The Commissioner Of Income Tax,Chennai v. M/S.rattha Holding Company Private Limited

T.C.A.Nos.316 & 317 of 2014 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 21.09.2023 CORAM THE HONOURABLE Mr.JUSTICE R.MAHADEVANANDTHE HONOURABLE Mr.JUSTICE MOHAMMED SHAFFIQ T.C.A.Nos.316 & 317 of 2014 The Commissioner of Income Tax,Chennai. .. Appellant inboth appeals Vs. M/s.Rattha Holding Company Private Limited,37, TTK Road, Alwarpet,Chennai – 600 018. .. Respondent inboth appeals Common Prayer: Tax Case Appeals filed under Section 260-A of the Income Tax Act, 1961, against the order dated 28.08.2013 passed in I.T.A.Nos.996 & 997/Mds/2011 on the file of the Income Tax Appellate Tribunal, 'C' Bench, Chennai. 1/6 T.C.A.Nos.316 & 317 of 2014 COMMON JUDGMENT [Judgement of the Court was delivered by R.MAHADEVAN, J.] Both the Tax Case Appeals are filed by the Revenue against the order dated 28.08.2013 passed by the Income Tax Appellate Tribunal, 'C' Bench, Chennai, in I.T.A.Nos.996 & 997/Mds/2011 relating to the Assessment Years 2007-08 and 2008-09 respectively. 2.By order dated 04.09.2014, the aforesaid appeals were admitted on the following common substantial question of law: "1. Whether under the facts and circumstances of the case the Income Tax Appellate Tribunal was right in holding that the income of the assessee from letting out its technology park and the alternate premises where the tenant was accommodated pending development of the technology park are assessable under the head 'income from business' and not under the head 'income from house property'?" 2/6 T.C.A.Nos.316 & 317 of 2014 3.The learned Standing Counsel appearing for the appellant submitted that the issue involved herein has been clarified by the Department of Revenue, Central Board of Direct Taxes, New Delhi, after taking note of the decisions of the Karnataka High Court in CIT v. Velakani Information Systems Pvt Ltd v. [2013-LL-0402-44] and in CIT v. Information Technology Park Ltd [2014-LL-0430-141], vide Circular No.16/2017 dated 25.04.2017, wherein, it is inter alia stated as follows: “3.In view of the above, it is now a settled position that in the case of an undertaking which develops, develops and operates or maintains and operates an industrial park/SEZ notified in accordance with the scheme framed and notified by the Government, the income from letting out of premises/developed space along with other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business'.” On the basis of the aforesaid circular and following the earlier decisions of this Court, a Division Bench of this court in its judgment dated 07.07.2020 passed in TCA Nos.732 and 733 of 2018, has decided the issue against the Revenue. The relevant paragraphs of the said judgment are usefully extracted below: "8.So far as Substantial Question of Law No.1 is concerned, it 3/6 has to be seen as to whether the income derived from letting out of the property in an industrial park / SEZ including the amenities and the income received by the owners for such property and the amenities therein would be business income in the hands of the owner of the property. 9.We need not labour much on this issue, on account of the circular No.16 of 2017 issued by the CBDT dated 25.04.2017. The CBDT after taking note of the two decisions of the Karnataka High Court held that it is now a settled position that in the case of an undertaking which develops, develops and operates or maintains and operates an industrial park/SEZ notified in accordance with the scheme framed and notified by the Government, the income from letting out of premises/developed space along with other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business'. 9.We need not labour much on this issue, on account of the circular No.16 of 2017 issued by the CBDT dated 25.04.2017. The CBDT after taking note of the two decisions of the Karnataka High Court held that it is now a settled position that in the case of an undertaking which develops, develops and operates or maintains and operates an industrial park/SEZ notified in accordance with the scheme framed and notified by the Government, the income from letting out of premises/developed space along with other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business'. 10.As rightly pointed out by Mr.R.Vijaya Raghavan, the emphasis is on not only letting out of the premises / developed space but along with other facilities in an industrial park / SEZ. The tribunal in this regard followed a decision of the Division Bench of this Court in the case of CIT Vs. Elnet Technologies Limited, reported in (2013) 30 Taxmann.com 63 (Mad). In the said decision, at paragraph No.11, the Division Bench has held as follows: "11.In considering whether the income arising on the leasing of the property was business of the assessee, one has to get into the nature of the business of the assessee, to find out the receipts are assessable under the head of income from house property or as business income and if receipts does not fall in any of those classified heads, would fall consideration under the residuary head of income as income from other sources". 11.After referring to the decision in the case of CIT Vs. Chennai Properties and Investments Limited, reported in (2005) 274 ITR 117, it was pointed out that income derived from letting out of the property with all amenities and facilities would be income from business and cannot be assessed either as income from house property or as income from other sources. The said decision of the Hon'ble Division Bench was appealed against by the revenue before the T.C.A.Nos.316 & 317 of 2014 Hon'ble Supreme Court in SLP No.11638 of 2013 and we are informed that the appeal was dismissed on 27.01.2020 on the ground of Low Tax Effect. 12.Considering all those facts as well as the circular issued by CBDT, substantial question of law No.1, has to be answered against the revenue and in favour of the assessee. The Tax Case Appeals are dismissed and the Substantial Questions of Law are answered against the revenue. No costs.” In view of the above, the substantial question of law raised herein is answered against the Revenue and in favour of the assessee. 4.Accordingly, both these tax case appeals stand dismissed. No costs. Index: Yes / NoSpeaking order/ Non-speaking orderNeutral Citation: Yes / Nonsd [R.M.D., J.] [M.S.Q., J.] 21.09.2023 To1.Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2.The Assistant Commissioner of Income Tax, Company Circle – V(3), Chennai. 3.The Commissioner of Income Tax (Appeals)-V Chennai. 5/6 6/6 T.C.A.Nos.316 & 317 of 2014 R.MAHADEVAN, J.AND MOHAMMED SHAFFIQ, J.nsd T.C.A.Nos.316 & 317 of 2014 21.09.2023(2/2)