2012 (8) TMI 675 - AT - Income Tax

Denial of benefit of deduction u/s 80IA - assessee was operating and maintaining two industrial parks - rent received from industrial parks towards letting out a portion of the Administrative building space - Held that - Condensing the facts clearly prove that administrative building is part of Phase I i.e., Mariner Block. In terms with the approval by the DIPP, the CBDT also issued a notification on 29/12/2005 notifying the assessee as an industrial park for the purpose of section 80IA(4)(iii) and that infrastructure development shall include common facilities for common use for industrial activity. As is clear from the letter dt. 02/08/1999 of the assessee, administrative building is part of the common facilities. For providing smooth hassle free and quality service to the tenants of industrial park, the assessee entered into an agreement with M/s Ascendas,for maintenance and management of the industrial part and they were provided space in the administrative building on charging of rent. This was done with an objective of providing world class service to the tenants of the industrial park. Thus, providing space to M/s Ascendas is part of operation and maintenance of the industrial park. The conclusion of the CIT(A) that income derived from the allocable area is only eligible for deduction u/s 80IA(4)(iii), therefore, is not acceptable - the deduction u/s 80IA(4)(iii) shall be restricted to income derived from the allocable area only, thus the assessee is eligible to claim deduction u/s 80IA(4)(iii) on the rental income from M/s Ascendas Property Management Services (India) Ltd - in favour of assessee.

Summary

Issues:
Denial of deduction u/s 80IA for rental income from Ascendas Property Management Services Ltd.; Exclusion of expenditure incurred towards earning rental income from Ascendas.

Analysis:
The appellate tribunal heard appeals against CIT(A) orders for assessment years 2006-07 and 2007-08 regarding denial of deduction u/s 80IA for rental income from Ascendas. The assessee developed an industrial park in Hyderabad and claimed deduction u/s 80IA(4)(iii). The Assessing Officer found the rented premises not part of the Mariner Block, thus disallowing the deduction. The CIT(A) upheld this decision, stating the administrative building was not part of the allocable area. The tribunal analyzed the building plan, approval letters, and notifications to determine the eligibility of the rental income. It was established that the administrative building was part of the Mariner Block and common facilities, making the rent income eligible for deduction u/s 80IA(4)(iii).

The tribunal found no dispute that the assessee operated Mariner and Auriga Industrial Parks. The administrative building was part of the Mariner Block, as per approved plans and correspondence with authorities. The scheme for industrial parks included common facilities like administrative buildings. The rent received from Ascendas was for providing world-class services to park tenants, thus integral to park operation. The tribunal concluded that the rent income was eligible for deduction u/s 80IA(4)(iii) based on the building's inclusion in the Mariner Block and common facilities.

The tribunal's decision was based on the scheme's objectives, approval letters, and notifications, which defined allocable areas and infrastructure development. The administrative building was considered part of common facilities, essential for park operation and maintenance. The tribunal rejected the CIT(A)'s interpretation that only income from allocable areas qualified for the deduction. Section 80IA did not restrict the deduction to income from allocable areas. As a result, the tribunal allowed the appeals, setting aside the CIT(A) orders and permitting the deduction for rental income from Ascendas.

In conclusion, the tribunal allowed the appeals, ruling in favor of the assessee regarding the eligibility of rental income from Ascendas for deduction u/s 80IA(4)(iii). The decision was based on the administrative building's inclusion in the Mariner Block and common facilities, essential for industrial park operation and maintenance.