S. 80IA : Industrial undertakings-Enterprises engaged in infrastructure development-Derived-Interest income on fixed deposits kept for contractual obligations and Interest on wrongful deduction of TDS refund-Eligible for deduction as profits derived from infrastructure facility. [S. 56 , 80IA(ii), 254(2), 260A, Art. 226]
The assessee, Gateway Terminals India Pvt. Ltd., a joint venture between APM Terminals Mauritius Ltd. and Container Corporation of India Ltd., was engaged in operating a container terminal at JNPT under a BOT agreement, an eligible business u/s 80IA. For AY 2012-13, it earned interest (i) on fixed deposits kept pursuant to contractual obligation to replace cranes and also pursuant to a Court order in a tariff dispute, and (ii) on income-tax refund relating to wrongful TDS deduction by customers from port charges. The AO accepted deduction u/s 80-IA on FD interest but treated interest on refund as “Income from Other Sources.” CIT(A) issued enhancement notice and denied deduction on FD interest, holding it was not derived from eligible business. ITAT upheld the denial. On appeal the Bombay High Court noted that the fixed deposits were not a case of parking surplus funds but a business compulsion directly linked to obligations under the licence agreement and Court’s interim orders. The interest was thus inextricably connected to the eligible business. Similarly, interest on TDS refund represented delayed recovery of port revenue wrongly subjected to TDS deduction, and hence was integrally part of the assessee’s business receipts. Distinguishing Liberty India v. CIT [2009] 183 Taxman 349/ 317 ITR 218 / 225 CTR 233 (SC), CIT v. Sterling Foods [1999] 104 Taxman 204/237 ITR 579/153CTR 439 (SC) relied on by Revenue, the Court applied the principle in CIT v. Karnataka State Co-operative Apex Bank. (2001) 251 ITR 194/118 Taxman 321/ 169 CTR 486 (SC), CIT v. Meghalaya Steels [2016] 238 Taxman 559 /383 ITR 217 / 284 CTR 321 (SC) and CIT v. Hiranandani Builders (IT No.1413 of 2016 dt. 10 -1 2019 (Tribunal order , ITO v. Hiranandani Builders ( 2017) 83 taxmann.com 65 (Mum)(Trib) that income having direct nexus with the business is eligible for deduction. Held, interest on fixed deposits placed under contractual/business compulsion as well as interest on TDS refund has a direct nexus with the assessee’s infrastructure facility operations, and is deductible u/s 80-IA. ITAT order reversed. (ITA No. 1139 of 2021, W.P. No. 4963 of 2021; dt. 26-08-2025 ITA No. 1139 of 2021, W.P. No. 4963 of 2021; dt. 26-08-2025 ( AY. 2012-13 )
Gateway Terminals India Pvt. Ltd. v. DCIT (Bom) (HC) www.itatonlineorg
[Coram : Hon’ble Shri Justice B. P. Colabawalla,
Hon’ble Shri Justice Firdosh Phiroze Pooniwalla]