The New Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the interest income earned on fixed deposit by bank and all other interest income was eligible for deduction under Section 80IA of the Income Tax Act, 1961.
M/s. Viramgam Mahesana, the appellant assessee was engaged in the business of developing of any infrastructure facility and claimed to be eligible for a deduction of 100% of profits and gains derived from their business for any ten consecutive assessment years out of 20.
But the assessing officer noticed that the assessee company had included interest income from fixed deposits into their eligible business income, which should be taken separately under the head of income from other sources.
The Commissioner of Income Tax(Appeals) passed an order observed that the assessee was not eligible for deduction under section 80IA of the Income Tax Act. Thus the assessee appealed against the disallowance of deduction under section 80IA of the Income Tax Act.
G.S.Grewal, CA and Harsimran Grewal, CA, the counsels for the assessee contended that the assessee had no independent control of the investments and the deposits under the Escrow Account were restricted in sources. The permitted investment was primarily invested in high security investments to protect the interest of the lender bank.
Princy Singla , the counsel for the respondent had strongly denying the benefit of Section 80IA to the assessee. She contended that the income must have direct nexus with the assessee’s main business activity, and interest from bank fixed deposit must have a relatability or base nexus with the business.
The Bench is of the opinion that the primary objective of investment in permitted securities was not generating return, but rather incidental recourse to performance of a Concessional agreement. It was also observed that the interest income earned on fixed deposits and other interest income eligible for deduction under Section 80IA of Income Tax Act, 1961.
The two member bench comprising of Anubhav Sharma(Judicial) And Shamim Yahya (Accountant) held that the tax Authorities had fallen in error in denying the benefit of Section 80IA of Income Tax Act, 1961 to the assessee/appellant while allowing the appeal.
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