ITAT Delhi affirms deduction for SEZ projects under section 80IAB, emphasizing SEZ Act 2005.

The ITAT Delhi dismissed the revenue's appeal and affirmed the allowance of deduction u/s. 80IAB to the assessee engaged in developing SEZ projects. The judgment emphasized that income derived from developing SEZ projects qualifies for the deduction under section 80IAB, regardless of the income head it falls under. The decision highlighted the overriding effect of the SEZ Act 2005 on other laws and established that developing SEZ constitutes a business for the purposes of claiming the deduction.

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Issues:
Allowance of deduction u/s. 80IAB of the Income Tax Act to the assessee.

Analysis:
The appeal was filed by the revenue against the order of the CIT(A)-3, Delhi pertaining to A.Y. 2012-13, challenging the allowance of deduction u/s. 80IAB of the Act to the assessee. The revenue contended that the deduction was erroneously allowed on rental income under the head "income from house property." The AO denied the claim, stating that the deduction is only available from profits and gains derived by an undertaking from any business, which did not include income from house property. The assessee argued that it was engaged in developing SEZ, and income derived from such eligible business should qualify for the deduction, irrespective of the income head. The CIT(A) allowed the claim, emphasizing the eligibility of the assessee engaged in developing SEZ projects.

The scheme of the SEZ Act 2005, as per Section 51, provides that the SEZ Act shall have an overriding effect on any other law, and developing SEZ itself constitutes a business under section 80IAB of the Act. Citing the decision of ITAT Chennai in Coimbatore Hitech Infrastructure (P) Ltd. case, it was established that the business of developing SEZ qualifies for deduction under section 80IAB, irrespective of running eligible units. The ITAT Chennai also held a similar view in the case of Lulu Tech Park Pvt. Ltd., emphasizing that lease rental income from house property developed as a SEZ is eligible for deduction under section 80IAB. The ITAT Delhi, considering these precedents, upheld the CIT(A)'s decision to allow the deduction to the assessee.

In conclusion, the ITAT Delhi dismissed the revenue's appeal, affirming the allowance of deduction u/s. 80IAB to the assessee engaged in developing SEZ projects. The judgment highlighted the eligibility criteria and the nature of income derived from developing SEZ projects, emphasizing that the income source, even if categorized under a specific head, should not disqualify it from claiming the deduction under section 80IAB of the Income Tax Act.

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