DCIT, Bangalore v. M/s Velankani Information Systems Pvt. Ltd.,, Bangalore

ITA 1510/BANG/2010 | 2006-2007
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 151021114 RSA 2010
Assessee PAN AABCV0552G
Bench Bangalore
Appeal Number ITA 1510/BANG/2010
Duration Of Justice 1 year(s) 3 month(s) 6 day(s)
Appellant DCIT, Bangalore
Respondent M/s Velankani Information Systems Pvt. Ltd.,, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-03-2012
Date Of Final Hearing 22-03-2012
Next Hearing Date 22-03-2012
Assessment Year 2006-2007
Appeal Filed On 24-12-2010
Judgment Text
PAGE 1 OF 18 ITA NO.1507 TO 1510/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K J.M AND SHRI JASON P BOAZ ACCOUNTANT MEMBER ITA NOS.1507 TO 1510/BANG/2010 (ASSESSMENT YEARS 2003-04 TO 2006-07) THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-12(5) BANGALORE. VS M/S VELANKANI INFORMATION SYSTEMS PVT. LTD. NO.43 ELECTRONIC CITY PHASE-2 HOSUR ROAD BANGALORE. PA NO.AABCV0552G (APPELLANT) (RESPONDENT) DATE OF HEARING : 22.03.2012 DATE OF PRONOUNCEMENT : 30.03.2012 APPELLANT BY : SHRI S K AMBASTHA CIT-I (ITAT ) RESPONDENT BY : SHRI ARVIND V SONDE C.A. OR DER PER BENCH : THESE ARE FOUR APPEALS INSTITUTED BY THE REVENUE A GAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A)-III BANG ALORE DATED 7.7.2009. THE RELEVANT ASSESSMENT YEARS ARE 2003-04 TO 2006-07. 2. SINCE THESE APPEALS ARE RELATING TO THE SAME AS SESSEE THEY WERE HEARD CONSIDERED TOGETHER AND DISPOSED OF F IN THIS CONSOLIDATED ORDER. PAGE 2 OF 18 ITA NO.1507 TO 1510/BANG/2010 2 3. THOUGH THE REVENUE HAS RAISED FIVE IDENTICAL GR OUNDS THE CRUX OF THE ISSUE AGITATED IN ALL THESE APPEALS IS WHETHER THE LD. CIT (A) WAS JUSTIFIED IN DIRECTING THE ASSESSIN G OFFICERS TO ASSESS LEASE RENTALS INCOME FROM LEASING OUT THE BU ILDING AS BUSINESS INCOME INSTEAD OF INCOME FROM HOUSE PRO PERTY? 4. THE ASSESSEE COMPANY [THE ASSESSEE HENCEFORTH] HAS BEEN IN THE BUSINESS OF DEVELOPING OF AN I.T PARK A ND RENDERING SERVICES. WHILE CONCLUDING THE ASSESSMENTS FOR THE AYS 2003-04 TO 2006-07 THE ASSESSING OFFICERS TREATED THE LEASE R ENTALS RECEIVED BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AS AG AINST BUSINESS INCOME CLAIMED BY THE ASSESSEE FOR THE REASONS REC ORDED IN THEIR RESPECTIVE IMPUGNED ORDERS UNDER CHALLENGE. THE CO NSEQUENTIAL DISALLOWANCES WERE ALSO MADE IN THE ASSESSMENT ORDE RS. 5. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUES AMO NG OTHERS WITH THE LD CIT (A) FOR RELIEF. AFTER DUE CONSIDERATION OF THE LENGTHY SUBMISSIONS COUPLED WITH VARIOUS CASE LA WS PUT FORTH BY THE ASSSESSEES LEARNED A.R AND ALSO CASE RECORDS THE RELEVANT PORTIONS OF THE CIT (A)S OBSERVATIONS ARE FOR APP RECIATION OF FACTS ARE EXTRACTED. 5.1. EXTENSIVELY QUOTING AND ANALYZING VARIOUS RULIN GS OF JUDICIARY ON A SIMILAR ISSUE CHIEFLY THE RULINGS OF HONBLE SUPREME COURT REPORTED IN 66 ITR 596 (SC) AND 83 ITR 700 ( SC) THE CIT (A) HAD OBSERVED THUS: PAGE 3 OF 18 ITA NO.1507 TO 1510/BANG/2010 3 11.1. FROM A PERUSAL OF THE ABOVE DECISION AS WE LL AS OTHER DECISIONS RELIED ON BY THE APPELLANT THE CHARACTERISTICS ON THE BASIS OF WHICH WE MAY DETERM INE WHETHER AN ASSESSEE WAS SIMPLY LETTING OUT THE PROP ERTY OR COMMERCIALLY EXPLOITING THE PROPERTY MAY BE SUMMARIZED AS UNDER: (A) IF THE INCOME EARNED IS ONLY FOR BARE LETTING OF TH E PROPERTY THE INCOME HAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. IN THIS REGARD THE HONBLE HIGH COURT OF MADRAS HAS HELD IN THE CASE OF CIT V. KONGARAR SPINNERS PRIVATE LIMITED (208 ITR 645) THA T THUS IT IS CLEAR THAT IT IS ONLY A LETTING OUT OF A PROPERTY SIMPLICITER WITHOUT ANYTHING MORE THAT WIL L FALL UNDER THE CATEGORY INCOME FROM HOUSE PROPERTY . (B) THE INCOME OBTAINED SHOULD BE BECAUSE OF THE