TMI Blog2022 (5) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... on and maintenance in relation to the aforesaid projects and the activities have already been mentioned above. The assessee had converted the bare shell buildings into warm shell and providing other facilities and has let out the units purely for rental income. Income earned from lease rentals for renting out a property per se, ostensibly falls under the head income from house property , unless it is shown that there was some systematic activity falling into the nature of business. Whence, the lease rental income of the assessee has been accepted to be assessed under the head income from house property in AY 2012-13 and again in AYs 2017-18 2018-19, then we do not find any reason as to why the income from the same activity is not to be classified under the head income from house property in these years. Hon ble Supreme Court in the case of CIT-I vs. Reliance Energy Ltd.[ 2021 (4) TMI 1237 - SUPREME COURT] in the context of section 80IA, held that the scope of section 80IA (5) is limited to determine the quantum of deduction under sub-section (1) of section 80IA by treating eligible business for only source of income and same cannot be pressed into service for readin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of facts and similar findings of AO/CIT(A), therefore, the same were heard together and are being disposed off by way of this consolidated order. 3. For the sake of ready reference, we are adjudicating upon the appeal for AY 2013-14, and the finding given therein will apply mutatis mutandis in the appeals of other two assessment years. 4. The ground of appeal raised by the Revenue reads as under :- On the facts and in circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by the AO wherein AO had restricted deduction u/s 80IAB at Rs.NIL as against claimed at Rs.341,06,90,452/- by the appellant. 5. The facts in brief are that the assessee company was engaged in the business of leasing of commercial properties under Special Economic Zone (SEZ), operation maintenance of SEZ and was having ownership rights over commercial space developed in SEZ project and the same was reflected as fixed assets in the balance sheet. The said commercial space was rented out to various entities in their absolute right and the lease rental was declared as income under the head income from house property . The leased out commercial space ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible to claim deduction for 10 consecutive assessment years at the option of the assessee out of 15 years from the year in which the Special Economic Zone has been notified by the Central Govt. In the case of the assessee, the SEZ Zones have been notified as under:- (a) Chennai - A Y 2007-08 - Developer - DLF Infocity Developers Chennai) Ltd. (b) Hyderabad - A Y 2008-09 - Developer - DLF Commercial Developers Ltd. (c) DLF Cyber City, Gurgaon - AY 2008-09 - DLF Cyber City Developers Ltd. (d) Silokhera, Gurgaon - A Y 2008-09 - DU Limited. Therefore, the assessee company with respect to Chennai project is eligible to claim deduction for 10 consecutive years (out of the 15 Years), beginning Assessment Year 2007-08 upto 2021-22; with respect to other projects, beginning Assessment Year 2008-09 upto Assessment Year 2022-23. The assessee since have opted to claim deduction for the first time in the Assessment Year 2012-13, shall be eligible to claim deduction with respect to Chennai Project for ten consecutive Assessment Years and the last year of deduction in this case will be Assessment Year 2021-22. In the case of the other thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Industry, Department of Commerce. The services annexed to the approval letter are mentioned hereunder: 1. Office Space (Warmshell) 2. Power generation and Power backup facilities through DG. Set 3. Air conditioning and Chiller 4. Shopping arcade and/ or retail space 5. Business and/ or convention Centres 6. Food services including cafeteria, foods court(s), Restaurants, coffee shops, canteens and catering facilities 7. Clinic and medical centres 8. Wi Fi and/ or Wi Max Services 1.8 That post obtaining approval from the Board of Approval ('BoA') and notification from the Ministry of Commerce, the Developer entities have entered into Memorandum of Understanding ('MOU') and Co-developer Agreement with the assessee to implement the projects, as a Co-developer for all the four SEZs, through carrying out various activities forming part of the authorized operations. These authorized operations include developing, operating and maintaining the SEZ as a Co-Developer. 1.9 That the assessee has, subsequently, after conversion of bare shell buildings into warm shell and providing other facilities as stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add : Income from house property 550,52,65,238 Less : Property Tax 25,43,443 Less : Interest 73,13,20,464 Less : Depreciation 623,17,72,906 Less : Other Business Expenditure - Marketing Service Charges 9,26,78,290 - Land Lease Rent 7,36,63,588 713,19,78,691 Income from business -130,43,39,196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for effective representation on varied GOA raised by Revenue in light of decision of Delhi High Court in 92 taxmann.com 10 in the case of CIT vs DLF Commercial Developers dated 22.02.2018 (ITA 507/2014,563/2015,610/2017) wherein it is stated that ... 10. This Court is of the opinion that the ITAT's decision merely reproduced the CIT(A)'s judgment and has not analysed independently, in either of the AYs, the applicability of Section 80IAB towards the deductions claimed in the light of the transactions reported and the documents disclosed. Furthermore, those facts have also to be analysed in the light of the provisions of SEZ Act, 2005, which the ITAT has not independently done. For these reasons, the impugned orders of the ITAT are set-aside and are remitted for fresh consideration by the ITAT in accordance with law. All rights and contentions of the parties are reserved ... The orders relied upon by the assessee and the CIT(A) merely capture the legal matrix; the factual aspects of the matter needs to be examined from the case records alongwith various regulatory compliances/information submitted under SEZ rules 2006 (pertaining to SEZ Act 2005) for satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity of the assessee squarely falls within the activities approved by the competent authority and Board of Approval under the SEZ Act which has overriding effect in any other Act or even in Income-tax Act. Therefore, in the open court itself, we had rejected the contentions of the ld. CIT DR and we have decided to proceed the issue on merits, as we find, there is no material change at all