TMI Blog2022 (5) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Ld. CIT(A).- Decided in favour of revenue. - ITA No.4200 4201 And 4202/Del/2017 - - - Dated:- 24-5-2022 - Dr. B.R.R. Kumar, Accountant Member And Sh. Yogesh Kumar Us, Judicial Member For the Appellant : Sh. N. C. Upadhyay, SR DR For the Respondent : Sh. Saurab Gupta, CA ORDER PER B. R. R KUMAR AM: 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, v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly received by it could be said to have any direct nexus with such expenditure. The AO concluded that it is by way of an informal arrangement, that it retains the interest component of the land premium (in installments scheme). If the installment scheme were not there, or if no allottee opted for the scheme, there would be no interest income. Thus, the income in question was purely incidental to the main business of development of industrial parks; it flowed from the financing arrangement, not from the business of development, or operation, or maintenance of industrial parks. The AO observed that the assessee, while offering installment scheme to the allottees, acts as a financial institution. As per RBI regulations relating to such institutions, it was mandatory for any corporation acting as such, to register itself with the RBI and follow the said regulations in conduct of such business. The assessee had not registered itself with the RBI. Yet, it was operating as a financial institution. Thus, the RBI regulations were being violated by it. Be that as it may, he concluded that the interest income was directly attributable to the financing activity, which in turn, may be call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction under section 8OIA as per the notifications issued by the CBDT in respect of these industrial parks. The question therefore arises as to whether assessee can be denied the benefit of deduction in respect of receipt of interest on deferred payments. The Assessing Officer has held that the land belongs to the State Government and thus the land premium belongs to it. He adds that there is no contractual agreement by which it has been agreed that the assessee will have a right to receive interest component of the deferred payment scheme. He has further argued that interest on deferred payment does not arise by the activity of development and maintenance of the industrial park but as a result of financing activity done by the assessee company and therefore at best it is attributable to the business but not derived from the business. Therefore as per the judgments of the Hon Supreme Court in the case of Liberty lndia(Supra)it is not a deductible receipt The assessee has stated that the deferred payment scheme is one of the ways in which the allottees have been allowed to make payment for the land. In the event of down payment they are given a discount and the entire land premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e owner of the land in this regard. The letter of the Principal Secretary, Industrial development dated 13 Feb 2013 makes it quite clear that the corporation has been set up by the state of Uttarakhand (the land owner) and given management rights to foster the industrial development in the state and lays down the levies to be passed ok to the State Government by SIDCUL. Interest on deferred payments is not one of the levies which is required to be passed on. Furthermore, perusal of the application for allotment indicates that for the purposes of the allottee, the single entity with which it has to deal for the project is the Assessee corporation. It is the Assessee corporation that collects fees and it the Corporation that allots the land for industrial operations. Thus an allottee can only be allotted land as per the scheme laid down in the application form. Presuming that there is no separate Government approval for the deferred payment scheme (since the assessee could not produce any document in support of such) or the collection of interest with regard to it, it has to be assumed that the payment schemes have been devised by the management of SIDCUL to get as much payment upfro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities in its accounts and the rest are taken as receipts for the purposes of computation of its eligible income. That part of the receipts that go to the Government, are in any case exempt from tax as per the provisions of Article 289 of the constitution, while the income derived by the assessee corporation from such operations is eligible for deduction under section 80IA, as notified by the CBDT. The Government obviously does not have any issue with the assessee collecting and keeping a portion of the land cost so determined and collected in the form of interest, otherwise a demand would have been made for the same from the assessee. Thus, in view of the fact that it is authorized to develop, operate and maintain the Industrial parks, authorized to allot to lessees and collect payments on allotment from lessees and only pay specified levies to the Government in this regard, it has to be held that the assessee has a title to retain what is not specifically demanded by the Government. 10. The case of Liberty India (supra) cited by the Assessing Officer is not applicable to the facts of the case. It was delivered in the context of a manufacturing undertaking seeking benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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