SERVICES RENDERED AND FACILITIES PROVIDED AND NOT S O MUCH FOR THE LETTING OF THE PROPERTY. (C) IT IS HOWEVER TO BE NOTED THAT SOME SERVICE OR FACILITIES ARE PROVIDED BY ALL HOUSE OWNERS IN THE NORMAL COURSE OF LETTING OUT THEIR HOUSE ON RENT. THUS THE SERVICES RENDERED OR FACILITIES PROVIDED SHOULD NOT BE SUCH WHICH IS MERELY INCIDENTAL TO TH E LETTING OUT OF THE HOUSE. THE SERVICES RENDERED OR FACILITIES PROVIDED SHOULD NOT BE SUCH WHICH ARE ORDINARILY RENDERED OR PROVIDED BY A LANDLORD WHO H AS LET OUT HIS HOUSE. (D) THE SERVICE RENDERED OR FACILITY PROVIDED SHOULD BE ELABORATE AND COMPLEX IN NATURE. (E) THE RENDERING OF SUCH SERVICE AND PROVIDING OF SUCH FACILITIES MUST BE CARRIED OUT AS AN ORGANIZED ACTI VITY CARRIED OUT WITH THE PRIMARY INTENT OF COMMERCIAL EXPLOITATION OF THE HOUSE PROPERTY. PAGE 4 OF 18 ITA NO.1507 TO 1510/BANG/2010 4 11.2. ON EXAMINATION OF THE MATTER I FIND THAT ALL THE CHARACTERISTICS ENUMERATED ABOVE ARE PRESENT IN THE CASE OF THE APPELLANT AND THE SAME IS EVIDENT FROM THE HOT OF ELABORATE SERVICES RENDERED AND FACILITI ES PROVIDED BY THE APPELLANT WHICH ARE ENUMERATED AS UNDER: (A) THE APPELLANT HAD PROVIDED A COMMON RECEPTION AREA FOR ALL THE LESSEES AND WAS MAINTAINING THE SAME WI TH NECESSARY STAFF. (B) THE APPELLANT HAD NOT ONLY PROVIDED LIFTS BUT UNDER TOOK THE RESPONSIBILITY OF THEIR MAINTENANCE AND ALSO PROVIDED STAFF FOR THEIR OPERATION. (C) THE APPELLANT HAD NOT ONLY PROVIDED NECESSARY FURNI TURE AND FIXTURES ALONG WITH EACH UNIT BUT HAD PROVIDED SUCH FURNITURE AND FIXTURES WHEREVER NECESSARY COMPLET E WITH OUTLETS FOR ELECTRICITY TELECOM AND INTERNET CONNECTION THROUGH WHICH THE APPELLANT MADE AVAILA BLE ELECTRICITY TELECOM AND INTERNET FACILITIES TO THE TENANTS. (D) IN ADDITION TO THE RESPONSIBILITY OF THE REPAIRS AN D MAINTENANCE OF THE EXTERIOR STRUCTURE OF THE BUILDI NG SUCH AS THE REPAIRS OF ROOF SPACE EXTERIOR WALLS BEARING WALLS SUPPORT BEAMS AND FOUNDATION COLUMNS THE APPELLANT WAS ALSO RESPONSIBLE FOR THE REPAIRS AND MAINTENANCE OF THE INTERIORS OF THE LEASED PREMISES . (E) THE APPELLANT HAD PROVIDED ADEQUATE PARKING FACILIT IES TO THE LESSEES AND FOR SUCH PURPOSE HAD ENGAGED THE SERVICES OF PARKING ATTENDANTS. (F) THE APPELLANT UNDERTOOK THE RESPONSIBILITY OF THE MAINTENANCE OF SANITARY WORKS AND FOR SUCH PURPOSE PROVIDED PLUMBING AND JANITORIAL SERVICES. (G) THE APPELLANT HAD ALSO ESTABLISHED A CENTRALIZED SE WAGE TREATMENT SYSTEM WHEREBY THE WASTE WATER WAS TREATED AND MADE SUITABLE FOR USE IN FLUSHING AND GARDENING. PAGE 5 OF 18 ITA NO.1507 TO 1510/BANG/2010 5 (H) THE APPELLANT HAD PROVIDED FOR LANDSCAPING IN AND AROUND THE INDUSTRIAL PARK AND ALSO MAINTAINED A GA RDEN FOR THE BENEFIT OF THE LESSEE. (I) THE APPELLANT HAD ALSO TAKEN ON A COMPREHENSIVE INSURANCE WITH REGRD TO THE PREMISES. (J) THE APPELLANT UNDERTOOK THE RESPONSIBILITY OF PROVI DING SECURITY AND LOOKED AFTER NOT ONLY THE EXTERNAL SEC URITY OF THE BUILDING BUT ALSO PROVIDED INTERNAL SECURITY OF THE LEASED PREMISES. (K) THE APPELLANT UNDERTOOK THE RESPONSIBILITY OF HOUSE - KEEPING WHICH INCLUDED DUTIES SUCH AS CLEANING THE FLOOR FURNITURE AND COMPUTERS ETC. OF THE LEASED PREMISES. (L) THE APPELLANT PROVIDED CENTRAL AIR CONDITIONING TO THE LESSEES AND WAS RESPONSIBLE FOR THE OPERATION MAINTENANCE AND UP KEEP OF AIR CONDITIONING PLANT ESTABLISHED FOR SUCH PURPOSE. (M) THE APPELLANT HAD GUARANTEED 24 HOURS SUPPLY OF ELECTRICITY TO THE LESSEES AND FOR SUCH PURPOSE THE APPELLANT HAD SET UP SUBSTATIONS AT A CENTRALIZED LOCATION INSIDE THE INDUSTRIAL/SOFTWARE PARK AND FR OM THEREON DISTRIBUTED AND TRANSMITTED ELECTRICITY TO THE LESSEES THROUGH THE UNDERGROUND CABLE NETWORK ESTABLISHED BY IT. IN ADDITION THE APPELLANT PROV IDED 100% POWER BACK UP TO LESSEES THROUGH CAPTIVE GENERATORS. THE APPELLANT HAD NOT ONLY ESTABLISHED ELECTRICAL CABLE NETWORK THROUGHOUT THE CAMPUS BUT HAD ALSO PROVIDED THE VARIOUS ELECTRICAL FITTINGS REQUI RED FOR THE SUPPLY OF SUCH POWER TO THE LESSEES. (N) THE APPELLANT PROVIDED TELECOM AND INTERNET SERVICE S TO THE LESSEES AND FOR SUCH PURPOSE IT HAD OBTAINED DISTRIBUTORSHIP FROM THE NODAL TELECOM SERVICE PROVIDERS AND INTERNET SERVICE PROVIDERS AND FOR TH E SAID REASON HAD ENABLED ALL THE 4 NATIONAL NODAL TELECOM SERVICE PROVIDER AND INTERNET SERVICE PROVI DER TO LOCATE THEIR DIGITAL LOOP CARRIER IN THE INDUSTR IAL PARK CAMPUS. THE APPELLANT THEREUPON PROVIDED THE REQUIRED TELECOM AND INTERNET SERVICE TO THE LESSEE S PAGE 6 OF 18 ITA NO.1507 TO 1510/BANG/2010 6 THROUGH OPTICAL FIBRE NETWORK ESTABLISHED BY THE APPELLANT THROUGH OUT THE CAMPUS AND MAINTAINED DEDICATED STAFF FOR SUCH PURPOSE. (O) THE APPELLANT WAS RESPONSIBLE FOR THE SUPPLY OF WAT ER TO THE LESSEES AND FOR SUCH PURPOSE IT HAD MADE ARRANGEMENT TO OBTAIN WATER THROUGH THE ELECTRONIC CITY INDUSTRY ASSOCIATION AND THE BENGALURU WATER SUPPLY & SEWERAGE BOARD. THE APPELLANT DISTRIBUTED THE WATER SO OBTAINED TO INDIVIDUAL BLOCKS BY WAY O F HYDRO PNEUMATIC PUMPING SYSTEMS FROM A CENTRALIZED PUMP. (P) THE APPELLANT PROVIDED AND MAINTAINED A CANTEEN INS IDE THE INDUSTRIAL/SOFTWARE TECHNOLOGY PARK AND HAD ALS O MADE ARRANGEMENTS FOR A COMMON FOOD COURT FOR THE BENEFIT OF THE PEOPLE WORKING IN THE INDUSTRIAL/SOFTWARE TECHNOLOGY PARK. (Q) THE APPELLANT HAD PROVIDED AND MAINTAINED AN AMPHITHEATRE IN THE PREMISES FOR THE USE OF THE LESSEES. 12. IT IS EVIDENT FROM THE ABOVE DETAILED SERVICES AND FACILITIES THAT THE INCOME EARNED BY THE APPELLANT IS NOT MERELY FOR THE BARE LETTING OF THE PROPERTY. IN FA CT IN THE CASE OF THE APPELLANT I FIND THAT THERE IS MUCH MO RE THAN MERE LETTING OUT OF PROPERTY SIMPLICITER INASMUCH A S A HOST OF SERVICES AND FACILITIES ARE BEING PROVIDED TO TH E TENANTS BY THE APPELLANT. THESE SERVICES AND FACILITIES AR E ELABORATE AND COMPLEX IN NATURE AND ARE SUCH WHICH ARE NOT OR DINARILY RENDERED OR PROVIDED BY A LANDLORD WHO HAS LET OUT HIS HOUSE. MORE IMPORTANTLY IT IS SEEN THAT THE RENDE RING OF SUCH SERVICES AND PROVIDING OF SUCH FACILITIES HAS BEEN CARRIED OUT BY THE APPELLANT IN AN ORGANIZED MANNER WITH THE PRIMARY INTENT OF COMMERCIAL EXPLOITATION OF THE PROPERTY. IN FACT IT IS EVIDENT FROM THE LIST OF SERVICES AND FACILITIES DETAILED ABOVE THAT THERE WAS NO INT ENTION ON THE PART OF THE APPELLANT TO SIMPLY LET OUT THE PRO PERTY AND IN FACT ALL THE ACTIVITIES AS DETAILED ABOVE EXHIBI TS THE CLEAR INTENTION OF THE APPELLANT TO COMMERCIALLY EXPLOIT THE PAGE 7 OF 18 ITA NO.1507 TO 1510/BANG/2010 7 PROPERTY. FOR INSTANCE IT MAY BE NOTED THAT IN ORD ER TO PROVIDE READY MADE TELECOM AND INTERNET SERVICES TO THE UNITS IN THE INDUSTRIAL PARK THE APPELLANT AS ALR EADY DETAILED AT SUB-PARAGRAPH (N) OF PARAGRAPH 11.2 ABO VE HAD OBTAINED DISTRIBUTORSHIP FROM THE NODAL TELECOM SER VICE PROVIDERS AND INTERNET SERVICE PROVIDERS AND HAD EN ABLED ALL THE 4 NATIONAL NODAL TELECOM SERVICE PROVIDER AND I NTERNET SERVICE PROVIDER TO LOCATE THEIR DIGITAL LOOP CARRI ER IN THE INDUSTRIAL PARK CAMPUS. THE APPELLANT THEREAFTER P ROVIDED THE REQUIRED TELECOM AND INTERNET SERVICE TO THE UN ITS THROUGH THE OPTICAL FIBRE NETWORK ESTABLISHED BY TH E APPELLANT THROUGH OUT THE CAMPUS. THE APPELLANT HA D ALSO SET UP ELECTRICAL SUB-STATIONS AND CAPTIVE GENERATO R INSIDE THE PARK AND ENSURED SUPPLY OF 24 HOURS ELECTRICITY TO THE LESSEES THROUGH UNDERGROUND CABLE NETWORK ESTABLISH ED BY IT. THE SAID TELECOM AND INTERNET SERVICE AND ELECTRICI TY WERE MADE AVAILABLE TO THE UNITS LET OUT TO THE TENANTS AND IN MANY INSTANCES WERE SUPPLIED