M/s Cessna Garden Developers Pvt Ltd , Bangalore V. Assistant Commissioner of Income Tax Circle-2(1)(1), Bangalore

ITA 202/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3243 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-03-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Rectification of order; Wrong claim
• Section: 143(3); 201; 43; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER IT A NO S . 202 & 203 /BANG/201 9 ASSESSMENT YEAR: 201 1 - 1 2 & 2014 - 15 M/S CESSNA GARDEN DEVELOPERS PVT. LTD., THE FALCON HOUSE, NO.1,MAIN GUARD CROSS ROAD, OFF INFANTRY ROAD, BANGALORE - 560001 PAN: AA ACC 8539R VS. THE ASSISTANT COMMISSIONER INCOME TAX, CIRCLE 2(1)(1) BANGALORE. APPELLANT RESPONDENT & IT A NO S . 225 /BANG/2019 ASSESSMENT YEAR : 2014 - 15 THE DEPUTY COMMISSIONER INCOME TAX, CIRCLE 2(1)(1), BANGALORE. VS. M/S CESSNA GARDEN DEVELOPERS PVT. LTD. THE FALCON HOUSE NO.1,MAIN GUARD CROSS ROAD, OFF INFANTRY ROAD, BANGALORE - 560001 PAN: AAACC8539R . APPELLANT RESPONDENT APPELLANT B Y : SMT . R. PREMI, JCIT(DR)(ITAT), BENGALURU RESPONDENT BY : SHRI. B. SUDHEENDRA, ADVOCATE . DATE OF HEARING : 02.03 .2020 DATE OF PRONOUNCEMENT : 05 .03 .2020 ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 2 OF 10 O R D E R PER PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER THE CAPTIONED APPEAL IN ITA NO. 202/BANG/2019 HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER DATED 30 .11.2018 OF THE CIT(APPEALS)-2, BENGALURU FOR THE ASSESSMENT YEAR 2 011-12. APPEALS IN ITA NOS.203/BANG/2019 & 225/BANG/2019 ARE CROSS APP EALS FILED BY THE ASSESSEE AND THE REVENUE RESPECTIVELY AGAINST THE O RDER DATED 30.11.2018 OF THE CIT(APPEALS)-2, BENGALURU FOR THE ASSESSMENT YEAR 2014-15. ALL THE 3 APPEALS GIVE RISE TO COMMON ISSUES AND THUS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER. 2. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE ASSESSEE IN ITA NO.202/BANG/2019 CONCERNING THE AY 2011-12 FOR ADJU DICATION. 2.1 BRIEFLY STATED, THE ASSESSEE UNDERTAKING IS E NGAGED IN THE DEVELOPMENT OF SPECIAL ECONOMIC ZONE (SEZ) AND IS E LIGIBLE FOR CLAIMING DEDUCTION U/S. 80IAB OF THE INCOME-TAX ACT, 1961 [T HE ACT]. THE ASSESSEE HAS DERIVED LEASE/RENTAL INCOME FROM DEVELOPMENT OF SEZ. THE LEASE/RENTAL INCOME FROM SEZ WAS DECLARED BY THE AS SESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE A LSO CLAIMED DEDUCTION FROM SUCH INCOME U/S. 80IAB WHILE FILING THE RETURN OF INCOME. THE LEASE INCOME SO DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY WAS ACCEPTED BY THE AO AS SUCH AND DEDUCT ION CLAIMED U/S. 80IAB THEREON WAS ALSO ALLOWED AT THE TIME OF FRAMI NG ASSESSMENT U/S. 143(3) OF THE ACT. THE ASSESSMENT WAS ACCORDINGLY COMPLETED AFTER ALLOWING DEDUCTION OF RS.1,14,54,343 U/S. 80IAB OF THE ACT. AFTER THE COMPLETION OF ASSESSMENT, THE AO INITIATED RECTIFIC ATION PROCEEDINGS U/S. 154 OF THE ACT WHEREBY DEDUCTION ALLOWED U/S. 80IAB AGAINST THE LEASE ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 