DCIT, NEW DELHI vs. CANDOR GURGAON ONE REALITY PROJECT PVT. LTD., NEW DELHI

We have heard the rival submissions and perused the materials available on record. The assessee company is engaged in the business of developing and operating Information Technology (IT) / Information Technology Enabled Services (ITeS) Special Economic Zone (SEZ) at Tikri Gurgaon. The said SEZ was notified by the Government of India in the official gazette and approval of the authorized services was granted to the assessee company on 10.3.2008. The profits and gains derived from business of developing and operating the aforesaid SEZ is eligible for deduction u/s 80IAB of the Act. The dispute involved herein is with regard to the eligibility of deduction u/s 80IAB of the Act in respect of the following receipts:-

We find that the Central Board of Direct Taxes had also come out with a Circular No. 16/2017 dated 25.4.2017 to this effect in the context of allowability of deduction u/s 80IA(4)(iii) of the Act in respect of income derived from Industrial Parks / SEZ. For the sake of convenience, the said Circular is reproduced below:-

The matter has been considered by the Board. Income from the Industrial Parks/SEZ established under various schemes framed and notified under section 80- IA(4)(iii) of the Income-tax Act, 1961 ('Act') is liable to be treated as income from business provided the conditions prescribed under the schemes are met. In the case of Velankani Information Systems Pvt Ltd., [2013] 35 taxmann.com 1 (Karnataka) the Hon'ble Karnataka High Court observed that any other interpretation would defeat the object of section 80-IA of the Act and government schemes for development of Industrial Parks in the country. SLPs filed in this case by the Department have been dismissed by the Hon'ble Supreme Court. In a subsequent judgment dated 30-4-2014 in & 78/2012 in the case of CIT v. Information Technology Park Ltd., [2014] 46 taxmann.com 239 (Karnataka) the Karnataka High Court has reaffirmed its earlier views. It has held that, since the assessee-company was engaged in the business of developing, operating and maintaining an Industrial Park and providing infrastructure facilities to different companies as its business, the lease rent received by the assessee from letting out buildings along with other amenities in a software technology park would be chargeable to tax under the head "Income from Business" and not under the head "Income from House Property". The judgment has been accepted by the Board.

In view of the above, it is now a settled position that in the case of an undertaking which develops, develops and operates or maintains and operates an industrial

Further we find that the Department of Commerce, Ministry of Commerce and Industry, Government of India vide Notification dated 27.10.2006 had permitted various items as part of IT/ITES in a SEZ. In that notification, item no. (viii) contains Parking including Multi-level car parking (automated or manual) and item no. (xxiii) contains Food Services including Cafetaria, food court(s) , Restaurants, coffee shops, canteens and catering facilities. This notification is enclosed in Pages 100 and 101 of the Paper Book.

In view of the aforesaid observations and respectfully following the CBDT Circular, Notifications of Ministry of Commerce and Industry and the judicial precedent relied upon hereinabove, we hold that the income derived from car parking rentals and sale of food and beverages would have to be construed as income derived from business of developing and operating the SEZ and consequentially would be eligible for deduction u/s 80IAB of the Act.

With regard to interest income on fixed deposits, the ld. AR at the behest of this Bench had submitted that the assessee company in order to develop and operate the SEZ had placed bank guarantees in the form of fixed deposit to Department of Industries & Commerce, Government of India of Rs 3.10 crores and President of India, State Pollution Board of Rs 1.25 crores in earlier years. The said fixed deposits had fetched interest income of Rs 43,64,877/- to the assessee company during the year. We find that the said fixed deposits were given for the purpose of securing the bank guarantee to commence the business of developing and operating the SEZ from Government of India and bank guarantees were given only to Government of India. Hence the issuance of bank guarantees to Government of India and for that purpose placing fixed deposits by the assessee, becomes interlined and inextricably linked with the operating business of the assessee. Accordingly, it could be safely concluded that the interest income on fixed deposits would partake the character of business receipts and consequentially eligible for deduction u/s 80IAB of the Act. Our view is further fortified by the decision of Hon’ble Supreme Court in the case of CIT vs Karnal Co-operative Sugar Mills Ltd reported in 243 ITR 2(SC) ; CIT vs Bokaro Steel Ltd reported in 236 ITR 315 (SC). We find that but for the issuance of bank guarantee to the Government of India, the assessee could not have completed the first step of setting up of business of developing and operating the SEZ without the business itself would not have commenced. Hence the first degree nexus of placing fixed deposits for securing bank guarantees qua the business of the assessee stands clearly established. Accordingly, the interest income earned thereon would be eligible for deduction u/s 80IAB of the Act. This view is further fortified by the decision of Hon’ble Supreme Court in the case of CIT vs Meghalaya Steel Ltd reported in 383 ITR 217 (SC). Hence we hold that interest income on fixed deposits would be eligible for deduction u/s 80IAB of the Act in the instant case.

