TMI Blog2015 (11) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of computing the profits and gains derived from the undertaking, in which case, the interest income need not be assessed separately and it would automatically get deduction u/s 80IA of the Act due to netting off. In view of the above, we uphold the decision taken by the Ld CIT(A) on this issue.- Decided in favour of assessee. Receipt relates to the interest received from others, which is the interest received from the lessees for the delayed payment of lease rent. In view of the decision rendered by the Hon’ble Supreme Court in the case of Govinda Choudhary & Sons (1992 (4) TMI 8 - SUPREME Court) and CIT Vs, Bhansali Engg. Polymers Ltd (2008 (4) TMI 236 - BOMBAY HIGH COURT), we do not find any infirmity in the decision of Ld CIT(A) in holding that interest so received partakes the character of lease rentals and hence eligible for deduction u/s 80IA of the Act.- Decided in favour of assessee. Receipt relates to the interest received on FDR - The assessee had received lease deposits from the lessees, which is required to be returned to them upon vacating the premises. Since the possibility of vacating the premises in the middle is always there, in which event the leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the deduction u/s 80IA is allowed in respect of “Profits and gains”, which means only net income, i.e., Gross receipt less corresponding expenditure incurred to earn the said income. Accordingly, we direct the AO to exclude only the net receipts in respect of ineligible item of income. - Decided in favour of assessee for statistical purposes. - I.T.A. No. 4613/Mum/2013, CO No. 188/Mum/2014 - - - Dated:- 28-10-2015 - Shri Joginder Singh ( JM ) And B. R. Baskaran ( AM ) For the Petitioner : Shri K Mohandas For the Respondent : Shri Chetan Karia ORDER Per B. R. Baskaran ( AM ) The appeal filed by the revenue and the cross objection filed by the assessee are directed against the order dated 08-03-2013 passed by Ld CIT(A)-23, Mumbai and it relates to the assessment year 2009-10. 2. The revenue is aggrieved by the decision of Ld CIT(A) in holding that the assessee is eligible to claim deduction u/s 80IA of the Act on the following receipts:- (a) Interest on IT refund. (b) Interest from others. (c) Interest on FDR (d) Tender fees. 3. In the cross objection, the assessee is contending that the deduction u/s 80IA should have been dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered as derived from the undertaking and accordingly held that the assessee is eligible for deduction u/s 80IA(1) of the Act. (a) Interest on IT refund. (b) Interest from others. (c) Interest on FDR (d) Sale of scrap (e) Tender fees. In respect of remaining receipts, the Ld CIT(A) upheld the view taken by the assessing officer. The revenue is aggrieved by the decision of Ld CIT(A) in granting relief in respect of the above said receipts except on sale of scrap. In the cross objection, as stated earlier, the assessee is contending that the net income should have been disallowed in respect of the receipts that were held to be not eligible. 7. We heard the parties and perused the record. The issue that requires examination is whether each of the receipts mentioned above can be considered to be profits or gains derived from the eligible business or not. The AO has placed reliance on the decision of Hon ble Supreme Court rendered in the case of Liberty India Ltd (supra) to decide against the assessee. In the above said case, the Hon ble Supreme Court has held the words derived from is narrower in connotation as compared to the words attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 along with interest thereon. Details of the same are ' enclosed herewith from the above it can be seen that interest on income tax refund is received on account of refund of TDS on Lease Rentals of projects, income from which are exempt and therefore this amount is also eligible for exemption u/s 801A. Further, firm had applied for Nil deduction certificate from department but the same was received in July, TDS was deducted on Lease Rentals. If the said TDS was not deducted ( in view of the lower deduction proceedings not taking time) there was No question of any refund or nay interest on refund. Further if the said TDS was not deducted firm would have been able to utilize the said amount in repaying its loan and reduce the interest liability. Therefore even if the interest on Income Tax Refund of ₹ 1,12,09,827/- is considered as Income from other sources then interest paid of ₹ 7,88,92,760/- should be allowed deduction against the same. 5. Interest on Others of ₹ 3,749/- The lease Agreements provide for payments of interest by the lessee in case of delay in paying the rental. These are interest in case of lease rentals which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ington B building was completed by firm. After the completion form had some accumulated scrap and the same was sold to various parties by the firm and amount of ₹ 25,93,954/- was realized from the same. Further firm has paid Custom Duty of the same of ₹ 6,99,662/-. Details of same are enclosed herewith. Since income of Kensington building is exempt these incidental income is also claimed as exempt. Alternatively the same can also be deducted from the Material expenses debited in Profit Loss account. 9. Sundry Balances Written back of Rs, 58,894/- During the year under assessment Kensington B building was completed by firm. After the completion firm had reconciled all the balances with various parties and the excess balances were written back. Details of the same are enclosed herewith. Since the income of three buildings is exempt these is also claimed as exempt. Alternatively the same can also be deducted from the Material expenses debited in profit loss account. 10. Tender Fess of ₹ 24,300/- Firm floats Tenders for all the contract works and collects fees for the same. During the year firm had floated various tenders for work in Fairmou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,749 This interest is charged to appellant s customers for delayed payment of lease charges. The interest so received partakes the character of lease rentals falling under the first degree source and, therefore, eligible for deduction u/s 80IA of the Act. 3 Interest on FDR 58,55,932 As per the terms of the lease agreements, appellant received deposits from its customers which are returnable on vacation of the premises. To meet these eventualities deposits are kept in bank with fixed tenure. Interest so received is, therefore, has direct nexus with the developmental activities of the appellant and, therefore, eligible for deduction u/s 80IA of the Act. 4 Sale of scrap 25,93,954 Appellant submitted that during the year under consideration, its SEZ building was completed. The accumulated scrap generated during construction of the building was sold. Thus, the income has direct nexus with the construction activity of the appellant and, therefore, eligible for deduction u/s 80IA of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the lease rent for business purposes, including for repaying the loans taken for construction of IT parks and SEZ. Accordingly, in the alternative, it was submitted by the assessee that the interest on TDS refund should be netted off against the interest payment, in which case also, the interest on TDS would get deduction u/s 80IA automatically. 12. Thus, we notice that the TDS deduction from lease rental income was beyond the control of the assessee and also due to the delay in getting no-deduction certificate from the AO. In view of the same, the assessee was deprived of funds to the extent of TDS amount, which would have otherwise used for the purpose of business purposes including repayment of loan taken for construction of IT parks and SEZ. The Income tax department was required to pay interest only due to the delay in granting refund of TDS. In the case of Liberty India Ltd (supra), relied upon by the AO, the assessee therein received DEPB credits as per the scheme framed by the Government of India. Hence the Hon ble Supreme Court held that the primary source of the DEPB receipt is the scheme framed by the Government. However, in the instant case, TDS deduction is integr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits out of business compulsion. Since the lease rental income is the primary source of the assessee, in our view, the keeping of fixed deposits shall form integral part of the business of operation of IT parks and SEZ. We also find merit in the alternative argument of the assessee that the interest income should be netted off against the interest expenditure, since the assessee was constrained to keep part of lease deposits into fixed deposits in view of the peculiar nature of activities of the assessee instead of using the same for business purposes including repayment of loan. In view of the above, we do not find any infirmity in the decision taken by the Ld CIT(A) on this issue. 15. The next item of receipts relates to the Tender fees received by the assessee on sale of tender forms. The Ld CIT(A) has noticed that the assessee has availed the services of various sub-contractors for the purpose of carrying our various works in the IT parks and SEZ. In order to select the vendors (sub-contractors), the assessee has followed tender system and in that process, it has collected money on sale of tender forms. Hence, the Ld CIT(A) has held that the activity of inviting tender ..... X X X X Extracts X X X X X X X X Extracts X X X X
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