The Income Tax Appellate Tribunal (ITAT), New Delhi Bench allowed the deduction in respect of rental income from SEZ development under section 80IAB of the Income Tax Act.
The revenue preferred an appeal against the order of the CIT(A) expressing the solitary grievance against the CIT(A) erred in allowing deduction under section 80IAB of the Act to the assessee.
The assessee, DLF Assets Pvt Ltd. filed its return of income declaring income of Rs.66.37 lacs after claiming deduction under section 80IAB of the Act amounting to Rs.316.04 crores. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
While scrutinizing the return of income the AO noticed that the assessee has claimed deduction under section 80IAB of the Act amounting to Rs. 316.04 crores. The AO found that the assessee has claimed the said deduction on the rental income shown under the head “income from house property”.
The assessee was asked to show-cause why the claim of deduction under section 80 IAB of the Act should not be denied as the claim is made on the rental income and not from any profits and gains of business. The Assessee filed a detailed reply substantiating its claim of deduction and relied upon various judicial decisions in support of its claim.
The main contention of the assessee was that it is engaged in the eligible business of developing SEZ and the income arising to the assessee is from such eligible business. The assessee strongly contended that the relevant factor is profit and gain should be derived from the eligible business irrespective of the head of the income.
The coram of Suchitra Kamble and N.K. Billaiya, while dismissing the appeal of the revenue opined that developing SEZ by itself is the business contemplated under section 80 IAB of the Act and the SEZ itself provides that the lease rental income generated in the hands of a developer engaged in setting up of the SEZ, is the profits and gains derived from the business of developing a SEZ.
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