Gateway Terminals India Pvt. Ltd. Vs DCIT (Bombay High Court)
Conclusion: Assessee was entitled to deduction under Section 80IA on business income in the nature of interest from fixed deposits with the bank and on interest on TDS refund as TDS refund received by assessee was an integral part connected with the receipt of business income by assessee and the same could not be separated from the business of assessee.
Held: Assessee was engaged in its only business of operating and maintaining a container terminal at Jawaharlal Nehru Port Trust (JNPT), which was eligible for deduction under the provisions of Section 80IA. During the previous year, interest income arose out of the said eligible business of the assessee. It was the case of assessee that interest was earned out of money accrued from the eligible business of assessee and the same was also utilized for the purpose of its eligible business. The interest was earned from fixed deposits maintained with banks for the purpose of the business and related to the business of assessee. Interest was also earned on refund of taxes due to wrongful deduction of TDS by the customers of assessee. Assessee filed its Return of Income claiming deduction under Section 80IA of its business income, which included the interest income. AO accepted assessee’s claim for deduction under the provisions of Section 80IA, which also included the interest earned on fixed deposits as being a part of the business income. The interest income arising out of income tax refund was taxed by AO under the head “Income from other Sources”. Against the assessment order assessee filed an appeal before the CIT (Appeals) which was rejected. Revenue submitted that assessee was free to deploy its funds in any manner it decides, but the same was immaterial for the purpose of deduction under Section 80IA. The profit so deployed might generate further profit, i.e., the fruits of profit. However, the entire profit made by assessee in a year was not allowed for deduction but only that part of the profit which was generated in the process of creation of eligible infrastructure assets was deductible. It was held that assessee was entitled to the deduction [under Section 80IA of the Act] on the interest earned from fixed deposits which were placed by the assessee for planning of replacement of equipment’s as per the provisions of the said License Agreement and due to the tariff dispute. Further, TDS refund received by assessee was an integral part connected with the receipt of business income by the assessee and the same could not be separated from the business of the assessee. In these circumstances, assessee was entitled to deduction under Section 80IA, on the interest received by it on TDS refunded to it. The bench directed Revenue to grant deduction under Section 80IA to the assessee on business income in the nature of interest from fixed deposits with the bank and on interest on TDS refund.
