2018 (6) TMI 296 - HC - Income Tax

Deduction u/s 80IA - deductions of profits and gains from industrial undertakings or enterprises engaged in infrastructure development - Held that - An assessee can claim the benefit of deduction only upon a notification pertaining to the industrial park or special economic zone being published by the Central Government and it is on AO to ascertain whether the terms as to the completion of the project have been complied by assessee before allowing the benefit - thus it is directed that Revenue will prepare the paper-books and file them within eight weeks. Interest on loan given to sister concern - Held that - Whether an entity is associated with another or not is essentially a question of fact - thus the tribunal came to a conclusion that the other concerns were sister concerns of the respondent assessee and this aspect of the matter does not fall for any consideration.

Issues:
1. Interpretation of Section 80-1A of the Income Tax Act, 1961 regarding deductions for industrial undertakings or enterprises engaged in infrastructure development.
2. Determination of interest in relation to loans made available by the respondent assessee to sister concerns.

Issue 1: Interpretation of Section 80-1A of the Income Tax Act, 1961

The primary contention raised by the Revenue in this appeal pertains to the application of Section 80-1A of the Income Tax Act, 1961 regarding deductions for profits and gains from industrial undertakings or enterprises engaged in infrastructure development. The Revenue argues that no notification had been issued for the industrial park or special economic zone to be recognized as such, as required by Section 80-1A(4)(iii) of the Act. Despite the absence of such notification, it is acknowledged that the relevant industrial park or special economic zone was established, and the respondent assessee was tasked with developing the infrastructure there. The central issue revolves around whether the work carried out by the respondent assessee aligns with the scheme or rules entitling them to claim the benefits under Section 80-1A. The matter necessitates an examination of whether an assessee undertaking development work in an industrial park or special economic zone can claim benefits under Section 80-1A without a formal notification from the Central Government, and whether it is the responsibility of the assessing officer or income tax authorities to verify the compliance of project completion terms before granting the claimed benefits.

Issue 2: Determination of interest in relation to loans to sister concerns

Regarding the second issue raised by the Revenue, it pertains to the interest on loans provided by the respondent assessee to certain sister concerns. The Revenue contends that the appellate tribunal failed to establish a clear connection between the respondent assessee and the sister concerns, questioning the validity of such relationships. However, the tribunal concluded that the sister concerns were indeed associated with the respondent assessee, a determination considered a factual matter falling outside the scope of legal review unless supported by specific legal provisions. As no such provisions were cited, the connection between the entities was deemed factual. The crux of this issue lies in the establishment of the relationship between the respondent assessee and the sister concerns, with the tribunal's decision being upheld based on factual findings rather than legal grounds.

In conclusion, the judgment of the High Court of Calcutta delves into two principal issues concerning the interpretation of Section 80-1A of the Income Tax Act, 1961 and the determination of interest in relation to loans provided to sister concerns. The analysis focuses on the legal requirements for claiming deductions under Section 80-1A, particularly in the absence of a formal notification, and the factual assessment of relationships between the respondent assessee and sister concerns. The decision emphasizes the distinction between legal and factual considerations in resolving these issues, setting the stage for further examination and clarification in subsequent proceedings.

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