DCIT Vs DLF Assets Pvt Ltd. (ITAT Delhi)
The assessee is without doubt a Developer of a SEZ, having been in fact allowed deduction u/s.80-IAB on it’s other income/s, as from service agreements, chargeable u/s. 28. That the said income is assessable as business income, and only rightly so, inasmuch as the source thereof is the commercial activity of providing a range of services, is besides the point. We have in fact found the said services as only enabling services, i.e., enabling the enjoyment and the user of the house property, developed by the assessee as a developer thereof — a term defined under SEZ Act, 2005. By letting the built-up space, the assessee is only turning into account it’s investment in the house property, being a building and land appurtenant thereto. It is, in fact, this – the construction of a building suitable for the firms operating in the IT sector, that qualifies it as a developer of an Info-park, approved as a SEZ. That the said activity, i.e., developing real estate and leasing it, which is, broadly speaking, and in common parlance, only a business, is not regarded as so for the purpose of assessment of income there-from, being derived from a house property, a defined source of income for which a specific head of income is provided under the Act, is another matter. This is so even where it is carried in an organized manner, i.e., as a business, as in the present case. It shall, however, not cease, for that reason, to be profits and gains derived from the activity of developing a SEZ. The word `business’ – even otherwise a word of wide and indefinite import, as occurring in section 80-IAB(1), is to be, accordingly, construed in a broad rather than a strict sense, as conveying the gamut of activities, including activities subservient and incidental to developing a SEZ and turning it into account. Now, surely, leasing of house property, inasmuch as the lessees (who are to be, or presumably so, in info-tech business) would be able to undertake their businesses only on the developed property being made available to them, could not therefore but be regarded as the principal activity yielding income from the development of a SEZ. In fact, even the income (to the assessee) from providing ancillary and maintenance services to these businesses arises or stands to arise only on account of, or by virtue of, their being lessees. The lease rental income, on the lease of the house property thereto, would thus, in our view, notwithstanding the use of the words ‘profit§ and gains’ and ‘business’ in section 80-IAB(1), qualify to be eligible for deduction there-under. That is, the lease rental is within the contemplation of the profits derived by a developer of a SEZ from the ‘business’ of developing it, eligible for deduction u/s. 80-IAB. It is in fact this that forms the basis of the decisions in Coimbatore Hitech Infrastructure (P.) Ltd. (supra) and Global Tech Park Pvt. Ltd. (supra). The head of income under which the said income is assessable, which is on the basis of the source — from amongst the specified sources under the Act, most appropriate for the said income, so that it is not assessable as business income but as income from house property, would not be a limiting or debilitating factor.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the revenue is preferred against the order of the CIT(A)-3, Delhi dated 21.06.2016 pertaining to A.Y. 2012-13.
2. The solitary grievance of the revenue is that the CIT(A) erred in allowing deduction u/s. 80IAB of the Act to the assessee.
3. Representatives of both the sides were heard at length and case record carefully perused.
4. The assessee filed its return of income declaring income of Rs.66.37 lacs after claiming deduction u/s. 80IAB of the Act amounting to Rs.316.04 crores. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
5. While scrutinizing the return of income the AO noticed that the assessee has claimed deduction u/s 80IAB of the Act amounting to Rs. 316.04 crores. The AO found that the assessee has claimed the said deduction on the rental income shown under the head “income from house property”.
6. The assessee was asked to show-cause why the claim of deduction u/s. 80 IAB of the Act should not be denied as the claim is made on the rental income and not from any profits and gains of business.
7. Assessee filed a detailed reply substantiating its claim of deduction and relied upon various judicial decisions in support of its claim.
8. The main contention of the assessee was that it is engaged in the eligible business of developing SEZ and the income arising to the assessee is from such eligible business. The assessee strongly contended that the relevant factor is profit and gain should be derived from the eligible business irrespective of the head of the income.
9. The claim of the assessee was considered by the AO but did not find any favour because the AO was of the firm belief that deduction u/s. 80IAB of the Act is available only from the profits and gains derived by an undertaking from any business and since income from house property does not qualify for deduction u/s.80 IAB of the Act, the claim was denied.
10. Assessee carried the matter before the CIT(A) and successfully got the claim of deduction.
11. There is no dispute in so far as the eligibility of the assessee is concerned. The assessee during the year under consideration has been engaged in developing, leasing as well as maintenance and operations of commercial properties under SEZ. The assessee company is an approved co-developer of the following notified SEZ projects :-
