IT Park Leasing with Integrated Services Is Business Income, Not House Property Income: ITAT

M/s Advant IT Park Pvt. Ltd. developed and operated an IT Park at Sector-142, Noida, comprising two towers, and leased out office spaces along with furniture and a bundle of integrated facilities such as power backup, air-conditioning, lifts, security, parking, and maintenance. For AYs 2016-17 to 2018-19, the assessee offered lease rent, hire charges, and maintenance receipts as business income.

The Assessing Officer reclassified lease rent as income from house property and other receipts as income from other sources, primarily on the ground that the IT Park was not notified under CBDT Circular No. 16/2017. The CIT(A) reversed the reclassification, leading to Revenue appeals before the Tribunal.

Main Issue: Whether receipts from leasing space in an IT Park along with organized and continuous facilities and services, constitute business income or are taxable as income from house property and other sources.

Tribunal’s Ruling: The ITAT dismissed the Revenue’s appeals and upheld the order of the CIT(A). The Tribunal held that the true test is the nature of activities carried on by the assessee and not mere ownership of property or notification under an Industrial Park scheme.

It found that leasing space coupled with a wide range of systematic, continuous, and organised services was the assessee’s principal business activity, as evident from its Memorandum of Association and the manner in which the IT Park was operated with dedicated infrastructure and manpower. The Tribunal also clarified that CBDT Circular No. 16/2017 is not restrictive and does not bar non-notified IT Parks from treating such receipts as business income.

Relying on Chennai Properties & Investments Ltd., Rayala Corporation (P.) Ltd. and M.P. Entertainment & Developers (P.) Ltd., the Tribunal held that the receipts were rightly assessable as business income.

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