3 OF 10 INCOME DECLARED UNDER THE HEAD INCOME FROM HOUSE P ROPERTY WAS SOUGHT TO BE WITHDRAWN ON THE GROUND THAT DEDUCTION U/S. 8 0IAB IS ADMISSIBLE ONLY IN RESPECT OF PROFITS & GAINS FROM SEZ BUSINESS OF DEVELOPING A SPECIAL ECONOMIC ZONE AND NOT FROM INCOME TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE DEDUCTION CLAIMED U/S. 80IAB AMOUNTING TO RS.114,54,343 WAS ACCORDINGLY DISALLOWED BY A RECTI FICATION ORDER PASSED BY THE AO U/S. 154 OF THE ACT DATED 27.10.2016. 2.2 THE ASSESSEE CHALLENGED THE AUTHORITY OF THE AO TO PASS RECTIFICATION ORDER DENYING THE DEDUCTION U/S. 80IAB BEFORE THE C IT(APPEALS). THE CIT(A), HOWEVER, CONFIRMED THE ACTION OF THE AO ESS ENTIALLY ON THE GROUND THAT LEASE RENT HAS BEEN REPORTED UNDER THE HEAD I NCOME FROM HOUSE PROPERTY AND IN THE ABSENCE OF ANY BUSINESS INCOME FROM SEZ, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S. 80IAB O F THE ACT. THE CIT(A) AACCORDINGLY FOUND THAT THE AO HAD COMMITTED APPARE NT ERROR IN ALLOWING DEDUCTION WHILE FRAMING ASSESSMENT U/S. 143(3) OF T HE ACT WHICH WAS RIGHTLY WITHDRAWN BY PASSING A RECTIFICATION ORDER U/S. 154 OF THE ACT. 2.3 AGGRIEVED BY THE AFORESAID ACTION OF THE LOWER AUTHORITIES, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 3. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET , CONTENDED THAT SCOPE OF RECTIFICATION U/S. 154 IS LIMITED AND RESTRICTED TO RECTIFICATION OF MISTAKE APPARENT FROM THE RECORD. IT WAS POINTED OUT THAT THE ISSUE WHICH IS DEBATABLE AND CAN BE JUSTIFIED EITHER WAY BY LONG DRAWN PROCESS OF REASONING IS NOT SUSCEPTIBLE TO RECTIFICATION U/S. 154 OF THE ACT. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T.S. BALARAM V. VOLKART BROS., 82 ITR 50 (SC) . IT WAS THEREAFTER SUBMITTED THAT NOTWITHSTANDING ERROR COMMITTED BY THE ASSESSEE IN DECLARING THE LEASE RENTAL INCOME FROM SEZ UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE INCOME SO DERIVED ESSENTIALLY AND INHERENTLY REMAIN S THE BUSINESS INCOME ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 4 OF 10 AND IS CHARGEABLE UNDER THE HEAD INCOME FROM BUSIN ESS/PROFESSION. IT WAS CONTENDED THAT THE NATURE OF INCOME IS REQUIRED TO BE DECIDED ON COMMERCIAL PRINCIPLES AND AN INADVERTENT WRONG CLAS SIFICATION OF INCOME UNDER A DIFFERENT HEAD BY THE ASSESSEE WOULD NOT AL TER THE TRUE CHARACTER OF INCOME AS HELD IN CIT V. COCANADA RADHASWAMI BANK LTD., 57 ITR 306 (SC) . 3.1 ADVERTING FURTHER, THE LD. COUNSEL FOR THE AS SESSEE DREW OUR ATTENTION TO A CIRCULAR NO.16/2017 DATED 25.4.2017 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT). WITH REFERENCE TO THE CIRCULA R, IT WAS POINTED OUT THAT THE ISSUE WHETHER INCOME ARISING FROM LETTING OUT O F PREMISES/DEVELOPING SPACE ALONG WITH OTHER AMENITIES IN AN INDUSTRIAL P ARK/SEZ IS CHARGEABLE UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR UND ER THE HEAD INCOME FROM HOUSE PROPERTY HAS ADMITTEDLY BEEN THE SUBJECT MAT TER OF LITIGATION ALL ALONG. ON THE FACE OF SUCH