ACIT Vs Golflinks Software Park Private Limited (ITAT Bangalore)
80IA Deduction on ‘Other Sources’ Income? First Prove Nexus With Industrial Undertaking, Says Bangalore ITAT
In an important ruling on section 80IA deductions, the Bangalore ITAT held that while an assessee can raise a fresh deduction claim before the CIT(A) even if not claimed in the return or before the AO, the appellate authority must still examine whether the income actually satisfies the statutory requirement of being “derived from” the eligible industrial undertaking.
The assessee, Golflinks Software Park Pvt. Ltd., had originally claimed deduction u/s 80IA in respect of its eligible business. During appellate proceedings, it raised an additional claim seeking deduction on income assessed under the head “Income from Other Sources”, which had not been claimed either in the return of income or during assessment proceedings.
The CIT(A) admitted the additional ground and, relying on the Supreme Court decision in Reliance Energy Ltd., directed the AO to allow deduction u/s 80IA even on such “other sources” income.
However, the ITAT found serious infirmity in the appellate order. The Tribunal observed that the CIT(A) had not examined what exactly constituted the “income from other sources,” its nature, source, quantum, or whether it had any direct nexus with the eligible industrial undertaking.
The Bench emphasized that section 80IA permits deduction only for income “derived from” the industrial undertaking and not for every kind of incidental or unrelated income. Therefore, without examining the source and nexus of such income, deduction could not have been granted mechanically.
While affirming that a fresh claim can indeed be raised before the first appellate authority, the ITAT clarified that such admission does not automatically entitle the assessee to deduction. Proper factual examination is mandatory.
Accordingly, the Tribunal restored the matter back to the CIT(A) with directions to conduct a detailed examination regarding the nature of income and whether it was genuinely derived from the industrial undertaking before granting deduction u/s 80IA. The Revenue’s appeals for both AYs 2017-18 and 2018-19 were therefore allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
