given its building on lease for 9 years. The background is that a land of 3.542 acres was allotted to the assessee by West Bengal Electronic Industry Development Corporation for a period of 99 years. The Corporation asked the assessee to develop a building and its related infrastructure to 1,80,000 sq.ft. with specific parameters for an IT complex. The assessee developed the same and gave it on lease to M/s HDPI Limited. The Assessing Officer held that in providing the complex on lease, the appellant did not carry out any activity which would constitute a business. Accordingly, he held the lease rentals received by the assessee to be income from house property.
3.2 Before the AO, the assessee submitted as under:
The issue of classification of Income has been a subject matter of extensive litigation and is a very contentious issue. In the case of Sultan Brothers Pvt.Ltd. v.CIT[1964] 51 ITR 353, 354 and in Universal Plast Ltd. v. CIT [1999-] 237 ITR 454,459 [the principle formulated by the apex court is as under:
"Whether a particular letting is business, has to be decided in the circumstances of each case. Each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner ..."
As stated earlier, it is the intention of Government of West Bengal to promote IT industry in the State of West Bengal and to facilitate this objective it has taken initiative for setting up the IT park with the association of HSBC and L&T. The intention of the 3 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota Government is not exploitation of the land as owner but to promote industry and commerce. Therefore restrictive conditions for use of land have been laid down in the land lease document and LTIIL cannot have any other intention different from that of the Government.
Thus, the foundation of the business is the 'bouquet' of infrastructure facilities needed for carrying out IT/ITES business activity.
It is a systematic and sophisticated business activity through which assessee supports business function of its customers. It is a contemporaneous commercial activity wherein the assessee has to keep itself updated and aware of the needs of other IT business houses e.g. industrial cabling, security systems, uninterrupted centralized power system, building management system, telecommunication services, sewerage and water treatment system etc. Thus the activity of assessee is much beyond mere letting of a building and enjoying rental income as owner of the building. In finding out whether a lease of assets amounts to business, what is relevant is the intention of the assessee. It has to be ascertained whether the assessee intended to use the asset as a business asset or otherwise during the relevant period. The yield of income by a commercial asset is the profit of a business irrespective of the manner in which the asset is exploited by the owner of the business. Further the nature of property as per records of Municipal Corporation is also 'Commercial Property' Assessee submitted a plethora of judicial precedents which have held in cases similar to that of assessee company, that where the us of property is as a business asset along with provision of commercial services then the income would be taxable under the head 'Income from business or profession '.
Further, in this regard, assessee placed reliance on following the judicial pronouncements:
• In Commissioner of Income-tax Vs. National Storage Pvt. Ltd. [1967J 66 ITR 596 (SC).
CIT Vs AP Small Scale Industrial Development Corporation [1989J 175 ITR 352 (AP) Elnet Technologies Limited v. DCIT 1606 (Mds)/1999 (Assessment Year 1996-1997).
PFH Malland Retail Management Ltd. Vs. ITO [2008J 110 ITO 337 (Kol) 4 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota • In Commissioner of Income-tax Vs. Halai Memon Association [2000J 243 ITR 439 (Mad) Balaji Enterprises Vs. Commissioner of Income-tax [1997] 225 ITR 471 (Kar.) 3.3 The AO gave the following reasons for treating the rental income shown by the assessee as 'the income from house property':
i. There is a single tenant occupying the building for whom the construction has been made and the tenancy is for a fairly long period.
ii. The assessee by itself has not exploited the building as a commercial asset at any time prior to letting out of the property. iii. The whole construction has been undertaken for the purpose of letting out to a tenant.
iv. The construction specifications do not indicate any special traits associated with construction of a commercial asset, though the building facilitates housing IT. and IT. Enabled Services. No additional features are indicated in the specifications of construction which enable interpretation of the construction as business activity.
v. The tenant has deducted tax at source under section 194I. vi. The Company is a Special Purpose Vehicle of L & T. Infocity Limited for construction of a standalone building that could be rented out; albeit for I.T. purposes.
vii. In this connection, reliance is placed on the decisions of the jurisdictional Tribunal. in the case of B. Rama Chandra Reddy in ITA No. 171/Hyd/2006 dated 25.01.2008 and also the decision of this Tribunal in the case of ITO Vs. Susheelaram Enterprises (2002) 83 ITD 372 (Hyd). Reliance is also placed on the judgement of Madras High Court in the case of CIT Vs. Chennai Properties & Investments Ltd. (2004) 266 ITR 685 and the judgement of Apex Court in the case of CIT, Vs. Podar Cement Pvt. Ltd. and Others (1997) 226 ITR 625. Reliance is also placed on the judgement of AP. High Court in the case of CIT Vs. Phabiomal & Sons (1986) 158 ITR 773 and also in the case of Veerabhadra Industries (1999) 240 ITR 5. Reliance is also placed on the decision of the Hon'ble Supreme Court of India in the case of CIT Vs. Shambhu Investments Pvt. Ltd. reported in (2001) 263 ITR 143.
3.4 AO further observed as below:
5ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota i. The Government of West Bengal entered into an agreement with the assessee company through the Information Technology Department, Government of West Bengal for the, development of 1,80,000 sq.ft. of building with respect to back office processing / call centre project to be established by HDPI, it is also a fact that the assessee company has experience in developing similar projects.
ii. The assessee was given a lease of 99 year over a plot of land measuring 3.542 acres in Salt Lake City for the exclusive purpose of setting out the building, custom built for clients like HDPI.
iii. Thereafter, a lease agreement was entered into with the HDPI for a period of 9 years subject to renewal having a minimum locking in period of 6 years.
iv. The main objects of its incorporation are to promote, setup, etc. infrastructure projects as the present one. However, it is not the memorandum of association which determines the head of the income earned under the Income Tax Act. Rather, it is the nature and extent of actual activities being carried out which determine whether the assessee had conducted any business during the financial year or not. v. The building it has made is for a specific I.T. industry and cannot be used for any other purpose. As per agreement it cannot use the building for residential or other commercial purpose. The specifications of the building or a caveat imposed on its use which determines whether the income earned from building is business income or not. Rather it is the nature and extent of activities carried out by the assessee which are the determining factors.
vi. The assessee has stated that it has provided 200 surface car parking spaces and 250 motor cycle parking spaces. It has provided central air conditioning facilities through chilling plants. It has provided sewerage treatment and disposal arrangements along with water facilities. Telephone and internet cable has also been provided apart from software industry friendly building construction, corridors and room layout plans. The assessee stated that it has also provided security systems and DG sets back up. The assessee has emphasized that the above facilities are completely required in IT related infrastructure project and therefore, its income should be treated as business income. An Analysis of the above arguments of the assessee indicates that none of the aforementioned items tantamount to an ongoing activity. These are merely specifications of the building constructed by the assessee. Moreover, things like water supply arrangements, sewerage disposal arrangements. DC set back up, telephone and internet cabling are firstly fairly generic in all 6 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota modern constructions. Secondly, there is no element of any activity in these specifications. These are not 'facilities' provided by the assessee. The assessee has only provided a DG generator. Assessee does not operate or maintained it. He has provided cabling for telephone connections. Assessee does not maintain or operate such services.
3.5 AO further observed that as per the Memorandum of Understanding between the assessee and the Government of West Bengal, Clause B(v), is reproduced as under:
"(v)LTIL is a company possessing a wide experience and is a pioneer in establishing IT and related infrastructure development projects in India and elsewhere through its subsidiaries/ associated companies. LTIL has been approached by HDPI, for development of an IT facility of 1,80,000 sq. ft. in Kolkota, at the side made available by the GoWB, for a back office processing / call centre project to be established by HDPI. LTIL has agreed for development of the said IT facility, custom built to the requirements of HDPI for their exclusive use."
3.6 AO observed, it is clear that it has never been the intention of the Govt. of West Bengal that the assessee should carryon any business in the building. Read with further clauses of the MOU will make the intent of the entire MOU very clear.
"1. LTIL agrees to undertake the construction of GPC at the Site in the time frame and upon and subject to the terms land conditions set out in Part A of the Schedule hereto so as to enable HDPI to establish and operate a GPC at the Site.
2. HDPI agrees to lease the GPC from LTIL upon and subject to the terms and conditions set out in Part B of the Schedule hereto.
3. Each of the parties agrees to maintain the confidentiality of any information and / or the contents of any documents provided or otherwise made available to it by the other in connection with. the Project and shall not, without the prior written consent of the other, disclose the same to any third party.
4. This MOU, other than clauses 3,5 and 6, does not constitute a contract or an agreement to enter into a contract and does not create an obligation at law and is not and will not become legally binding on the parties. Instead this MOU is intended to provide a means for the parties to set out and understand their respective intentions and expectations with regards to the Project. Accordingly neither party shall be under any obligation to the 7 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota other to reach any formal, binding agreement or to enter into any contract or commitment in connection with the Project.
5. Each part will bear its own costs incurred prior to the earlier of
(i) the date of the execution of any formal agreement between the parties; and (ii) the date the parties agree not to proceed with the Project.
6. The parties agree that any publicity in relation to the Project is agreed in writing between them both as to the terms of the content and the timing.
7. The laws of India will govern this MoU and the Courts of Kolkata shall have jurisdiction to settle any disputes in connection with this MOU."
It is absolutely clear that the Govt. of West Bengal wanted HOPI to run its business of back office processing operations. For this end, a land of 3.5 acres was sub leased to the assessee for building an office complex specifically for the requirements of concerns like HDPI. Once this building has been constructed along with DG sets it has been completely handed over to HDPI with no day to day activity being carried out by the assessee. The business in this building is being carried on by the HDPI, the tenant.
3.7 The above point is once again emphasized in para F of the MOU between the assessee and HDPI as below:
"(F) LTIL, a company processing wide experience and a pioneer in establishing IT and related infrastructure development projects in India and elsewhere through its subsidiaries, parent and associated companies, has been approached by HDPI to utilize its experience, expertise, commitment and financial capabilities in the development of an IT facility of 1,80,000 sq. ft. at the Site, for a back Office process call centre for HDPI (the "Project") in accordance with the specifications and requirements of HDPI."
3.8 The rental agreement between HDPI and the assessee is as below:
"1. HDPI is to enter into a lease with LTIL for the lease of the GPC at the Site, the terms of which lease are to include the following terms:
(a) Term - Minimum term of 9 year, with a lock-in of 6 years, from the date the GPC is ready for occupation.8
ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota
(b) Deposit - Interest free, refundable deposit of 12 months lease rentals, payable by HDPI at the commencement of construction of the GPC
(c) Rent - Payable on a lettable area of not more than 1,80,000 square feet gross.
- Rent payable to cover and include the use of the 200 surface car-parking spaces and 250 surface motorcycle-parking spaces.
- HDPI to pay initial rental of INR 21.75 per square foot per calendar month for the first 3 year of the term of the let (the "Initial Term") net of service lox on construction services, if levied by the Government of India. If the service tax is levied, this would increase the month rental by INR 1.80 per square foot.
- Following the expiration of the Initial Term, LTIL is entitled to increase the rent payable land the security deposit by 18 % for the next 3 year of the let (a "Subsequent Term") and thereafter shall be entitled to incase the rent payable- security deposit by 18% of the then rental at the end of each such Subsequent Term.
- First rental payment to be made from the beginning of the 12th month from the start of construction (the "Rent Commencement Date"), in respect of the first calendar month or part thereof, provided always that (aa) structural work being undertaken by LTIL is completed within eight and a half months from the start of construction for the "handover" of the internal space to HDPI; and (bb) the glazing work being undertaken by LTIL on the GPC is completed within period of 15 days. In the event that either of the aforementioned 'completion' dates are not adhered to otherwise than by reason of a 'force majeure' event, including but not limited to political turmoil or any external hindrances to the smooth implementation of construction activities, then:
LTIL will pay HDPI a sum byway of liquidated damages equivalent to one day's rent for lone day's delay for the duration of the term of any such delay (being the period commencing on the contracted 'completion' date and ending on the actual 'completion' date) (the "Delay Period); and The Rent Commencement Date will be amended so as to be the date, which next falls if one adds the Delay Period to the Rent Commencement Date.
