2018 (4) TMI 1810 - AT - Income Tax

Tribunal Upholds Tax Deduction Decision, Lease Rent Income Eligible for Deduction

M/s. Tidel Park Limited Versus The Deputy Commissioner of Income Tax, Corporate Circle 3 (1), Chennai AND The Assistant Commissioner of Income Tax, Corporate Circle 3 (1), Chennai Versus M/s. Tidel Park Limited

The Tribunal upheld the lower authorities' decisions in a tax case involving deduction claims under section 80IA of the Income Tax Act. It ruled that ... Deduction u/s 80IA - treatment to interest income and other income under the head ‘Other Sources’ OR 'income from business' - HELD THAT:- In assessee’s own case for the assessment year 2008-09 [2013 (9) TMI 1256 - ITAT CHENNAI] by following the decision of the Hon’ble Madras High Court in the case of CIT v. Elnet Technologies[2012 (11) TMI 671 - MADRAS HIGH COURT] and directed the Assessing Officer to treat the interest income and other income under the head “income from other sources”, which cannot be allowed as deduction under section 80IA. As assessee has not brought on record any higher Court decision having modified or reversed the above findings of the Tribunal. Under the above facts and circumstances, we are of the considered opinion that the ld. CIT(A) has rightly followed the decision of the Tribunal in assessee’s own case for earlier assessment years on this issue and sustained both the disallowances and thus, no interference is warranted. - Decided against assessee. Deduction under section 80IA - lease rent income received from letting out modules of STP to various lessees - AO held that the provisions of section 80IA(4)(iii) of the Act are applicable only for the profits derived out of development and sale of built up space and not applicable for rented property - HELD THAT:- As in assessee’s own case for the assessment year 2008-09[2013 (9) TMI 1256 - ITAT CHENNAI] by following the decision of the Hon’ble Madras High Court in the case of CIT v. Elnet Technologies[2012 (11) TMI 671 - MADRAS HIGH COURT] the Coordinate Benches of the Tribunal held that the lease rent income from modules/built up space of the Industrial Park is assessable under the head ‘income from business’ and such income is eligible for deduction under section 80IA - DR could not controvert the above findings of the Tribunal and brought on record any higher Court decision having modified or reversed the above findings of the Tribunal as well as the decision of the Hon’ble Madras High Court - Decided against revenue. Disallowance u/s 14A - CIT- A restricted addition to the extent of dividend income declared by the assessee - HELD THAT:- Assessing Officer is not justified in making excessive disallowance and the ld. CIT(A) rightly restricted the disallowance to the extent the dividend income declared by the assessee. The ld. DR could not controvert the above findings - Decided against revenue Issues:1. Deduction of interest income and other income under section 80IA of the Income Tax Act.2. Treatment of lease rent income as income from business eligible for deduction under section 80IA of the Act.3. Disallowance under section 14A of the Act.Issue 1: Deduction of Interest Income and Other Income under Section 80IA:The assessee claimed deduction of interest income and other income under section 80IA of the Income Tax Act for the assessment years 2011-12 and 2012-13. However, the Assessing Officer disallowed these claims based on the decision of the Supreme Court in the case of Liberty India v. CIT. On appeal, the CIT(A) directed the Assessing Officer to treat the interest income and other income under the head 'income from other sources' and not eligible for deduction under section 80IA. The Tribunal upheld the CIT(A)'s decision, stating that the interest income and other income cannot be considered as business income and are not eligible for deduction under section 80IA. The Tribunal also noted that no higher court decision has modified or reversed this finding. Therefore, the Tribunal dismissed the assessee's appeal on this issue.Issue 2: Treatment of Lease Rent Income as Income from Business:The Revenue challenged the CIT(A)'s decision directing the Assessing Officer to treat the lease rent income from letting out modules of STP as income from business eligible for deduction under section 80IA. The Assessing Officer disallowed the claim of rental income as deduction under section 80IA(4)(iii) of the Act, stating it was not applicable for rented property. However, the Tribunal, following its previous decisions and the decision of the Madras High Court, held that the lease rent income should be assessed under the head 'income from business' and is eligible for deduction under section 80IA. The Tribunal found no grounds to reverse the CIT(A)'s decision and dismissed the Revenue's appeal on this issue.Issue 3: Disallowance under Section 14A of the Act:The Revenue raised a ground regarding the disallowance under section 14A of the Act, where the Assessing Officer had disallowed expenditure based on the dividend income declared by the assessee. The CIT(A) restricted the disallowance to the extent of the exempt income earned by the assessee, following the decision in the case of Joint Investment Pvt. Ltd. v. CIT. The Tribunal, considering the facts and the decision of the Delhi High Court, upheld the CIT(A)'s decision, stating that the Assessing Officer's excessive disallowance was not justified. The Tribunal found no higher court decision modifying or reversing the Delhi High Court's decision and dismissed the Revenue's appeal on this issue.In conclusion, the Tribunal dismissed both the cross appeals filed by the assessee and the Revenue, maintaining the decisions of the lower authorities on all the issues raised in the appeals.