TaxTMI 
TaxTMI 
2022 (5) TMI 1225
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....nd infrastructure development in the State, to provide the financial assistance in the shape of debt, equity, venture capital, to develop infrastructure and assist the private initiative in industry and infrastructure and to implement and manage projects and provide specialized financial consultancy and construction and all such other activities to promote industries and develop industrial infrastructure in the state of Uttarakhand. 3. The assessee electronically filed its Return for A.Y. 2011-12 on 30.09.2011 declaring income of Rs.21,45,12,620/-.The assessee claimed deduction u/s 80IA(4)(iii) of the I.T. Act amounting to Rs.15,79,11,665/- in respect of the units developed at Pant Nagar Industrial Estate, District- Rudrapur, Uttarakhand and BHEL, near Ranipur, Haridwar. 4. During the course of assessment proceedings, the AO noticed that the assessee's profit consisted of interest on amounts which were due from persons to whom areas had been allotted in the industrial estate. The assessee was therefore required to justify the claim of deduction u/s 80IA on the interest income on land premium of Rs. 17,60,12,522/-. 5. In response, the assessee submitted that the claim for deducti....
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....rom the order of the Assessing Officer as mentioned in the order of the Ld. CIT(A) are as under :- * The land on which the industrial parks have been developed or are being developed, was made available by the State Government. The assessee developed industrial parks and the developed industrial plots were given on 99 years' lease to interested persons, for setting up industrial undertakings. The allottee has to make an initial one-time payment and then, recurring annual lease premium. The allottee is given an option of making down payment or deferred payment. In case of the former, he was allowed discount; in case of the latter, he was required to make payment in EMIs with interest. * The AO observed that the assessee does not own the land. The development expenditure incurred by it, is debited and capitalized as current asset in its books of account. The land premium received by it from the allottees, is payable to the Government, is credited to liability in the books of account. The interest on the land premium (in cases of deferred payments), is treated by it as its own receipt. The surplus by way of such receipt, after accounting for various operational expenses, is recogn....
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....come was directly attributable to the financing activity, which in turn, may be called incidental to the main activity, of development/operation/ maintenance of industrial parks. Hence, he was of the opinion that the interest income was liable to be treated as income from other sources. * At the most, he conceded that it may be called profit incidental or attributable to the main business but not 'derived from' the same. He pointed out that deduction u/s 80-IA of the I.T. Act was available in respect of the profit 'derived from' the eligible business. He also pointed out that the distinction between profit 'attributable to' and that 'derived from' a business that had engaged attention of the courts of law was settled after the decision of the Hon. Supreme Court in the case of Liberty India. In view of the facts and circumstances of the case as discussed above, he held that it was clear that the interest income did not have direct nexus to the business of development/operation/maintenance of industrial parks, not derived from it. * The case laws quoted by the assessee were not entirely related to this case. Hence, he held that the assessee was not eligible for deduction u/s 80-I....
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.... event of down payment they are given a discount and the entire land premium collected from them is paid to the Government. Under the deferred payment scheme, the interest component is added to the land premium and collected from the allottees. The land premium is paid to the Government and the interest is retained by the Corporation. The assessee corporation could not present a copy of the scheme whereby it was authorized to retain this money but presented a letter in which the Government has pointed out that the land has been mutated in the name of the Uttarakhand Government and management rights vested in the Corporation and asking the Managing Director to ensure that upon allotment (to lessees) by SIDCUL, the land premium, lease rent, re establishment Levy, reconstitution levy and transfer levy may be paid to the Government treasury from time to time. It has been thus argued that there is no demand for interest from deferred payment scheme to be deposited in Government account and this shows that the assessee was entitled to retain this amount. It has also furnished a copy of the application form in which the details of the scheme of allotment, including the payment requirement....
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....en devised by the management of SIDCUL to get as much payment upfront as possible and also to encourage those who are not able to pay upfront to also seek allotment. The Upfront payments are at discounted rate in that they are bereft of any interest payment and a rebate of 2% is offered. The deferred payments are charged at a rate of 15% per annum. The allotttee has to opt for one and once he does, then he is obligated to make payment as per the same or else SIDCUL has the right to cancel the allotment. Thus, contractually, he is bound to pay to SIDCUL, the amount demanded by it as per the relevant scheme of payment opted for. With regard to the deferred payment scheme in itself, these kinds of payment schemes are quite common in any real estate project. Deferred payments are taken to encourage allottees to apply for flats, lands or houses and pay as they earn. A premium is usually charged in respect of such payments as a compensation for the delayed receipt of payment This does not convert the builder or the real estate developer into a financer (as alleged by the Assessing Officer) and by no stretch of imagination can it be argued, that the payment received is on account of any f....