M/S. SEAVIEW DEVELOPERS LTD.,NEW DELHI vs. DCIT, CIRCLE-23(2), NEW DELHI

4. Being aggrieved, the appellant/assessee preferred present appeal with following grounds: “

Ground 1.

1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income-Tax (Appeals)-28, New Delhi ["CIT(A)"] erred in upholding the action of the Deputy Commissioner of Income-tax Circle 23(2), New Delhi ("AO") in rejecting the claim made by the appellant under section 80IAB of the Income-tax Act, 1961 ("the Act") for income received in the nature of sale of food and beverages amounting to Rs.30,88,051 (net of expenses relating to sale of food and beverages).

2. The appellant prays that the income received in the nature of sale of food and beverages amounting to Rs. 30,88,051 (net of expenses relating to sale of food and beverages) be allowed, as a deduction under section 801AB of the Act. Ground II

1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the Learned AO in adding the expense relating to interest in delay deposit of TDS amounting to Rs. 5,88,581 under the head Income from other sources.

2. The appellant prays that the said addition under the head income from other sources be deleted

5. Learned Authorized Representative for the appellant/assessee submitted that Ld. CIT(A) erred in upholding action of Ld. AO in rejecting claim under Section 801AB of the Act for income received in the nature of sale of food and beverages amounting to Rs.30,88,051/-. Ld. AO failed to appreciate that the Appellant is in the business of developing as SEZ sector. As a part of development and leasing of premises situated in the SEZ, the Appellant has earned income from sale of food and beverages only through the leasing of the property that the said income is generated. Since, income received from sale of food and beverages forms integral part of its SEZ activities it had claimed deduction of the same under section 80-IAB of the Act. The income earned from sale of food and beverages is part of the main SEZ business as evident from Notification no. F. No. F.1/7/2006-EPZ, dated October 27, 2006 which authorizes various operations that can be undertaken in a SEZ which inter alia, includes "Food Services including Cafeteria, food court(s), Restaurants, coffee shops, canteens and catering facilities." (refer page 41 of the Paper Book). Hence, the income earned from the food court is part and parcel of the main SEZ business only and cannot be segregated from the main source. Further, vide notification no. F. No. 2/40/2006 dated March 10, 2008, the Board of Approval ('BOA') of Ministry of Commerce and Industry granted approval for authorized operations to be carried out by the Appellant in SEZ for IT/ITeS sector (refer Page No. 38 of the Paperbook). The list of authorised operations annexed with such approval which also included food services including cafeteria, food court(s), restaurants, coffee shops, canteens, and catering facilities (as reproduced below): M/s. Seaview Developers Limited, Noida, Uttar Pradesh Authorized operations inn the Processing Area S. No. ACTIVITY Quantum approved 1. Power (including power back up facilities) 30 MW 2. Parking Including multi-level car/two wheeler parking (automated or manual) 3. Recreational facilities including club 1100 sq.m. house, indoor or outdoor games, Gym etc.

4. Food services including cafeteria, food 3000 sq.m. court(s) restaurants, coffee shopa, canteens and catering facilities.

5. Employee welfare facilities like crèche, 1000 sq. m. medical center and other such facilities.

7. Business and/or convention centre 1100 sq m.

10. Drip and Micro irrigation system - 5.1 The Learned Authorized Representative for the appellant/assessee further drawn our attention to the Circular no. 16/2017 ('the Circular') issued by the Central Board of Direct Taxes ('CBDT) which states that in case of an undertaking which 'develops', 'develops and operates' or 'maintains and operates' an industrial park/SEZ notified in accordance with the scheme framed and notified by the Government, the income from letting out of premises/developed space along with the other facilities in an industrial park/SEZ is to be charged to tax under the head 'Profits and Gains of Business' (refer Page No. 43 of the Paperbook). 5.2 In this regard, reliance is placed on the decision of the Hon'ble Delhi Tribunal in the case of ACIT v. DLF Info City Developers (Chennai) Ltd.

[2014] 46 taxmann.com 124 wherein it was held that since the BOA had granted approvals after due consideration and examination of facts and documents on record, the assessee could not be denied benefit of deduction under section 801AB of the Act on profits arising from such authorized transactions.