from the earlier which is discernible from the assessment order or ld. CIT (A) order because AO has held repeatedly had mentioned the same reasoning given in the assessment order for AY 2012-13 and ld. CIT (A) has followed the order of his predecessor for AY 2012-13 which has now been followed and upheld by the Tribunal which we are bound by. 12. Now let us examine the issue as raised in grounds of appeal. First of all, the provisions of u/s 80IA (b) reads as under :- 80-IAB. (1) Where the gross total income of an assessee, being a Developer, includes any profits and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after the 1st day of April, 2005 under the Special Economic Zones Act, 2005, there shall, in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all under the head Income from House Property For that, we will refer to certain legal principles as laid down by Hon ble Supreme Court { as taken from head notes} as under :- a. Raj Dadarkar Associates v. ACIT [2017] 394 ITR 592 (SC) Section 22, read with sections 27 and 28(i) of the Income-tax Act, 1961 - Income from house property - Chargeable as (Letting of shops) - Assessee acquired leasehold rights in a property from MCGB - It constructed various shops and stalls on said property and gave same to various persons on sub-licensing basis - Income generated from sub-licensing was claimed as business income - Assessing Officer took a view that since assessee had acquired leasehold right in land for more than 12 years, it was to be regarded as 'deemed owner' of premises by virtue of section 27(iiib) - Accordingly, income earned from letting out shops and stalls was taxed under head 'income from house property'- Tribunal as well as High Court upheld order of Assessing Officer - Whether since assessee had not established that it was engaged in any systematic or organized activity of providing service to occupiers of shops/s ails, ere act a object clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease rentals for renting out a property per se, ostensibly falls under the head income from house property , unless it is shown that there was some systematic activity falling into the nature of business. Whence, the lease rental income of the assessee has been accepted to be assessed under the head income from house property in AY 2012-13 and again in AYs 2017-18 2018-19, then we do not find any reason as to why the income from the same activity is not to be classified under the head income from house property in these years. 16. Hon ble Supreme Court in the case of CIT-I vs. Reliance Energy Ltd. reported in (2022) 441 ITR 346 in the context of section 80IA, held that the scope of section 80IA (5) is limited to determine the quantum of deduction under sub-section (1) of section 80IA by treating eligible business for only source of income and same cannot be pressed into service for reading a limitation of deduction under subsection (1) only to business income . The relevant extract of the judgment of Hon ble Apex Court reads as under :- 9. The controversy in this case pertains to the deduction under Section 80-IA of the Act being allowed to the extent of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of gross total income . The Appellate Authority was of the view that there is no limitation on deduction admissible under Section 80-IA of the Act to income under the head business only, with which we agree. 13. The other contention of the Revenue is that sub-section (5) of Section 80-IA refers to computation of quantum of deduction being limited from eligible business by taking it as the only source of income. It is contended that the language of sub-section (5) makes it clear that deduction contemplated in sub-section (1) is only with respect to the income from eligible business which indicates that there is a cap in sub-section (1) that the deduction cannot exceed the business income . On the other hand, it is the case of the Assessee that sub-section (5) pertains only to determination of the quantum of deduction under sub-section (1) by treating the eligible business as the only source of income. It was submitted by Mr. Vohra, learned Senior Counsel, that the final computation of deduction under Section 80-IA for the assessment year 2002-03 as accepted by the Assessing Officer, was arrived at by taking into account the profits from the eligible business as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income. Here in this case also, there is no dispute that the income which has been derived by the assessee is derived from approved activity under SEZ which is the only source of income for which the deduction u/s 80IA(b) is to be allowed. It is immaterial that whether the income derived has been shown from house property or business income or any other head. Thus, we hold that income derived from approved activity from the SEZ is liable to be allowed as deduction u/s 80IA. 18. Otherwise, this issue is covered by the order of earlier year of the Tribunal. The relevant observation of the Tribunal in AY 2012-13 is reproduced as under :- 13. In our understanding, the scheme of SEZ is governed by the provision of law contained under the SEZ 2005. Section 51 of the SEZ Act 2005 provides that the SEZ Act shall have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. In our considered opinion developing SEZ by itself is the business contemplated u/s. 80 IAB of the Act and the SEZ itself provides that the lease rental income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incidental to developing a SEZ and turning it into account. Now, surely, leasing of house property, inasmuch as the lessees (who are to be, or presumably so, in info- tech business) would be able to undertake their businesses only on the developed property being made available to them, could not therefore but be regarded as the principal activity yielding income from the development of a SEZ. In fact, even the income (to the assessee) from providing ancillary and maintenance services to these businesses arises or stands to arise only on account of, or by virtue of, their being lessees. The lease rental income, on the lease of the house property thereto, would thus, in our view, notwithstanding the use of the words 'profits and gains' and 'business' in section 80-IAB(1), qualify to be eligible for deduction there-under. That is, the lease rental is within the contemplation of the profits derived by a developer of a SEZ from the 'business' of developing it, eligible for deduction u/s. 80-IAB. It is in fact this that forms the basis of the decisions in Coimbatore Hitech Infrastructure (P.) Ltd. (supra) and Global Tech Park Pvt. Ltd. (supra). The head of income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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