M/s Vizag IT Park Ltd., Visakhapatnam v. The ACIT, Circle-4(1), Visakhapatnam

ITA 400/VIZ/2009 | 2006-2007
Pronouncement Date: 23-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 40025314 RSA 2009
Assessee PAN AACCV0107E
Bench Visakhapatnam
Appeal Number ITA 400/VIZ/2009
Duration Of Justice 1 year(s) 4 month(s) 19 day(s)
Appellant M/s Vizag IT Park Ltd., Visakhapatnam
Respondent The ACIT, Circle-4(1), Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 23-12-2010
Date Of Final Hearing 23-11-2010
Next Hearing Date 23-11-2010
Assessment Year 2006-2007
Appeal Filed On 03-08-2009
Judgment Text
ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.156/VIZAG/2008 ASSESSMENT YEAR: 2004-05 VIZAG IT PARK VISAKHAPATNAM VS. A. COMMISSIONER OF INCOME TAX CIRCLE-4(1) VISAKHAPATNAM (APPELLANT) PAN NO: AACCV 0107 E (RESPONDENT) ITA NO.368/VIZAG/2008 ASSESSMENT YEAR: 2005-06 VIZAG IT PARK VISAKHAPATNAM VS. JCIT RANGE-4 VISAKHAPATNAM (APPELLANT) PAN NO: AACCV 0107 E (RESPONDENT) ITA NOS.399 TO 401/VIZAG/2009 ASSESSMENT YEAR S : 2004 - 05 2006 - 07 & 2007 - 08 VIZAG IT PARK VISAKHAPATNAM VS. A. COMMISSIONER OF INCOME TAX CIRCLE-4(1) VISAKHAPATNAM (APPELLANT) PAN NO: AACCV 0107 E (RESPONDENT) APPELLANT BY: SHRI V.RAGHAVENDRA RAO ADVOCATE RESPONDENT BY: SHRI T.J. PETER DR ORDER PER BENCH: ALL THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE. THE APPEAL NUMBERED AS 156/VIZAG/2008 IS DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT-II VISAKHAPATNAM UNDER SECTION 263 OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. THE REMAINING FOUR APPEALS ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LEARNED CIT (A)-I VISAKHAPA TNAM AND THEY RELATE TO THE ASSESSMENT YEARS 2004-05 TO 2007-08. SINCE T HE CORE ISSUES URGED IN ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 2 OF 10 ALL THESE APPEALS ARE IDENTICAL IN NATURE THEY WER E HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE. 2. FIRST WE TAKE UP THE APPEAL NUMBERED AS ITA NO.1 56/VIZAG/2008 RELATING TO THE ASSESSMENT YEAR 2004-05. THE ASSES SEE HAS CONSTRUCTED A 5 STORIED BUILDING AND LET IT OUT TO M/S HSBC ELECTRO NICS DATA PROCESSING INDIA PRIVATE LIMITED. THE LEASE INCOME RECEIVED BY IT WA S OFFERED UNDER THE HEAD INCOME FROM BUSINESS IN THE RETURN OF INCOME FILE D BY THE ASSESSEE. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKIN G CERTAIN DISALLOWANCES BY ACCEPTING THE LEASE INCOME AS INC OME FROM BUSINESS. THE LEARNED CIT NOTICED THAT THE ASSESSEE DID NOT C ARRY OUT ANY BUSINESS ACTIVITY EXCEPT RENTING OUT THE BUILDINGS CITED ABO VE AND HENCE HE FELT THAT THE RENTAL INCOME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY HE INITIATED REVISION PROCEED INGS U/S 263 OF THE ACT AND AFTER HEARING THE ASSESSEE HE SET ASIDE THE AS SESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO FRAME ASSESSMENT DE NOVO AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASS ESSEE IS CHALLENGING THE SAID ORDER OF THE LEARNED CIT. 2.1 IT IS NOTICED THAT THE ASSESSING OFFICER HAS PAS SED THE ORDER IN ACCORDANCE WITH THE DIRECTIONS OF THE LEARNED CIT C ITED ABOVE FOR THE ASSESSMENT YEAR 2004-05 BY ASSESSING THE LEASE INCO ME RECEIVED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. FOR THE SUCCEEDING THREE ASSESSMENT YEARS ALSO I.E. ASSESSMENT YEAR 2 005-06 TO 2007-08 THE ASSESSING OFFICER HAS ASSESSED THE LEASE INCOME UND ER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LEARNED CIT (A) FOR ALL THE YEARS BUT COULD NOT FI ND FAVOUR FROM HIM. HENCE THE ASSESSEE HAS FILED APPEALS BEFORE US CHALLENGIN G THE ORDERS OF THE LEARNED CIT (A). IN VIEW OF THE ABOVE FACTS THE A PPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER OF LEARNED CIT PASSE D UNDER SECTION 263 IS OF ACADEMIC NATURE. ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 3 OF 10 2.2 BE THAT AS IT MAY WE NOTICE FROM THE ASSES SMENT ORDER DATED 31.8.2006 THAT THE ASSESSING OFFICER DID NOT EXAMIN E THE LEGAL ASPECT OF ASSESSABILITY OF LEASE INCOME RECEIVED BY THE ASSES SEE THOUGH HE HAS NOTICED THAT THE ASSESSEE HAS RECEIVED RENTAL INCOM E. HENCE WE ARE OF THE VIEW THAT THE SAID ASSESSMENT ORDER IS ERRONEOUS AN D PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LEARNED CIT UNDER SECTION 26 3 OF THE ACT. 3. ALL THE REMAINING APPEALS ARE DIRECTED AGAINST T HE ORDERS OF LEARNED CIT(A). THE ASSESSEE IS ASSAILING THE DECISION OF T HE LEARNED CIT (A) IN HOLDING THAT THE LEASE INCOME RECEIVED BY THE ASSES SEE IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE COMPANY CONSTRUCTED A 5 STOREY BUILDING ON THE LAND ACQUIRED FROM VISAKHAPATNAM URBAN DEVELOPMENT AUTHORITY( VUDA) EX CLUSIVELY FOR THE PURPOSE OF CARRYING ON ACTIVITY RELATING TO INFORMA TION TECHNOLOGY ENGINEERING CONSULTANCY SERVICES OR FINANCIAL BANKI NG SERVICES. THE ASSESSEE COMPANY APPLIED TO THE MINISTRY OF COMMERCE AND IND USTRY (DEPARTMENT OF INDUSTRIAL POLICY) AND OBTAINED APPROVAL OF THE BUIL DING AS AN INDUSTRIAL PARK VIDE MINISTRY OF COMMERCE AND INDUSTRIES LETT ER NO.15/18/04-IP&ID DATED 1-9-2004. THE SAID APPROVAL WAS GIVEN SUBJEC T TO CERTAIN TERMS AND CONDITIONS. THE ASSESSEE LEASED OUT THE SAID PREMIS ES TO A SINGLE COMPANY NAMED M/S HSBC ELECTRONICS DATA PROCESSING INDIA PR IVATE LIMITED. THE ASSESSEE OFFERED THE LEASE AMOUNT RECEIVED BY IT UN DER THE HEAD INCOME FROM BUSINESS. HOWEVER THE ASSESSING OFFICER ASSE SSED THE LEASE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LE ARNED CIT (A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HEN CE THE ASSESSEE IS IN APPEAL BEFORE US FOR ALL THE YEARS ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 4 OF 10 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE COMPANY HAS CONSTRUCTED THE BUILDING AS AN INFORMATI ON TECHNOLOGY PARK WHICH IS AN INFRASTRUCTURE