2015 (9) TMI 650 - AT - Income Tax

Eligibility for deduction under section 80IA - whether lease rent income received from letting out modules of software technology park to various lessees would constitute income from business and eligible for deduction under section 80IA? - Held that - The issues in both the appeals of the assessee and Revenue have been decided by the Tribunal in assessee s own case for the assessment year 2008-09 holding that lease rent income from modules built up space of industrial park is assessable under the head income from business and interest income and other income is to be assessed under the head income from other sources . Therefore, we direct the Assessing Officer to treat interest income and other income only under the head income from other sources and allow deduction under section 80IA on rest of the incomes i.e. rent from premises, operation and maintenance income, revenue sharing income, common facilities such as rent from auditorium and rent from others - Decided against revenue. As far as the contention of the assessee that interest on debtors should be considered as income from business in view of the decision of jurisdictional High Court in Madras Motors Ltd.(2002 (3) TMI 10 - MADRAS High Court), we find that the decision is distinguishable on facts. In that decision, it was the case of the assessee where the assessee, an export oriented company, is manufacturing forgings derived interest on delayed payment of sale proceeds. In the case of the assessee interest was not received on export of sale proceeds but it was delay in paying the rental income to the assessee. Therefore the decision relied on by the assessee is not applicable to the facts of the present case. - Decided against assessee.

Summary

Issues:
1. Whether lease rent income from letting out modules of software technology park constitutes income from business eligible for deduction under section 80IA of the Act.
2. Whether interest income should be treated as income from business and eligible for deduction under section 80IA of the Act.

Issue 1: Lease Rent Income Eligibility for Deduction under Section 80IA:
The Revenue contended that the lease rent income received from letting out modules of a software technology park should not constitute income from business eligible for deduction under section 80IA of the Act. However, the Counsel for the assessee argued that the issue was already decided in favor of the assessee in a previous case for the assessment year 2008-09. The Tribunal, after considering the submissions and agreements, held that the income from providing modules of built-up space with common infrastructure facilities should be assessed as profits and gains from business, making it eligible for deduction under section 80IA. The Tribunal referred to the approval granted by the Ministry of Industry and CBDT, noting that the income derived from providing such facilities constituted a business activity, qualifying for the deduction under section 80IA.

Issue 2: Treatment of Interest Income:
In the assessee's appeal, it was argued that the interest income should be considered as income from business and not under the head of "other sources." The Counsel for the assessee relied on a decision by the Madras High Court in a specific case. The Tribunal, however, differentiated the facts of the present case from the case cited by the assessee. It noted that the interest income in question was not received on export sale proceeds but rather on delayed payment of rental income. Consequently, the Tribunal held that the decision cited by the assessee was not applicable to the current scenario. Therefore, the Tribunal directed the Assessing Officer to treat the interest income and other income under the head of "income from other sources" while allowing the deduction under section 80IA for the remaining incomes such as rent from premises, operation and maintenance income, revenue sharing income, and income from common facilities.

The Tribunal upheld the order of the Commissioner of Income Tax (Appeals) regarding the eligibility of lease rent income for deduction under section 80IA and the treatment of interest income. It referenced previous decisions by the jurisdictional High Court and the co-ordinate Bench of the Tribunal to support its findings. Ultimately, both the appeals of the assessee and the Revenue were dismissed, with the Tribunal emphasizing the inapplicability of the cited decision to the facts of the present case concerning interest income.