M/s. Unitech Developers and Projects Ltd., New Delhi V. DCIT, New Delhi

ITA 4032/DEL/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9575 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.4032/DEL/2015 Assessment Year 2010-11 M/s. Unitech Developers & Projects Ltd., 6, Community Centre, Saket, New Delhi. v. DCIT, New Delhi. TAN/PAN: AAACU8404B (Appellant) (Respondent) Appellant by: Shri K.M. Gupta, Adv. Shri Rishabh Malhotra, Adv. Respondent by: Ms. Rakhi Vimal, CIT-DR Date of hearing: 26 09 2022 Date of pronouncement: 30 09 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed by the Assessee against the order of the Co mmissioner of Inco me Tax (Appeals)- XVI I, New Delhi [‘C IT( A) ’ in short] dated 31.03.2015 arising fro m assess ment order dated 15.03.2013 passed by the Assessing Officer (AO) under Section 143(3) of the Inco me Tax Act, 1961 (the Act) concerning AY 2010-11. 2. As per Ground No.1, the assessee has challenged the denial of deduction under Section 80IAB in respect of income received in the nature of ca r parking rental amounting to Rs.1,28,94,927/- I.T.A. No.4032/Del/2015 2 2.1 The assessee-co mpany is engaged in the business of real estate developmen t and maintaining/operating a SEZ in Gurgaon developed by it. The assessee inter alia claimed deduction under Section 80IAB on the profits derived by it fro m the business of developing SEZ. The Assessing Officer in the course of scrutiny assessment inter alia denied the deduction claimed on profits derived fro m car parking rental, sale of waste oil and sale of garbage holding such income to be incidental in nature and on the ground that such income does not fall within the purview of expression ‘derived fro m’ as mandated in Section 80IAB of the Act. The CIT(A) a lso endorsed the aforesaid action. 3. Before us, the ld. counsel for the assessee submitted that the assessee has leased out completed areas of the said notified SEZ to various tenants and has earned operating lease rentals fro m the aforesaid property which represents the main co mponent of the inco me reported by it. Incidental to the operating lease rental, the assessee has also earned inco me fro m car parking rentals as business income . Ho wever, the benefit of deduction under Section 80IAB was denied to car parking rentals whereas the lease rental from the property wa s accepted by the Revenue. S i milarl y, the income e arned fro m sale of waste oil arising from use of generator etc and sale of scrap ite ms which are part and parcel of the industrial activity has been unjustifiably plac ed outside the ambit of beneficial provision. In this regard, it wa s contended that the income earned fro m car parking rental has direct and immediate nexus with the lease rentals. The provision of car parking services is essential part of carr ying out the business of development, operation and I.T.A. No.4032/Del/2015 3 maintenance of S EZ. An instruction No.50 dated 15 t h March, 2010 issued by Go vern ment of India, Ministry of Co mmer ce and Industry, Depart ment of Co mme rce was adverte d and was submitted that inco me b y wa y of car parking is part of authorized activities as per the guidelines. Another reference was made to co mmunication No. F 2/115/2005-EPZ Govern ment of India, Ministry of Co mmerce a nd Industry, Dep artment of Co mmerc e (S EZ Section) dated 30 t h January, 2008 and was asserted that car parking has been included as part of authorized operations in SEZ. It is thus contended that car parking cannot be separated from the main business of SEZ and hence there is no justifiable reason to deny be nefits on income fro m c ar parking rental in this backdrop. 4. We have carefull y exa mined the issue and perused the orders of the lower authorities. In the light of docu mentar y evidences placed by wa y of notifications and instructions fro m co mpetent authorities, it is manife st that car parking rentals have been reckoned as authorized operation in SEZ. In the light of express guidelines issued by the Govern ment as referred to and relied upon, we ar e of the vie w that the inco me fro m ca r parking rental would squarely qualify for deduction under Section 80IAB of the Act. 5. Ground No.1 of th e appeal of the ass essee is allowed. 6. Ground No.2 concerns denial of deduction under Section 80IAB of the Act on sale of garbage of Rs.2,79,000/- and oil waste of Rs.1,29,750/-. We take note of the similar c ontentions on behalf of the assessee that generation of waste oil and I.T.A. No.4032/Del/2015 4 garbage are inextricably connecte d to the maintenance and running of a SEZ and thus any prof it derived from sa le of such scrap will be eligible for deduction under Section 80IAB of the Act. A reference made in this rega rd in the case of ACI T vs. Zydus Infrastructure, 161 ITD 611 has been taken note of. We thus agree with the plea of the asses see on this score too. 7. Ground No.2 of th e Assessee is thus allowed. 8. Ground No.3 concerns challenge to the disallowance of Rs.22,99,529/- made b y the Assessing Officer under Section 14A of the Act. I n this regard, we take note of the following argu ments raised on behalf of the assessee, i.e., (i) a suo motu disallowance of R s.5,45,306/- has been carried out which is the total indirect expenses and all other expenses claimed are directly attributable to SEZ operations and has no relation to the exe mpt income e arned by wa y of dividend on mu tual fund investment (ii) where suo motu disallowance has been made , the Assessing Officer is required to form ‘satisfaction’ in ter ms of Section 14A of the Act for higher disallowance which has not been made and thus the for mula provided for quantification of disallowance under Rule 8D would not automaticall y a pply. 9. We find merit in the plea of the assessee that the disallowance cannot exceed the actual expenditure incurred in relation to the earning of the exemp t income. In the instant case, no direct expenses has been incurred and the disallowance has been carried out under Rule 8D(2)(iii) of the Rules in respect of indirect expenses. The disallowance has been carried out at Rs.22,99,529/- (being 0.5% of the average value of invest ments) I.T.A. No.4032/Del/2015 5 in place of the disallowance offered a mounting to Rs.5,45,306/-. The action of t he Assessing Officer is apparently without application of mind inas much as the actual indirect expenditure available for allocation is Rs.5,45,306/- only. Other expenses incurred are stated to be directly a ttributable to SEZ operation and thus cannot be subjected to esti mated disallowance qua be exe mpt inco me . We thus find meri t in the plea of the assessee. The Assessing Officer is directed to restore the position claimed by the assessee in this regard. 10. Ground No.3 of th e appeal of the ass essee is allowed. 11. In the result, the a ppeal of the assessee is allowed. Order pronounced in the open Court on 30/09/2022. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /09/2022 Prabhat