ADMISSION, THE CBDT HAS OPINED THAT INCOME GENERATED FROM SEZ IS CHARGEABLE UNDER THE HEAD BU SINESS INCOME AFTER TAKING COGNIZANCE OF DECISIONS RENDERED BY THE JURI SDICTIONAL HIGH COURT OF KARNATAKA IN THE CASE OF VELANKANI INFORMATION SYSTEMS PVT. LTD. AND CIT V. INFORMATION TECHNOLOGY PARK LTD. IN THIS BACKDROP, THE LD. AR STRIDENTLY SUBMITTED THAT THE EXPRESS CBDT CIRCULAR CLEARLY SP ELLS OUT THAT LETTING OUT OF BUILDING/DEVELOPING THE SPACE IN SEZ IS CHARGEAB LE UNDER THE HEAD BUSINESS INCOME. THUS, ON THE FACE EXPRESS ASSER TIONS MADE IN CBDT CIRCULAR TOWARDS RAGING CONTROVERSY ON NATURE AND C HARACTER OF LEASE INCOME, ELIGIBILITY OF DEDUCTION U/S. 80IAB CANNOT BE DENIED WITHOUT INDULGING IN LONG DRAWN DEBATE. 3.2 IN THE CIRCUMSTANCES, IT WAS CONTENDED THAT THE RECTIFICATION ACTION OF THE AO IS BEYOND THE SCOPE OF SECTION 154 OF THE AC T. THE LD. AR FURTHER REFERRED TO SEVERAL DECISIONS OF THE TRIBUNAL TO SU BMIT THAT LEASE RENTALS ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 5 OF 10 RECEIVED FROM SEZ ARE IN THE NATURE OF PROFITS & GA INS DERIVED FROM BUSINESS. 3.3 IT WAS THUS CONTENDED THAT RECTIFICATION C ARRIED OUT BY THE AO U/S. 154 IS WITHOUT AUTHORITY OF LAW AND REQUIRES TO BE QUASHED. IT WAS FURTHER CONTENDED THAT THE CIT(APPEALS) HAS OVERLOOKED THE EXPRESS CBDT CIRCULAR AND HAS MISDIRECTED HIMSELF IN LAW IN AFFI RMING THE ACTION OF THE AO WITHOUT EXAMINING THE TRUE AND ESSENTIAL NATURE OF INCOME DERIVED BY THE ASSESSEE. 4. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ER OF AO AND CIT(APPEALS). IT WAS SUBMITTED IN FURTHERANCE THAT WHERE THE ASSESSEE HIMSELF HAS NOT DECLARED ANY INCOME UNDER THE HEAD PROFITS & GAINS OF BUSINESS, THE REVENUE AUTHORITIES WERE OSTENSIBLY J USTIFIED IN DENYING DEDUCTION U/S. 80IAB OF THE ACT, WHERE THE DERIVING INCOME FROM BUSINESS IS A SIN QUA NON FOR ITS CLAIM. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE SCOPE OF RECTIFICATION UNDER SECTION 154 IN THE CONTEXT OF T HE CASE IS IN CONTROVERSY. AS BROADLY NOTED ABOVE, IN THE INSTANT CASE, THE LE ASE RENT FROM DEVELOPED SPACE IN SEZ HAS BEEN OFFERED FOR TAXATION BY THE A SSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY THE ASSESSEE. DEDUCTION U/S. 80IAB WAS CLAIMED ON SUCH LEASE INCOME AND ALLOWED BY THE AO U/S. 143(3) OF THE ACT. THE AO THEREAFTER HAS SOUGHT TO WITHDRAW T HE DEDUCTION IN A RECTIFICATION PROCEEDING UNDER S. 154 OF THE ACT ON THE GROUND THAT DEDUCTION U/S 80IAB IS ALLOWABLE ONLY WITH REFERENC E TO BUSINESS INCOME AND IN THE ABSENCE OF ANY BUSINESS INCOME FROM SEZ OFFERED IN THE ROI, THE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION UNDER S. 80IAB AND THE AO HAS WRONGLY ADMITTED THE CLAIM OF DEDUCTION IN THE ASSESSMENT COMPLETED U/S. 143(3) OF THE ACT. THE ASSESSEE HAS CHALLENGE D THE RECTIFICATION ACTION OF THE REVENUE AUTHORITIES AND HAS CLAIMED THAT IN VIEW OF THE NARROW ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 6 OF 10 SPHERE OF SECTION 154 OF THE ACT, RECTIFICATION