Ascendas IT SEZ (Chennai) Private Limited, CHENNAI V. ITO, CHENNAI

ITA 1193/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9420 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 19-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Section: 10; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , '!# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.1193/MDS/2015 ' $ %$ / ASSESSMENT YEAR : 2009-2010. M/S. ASCENDAS IT SEZ (CHENNAI) PRIVATE LTD, NO,9, IST FLOOR, INTERNATIONAL TECHPARK, TARAMANI ROAD, TARAMANI, CHENNAI 600 113. VS. THE INCOME TAX OFFICER, COMPANY WARD I(1) CHENNAI 600 034. [PAN AAFCA 5329L] ( / APPELLANT) ( /RESPONDENT) &' ( ) / APPELLANT BY : SHRI. RAGHUNATHAN SAMPATH, ADV *+&' ( ) /RESPONDENT BY : SHRI. A.V.SREEKANTH, IRS, JCIT. ( , / DATE OF HEARING : 18-02-2016 -.% ( , / DATE OF PRONOUNCEMENT : 29-04-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHEN NAI IN ITA NO.847/11-12/A-1, DT 30.01.2015 FOR THE ASSESSMENT YEAR 2009-2010 ITA NO.1193/MDS/2015. :- 2 -: PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1 961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 2 .1 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THAT THE INTEREST INCOME OF INR 2,52,04,544/- DERIVED FROM THE 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 COMPANYS 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 ADMITTING NIL INCOME. THE CASE WAS SELE CTED FOR SCRUTINY AND NOTICE U/S.143(2) WAS ISSUED. IN COMPLIANCE TO NOTICE, THE LD. AUTHORISED REPRESENTATIVE OF ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED DETAILS. THE LD. ASSESSING OFFICER ON PE RUSAL OF THE FINANCIAL STATEMENTS FOUND THAT ASSESSEE HAS CLAIMED DEDUCTIO N U/S.80IAB OF THE ACT ?4,20,59,087/- WHICH INCLUDES INTEREST INCO ME OF ?2,52,04,544/- AND THE ASSESSEE HAS TREATED INTERES T INCOME AS BUSINESS PROFITS FOR CLAIMING DEDUCTION U/S.80IAB OF THE ACT. THE LD. ASSESSING OFFICER ON PERUSAL OF THE PROVISIONS OF S EC. 80IAB FOUND THAT ITA NO.1193/MDS/2015. :- 3 -: INTEREST INCOME DOES NOT FORM PART OF BUSINESS PROF ITS OF AN UNDERTAKING. THE LD. AUTHORISED REPRESENTATIVE EXP LAINED THAT IT INADVERTENTLY CLAIMED AND AS PER THE FORM NO.10CC B ISSUED BY AUDITOR RESTRICTED THE CLAIM TO ?1,68,54,543/-. TH E ASSESSING OFFICER CONSIDERED THE EXPLANATIONS AND THE RECORDS AND TRE ATED BALANCE ?.2,52,04,544/- AS INCOME FROM OTHER SOURCES AND PA SSED ORDER U/S.143(3) OF THE ACT DATED 30.12.2011 AND RAISED D EMAND. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE C OMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE RAISED ADDITIONAL GROUNDS AND WERE A DMITTED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE LD. AUTHO RISED REPRESENTATIVE REITERATED THE SUBMISSIONS MADE BEFO RE THE ASSESSING OFFICER AND ALSO RELIED ON THE JUDICIAL DECISIONS O F HIGH COURTS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE OBSERVATIONS OF THE LD. ASSESSING OFFICER AND BUSINESS OPERATIO NS OF THE ASSESSEE THAT THE COMPANY BUSINESS IS ONLY DEVELOPING SEZ A ND LEASING THEM TO ENTERPRISES ENGAGED IN INFORMATION TECHNOLOGY AND T ECHNOLOGY ENABLED SERVICE PROVIDERS. THE ASSESSEE COMPANY INVESTED S URPLUS ARISING OUT OF BUSINESS WHICH IS IMMEDIATELY NOT REQUIRED IN F IXED DEPOSITS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERE D THE DETAIL ITA NO.1193/MDS/2015. :- 4 -: SUBMISSIONS AT PARA 5.1.1 OF THE ORDER