TaxTMI 
TaxTMI 
2022 (5) TMI 676
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....ly mutatis mutandis in the appeals of other two assessment years. 4. The ground of appeal raised by the Revenue reads as under :- "On the facts and in circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by the AO wherein AO had restricted deduction u/s 80IAB at Rs.NIL as against claimed at Rs.341,06,90,452/- by the appellant." 5. The facts in brief are that the assessee company was engaged in the business of leasing of commercial properties under Special Economic Zone (SEZ), operation & maintenance of SEZ and was having ownership rights over commercial space developed in SEZ project and the same was reflected as fixed assets in the balance sheet. The said commercial space was rented out to various entities in their absolute right and the lease rental was declared as income under the head "income from house property". The leased out commercial space was regularly in use by tenants for their own commercial activities. It is also matter of record and undisputed fact that the activity of the appellant has been approved by the Board of Approval of Ministry of Commerce in respect of SEZ project which fact has also been acknowledged....
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....refore, the assessee company with respect to Chennai project is eligible to claim deduction for 10 consecutive years (out of the 15 Years), beginning Assessment Year 2007-08 upto 2021-22; with respect to other projects, beginning Assessment Year 2008-09 upto Assessment Year 2022-23. The assessee since have opted to claim deduction for the first time in the Assessment Year 2012-13, shall be eligible to claim deduction with respect to Chennai Project for ten consecutive Assessment Years and the last year of deduction in this case will be Assessment Year 2021-22. In the case of the other three projects, though the block of 15 years will expire in Assessment Year 2022-23 but on facts, the deduction will 'be available upto Assessment Year 2021-22. 1.5 That each Developer has got the approval from the Board of Approval ("BoA"). Ministry of Commerce for setting up Information Technology & ITES SEZ (IT & ITES SEZ). on land parcel owned by the Developer. All the 4 IT & ITES SEZs are notified SEZs. 1.6 That the assessee company approached the Government of India to seek approval of being a 'Co-Developer' in respect of the above mentioned SEZs, ....
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....out various activities forming part of the authorized operations. These authorized operations include developing, operating and maintaining the SEZ as a Co-Developer. 1.9 That the assessee has, subsequently, after conversion of bare shell buildings into warm shell and providing other facilities as stated above at Para 1.6, entered into lease agreements for letting out the units in the said SEZs to earn rental income on letting out property and service income for providing maintenance services. The tax holiday under section 80-IAB of the Act is available to an assessee engaged in the development of a notified SEZ and such benefit can be availed by the assessee for ten consecutive years out of the first fifteen years. The rental income is required to be disclosed in the return of income under the head 'income from house property' and service income is required to be disclosed under the head 'profits and gains from business or profession I as per the provisions of the Act." 6. Assessee has also given very detailed submissions to justify the claim which has been reproduced in the assessment order in toto. However, ld. AO held as under :- "3.5 The reply ....
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....eturn of income Rs.257,66,45,801/- Total income u/s 115 JB of IT Act Rs.257,66,45,801/- 4. Since, the tax liability of the assessee under normal provisions of the income tax is less than that of under section 115JB of IT Act, 1961, hence the total income of the assessee is accordingly assessed under section 115JB at Rs.257,66,45,801." 7. Ergo, AO has accepted that assessee's income is liable for 100% deduction u/s 80IAB and has computed the income at 'nil'. However, he has held that instead of income shown by the assessee under the head "income from house property", the same is assessable under the head "profits & gains of business & profession". There is no dispute with respect to the allowability of claim u/s 80IAB and that assessee's activities are not approved under the SEZ Act. 8. Ld. CIT (A) held that similar issue was involved in AY 2012-13 in the case of assessee and ld. CIT (A) allowed the issue in favour of the assessee in detailed order, therefore, there is no reason to differ from ld. Predecessor. 9. Before us, at the outset, ld. counsel for the assessee submitted that this issue is squarely covered by the decision of Tribunal in assessee's ow....
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....available on record. We find that only dispute in appeal is, whether the assessment of lease income from commercial space in SEZ, should be taxed under the head "Income from house property" or as "business income". In so far as the same is liable for deduction u/s 80IAB is not a dispute as admittedly it is an approved activity under SEZ Act and also approved SEZ project. The only dispute which has been raised by the AO is that the lease income should be considered under the head "profits & gains from business & profession" and not as "Income from House Property". It is also not in dispute that this is the second year and in first year, this issue had come up for consideration in AY 2012-13 (supra) where the Tribunal has accepted the claim of the assessee. Not only that, even the Department in AYs 2017-18 & 2018-19 vide assessment order passed u/s 143(3) of the Act dated 12.05.2021 & 02.11.2021 has accepted the claim of the assessee. In the light of these background and facts, we are unable to appreciate the request of the ld. CIT DR. When the matter had come up for hearing on 09.03.2022, we have specifically asked the ld. CIT DR to go through the order whether there is any material....