OF ASSESSMENT ORDER IS NOT PERMISSIBLE UNLESS SUCH ORDER SUFFERS FROM APPARENT MISTAKE. IN ITS DEFENSE, IT IS CLAIMED ON BEHALF OF ASSESSEE THAT L EASE RENT FROM DEVELOPED SPACE IN SEZ CARRIES THE TRAPPING OF BUSINESS INCOM E, REGARDLESS OF ITS WRONG DECLARATION UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY THE ASSESSEE. FOR ADVANCING SUCH PROPOSITION, A REFERE NCE TO THE CBDT CIRCULAR NO.16/2017 DATED 25.4.2017 SQUARELY ON THE POINT WAS MADE AND RELIED UPON TOGETHER WITH JUDICIAL PRECEDENTS NOTED ABOVE. 6. ON PERUSAL OF CBDT CIRCULAR MENTIONED ABOVE, WE OBSERVE THAT THE CBDT CIRCULAR ISSUED IS SQUARELY ON THE POINT OF TA XABILITY OF LEASE RENTALS AND CONSEQUENT ELIGIBILITY OF DEDUCTION AVAILABLE U NDER THE ACT. KEEPING IN MIND THE OBJECT OF BENEFICIAL PROVISION, THE CBDT H AS DIRECTED THE FIELD OFFICERS TO ALLOW ELIGIBLE DEDUCTION TO THE TAXPAYE RS IN RESPECT OF LEASE RENT FROM LET OUT BUILDINGS/DEVELOPED SPACE IN AN INDUST RIAL PARK/SEZ. THE CBDT HAS CLEARLY DIRECTED THE OFFICERS TO TREAT SUC H LEASE RENT AS BUSINESS INCOME. THUS, IN THE LIGHT OF CBDT CIRCULAR, THE B ENEFIT OF DEDUCTION AVAILABLE U/S. 80IAB OF THE ACT COULD NOT HAVE BEEN DENIED TO THE ASSESSE ON THE PRETEXT THE INCOME HAS BEEN OFFERED FOR TAXA TION UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AT THIS JUNCTURE, W E FURTHER TAKE NOTE OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F COCANADA RADHASWAMI BANK LTD. (SUPRA) AND CHUGANDAS & CO. (SUPRA) FOR THE PROPOSITION THAT NATURE OF INCOME HAS TO BE DECIDED ON COMMERCIAL PRINCIPLES AND A WRONG CLASSIFICATION WOULD NOT ALT ER THE TRUE CHARACTER OF INCOME. THE TAXABILITY OF AN INCOME UNDER THE APPRO PRIATE HEAD HAS ALSO BEEN ANSWERED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRANJAY MERCANTILE LTD. (2014) 43 TAXMANN.COM 193 ( GUJ.) WHEREIN IT WAS OBSERVED THAT THE INCOME OF THE ASSESSEE IS TO BE A SSESSEE UNDER DIFFERENT HEADS ENUMERATED IN SECTION AS PER TRUE NATURE AND CHARACTER OF INCOME AND NOT MERELY ON THE BASIS OF CLASSIFICATION GIVEN BY THE ASSESSEE. ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 7 OF 10 7. HAVING REGARD TO THE CIRCULAR AND JUDICIAL PRE CEDENTS REFERRED TO AND RELIED UPON, IT IS MANIFEST THAT THE ELIGIBILITY OF DEDUCTION U/S. 80IAB IS GOVERNED BY THE TRUE CHARACTER OF LEASE RENTAL INCO ME DERIVED. THE CBDT CIRCULAR ALBEIT IN THE CONTEXT OF S. 80IA(4-(III) H AS EXPRESSED ITS CONCERN ON LITIGATION TOWARDS TAXABILITY OF LEASE INCOME UNDER THE APPROPRIATE HEAD AND GRANTED RELIEF TO THE TAXPAYER FOR ELIGIBILITY OF D EDUCTION. THE ISSUE THUS CANNOT BE SAID TO BE TOTALLY FREE OF ANY DEBATE. ON THE CONTRARY, THE DEBATE, IF ANY, LEANS IN FAVOUR OF THE ASSESSEE. THUS, THE RECTIFICATION CARRIED OUT U/S. 154 OF THE ACT, IN OUR VIEW, IS BEYOND THE MAN DATE OF LAW AND REQUIRES TO BE STRUCK DOWN. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IN ITA NO.202/BANG/2019 IS ALLOWED. 