Case Law Details
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
These appeals are filed by the Department against the order of Ld. Commissioner of Income tax (Appeals)-11, Bengaluru dated 18-Jun-2025 for the Assessment Years 2017-18 & 2018-19 wherein the ld. AO is aggrieved that the ld. CIT(A) has allowed additional deduction to the assessee u/s. 80IA of the Income Tax Act, 1961 [the Act] on income from other sources which was not made before the ld. AO or even in the income tax return filed by the assessee. Thus, the ld. AO is aggrieved by the enhanced deduction granted by the ld. CIT(A) u/s. 80IA of the Act on income from other sources.
2. At the outset, it is noticed from the record that there is a delay of 10 days in filing the appeal before the Appellate Tribunal. In the condonation petition for delay, it is submitted that the due date of filing of appeal in this case was 31/08/2025. There has been a delay of 10 days in filing of the present appeal before the Tribunal. The delay in filing of present appeal is on account of workload due to pending scrutiny assessments time barring on 31/03/2026 and penalty cases time barring on 30/09/2025 and other reports and shortage of the staff as they were deputed for the search and seizure duty during the period of delay. Further, there have been several set aside cases which were getting time barred on 31/08/2025 and therefore, the delay was not intentional and deliberate. It is prayed to condone the delay which was beyond the control of ld. AO’s office and to admit the appeal.
3. In view of Nominal delay in filing of appeal, we find that reason stated are sufficient cause for delay in filing of appeal. Thus, Delay is condoned and appeals are admitted.
4. Briefly stated the facts for AY 2017-18 show that assessee is engaged in the business of developing software product and providing office space for technology. It filed return of income at Rs.3,53,68,810. The return was picked up for scrutiny. Assessment was framed u/s. 143(3) of the Act determining total income of the assessee at Rs.11,48,77,277. The claim of deduction u/s. 80IA made by the assessee was not at all disturbed by the AO. However, certain other disallowances u/s. 14A, TDS mismatch, CSR expenditure and deduction 80G were made.
5. Against the assessment order, the assessee preferred appeal before the ld. CIT(A) raising additional grounds of appeal that assessee is eligible to claim deduction u/s. 80IA of income under the head income from other sources. The ld. CIT (A) sent the additional ground to the ld. AO on 26.5.2025 for his report. The ld. AO raised a specific issue that assessee has not claimed deduction u/s. 80IA on other income arising under the head income from other sources in the return of income as well as before him. Even without prejudice to this submission of the AO, the ld. AO raised a contention of decision of the Hon’ble Supreme Court in the case of Shriram Investments v. CIT dated 4.10.2024 stating that such additional claim cannot be entertained by the AO. The assessee filed a rejoinder stating that assessee can claim the deduction for the first time before the ld. appellate authority. The ld. CIT(A) was shown the decision of the Hon’ble Supreme Court in the case of CIT v. Reliance Energy Ltd. dated 28.4.2021 which has held that deduction u/s. 80IA has to be granted from the gross total income of the assessee, therefore the claim was that it cannot be restricted to only income from business.
6. Based on the above decision, the ld. CIT(A) admitted the additional ground holding that fresh claim can be raised before the first appellate authority and held that assessee is eligible to claim deduction u/s. 80IA on the income from other sources. Accordingly directed ld. AO to allow the enhanced claim u/s 80 IA of The Act.
7. The ld. DR, Shri Balusamy H., JCIT, submitted that not even a word is said by the ld. CIT(A) that what kind of income is chargeable to tax under the head income from other sources. He further stated that only income derived from industrial undertaking is eligible for deduction. The ld. CIT(A) has categorically not mentioned what the income is and how it is derived from and therefore the order of the ld. CIT(A) is not sustainable. He extensively read the order of the learned CIT – A submitted that the learned CIT – A has not even examined what kind of income the assessee is claiming to have been derived from the industrial undertaking for which deduction under section 80 IA of the act is claimed. He further submission was that unless the income is identified, what kind of income it is, wherefrom it is derived from, what is the source of income, what is the quantum of income, how it is stated to be derived from the industrial undertaking, what is the approximate nexus, in absence of all these findings, and the order of the learned CIT – A is not sustainable.
8. None appeared on behalf of the assessee.
9. We have carefully considered the rival contentions and perused the orders of the ld. CIT(A). The facts clearly show that assessee is entitled to deduction u/s. 80IA of the Act. However, the provisions of section 80IA speak that only income derived from industrial undertaking is eligible for deduction. We find that the ld. CIT(A) has admitted the additional ground of appeal that assessee is entitled to deduction on income from other sources which was not raised before the ld. AO or not even claimed in the return of income. We completely agree with the ld. CIT(A) that a fresh claim can be raised before the ld. first appellate authority for the first time. However, to grant deduction on income from other sources, at least the ld. CIT(A) should have looked at the provisions of section 80IA of the Act and examined the nature of such income as well as whether this income is derived from industrial undertaking or not. Without giving any finding on the same, the claim of the assessee is allowed.
10. The provisions of section 80IA of the Act are clear that such income should be derived from the industrial undertaking. The decision of the Hon’ble Supreme Court which is relied upon by the learned CIT – A, is not on the issue that whether income of whatever nature shown under income from other sources is allowable to the assessee as deduction u/s. 80IA of the Act. The ld. CIT(A) has neither examined the nature nor the source and whether such income has direct nexus with the industrial undertaking or not. Without examining, holding that income from other sources is eligible for deduction u/s. 80IA of the Act is not in accordance with law.
11. In view of this, we allow the ground of appeal raised by the ld. AO and restore the appeal back to the file of the ld. CIT(A) to give a clear-cut finding how income from other sources shown by the assessee is eligible for deduction u/s. 80IA of the Act after examining the nature and source of such income.
12. The appeal of the ld. AO for AY 2018-19 also involves a similar issue wherein the ld. CIT(A) has directed the ld. AO to allow deduction of income from other sources u/s. 80IA of the Act. The ground of appeal of the ld. AO is also the same. In view of our finding for AY 2017-18, with similar directions we allow the appeal of the ld. AO and restore the issue back to the file of the ld. CIT(A) to give a clear-cut finding that how the income from other sources is derived from industrial undertaking.
13. In the result, both the appeals filed by the Department are ALLOWED, as indicated above.
Order pronounced in the open court on 25th May 2026.
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