Delhi ITAT: Fixed Deposits Are Eligible for Tax Deduction U/S 80IA of I-T Act

The Income Tax Appellate Tribunal (ITAT)’s New Delhi Bench ruled that all interest income, including that generated on bank fixed deposits, qualified for a deduction under Section 80IA of the Income Tax Act of 1961.

M/s. Viramgam Mahesana, the appellant assessee, claimed to be qualified for a deduction of 100% of earnings and gains from their business for any 10 consecutive assessment years out of 20. They were engaged in the business of the development of any infrastructure facility.

However, the assessing officer observed that the interest from fixed deposits with their qualified business income had been included by the assessee company, which should be reported separately under the category of income from other sources.

The assessee was not qualified for a deduction under Section 80IA of the Income Tax Act, according to a decision taken by the Commissioner of Income Tax (Appeals). The assessee filed an appeal against section 80IA of the Income Tax Act deduction being denied.

The assessee’s counsel, G.S. Grewal, CA, and Harsimran Grewal, CA, argued that the assessee lacked independent control over the investments and that the payments made into the escrow account were from a limited range of sources. To safeguard the interests of the lender bank, the permissible investment was generally placed in high-security ventures.

Princy Singla, the respondent’s attorney, firmly refused to provide Section 80IA’s advantage to the assessee. She argued that interest from bank fixed deposits must have a relatability or fundamental connection to the business and that income must have a direct relationship with the assessee’s primary business activity.

The Bench believes that investing in allowed securities has as its secondary goal the performance of a concession agreement rather than the primary goal of making a profit. Additionally, it was noted that under Section 80IA of the Income Tax Act of 1961, interest income from fixed deposits and other sources is eligible for a deduction.

While approving the appeal, the two-member bench composed of Anubhav Sharma (Judicial) and Shamim Yahya (Accountant) ruled that the tax authorities committed a mistake in not granting the assessee or appellant the benefit of Section 80IA of the Income Tax Act, 1961.