6. Learned Authorized Representative for the appellant/assessee further submitted ground no. II is regarding addition of interest expense on TDS of Rs.5,88,581/- as income under the head 'Income from Other Sources'. During the year consideration, the Appellant had incurred expenses in relation to interest on delay in deposit of TDS amounting to Rs.5,88,581 and claimed the same as deduction in the return of income. The Ld. AO disallowed the interest on TDS under section 37 of the Act holding that interest is payable as a consequence of default in discharging a statutory liability and the same cannot be considered as expenditure laid out wholly and exclusively for the purpose of business or profession. Hence, the expenditure of interest on TDS are not deductible by virtue of Section 37(1) of the Act. The Ld. AO disallowed the interest expenses on TDS of INR 5,88,581/- and the added back the same under the head 'Profit and Gains from Business and Profession'. The Ld. AO also allowed the Appellant with a deduction under section 80IAB of the Act against the whole amount of disallowance of interest expenses on TDS. However, the Ld. AO again added back the interest expenses on TDS of Rs.5,88,581/- under the head 'Income from Other Sources without providing any reason for such addition, leading to double disallowance of the same expenses under two different head of income. 6.1 In view of above stated facts, the appellant/assessee prays that the interest expenses on TDS of Rs.5,88,581/- being already added back under the head 'Profit and Gains from Business and Profession’ should not again be added back under head 'Income from Other Sources'. Accordingly, the addition made by the Ld. AO under the head 'Income from Other Sources' on account of interest expense on TDS amounting to Rs.5,88,581/- may be deleted. 6.2 Without prejudice to the foregoing contentions, the withholding tax liability is a vicarious liability. An assessee is required to withhold tax from the amount of expenditure incurred by the assessee as per the provision of the Act and thereafter, the assessee acting as agent of the government is required to pay the said tax component to the credit of the Government. The withholding tax is a part of business expenditure which is allowed deduction under Section 37 of the Act and therefore interest thereon should be allowed as deduction. 6.3 Learned Authorized Representative for the appellant/assessee placed reliance on the judgement of the Hon'ble Supreme Court in the case of Prakash Cotton Mills Pvt. Ltd. v. CIT (1993) 201 ITR 684 (SC) wherein the Hon'ble Apex Court held that any statutory impost paid by an assessee by way of damages or penalty or interest is claimed as an allowable expenditure under section 37(1) of the Act, the Revenue has to allow deduction of the same under section 37(1) if the nature of such impost is compensatory in nature. 6.4 Learned Authorized Representative also drawn out attention on the decision in the case of Delhi Cargo Service Center [2023] 151 taxmann.com 322 (Delhi-Trib.) placing reliance on the decision of the Hon'ble Mumbai Tribunal in case of M.L. Realty v. ACIT (ITA No. 796/Mum/2019), has held that the interest paid on late payment of TDS is compensatory in nature and is an allowable deduction under section 37 of the Act. 6.5 Learned Authorized Representative for the appellant/assessee placed reliance on following judgements of Hon'ble Tribunal wherein it has been held that interest on TDS is an allowable expenditure: a) Resolve Salvage & Fire India (P.) Ltd. v. DCIT (2022) 195 ITD 266 (Mumbai Trib.); b) Welkin Telecom Infra (P.) Ltd. v. DCIT (2022) 96 ITR(T) 475 (Kolkata Trib.); c) STUP Consultants Pvt. Ltd. v. ACIT (1.T.A. No. 5827/Mum/2012) (Mumbai Trib.); d) DCIT v. Narayani Ispat Pvt. (I.T.A. No. 2127/Kol/2014) (Kolkata Trib.); and e) ACIT v. Narayani Sons (1.T.A. No. 1796-1798/Kol/ 2017) (Kolkata Trib.).

8. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. CIT(A) upheld the action of Ld. AO in rejecting claim of appellant under Section 80IAB of the Act for income received in the nature of ‘sale of food and beverages amounting to Rs.30,88,051/-. Ld. AO vide assessment order dated 29.12.2016 under Section 143(3) of the Act, assessed income of Rs.51,89,860/-. Under the normal provisions of the Act and book profit of Rs.38,90,95,461/- under Section 115JB of the Act. The difference in returned income and assessed income was due to addition of interest by denying deduction of interest income of Rs.15,13,228/- under Section 80IAB of the Act. Denial of deduction on sale of food and beverages of Rs.1,68,81,429/- and disallowance of interest of TDS of Rs.5,88,,581 claimed as business expenses. Ld. CIT(A) vide order dated 27.06.2017 deleted addition of interest income of Rs.15,13,228/- but sustained the disallowance of deduction under Section 80IAB of the Act on sale of food and beverages at Rs.1,68,81,429/- and interest paid on details of interest TDS at Rs.5,81,588/-. 8.1 As per letter dated 10.03.2008, assessee was authorized for food court activities which were covered under Section 80IAB of the Act. Letter of authorization is at page no. 37 of the paper books. Notification dated 27.10.2006 on page no.39 of the paper books contains entries no. (xxiii) Food Services including Cafeteria, food court(s), Restaurants, coffee shops, canteens and catering facilities. 8.2 In assessee’s own case for assessment year 2013-14, Tribunal decided the matter against the assessee in on 21.07.2023. In the order dated 21.07.2023 allotment of letter of assessee was not considered. 8.3 A Co-ordinate Bench of the Tribunal in titled “Candor Gurgaon One Realty Projects Pvt. Ltd. Vs. ACIT” in order dated 01.05.2024 in para nos. 8 to 11, has observed as under: “8. Further we find that following are the permitted services by Department of Commerce (SEZ Section), Ministry of Commerce and Industry, Government of India vide approval letter dated 10.3.2008 :- “M/s Unitech Realty Projects Limited, Gurgaon, Haryana Authorized Operations in the Processing Area S. No. ACTIVITY QUANTUM APPROVED 1 Power (including Power back up facility) 30 MW 2 Parking including multi-level car parking (automated or manual) 3 Recreational facilities including club house, indoor or outdoor games Gym etc. 1000 sq. m. 4 Food services including, cafeteria, food court(s) restaurants, coffee shops, canteens and catering facilities 2000 sq m. 5 Employees welfare facilities like crèche, medical center and other such facilities 1000 sq m. 6 Shopping arcade and/ or retail shops 1000 sq m. 7 Business and/ or retail space 1000 sq. m. 8 Common data centre with inter-connectivity 1000 sq m. 9 WiFi and/ or WiMax services 10 1000 sq. m Drip and Micro irrigation system 750 sq. m. For captive use only. The power generated will not be sold outside the SEZ.”

2. The matter has been considered by the Board. Income from the Industrial Parks/SEZ established under various schemes framed and notified under section 80IA(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.

10. 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. Book. This notification is enclosed in Pages 100 and 101 of the Paper book.

9. In view of above material facts and judicial precedents in considering instruction dated 25.04.2017, respectfully following the decision, it is held that the action of Ld. Departmental Authorities being illegal is set aside. Accordingly, ground of appeal no. I is allowed.

no. II is allowed in above terms.