Kalthia Infra-Con Pvt. Ltd. Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that interest income earned from the FDRs, which were created as part of the financing arrangement for the infrastructure project, qualifies as business income derived from the eligible business under Section 80-IA(4) of the Act.
Facts- The assessee is a Special Purpose Vehicle (SPV) incorporated for undertaking infrastructure development projects under the Build-Operate-Transfer (BOT) model. For AY 2016-17, the assessee filed a return of income claiming a deduction of Rs.20,93,513/- u/s. 80-IA(4) of the Act.
AO disallowed the deduction of Rs.20,93,513/- u/s. 80-IA(4) of the Act, concluding that the interest income from FDRs could not be treated as “profits derived from” the infrastructure development business. CIT(A) upheld the disallowance made by AO. Being aggrieved, the present appeal is filed.
Conclusion- The FDRs were not independent investments but were integral to the business’s financing structure. The interest income arising from these FDRs was incidental to the core business activity of infrastructure development and thus should be considered as “profits derived from” the business for the purposes of Section 80-IA(4) of the Act.
Held that the interest income earned from the FDRs, which were created as part of the financing arrangement for the infrastructure project, qualifies as business income derived from the eligible business under Section 80-IA(4) of the Act. The AO’s disallowance as upheld by the CIT(A) was incorrect. The disallowance is hereby set aside, and the assessee’s claim for deduction under Section 80-IA(4) of the Act is allowed.
