ITO Vs State Infrastructure & Industrial Development Corporation of Uttarakhand Ltd. (ITAT Delhi)
We hold that since the receipt of interest is intrinsically linked to the primary activity of allotment of plots in the industrial park, it is hereby held that the interest is derived from the eligible business and thus, eligible for the purpose of direction u/s. 80 IA.
Facts-
The assessee company is a Govt, of Uttarakhand Enterprises acting as a nodal agency of the State Govt, which was incorporated as a Public Ltd. Company in the year 2002, in order to promote industrial and infrastructure development in the State, to provide the financial assistance in the shape of debt, equity, venture capital, to develop infrastructure and assist the private initiative in industry and infrastructure and to implement and manage projects and provide specialized financial consultancy and construction and all such other activities to promote industries and develop industrial infrastructure in the state of Uttarakhand.
During the course of assessment proceedings, the AO noticed that the assessee’s profit consisted of interest on amounts which were due from persons to whom areas had been allotted in the industrial estate. The assessee was therefore required to justify the claim of deduction u/s 80IA on the interest income on land premium of Rs. 17,60,12,522/-.
CIT(A) disagreed with the finding of AO and based on the decision for AY 2012-13, CIT(A) deleted the addition. Being aggrieved, the revenue preferred the present appeal.
Conclusion-
Held that the issue boils down to as to whether the receipts from the clients of the assessee who choose to make lumpsum upfront payment and who choose to make deferred installment payments along with interest are to be treated alike or not. We hold that since the receipt of interest is intrinsically linked to the primary activity of allotment of plots in the industrial park, it is hereby held that the interest is derived from the eligible business and thus, eligible for the purpose of direction u/s. 80 IA of the Act. Ergo, we hereby affirm the decision of Ld. CIT(A).”
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed by the revenue against the order of the CIT(A), Dehradun dated 26.04.2017, on the following grounds :-
1. The Ld. CIT(A) has erred in law and on facts in allowing the assessee’s claim of deduction u/s. 80 IA (4) (iii) ignoring the fact that the interest income shown by the assessee was the part of profit attributable to the business of the assessee and it was not ‘derived from’ eligible business activities.
Since all the appeals deal with the same issue, they are being adjudicated by a common order.
2. The assessee company is a Govt, of Uttarakhand Enterprises acting as a nodal agency of the State Govt, which was incorporated as a Public Ltd. Company in the year 2002, in order to promote industrial and infrastructure development in the State, to provide the financial assistance in the shape of debt, equity, venture capital, to develop infrastructure and assist the private initiative in industry and infrastructure and to implement and manage projects and provide specialized financial consultancy and construction and all such other activities to promote industries and develop industrial infrastructure in the state of Uttarakhand.
3. The assessee electronically filed its Return for A.Y. 2011-12 on 30.09.2011 declaring income of Rs.21,45,12,620/-.The assessee claimed deduction u/s 80IA(4)(iii) of the I.T. Act amounting to Rs.15,79,11,665/-in respect of the units developed at Pant Nagar Industrial Estate, District-Rudrapur, Uttarakhand and BHEL, near Ranipur, Haridwar.
4. During the course of assessment proceedings, the AO noticed that the assessee’s profit consisted of interest on amounts which were due from persons to whom areas had been allotted in the industrial estate. The assessee was therefore required to justify the claim of deduction u/s 80IA on the interest income on land premium of Rs. 17,60,12,522/-.
5. In response, the assessee submitted that the claim for deduction included interest on land premium on some industrial parks, in respect of which deduction under section 80IA had been claimed.
6. Regarding eligibility of interest on land premium for deduction under section 80IA, the assessee submitted before the revenue authorities that,
“In the case of the assessee company there are various receipts forming part of the income from the industrial estates including interest received from allotee(s) who opt for deferred payment option in respect of land price. The said interest income in case of these three industrial estates is eligible for deduction U/s 80IA and also in case of other industrial estates is not eligible to deduction U/s 801 A, is a business income of the assessee and is an integral part of the legitimate business receipts and are directly related and originate from the eligible business of the assessee.
Before discussing the dissimilarity of section 8OIA and 80IC would like to draw attention towards the latest judgment dated 28th October 2015 of the Hon’ble ITAT, Mumbai in the case of M/s Hiranandani Builders Vs I.T.O. In the said judgment not only the interest on deferred payment but also the interest income of FDR’s created in the undertaking or an enterprise have been considered as having direct nexus with the business and have been declared eligible for deduction U/s 80IA. The judgment of Hon’ble Supreme Court in the case of M/s Liberty India Vs. CIT (317ITR) has been categorically discussed and differentiated”.
7. The business activities of the assessee company with respect to provisions of section 80-IA(4)(iii). The text of the said clause is given hereunder
“any undertaking which develops, develops and operates or maintains and operates an park [—][or special economic zone] notified by the Central Government in accordance with the scheme framed and notified]—] by that Government…”
8. Memorandum of Association of the assessee company is which is an integral part of main objects for which the company is established clearly provides, that development and management of industrial estates as one its main objects. Supported by the fact that assessee is incurring expenditure on development of the various industrial parks is established that to develop and operate industrial park is the main business activity of the assessee company. This fact has not been disputed by the revenue.
9. Snippets from the order of the Assessing Officer as mentioned in the order of the Ld. CIT(A) are as under :-
