Income Tax Appellate Tribunal - Delhi
M/S. Unitech Developers And Projects ... vs Dcit, New Delhi on 30 September, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G" DELHI
BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
&
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
I.T.A. No.4032/DEL/2015
Assessment Year 2010-11
M/s. Unitech Developers & Projects v. DCIT,
Ltd., New Delhi.
6, Community Centre, Saket,
New Delhi.
TAN/PAN: AAACU8404B
(Appellant) (Respondent)
Appellant by: Shri K.M. Gupta, Adv.
Shri Rishabh Malhotra, Adv.
Respondent by: Ms. Rakhi Vimal, CIT-DR
Date of hearing: 26 09 2022
Date of pronouncement: 30 09 2022
ORDER
PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)- XVII, New Delhi ['CIT(A)' in short] dated 31.03.2015 arising from assessment order dated 15.03.2013 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.
2. As per Ground No.1, the assessee has challenged the denial of deduction under Section 80IAB in respect of income received in the nature of car parking rental amounting to Rs.1,28,94,927/-
I.T.A. No.4032/Del/2015 22.1 The assessee-company is engaged in the business of real estate development and maintaining/operating a SEZ in Gurgaon developed by it. The assessee inter alia claimed deduction under Section 80IAB on the profits derived by it from the business of developing SEZ. The Assessing Officer in the course of scrutiny assessment inter alia denied the deduction claimed on profits derived from car parking rental, sale of waste oil and sale of garbage holding such income to be incidental in nature and on the ground that such income does not fall within the purview of expression 'derived from' as mandated in Section 80IAB of the Act. The CIT(A) also endorsed the aforesaid action.
3. Before us, the ld. counsel for the assessee submitted that the assessee has leased out completed areas of the said notified SEZ to various tenants and has earned operating lease rentals from the aforesaid property which represents the main component of the income reported by it. Incidental to the operating lease rental, the assessee has also earned income from car parking rentals as business income. However, the benefit of deduction under Section 80IAB was denied to car parking rentals whereas the lease rental from the property was accepted by the Revenue. Similarly, the income earned from sale of waste oil arising from use of generator etc and sale of scrap items which are part and parcel of the industrial activity has been unjustifiably placed outside the ambit of beneficial provision. In this regard, it was contended that the income earned from car parking rental has direct and immediate nexus with the lease rentals. The provision of car parking services is essential part of carrying out the business of development, operation and I.T.A. No.4032/Del/2015 3 maintenance of SEZ. An instruction No.50 dated 15 t h March, 2010 issued by Government of India, Ministry of Commerce and Industry, Department of Commerce was adverted and was submitted that income by way of car parking is part of authorized activities as per the guidelines. Another reference was made to communication No. F 2/115/2005-EPZ Government of India, Ministry of Commerce and Industry, Department of Commerce (SEZ Section) dated 30 t h January, 2008 and was asserted that car parking has been included as part of authorized operations in SEZ. It is thus contended that car parking cannot be separated from the main business of SEZ and hence there is no justifiable reason to deny benefits on income from car parking rental in this backdrop.
4. We have carefully examined the issue and perused the orders of the lower authorities. In the light of documentary evidences placed by way of notifications and instructions from competent authorities, it is manifest that car parking rentals have been reckoned as authorized operation in SEZ. In the light of express guidelines issued by the Government as referred to and relied upon, we are of the view that the income from car parking rental would squarely qualify for deduction under Section 80IAB of the Act.
5. Ground No.1 of the appeal of the assessee is allowed.
6. Ground No.2 concerns denial of deduction under Section 80IAB of the Act on sale of garbage of Rs.2,79,000/- and oil waste of Rs.1,29,750/-. We take note of the similar contentions on behalf of the assessee that generation of waste oil and I.T.A. No.4032/Del/2015 4 garbage are inextricably connected to the maintenance and running of a SEZ and thus any profit derived from sale of such scrap will be eligible for deduction under Section 80IAB of the Act. A reference made in this regard in the case of ACIT vs. Zydus Infrastructure, 161 ITD 611 has been taken note of. We thus agree with the plea of the assessee on this score too.
7. Ground No.2 of the Assessee is thus allowed.
8. Ground No.3 concerns challenge to the disallowance of Rs.22,99,529/- made by the Assessing Officer under Section 14A of the Act. In this regard, we take note of the following arguments raised on behalf of the assessee, i.e., (i) a suo motu disallowance of Rs.5,45,306/- has been carried out which is the total indirect expenses and all other expenses claimed are directly attributable to SEZ operations and has no relation to the exempt income earned by way of dividend on mutual fund investment (ii) where suo motu disallowance has been made, the Assessing Officer is required to form 'satisfaction' in terms of Section 14A of the Act for higher disallowance which has not been made and thus the formula provided for quantification of disallowance under Rule 8D would not automatically apply.
9. We find merit in the plea of the assessee that the disallowance cannot exceed the actual expenditure incurred in relation to the earning of the exempt income. In the instant case, no direct expenses has been incurred and the disallowance has been carried out under Rule 8D(2)(iii) of the Rules in respect of indirect expenses. The disallowance has been carried out at Rs.22,99,529/- (being 0.5% of the average value of investments) I.T.A. No.4032/Del/2015 5 in place of the disallowance offered amounting to Rs.5,45,306/-. The action of the Assessing Officer is apparently without application of mind inasmuch as the actual indirect expenditure available for allocation is Rs.5,45,306/- only. Other expenses incurred are stated to be directly attributable to SEZ operation and thus cannot be subjected to estimated disallowance qua be exempt income. We thus find merit in the plea of the assessee. The Assessing Officer is directed to restore the position claimed by the assessee in this regard.
10. Ground No.3 of the appeal of the assessee is allowed.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 30/09/2022.
Sd/- Sd/-
[CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED: /09/2022
Prabhat