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.... the context, whether the income which has been derived is from the approved activities under the SEZ Act. The term "business of development economic zone" has to be understood in the context of authorized operation as approved by Board of Approval under the SEZ Act keeping in mind the overriding effect of SEZ Act on Income Tax Act as per section 51 of that Act. In such a situation, what is relevant is the claim of deduction and not the head of income, because the only requirement is that income must be derived from business of developing of SEZ which may fall under any head of income. 14. Here, in this case, it is an undisputed fact that assessee is a co-developer of commercial properties under the SEZ and has been approved as a co-developer and the name of the developer has already been mentioned above and each developer has got the separate approval from the Board of Approval, Ministry of Commerce for setting up of Information Technology and IT Enabled Services SEZ on the land parcel owned by the Developer. The assessee had approached the Government of India to seek approval of being a 'co-developer' in respect of the above mentioned SEZs which was granted by the Department o....
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....rious persons as business income, was held by Commissioner under section 263 as erroneous and prejudicial to interests of revenue and was set aside with direction to Assessing Officer to assess said income as property income - Prime object of assessee under said agreement was to let out portion of said property to various occupants by giving them additional right of using furniture and fixtures and other common facilities for which rent was being paid month by month in addition to security free advance covering entire cost of said immovable property - Whether it would be wrong to say that assessee was exploiting property for its commercial business activities and such business activities were primary motto and letting out property was secondary one - Held, yes - Whether from agreement between two parties, it was clear that primary object was to let out portion of said property with additional right of using furniture and fixtures and other common facilities for which rent was being charged from month to month and, therefore, income derived from said property was income from property which should be assessed as such - Held, yes c. East India Housing and Land Development Tru....
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....ion 80U of the Act shall be allowed from his 'gross total income'. Sub-section (2) of Section 80A of the Act provides that the aggregate amount of the deductions under Chapter VI-A shall not exceed the 'gross total income' of the Assessee. We are in agreement with the Appellate Authority that Section 80AB of the Act which deals with determination of deductions under Part C of Chapter VI-A is with respect only to computation of deduction on the basis of 'net income'. ...................... 12. The import of Section 80-IA is that the 'total income' of an assessee is computed by taking into account the allowable deduction of the profits and gains derived from the 'eligible business'. With respect to the facts of this Appeal, there is no dispute that the deduction quantified under Section 80-IA is Rs.492,78,60,973/-. To make it clear, the said amount represents the net profit made by the Assessee from the 'eligible business' covered under sub-section (4), i.e., from the Assessee's business unit involved in generation of power. The claim of the Assessee is that in computing its 'total income', deductions available to it have to be set-off against the 'gross total incom....
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....rom the 'eligible business' under Section 80-IA and is the only source of income for the purposes of computing deduction under Section 80-IA. The question that arises further with reference to allowing the deduction so computed to arrive at the 'total income' of the Assessee cannot be determined by resorting to interpretation of sub- section (5). 15. In the case before us, there is no discussion about Section 80- IA(5) by the Appellate Authority, nor the Tribunal and the High Court. However, we have considered the submissions on behalf of the Revenue as it has a bearing on the interpretation of sub-section (1) of Section 80-IA of the Act. We hold that the scope of subsection (5) of Section 80- IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating 'eligible business' as the 'only source of income'. Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to 'business income'. An attempt was made by the learned Senior Counsel for the Revenue to rely on the phrase 'derived ... from' in Section 80-IA (1) of the Act in respect of his submission th....
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....relevant part, reads as under: .... The assessee is without doubt a Developer of a SEZ, having been in fact allowed deduction u/s.80-IAB on it's other income/s, as from service agreements, chargeable u/s.2B. That the said income is assessable as business income, and only rightly so, inasmuch as the source thereof is the commercial activity of providing a range of services, is besides the point. We have in fact found the said services as only enabling services, i.e., enabling the enjoyment and the user of the house property, developed by the assessee as a developer thereof - a term defined under SEZ Act, 2005. By letting the built-up space, the assessee is only turning into account it's investment in the house property, being a building and land appurtenant thereto. It is, in fact, this - the construction of a building suitable for the firms operating in the IT sector, that qualifies it as a developer of an Info-park, approved as a SEZ. That the said activity, i.e. developing real estate and leasing it, which is, broadly speaking, and in common parlance, only a business, is not regarded as so for the purpose of assessment of income there-from, being derived....