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TMI Blog2015 (11) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... e name "Fairmount" and "Winchester" and also one Special Economic Zone (SEZ) under the name "Kensington". The provisions of sec. 80IA(1) provides for deduction in respect of profits and gains derived by an undertaking from any business referred in sub-section (4) thereof. Under the provisions of sec. 80IA(4)(iii), the deduction u/s 80IA(1) shall be allowable to an undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by the Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006. There is no dispute between the parties that the assessee is eligible to claim deduction u/s 80IA(1) of the Act in respect of profits and gains derived from the operation of two IT parks and one SEZ mentioned above. 5. The provisions of sec. 80IA(1), as stated earlier, provide for deduction in respect of "Profits and gains derived by an undertaking". The assessing officer, by placing reliance on the decision rendered by Hon'ble Supreme Court in the case of Liberty India Ltd (317 ITR 280), held that the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see consists of lease income only. While leasing out the properties, the assessee has also collected lease deposits from the tenants and part of lease deposits have been parked in the bank as Fixed deposits, which has generated interest income. The tenants have deducted tax at source from the lease rent payments made to the assessee as per the provisions of the Income tax Act. In view of the deduction claimed by the assessee u/s 80IA of the Act, the entire amount of tax deducted at sources (TDS) became refundable to the assessee. The assessee has received interest on the refund of TDS as per the provisions of the Income tax Act. The assessee has also received interest from tenants on delayed payment of lease rent. The assessee also generated income on sale of tender forms and sale of scrap. The Ld CIT(A) has held that the assessee is eligible for deduction u/s 80IA of the Act in respect of all the receipts stated above. 9. There is no dispute with regard to the fact that the lease rental income derived by the assessee is eligible for deduction u/s 80IA of the Act. The dispute is with regard to the remaining receipts. The submissions made by the assessee before the AO in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount, Winchester and Kensington buildings. Since these amounts become refundable on vacating of leased premises which can be anytime firm has to keep sufficient amount in fixed deposit so that the same can be repaid immediately. Firm has kept aside sum of RS.43 crore in Fixed deposits for such unforeseen eventualities. From the above it can be seen that interest on fixed deposit received are directly related to Leased units in projects whose income are exempt, and therefore this amount is also claimed exempt. Further if the said amount was not kept in Fixed Deposits firm would have been able to utilize the said amount in repaying its loan and reduce the interest liability. Therefore even if the Interest on Fixed Deposits of Rs. 58,55,932/- is considered as Income from other sources then Interest paid of Rs. 7,88,92,760/- should be allowed as deduction against the same. 7. Misc. Income of Rs. 3,25,013/* Fairmount, Winchester and Kensington are I T Parks and SEZ These premises are highly secured and maintained very well as they are occupied by Multinationals. Therefore penalty is charges any damage done to any property or violation of any rules. Misc Income are amounts recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the assessee's reply, the words 'derived from' is narrower in connotation as compared to the word 'Attributable to'. In the recent decision in the case of Liberty India Ltd 317 ITR 280 (SC), the Hon'ble Supreme Court has made the distinction between these two words. By using the expression 'derived from', Parliament intended to cover sources not beyond the first degree. Whatever be the income receipts shown as income as stated above, in my opinion do not fall within the ambit of first degree sources as it is not directly relatable to the income of the assessee. Therefore, no deduction u/s. 80-IA can be allowed on these receipts." 10. However, the Ld CIT(A) was convinced with the said explanations given by the assessee in respect of the following receipts and for the sake of convenience, we extract below the decision rendered by Ld CIT(A):- S.No. Nature of income Amount Rs. Remarks 1 Interest on IT refund 1,12,09,827 It is submitted that the said interest was received from income tax debarment on refund arising from excess tax deducted at source from appellant's leasing income. Thus, the excess amount lying with the income tax de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s lease income from the lessees, since the lessees are required to deduct tax at source (TDS) from the lease rent as per the provisions of Income tax Act. Hence, the non-receipt of the TDS portion of the lease rent is beyond the control of the assessee. However, the Income tax department was constrained to refund a portion of TDS, since the income of the assessee is deductible u/s 80IA of the Act. On the amount so refunded, the Income tax department has paid interest as per the provisions of the Act. Under these set of facts, it was contended by the assessee that the refund of TDS amount is akin to delayed payment of lease rent along with interest and hence the interest amount shall partake the character of lease rent as per the decision of Hon'ble Supreme Court in the case of Govinda Choudury and Sons (supra). The assessee has also submitted that the lessees would not have deducted TDS, if no-deduction certificate had been issued by the AO in time, in which case, the question of granting refund along with the interest would not have arisen. In that scenario, the assessee would have been in a position to use the TDS portion of the lease rent for business purposes, including for rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Govinda Choudhary & Sons (supra) and the decision of Hon'ble jurisdictional Bombay High Court in the case of CIT Vs, Bhansali Engg. Polymers Ltd (2008)(306 ITR 194), we do not find any infirmity in the decision of Ld CIT(A) in holding that interest so received partakes the character of lease rentals and hence eligible for deduction u/s 80IA of the Act. 14. The next receipt relates to the interest received on FDR. The assessee had received lease deposits from the lessees, which is required to be returned to them upon vacating the premises. Since the possibility of vacating the premises in the middle is always there, in which event the lease deposits are required to be refunded, the assessee was not in a position to use the entire lease deposits for business purposes including for repayment of loans taken by it. Hence, as a prudent business policy, the assessee was constrained to keep part of the lease deposits into the Fixed deposits maintained with banks. The said fixed deposits have earned interest income. Thus, we notice that the assessee was required to keep part of lease deposits amounts in fixed deposits out of business compulsion. Since the lease rental in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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