Income Received by IT Park for Proving Space & Other Services to Software Companies constitute ‘ Business Income ’: ITAT [Read Order]

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The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the income received by an IT Park for proving space & other services to software companies constitute “ business income ” and not house property income for the purpose of taxation.

Assessee is a recognized IT park and had rented it out to various software companies. While doing so, the assessee had entered into two agreements with its lessees, one for renting out the space and other for providing services and maintenance.

The assessing officer treated the entire receipt as “Income from House property” against the assessee’s claim that the same amount to “Business Income.” According to the Assessing Officer, the assessee had leased out the space alongwith a host of supporting features which helped its business.

When the matter travelled to the Tribunal, the bench observed that what is to be looked into is intention of the parties while entering into the lease. It was noted that the agreements entered by the assessee with the lessees were contemporaneous. The objects of the lease was to allow enjoyment of the entire property with all services related to its use as technology centers.

“Contemporaneous nature of the agreements entered by the assessee with its lessees, nature of the premises rented out and object of the assessee firm all, in our opinion, demonstrate its intention to provide the space on lease, as a part and parcel of its business,” the bench noted.

It was therefore, held that the income of the assessee both from leasing the space as well as providing maintenance services had to be considered only under the head income from business. “Ld. Assessing Officer fell in error in treating such amounts under the head income from house property. Ld. Commissioner of Income Tax (Appeals) fell in error in treating part of such income as income from house property. We are of the opinion that assessee’s income has to be considered only under the head ‘’income from business,” the bench said.

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