‘Industrial Building’ Not only includes Manufacturing Units but also includes IT & Software Offices for purposes of Property Tax: Delhi HC [Read Order]

The Delhi High Court ruled that, for property tax purposes, a "industrial building" can incorporate an IT and software office in addition to more conventional ideas of production including tangible and real commodities. The Municipal Corporation of Delhi filed a petition challenging the Municipal Tax Tribunal's (MTT) rulings, which declared that the property in question—which had been leased to Wipro for IT and enabled services—was a "Industrial Building" and, as such, the demand for higher property taxes was invalid. The Corporation contended that the DMC Act's provisions alone regulate property tax and that Wipro's operations would qualify as a "business building" rather than an industrial building under Section 116 A(1)(f) of the Act. Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here On the other hand, the respondent-assessee argued that the computer hardware and software business, as well as industries that integrate computer hardware and software into systems, have been considered "industrial activities" under Clause 7.7 of the Master Plan for Delhi 2021. The High Court first reviewed Bye-law 9(e) of the DMC Property Tax Bye-Laws 2004 which states that an industrial building is any structure where goods or materials of any type and properties are "fabricated, assembled, or processed." This includes factories, workshops, automobile repair garages, printing presses, refineries, gas plants, laboratories, power plants, and mock houses. However, the portion of the building used for purposes other than those listed in said clause will be assessed separately based on its use. In order to understand the ambit of the said definition, Court said it is essential to accord due significance to certain key terms embedded within it, i.e., 'fabricated, assembled, and processed'. Retrospective Notification on GST ITC Refund due to Ledger Mismatch cannot Bar Application Made After Issue Date: Supreme Court Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here It was viewed that these expressions are not merely incidental; rather, they form the core of the definitional framework and serve to delineate the nature of transformation or treatment that a material or product must undergo to fall within the ambit of the definition…the manner in which these terms have been defined—often employing broad, functional language such as ―a series of actions, ―the act of preparing or treating, or ―the fitting together of parts—indicates a deliberate attempt to render them inclusive and adaptable to varied industrial and commercial contexts. A single bench of Justice Purushaindra Kumar Kaurav held that an 'Industrial Building' encompasses IT sector businesses where non-material inputs such as data, digital content, or intellectual capital are subjected to systematic transformation or reconstitution into new intellectual property outputs, such as software, algorithms, digital products, or proprietary databases. The bench explained that IT offices cannot be categorised as "Industrial Buildings" in a general sense; rather, the criteria is whether or not its operations entail complex processing similar to manufacturing. IT offices that are used for administrative or communication purposes would not be considered industrial buildings. How to Audit Public Charitable Trusts under the Income Tax Act Click Here If "industrial building" and "business building" were fairly compared, "industrial building" would mean any building or part of a building where some fabrication, assembly, or processing of raw materials are some basic ingredients, while "business building" would mean a place where business is conducted, offices are held, and records, etc., are kept. The Court came to the conclusion that the process embodies the characteristics of industrial activity in its contemporary, knowledge-based incarnation, making it eligible to be classified as a "industrial building" when raw data is consumed, organized, refined, and finally transformed into a new and distinct intellectual property with independent market value and commercial utility. Therefore, in line with the progressive interpretation of planning and taxation regulations in the context of a digital economy, industries involved in such technologically demanding processing should also be included in the category of "industrial building." Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates

‘Industrial Building’ Not only includes Manufacturing Units but also includes IT & Software Offices for purposes of Property Tax: Delhi HC [Read Order]

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‘Industrial Building’ Not only includes Manufacturing Units but also includes IT & Software Offices for purposes of Property Tax: Delhi HC [Read Order]

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