2019 (1) TMI 803 - HC - Income Tax

Deduction u/s. 80IA - interest received has a direct nexus with the development activities - it is an interest received on excess payment of tax which has no nexus with the business activity and it has not been derived from the I.T. Parks/S.E.Z. undertaking? - income from derived from the assessee s eligible business - Held that - Assessee is engaged in the business of developing I.T. Parks and S.E.Z. and derives its income from leasing out such properties. Undisputedly, such income qualifies for deduction u/s 80IA. The revenue however contests the assessee s claim of such deduction for various other receipts such as interest on income tax refund, interest on FDRs etc. CIT (Appeals) and the Tribunal concurrently hold that such income was also derived from the assessee s principal business of leasing out the premises in I.T. Parks and S.E.Z. areas. We are broadly in agreement with the view of the Tribunal. The assessee having paid excess income tax, received refund with interest. The assessee had obtained deposits from the lessees for performance guarantee which would not invite any interest. The assessee parked such fund in bank deposits which earned interest. The entire transaction of leasing out the property at specified lease rent upon the lessees agreeing to offer deposit without claiming interest thereon is integral part of the assessee s principal business of leasing out the premises in I.T. Parks and S.E.Z. and therefore, Tribunal correctly concluded that such income can be stated to have been derived from the assessee s eligible business. - Decided against revenue.

Summary

Issues:
1. Interpretation of Section 80IA of the Income Tax Act, 1961 regarding deduction eligibility for interest received on excess payment of tax.

Analysis:
The judgment by the Bombay High Court involved a dispute regarding the deduction claim under Section 80IA of the Income Tax Act, 1961. The respondent-assessee, engaged in developing I.T. Parks and S.E.Z., claimed deduction for various receipts including interest on income tax refund and FDRs. The revenue challenged this claim, arguing that such income had no nexus with the business activity. Both the CIT (Appeals) and the Tribunal upheld the claim, stating that the interest income was derived from the principal business of leasing out properties in I.T. Parks and S.E.Z. areas. The Court agreed with this view, emphasizing that the interest received on excess income tax refund and bank deposits from lessees formed an integral part of the leasing business. Therefore, the Tribunal's decision was deemed justified, and the tax appeal was dismissed.