When The Matter Was Taken Up _ Todaylearned Counsel For The Assessee Submitted That.substantial Questions Of Law Involved In This Appeal Havebeen Answered By A v. Velankani Information Systems Pvt Ltd,(2014) 2 Itr-Ol 138 Kar.the Aforesaid Submissioncould Not Be Disputed By Learned Counsel For Therevenue

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 26 DAY OF MAY 2071. PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDAR BETWEEN: ILT.A. NO.708 OF 2017 M/S. RAO COMPUTER CONSULTANTS PVT. LTD.,NEIL RAO TOWERS, PLOT NO.118ROAD NO.3, EPIP I PHASE, WHITEFIELD|BANGALORE-560066 REP. BY ITS DIRECTORSRI. DHANUNJAYA VAYUGUNDLA RAOS/O LATE BASAVAIAHAGED ABOUT 52 YEARS.PAN: AAACR842 74R (BY SMT. VANI H, ADV.,) ... APPELLAN| AND" THE JOINT COMMISSIONER OF INCOME TAX. (OSD), O/O CIT-III, BANGALORE. (BY SRI. K.V. ARAVIND, ADV.) .., RESPONDENT THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 13.04.2017 PASSEDIN ITA NO.304/BANG/2017 FOR THE ASSESSMENT YEAR 2012-13,PRAYING TQ: | (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE IMPUGNED|ORDER OF THE ITAT PASSED IN ITA NO.304/BANG/2017—RELATING TO ASSESSMENT YEAR 2012-13.ait) PASS SUCH OTHER SUITABLE ORDERS AS THIS)HON BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND|CIRCUMSTANCES OF THE CASE IN THE INTERES! OF JUSTICE.AND EQUITY. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY, | ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)nas been preferred by tne assessee against tne orderdated 13.04.2017 passed by the Income Tax AppellateTribunal (hereinafter referred to as the tribunal’ forShort). The subject matter of the appeal pertains to the|Assessment year 2012-13. The appeal was admitted bya bencn of this Court on the following substantialquestions of law:| " (1)Whether on the facts and|circumstances of the case, the findings ofthe Appellate Tribunal that income earnedby the appellant from complex commercialactivity of letting out of the bDuliding along with other amenities in the industrial parkShall be treated as ‘Income from houseproperty’ are perverse and illegal?| (2)Whether on the facts and|circumstances of the case, the authoritiesbelow erred in_ treating the businessincome derived from complex commercialactivities of letting out buildings along withthe other amenities in an industrial parkpartly as income from house property andpartly as income from other’ sourcesignoring the law laid down by this Hon'bleCourt in the case of Velankani [nformationSystems and the Circular issued by theDepartment? (3)Whether on the facts and|circumstances of the case, the authoritiesbelow erred in disallowing the expenditureincurred wholly and exclusively for thepurposes of the business of complexcommercialletting OUTServicesand|whether the findings of the AppellateTribunal in this regard are perverse? (4)Whether on the facts and|circumstances of the case, the findings of the authorities below that, receipts onaccount of sale of software technicalServicesbeing|Me€Eagecannotbeconsidered as income from business, areperverse?” 2.|When the matter was taken up _ todaylearned counsel for the assessee submitted that.substantial questions of law involved in this appeal havebeen answered by a bench of this court in'CIT VS. VELANKANI INFORMATION SYSTEMS PVT LTD,|(2014) 2 ITR-OL 138 KAR.The aforesaid submission|could not be disputed by learned counsel for therevenue. 3We have considered the submissions made§by learned counsel for the parties and have perused therecord. A division bench of this court In/VELANKANIINFORMATION SYSTEMS PVT LTDSupra has held asunder:| 25.The doctrine of inseparability finds aplaceIn|theseCwoProvisions.Theinseparability referred to in the said provision.is arising from the intention of the parties. 2.|When the matter was taken up _ todaylearned counsel for the assessee submitted that.substantial questions of law involved in this appeal havebeen answered by a bench of this court in'CIT VS. VELANKANI INFORMATION SYSTEMS PVT LTD,|(2014) 2 ITR-OL 138 KAR.The aforesaid submission|could not be disputed by learned counsel for therevenue. 3We have considered the submissions made§by learned counsel for the parties and have perused therecord. A division bench of this court In/VELANKANIINFORMATION SYSTEMS PVT LTDSupra has held asunder:| 25.The doctrine of inseparability finds aplaceIn|theseCwoProvisions.Theinseparability referred to in the said provision.is arising from the intention of the parties. 