In a significant ruling, the Income Tax Appellate Tribunal ( ITAT ), Bangalore bench has held that the rental income which is inseparably connected with the business of cargo handling services shall be eligible for income tax deduction under section 80IA of the Income Tax Act, 1961.
The assessee, M/s. Menzies Aviation Bobba is engaged in the business of providing cargo handling services to airlines and clearing, forwarding at Bangalore International Airport Ltd. The assessee has entered into License Agreement for using of the space in the Cargo Terminal operated by the assessee with Cargo Handling Agents, Airlines, Banks, Post Office etc. The list of licensee from whom the assessee has received the rental income has been submitted to the income tax department.
The income tax department rejected the deduction claim. The assessee approached the ITAT for relief.
A Two-Member ITAT comprising Shri N.V. Vasudevan, Vice President and Ms. Padmavathy S, Accountant Member observed that the service commitment by the assessee to BIAL is directly related to the services provided by the licensees who have taken the space in the cargo terminal.
“We also see merit in the argument that in order to meet the requirement of cargo services 365* 7*24, it is essential for the licensees’ to operate within the cargo terminal so that the assessee can provide uninterrupted cargo service as committed to BIAL. From the perusal of the various terms of the sample agreements entered by the assessee with the licensees (page 124 to 156 of paper book) it is noticed that the licensees’ cannot use the facility for any purpose other than for supporting the cargo services. Renting of the space is an integral part of the cargo business of the assessee since the licensees are using the space to render services which are committed by the assessee to BIAL as part of Cargo services. In view of these discussions, we are of the considered view that the rental income is inseparably connected with the business carried on by the assessee and emanate directly from the business of the undertaking. Accordingly we hold that the rental income derived by the assessee from Cargo Agents, Airlines, Banks etc., is derived from the cargo business and eligible for deduction u/s. 80IA,” the ITAT held.
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