P.M. Jagtap ORDER
P.M. Jagtap, Vice President
1. This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Kolkata dated 25.10.2019.
2. The issue involved in Ground No. 1 of this appeal relates to the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of assessee's claim for deduction under section 80IB(10) of the Income Tax Act, 1961 in respect of interest received amounting to Rs. 11,10,810/- and other income amounting to Rs. 6,36,746/-.
3. The assessee in the present case is a Company, which is engaged in the business of Builders and Property Developers. The return of income for the year under consideration was filed by it on 17.09.2011 declaring total income at 'NIL'. During the year under consideration, the assessee-company had developed a housing project namely "Salarpuria Symphony" in Bangalore, Karnataka and the entire profit of the said project was claimed to be exempt under section 80IB(10) of the Act. During the course of assessment proceedings, it was noticed by the Assessing Officer that interest income of Rs. 11,10,810/- received on Bank deposits, etc. as well as other income of Rs. 6,36,476/- earned during the year under consideration was also included by the assessee in the profit earned from developing of a housing project, which was claimed to be eligible for deduction under section 80IB(10). According to the Assessing Officer, the said income was not derived by the assessee from the business of development of housing project and the same, therefore, was not eligible for deduction under section 80IB(10). He accordingly disallowed the claim of the assessee for deduction under section 80IB(10) in respect of interest income of Rs. 11,10,810/- and other income amounting to Rs. 6,86,476/-. On appeal, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer.
4. I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As per the provisions of section 80IB(10), the income derived from the business of developing housing project is eligible for deduction and as held in the various judicial pronouncements, the expression "derived from" in section 80IB(10) envisages a direct or first degree connection of the income eligible for deduction with the corresponding business of the assessee of developing a housing project. It means the immediate source of the income should be the business of the assessee of developing a housing project in order to make it eligible for deduction under section 80IB(10). If this well settled test is applied in the present case, I find that the interest of Rs. 11,10,810/- earned by the assessee during the year under consideration on Bank deposits etc. cannot be held to be eligible for deduction under section 80IB(10) as the immediate source of the said interest income was not the business of the assessee of developing housing project and it was the investment made by the assessee in Bank deposits, etc. As regards the other income amounting to Rs. 6,36,476/-, the details of which are placed at page no. 7 of the assessee's paper book, I find that the income by way of transfer fees received by the assessee for Apartment Booking amounting to Rs. 4,10,892/- and interest received for delay in payment against Flat amounting to Rs. 1,61,674/- had a direct or first degree connection with the business of the assessee of developing a housing project and the same, therefore, was eligi........