M/S. SEAVIEW DEVELOPERS LTD.,NEW DELHI V. DCIT, CIRCLE-23(2), NEW DELHI

ITA 5188/DEL/2017

AI Insights

The case involves M/s. Seaview Developers Private Limited, which appealed against the orders of the Deputy Commissioner of Income Tax and the Commissioner of Income Tax (Appeals) concerning the rejection of a deduction claim under Section 80IAB of the Income Tax Act for income received from the sale of food and beverages amounting to Rs.30,88,051. The Tribunal examined whether such income, part of the company's SEZ activities, qualifies for deduction under the specified section. Additionally, the Tribunal addressed the issue of double disallowance of interest on delayed deposit of TDS, initially added back under 'Profit and Gains from Business and Profession' and again under 'Income from Other Sources'.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781557 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 10-08-2017
• Other Referred Cases: ACIT v. DLF Info City Developers (Chennai) Ltd., Prakash Cotton Mills Pvt. Ltd. v. CIT, Delhi Cargo Service Center, M.L. Realty v. ACIT, STUP Consultants Pvt. Ltd. v. ACIT, DCIT v. Narayani Ispat Pvt., ACIT v. Narayani Sons
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: RAVI SHARMA; KASHISH; WAY OF
• Keywords: Set aside; Business income; Business expenditure; TDS
• Section: 143(3); 142(1); 37; 115JB; 37(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI M BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 5188/Del/2017 Assessment Year: 2014-15 M/s. Seaview Developers Private Limited, (formerly known as ‘Seaview Developers Ltd.), 1102, Tower B, 11th Floor, Peninsula Business Park, Senapati Bapat Road, Lower Parel, Mumbai- 400013 Vs. Deputy Commissioner of Income Tax, Circle 23(3), New Delhi PIN: 1100 02 PAN :AAJCS4143C (Appellant) (Respondent) ORDER PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal of the assessee is against order dated 27.06.2017 of Learned Commissioner of Income Tax (Appeals)-28, New Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250(6) of the Income Tax Act, 1961 Appellant by Shri Ravi Sharma, Adv. & Ms. Kashish Gupta, CA Respondent by Ms. Harpreet Kaur Hansra, Sr. DR Date of hearing 07.08.2025 Date of pronouncement 30.09.2025 Printed from counselvise.com 2 ITA No.5188/Del.2017 (hereinafter referred as “the Act”) arising out of Assessment Order dated 29.12.2016 of the Learned Assessing Officer/Deputy Commissioner of Income Tax, Circle 23(2), New Delhi (hereinafter referred as “the Ld. AO”) under Sections 143(3) Act for assessment year 2014-15. 2. Brief facts of the case are that the assessee is engaged in developing commercial real estate property in India. The assessee is involved in developing and leasing investment property in IT/ITeS Sector. The assessee company filed its return of income on 29.11.2014 declaring total income at Nil under normal provision and book profit of Rs.38,90,95,461/- under Section 115JB of the Act. The case was selected for scrutiny under ‘Complete Scrutiny’ parameter. Notices under Section 143(2) of the Act were issued on 28.08.2015 and 10.09.2015. Notice under Section 142(1) of the Act along with questionnaire was issued on 25.05.2016, seeking certain documents. Due to change of Ld. AO, notice under Section 143(2) read with section 142(1) was issued on 21.07.2016. Shri Ajay Rastogi, CA & AR of the assessee attended the proceedings and furnished the requisite documents and details etc. On completion of assessment proceeding, Ld. AO vide order dated 29.12.2016 made additions of Rs.46,01,279/- and Rs.5,88,581/-. 3. Against order dated 29.12.2016 of Ld. AO, the appellant/assessee preferred appeal before the Ld. CIT(A) which was partly allowed vide order dated 27.06.2017. Printed from counselvise.com 3 ITA No.5188/Del.2017 4. Being aggrieved, the appellant/assessee preferred present appeal with following grounds: “Ground 1. 1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income-Tax (Appeals)-28, New Delhi [\"CIT(A)\"] erred in upholding the action of the Deputy Commissioner of Income-tax Circle 23(2), New Delhi (\"AO\") in rejecting the claim made by the appellant under section 80IAB of the Income-tax Act, 1961 (\"the Act\") for income received in the nature of sale of food and beverages amounting to Rs.30,88,051 (net of expenses relating to sale of food and beverages). 