Ita/1038/2008 Of The Commissioner Of Income Tax v. M/S Global Tech Park Pvt Ltd

IN THE HIGH COURT OF KARNATAKA AT BANGALOREDATED THIS THE 9[TH|]DAY OF SEPTEMBER 2014. PRESENT THE HON’BLE MR.JUSTICE N. KUMAR AND| THE HON’ BLE MRS.JUSTICE RATHNAKALA I.T.A.No.1038/2008 BETWEEN: 1.|Tne Commissioner of Income Tax, 55/1, Shilpashree, Vidyaranya Complex, |Vishveshwaranagar,Mysore.Vishveshwaranagar,Mysore. 2.|Tne Asst. Commissioner of Income-Tax, —Circle-1(2),Circle-1(2), 55/1, Shilpashree, Vidyaranya Complex, | Visnhvesnwaranagar, Mysore. ..APPELLANTS (By Sri.K.V.Anand, Adv.) AND: M/s.Global Tech Park Pvt. Ltd., — No.42/2, Chetnana, | Asnrama Road, Jayalaksnhmipuram, Mysore. RESPONDENT (By Sri.A.Shankar & M.Lava, Advs.,). * KK KK This appeal is filed under Section 260-A of I.T.Act,.1961 arising out of order dated 30.6.2008 passed in ITA|No.1021/BNG/2007, for the Assessment year 2003-2004,|praying that this Court may be pleased to formulate the|substantial questions of law stated therein and allow the.appeal and set aside the order passed by the ITAT.Bangalore in ITA No.1021/BNG/2004 dated 30.6.2008|confirm the orders of the Assistant Commissioner of Income.Tax, Circle 1(2) Mysore, in the interest of justice and.equity.| This|appealcoming|ON)forHearingthis.day,N.KUMAR. J.,delivered the following: JUDGMENT The revenue has preferred this appeal against theorder passed by the Tribunal whicn nas held that tne rental income earned by the assessee should be brought under|the head of Income from Business’ and not under the nead“Income from House Property .. 2 |This appeal was admitted to consider thefollowing substantial question of law: _ Whether the Appellate Authoritieswere correct in holding that the rentalincome earned by the assessee company|fromlettingOUTbuildingShouldbebrought to tax under the head “Income|from Business” and not under the head“Income from House Property” as held by|the Assessing Officer? 3.This Court had an occasion to consider the said|question of law in the case of|COMMISSIONER OFINCOMETAX-IITVS, VELANKANTINFORMATION SYSTEMS (P.) LTDfwherein it has been held as under: ‘275. We have to find out In that contextwhat was the intention of the parties inentering into the lease transaction. It is notthe number of agreements, whicn are enteredinto between the parties which Is decisive indetermining the nature of transaction. Whatis the object of entering into more than one SaidtransactionsISionbe|looked.Into.However, if for enjoyment of lease, thesubject matter of all the agreements Isnecessary, then notwithstanding the fact thatthere are more than one agreement or onelease deed, the transaction is one. AS all theagreementsare—enteredInto contemporaneously and the object is to enjoythe entire property viz: building, furniture andthe accessories as a whole which is necessaryfor carrying on the business, then the incomederived therefrom cannot be separated basedon the separate agreement entered intobetween the parties. What has to be seen is,what was the primary object of the assesseewhile exploiting the property. If it ts foundapplying such principle that the intention ts forletting out the property or any portion thereof,the same may be considered as rental incomeor income from properties. In case, if it Isfound that the main intention is to exploitimmovable property by way of complexcommercial activities, in that event it must beheld as business [ncome., 26. Sub-section (1) of Section 56 makes|it clear that income of every kind which ts notbe excluded from the total [ncome under thisAct shall be chargeable to income tax underthe head “Income from other sources”, if it Isnot chargeable to income-tax under any of theheads specified in section 14, items A to E.Sub-section (2) of Section 56. specificallystates that the incomes shall be chargeable toincome-tax under the head “Income fromother sources”. Clause (ii) of Section 56(2)provides that income from machinery, plant orfurniture belonging to the assessee and let onhire, if the income is not chargeable toincome-tax under the head ‘profits and gainsof business or profession’. Clause (ili) alsoprovides that where an assessee /ets on hiremachinery, plant or furniture belonging to himand also buildings, and the letting of thebuildings is inseparable from the letting of thesaid machinery, plant or furniture, the incomefrom such letting, if it is not chargeable toincome-tax under the head_ profits and gainsof business or_ profession’. Therefore the intention of the legislature is explicit. Theprovision is clear, t.e., if the letting of building,plant, machinery and furniture is inseparable,the income from such letting should ordinarilyfall within the head profits and gains ofbusiness or profession’. But for any reason, ifit does not fall under that head, it shall fallunder the head “income from other sources”,but certainly not under the heading incomefrom House property. If the intention is toexploit commercial property by putting upconstruction and letting it out for the purposeof getting rental income, then notwithstandingthe fact that the furniture and fittings areprovided to the lessee, the income from thebuilding fall under the head “income fromhouse property”. But if the assessee is in thebusiness of taking land, putting up commercialBuildingsthereonandlettingoutSUCh|buildings with all furniture as his profession orbusiness, then notwithstanding the fact thathe has constructed a building and he has alsoprovided other facilities and even if there aretwo separate rental deeds, it does not fall within the heading of income from houseproperty.Therefore,firstlywhetIS.theintention behind the lease and secondly whatare the facilities given along with the buildingsand documents executed in respect of each ofthem is to be seen. Thirdly it ts to be foundout whether it is inseparable or not. If theyare inseparable and the intention is to carryon the business of letting out the commercialproperty and carrying at complex commercialactivity and getting rental income therefrom,then such a rental income falls under theheading of profits and gains of business orprofession. In fact, any other interpretationwould defeat the very object of introduction ofSection 80-IA as well as the scheme which Isframed by the Government for development ofindustrial parks in the country. In that view ofthe matter, the finding recorded by theAppellate Authority as well as the Tribunal Isin accordance with law and does not sufferfrom any legal infirmity which— calls forinterference.Accordingly, thesubstantial questions 1 and 2 are answered in favour ofthe assessee and against the revenue. 4In view of the aforesaid legal position, the| substantial question of law is answered in favour of the assessee and against the revenue. Therefore, we do not.see any merit in this appeal. Accordingly, the appeal is dismissed. BSS Sd/-.JUDGESd/-'|JUDGE