2025 (1) TMI 1341 - AT - Income Tax

Denial of deduction claimed u/s. 80IA(4)(iii) - it is the income arising from house property and not a business income - also assessee has not satisfied the conditions for claiming the deduction u/s. 80IA(4)(iii) that there should be minimum 30 industrial units set up by the assessee for the purpose of claiming the said deduction - HELD THAT - It is evident that this issue has been recurring in nature were the Tribunal has constantly granted relief to the assessee by holding that the assessee is entitled to claim deduction u/s. 80IA(4)(iii) of the Act. Even on the merits of the case it is pertinent that the Industrial Park Scheme 2002 notified by the GOI in exercise of powers u/s. 80IA(4)(iii) of the Act facilitates projects for setting up industrial parks which are eligible for claiming deduction u/s. 80IA(4)(iii) of the Act. There is no iota of doubt that the assessee was entitled to get benefit under this provision for the reason that the assessment order does not speak of any violation in the conditions specified in the scheme though the revenue has raised a specific ground of appeal that the minimum 30 industrial units requisite for claiming deduction has not been satisfied. The assessment order nowhere has specified that the assessee has not complied with the said condition. In the absence of the same we find no infirmity in the order of the ld. CIT(A) in allowing the deduction claimed by the assessee u/s. 80IA(4)(iii) of the Act. Decided against revenue.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the income derived by the assessee from its real estate and industrial park operations should be classified as 'business income' or 'income from house property' for the purposes of claiming deductions under Section 80IA(4)(iii) of the Income Tax Act, 1961.
Whether the assessee met the conditions required to claim deductions under Section 80IA(4)(iii), specifically the requirement of having a minimum of 30 industrial units.

ISSUE-WISE DETAILED ANALYSIS

Classification of Income

Relevant Legal Framework and Precedents: The primary legal framework involves Section 80IA(4)(iii) of the Income Tax Act, 1961, which allows deductions for income derived from developing, operating, and maintaining industrial parks. The classification of income as 'business income' or 'income from house property' significantly impacts the eligibility for this deduction.
Court's Interpretation and Reasoning: The Tribunal examined the nature of the income generated by the assessee, which included rent from leasing spaces and facilities management charges. The Tribunal referenced a CBDT circular clarifying that income from letting out premises in an industrial park should be classified as 'business income' if the park is approved under the relevant government scheme.
Key Evidence and Findings: The Tribunal noted that the assessee's projects were approved under the Industrial Park Scheme, 2002, and the income was consistently treated as 'business income' in previous assessments, supported by the CBDT circular.
Application of Law to Facts: The Tribunal applied the principles from the CBDT circular and prior Tribunal decisions to conclude that the income should be classified as 'business income', thereby qualifying for the deduction under Section 80IA(4)(iii).
Treatment of Competing Arguments: The revenue argued that the income should be classified as 'income from house property', but the Tribunal rejected this based on the consistent treatment of similar income in previous years and the absence of any change in circumstances.
Conclusions: The Tribunal concluded that the income derived by the assessee qualifies as 'business income', making it eligible for the deduction under Section 80IA(4)(iii).

Compliance with Section 80IA(4)(iii) Conditions

Relevant Legal Framework and Precedents: Section 80IA(4)(iii) requires certain conditions to be met, including the establishment of a minimum number of industrial units within the park.
Court's Interpretation and Reasoning: The Tribunal assessed whether the assessee complied with the condition of having at least 30 industrial units. The Tribunal found no evidence in the assessment order indicating non-compliance with this requirement.
Key Evidence and Findings: The Tribunal noted that the assessment order did not specify any violation of the conditions under the Industrial Park Scheme, 2002.
Application of Law to Facts: The Tribunal applied the law by considering the absence of any specific findings against the assessee regarding the number of industrial units.
Treatment of Competing Arguments: The revenue's argument that the assessee did not meet the minimum unit requirement was not substantiated by evidence in the assessment order.
Conclusions: The Tribunal found no infirmity in the first appellate authority's decision to allow the deduction, as the assessee was deemed to have complied with the conditions of Section 80IA(4)(iii).

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed the principle that income from approved industrial park operations should be classified as 'business income' for the purposes of Section 80IA(4)(iii) deductions, consistent with CBDT guidance and prior Tribunal decisions.
Final Determinations on Each Issue: The Tribunal dismissed the revenue's appeal, upholding the first appellate authority's decision to allow the deduction under Section 80IA(4)(iii) for the assessee. The Tribunal emphasized the importance of consistency in tax treatment across assessment years, particularly when there is no change in the underlying circumstances.

In conclusion, the Tribunal dismissed the appeals filed by the revenue for all assessment years in question, thereby allowing the deductions claimed by the assessee under Section 80IA(4)(iii) of the Income Tax Act, 1961.

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