76.We have to find out In that contextwhat was the intention of the _ parties ientering into the lease transaction. It is not the number of agreements, which are entered into|between the parties which is decisive’ indetermining the nature of transaction. What Is the object of entering into more than one sald|transactions is to be looked into. However, iffor enjoyment of lease, the subject matter ofalltheagreementsISNecesSSdy,then|notwithstanding the fact that there are more|than one agreement or one lease deed, the.transaction is one. As all the agreements are|entered into contemporaneously and the object|is to enjoy the entire property, viz., Duilding,|furniture and the accessories as a whole which|is necessary for carrying on the business, then|the income derived therefrom cannot beseparated based on the separate agreement.entered into between the parties. What Nas fo be seen is, wnat was the primary object of tne assessee while exploiting the property. If it Is|found applying such principle that the intentionis for letting out the property or any portion|thereof, the same may be considered as rentalincome or income from properties. In case, if it|found that the main intention ts to exploit.ImmovablepropertyDy WaYyOF|complexcommercial activities, in that event it must be.held as business Income. 2/7. Sub-section (1) of Section 56 makesit clear that income of every kind which is not|to be excluded from the total [ncome underthis Act shall be chargeable to income-tax|under the head “income from other sources’, ifit is not chargeable to income-tax under any ofthe heads specified in Section 14, items A to E.Sub-section (2) of Section 56 specifically statesthat the income shall be chargeable to Income-tax under the head "Income from othersources’. Clause (ii) of Section 56(2) provides|that income from machinery, plant or furniturebelonging to the assessee and /fet on hire, ifthe income is not chargeable to Income-tax|under the head profits and gains of business or profession. Clause (iii) also provides that where an assessee lets on hire machinery,|plant or furniture belonging to him and also|buildings, and the letting of the buildings is inseparable from the letting of the saidmachinery, plant or furniture, the income fromsuch letting, if it is not chargeable to Income-tax under the head ‘Profits and gains ofDUSINESSOrprofession”,Therefore,theintention of the Legislature is explicit. Theprovision is clear, 1.e., if the letting of building,plant, machinery and furniture is inseparable,the income from such letting should ordinarily|fall within the head ‘Profits and gains of.business 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 head “income fromhouse property”. If the intention ts to exploit|commercialpropertyDy puttingUpconstruction and letting it out for the purpose|of getting rental income, then notwithstanding|the fact that the furniture and fittings areprovided to the lesses, the income from the|building fall under the head “Income from.house property’. But if the assessee is in the| business of taking land, putting up commercial|buildings thereon and letting out such buildingswith all furniture as his profession or business,|then notwithstanding the fact that he has_constructed a building and he _ has_ alprovided other facilities and even if there are|two separate rental deeds, it does not fallwithin the heading of “Income from hNnousproperty”. Therefore, firstly, what its the|intention behind the lease and secondly what.are facilities given along with the buildings anddocuments executed in respect of each of themis to be seen. Thirdly, it is to be found out.whether it is inseparable or not. If they are)inseparable and the intention is to carry on thebusiness of letting out the commercial propertyand carrying out complex commercial activity|and getting rental income therefrom, thensuch a rental income falls under the heading of“Profits and gains of business or profession”. |In fact, any other interpretation would defeat.the very object of introduction of section 80-IA|as well as the scheme which is framed by the|Government for development of industrial|parks in the country. In that view of the| matter, the finding recorded by the appellate|authority as well as the Tribunal is in.accordance with law and does not suffer from any legal infirmity which calls for interference. |Accordingly, the substantial questions WNos.1and 2 are answered In favour of the assessee|and against the Revenue. — a |In view of the aforesaid enunciation of law,the substantial questions of law framed in this appealare answered in favour of the assessee and against therevenue. The order dated 13.04.2017 insofar as itpertains passed by the Income Tax Appellate Tribunalinsofar as it pertains to Assessment Year 2012-13 ishereby quashed. In the result, the appeal is allowed. Sd/-—JUDGE. SS| Sd/-JUDGE.