2023 (9) TMI 374 - AT - Income Tax

Deduction u/s 80IAB - income from sale of food and beverages - income for developing and operating SEZ - assessee is a SEZ developer and is primarily engaged in the business of developing and leasing of property in IT/ ITES Sector Noida - HELD THAT - In so far as Instruction No. 50 issued by GOI Ministry of Commerce and Industry Department of Commerce SEZ Sector it has authorized activities which can be undertaken by the developer approved company developer by default and one of the items is cafeteria/canteen for staff in the processing area. Since the income of the assessee is not derived from cafeteria/canteen for staff therefore the said Instruction is not applicable to the facts of the case. In so far as claim of interest expense is concerned we find that while computing the income the assessee has added back interest expense considered under the head Income from other sources Rs. 57, 19, 934 and under the head income from other sources the assessee has deducted interest expense of Rs. 88, 767/- only which means that the assessee has increased its eligible profit by Rs. 56, 31, 167/-. Considering the facts of the case in hand the assessee ought to have reduced this amount from eligible profit. We accordingly direct AO to reduce Rs. 56, 31, 167/- from the eligible profit and recompute deduction u/s 80IAB - Under no circumstances sum can be considered as income under section 68 of the Act. With the above the ground of the assessee is partly allowed.

Summary

Issues involved:
The denial of deduction u/s 80IAB of the Income-tax Act for income from sale of food and beverages and interest expenses.

Deduction u/s 80IAB for income from sale of food and beverages:
The assessee, a SEZ developer primarily engaged in property development, claimed deduction on income from sale of food and beverages. The Assessing Officer denied the deduction stating there was no direct sale of food and beverages by the company. The claim was challenged by the assessee but was unsuccessful. The Tribunal noted that the activities authorized by Instruction No. 50 did not cover the income source in question. The reliance on a previous case was also deemed misplaced. The Tribunal directed the Assessing Officer to recompute the deduction, reducing the disputed amount from the eligible profit.

Deduction u/s 80IAB for interest expenses:
The assessee claimed deduction for interest expenses, justifying it by adding back a certain amount in the computation of income. The Assessing Officer, however, added the interest expense to the income under section 68 of the Act. The Tribunal observed that the assessee had correctly accounted for the interest expense, increasing the eligible profit by the same amount. The Tribunal directed the Assessing Officer to reduce the interest expense amount from the eligible profit and recompute the deduction under section 80IAB. It was clarified that the interest expense amount cannot be considered as income under section 68 of the Act.

Separate Judgement:
No separate judgment was delivered by the judges in this case.