The Visakhapatnam Bench of the Income Tax Appellate Tribunal (ITAT) held that receipts derived from leasing educational infrastructure along with multifaceted allied services are taxable as business income and not as income from house property. The Tribunal observed that where an assessee is engaged in the business of developing custom-built educational facilities and commercially exploits such infrastructure through composite arrangements involving essential support services, the income so generated assumes the character of business income. The ruling reiterates that the dominant intention behind the activity and the inseparability of services from leasing are decisive factors in determining the correct head of income.
Citation:
12 Jan 2026 | [2025] 181 taxmann.com 240 (Visakhapatnam – Trib.)
Date of Order: 26-11-2025
Act: Income-tax Act, 1961
Section involved: Sections 22 & 28
Facts of the Case
- The assessee was a company engaged in providing educational infrastructure.
- It constructed custom-built school buildings as per the specific requirements of educational institutions.
- Apart from leasing the buildings, the assessee provided multifaceted allied services, such as:
- Maintenance of infrastructure
- Campus-related facilities
- Operational and support services necessary for running educational institutions
- The Assessing Officer treated lease receipts as Income from House Property under section 22.
- The assessee contended that the receipts arose from a systematic business activity and should be taxed as Business Income.
Issue for Consideration
Whether receipts from leasing custom-built educational infrastructure along with multiple allied services are taxable as:
- Income from House Property, or
- Business Income
Tribunal’s Observations
- The assessee was not a passive owner of property.
- The infrastructure was:
- Specifically designed and constructed for educational use
- Let out as part of a composite commercial arrangement
- Leasing was inseparable from the provision of various services.
- The dominant intention was commercial exploitation of assets, not mere earning of rental income.
- The activity constituted a continuous and organized business operation.
Held
- Receipts from leasing educational infrastructure along with multifaceted services constitute Business Income.
- Such receipts cannot be assessed as Income from House Property under section 22.
- The appeal of the assessee was allowed.
Key Takeaway
📌 Composite leasing arrangements, where infrastructure is custom-built and coupled with essential operational services, indicate business activity, not passive letting.
📌 The dominant intention test plays a crucial role in deciding the head of income.