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2016 (7) TMI 10 - ITAT CHENNAI

2016 (7) TMI 10 - ITAT CHENNAI - TMI - Eligibility for deduction u/s 80IAB for interest income - whether interest income was inextricably linked to the company’s business activity and therefore eligible for deduction under section 80IAB? - Held that:- On perusal of the financial statements of the assessee company the main source of income being lease income and assessee offered interest income. Further, similar interest income for the assessment year 2007-2008 was obtained. The ld. Authorised Re .....

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r the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived by the undertaking for the purpose of the special deduction under section 80HH - Decided against assessee - I.T.A. No.1193/Mds/2015 - Dated:- 29-4-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. Raghunathan Sampath, Adv For The Respondent : Shri. A.V.Sreek .....

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e industrial undertaking is not eligible for deduction u/s80IAB of the Act. 2.2 The learned CIT(A) has failed to appreciate the facts of the case and submissions made by the assessee to show that such interest income was inextricably linked to the company s business activity and therefore eligible for deduction under section 80IAB of the Act . 3. The Brief facts of the case the assessee is in the business of developing and leasing of IT parks and filed its e-return of income on 25.08.2010 admitt .....

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u/s.80IAB of the Act. The ld. Assessing Officer on perusal of the provisions of Sec. 80IAB found that interest income does not form part of business profits of an undertaking. The ld. Authorised Representative explained that it inadvertently claimed and as per the form No.10CCB issued by Auditor restricted the claim to ₹ 1,68,54,543/-. The Assessing Officer considered the explanations and the records and treated balance Rs. .2,52,04,544/- as income from other sources and passed order u/s.1 .....

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als) considered the observations of the ld. Assessing Officer and business operations of the assessee that the company business is only developing SEZ and leasing them to enterprises engaged in information technology and technology enabled service providers. The assessee company invested surplus arising out of business which is immediately not required in fixed deposits. The ld. Commissioner of Income Tax (Appeals) considered the detail submissions at para 5.1.1 of the order and judicial decisio .....

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nces I security deposits from the tenants and the same were deposited with the banks in the form of Fixed Deposits and earned interest. The AO has treated this interest as income from other sources as it was not derived from the activity of development of SEZ which is eligible for 80IAB deduction. No doubt the interest income was derived in the course of business and it certainly becomes an earning of the appellant, but as the activity of the undertaking which is eligible for deduction is differ .....

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for deduction u/s 80IAB as was claimed by the appellant in Form 10CCS. Further, when the appellant itself has accepted before the AO that the claim of 80lAB was only _1,68,54,543 as claimed in Form 10CCB, there is no scope for dispute now. I, therefore, uphold the decision of the AO. The decisions relied on by the appellant are distinguishable. The ground is dismissed . and dismissed the appeal of the assessee. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed a .....

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nts and they have to be refundable on termination of lease or vacation of premises. It is mandatory to collect the security deposit as a prudent business practice in the development of software industry. As there was no immediate requirements of funds, the assessee company deposited the amount with banks and earned interest. The nature of transaction of funds are only in connection with lease rentals and they are incidental to the business activities and therefore takes the characteristic of pro .....

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he lower authorities and prayed for dismissal of appeal. 7. We heard the rival submissions, perused the material on record and judicial decisions cited. The ld. Authorised Representative of assessee basic contention being assessee company is in the business of developing software parks and leasing to software companies. These companies provide security deposits to the assessee company which are returnable on termination of lease. Such refund may be for a period of five years or more and the asse .....

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d accepted the deduction to that extent and ld. Assessing Officer treated balance of ₹ 2,52,04,544/- as income from other sources. The ld. Authorised Representative before Commissioner of Income Tax (Appeals) has contested and filed additional grounds to treat interest income as business profits of undertaking eligible for deduction u/s.80IAB of the Act. The ld. Commissioner of Income Tax (Appeals) considering the facts, provisions of law has elaborately discussed at para 5.2 of the order .....

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