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Income Tax Appellate Tribunal, “A “ BENCH: KOLKATA
Before: Hon’ble Shri J. Sudhakar Reddy, AM & Hon’ble Shri A. T. Varkey, JM
ORDER Shri J.Sudhakar Reddy, AM This is an appeal filed by the assessee directed against the order of the Learned Commissioner of Income-tax (Appeals), 12, Kolkata dated 30-09-2019 for the assessment year 2009-10.
The assessee company is engaged in the business of real estate development. It had developed an Industrial Park namely “Salarpuria Softzone” at SY No. 81/1, Bellandur Village, Varthur Hobli, Bangalore-560 027. During the year under consideration it declared income mainly from rental receipts from operating of said Industrial Park. It had claimed deduction u/s. 80IA(4)(iii) of the income-tax Act, 1961 (hereinafter, referred to as the ‘Act’), to the extent of Rs. 1,22,84,088/-. This deduction was allowed by the Learned Assessing Officer ( in short, the Ld. AO) in the original assessment order passed u/s. 143(3) of the Act on 27-12-2011. Thereafter, the assessment was re-opened u/s. 147 of the Act and the Ld. AO in his order passed u/s. 147 r.w.s 143(3) of the Act on 3-03-2015 disallowed the claim of deduction u/s. 80IA(4)(iii) of the Act of Rs. 1,22,84,088/-. Aggrieved, the assessee carried the matter in appeal before the Learned CIT(A).
M/s. Soft Zone Tech Park Ltd 3. In its appeal before the Ld. CIT(A) both the legality of re-opening as well as denial of claim of deduction u/s. 80IA(4)(iii) was challenged by the assessee. The Ld. CIT(A) upheld the order of the Ld.AO. Aggrieved, the assessee is in appeal before us on the following grounds:- 1.For that in view of the facts and in the circumstances the order u/s 143(3)/147 dt. 30.3.2015 is wholly bad, illegal, unjustified and uncalled for both on points of law as well as facts and in view of the facts and in the circumstances such order is liable to be quashed / cancelled and in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in confirming the said action of the AO and in view of the facts and in the circumstances it may kindly be held accordingly. 2.For that in view of the facts and in the circumstances the provision of sec. 147 did not validly lie in the case of your appellant company and in view of the facts and in the circumstances such proceedings U/S 147 initiated against your appellant company is wholly bad, illegal, unjustified and uncalled for both on points of law as well as facts and in view of the facts and in the circumstances such proceedings U/S 147 is liable to be quashed! cancelled and in the circumstances the Ld. CIT(A) is wholly unjustified in confirming the said action of the AO and in view of the facts and in the circumstances it may kindly be held accordingly. 3.For that in view of the facts and in the circumstances of the case there being no failure in the part of your petitioner company to disclose any material facts necessary for assessment since, a detailed explanation regarding allowability of deduction claimed U/S 80IA( 4)(iii) along with all the necessary documents were furnished before the AO during the regular assessment proceedings u/s 143(3) and hence there was no failure on part of your petitioner to disclose all material facts necessary for assessment and in view of the facts and in the circumstances question of making any disclosure in respect of such deduction U/S 80IA(4)(iii) at the time of original assessment U/S 143(3) did not arise and hence proceedings U/S 147 in view of the facts and in the circumstances is wholly bad, illegal and unjustified and uncalled for and void ab initio for both on point of law as well as fact and in the circumstances the Ld. CIT(A) is wholly unjustified in confirming the said action of the AO and in view of the facts and in the circumstances the proceeding U/S 147 may kindly be quashed/cancelled. 4.For that in view of the facts and in the circumstances the AO having initiated the proceeding U/S 147 without any application of mind, only on the basis of observation of the Central Board of Direct taxes ( in short CBDT ) and a request made by the CBDT on the basis of that observation that the approval for deduction U/S 80IA(4)(iii) of the Act earlier granted by the Ministry of Commerce and Industry, Department of Industrial Policy & Promotion should be withdrawn by that Ministry under intimation to the CBDT ignoring the fact that such of the CBDT had not been still accepted by the concerned Ministryand also that a writ was pending and hence the matter is sub-judice and hence the entire proceedings u/s. 147 based merely on the change of opinion is wholly bad, illegal, unjustified and uncalled for and in the circumstances the Ld. CIT(A) is wholly unjustified in confirming the said action of the AO and in view of the facts and in the circumstances it may kindly be held accordingly.
5. For that in view of the facts and in the circumstances the AO having failed to dispose of the objection petition filed and the objection petition having not been disposed of by the AO the entire order u/s 147/143(3) is wholly bad, illegal, unjustified, uncalled for and void ab initio both on points of law as well as facts and in view of the facts and in the circumstances, the Old. CIT(A) is wholly unjustified in confirming the said actin of the AO and in view of the facts and in the circumstances it may kindly be held accordingly.
6. For that in view of the facts and in the circumstances, the Ld. CIT(A) erred in not granting benefit for deduction uls 80IA(4)(iii) and as such the Ld. CIT(A) erred in confirming the order of the AO without appreciating the fact that the appellant is entitled to such deduction and in view of the facts and in the circumstances it may kindly be held accordingly.
7. Without prejudice to Ground No. 7 above, the Ld. CIT(A) erred in not allowing Deduction/s 80IA(4)(iii) for Rs. 1,22,84,088/- and in view of the facts and in the circumstances kindly be held accordingly.
8. Without prejudice to Grounds No. 7 & 8 above, the Ld. CIT(A) erred in not appreciating the fact that the deduction u/s 80IA(4)(iii) had been allowed for the impugned undertaking i.e. "Salarpuria Sopftzone" in the preceding A.Y s 2008-09 & 2009-10 and the Ld. CIT(A) erred in not following the order of the Hon'ble ITAT, Kolkata Benches and in view of the facts and in the circumstances it may kindly be held accordingly.
9. That the appellant craves leave to add, alter, amend, amplify or modify any or all of the above grounds of appeal
at or before the time of hearing of the appeal.
4. Learned Counsel for the assessee, Mr. S. Jhajharia, FCA, submitted that ground nos. 6,7 and 8 are against the denial of assessee’s claim of deduction u/s. 80IA(4)(iii) of the Act. He relied on the judgment of this Kolkata Tribunal, ‘B‘ Bench in assessee’s own case in & 666/Kol/2013 for the AYs. 2008-09 & 2009-10, and in ITA Nos. 581 & 813/Kol/2013 for the AYs. 2008-09 & 2009-10 order dated 29-02-2016 and submitted that on the same facts the issue is covered in favour of the assessee. He further submitted that Central Board of Direct Taxes (CBDT) Notification [ S.O. 3035( E )] dated 8th September, 2020 published in the Gazette of India further justifies the assessee’s claim. Therefore, he submits before us that the issue in this regard stands covered in favour of assessee
5. Learned Departmental Representative, Mr. Dhrubajyoti Ray, JCIT, on the other hand, opposed the above submissions of the assessee and submitted that the Ld. AO had rightly rejected the claim of the assessee. He relied on the order of the Ld. CIT(A) at paras (iv)
M/s. Soft Zone Tech Park Ltd and (v).
6. After hearing the rival contentions, we find that this Tribunal in the case of M/s. Salapuria Softzone (supra) vide paras 7 to 12 at pages 5 to 10 held as follows:- 7. In view of the above factual position, we are of the view that the entire Industrial Park was located in the Industrial Park much before expiry of .. year from the date of commencement as mentioned in the application and which was duly approved by the Empowered Committee. The assessee had already enclosed a copy of approval dated 25.07.2006 at assessee’s paper book page 52, Vol-I. We are reproducing relevant para 5(2i) of the Scheme which reads as under: “In case the commencement of the Industrial Park is delayed by more than one year from the date as indicate in Para 4(xi) of the approval letter, fresh approval shall be required under the Industrial Park Scheme 2002, for availing benefits under Sub-section 4(iii) of Section 80IA of the Income Tax Act, 1961. Further, the AO in his remand report, given at page 86 of assessee’s Paper book Volume had merely contended that- (a) The date of lease agreements prior to 31.03.2007 cannot be construed as to the actual date of commencement of lease rental and for which he also submitted the magnitude of electricity from March 2007 to till March 2008. (b) Further, he contended that the architect’s completion certificate was dt. 16.01.2007 when the assessee had applied for completion certificate before the Bangalore Development Authority vide letter dated 29.12.2006. (c) The assessee had increased the number of Industrial Units in the project from 3 units .. original proposal to 15 units. (d) In view of the deviation from the original proposal and the deviation not having accepted in CBDT’s Office Memorandum, disallowance u/s. 80IA(4)(iii) was made. We find from the facts that Date of Lease Agreement with the Clients to lease out space “Salarpuria Softzone”shows and proves that the agreement have been entered with the park for a definite area located in the industrial park. The assessee has entered agreement with clients before 31.03.2007 and the date of lease deed only indicates the date of registration of agreement and is done only at the behest of client’s requirement. The contention taken by AO is that the date of lease deeds are different from the agreement is not correct. As per approval letter dated 25th July 2006 minimum 3 numbers of units are required to be located the industrial park. The expected date of commencement as mentioned in the IPS- I 28.03.2006. As per the approval letter terms & conditions mentioned in the clause No. 5 reads as under: “If the required no of units needs to be located are within one year from the date of expected date of commencement, no fresh approvals are required to be taken under the non-automatic route.” Further, understanding with Career Net Technologies (P) Ltd is based on certain terms conditions as mentioned in the lease agreement and on fulfilling those terms & conditions.. rental started. So the contention of the authority that the industrial park was not ready and under construction is not true. The completion certificate of all the electrical drawing and infrastructure were M/s. Soft Zone Tech Park Ltd completed on 20.03.2007 including the transformers and the other electric equipments and the official memorandum was issued by the Chief Electrical Inspector to Govt. of Karnataka, Bangalore dated 20.03.2007, which proves that all the equipments and electric works were completed before 31.03.2007. The amount of the electrical bills is always based on the consumption made by the clients. Assessee has no control over the consumption infrastructure for the electrical connection in the industrial park was ready o 20.03.2007, date of occupation certificate issued by the Bangalore Development Authority on 23.06.2007 which the assessee had Bangalore Development Authority on 29.12.2006 with a provision Completion Certificate issued by the Architech. It is not within the control of the assessee company to obtain completion certificate from Bangalore Development Authority and contention of the assessing authority is not correct. The Provisional completion certificate issued by M/s. Venkataramannan Associates dated 26.12.2006 was submitted along with application made to Bangalore Development Authority for completion certificate on 29.12.2006. Subsequently another inspection was done by 10.01.2007 and accordingly completion certificate was issued on 16.01.2007 and the same was submitted to Bangalore Development Authority. The copy of the Provisional Completion Certificate dated 26.12.2006 has been filed before and his contention of make- believe is only to create unnecessary doubt. The observation by the AO about the details of IPS-II as on 01.07.2007 filed on 19.07.2008 and IPS-II 01.07.2008 should be read as 01.01.2008 filed on 19.07.2008. Since all other facts remains same except that the number of units lease out are different & have been mentioned correct. The contention of the AO that the fresh approval was required under the non-automatic.. more than the minimum number of units required to be established in the industrial park is correct because the approval was for minimum number of units and there was no restriction imposed for increasing the number of units and hence no fresh approval is required under current scenario. Further, assessee sent all the details of CBDT for notification on the basis the first approval as well as after receipt of the renewed approval. The new notification and Industrial policy 2008 has come subsequently. Assessee has given a representation to Chairman of Empowered Committee & the Director of CBDT for giving an opportunity assessee. The Empowered Committee has still not withdrawn the approval granted and hence validity cannot be dispute. As regards the approval issued by the DIPP, Ministry of Commerce and Industry, we are of the view that the said approval was for non-automatic route and the approval so granted by the Ministry of Commerce and Industry has not been cancelled till date. Further, such change has been duly intimate vide IPS-II dt. 01.01.2008 and on consideration of the same the approval dated 16.03.2009 has been granted and further the said approval remains in force till date. Further, such change has been duly intimated vide IPS-II dt. 01.01.2008 and on consideration of the same the approval dated 16.03.2009 has been granted and further the said approval remains in force till date and has not been withdrawn.
We find that in similar facts and circumstances Hon’ble Karnataka High Court in the case of CIT Vs. Ittina Properties (P) Ltd of 2013 and 105 of 2014 dated 15.07.2 held in respect to controversy regarding the date on M/s. Soft Zone Tech Park Ltd which the project was completed to eligible for the benefit of section 80IB of the Act. Hon’ble High court held as under:-
One of the project has been sanctioned subsequent to the Act. The point of controversy is regarding the date on which the-project was completed to be eligible for the benefit of the said provision. The Revenue' contends, the completion certificate issued by the Village Patnchayat is not valid and therefore the assessee is-not entitled to the said benefit. Admittedly the plan is sanctioned by the BDA. The BDA has not issued any completion certificate. The reason being,' in the BDA Act or the Karnataka Municipal Corporation Act, there is no provision for issue of completion certificate. The provision in the Karnataka Municipal Corporation Act is for issuance of occupancy certificate. When the statute does not provide for issue of a completion certificate, if the authorities were insisting on such certificate, the assessee has gone to the Village Panchayat within whose limits the property is situated and has obtained the completion certificate and has produced the same for availing the benefit. Whether that certificate would satisfy the requirement of law need not be gone into in these proceedings because, when the statute does not provide for issue of such a certificate, if the Revenue insists on such certificate, the assessee would be left with no option except to get such certificate with some authority which would be called as a local authority. In the facts of this case, we are of the view that the Tribunal has recorded a finding that the building was completed within the stipulated period and therefore de hors this certificate issued by the Panchayat after the building is completed, the assessee is entitled to the said benefit. In that view of the matter, we do not see any merit in these appeals. Accordingly the appeals are dismissed.
Further, exactly on the same issue Hon’ble Bombay High Court in the case of CIT Ackruti City Ltd (2013) 214 Taxman 398 (Bom) has held that once Industrial Park approved by Ministry of Commerce & Industry, CBDT has to suo motto issue notification delay on the part of the CBDT in issuing notification would not warrant assessee being denial benefit of deduction u/s. 80IA(4)(iii) of the Act. Hon’ble High Court has decided this issue under: “3….. ….. ….. The CIT(A) as well as the Tribunal have held that the Ministry of Commerce and Industry had finally by letter dated 31st December, 2004 approved the industrial park and a copy of the same was forwarded to the CBDT. In terms of Rule l8C(4) of the Rules, once the industrial . park is approved by the Ministry of Commerce and Industry. the CBDT has to suomotto issue the notification. The Tribunal. on examination of all facts concluded that all the requisite conditions for claiming benefit under Section 80JA(4) (iii) of the Act has been complied with by the respondent assessee during the assessment year in question. Further, there is no reason to hold the benefit under Section 80JA(4)(iii) of the Act is available only prospectively from the date of the issue of Notification by the CBDT In these circumstances, as the decision of the Tribunal is based on finding of fact and mere delay on the part of the Central Board of Direct Taxes in issuing the notification would not warrant the respondent – assessee being denied the benefit of Section M/s. Soft Zone Tech Park Ltd 801A(4)(iii). "
10. Similarly, Hon'ble Gujarat High Court in the case of Creative Infocity Ltd. Vs. Un Secretary (2012] 19 Taxmann.com 270 (Guj.) also held that, once Industrial Park was approved by Ministry of Commerce & Industry, CBDT has to suo motto issue notification and if there is delay on the part of the CBDT in issuing notification, it would not warrant assessee be denied benefit of deduction u/s. 80IA(4)(iii) of the Act. Hon'ble High Court finally held under: "Once approval is given by the Commerce Ministry to the petitioner in terms of sub-rule [2] of Rule 18C, the Board is duty bound to notify the industrial parks for benefits under Section 80-IA without any further investigation as to whether the petitioner has complied with the terms and conditions envisaged in the scheme. Since the power of grant" of approval has been conferred upon the Commerce Ministry, in the absence of any express provision ill the Rules, it should be presumed that the authority, which has given approval, has the power revocation and examination of compliance of the conditions upon which the approval has been accorded. Therefore, it is the duty of the Commerce Ministry to decide whether an industrial undertaking is complying with- the conditions envisaged in the scheme and if the undertaking fails to comply with those conditions, it is the Commerce Ministry alone, which has the right to withdraw the benefit granted under sub-rule [2J of Rule l8C of the Rules. As soon as the approval under sub-rule[2] of Rule 18C is given, it is obligatory on the part of the Central Board of Direct Taxes to notify industrial parks in terms of sub-rule [4] of Rule 18C.”
In similar circumstances Hon'ble Bombay High Court in the case of Silver I Developers (P) Ltd. & Ors. Vs. Empowered Committee (2012) 343 ITR 0439 (Born) has that the Empowered Committee was not justified in rejecting the application for notification approved units u/s. 80IA(4) (iii) of the Act under the Industrial Park Scheme of 2002 only on ground that development of Industrial Park was completed beyond 31.03.2006. Hon’ble Bombay High Court held as under: “21. We find merit in the contention of the Petitioners that if the position which has been adopted by the Empowered Committee were to be accepted, that would result in virtually Dmt 34 tp 744-11 defeating the salutary public purpose which underlies Section 80IA(4) (iii). Notice would have to be taken of the fact that infrastructural projects require a considerable amount of investment and a time lag is involved in the completion of the project. The view of the Empowered Committee is that para 9 of the Scheme would apply to a delay in a project beyond one year but that the delayed date of completion should not in any event fall beyond 31 March 2006. If this were to be accepted as the correct interpretation, that will denude the benefit of Section 80IA to project where approvals were granted a few months before 31 March 2006 and the completion spills over beyond that date. There is no indication either in the statute or in the scheme that Parliament or its delegate intended to deprive the assessee of the benefit of section 80IA(4)(iii). Para 9 of the Scheme would in fact indicate an intent not to deprive the benefit of section 80IA(4)(iii) save and except that if the commencement of the project is delayed beyond one M/s. Soft Zone Tech Park Ltd year a fresh approval would have to be obtained to get the benefits under the Act. Dmt 35 wp744-11 The Court cannot also ignore the fact that the intent of the legislature and its executive is not to discontinue the benefits available in law. The Union Government has further liberalised the scheme in 2008 by requiring that the undertaking shall. begin to develop the industrial park by a stipulated date. In this case, approvals had been granted on 24 July 20q6 which was several months after 31 March 2006 when the Scheme of 2002 was to expire.
During the course of the hearing, learned Counsel appearing on behalf of the Revenue relied on the fact that though the Petitioners had initially stated in their application that they would have eight units in the industrial. park, this figure was sought to be reduced to three. Learned Counsel submitted that Para 9(2) of the Scheme speaks that the tax benefits under the Act can be availed of only after the number of units indicated in the application are located in the industrial park. In response to this, the attention of the Court was drawn by the learned Counsel. for the Petitioners to the Dmt 36 wp744-11jact that the Petitioners had in their original application stated thatthere would be eight units; that the proposed area of the industrial park would be 8261-56 sq. mt.; and that the proposed allocable area of would be 6529.42 sq. mt. By their further application dated 26 October 2006 the Petitioners sought to alter the number of units from eight to three. - However, there was no change proposed either in the area as declared earlier or in the allocable area. Learned Counsel submitted that the Petitioners fulfilled in substance the object and substance underlying the Scheme and the Department was notified on 25 July 2007 that three units located in the park as on 14 March 2007 were occupied by Tata Consultancy Services Ltd., Polaris Software Lab. Ltd., and Bharti Airtel Ltd -. Subsequently, the Petitioners notified the Department that an additional unit had been occupied by Citigroup Global Services Ltd.
The application filed by the Petitioners for a modification of the number of approved units was not allowed Dmt 37 wp 744-11 purely on the ground that the development of the industrial park was completed beyond 31 March 2006. For the reasons already indicated by us in the earlier part of this judgment, we have come to the conclusion that the Respondents were not justified in rejecting the application purely on the ground that the development of the park was not complete by 31 March 206. In holding thus, the Empowered Committee disabled itself from exercising the power and jurisdiction which it had under para 9(1) of the Scheme.” 12. In view of the above facts and circumstances, the issue is covered by the decision of Hon’ble Bombay High Court and the Hon’ble Karnataka High Court, cited supra. Hence, this issue of assessee’s appeal is allowed. “
We find that the assessee, Salarpuria Softzone vis-à-vis M/s. Soft Zone Tech Park Ltd was approved by the Ministry of Finance, Department of Revenue, Central Board of M/s. Soft Zone Tech Park Ltd Direct Taxes, Notification No. S.O 305(E), New Delhi, the 8th September, 2020. The approval is for the period of 1st day of April, 1997 to 31st day of March, 2006. The Central Govt. has approved the said Industrial Park vide Ministry of Commerce and industry’s letter No. 15/23/2006-IPC/D dt. 25th July, 2006. This Notification reads as under: “ S.O. 3035(E).-Whereas the Central Government in exercise of the powers conferred by clause (iii) of sub-section (4) of section 80IA of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the said Act), has famed and notified a scheme for industrial park, vide notification of the Government of India in the Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), number S.O. 354( E ), dated the 1st day of April, 2002, for the period beginning on the l " day of April, 1997 and ending 011 the 31st day of March, 2006; And whereas M/s Softzone Tech Park Ltd. situated at Survey No.80/1, 81/1, 81/2, Bellandur village, Varthur Hobli, Bangalore - 560037 is developing an Industrial Park at Survey No_80/1, 81/1, 8112, Belbodru- village, Varthur Hobli. Bangalore - 560037;
8. In view of above discussion, we respectfully follow the proposition of law by the co- ordinate bench of this Tribunal in assessee’s own case and in view of the Notification of the Central Govt. referred above, the order of the Ld. CIT(A) has to be reversed on this issue on the grounds on which the disallowance of claim was made are not legally and factually sustainable. Hence, ground nos. 6, 7 & 8 of assessee’s appeal are allowed.
On ground nos. 1 to 5 the Ld. Counsel for the assessee submitted that he is no pressing the same for the reasons that the issue on merits is covered in favour of the assessee. Hence, we dismiss these grounds.
In the result, the appeal of assessee is allowed in part.