2. The appellant prays that the income received in the nature of sale of food and beverages amounting to Rs. 30,88,051 (net of expenses relating to sale of food and beverages) be allowed, as a deduction under section 801AB of the Act. Ground II 1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the Learned AO in adding the expense relating to interest in delay deposit of TDS amounting to Rs. 5,88,581 under the head Income from other sources. 2. The appellant prays that the said addition under the head income from other sources be deleted 5. Learned Authorized Representative for the appellant/assessee submitted that Ld. CIT(A) erred in upholding action of Ld. AO in rejecting claim under Section 801AB of the Act for income received in the nature of sale of food and beverages amounting to Rs.30,88,051/-. Ld. AO failed to appreciate that the Appellant is in the business of developing as SEZ sector. As a part of development and leasing of premises situated in the SEZ, the Appellant has earned income from sale of food and beverages only through the leasing of the Printed from counselvise.com 4 ITA No.5188/Del.2017 property that the said income is generated. Since, income received from sale of food and beverages forms integral part of its SEZ activities it had claimed deduction of the same under section 80-IAB of the Act. The income earned from sale of food and beverages is part of the main SEZ business as evident from Notification no. F. No. F.1/7/2006-EPZ, dated October 27, 2006 which authorizes various operations that can be undertaken in a SEZ which inter alia, includes \"Food Services including Cafeteria, food court(s), Restaurants, coffee shops, canteens and catering facilities.\" (refer page 41 of the Paper Book). Hence, the income earned from the food court is part and parcel of the main SEZ business only and cannot be segregated from the main source. Further, vide notification no. F. No. 2/40/2006 dated March 10, 2008, the Board of Approval ('BOA') of Ministry of Commerce and Industry granted approval for authorized operations to be carried out by the Appellant in SEZ for IT/ITeS sector (refer Page No. 38 of the Paperbook). The list of authorised operations annexed with such approval which also included food services including cafeteria, food court(s), restaurants, coffee shops, canteens, and catering facilities (as reproduced below): M/s. Seaview Developers Limited, Noida, Uttar Pradesh Authorized operations inn the Processing Area S. No. ACTIVITY Quantum approved 1. Power (including power back up facilities) 30 MW Printed from counselvise.com 5 ITA No.5188/Del.2017 2. Parking Including multi-level car/two wheeler parking (automated or manual) 3. Recreational facilities including club house, indoor or outdoor games, Gym etc. 1100 sq.m. 4. Food services including cafeteria, food court(s) restaurants, coffee shopa, canteens and catering facilities. 3000 sq.m. 5. Employee welfare facilities like crèche, medical center and other such facilities. 1000 sq. m. 6. Shopping arcade and/or retail space. 950 sq. m. 7. Business and/or convention centre 1100 sq m. 8. Common data centre with inter- connectivity 1000 sq m. 9. Wi Fi and/or Wi Max services 750 sq m. 10. Drip and Micro irrigation system - 5.1 The Learned Authorized Representative for the appellant/assessee further drawn our attention to the Circular no. 16/2017 ('the Circular') issued by the Central Board of Direct Taxes ('CBDT) which states that in case of an undertaking which 'develops', 'develops and operates' or 'maintains and operates' an industrial park/SEZ notified in accordance with the scheme framed and notified by the Government, the income from letting out of premises/developed space along with the other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business' (refer Page No. 43 of the Paperbook). 5.2 In this regard, reliance is placed on the decision of the Hon'ble Delhi Tribunal in the case of ACIT v. DLF Info City Developers (Chennai) Ltd. Printed from counselvise.com 6 ITA No.5188/Del.2017 [2014] 46 taxmann.com 124 wherein it was held that since the BOA had granted approvals after due consideration and examination of facts and documents on record, the assessee could not be denied benefit of deduction under section 801AB of the Act on profits arising from such authorized transactions. 6. Learned Authorized Representative for the appellant/assessee further submitted ground no. II is regarding addition of interest expense on TDS of Rs.5,88,581/- as income under the head 'Income from Other Sources'. During the year consideration, the Appellant had incurred expenses in relation to interest on delay in deposit of TDS amounting to Rs.5,88,581 and claimed the same as deduction in the return of income. The Ld. AO disallowed the interest on TDS under section 37 of the Act holding that interest is payable as a consequence of default in discharging a statutory liability and the same cannot be considered as expenditure laid out wholly and exclusively for the purpose of business or profession. Hence, the expenditure of interest on TDS are not deductible by virtue of Section 37(1) of the Act. The Ld. AO disallowed the interest expenses on TDS of INR 5,88,581/- and the added back the same under the head 'Profit and Gains from Business and Profession'. The Ld. AO also allowed the Appellant with a deduction under section 80IAB of the Act against the whole amount of disallowance of interest expenses on TDS. However, the Ld. AO again added back the interest expenses on TDS of Rs.5,88,581/- under the head 'Income from Other Sources without providing any reason for such addition, Printed from counselvise.com 7 ITA No.5188/Del.2017 leading to double disallowance of the same expenses under two different head of income. 6.1 In view of above stated facts, the appellant/assessee prays that the interest expenses on TDS of Rs.5,88,581/- being already added back under the head 'Profit and Gains from Business and Profession’ should not again be added back under head 'Income from Other Sources'. Accordingly, the addition made by the Ld. AO under the head 'Income from Other Sources' on account of interest expense on TDS amounting to Rs.5,88,581/- may be deleted. 6.2 Without prejudice to the foregoing contentions, the withholding tax liability is a vicarious liability. An assessee is required to withhold tax from the amount of expenditure incurred by the assessee as per the provision of the Act and thereafter, the assessee acting as agent of the government is required to pay the said tax component to the credit of the Government. The withholding tax is a part of business expenditure which is allowed deduction under Section 37 of the Act and therefore interest thereon should be allowed as deduction. 6.3 Learned Authorized Representative for the appellant/assessee placed reliance on the judgement of the Hon'ble Supreme Court in the case of Prakash Cotton Mills Pvt. Ltd. v. CIT (1993) 201 ITR 684 (SC) wherein the Hon'ble Apex Court held that any statutory impost paid by an assessee by way of damages or penalty or interest is claimed as an allowable expenditure under Printed from counselvise.com 8 ITA No.5188/Del.2017 section 37(1) of the Act, the Revenue has to allow deduction of the same under section 37(1) if the nature of such impost is compensatory in nature. 6.4 Learned Authorized Representative also drawn out attention on the decision in the case of Delhi Cargo Service Center [2023] 151 taxmann.com 322 (Delhi-Trib.) placing reliance on the decision of the Hon'ble Mumbai Tribunal in case of M.L. Realty v. ACIT (ITA No. 796/Mum/2019), has held that the interest paid on late payment of TDS is compensatory in nature and is an allowable deduction under section 37 of the Act. 6.5 Learned Authorized Representative for the appellant/assessee placed reliance on following judgements of Hon'ble Tribunal wherein it has been held that interest on TDS is an allowable expenditure: a) Resolve Salvage & Fire India (P.) Ltd. v. DCIT (2022) 195 ITD 266 (Mumbai Trib.); b) Welkin Telecom Infra (P.) Ltd. v. DCIT (2022) 96 ITR(T) 475 (Kolkata Trib.); c) STUP Consultants Pvt. Ltd. v. ACIT (1.T.A. No. 5827/Mum/2012) (Mumbai Trib.); d) DCIT v. Narayani Ispat Pvt. (I.T.A. No. 2127/Kol/2014) (Kolkata Trib.); and e) ACIT v. Narayani Sons (1.T.A. No. 1796-1798/Kol/ 2017) (Kolkata Trib.). 7. Learned Authorized Representative for the Department of Revenue submitted that Ld. AO has relied on several case laws. The material consumed has to be excluded. In assessee’s own case for assessment year 2013-14, Printed from counselvise.com 9 ITA No.5188/Del.2017 Tribunal decided the matter against the assessee in ITA No.3213/Del/2018 on 21.07.2023. 8. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. CIT(A) upheld the action of Ld. AO in rejecting claim of appellant under Section 80IAB of the Act for income received in the nature of ‘sale of food and beverages amounting to Rs.30,88,051/-. Ld. AO vide assessment order dated 29.12.2016 under Section 143(3) of the Act, assessed income of Rs.51,89,860/-. Under the normal provisions of the Act and book profit of Rs.38,90,95,461/- under Section 115JB of the Act. The difference in returned income and assessed income was due to addition of interest by denying deduction of interest income of Rs.15,13,228/- under Section 80IAB of the Act. Denial of deduction on sale of food and beverages of Rs.1,68,81,429/- and disallowance of interest of TDS of Rs.5,88,,581 claimed as business expenses. Ld. CIT(A) vide order dated 27.06.2017 deleted addition of interest income of Rs.15,13,228/- but sustained the disallowance of deduction under Section 80IAB of the Act on sale of food and beverages at Rs.1,68,81,429/- and interest paid on details of interest TDS at Rs.5,81,588/-. 8.1 As per letter dated 10.03.2008, assessee was authorized for food court activities which were covered under Section 80IAB of the Act. Letter of authorization is at page no. 37 of the paper books. Notification dated 27.10.2006 on page no.39 of the paper books contains entries no. (xxiii) Food Services Printed from counselvise.com 10 ITA No.5188/Del.2017 including Cafeteria, food court(s), Restaurants, coffee shops, canteens and catering facilities. 8.2 In assessee’s own case for assessment year 2013-14, Tribunal decided the matter against the assessee in ITA No.3213/Del/2018 on 21.07.2023. In the order dated 21.07.2023 allotment of letter of assessee was not considered. 8.3 A Co-ordinate Bench of the Tribunal in ITA No.1635/Del/2020 titled “Candor Gurgaon One Realty Projects Pvt. Ltd. Vs. ACIT” in order dated 01.05.2024 in para nos. 8 to 11, has observed as under: “8. Further we find that following are the permitted services by Department of Commerce (SEZ Section), Ministry of Commerce and Industry, Government of India vide approval letter dated 10.3.2008 :- “M/s Unitech Realty Projects Limited, Gurgaon, Haryana Authorized Operations in the Processing Area S. No. ACTIVITY QUANTUM APPROVED 1 Power (including Power back up facility) 30 MW 2 Parking including multi-level car parking (automated or manual) 3 Recreational facilities including club house, indoor or outdoor games Gym etc. 1000 sq. m. 4 Food services including, cafeteria, food court(s) restaurants, coffee shops, canteens and catering facilities 2000 sq m. 5 Employees welfare facilities like crèche, medical center and other such facilities 1000 sq m. 6 Shopping arcade and/ or retail shops 1000 sq m. 7 Business and/ or retail space 1000 sq. m. 8 Common data centre with inter-connectivity 1000 sq m. 9 WiFi and/ or WiMax services 10 1000 sq. m Drip and Micro irrigation system 750 sq. m. For captive use only. The power generated will not be sold outside the SEZ.” 9. We find that the Central Board of Direct Taxes had also come out with a Circular No. 16/2017 dated 25.4.2017 to this effect in the context of allowability of deduction u/s 80IA(4)(iii) of the Act in respect of income Printed from counselvise.com 11 ITA No.5188/Del.2017 derived from Industrial Parks / SEZ. For the sake of convenience, the said Circular is reproduced below:- Circular No. 16/2017 dated 25.4.2017 SECTION 28(i) OF THE INCOME-TAX ACT, 1961 - BUSINESS INCOME - CHARGEABLE AS - LEASE RENT FROM LETTING OUT BUILDINGS/DEVELOPED SPACE ALONG WITH OTHER AMENITIES IN AN INDUSTRIAL PARK/SEZ TO BE TREATED AS BUSINESS INCOME CIRCULAR NO.16/2017 [F.NO.279/MISC./130/2015/ITJ], DATED 25-4-2017 The issue whether income arising from letting out of premises/developed space along with other amenities in an Industrial Park/SEZ is to be charged under head 'Profits and Gains of Business' or under the head 'Income from House Property' has been subject matter of litigation in recent years. Assessees claim the letting out as business activity, the income arising from which to be charged to tax under the head 'Profits and Gains of Business', whereas the Assessing Officers hold it to be chargeable under the head 'Income from House Property'. 2. The matter has been considered by the Board. Income from the Industrial Parks/SEZ established under various schemes framed and notified under section 80IA(4)(iii) of the Income-tax Act, 1961 ('Act') is liable to be treated as income from business provided the conditions prescribed under the schemes are met. In the case of Velankani Information Systems Pvt Ltd., [2013] 35 taxmann.com 1 (Karnataka) the Hon'ble Karnataka High Court observed that any other interpretation would defeat the object of section 80-IA of the Act and government schemes for development of Industrial Parks in the country. SLPs filed in this case by the Department have been dismissed by the Hon'ble Supreme Court. In a subsequent judgment dated 30-4-2014 in ITA No. 76 & 78/2012 in the case of CIT v. Information Technology Park Ltd., [2014] 46 taxmann.com 239 (Karnataka) the Karnataka High Court has reaffirmed its earlier views. It has held that, since the assessee-company was engaged in the business of developing, operating and maintaining an Industrial Park and providing infrastructure facilities to different companies as its business, the lease rent received by the assessee from letting out buildings along with other amenities in a software technology park would be chargeable to tax under the head \"Income from Printed from counselvise.com 12 ITA No.5188/Del.2017 Business\" and not under the head \"Income from House Property\". The judgment has been accepted by the Board. 3. In view of the above, it is now a settled position that in the case of an undertaking which develops, develops and operates or maintains and operates an industrial park/SEZ notified in accordance with the scheme framed and notified by the Government, the income from letting out of premises/developed space along with other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business'. 4. Accordingly, henceforth, appeals may not be filed by the Department on the above settled issue and those already filed may be withdrawn/not pressed upon. 5. The above may be brought to the notice of all concerned. 10. Further we find that the Department of Commerce, Ministry of Commerce and Industry, Government of India vide Notification dated 27.10.2006 had permitted various items as part of IT/ITES in a SEZ. In that notification, item no. (viii) contains Parking including Multi-level car parking (automated or manual) and item no. (xxiii) contains Food Services including Cafetaria, food court(s) , Restaurants, coffee shops, canteens and catering facilities. Book. This notification is enclosed in Pages 100 and 101 of the Paper book. 11. In view of the aforesaid observations and respectfully following the CBDT Circular, Notifications of Ministry of Commerce and Industry and the judicial precedent relied upon hereinabove, we hold that the income derived from car parking rentals and sale of food and beverages would have to be construed as income derived from business of developing and operating the SEZ and consequentially would be eligible for deduction u/s 801IB of the Act.” 9. In view of above material facts and judicial precedents in ITA No.1635/Del/2020, considering instruction dated 25.04.2017, respectfully following the decision, it is held that the action of Ld. Departmental Authorities being illegal is set aside. Accordingly, ground of appeal no. I is allowed. Printed from counselvise.com 13 ITA No.5188/Del.2017 10. Ground No. II is qua addition of interest expense of Rs.5,88,581 as income from ‘other sources. 10.1 A Co-ordinate Bench in the case of Delhi Cargo Service Centre [2023] 151 taxmann.com 322 (Delhi – Trib.), has held that interest paid on late payment of TDS is a part of business expenditure which is allowable deduction under Section 37 and therefore, interest thereon has to be allowed. Therefore, the action of Ld. AO in addition of interest on TDS of Rs.5,88,581/- as income is set aside and the matter is restored to the file of the Ld. AO for verification and passing of fresh order in accordance with law after affording fair opportunity of hearing to the assessee. Accordingly, ground of appeal no. II is allowed in above terms. 11. In the result, the appeal of assessee is allowed for statistical purposes. Order pronounced in the open court on 30th September, 2025. Sd/- Sd/- (M BALAGANESH) ACCOUNTANT MEMBER (VIMAL KUMAR) JUDICIAL MEMBER Dated: 30th September, 2025. Mohan Lal Printed from counselvise.com 14 ITA No.5188/Del.2017 Copy forwarded to: 1. Applicant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "