G.S.Pannu, Member (A) -
(1.) THE captioned appeal by the assessee is directed against an order of the Commissioner of Income -tax -I, Pune (in short "the CIT") dt 28th March, 2013 passed under s. 263 of the IT Act, 1961 (in short "the Act") whereby the assessment order made by the AO under s. 143(3) of the Act dt. 11th Oct., 2010 has been held to be erroneous insofar as it is prejudicial to the interest of the Revenue within the meaning of s. 263 of the Act. In brief, the pertinent dispute raised by the assessee in this appeal is to the effect that the CIT erred in invoking s. 263 of the Act and holding that the assessment order passed by the AO was erroneous insofar as it is prejudicial to the interests of the Revenue, having regard to the facts and circumstances of the case. The relevant facts are as follows. The appellant is a company incorporated under the provisions of the Companies Act, 1956, with the object of carrying on activity of builders, developers, contractors and acquired land, etc., for the same. In pursuance of its objects, it set up an infrastructure facility service under the software technology park scheme in Pune known as "Cybernex". The infrastructure facility set up by the assessee for the Software Technology Park (STP) units was duly approved by the Ministry of Communication and Information Technology, Government of India under the Electronics Hardware Technology Park scheme in 2006. As per the approval, assessee was allowed to set up infrastructure for STP units called "Cybernex" at Pune. The 'Cybernex' building comprised of 55,000 sq. ft. area and the space has been leased out to various lessees who are engaged in IT/IT Enabled Services. The units located in the Cybernex IT Park were duly registered with Directorate of Industries, Government of Maharashtra. The lease charges earned by the assessee were disclosed as business income in the return of income filed. For the assessment year under consideration, assessee filed a return of income on 23rd Sept., 2008 declaring 'nil' income which was subject to scrutiny assessment under s. 143(3) of the Act by the AO, wherein vide order dt. 11th Oct., 2010, the income shown by the assessee by way of lease charges as 'business income' was accepted. While determining gross total income for the year under consideration, AO allowed assessee's claim for current year's depreciation Rs. 10,79,238; and, the brought forward loss and unabsorbed depreciation relating to past years aggregating to Rs. 8,42,556, was also allowed to be set off. The total income was computed at Rs. 6,000, but as the tax computed in terms of s. 115JB of the Act was higher, the finally determined income was Rs. 6,76,658 as per s. 115JB of the Act.
(2.) SUBSEQUENTLY , the CIT examined the records and found that the AO admitted the income declared by the assessee under the head 'business' without examining the nature of the lease agreement and thus the nature of the lease charges earned remained to be examined. As per the CIT, lease charges earned by the assessee and offered for tax under the head 'Business income' ought to have been assessed under the head 'income from house property'. Further, as per the CIT, since there was no other activity in the nature of business, the brought forward loss and unabsorbed depreciation amounting to Rs. 8,48,556 could not be set off against the current year's income. On the aforesaid lines, the CIT show -caused the assessee as to why the assessment order dt. 11th Oct., 2010 be not considered to be erroneous insofar as it is prejudicial to the interests of the Revenue within the meaning of s. 263 of the Act. Before the CIT, assessee vehemently pointed out that the AO had duly examined the nature of rental incomes by making enquiries with regard to the nature of activities carried out by the assessee and the copies of lease agreements were duly furnished. Secondly, assessee pointed out that assessability of rental income under the head 'Business income' or under the head 'Income from house property' is a debatable issue and the AO having adopted a permissible view the same cannot be termed as erroneous or prejudicial to the interests of the Revenue within the meaning of s. 263 of the Act. Thirdly, assessee pointed out that the lease agreement clearly pointed out that assessee was not renting out the space simpliciter but it was providing various other services to the lessees and therefore the lease income was to be assessed as 'business income'. The claim of the assessee was that it has been in the business of leasing out space to the STP units and that such leasing is in the nature of exploiting asset for commercial considerations thus the same was to be assessed as 'business income". In support, assessee furnished copy of its Memorandum of Association and Articles of Association highlighting that its objects were "to improve, hold, lease, let or give on license or otherwise to dispose it of. Thus, as per the assessee, renting or leasing was not an incidental object but, was the main object of the assessee company.
(3.) IT was further contended that the assessee was approved as an Infrastructure Service Provider by the STP (Software Technology Park of India) and, moreover, the Directorate of Industries, Maharashtra, has registered the unit at "Cybernex" as an Information Technology (IT) Park. It was explained that Cybernex was Pune's only IT Park that delivered 90 per cent floor efficiency, which enabled clients to optimize floor area for maximizing number of work -stations/employees. The building was designed inside -out, and built with advanced technology specifications meant for the IT Park. The lessees, Axis Bank and HDFC Bank, were using the tenements as outbound/inbound call centres and back office services, which are IT enabled, while M/s. SMS Concast is into CAD/CAM designing of Steel Plants. It was also contended that all the lessees are certified by the Directorate of Industries to occupy/lease and use space at Cybernex.;