9. WE SHALL NOW ADVERT TO ITA NO.203 & 225/BANG/2019 (AY 2014-15) FOR ADJUDICATION; 9.1 AS PER GROUNDS OF APPEAL, THE ASSESSEE HAS CHA LLENGED :- I) DISALLOWANCE OF DEDUCTION CLAIMED U/S. 80IAB OF THE ACT; & II) ALLOWABILITY OF INTEREST EXPENDITURE U/S. 36(1)(III ) OF THE ACT. 9.2 THE ASSESSEE CLAIMED DEDUCTION OF RS.18,25,91 6 U/S. 80IAB OF THE ACT. IN THE BROADLY SIMILAR FACTS AS DISCUSSED IN ITA NO.202/BANG/2019, THE AO IN THE COURSE OF SCRUTINY ASSESSMENT UNDER S . 143(3) HAS DENIED THE DEDUCTION ON THE GROUND THAT DEDUCTION U/S. 80I AB IS ADMISSIBLE ONLY IN RESPECT OF PROFITS & GAINS FROM SPECIFIED BUSINESS AND NOT FROM INCOME FROM HOUSE PROPERTY. THE INCOME FROM LETTING OUT OF PR EMISES/DEVELOPED SPACE IN SEZ WAS FOUND BY THE AO TO BE DECLARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY THE ASSESSEE INSTEAD OF PROFITS & GAINS OF BUSINESS. THE AO ACCORDINGLY DENIED THE DEDUCTION CLAIMED U/S. 80 IAB OF THE ACT. ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 8 OF 10 9.3 IN THE FIRST APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ASSESSMENT FRAMED UNDER S. 143(3), THE CIT(APPEALS) BY A VERY CRYPTIC AND BRIEF FINDING SHUNNED ANY DELIBERATION ON THE DETAILED PLEADINGS OF THE ASSESSEE AND HELD AGAINST THE ASSESSEE ON THE SOLE GROUND THAT A SSESSEE ITSELF HAS OFFERED INCOME FROM LETTING OUT OF SEZ PROPERTY UND ER THE HEAD INCOME FROM HOUSE PROPERTY AND CONSEQUENTLY DEDUCTION U/S . 80IAB CANNOT BE ALLOWED WITH REFERENCE TO INCOME REPORTED UNDER THE HEAD HOUSE PROPERTY. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE IS SUE. WE HAVE DEALT WITH AN IDENTICAL ISSUE IN ITA NO.202/BANG/2019 FOR AY 2011-12 HEREINABOVE AND HELD THAT CBDT CIRCULAR NO.16/2017 CLEARLY ADDRESSES THE ISSUE IN FAVOUR OF ASSESSEE. THE CBDT HAS TAKE N NOTE OF THE DECISIONS OF THE JURISDICTIONAL HIGH COURT WHILE DIRECTING TH E FIELD OFFICERS TO ADJUDICATE THE ISSUE IN FAVOUR OF ASSESSEE IN SIMILAR CIRCUMST ANCES. WE THUS FIND CONSIDERABLE MERIT IN THE PLEA OF ASSESSEE FOR ALLO WABILITY OF DEDUCTION CLAIMED FROM INCOME DERIVED BY WAY OF LETTING OUT O F PROPERTIES. THE ASSESSEE IS ENTITLED TO BENEFIT OF DEDUCTION NOTWIT HSTANDING WRONG CLASSIFICATION OF INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY. THE AO WAS UNDER DUTY TO EXAMINE THE TRUE NATURE AND CH ARACTER OF INCOME WHILE FRAMING ASSESSMENT REGARDLESS OF ERROR COMMIT TED BY THE ASSESSEE IN THIS REGARD. THE CLAIM OF ASSESSEE UNDER S. 80IAB THUS DESERVES TO BE ALLOWED ON FIRST PRINCIPLES. 11. HOWEVER, AS SIMULTANEOUSLY POINTED OUT ON BEH ALF OF THE ASSESSEE, THE WRONG CLASSIFICATION OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, HAS RESULTED IN WRONG CLAIM OF DEDUCTION UNDER S. 23/24 WHILE COMPUTING INCOME UNDER THE HEAD HOUSE PROPERTY AN D REQUIRES CORRECTION. SIMILARLY, THE NORMAL BUSINESS EXPENSES INCURRED WE RE ALSO NOT CLAIMED FROM LEASE RENTALS IN VIEW OF RESTRICTIONS PLACED U NDER THE HEAD INCOME FROM HOUSE PROPERTY. THE CORRECT COMPUTATION OF B USINESS INCOME ON ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 