High Court allows deduction under Section 80IA for interest income on tax refund and FDRs linked to business activity.

The Bombay High Court upheld the claim for deduction under Section 80IA of the Income Tax Act, 1961, allowing the respondent-assessee engaged in developing I.T. Parks and S.E.Z. to claim interest income on income tax refund and FDRs. The Court agreed that the interest income was linked to the business activity of leasing out properties in I.T. Parks and S.E.Z. areas, supporting the Tribunal's decision and dismissing the revenue's challenge.

---

---

Issues:
1. Interpretation of Section 80IA of the Income Tax Act, 1961 regarding deduction eligibility for interest received on excess payment of tax.

Analysis:
The judgment by the Bombay High Court involved a dispute regarding the deduction claim under Section 80IA of the Income Tax Act, 1961. The respondent-assessee, engaged in developing I.T. Parks and S.E.Z., claimed deduction for various receipts including interest on income tax refund and FDRs. The revenue challenged this claim, arguing that such income had no nexus with the business activity. Both the CIT (Appeals) and the Tribunal upheld the claim, stating that the interest income was derived from the principal business of leasing out properties in I.T. Parks and S.E.Z. areas. The Court agreed with this view, emphasizing that the interest received on excess income tax refund and bank deposits from lessees formed an integral part of the leasing business. Therefore, the Tribunal's decision was deemed justified, and the tax appeal was dismissed.

---