PROJECT ELIGIBLE FOR DED UCTION UNDER SECTION 80IA. THE LAND REQUIRED FOR THE PROJECT WAS ALLOTTED BY V ISAKHAPATNAM URBAN DEVELOPMENT AUTHORITY FOR THE SPECIFIC PURPOSE OF C ONSTRUCTING INFORMATION TECHNOLOGY PARK. FOR PROMOTING THE SAID PROJECT A JOINT AGREEMENT WAS ENTERED BETWEEN ANDHRA PRADESH INDUSTRIAL INFRASTRU CTURE CORPORATION LIMITED VUDA L&T INFO CITY AND THE PROMOTERS OF TH E PROJECT. IN PURSUANCE OF THE SAID AGREEMENT THE ASSESSEE COMPA NY WAS PROMOTED AND THE IMPUGNED BUILDING WAS CONSTRUCTED. THE INFRASTR UCTURE AUTHORITY OF THE GOVERNMENT OF A.P HAS GIVEN EXEMPTION FROM PAYMENT OF STAMP DUTY AND REGISTRATION FEE FOR THE TRANSFER OF LAND TO THE AS SESSEE COMPANY. THE MINISTRY OF COMMERCE & INDUSTRY HAS APPROVED THE ASS ESSEE COMPANY UNDER INDUSTRIAL PARK SCHEME 2002 FOR AVAILING BEN EFIT UNDER SECTION 80IA OF THE ACT AND THE SAME HAS BEEN NOTIFIED UNDER NOT IFICATION NO.282/2006 DATED 29-9-2006 (208 CTR (ST) 30). HOWEVER THE AS SESSEE COMPANY DID NOT CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT SINCE IT HAD AN OPTION OF CLAIMING THE SAID DEDUCTION IN TEN CONSECUTIVE ASSE SSMENT YEARS. ACCORDINGLY THE LEARNED AUTHORISED REPRESENTATIVE S UBMITTED THAT SETTING UP OF IT PARKS FOR CARRYING ON IT ACTIVITIES IS A COMP LEX ACTIVITY AND HENCE THE INCOME DERIVED FROM THE SAID ACTIVITY SHOULD BE ASS ESSED UNDER THE HEAD INCOME FROM BUSINESS. IN THIS REGARD THE LEARNED A UTHORISED REPRESENTATIVE PLACED RELIANCE ON THE FOLLOWING DECISIONS: A) CIT VS. A.P SMALL SCALE INDUSTRIES DEVELOPMENT CO RPORATION 175 ITR 352 B) CIT VS. A.P. INDUSTRIAL INFRASTRUCTURAL CORPOR ATION 175 ITR 361 IN THE ALTERNATIVE THE LEARNED AUTHORISED REPRESENT ATIVE SUBMITTED THAT IF THE SAID CLAIM OF THE ASSESSEE IS NOT ACCEPTED THE N THE LEASE INCOME DERIVED BY IT SHOULD BE ASSESSED UNDER THE HEAD INC OME FROM OTHER SOURCES AS THE ASSESSEE HAS LEASED OUT THE BUILDIN G ALONG WITH PLANT AND MACHINERIES ATTACHED TO IT. HE FURTHER SUBMITTED TH AT IF THE LEASE INCOME IS ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 5 OF 10 DIRECTED TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY SINCE THE ASSESSEE IS A LIMITED COMPANY THE ADMINISTRATI VE EXPENSES INCURRED BY IT SHOULD BE DIRECTED TO BE ALLOWED AGAINST THE LEA SE INCOME. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE ASSESSEE DID NOT CARRY OUT ANY INFORMATION TECHNOLO GY ACTIVITY IN THE IMPUGNED BUILDING AND INSTEAD HAS LEASED OUT THE EN TIRE BUILDING TO A SINGLE PARTY EVEN THOUGH THE SAID BUILDING WAS CONSTRUCTE D UNDER INDUSTRIAL PARK SCHEME. THOUGH THE ASSESSEE WAS RECOGNIZED AS AN IT PARK UNDER SECTION 80IA THE ASSESSEE COULD NOT CLAIM THE SAID DEDUCTI ON IN VIEW OF NON- FULFILLMENT THE CONDITIONS SPECIFIED THEREIN. ACCOR DINGLY HE SUBMITTED THAT ONCE THE ASSESSEE HAS FAILED TO COMPLY WITH THE CON DITIONS SPECIFIED BY THE CONCERNED AUTHORITY THE IMPUGNED BUILDING