(d) Utilities - HDPI to be responsible for the payment of all charges for all utilities (Including water and electricity) provided to the GPC payable on an "actual" basis.
(e) Sub-letting - HDPI to be entitled to sub-let the GPC in whole or in part as well as assign it any time during the term of the 9 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota lease (with the prior approval of IT Department, Government of West Bengal).
(j) Signage - HDPI to be have unfettered signage rights at the GPC"
AO concluded that it is very clear that the entire agreement is for a rental agreement with no provision for any services whatsoever. The assessee has received a 12 months lease rental 21.75 per sq. ft. along with provisions for increase in lease rental over the years. HDPI is to be responsible for payment of all utility charges like water, electricity, etc. HDPI also has unfettered signage rights and even rights to sub lease and sub rent the building. The entire agreement does not have even one clause regarding any services to be provided by the assessee. In Schedule Part-A of the aforementioned lease agreement, it has been clearly mentioned that the assessee shall be responsible for the cost of 2000KV A transformer for the site and nothing else. It is therefore, clear from above, that the assessee has constructed the building as per certain specifications which include providing a 2000KV A Gen set and has handed over the same to HDPI. It is further noticed that the tenant HDPI has deducted tax at Source u/s 194-I of the I. T. Act and the entire construction has been done with the purpose of letting it out to HDPI.
3.9 In view of the above observations, the AO treated the income as income from house property instead of income from business as claimed by the assessee.
4. Aggrieved the assessee preferred appeal before the CIT(A) and contended that it was carrying out business and its activities/income could not be classified as income from house property.
5. The CIT(A)held that the AO has correctly appreciated the fact that it is the actual activities which would determine the nature of income earned rather than whatever is mentioned in the Memorandum of Association. Accordingly, he confirmed the action of the AO.
6. Aggrieved, the assessee is in appeal before us.
7. Assessee has raised the following grounds of appeal, which are common in all the appeals under consideration:10
ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota
1) For that on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) - 4, Hyderabad erred in law and on facts in upholding the order passed by the Assistant Commissioner of Income Tax _ Circle 16(3), Hyderabad assessing the income derived by the appellant from leasing of an I.T. Park under the head 'Income from House Property' as opposed to 'profits and gains of business' as returned by the appellant.
2) For that on the facts and in the circumstances of the case, the authorities below were unjustified in law & on facts in assessing income from exploitation of LT. Infrastructure under the head 'Income from House Property' ignoring the fact that the appellant was selected by the West Bengal State Government Authorities to develop the LT. Infrastructure at Kolkata considering technical expertise and experience which the appellant possessed in the field of development of LT. Infrastructural projects.
3) For that on the facts and circumstances in the case, the authorities below failed to appreciate that leasing of the LT.
Infrastructure, developed by the appellant, was one of the mode in which the appellant exploited its core business expertise and therefore the income derived from such commercial exploitation should have been assessed under the head 'Profits and Gains of Business' & not under the head 'Income from House Property'.
4) For that on the facts and in the circumstances of the case, the appellant's activity of developing and setting up of I.T. Infrastructure, being identical to the activity of setting up Industrial Parks as defined in Section 801A (4) of the Income Tax Act, the Authorities below ought to have assessed the income derived by the appellant from leasing of the I.T. Infrastructure under the head 'Profits and Gains of Business'.
5) For that on the facts and in the circumstances of the case, the Assessing Officer be directed to assess the income derived by the appellant from leasing of the LT. Park under the head 'Profits & Gains of Business' after allowing deduction for expenses incurred in relation thereto and after allowing depreciation ix] s 32 of the Income Tax Act, 1961.
6) For that the appellant craves leaves, to submit additional grounds and I or alter the grounds already taken either before or at the time of hearing of this appeal."
