DEPUTY COMMISSIONER OF INCOME TAX , CHENNAI vs. OLYMPIA TECH PARK (CHENNAI) PRIVATE LIMITED , CHENNAI

The Assessing Officer denied deduction on the ground that transferor undertaking and transferee undertaking shall be notified as per Industrial Park Scheme. In the present case, transferor undertaking is duly notified, whereas the transferee undertaking is not notified in any of the section. In our considered view, the Assessing Officer is once again failed to understand the provisions of section 80IA(4)(iii) of the Act, in right perspective because as we have stated in earlier part of this order transfer u/s. 80IA(4)(iii) of the Act is qua the undertaking and not qua the assessee. The undertaking owned by the transferor is same undertaking owned by the transferee. It is not a case of the department that the undertaking and industrial park transferred by the transferor is not notified. Further, as per Paragraph 9(4) of the Industrial Park Scheme, 2002 and Paragraph 10 of CBDT notification, if there is a transfer of undertaking, the transferor and transferee should jointly intimate to the DIPP. The said compliance was duly complied by the assessee vide letter dated 12.04.2011 and DIPP as acknowledged the transfer vide letter dated 01.02.2012 with a copy to the CBDT. In our considered view said compliance is sufficient for the transferee undertaking to claim deduction u/s. 80IA(4)(iii) of the Act for remaining period. This fact is further strengthened by Circular no. 10/2014 issued by the CBDT, where it has been clearly explained the & 3084/Chny/2025 Olympia Tech Park (Chennai) Pvt. Ltd. :- 4 -: concept of deduction and as per said circular, if an undertaking is transferred to another undertaking other than by way of amalgamation and demerger and in other cases, the transferee undertaking shall be eligible for deduction for remaining unexpired period. Therefore, we are of the considered view that the ground taken by the revenue on this issue fails.

The department has contended that provisions of section 80IA(4)(iii) of the Act restricts the deduction only to the operation and maintenance of industrial park. We find that CBDT Circular No. 779, dated 14.09.1999 explains the manner and method of claiming deduction u/s. 80IA(4)(iii) of the Act. As per said Circular the benefit of deduction u/s. 80IA(4)(iii) of the Act is similar to developer and operator. This fact is further strengthened by press release dated 21.02.2000 issued by Government of India, where it has been clearly spells out that section 80IA(4) of the Act has been amended to further enlarge the scope of concessions. The above referred scheme has been modified to bring it in line with amendments made in section 80IA of the Act and as per said amendment, if the developer wants to exit at any stage after the development of industrial park, and new entity enters as an operations and management undertaking, the same concession would be available to the operator during the balance period of 10 years. The above press releases clearly spells out that Government of India has no intention to split the deduction as intended by the revenue. Further, it should be noted that proviso to section 80IA(12) of the Act applies only when there is a transfer of operation and maintenance of industrial park. In the facts of the appellant case, the entire undertaking which developed the industrial park has been transferred and not merely the operation and maintenance alone. Therefore, in our considered view, the reasons given by the Assessing Officer to allow deduction u/s. 80IA(4) of the Act only to operation and maintenance is not in accordance with law.

Having said so, let us come back to exclusion of interest income earned from fixed deposits kept with bank. The assessee has claimed deduction u/s. 80IA(4)(iii) of the Act on interest income earned from fixed deposit on the ground that the said income has also derived from industrial undertaking by development, operation and maintenance of industrial park. It was the contention of the revenue that the only income derived from operation and maintenance qualify for deduction and interest income earned out of deposits cannot form part of eligible income in context of section 80IA(4) of the Act. Although, in principle we agree with the contention of the revenue that interest income earned from fixed deposits kept with bank cannot be considered as income derived from industrial undertaking, but facts of the present case has to seen in light of the conditions for keeping mandatory security deposit with the banks. As per the Ld. Counsel for the assessee, the appellant company has availed loan from consortium of team of bank and as per agreement with banks, the company should maintain a sum of Rs. 15 crores in Debt Service & 3084/Chny/2025 Olympia Tech Park (Chennai) Pvt. Ltd. :- 5 -: Reserve Account (DSRA) under lien to lenders to guard against account any temporary mismatch in cash flows for repayment of loan installments. This Debt Service Reserve to be maintained with one of the lenders. Accordingly, the assessee has kept fixed deposits of Rs. 15 crores in two banks and earned interest. Therefore, the assessee argued that interest income earned from bank deposit is inextricably linked with business activity of the assessee and accordingly, is eligible for deduction u/s 80IA(4)(iii) of the Act. We find that there is a condition from the lending banks to maintain certain amount of fixed deposits to ensure repayment of timely installments of loan. In order to satisfy the conditions of lending bank, the assessee has kept fixed deposits in bank. Therefore, in our considered view to that extent it may be said that there is a mandatory requirement of keeping fixed deposits in bank. But fact remains that, said condition is sufficient to hold that interest income earned from fixed deposits is derived from industrial undertaking. In our considered view, it cannot be said that just because there is a condition between the parties for availing loan, any interest income earned from fixed deposits can be said to be derived from an industrial undertaking for the purpose of section 80IA(4) of the Act. In order to derive income from an industrial undertaking, there should be direct link between the business activity of the assessee and nature of income earned from industrial undertaking. In the present case, the nature of business of the assessee is to develop, operate and maintain an industrial undertaking and consequently any income derived from said undertaking can be considered as income derived from an industrial undertaking. Therefore, to this extent, we are not in agreement with the arguments of the assessee.

Having said so, let us examine, whether entire interest income should be taxed under the head income from other sources. The answer is No, because there is a direct link between the funds utilized for keeping fixed deposits in bank and interest income earned from banks. If interest income is to be assessed under the head income from other source, then corresponding interest paid on loan borrowed for the purpose of funds utilized for making fixed deposits also needs to be allowed as deduction. Therefore, we direct the Assessing Officer to exclude interest income from income derived from industrial undertaking and assess separately under the head income from other source. We also direct the Assessing Officer to allow deduction towards corresponding interest expenditure linked to such income. The Assessing Officer is also directed to exclude interest portion that is relatable to interest income while computing deduction u/s. 80IA(4) of the Act.

The Department has also contended that the status of the assessee should be that of AOP and not firm. Section 184 of the Act provides the situations under which partnership firm can be treated as AOP. The conditions of section 184 of the Act have been duly complied and same is not under dispute. Further, the MOA of partner companies authorizes to enter into partnership arrangements as required under the Companies Act.

In this view of the matter and considering facts and circumstances of the case, we are of the considered view that the ld. CIT(A) after considering relevant facts has rightly allowed deduction claimed u/s. 80IA(4)(iii) of the Act, by the appellant in respect of income derived from an industrial undertaking which operate and maintains industrial park developed under Industrial Park Scheme, 2002. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.”

A similar view is held by the coordinate bench in assessee's own case for AY 2016-17 to AY 2018-19 also. Further from the perusal of the order of the A.O, we notice that the A.O has made the disallowance by following the order of his predecessor in assessee's own case for AY 2012-13 and therefore, we see merit in the submissions of the Ld. AR that the facts for the year under consideration are identical. During the course of hearing the Revenue did not bring any new material on record before us to controvert the above findings of the coordinate bench. Therefore, respectfully following the above decision of the coordinate bench, we hold that there is no infirmity in the order of the CIT(A) in allowing the claim of deduction u/s. 80IA(4) to the assessee.

In the result, the appeals of the Revenue for AY 2014-15 & 2015-16 are dismissed. Order pronounced on 03rd day of March, 2026 at Chennai.