PROJECT LOOSES ITS IDENTIFY AS AN INDUSTRIAL PARK AND IN THAT CASE WHAT THE ASSESSEE HAS LEASED OUT IS A BUILDING SIMPLICITER AND HENCE THE LEASE INCOME REC EIVED BY IT SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WITH REGARD TO THE ALTERNATIVE CLAIM OF THE ASSESSEE TO ASSESS THE LEA SE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE SAID REQUEST OF THE ASSESSEE IS NOT IN ACCORDANCE WITH THE ACT SINCE IT HAS LET OUT THE BUILDINGS WITH CER TAIN AMENITIES WHICH ARE USUALLY PROVIDED IN ALL THE BUILDINGS OF SIMILAR NA TURE. WITH REGARD TO THE CLAIM OF THE LEARNED AUTHORISED REPRESENTATIVE FOR DEDUCTION OF ADMINISTRATIVE EXPENSES THE LEARNED DEPARTMENTAL R EPRESENTATIVE ACCEPTED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION OF MINI MUM ADMINISTRATIVE EXPENDITURE. 7. IN THE REJOINDER THE LEARNED AUTHORISED REPRESENT ATIVE SUBMITTED THAT THE LESSEE OF THE BUILDING IS A DATA PROCESSIN G/CALL CENTRE AND HENCE THE INFORMATION TECHNOLOGY ACTIVITIES ARE CARRIED O N IN THE IMPUGNED BUILDING. HE FURTHER SUBMITTED THAT THE NOTIFICATIO N ISSUED UNDER SECTION 80IA IN FAVOUR OF THE ASSESSEE HAS NOT BEEN CANCELL ED SO FAR AND HENCE THE ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 6 OF 10 ASSESSEE CAN STILL CLAIM THE DEDUCTION UNDER THAT S ECTION ON FULFILLING THE CONDITIONS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE NOTICE THAT THOUGH THE ASSESSEE HAS CON STRUCTED THE IMPUGNED BUILDING AS AN INFRASTRUCTURE PROJECT UNDER INDUSTR IAL PARK SCHEME BUT AS POINTED OUT BY LEARNED DEPARTMENTAL REPRESENTATIVE THE ASSESSEE HAS FAILED TO COMPLY WITH CERTAIN TERMS & CONDITIONS PR ESCRIBED WHILE ISSUING THE NOTIFICATION. WE NOTICE THAT THE SAID NOTIFICATION INTER ALIA STATES THAT A MINIMUM OF FIVE NUMBERS OF INDUSTRIAL UNITS SHOULD OCCUPY THE IMPUGNED BUILDING AND FURTHER NO SINGLE UNIT SHALL OCCUPY MO RE THAN 50% OF THE ALLOCABLE AREA OF THE INDUSTRIAL PARK. IT HAS ALSO B EEN SPECIFIED THAT THE TAX BENEFITS UNDER THE INCOME TAX ACT CAN BE AVAILED ON LY AFTER THE REQUIRED NUMBER OF UNITS (5 UNITS) ARE LOCATED IN THE INDUSTR IAL PARK. HOWEVER THE ASSESSEE HAS CONTRAVENED THE SAID CONDITIONS BY LET TING OUT THE ENTIRE BUILDING TO A SINGLE PARTY. IT APPEARS THAT THE AS SESSEE DID NOT CHOOSE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT WHILE FILING THE RETURN OF INCOME IN VIEW OF THE NON-FULFILLMENT OF THE CONDIT IONS CITED ABOVE. NOW THE QUESTION THAT ARISES IS WHETHER UNDER THESE CI RCUMSTANCES THE LEASE INCOME DERIVED ON LEASING OUT THE IMPUGNED BUILDING TO A SINGLE PARTY IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY OR BUSINES S INCOME. FOR RESOLVING THE SAID CONTROVERSY WE FEEL IT PERTINEN T TO REFER TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF SHAMBU INVESTMENT (263 ITR 143) IN WHICH THEIR LORDSHIP OF THE APEX COURT HAVE CATEGORICALLY HELD THAT THE INCOME DERIVED BY ASSESSEE