9 OF 10 REALIGNMENT OF HEAD OF INCOME WOULD THUS BE REQUIRE D TO CORRECTLY DETERMINE THE QUANTUM OF INCOME ELIGIBLE FOR DEDUCT ION UNDER S. 80IAB OF THE ACT. WE, THUS, CONSIDER IT JUST AND APPROPRIAT E TO RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR RE-DETERMINATI ON OF TAXABLE INCOME IN ACCORDANCE WITH LAW, HAVING REGARD TO THE TRUE NATU RE OF INCOME DERIVED BY THE ASSESSEE. THE AO SHALL GRANT DEDUCTION U/S. 80 IAB OF THE ACT TO THE ASSESSEE IN ACCORDANCE WITH LAW IN THE LIGHT OF CIR CULAR ISSUED BY THE CBDT AND JUDICIAL PRECEDENTS AVAILABLE IN THIS REGARD. NEEDLESS TO SAY THAT PROPER OPPORTUNITY SHALL BE GRANTED TO THE ASSESSEE WHILE CONCLUDING THE ISSUE. 12. THE FIRST ISSUE CONCERNING DISALLOWANCE OF DE DUCTION U/S. 80IAB IS ALLOWED FOR STATISTICAL PURPOSES. 13. THE SECOND ISSUE CONCERNS ALLOWABILITY OF INT EREST EXPENDITURE U/S. 36(1)(III) OF THE ACT. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE INTEREST EXPENDITURE OF RS.5,27,62,823 WAS DISALLOWED IN THE COURSE OF ASSESSMENT UNDER S. 37 FOR THE REASON THAT WHOLE FINANCIAL COS T HAS BEEN INCURRED ON LOANS TAKEN FOR CONSTRUCTION OF LET OUT PROPERTY AN D NO LOANS WERE TAKEN FOR BUSINESS PURPOSE. THE INTEREST EXPENDITURE WAS THUS NOT ALLOWED AS DEDUCTION U/S. 24(B) OF THE ACT WHILE COMPUTING INC OME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE CIT(APPEALS) HA S HOWEVER GRANTED RELIEF TO THE ASSESSEE ON THIS ISSUE WITHOUT ASSIGN ING ANY REASON. 14. BOTH ASSESSEE AS PER SECOND ISSUE IN ITA NO. 203/BANG/2019 AS WELL AS REVENUE IN ITA NO. 225/BANG/2019 HAS CHALLENGED IN THE AFORESAID ACTION OF THE CIT(APPEALS) IN THE APPEAL. 15. THIS ISSUE TOWARDS CLAIM OF INTEREST EXPENSES IS ALSO REQUIRED TO BE EXAMINED DE NOVO BY THE AO IN THE LIGHT OF OVERHAUL AND REALIGNMENT OF NATURE OF SEZ INCOME UNDER THE HEAD BUSINESS INCOME . ACCORDINGLY, THE ITA NO. 202 & 203/BANG/2019 ITA NO. 225/BANG/2019 PAGE 10 OF 10 ISSUE OF ALLOWABILITY OF INTEREST IS RESTORED TO TH E FILE OF AO FOR RE- DETERMINATION IN ACCORDANCE WITH THE LAW IN THE LIG HT OF PROVISIONS APPLICABLE IN RELATION TO INCOME CHARGEABLE UNDER T HE BUSINESS INCOME AND IN THE LIGHT OF OBSERVATION NOTED ABOVE. 16. HENCE, THE SECOND ISSUE RAISED BY THE ASS ESSEE IN ITS APPEAL IN ITA NO.203/BANG/2019 AND THE APPEAL OF REVENUE IN ITA N O. 225/BANG/2019 IS ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE COMBINED RESULT, THE APPEALS OF THE AS SESSEE IN ITA NO.202/BANG/2019 IS ALLOWED WHEREAS THE ASSESSEES APPEAL IN ITA NO.203/BANG/2019 IS PARTLY ALLOWED. THE APPEAL OF THE REVENUE IN ITA NO.225/BANG/2019 IS ALLOWED FOR STATISTICAL PURPOSE S. PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF MARCH, 2020. SD/- ( N V VA SU DEVAN ) SD/- ( P RAD I P K UMAR K EDIA ) VICE PRESIDEN T A CCOUNTANT M EMBER BANGALORE, DATED, THE 5 TH MARCH, 2020. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4 . CIT(A) 5. DR, ITAT, BANGALOR E. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE