FEW POINTS ON SECTION 80-IA.

Ø  Assessment order allowing section 80-IA cannot be change by retrospective amendment. Ref. Katira Constructions Limited v UOI ( 31 Taxmann.com 250).

Ø   Receipt of various subsidies is having direct nexus with 80-IA undertaking and hence eligible for deduction.  Meghalaya Steels Limited – Guwahati HC.

Ø  Benefit for each 80-IA unit is available without setting off loss from non  eligible unit. Shriram Properties Limited

Ø   The Karnataka High Court (HC) has recently held that for determining quantum of deduction under Section 80IA(5) of the Act, loss and depreciation of eligible business related to years preceding the ‘initial assessment year’ which have already been set off against income from other source cannot be brought forward notionally and set off against profits eligible for deduction under Section 80IA of the Act for the ‘initial assessment year’ and subsequent years. Commissioner of Income Tax vs. Anil H. Lad TS-140-HC-2014 (KAR) 

Ø  Essential proportionate expenses incurred at corporate office for eligible unit should be considered for computing deduction under section 80-IA . Tide Water Oil Co. ( India) Ltd. 

Ø  An assessee has constructed units in an industrial park approved by the Government. The said units were given on lease and rent collected from lessees. Is assessee eligible for deduction under section 80-IA(4)(iii)?

Answer

Generally the income falling under sections
80-IA or 80-IB should be of business income. Where the assessee merely derives rental income. Such income may not be eligible. But an exception is possible where income is derived from lease, while supplying all infrastructure services of SEZ.

Thus if an assessee has developed industrial park approved by the Government and thereafter it has leased out units with all infrastructure facilities, then, it would be entitled for deduction under section 80-IA (4)(iii) of the Act, as per the following decisions of the Tribunals.

       i.        VITP(P) Ltd. v. ACIT [138 ITD 407 (Hyd.)]

      ii.        R. R. Industries Ltd. v. DIT [Bearing Nos. 2194 to 2199/Mad/2010 dated November 18, 2011 of Chennai]

In these cases, it has been held that letting out of the building/units predominantly as Industrial Park would be entitled for deduction under section 80-IA(4)(iii) of the Act.

Ø  AO denied deduction u/s 80-IB(10) only on the ground that assessee engaged in business of construction had adopted ‘Project completion method’ instead of ‘Percentage completion method’ as prescribed under AS-7 (Revised). The Hon’ble High Court observed that there was no allegation to the effect that on account of “Project completion method” adopted by the assessee, its profit for any particular year was distorted. Further, the assessee had followed the same system consistently for a long period of time. It was thus held that assessee must be allowed deduction u/s 80-IB(10). SATADHAR ENTERPRISES