8. The ld. AR of the assessee submitted before us that the revenue authorities failed to appreciate that leasing of the IT infrastructure developed by the assessee was one of the mode in which the assessee exploited its core business expertise and 11 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota therefore the income derived from such commercial exploitation should have been assessed under the head profits & gains of business and not under the head income from house property. He further submitted that assessee's activity of developing and setting up of IT Infrastructure being identical to the activity of setting up Industrial Parks as defined in section 80IA(4) of the IT Act, the revenue authorities ought to have assessed the income derived by the assessee from leasing of the IT Infrastructure under the head 'profits and gains of business'.
8.1 The ld. AR submitted that similar issue came up for consideration before the coordinate bench of this Tribunal in assessee's own case for AYs 2007-08 & 2008-09 in ITA No. 355 & 356/Hyd/2012 vide order dated 27/07/2016(where both the Members are the party) wherein the coordinate bench has directed the AO to treat the rental income as business income and allowed the appeals of assessee. A copy of the said order is placed on record.
9. The ld. DR, on the other hand, relied on the orders of revenue authorities.
10. Considered the rival submissions and perused the material facts on record. We find that similar issue was decided by the coordinate bench of this Tribunal in assessee's own case (supra) wherein the coordinate bench has held as under:
"10. Considered the submissions of the parties and perused the material facts on record as well as the decisions cited. The AO treated the rental income received by the assessee under the head 'income from house property as against the assessee's claim of business income for taxing purposes, on the ground that providing the complex on lease, the assessee did not carry out any activity which would constitute a business. According to the assessee, it was carrying out business and the same could not be classified as income from house property. The issue before us is whether the rental income received by the assessee is a business income or not ?12
ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota 10.1 In the case of M/s Chennai Properties & Investments Ltd., (supra), on which reliance placed by the assessee, the Hon'ble Supreme Court held as follows:
"We have heard the learned counsel for the parties on the aforesaid issue. Before we narrate the legal principle that needs to be applied to give the answer to the aforesaid question, we would like to recapitulate some seminal features of the present case. The Memorandum of Association of the appellant-company which is placed on record mentions main objects as well as incidental or ancillary objects in clause III. (A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as "Chennai House" and "Firhavin Estate" both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. What we emphasise is that holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. It may further be recorded that in the return that was filed, entire income which accrued and was assessed in the said return was from letting out of these properties. It is so recorded and accepted by the assessing officer himself in his order. It transpires that the return of a total income of Rs.244030 was filed for the assessment year in question that is assessment year 1983-1984 and the entire income was through letting out of the aforesaid two properties namely, "Chennai House" and "Firhavin Estate". Thus, there is no other income of the assessee except the income from letting out of these two properties. We have to decide the issue keeping in mind the aforesaid aspects. With this background, we first refer to the judgment of this Court in East India Housing and Land Development Trust Ltd.'s case which has been relied upon by the High Court. That was a case where the company was incorporated with the object of buying and developing landed properties and promoting and developing markets. Thus, the main objective of the company was to develop the landed properties into markets. It so happened that some shops and stalls, which were developed by it, had been rented out and income was derived from the renting of the said shops and stalls. In those facts, the question arose for consideration was: whether the rental income that is received was to be treated as income from the house property or the income from the business. This court while holding that the income shall be treated as income from the house property, rested its decision in the context of the main objective of the company and took note of the fact that letting out of the property was not the object of the company at all. The court was therefore, of the opinion that the character of that income which was from the house property had not altered because it was received by the company formed with the object of developing and setting up properties. Before we refer to the Constitution Bench judgment in the case of Sultan Brothers (P) Ltd., we would be well advised to discuss the law laid down authoritatively and succinctly by this Court in 'Karanpura Development Co. Ltd. v. Commissioner of Income Tax, West Bengal' [44 ITR 362 (SC)]. That was also a case where the company, which was the assessee, was formed with the object, inter alia, of acquiring and disposing of the underground coal mining rights in certain coal fields and it had restricted its activities to acquiring coal mining leases over large areas, developing them as coal fields and then sub-leasing them to collieries and other companies. Thus, in the said case, the leasing out of the coal fields to the collieries and other companies was the business of the assessee. The income which was received from letting out of those mining C.A. No. 4494/2004 etc. 5 http://www.itatonline.org Page 6 leases was shown as business income. Department took the position that it is to be treated as income from the house property. It would be thus, clear that in similar circumstances, identical issue arose before the Court. This Court first discussed the scheme of the Income Tax Act and particularly six heads under 13 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota which income can be categorised / classified. It was pointed out that before income, profits or gains can be brought to computation, they have to be assigned to one or the other head. These heads are in a sense exclusive of one another and income which falls within one head cannot be assigned to, or taxed under, another head. Thereafter, the Court pointed out that the deciding factor is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them. It was highlighted and stressed that the objects of the company must also be kept in view to interpret the activities. In support of the aforesaid proposition, number of judgments of other jurisdictions, i.e. Privy Counsel, House of Lords in England and US Courts were taken note of. The position in law, ultimately, is summed up in the following words: - "As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned." After applying the aforesaid principle to the facts, which were there before the Court, it came to the conclusion that income had to be treated as income from business and not as income from house property. We are of the opinion that the aforesaid judgment in Karanpura Development Co. Ltd.'s case squarely applies to the facts of the present case. No doubt in Sultan Brothers (P) Ltd.'s case, Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words: - "We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature." We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treated as 'income from the house property'. We, accordingly, allow this appeal and set aside the judgment of the High Court and restore that of the Income Tax Appellate Tribunal. No orders as to costs."
10.2 Even as per the MoU of the assessee company, the main objects for which LTIIL was incorporated were to carry on the business of "to promote, set up, construct, develop, build, own, lease, sell, transfer, operate, manage, service, upgrade, and /or maintain Information Technology Parks, Telecommunication, Engineering and Consultancy Parks, Cities, Complexes, Infrastructure projects, Software Technology Parks, Electronic and Hardware Technology Parks or any other infrastructure development projects with or without industrial estate, parks, 14 ITA Nos. 589 to 592 /H/16 Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota townships, factories, commercial offices, residential complexes and other allied facilities and amenities such as internal roads, helipad, satellite communication facilities, shops, gardens, swimming pools. in any place whether in India or outside India, and undertaking consultancy and project management for setting up of the above activities."
10.3 Therefore, respectfully following the decision of the Hon'ble Supreme Court in the case of M/s Chennai Properties & Investments Ltd. (supra) and the decision of the coordinate bench in the case of Alexandira Knowledge Park (P) Ltd. (supra), it is observed that the important is the intention of the assessee whether the asset was used to earn the rental income or the intention was to exploit the property for commercial purpose. In the given case, assessee had leased out the property only to be used for the purpose of IT & ITES business purpose. Moreover, there is a condition from the 'GoWB' that it has to be leased out only to the IT & ITES business. Accordingly, we set aside the orders of revenue authorities and direct the AO to treat the rental income as business income."
12. As the issue in the appeals under consideration is materially identical to that of AY 2007-08 & 2008-09 in assessee's own case, following the decision of the coordinate bench in those years, we set aside the orders of CIT(A) in AYs under consideration and direct the AO to treat the rental income as business income.
13. In the result, all the appeals of the assessee under consideration are allowed.
Pronounced in the open court on 10 th March, 2017.
Sd/- Sd/-
(P. MADHAVI DEVI) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 10 th March, 2017.
kv
15
ITA Nos. 589 to 592 /H/16
Pahapur Pragnya Tech (Park) (P) Ltd., Kolkota
Copy to:-
1) Paharpur Pragnya Tech Park (P) Ltd., Reg. Office: Paharpur House 8/1/B, Diamond Harbour Road, Kolkata - 700 027 (WB)
2) ACIT, Circle - 16(3), Hyderabad
3) CIT(A) - 4, Hyderabad
4) Pr. CIT - 4, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File