2021 (6) TMI 930 - AT - Income Tax

Interest income eligible for deduction under Section 80IA in industrial park activities

The Tribunal dismissed the Department's appeal, affirming that the interest income was eligible for deduction under Section 80IA as it was derived from ... Deduction u/s 80IA (4) (iii) - interest income shown by the assessee was the part of profit attributable to the business of the assessee and it was not derived from the business activities - HELD THAT:- CIT(A) has returned a categorical finding after duly considering all the facts of the case. The Ld. CIT(A) has referred to a letter dated 13th February, 2013 emanating from the Office of Principal Secretary, Industrial Development, wherein it has been specifically stated that the allotment of plots and collection for the same is to done by the assessee as part of the management of the Industrial Park and therefore, all the money collected for such allotment has to be considered as being derived from the business of running of industrial park. As been noted by the Ld. CIT(A) that the amounts which were specifically due for payment to the Government were shown as liabilities in its account and the balance was taken as receipts for the purposes of computation of eligible income. CIT(A) has also referred to the notification issued by the CBDT in respect of deduction u/s 80IA for industrial park and has, thereafter, come to the conclusion that the assessee was eligible for deduction u/s 80IA even on the amount disallowed by the AO. DR has, although, vehemently argued against the finding returned by the CIT(A), he could not controvert the findings of fact as recorded by the Ld. CIT(A) in the impugned order. DR also could not point out any error in law in the impugned order. CIT(A) has also referred and relied on the judgment passed in the case of CIT vs. Govinda Choudhary & Sons, [1992 (4) TMI 8 - SUPREME COURT] wherein it was held that the interest receipt on delayed payment cannot be separated from the other amounts granted to the assessee under the awards and, hence, cannot be treated as income from other sources. As laid down by the Hon’ble Apex Court in this case that amount awarded to the Contractor assessee as interest for delay in payment of his dues took the same character as the receipts for payment of which he was otherwise entitled under the contract and, therefore, the same was taxable as business income and not as income from other sources. We find no error on such reliance by the Ld. CIT(A). Similarly, ITAT Chandigarh Bench in the case of ACIT vs. Jaiparkash Hydro Power Ltd. [2013 (6) TMI 478 - ITAT CHANDIGARH] has held that when interest is received on account of delayed payment from customers, it would definitely constitute income from eligible business income because such interest had direct nexus with receipt from eligible business and, therefore, deduction u/s 80IA of the Act would be admissible. In the case of CIT vs. Suzlon Energy Ltd. [2013 (7) TMI 697 - GUJARAT HIGH COURT], while considering the allowability of deduction u/s 80 IB of the Act, held that interest income on late recovery of sale proceeds from debtors was eligible for deduction u/s 80IB - Interest receipt on delayed payments has been held to be business income. It is our considered opinion that the Ld. CIT(A) has rightly allowed the assessee’s claim of deduction u/s 80IA and we have no reason to interfere with the same. We uphold the findings of the Ld. CIT(A) and dismiss the appeal filed by the Department. Issues Involved:1. Eligibility of interest income for deduction under Section 80IA of the Income Tax Act, 1961.2. Nature of interest income: Business income vs. Income from other sources.Detailed Analysis:1. Eligibility of Interest Income for Deduction under Section 80IA:The primary issue was whether the interest income earned by the assessee, a nodal body of the Government of Uttarakhand, from deferred payment schemes could be considered as income derived from the eligible business of developing, operating, and maintaining industrial parks, thus qualifying for deduction under Section 80IA of the Income Tax Act, 1961.Arguments by the Assessing Officer:The Assessing Officer (AO) disallowed the deduction, arguing that the interest income of Rs. 9,77,02,124/- was not derived from the eligible business but from financing activities, and thus should be classified as income from other sources.Arguments by the Assessee:The assessee contended that the interest income was an integral part of its business income, directly related to its business activities of developing and maintaining industrial parks. The deferred payment scheme allowed allottees to pay land premiums over time, with interest added to the deferred payments and retained by the assessee.Findings of the CIT(A):The CIT(A) accepted the assessee's contention, noting that the deferred payment scheme was a legitimate business activity. The interest earned from deferred payments was considered part of the business receipts, eligible for deduction under Section 80IA. The CIT(A) highlighted that the land premium and interest were part of a single transaction related to the industrial park's development, operation, and maintenance.2. Nature of Interest Income: Business Income vs. Income from Other Sources:Department's Appeal:The Department argued that the interest income was not derived from the business activities of the assessee but from a separate financing activity, thus not qualifying for deduction under Section 80IA.Assessee's Cross Objection:The assessee supported the CIT(A)'s order, emphasizing that the interest income was derived from the eligible business activities.Tribunal's Analysis:The Tribunal upheld the CIT(A)'s findings, noting that the interest income was closely linked to the business activities of developing and maintaining industrial parks. The Tribunal referred to the letter from the Principal Secretary, Industrial Development, which clarified that the interest on deferred payments was part of the business receipts. The Tribunal also cited several judicial precedents, including the Supreme Court's judgment in CIT vs. Govinda Choudhary & Sons, which held that interest on delayed payments should be treated as business income, not as income from other sources.Conclusion:The Tribunal dismissed the Department's appeal, affirming that the interest income was eligible for deduction under Section 80IA as it was derived from the business activities of developing, operating, and maintaining industrial parks. The Cross Objections filed by the assessee were allowed, supporting the CIT(A)'s order.Final Order:The Department's appeal was dismissed, and the Cross Objections of the assessee were allowed. The order was pronounced on 31/05/2021.