Candor Gurgaon One Realty Projects Pvt Ltd Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi recently ruled in the case of Candor Gurgaon One Realty Projects Pvt Ltd vs ACIT regarding the tax treatment of interest income earned on fixed deposits (FDs). The core issue was whether the interest income on FDs placed for securing bank guarantees required to develop and operate a Special Economic Zone (SEZ) qualifies for deduction under Section 80IAB of the Income Tax Act.
Background of the Case
Candor Gurgaon One Realty Projects Pvt Ltd (the assessee) placed FDs amounting to Rs. 3.10 crores with the Department of Industries & Commerce, Government of India, and Rs. 1.25 crores with the President of India, State Pollution Board, as bank guarantees to secure permissions necessary for the development and operation of an SEZ. These FDs generated interest income of Rs. 43,64,877 during the assessment year.
Arguments by the Assessee
The assessee argued that the interest income should be treated as business receipts and be eligible for deduction under Section 80IAB of the Income Tax Act. This section provides deductions for incomes derived from the business of developing, operating, and maintaining an SEZ. The contention was that the FDs were intrinsically linked to the business operations since they were essential for securing the necessary permissions to commence SEZ development.
