Taxpayer wins 80IA deduction for industrial park income regardless of classification under house property

ITAT Delhi allowed the taxpayer's appeal regarding deduction u/s 80IA(4)(iii) for industrial park income. The tribunal held that rental income from notified SEZ buildings remains taxable under "Income from House Property" despite claiming 80IA deduction, as the AO had previously accepted this classification. The court ruled that 80IA deduction is available irrespective of income head classification, provided income derives from notified industrial park operations. Signage income from tenants was deemed eligible for 80IA deduction as it's intrinsically connected to industrial park operations. The tribunal also allowed deductions for facility management services, deleted TDS disallowance u/s 40(a)(i) for payments to US company without PE in India, and permitted full interest deduction under house property income where borrowings were used for rental-yielding property investments.

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Issues Involved:

1. Classification of income under the head "Income from House Property" vs. "Profits and Gains of Business."
2. Eligibility of various incomes for deduction under Section 80IA of the Income Tax Act.
3. Allocation of expenses to eligible and non-eligible income.
4. Disallowance of interest expenses.
5. Incorrect figures for estimating the budgeted cost of construction under the Percentage Of Completion Method (POCM).

Summary:

1. Classification of Income:
The primary issue was whether the lease rental income from units in an industrial park should be classified under "Income from House Property" or "Profits and Gains of Business." The Tribunal held that the lease rental income should be classified under "Income from House Property," following the principle of consistency as the same classification was accepted in previous years. The Tribunal emphasized that the nature and character of the lease agreements had not changed, and the income should be consistently classified.

2. Eligibility for Deduction under Section 80IA:
The Tribunal addressed the eligibility of various incomes, including signage income, promotional income, and income from the sale of scrap, for deduction under Section 80IA. It was held that these incomes are derived from the industrial park and should be eligible for deduction under Section 80IA, irrespective of the head under which they are taxed. The Tribunal relied on previous decisions and the principle that the deduction should be available for income derived from the business of developing, operating, or maintaining an industrial park.

3. Allocation of Expenses:
The Tribunal found that the allocation of expenses between eligible and non-eligible income by the Assessing Officer (AO) lacked a rational basis. The Tribunal directed the AO to accept the allocation and apportionment of expenses as provided by the assessee, which were supported by an audit certificate in Form 10CCB.

4. Disallowance of Interest Expenses:
The Tribunal addressed the disallowance of interest expenses related to the non-SEZ unit of Caraf Builders and Construction Pvt. Ltd., which was amalgamated with the assessee. It was held that the interest expenses should be fully allowable under the head "Income from House Property" as the borrowings were utilized for investment in property that yielded rental income.

5. Incorrect Figures for Budgeted Cost of Construction:
For the assessment year 2012-13, the Tribunal addressed the issue of incorrect figures used by the AO for estimating the budgeted cost of construction under the Percentage Of Completion Method (POCM). The Tribunal upheld the findings of the CIT(A) that the figures used by the AO were incorrect and that the revised budgeted cost provided by the assessee should be accepted.

Conclusion:
The appeals of the assessee were partly allowed, and the appeal of the revenue for AY 2012-13 was dismissed. The Tribunal's decisions were based on the principles of consistency, judicial precedents, and the proper interpretation of the Income Tax Act.

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