Income from Letting out of Property along with other facilities in an Industrial Park / SEZ is Business Income: Madras High Court

The Madras High Court, while upholding the order of the Tribunal held that income derived from letting out of the property to tenants along with other facilities in an industrial park/SEZ should be treated as income from business in the hands of the owner of the property.

The issue raised in this case was whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the income derived from letting out of the property to the tenants as income from business in the hands of the owner of the property.

The tribunal relied on the decision of the Division Bench of this Court in the case of CIT Vs. Elnet Technologies Limited, wherein it was held that 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 do not fall in any of those classified heads, would fall consideration under the residuary head of income as income from other sources.

The court relied on the circular No.16 of 2017 issued by the CBDT dated April 25, 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 the 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’.

The division bench of Justice T. S. Sivagnanam, and Justice V. Bhavani Subbaroyan after referring to the decision of the CIT Vs. Chennai Properties and Investments Limited held 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.