ASCENDAS india trust ANNUAL REPORT 2014/15
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
For the financial year ended 31 March 2015
31.
Contingent liabilities
(a)
Income from house property or business income
Information Technology Park Limited (“ITPL”) and Ascendas IT Park (Chennai) Limited (“AITPCL”) account for rental
and other income as business income. ITPL and AITPCL had received assessment orders from the taxation authorities
treating the rental income under “Income from House Property” and correspondingly the admissible deductions and
brought forward losses have been assessed at a lower amount.
ITPL had received assessment orders from the taxation authorities treating the rental income under “Income from
House Property” from assessment years 1999-00 to 2009-10 and correspondingly the admissible deductions and
brought forward losses have been assessed at a lower amount. ITPL had received favourable orders from Income Tax
Appellate Tribunal, considering rental income as business income for assessment years 1999-00 to 2009-10. ITPL had
also received favourable orders from the High Court of Karnataka for assessment years 1999-00, 2004-05, 2005-06 to
2009-10. However the income tax department has filed an appeal through special leave petition in Supreme Court.
For assessment years subsequent to 2009-10, the assessment proceedings are under progress.
AITPCL had received assessment order for assessment years 2005-06 and 2007-08 to 2011-12 amounting to INR 116 million
(equivalent to $2,559,000). AITPCL had received favourable orders from Income Tax Appellate Tribunal, considering rental
income as business income for assessment years 2008-09 and 2009-10 respectively. However, the taxation authorities
have the right to file an appeal against the Tribunal order in High Court, as evidenced by ITPL’s case.
ITPL and AITCPL had obtained opinion from an independent legal counsel on the above matters stating that income
generated is business income and not assessable under “Income from House Property”, and accordingly no provision
has been made.
(b)
Service tax disputes
ITPL had received orders from the Commissioner of Service Tax disallowing the availment of service tax credit relating
to construction costs, generation of electricity and maintenance of power plant and other miscellaneous items for the
period from October 2006 to March 2011. The potential tax exposure, including penalty amounted to INR 62 million
(equivalent to $1,373,000). ITPL had also received notice for the period April 2011 to September 2014 towards wrong
availing of service tax credit and service tax not discharged on certain services amounting to INR 9 million (equivalent
to $194,000). ITPL has obtained an opinion from its independent tax consultant who has expressed confidence in
getting a favourable decision from the Tribunal.
AITPCL had received service tax assessment orders, including penalties and interest, disallowing the availment of
service tax credit relating to construction costs used for renting of immovable property services for the period from
October 2005 to March 2013 and demand of service tax on electricity, water charges and fit-out
for the period from
October 2005 to March 2013
. As at 31 March 2015, the total service tax in dispute not recognised in the financial
statements, including penalties and interest, amounts to INR 818 million (equivalent to $18,087,000). AITPCL has
obtained an opinion from its independent tax consultant who is of the view that AITPCL is eligible to avail the credit
relating to construction costs while electricity, water and fit-out charges are not subject to service tax. A petition
against this assessment has been filed before the Central Excise and Service Tax Appellate Tribunal for the period
October 2005 to March 2013 and Commissioner of Service Tax for the period April 2012 to March 2013.
VITP Private Limited (“VITP”) and Cyber Pearl Information Technology Park Private Limited (“CP”) had received
service tax notices from the Service Tax Department on reimbursable expenditure, termination charges received from
tenants and recovery of credit availed for the periods June 2007 to June 2013. The potential tax exposure, including
penalty attributable to such demand notices is estimated to be INR 232 million (equivalent to $5,136,000) for VITP
and INR 45 million (equivalent to $983,000) for CP. VITP and CP have obtained an opinion from its independent tax
consultant who is of the view that the claims are not tenable and accordingly no provision has been made.