However, with regard to other non-operating income of Rs 71,600/- is concerned, the assessee had not furnished any details regarding the same proving the business nexus of such receipt. No arguments were even advanced before us regarding the same proving the nature of receipt. Hence we hold that this sum of Rs 71,600/- being other non-operating income would not be eligible for deduction u/s 80IAB of the Act. To this extent, the order of the ld. CIT(A) is confirmed.

Accordingly, the Ground Nos. 1 to 6 raised by the assessee are partly allowed in the abovementioned terms.

The Ground No. 7 raised by the assessee was stated to be not pressed by the ld. AR before us. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed.

The Ground Nos. 8 to 10 raised by the assessee are only seeking proper credit for TDS and TCS. This requires factual verification. Hence we direct the ld. AO to grant the TDS and TCS credit as per law. Accordingly, the Ground Nos. 8 to 10 raised by the assessee are allowed for statistical purposes.

The Ground No.11 raised is challenging the levy of interest u/s 234B of the Act which is consequential in nature. With regard to chargeability of interest u/s 234C of the Act is concerned, the law is very well settled that the same should be charged only on the returned income and not on the assessed income.

The Ground No. 12 raised by the assessee is challenging the initiation of penalty proceedings u/s 271(1) (c ) of the Act which would be premature for adjudication at this stage. Hence dismissed.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the disallowance made on account of brokerage expenses in the sum of Rs 5,75,71,357/- in the facts and circumstances of the case.

We have heard the rival submissions and perused the materials available on record. We find that the ld. CIT(A) had observed that the assessee had submitted ledger account of brokerage expenses along with copies of expenses made during the year. Since the said issue was already decided in favour of the assessee by the order of his predecessor in the case of Candor Gurgaon Two Developers & Projects Pvt Ltd vide order dated 22.2.2019, the ld. CIT(A) deleted the disallowance made for the year under consideration also, after ascertaining that the factual matrix in both the cases are exactly identical. Further we find that this issue was subject matter of adjudication by the co-ordinate bench of Delhi Tribunal in the case of Candor Kolkata One Hi-Tech Structures Pvt Ltd vs ACIT in for Asst Year 2013-14 dated 22.11.2023, wherein it was held as under:-

Against the above order, assessee has filed appeal before us. We have heard both the parties and perused the records.

Ld. Counsel of the assessee submitted that in assessee's group concern, on similar facts and circumstances, ITAT had decided the issue in favour of the assessee.

Per contra, Id. DR for the Revenue did not dispute this proposition.

We note that ITAT in bunch of appeals being & ors. in the case of M/s. Candor Gurgaon Two Developers and Projects Pvt. Ltd. vide order dated 14.06.2023 has decided the similar issue as under:- "8. As with regard to the issue no.5 being ground of brokerage in ITA No.3879/Del/2018, it can be observe that the invoices produced on behalf of the appellant at page no.1 and 3 of the paper book clearly mention the details of the premises let out and the party to whom the lease was made. The copies of lease deed have also been placed on record. Ld. Tax Authorities have fallen in error in want of more evidences. When assessee is engaged in the business of rental of the properties then engaging brokers for procurement of the tenants is a common practice and the expenses of brokerage thus, have to be considered to have been incurred in ordinary course of business.

Respectfully following the same, the grounds raised by the revenue are dismissed.

To sum up, the appeal of the assessee is partly allowed for statistical purposes and appeal of the revenue is dismissed.