WHEREVER REQUIRED RI GHT UP-TO THE DESK OF THE TENANTS THROUGH ELECTRICAL OUTLETS AND INTERNET AND TELECOM PLUG POINTS ATTACHED TO THE FU RNITURE AND FIXTURES PROVIDED BY THE APPELLANT IN EACH UNIT . THUS THE UNITS IN THE INDUSTRIAL/SOFTWARE TECHNOLOGY PAR K DEVELOPED BY THE APPELLANT WERE DESIGNED TO BE PLUG AND PLAY OFFICES WHEREIN ANY COMPANY FIRM OR PERSO N CAN COME IN AND SET UP ITS SOFTWARE TECHNOLOGY BUSI NESS OVERNIGHT. FURTHER THE APPELLANT BY PROVIDING FUR NITURE AND FIXTURES COMMON RECEPTION AREA PARKING SPACE SEW AGE TREATMENT PLANT LANDSCAPED GARDEN CENTRALIZED AIR - CONDITIONING ELECTRICITY WATER SUPPLY CANTEEN AN D AMPHITHEATRE ENSURED THAT THE ENTIRE INFRASTRUCTURE REQUIRED TO RUN A BUSINESS WERE MADE AVAILABLE TO THE OCCUPA NTS OF THE UNITS. SIMILARLY BY PROVIDING NECESSARY STAFF TO OPERATE AND MAINTAIN THE SAID FACILITIES AS WELL AS PROVIDI NG STAFF FOR HOUSEKEEPING SECURITY AND JANITORIAL SERVICES THE APPELLANT ENSURED THAT THE UNITS IN THE PARK DID NOT HAVE TO EMPLOY A SINGLE EMPLOYEE TO MAINTAIN AND OPERATE THE INFRAST RUCTURE SUPPORT. IF THE APPELLANT HAD WANTED TO JUST SIMPLY LET OUT THE BUIDING THE APPELLANT NEED PAGE 8 OF 18 ITA NO.1507 TO 1510/BANG/2010 8 NOT HAVE CARRIED OUT THE ACTION DETAILED ABOVE. THE VERY FACT THAT THE APPELLANT HAD UNDERTAKEN SUC H ELABORATE AND COMPLEX ACTIVITIES WHICH ARE ORDINARI LY NOT UNDERTAKEN BY LANDLORD INDICATES THAT THE APPELLAN T HAD NOT INTENDED TO LET OUT THE BUILDING AS AN ORDINARY LAN DLORD BUT HAD LET OUT THE BUILDING ALONG WITH SERVICE AND AME NITIES AS A BUSINESS VENTURE. I FIND THAT THE APPELLANT HAD DI RECTED ALL ITS ACTIVITIES IN AN ORGANIZED MANNER FOR THE PURPO SE OF DEVELOPING THE PROPERTY AS IN INDUSTRIAL/SOFTWARE T ECHNOLOGY PARK AND THEREAFTER ENGAGED ITSELF IN THE BUSINESS OF MANAGEMENT OF THE INDUSTRIAL/SOFTWARE TECHNOLOGY PA RK. THEREFORE THE ACTIVITIES OF THE APPELLANT INCLUDING THE LETTING OUT OF THE BUILDING REALLY PARTAKE OF THE CHARACTER OF A BUSINESS ACTIVITY. 5.2. PLACING RELIANCE ON THE JUDGEMENT OF THE HON BLE APEX COURT IN THE CASE OF KARNANI PROPERTIES LTD V. CIT [82 ITR 547 (SC)] THE CIT (A) FURTHER OBSERVED THAT 13..ON APPLICATION OF THE ABOVE PRINCIPLE TO THE CASE OF THE APPELLANT I FIND THAT THE ACTIVITY OF THE APPELLANT OF PROVIDING SERVICES AND AMENITIES HAS BEEN CARRIED ON IN AN ORGANIZED MANNER WITH THE SET PURPOSE OF DEVELOPING AND OPERATING AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK AND THEREBY EARNING INCOME. HENCE I AM OF THE OPINION THAT THE PRINCIPLE LAID DOWN IN THE CASE OF KARNANI PROPERTIES LIMITED V. CIT (SUPRA) IS SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT AND THEREFORE IT HAS TO BE HELD THAT THE ACTIVITY OF THE APPELLANT OF PROVIDING SERVICES AND AMENITIES T O ITS TENANTS IN THE PROCESS OF OPERATING AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK CONSTITUTE BUSINESS ACTIVITY AND THE INCOME ARISING FROM SUCH BUSINESS ACTIVITY IS THEREFORE ASSESSABLE UNDE R THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN FACT THE AO HAS ALSO ADMITTED AS PAGE 9 OF 18 ITA NO.1507 TO 1510/BANG/2010 9 MUCH WHEN HE STATES THAT THE CONSIDERATION RECEIVED FOR THE FURNITURE/FITTINGS IS TO BE ASSESSED UNDER INCOME FROM BUSINESS SINCE THIS FORMS PART OF THE NORMAL BUSINESS OF THE ASSESSEE OF RUNNING A ITP. THUS ACCORDING TO THE AO ALSO THE CONSIDERATION RECEIVED BY THE APPELLANT FROM PROVIDING SERVICES AND AMENITIES [ACCORDING TO THE AO THE APPELLANT IS PROVIDING ONLY FURNITURE AND FITTINGS] TO THE TENANTS CONSTITUTES INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION. 14.0. THE AO HAS HOWEVER FAILED TO NOTE THAT THE SAID SERVICES AND FACILITIES THAT THE APPELLANT HAD TO PROVIDE IN ITS BUSINESS OF RUNNING AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK COULD NOT HAVE BEEN PROVIDED IN AN OPEN FIELD AND HAD TO BE NECESSARILY PROVIDED INSIDE A BUILDING. IN FACT I N ORDER TO PROVIDE THE SERVICES AND FACILITIES REQUIR ED TO OPERATE AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK IT WAS INDISPENSIBLE FOR THE APPELLANT TO LET OUT T HE BUILDING ALSO AND IT IS ONLY FOR THIS REASON THAT T HE APPELLANT HAD TO LET OUT THE BUILDING. THUS THE BUILDING THAT WAS LET OUT BY THE APPELLANT WAS MERELY A PLACE REQUIRED BY THE APPELLANT TO RENDER THE SAID SERVICES AND FACILITIES AND THEREFORE TH E LETTING OUT OF THE SAID BUILDING WAS MERELY INCIDENTAL TO THE CARRYING ON OF THE BUSINESS OF RUNNING AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK. IT IS THUS OBVIOUS THAT THE APPELLANT HAD LET OUT THE BUILDING ONLY AS A PART AND PARCEL OF ITS BUSINESS ACTIVITY OF RUNNING AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK AND NOT IN ITS CAPACITY AS THE OWNER OF THE BUILDING. THUS THOUGH THE ACTION OF THE APPELLANT CONSISTED OF ONE PART WHICH WAS ATTRIBUTABLE TO THE LETTING OUT OF BUILDING AND ANOTHER PART WHICH WAS ATTRIBUTABLE TO PROVIDING OF SERVICES AND FACILITIES BOTH THE ACTIONS WERE CARRIED OUT AS A PART AND PARCEL OF THE BUSINESS PAGE 10 OF 18 ITA NO.1507 TO 1510/BANG/2010 10 ACTIVITY OF THE APPELLANT OF RUNNING AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK AND THEREFORE THE ENTIRE ACTIVITY OF THE APPELLANT INCLUDING THE LETTING OUT OF THE BUILDING HAS TO BE CLASSIFIED AS A BUSINESS ACTIVITY. IN FACT ONE ON E HAND IT WAS NOT POSSIBLE FOR THE APPELLANT TO PROVIDE SERVICES AND AMENITIES WITHOUT A BUILDING AND ON THE OTHER HAND A BARE BUILDING WITHOUT THE SERVICES AND FACILITIES WOULD HAVE BEEN USELESS TO THE TENANTS. THEREFORE IT WAS THE INTENTION OF THE APPELLANT AND THE TENANTS THAT BOTH THE SERVICES AND FACILITIES AND THE BUILDING SHOULD BE ENJOYED TOGETHER AND NOT SEPARATELY FROM ONE ANOTHER. THEREFORE THE CONSIDERATION RECEIVED FOR THE LETTING OF THE BUILDING AND THE CONSIDERATION RECEIVED FOR PROVIDING SERVICES AND FACILITIES FORMED INSEPARABLE PARTS OF A COMPOSITE CONSIDERATION. THUS EVEN THOUGH A PART OF THE RECEIPTS WERE ATTRIBUTABLE TO THE LETTING OUT OF THE BUILDING SINCE THE BUILDING WAS LET OUT ONLY AS A PART AND PARCEL OF THE BUSINESS OF RUNNING AN INDUSTRIAL/SOFTWARE TECHNOLOGY PARK THE RENT RECEIPT FORMED AN INDIVISIBLE PART OF A COMPOSITE CONSIDERATION [WHIC H WAS ASSESSABLE AS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION] AND THEREFORE THE RENT RECEIPTS WERE ALSO ASSESSABLE AS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN VIEW OF THE ABOVE THE ACTION OF THE AO IN SEGREGATING AND ASSESSING THE RECEIPTS ATTRIBUTABLE TO THE LETTING OUT OF THE BUILDING AS INCOME FROM HOUSE PROPERTY IS FOUND TO BE NOT SUSTAINABLE. 5.3. AFTER DUE EXAMINATION OF THE REASONS RECORDED BY THE AOS AND ALSO ANALYZING THE HISTORY IN THE CASE OF BH OOPALAM PAGE 11 OF 18 ITA NO.1507 TO 1510/BANG/2010 11 COMMERCIAL COMPLEX & INDUSTRIES PRIVATE LTD WHICH TRAVELLED FROM THE CIT (A) TO THE TRIBUNAL AND FURTHER WENT BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WHICH AFTER DULY ANALYZING THE ISSUE THREADBARE AND CAME TO A CONCLUSION THAT THE ASSESS EE HAD TO BE VIEWED AS AN OWNER AND THEREFORE THE RESULTANT INC OME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 5.4. HOWEVER THE CIT (A) DISTINGUISHED THE BHOOPL AM CASE (SUPRA) FROM THAT OF THE ONE (THE PRESENT ASSESSEE) UNDER CONSIDERATION AND DULY RECORDED IN DOING SO AS UNDER : 15.4 IN VIEW OF THE ABOVE I AM OF THE OPINION THAT THE CASE OF THE APPELLANT IS DISTINGUISHABLE FROM THE CASE RELIED ON BY THE AOS. THIS CONCLUSION IS ALSO SUPPORTED BY THE DECISION IN THE CASE OF DCIT V. MANMIT ARCADE PRIVATE LIMITED (SUPRA). IN THIS CASE THE HONBLE ITAT BANGALORE B BENCH DISTINGUISHED THE CASE OF CIT V. BHOOPALAM COMMERCIAL COMPLEX & INDUSTRIES PRIVATE LTD [SUPRA] AND HAD STATED THAT IN THE CASE OF CIT V. BHOOPALAM COMMERCIAL COMPLEX & INDUSTRIES PVT LTD (SUPRA) THERE WAS ONLY A LEASE RENT COLLECTED AS PER THE LEASE DEED AND NO ADDITIONAL FACILITIES AND SERVICES PROVIDED NOR CHARGED . THE CASE OF THE APPELLANT IS ALSO SIMILARLY DISTINGUISHABLE AS IN THE CASE OF CIT V. BHOOPALAM COMMERCIAL COMPLEX & INDUSTRIES PRIVATE LIMITED (SUPRA) ONLY LEASE RENT BUT ALSO INCLUDED CHARGES FOR A HOST OF ADDITIONAL FACILITIES AND SERVICES. THEREFORE THE RATIO OF THE DECISION IN THE CASE OF CIT V. BHOOPALAM COMMERCIAL COMPLEX & INDUSTRIES PRIVATE LIMITED (SUPRA)CANNOT BE APPLIED TO THE CASE OF THE APPELLANT. PAGE 12 OF 18 ITA NO.1507 TO 1510/BANG/2010 12 15.5. IN MY OPINION THE AO ARRIVED AT A WRONG CONCLUSION THAT THE DECISION OF THE CASE OF CIT V. BHOOPALAM COMMERCIAL COMPLEX & INDUSTRIES PRIVATE LIMITED (SUPRA) IS APPLICABLE TO THE CASE OF THE APPELLANT BECAUSE HE MADE TWO ERRONEOUS ASSUMPTIONS. FIRSTLY THE AO HAS ASSUMED THAT THE INCOME RECEIVED BY THE ASSESSEE CONSISTED OF LETTING OUT OF SUPERSTRUCTURE IT IS TRUE THAT ANY INCOME RECEIVED FROM THE LETTING OUT OF A SUPERSTRUCTURE IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. HOWEVER THE ASSUMPTION OF THE AO THAT THE CASE OF THE APPELLANT CONSISTED OF MERE LETTING OUT OF A SUPERSTRUCTURE IS ERRONEOUS. AS ALREADY NOTED ABOVE IN THE CASE OF THE APPELLANT THERE WAS NO MERE LETTING OUT OF A SUPERSTRUCTURE AND IN FACT THE RECEIPTS OF THE APPELLANT CONSISTED OF NOT ONLY A SUPERSTRUCTURE BU T ALSO INCLUDED CHARGES FOR A HOST OF ADDITIONAL FACILITIES AND SERVICES WHICH HAVE ALREADY BEEN DETAILED ABOVE. SECONDLY FROM THE REMARK OF THE AO THAT THE CONSIDERATION RECEIVED FOR THE FURNITURE/FITTINGS IS TO BE ASSESSED UNDER INCOME FROM BUSINESS. IT APPEARS THAT THE AO HAS ASSUMED THAT THE APPELLANT HAS SIMPLY PROVIDED SOME FURNITURE AND FITTINGS. THIS ASSUMPTION OF THE AO IS WRONG AS THE APPELLANT HAD PROVIDED NOT ONLY FURNITURE AND FITTINGS BUT ALSO HAD PROVIDED A HOST OF ADDITIONAL FACILITIES AND SERVICES. THUS BOTH THE ASSUMPTION OF THE AO WERE ERRONEOUS AND THEREFORE THE CONCLUSION OF THE AO THAT THE FACTS OF THE ASSESSEES CASE FALL SQUARELY WITHIN THE SCOPE OF THE JUDGMENT BEING BASED ON SUCH ERRONEOUS ASSUMPTION IS INCORRECT. THEREFORE THE RATIO OF THE DECISION OF THE CASE OF CIT V. BHOOPALAM COMMERCIAL COMPLEX & INDUSTRIES PRIVATE LIMITED (SUPRA) CANNOT BE APPLIED TO THE CASE OF THE APPELLANT. PAGE 13 OF 18 ITA NO.1507 TO 1510/BANG/2010 13 16.0. IN VIEW OF THE ABOVE I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE COMPOSITE CHARGES WHICH INCLUDES THE CHARGES RECEIVED FOR LETTING OUT OF THE BUILDING IS TO BE TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. IN THIS REGARD I FIND THAT THE APPELLANT HAS CORRECTLY PLACED RELIANCE ON THE DECISION IN THE CASE OF GLOBAL TECH PARK PRIVATE LIMITED V. ACIT (SUPRA). IN THIS CASE THE ASSESSEE WAS ALLOTTED LAND MEASURING 6.25 ACRES OR 2 72 000 SQUARE FEET IN THE ELECTRONICS CITY PHASE II INDUSTRIAL AREA BANGALORE BY THE KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD. THE MAIN OBJECT OF THE ASSESSEE AS PER ITS MEMORANDUM OF ASSOCIATION WAS TO ESTABLISH AND MAINTAIN INFORMATION TECHNOLOGY PARK WITH FACTORIES COMMERCIAL OFFICES RESIDENTIAL COMPLEXES AND OTHER ALLIED FACILITIES AND AMENITIES SUCH AS GARDENS SWIMMING POOLS INTERNAL ROADS SATELLITE COMMUNICATION FACILITIES SHOPS ETC ON LAND TO BE ALLOTTED BY ANY GOVERNMENT OR TO BE PURCHASED FROM ANY PERSON. ACCORDINGLY THE ASSESSEE DEVELOPED THE SAID LAND AND CONSTRUCTED AN INFORMATION TECHNOLOGY PARK THEREON. THE INFORMATION TECHNOLOGY PARK CONSISTS OF TWO LARGE BLOCKS OF BUILDINGS WITH FOUR FLOORS IN EACH BLOCK SERVICE BLOCK CAFETERIA LIBRARY GYMNASIUM UTILITIES FOR STAFF REST ROOMS SECURITY ATM AND GEODESIC DOME. BESIDES LANDSCAPING AND CONSTRUCTION OF STEEL REINFORCED CEMENT ROADS AND HIGH SECURITY COMPOUND WALL FITTED WITH MOTORIZED GAGE HUGE WATER TANK FITTED WITH HIGH PRESSURE PUMPS RESERVOIR AND SUMP BORE WELL SEWAGE TREATMENT PLANT LIFTS RAIN WATER HARVESTING SYSTEM HIGH STANDARD ELECTRICAL INSTALLATION INCLUDING TRANSFORMER AND GENERATORS AIR- CONDITIONING FIRE FIGHTING AND SMOKE DETECTOR EQUIPMENTS ETC. HAVE BEEN PROVIDED/INSTALLED IN PAGE 14 OF 18 ITA NO.1507 TO 1510/BANG/2010 14 THE SAID INFORMATION TECHNOLOGY PARK BY THE ASSESSEE. THE ASSESSEE IS PROVIDING WARD AND WATCH MAINTENANCE OF COMMON AREA MAINTENANCE OF LIGHT IN THE COMMON AREA SUPPLY OF WATER PROVIDING LIFT INSTALLATION OF ELECTRIC TRANSFORME R POWER TO THE LESSEES PROVIDING GENERATOR OVERHEAD WATER TANKS MAINTENANCE OF DRAINAGE ETC. IN THE SAID TECHNOLOGY PARK. THE HONBLE INCOME-TAX APPELLATE TRIBUNAL BANGALORE A BENCH HELD THAT AS THE ENTIRE ACTIVITY OF LEASE OF THE PROPERTY . WAS DONE BY THE ASSESSEE AS A BUSINESS VENTURE AND WAS IN ACCORDANCE WITH THE MAIN OBJECT OF THE COMPANY THE RENTAL INCOME IS ASSESSABLE AS BUSINESS INCOME. 16.1. ON EXAMINATION I FIND THAT THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF GLOBAL TECH PARK PRIVATE LIMITED V. ACIT (SUPRA) AND HENCE I AGREE WITH THE APPELLANT THAT THE DECISION IN THE CASE THAT THE RENTAL INCOME IS ASSESSABLE AS BUSINESS INCOME IS SQUARELY APPLICABL E TO THE CASE OF THE APPELLANT. 17.0. IN VIEW OF THE ABOVE DISCUSSED REASONS THE ACTION OF THE AO IN BIFURCATION AND ASSESSMENT OF THE COMPOSITE COMPENSATION RECEIVED BY THE APPELLANT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IS FOUND TO BE NOT SUSTAINABLE AND THEREFORE THE CONSEQUENT DISALLOWANCES MADE BY THE AO ON THE BASIS OF SUCH BIFURCATION IS HEREBY DELETED. THE AO IS DIRECTED TO TREAT THE ENTIRE INCOME OF THE APPELLANT AS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. PAGE 15 OF 18 ITA NO.1507 TO 1510/BANG/2010 15 6. BEING AGGRIEVED WITH THE FINDINGS OF THE CIT (A ) THE REVENUE HAS COME UP WITH THE PRESENT APPEALS BEFORE US. 6.1. THE LEARNED DR HEAVILY PLACED RELIANCE ON THE FINDINGS OF THE AOS AND ARGUED THAT THE CIT (A) OUGHT TO HAVE A PPRECIATED THE VERY FACT THAT THE ASSESSEE HAD COLLECTED RENT FOR T HE BUILDING PREMISES LET OUT AND THE SAME WAS NOT IN THE NATURE OF COMPOSITE RENT PAID FOR LETTING OUT THE PREMISES AND OTHER IN CIDENTAL FACILITIES PROVIDED. IT WAS FURTHER SUBMITTED THAT AS PER T HE LEASE DEED THE TENANT WAS REQUIRED TO PAY SEPARATELY FOR CERTAIN FAC ILITIES LIKE USE OF CATERING SERVICES AND AMPHITHEATRE AVAILED IF ANY BY THE TENANTS. HE HAD PLACED MORE EMPHASIS ON THE LEASE DEEDS WHIC H ACCORDING TO HIM CLEARLY MENTION THAT THE TENANT WAS REQUIRED TO PAY RENT FOR THE BUILDING AND HIRE CHARGES FOR FURNITURE AND FITTING S TAKEN ON HIRE SEPARATELY. IN CONCLUSION IT WAS ARGUED THAT THE C IT (A) OUGHT TO HAVE HELD THAT THE HIRE CHARGES WERE ASSESSABLE AS BUSINESS INCOME AND THE RENT RECEIVED FOR THE BUILDING LET OUT WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY. 6.2. ON THE OTHER HAND THE LEARNED A R SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS DIRECTLY COVERED BY THE FINDINGS OF THE EARLIER BENCHES IN THE CASES OF (I) GLOBAL TECH PAR K (P) LTD V. ACIT [119 TTJ 421 (BNG); (II) DCIT V. GOLF-LINK SOFTWARE PARK P LTD ITA NOS. 40 41 52 & 53/BANG/2010; AND (III) ITO V. M/ S. INFORMATION TECHNOLOGY PARK LTD ITPL BANGALORE ITA NOS.1147 TO 1152/BANG/ PAGE 16 OF 18 ITA NO.1507 TO 1510/BANG/2010 16 2010). IT WAS THEREFORE PLEADED THAT THE ISSUE B E DECIDED IN FAVOUR OF THE ASSESSEE. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF EITHER PARTY AND DILIGENTLY PERUSED AND EVALUATED THE RELEVA NT CASE RECORDS. 7.1. IT WAS INDEED AN UNDISPUTED FACT THAT THE ASS ESSEE HAD DEVELOPED A TECHNOLOGY PARK WHEREIN A SIZEABLE PRIVI LEGED I.T. COMPANIES HAVE THEIR FOCAL POINTS HOUSED. IT WAS A LSO A FACT THAT THE ASSESSEE HAD NOT ONLY LET OUT ITS BUILDING BUT ALSO CARRIED ON A COMPLEX COMMERCIAL ACTIVITY OF SETTING UP OF A SOFTW ARE TECHNOLOGY PARK IN WHICH A MIXTURE OF AMENITIES AS DETAILED/DI SCUSSED IN THE IMPUGNED ORDER OF THE CIT(A) WAS PROVIDED TO THE TE NANTS. 7.2. AT THIS JUNCTURE WITH DUE REGARDS WE WOULD LIKE TO HIGHLIGHT THE LANDMARK VERDICT OF THE HONBLE SUPRE ME COURT IN THE CASE OF CIT V. NATIONAL STORAGE PVT. LTD REPORTED I N 66 ITR 596 (SC) WHEREIN THE HONBLE COURT IN ITS WISDOM HAD CLEARLY DISTINGUISHED THE DIFFERENCE BETWEEN MERELY LETTING OUT A BARE BUILDIN G FROM THAT OF BUILDING WHICH HAS BEEN ADORNED WITH VARIOUS AMENIT IES. 7.2.1. YET ANOTHER FINDING THE EARLIER BE NCH OF THIS TRIBUNAL IN ITS FINDINGS IN GLOBAL TECH PARK (P) LTD V. ACIT RE PORTED IN (2008) 119 TTJ (BANG) 421 HAD ENDORSED THE PRINCIPLE THAT THE LEASE RENTAL INCOME ARISING FROM A COMPLEX COMMERCIAL ACTIVITY WI LL BE CATEGORIZED AS INCOME FROM BUSINESS AS AGAINST INCOME FROM H OUSE PROPERTY. THE RELEVANT PORTION OF ITS FINDINGS ARE EXTRACTED AS UNDER: PAGE 17 OF 18 ITA NO.1507 TO 1510/BANG/2010 17 7ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS INCORPORATED WITH THE SOLE INTENTION OF DEVELOPING TECHNOLOGY PARK FOR WHICH I T OBTAINED LEASEHOLD LAND FROM THE KARNATAKA INDUSTRIAL DEVELOPMENT CORPORATION AND ALSO OBTAINED LOAN FROM UNION OF INDIA FOR CONSTRUCTING SUPERSTRUCTURE THEREON WHICH COULD NOT BE CONSIDERED AS INVESTMENT IN A PROPERTY FOR EARNING RENTAL INCOME ONLY. THE LEASE OF THE PROPERTY WAS SHOWN AS PART OF THE BUSINESS ACTIVITY THE INCOME RECEIVED THERE-FROM CANNOT BE SAID AS INCOME RECEIVED AS A LAND OWNER BUT AS A TRADER. IN OTHER WORDS IF THE PROPERTY IS TAKEN ON LEASE THEREAFTER DEVELOPED ON LEASE IS PART OF THE BUSINESS ACTIVITY OF THE ASSESSEE AS AN OWNER THEN THE INCOME HAS TO BE TREATED AS BUSINESS INCOME THE ACTIVITY WAS DONE BY THE ASSESSEE AS A BUSINESS VENTURE AND WAS IN ACCORDANCE WITH THE MIN OBJECT OF THE COMPANY. THE INTENTION OF ANY PRUDENT BUSINESSMAN IS TO EARN PROFIT AT A MAXIMUM LEVEL AND INVESTMENT MADE IN THE BUSINESS NEVER LOST ITS MAIN INTENTION FOR WHICH IT WAS INCORPORATED. THE ENTIRE COST OF CONSTRUCTION WAS BY WAY OF OBTAINING LOAN WHICH WAS A RISK AS ADVENTURE IN THE NATURE OF TRADE. THEREFORE THE CONVERSION FROM LEASEHOLD TO OWNERSHIP LED TO A PURE COMMERCIAL PROPOSITION RESULTING IN A BUSINESS VENTURE CARRIED OUT BY THE ASSESSEE COMPANY. THE ASSESSEE IS PROVIDING WARD AND WATCH MAINTENANCE OF COMMON AREA MAINTENANCE OF LIGHT IN THE COMMON AREA SUPPLY OF WATER PROVIDING LIFT INSTALLATION OF ELECTRIC TRANSFORMER POWER TO THE LESSEES PROVIDING GENERATOR OVERHEAD WATER TANKS MAINTENANCE OF DRAINAGE ETC. CLEARLY ESTABLISH THAT THE ENTIRE ACTIVITY IS IN ORGANIZED MANNER TO EARN PROFIT OUT OF INVESTMENT MADE BY THE ASSESSEE AS A COMMERCIAL VENTURE. PAGE 18 OF 18 ITA NO.1507 TO 1510/BANG/2010 18 7.3. TAKING INTO ACCOUNT ALL RELEVANT FACTS AND TH E CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN T HE FOREGOING PARAGRAPHS AND ALSO IN CONFORMITY WITH THE JUDICIAL PRONOUNCEMENTS CITED SUPRA WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT (A) WAS JUSTIFIED IN HIS REASONING WHICH REQUIRES NO IN TERVENTION OF THIS BENCH. IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF MARCH 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR ITAT BANGALORE .