AND JUDICIA L DECISIONS RELIED BY THE ASSESSEE. BUT THE LD. COMMISSIONER OF INCOME T AX (APPEALS) GAVE FINDINGS THAT ASSESSEE SUO-MOTU HAS CLAIMED AS THE FORM 10CCB DEDUCTION U/SEC. 80IAB FOR ?1,68,54,543/- AND AGR EED IN ASSESSMENT PROCEEDINGS AND OBSERVED PARA 5.2 OF HIS ORDER AS UNDER:- 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS AND THE SUBMISSIONS OF THE ID.AR. I HAVE ALSO GONE THROUGH THE DECISIONS R ELIED ON BY THE ID.AR. AS SEEN FROM THE FACTS OF THE CASE, THE APPELLANT HAS ACCEPTED CERTAIN REFUNDABLE ADVANCES I SECURITY DEPOSITS FROM THE TENANTS AND THE SAME WERE DEPOSITED WITH T HE 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 WHI CH IS ELIGIBLE FOR 80IAB DEDUCTION. NO DOUBT THE INTEREST INCOME W AS DERIVED IN THE COURSE OF BUSINESS AND IT CERTAINLY BECOMES AN EARNING OF THE APPELLANT, BUT AS THE ACTIVITY OF THE UNDERTAKING W HICH IS ELIGIBLE FOR DEDUCTION IS DIFFERENT FROM THE ACTIVITY OF TAK ING DEPOSITS AND EARNING INTO THE BANKS WILL NOT FIT IN TO BUSINESS ACTIVITY OF THE APPELLANT COMPANY SO AS TO AVAIL DE DUCTION U/S 80IAB. IN OTHER WORDS, WHEN THE UNDERTAKING IS ENTI TLED FOR DEDUCTION U/S 80IAB, FOR THE PURPOSE OF WORKING OF 80LAB THE INTEREST EARNED FROM THE BANK SHOULD BE REDUCED. TH EREFORE, I HOLD THAT THE AO HAS RIGHTLY BROUGHT TO TAX THE INT EREST INCOME EARNED OF 2,52,04,544 AS INCOME FROM OTHER SOURCES AND THE BALANCE OF 1,68,54,543 WAS ALLOWED 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 TH E CLAIM OF 80LAB WAS ONLY 1,68,54,543 AS CLAIMED IN FORM 10CCB, THERE IS NO SCOPE FOR DISPUTE NOW. I, THEREFORE, UPHOLD T HE DECISION OF THE AO. THE DECISIONS RELIED ON BY THE APPELLANT AR E DISTINGUISHABLE. THE GROUND IS DISMISSED. ITA NO.1193/MDS/2015. :- 5 -: AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER, THE ASS ESSEE ASSAILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE IN THE ASSESSMENT P ROCEEDINGS AND APPELLATE PROCEEDINGS ON THE ADDITIONAL GROUNDS ADM ITTED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE CONTENTI ON OF THE LD. AUTHORISED REPRESENTATIVE BEING THAT THE NATURE OF THE BUSINESS OF THE ASSESSEE BEING DEVELOPMENT AND MAINTENANCE OF IT PARK AND THE INTEREST ON DEPOSITS PERTAINS TO ADVANCE MONEY SECU RITY DEPOSITS RECEIVED FROM TENANTS AND THEY HAVE TO BE REFUNDABL E ON TERMINATION OF LEASE OR VACATION OF PREMISES. IT IS MANDATORY TO COLLECT THE SECURITY DEPOSIT AS A PRUDENT BUSINESS PRACTICE IN THE DEVEL OPMENT OF SOFTWARE INDUSTRY. AS THERE WAS NO IMMEDIATE REQUIREMENTS O F FUNDS, THE ASSESSEE COMPANY DEPOSITED THE AMOUNT WITH BANKS AN D 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 PROFIT OF BUS INESS UNDERTAKING AND ELIGIBLE FOR DEDUCTION U/S.80IAB OF THE ACT. THE L D. AUTHORISED REPRESENTATIVE FURTHER SUPPORTED HIS ARGUMENTS WITH JUDICIAL DECISIONS AND FINANCIAL STATEMENT OF THE ASSESSEE COMPANY FOR THE SAID ITA NO.1193/MDS/2015. :- 6 -: ASSESSMENT YEAR AND PRAYED FOR ALLOWING DEDUCTION O F INTEREST INCOME AS BUSINESS PROFIT OF UNDERTAKING. 6. CONTRA, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF LOWER AUTHORITIES AND OPPOSED TO THE GROUNDS AND FILED JUDICIAL DECISIONS SUPPORTING THE GROUNDS OF THE LOWER AUTHO RITIES AND PRAYED FOR DISMISSAL OF APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AUTHOR ISED 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 DEPOSI TS TO THE ASSESSEE COMPANY WHICH ARE RETURNABLE ON TERMINATI ON OF LEASE. SUCH REFUND MAY BE FOR A PERIOD OF FIVE YEARS OR MORE A ND THE ASSESSEE COMPANY FOR LIQUIDITY PURPOSE DEPOSIT THE AMOUNT IN FIXED DEPOSITS IN BANK AND INTEREST IS RECEIVABLE AND OFFERED IN FINA NCIAL STATEMENTS AND WHETHER INTEREST TAKES THE CHARACTERISTIC PROFIT FR OM BUSINESS UNDERTAKING WHICH IS DISPUTED. ON PERUSAL OF THE A SSESSMENT ORDER, THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IAB OF THE ACT ON THE INTEREST PORTION ALSO BUT AT THE TIME OF ASSESSMENT BASED ON THE AUDITOR CERTIFICATE FORM 10CCB CLAIMED DEDUCTION O NLY TO THE EXTENT OF ?1,68,54,543/- AND ACCEPTED THE DEDUCTION TO THAT E XTENT AND LD. ASSESSING OFFICER TREATED BALANCE OF ?2,52,04,544/- AS INCOME FROM ITA NO.1193/MDS/2015. :- 7 -: OTHER SOURCES. THE LD. AUTHORISED REPRESENTATIVE B EFORE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONTESTED AND FILED ADD ITIONAL GROUNDS TO TREAT INTEREST INCOME AS BUSINESS PROFITS OF UNDER TAKING ELIGIBLE FOR DEDUCTION U/S.80IAB OF THE ACT. THE LD. COMMISSION ER OF INCOME TAX (APPEALS) CONSIDERING THE FACTS, PROVISIONS OF LAW HAS ELABORATELY DISCUSSED AT PARA 5.2 OF THE ORDER WERE ASSESSEE AG REED THE ADDITION AND CLAIMED RELIEF AS PER FORM 10CCB AND UPHELD THE ORDER OF THE ASSESSING OFFICER. NOW QUESTION ARISES WHETHER AFTE R AGREEING THE ADDITION ON TECHNICAL GROUNDS, CAN ASSESSEE CAN CLA IM FURTHER DEDUCTION, ON LEGAL ASPECT INTEREST ON FDR AS INCO ME DERIVED FROM INDUSTRIAL UNDERTAKING, THE LD. AUTHORISED REPRESE NTATIVE RELIED ON JUDICIAL DECISIONS AND TRIBUNAL DECISION TO SUPPORT THE CASE. ON PERUSAL OF THE FINANCIAL STATEMENTS OF THE ASSESSE E COMPANY AT PAGE 35 OF THE PAPER BOOK THE MAIN SOURCE OF INCOME BEIN G LEASE INCOME AND ASSESSEE OFFERED INTEREST INCOME REFERRED AT SC HEDULE 10 OF PAGE 41 OF PAPER BOOK. FURTHER, SIMILAR INTEREST INCOME FOR THE ASSESSMENT YEAR 2007-2008 WAS OBTAINED. THE LD. AUTHORISED RE PRESENTATIVE COULD NOT SUPPORT WITH EXPLANATION WHETHER ASSESSE E HAS CLAIMED DEDUCTION U/S.80IAB OF THE ACT FOR THE ASSESSMENT YEAR 2008-09 ON INTEREST INCOME. WE FOUND THE ASSESSEE COULD NOT S UBSTANTIATE THE DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING AND WE RELY ON DECISION OF ITA NO.1193/MDS/2015. :- 8 -: SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD VS. CIT 262 ITR 278 WERE IT WAS HELD AS UNDER:- THE WORDS DERIVED FROM IN SECTION 80HH OF THE INCOME TAX ACT, 1961, MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSEES INDUSTRIAL UNDERTAKING. ALTHOU GH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTA KING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. HELD ACCORDINGLY, THAT INTEREST DERIVED BY THE INDU STRIAL UNDERTAKING OF THE ASSESSEE ON DEPOSITS MADE WITH THE ELECTRICITY BOA RD FOR 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 S PECIAL DEDUCTION UNDER SECTION 80HH. ON APPLICATION OF RATIO OF ABOVE CASE, WE ARE NOT INCLINED TO INTERFERE WITH ORDER OF THE COMMISSIONER OF INCOME TAX (APPEA LS) ON THIS GROUND AND UPHELD THE SAME AND DISMISS THE APPEAL O F THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON FRIDAY, THE 29TH DAY OF APRIL , 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) /JUDICIAL MEMBER /CHENNAI 0 /DATED: 29.04.2016 KV 1 ( *',23 43%, /COPY TO: 1. &' /APPELLANT 3. 5, ( )/CIT(A) 5. 367 *',' /DR 2. *+&' /RESPONDENT 4. 5, /CIT 6. 78$ 9 / GF