Case Law Details
Cessna Garden Developers Pvt. Ltd. Vs ACIT (ITAT Bangalore)
The issue under consideration is whether deduction under section 80IAB will be allowed against the income of lease/ rental income from development of SEZ irrespective of wrong classification of head of income.
The assessee undertaking is engaged in the development of Special Economic Zone (SEZ) and is eligible for claiming deduction u/s. 80IAB of the Act. The assessee has derived lease/rental income from development of SEZ. The lease/rental income from SEZ was declared by the assessee under the head ‘income from house property’. The assessee also claimed deduction from such income u/s. 80IAB while filing the return of income. The AO has disallowed this deduction with the view that deduction u/s. 80IAB is admissible only in respect of profits & gains from SEZ business.
CBDT through its circular has directed the field officers to allow eligible deduction to the taxpayers in respect of lease rent from let out buildings/developed space in an industrial park/SEZ. The CBDT has clearly directed the Officers to treat such lease rent as business income. Thus, in the light of CBDT Circular, the benefit of deduction available u/s. 80IAB of the Act could not have been denied to the assesse on the pretext the income has been offered for taxation under the head ‘income from house property’.
ITAT held that CBDT Circular No.16/2017 clearly addresses the issue in favour of assessee. The CBDT has taken note of the decisions of the jurisdictional High Court while directing the field officers to adjudicate the issue in favour of assessee in similar circumstances. ITAT thus find considerable merit in the plea of assessee for allowability of deduction claimed from income derived by way of letting out of properties. The assessee is entitled to benefit of deduction notwithstanding wrong classification of income under the head ‘income from house property’. The AO was under duty to examine the true nature and character of income while framing assessment regardless of error committed by the assessee in this regard. The claim of assessee under S. 80IAB thus deserves to be allowed on first principles.
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