If there is an inseparable and the intention is to carry on the business of letting out the commercial property then rental income us taxable as “Profits and gains of business or profession”.
Short Overview of the case:
Issue is of taxation under Income from house property or income from other sources
Income was earned by the appellant from letting out of the building along with other amenities in the industrial park
Authorities below treating the business income derived from complex commercial activities of letting out buildings along with the other amenities in an industrial park partly as income from house property and partly as income from other sources
AO disallowed the expenditure incurred wholly and exclusively for the purposes of the business of complex commercial letting out services
HC held as under :
As decided in VELANKANI INFORMATION SYSTEMS (P.) LTD. [2013 (8) TMI 113 – KARNATAKA HIGH COURT], firstly it is the intention behind the lease and secondly what are facilities given along with the buildings and documents executed in respect of each of them is 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 the business of letting out the commercial property and carrying out complex commercial activity and getting rental income therefrom, then such 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.
On the another issue of Income from business & receipts on account of sale of software technical services being meager, it held that substantial question of law has been answered by the Supreme Court in ‘PEERLESS GENERAL FINANCE AND INVESTMENT COMPANY LTD. [2019 (7) TMI 880 – SUPREME COURT].
The order passed insofar as it pertains to Assessment Year 2010-11 is hereby quashed.
KARNATAKA HIGH COURT
M/S. RAO COMPUTERS CONSULTANTS PVT. LTD., VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX (OSD) , CIRCLE5 (1) (1) , BANGALORE.
I.T.A. NO.710 OF 2017
Conclusion :
If there is an inseparable and the intention is to carry on the business of letting out the commercial property then rental income us taxable as “Profits and gains of business or profession”.