BY LETTING OUT FURNISHED PREMIS ES ON MONTHLY RENT BASIS TO VARIOUS PARTIES ALONG WITH THE FURNISHED FIXTURE LIGHT AIR CONDITIONERS ETC. FOR BEING USED AS A TABLE SPACE AND ALSO PROV IDED THEM COMMON SERVICES LIKE WATCH AND WARD STAFF ELECTRICITY WA TER AND OTHER AMENITIES WITHOUT ANY SEPARATE CHARGES WAS ASSESSABLE AS INC OME FROM HOUSE PROPERTY AND NOT A BUSINESS INCOME. THE FACTS ARE NOT CLEAR IN THE JUDGMENT OF THE APEX COURT THAT IS WHY WE WOULD LIK E TO REFER THE JUDGMENT ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 7 OF 10 OF THIS HIGH COURT WHICH HAS BEEN APPROVED BY THE A PEX COURT. THE JUDGMENT OF THE HIGH COURT IN THE CASE OF SHAMBHU IN VESTMENT (SUPRA) IS REPORTED AT PG.249 ITR 47. THE FACTS OF THAT CASE ARE THAT ASSESSEE OWNED A BUILDING AT RAHEJA CHAMBERS NARIMAN POINT MUMBA I. THE SAID PREMISES HAS BEEN FURNISHED BY THE ASSESSEE AND HAS BEEN LET OUT TO VARIOUS PERSONS/FIRMS/ORGANIZATIONS WITH ALL FURNITURE FIX TURE AND LIGHT AIR CONDITIONERS FOR BEING USED AS A TABLE SPACE. TH E SAID ASSESSEE UNDER THE AGREEMENT WITH THOSE OCCUPIERS IS TO PROVIDE S ERVICE LIKE WATCH AND WARD STAFF ELECTRICITY WATER AND OTHER COMMON AME NITIES. INCOME DERIVED BY THE ASSESSEES FROM THE SAID OFFICE PREMISES WAS OFFERED FOR TAXATION AS A BUSINESS INCOME AND THE SAME WAS ASSESSED ACCORDING LY BY THE A.O. THE CIT INVOKED ITS JURISDICTION U/S 263 AFTER HAVING O BSERVED THAT THE INCOME DERIVED FROM THE SAID PROPERTIES WERE ACTUALLY RENT RECEIVED FROM THE OCCUPIERS AND NOT TO BE REGARDED AS SERVICE CHARGES AND MAINTENANCE AND CANNOT BE TERMED AS BUSINESS INCOME AND REVISE THE ORDER OF THE ASSESSING OFFICER BY HOLDING THAT RENTAL INCOME HAS TO BE ASS ESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE MATTER TRAVELED TO THE HIGH COURT AND THE HONBLE CALCUTTA HIGH COURT HAVING EXAMINED THI S ISSUE IN DETAIL HAS CATEGORICALLY HELD THAT INCOME DERIVED BY THE ASSES SEE FROM LETTING OUT THE FURNISHED PREMISES ON MONTHLY RENT BASIS TO VARIOUS PARTIES FOR BEING USED AS A `TABLE SPACE IS TO BE ASSESSED AS INCOME FROM PROPERTY AND NOT BUSINESS INCOME. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE EXTRACTED HEREUNDER: MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABLE PROPERTY CANNOT BE THE SOLE FACTOR FOR ASSESSMENT O F SUCH INCOME AS INCOME FROM PROPERTY. WHAT HAS TO BE SEEN IS WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS FOUND APPLYING SUCH TEST THAT M AIN INTENTION IS FOR LETTING OUT THE PROPERTY OR ANY PO RTION THEREOF THE SAME MUST BE CONSIDERED AS RENTAL INCOM E OR INCOME FROM PROPERTY. IN CASE IT IS FOUND THAT THE MAIN INTENTION IS TO EXPLOIT THE IMMOVABLE PROPERTY BY W AY OF COMPLEX COMMERCIAL ACTIVITIES IN THAT EVENT IT MUST BE ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 8 OF 10 HELD AS BUSINESS INCOME. FROM THE COPY OF THE AGREEMENT IT APPEARS THAT THE ASSESSEE HAS LET OUT THE FURNISHED OFFICE AT A MONTHLY RENT PAYABLE MONTH BY MONTH BY THE RESPECTI VE OCCUPANTS. SERVICES RENDERED TO THE VARIOUS OCCUPA NTS ACCORDING TO THE SAID AGREEMENT ARE NOT SEPARATELY CHARGED AN D THE MONTHLY RENT PAYABLE IS INCLUSIVE OF ALL CHARGES TO THE ASSESSEE. A PORTION OF THE SAID PROPERTY IS USED BY THE ASSES SEE HIMSELF FOR HIS OWN BUSINESS PURPOSE. THE REST OF THE SAID PRO PERTY HAS BEEN LET OUT TO THE VARIOUS OCCUPIERS. IT FURTHER A PPEARS THAT THE ASSESSEE HAD ALREADY RECOVERED A SUM OF RS.4 25 000 /- AS AND BY WAY OF SECURITY FREE ADVANCE FROM THREE OCCUPANT S. HENCE THE ENTIRE COST OF THE PROPERTY LET OUT TO THOSE OC CUPIERS HAVE ALREADY BEEN RECOVERED AS AN BY WAY OF INTEREST-FRE E ADVANCE BY THE ASSESSEE. HENCE IT CANNOT BE SAID THAT THE AS SESSEE IS EXPLOITING THE PROPERTY FOR ITS COMMERCIAL BUSINESS ACTIVITIES AND SUCH BUSINESS ACTIVITIES ARE PRIME MOTTO AND LETTIN G OUT THE PROPERTY IS A SECONDARY ONE. THERE IS NO SEPARATE AGREEMENT FOR FURNITURE AND FIXTURES OR FOR PROVIDING SECURITY AN D OTHER AMENITIES. THE ONLY INTENTION WAS TO LET OUT THE P ORTION OF THE PREMISES TO THE RESPECTIVE OCCUPANTS. HENCE THE I NTENTION IN MAKING SUCH AGREEMENT IS TO ALLOW THE OCCUPANTS TO ENJOY THE TABLE SPACE TOGETHER WITH THE FURNITURE AND FIXTURE S. FROM A PLAIN READING OF THE AGREEMENT IT APPEARS THAT THE INTENTION OF THE PARTIES TO THE SAID AGREEMENT ARE CLEAR AND UNA MBIGUOUS BY WHICH THE FIRST PARTY HAS ALLOWED THE SECOND PARTY TO ENJOY THE SAID TABLE SPACE UPON PAYMENT OF THE COMPREHENSIVE MONTHLY RENT. AS DISCUSSED HEREINBEFORE IT IS COMPOSITE TA BLE SPACE LET OUT TO VARIOUS OCCUPANTS THE AMENITIES GRANTED TO THOSE OCCUPANTS INCLUDING THE USER OF THE FURNITURE AND F IXTURES ARE ATTACHED TO SUCH LETTING OUT. BY THE SAID AGREEMEN T THE PARTIES HAVE INTENDED THAT SUCH LETTING OUT WOULD BE AN INS EPARABLE ONE. HENCE THE PRIME OBJECT OF THE ASSESSEE UNDER THE S AID AGREEMENT WAS TO LET OUT THE PORTION OF THE SAID PR OPERTY TO VARIOUS OCCUPANTS BY GIVING THEM ADDITIONAL RIGHT O F USING THE FURNITURE AND FIXTURES AND OTHER COMMON FACILITIES FOR WHICH RENT WAS BEING PAID MONTH BY MONTH IN ADDITION TO THE SE CURITY ADVANCE COVERING THE ENTIRE COST OF THE SAID IMMOVA BLE PROPERTY. IN VIEW OF THE FACTS AND LAW DISCUSSED ABOVE THE INC OME DERIVED FROM THE SAID PROPERTY IS INCOME FROM PROPERTY AND SHOULD BE ASSESSED AS SUCH. IN FACT THERE WAS A RELATIONSHIP OF LANDLORD AND TENANT BETWEEN ASSESSEE AND PERSONS WHO HIRED O FFICE ACCOMMODATION SULTAN BROS (P) LTD. VS. CIT (1964) 51 ITR 353 (SC): TC 41R. 500 APPLIED. ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 9 OF 10 9. THIS VIEW OF THE HONBLE HIGH COURT HAS BEEN APP ROVED BY THE APEX COURT AND THEREFORE THE NATURE OF RENTAL INCOME FR OM HOUSE PROPERTY IS TO BE EXAMINED IN THE LIGHT OF SURROUNDING CIRCUMSTANC ES AND THE INTENTION OF THE ASSESSEES AT THE TIME OF LETTING OUT OF THE PRO PERTY. IN THE INSTANT CASE THOUGH THE ASSESSEE HAS CONSTRUCTED THE BUILD ING AS AN INFRASTRUCTURE PROJECT UNDER THE INDUSTRIAL PARK SCHEME YET AFTER COMPLETION OF THE CONSTRUCTION THE ASSESSEE HAS LEASED IT OUT TO A S INGLE PARTY FOR A TERM OF 9 YEARS. AS POINTED OUT BY THE HON'BLE CALCUTTA HIGH COURT IN THE SHAMBU INVESTMENTS (SUPRA) THE INTENTION OF THE PARTIES HA S TO BE SEEN TO RESOLVE THE CONTROVERSY WITH REGARD TO THE ASSESSABILITY OF RENTAL INCOME. IN THE INSTANT CASE THE ASSESSEE MIGHT HAVE HAD THE INTEN TION TO CARRY OUT THE PROJECT AS A COMPLEX COMMERCIAL ACTIVITY AT THE TIM E OF PROMOTING THE PROJECT. HOWEVER AFTER COMPLETION OF THE CONSTRUC TION THE DECISION TAKEN BY THE ASSESSEE TO LET OUT THE ENTIRE BUILDING TO A SINGLE PARTY WOULD SHOW THAT THE ASSESSEE HAS CHANGED ITS INTENTION. AS PO INTED OUT EARLIER THE NATURE OF RENTAL INCOME FROM HOUSE PROPERTY IS TO B E EXAMINED IN THE LIGHT OF SURROUNDING CIRCUMSTANCES AND THE INTENTION OF T HE ASSESSEES AT THE TIME OF LETTING OUT OF THE PROPERTY. ON PROPER APP RECIATION OF THE SURROUNDING CIRCUMSTANCES AND THE INTENTION OF THE ASSESSEE WE ARE OF THE VIEW THAT THE MAIN INTENTION OF THE ASSESSEE COMPAN Y HEREIN WAS TO DERIVE RENTAL INCOME ONLY BY LETTING OUT THE IMPUGNED BUIL DING. THEREFORE WE HOLD THAT THE RENTAL INCOME DERIVED FROM THESE IMMO VABLE PROPERTIES IS NOTHING BUT AN INCOME FROM HOUSE PROPERTY. IN VIEW OF THE ABOVE WE REJECT THE ALTERNATIVE CONTENTION OF THE ASSESSEE F OR ASSESSMENT OF THE IMPUGNED RENTAL INCOME UNDER THE HEAD INCOME FROM O THER SOURCES. 10. WITH REGARD TO THE CLAIM OF THE ASSESSEE FO R DEDUCTION OF ADMINISTRATIVE EXPENSES AGAINST THE RENTAL INCOME THE LEARNED D.R HAS AGREED FOR A DEDUCTION OF REASONABLE (MINIMUM) EXPE NSES. WE NOTICE THAT THE PROVISIONS RELATING TO THE INCOME FROM HOUSE PR OPERTY PRESCRIBES FOR DEDUCTION OF CERTAIN SPECIFIC EXPENSES. ACCORDING TO THE ASSESSEE A PART OF ITA NOS.156 & 368 OF 08 399 400 & 401 OF 09 VIZAG IT PA RK PAGE 10 OF 10 LEASE INCOME IS TO BE APPROPRIATED TOWARDS THE ADMI NISTRATIVE EXPENSES SINCE THE ASSESSEE IS A LIMITED COMPANY. SINCE THE PRESENT CLAIM IS URGED BEFORE US FOR THE FIRST TIME WE DO NOT WANT TO EXP RESS ANY OPINION ON IT AND ACCORDINGLY WE SET ASIDE THIS ISSUE OF DEDUCTIO N OF ADMINISTRATIVE EXPENSES TO THE FILE OF THE ASSESSING OFFICER FOR T AKING APPROPRIATE DECISION. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE NUMBER ED AS 156/VIZAG/2008 IS DISMISSED AND THE REMAINING APPEALS ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE:23-12-2010 COPY TO 1 M/S VIZAG IT PARK LIMITED VUDA COMPOUND SIRIPUR AM JUNCTION VISAKHAPATNAM 2 THE ADDITIONAL COMMISSIONER OF INCOME TAX CIRCLE- 4(1) VISAKHAPATNAM 3 4. THE J.C.I.T. RANGE-4 VISAKHAPATNAM THE CIT-I VISAKHAPATNAM 5 THE CIT(A)-I VISAKHAPATNAM 6 THE DR ITAT VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM