THE COMMISSIONER vs. M/S GOPALAN ENTERPRISES

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.3 OF 2015 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX

C.R. BUILDING, QUEENS ROAD

BANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX

CIRCLE-11(3), R.P. BHAVAN

NRUPATHUNGA ROAD, BANGALORE-560001.

... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.) AND: M/S. GOPALAN ENTERPRISES INDIA PVT. LTD., NO.5, RICHMOND ROAD NO.48, MUSEUM ROAD BANGALORE-560025. ... RESPONDENT (BY SMT. S.R. ANURADHA, ADV.) - - - THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961, ARISING OUT OF ORDER DATED 18-07-2014

2 PASSED IN ITA NO.923/BANG/2013, FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE IN ITA NO.923/BANG/2013 DATED 18-07-2014 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER INCOME TAX, CIRCLE-11(3), BANGALORE. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr.K.V.Aravind, learned counsel for the revenue. Smt.S.R.Anuradha, learned counsel for the assessee. 2. This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment Year 2008-09. The appeal was admitted by a Bench of this Court vide order dated 7.12.2015 to consider the following substantial questions of law:

3 i. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is eligible for claim of deduction under section 80IA(4)(iii) even though the conditions laid down by the Ministry of Commerce for the same have not been fulfilled by the assessee as noted by the assessing officer after physical verification of the premises and recorded perverse finding. ii. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in placing reliance on the order of Tribunal, Bangalore Bench, in the case of M/s. Piramal Projects Pvt. Ltd., (139 ITJ 233) and held that "unit" means separate floor, without appreciating that the intent of Legislature is to encourage the creation of more businesses for the economy and not creation of more floors in the building and recorded perverse finding? iii. Whether on the facts and in the circumstances of the case, the appellate authorities were correct in holding that one of the lessee occupying more than 50% of the allocable area would not amount to occupation of 50% of the allocable area by an unit, admittedly when more than 50% of the allocable area was occupied by one lessee (unit) and the

4 same was contrary to the conditions contemplated under the Industrial Park Scheme 2002 for claiming deduction under Section 80IA(4)(iii) of the Act under which the assessee has undertaken not to allow single unit to occupy more than 50% of the allocable industrial area and recorded perverse finding?" 3. The factual background in which the aforesaid substantial questions of law arise for our consideration need mention. The assessee is a company engaged in building construction, promotion and development. The assessee filed the return of income on 30.09.2008 for the Assessment Year 2008-09. The assessment was completed under Section 143(3) of the Act and by an order dated 29.12.2010 disallowed the claim of deduction of the assessee under Section 80IA(4)(iii) of the Act. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 28.03.2013, by placing reliance on the decision of the Income Tax Appellate Tribunal, Bengaluru in the case of PIRAMAL PROJECTS (P)

5 LTD., held that the assessee is entitled to claim deduction under Section 80IA(4)(iii) of the Act and directed the Assessing Officer to grant the deduction. The Commissioner of Income Tax (Appeals) partly allowed the appeal preferred by the assessee. Being aggrieved, the revenue filed an appeal before the Income Tax Appellate Tribunal. The Tribunal, by an order dated 18.07.2014, dismissed the appeal preferred by the revenue. In the aforesaid factual background, the revenue has filed this appeal. 4. Learned counsel for the revenue submitted that the revenue had filed an affidavit before the approving authority that not more than 50% of the allocable industrial area would be allotted to a single unit which is a condition for eligibility under Section 80IA(4)(iii) of the Act. However, admittedly, 1,38,000 sq. ft. is allotted to a single unit which is more than 50% of the allocable area. It is further submitted that the assessee had

6 given an undertaking that 4 units would be located whereas only 3 units were located and 2 units out of 3 units got amalgamated and therefore, only 2 units remained in existence. It is further submitted that the Tribunal has not given any finding with regard to fulfillment of the conditions by the assessee to claim deduction under Section 80IA(4)(iii) of the Act. It is also urged that 'unit' is defined to be separately identifiable either under the State Law or Central Law and unit has to be separate taxable identity under the conditions of Industrial Park Scheme, 2002. It is further submitted that the conditions laid down in order to claim eligibility have to be satisfied and the same have to be strictly complied with. It is also argued that the burden is on the assessee to establish compliance with the conditions of the eligibility. However, the Tribunal has not recorded any finding in this regard and therefore, the matter deserves to be remitted to the Tribunal. In support of aforesaid submission, reliance has been

7 placed on the decisions of the Supreme Court in 'DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE Vs. ACE MULTI AXES SYSTEMS LTD.' 400 ITR 141 (SC) AND 'RAMNATH & CO. Vs. COMMISSIONER OF INCOME-TAX' (2020) 116 TAXMANN.COM 885 (SC). 5. On the other hand, learned counsel for the assessee submitted that assessee was granted approval by Government of India for setting up industrial park under the Industrial Park Scheme, 2002 and under the aforesaid proposal, 4 units were to be set up. It is further submitted that a person setting up an industrial park is entitled to tax benefit under clause 5(i) only after proposed number of units are put up. It is further submitted that the approval has been granted to the assessee on revised application under the Scheme and from the perusal of the report of the inspector, it is evident that there were four floors and units were

8 operating. It is also argued that the Commissioner of Income Tax (Appeals) for the Assessment Year 2004-05 sought for the remand report on the ground that the facts in the case of the assessee are similar to case of PIRAMAL PROJECTS (P) LTD. It is also argued that the setting up of an industrial unit is as per the revised approved order and finding of fact has been recorded that there is a basement and a cafeteria on the fourth floor and there are ground, first, second and third floors and each is distinct and workable unit. It is contended that there is no bar on one tenant so long as there are distinctive identifiable units and the Tribunal as a final finding fact of authority has held that there are different distinct units on each floor or each floor can be treated as distinct functional unit. Our attention has also been invited to order passed by the learned Single Judge of this Court in W.P.No.13172/2013 which has been affirmed in W.A.No.3298/2016 and it has been held that requirement of not allotting more than 50% of the area

9 to one unit or the condition that no single unit shall occupy more than 50% of the allocable area is not applicable to a revised or non-automatic approval. It is also pointed out that even if the aforesaid requirement is applicable, admittedly there are four different units with different four areas and no floor unit occupies more than 50% of the total allocable area. It is also pointed out that number of tenants has no co-relation with number of units and a single tenant can operate distinct units and merger of tenant company is inconsequential. It is also pointed out that the decision relied on by the revenue in the case of ACE MULTI AXES SYSTEMS, supra, is not applicable to the fact situation of the case. It is also pointed out that the decision relied by the revenue in the case of RAMNATH AND CO. supra, supports the case of the assessee as the assessee fulfills the criteria laid down in order to claim deduction.

10 6. We have considered the submissions made on both sides and have perused the record. Before proceeding further, it is apposite to take note of Section 80IA(4)(iii) of the Act, which reads as under: "Section 80IA(4) (iii)- any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006 : Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and

11 maintenance were not so transferred to the transferee undertaking : Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, 2011" had been substituted" 7. In exercise of powers conferred by clause (iii) of sub-section (4) of Section 80IA of the Act, the Central Government has framed the Scheme which is known as Industrial Park Scheme, 2002. Clause(2)(i) of the Scheme defines the expression 'unit' which means any separate and distinct entity for the purpose of one or more State or Central Tax law. Clause 6 of the Scheme deals with criteria for automatic approval. Clause 6(f) provides that no single unit referred to in Column No.2 (of the table given in sub paragraph (b) of paragraph 6) shall occupy more than 50% of the allocable industrial

12 area of an industrial model town or industrial park or growth centre. Clause 7 deals with non-automatic approval. There cannot be any dispute with the legal proposition that in order to claim the benefit of deduction under Section 80IA(4)(iii) of the Act, the conditions mentioned in the Scheme have to be complied with. 8. In the backdrop of aforesaid factual position, when we advert to the facts of the case, we find that the order of the Tribunal is cryptic and no finding has been recorded by the Tribunal whether or not the assessee has fulfilled the conditions laid down in the scheme. In paragraph 4 of the order, the Tribunal has recorded a finding that an identical issue has been dealt by it in the case of PIRAMAL PROJECTS P. LTD. and the case of the assessee is also similar. However, no reasons have been assigned by the Tribunal. The Tribunal is the final fact finding authority and has to record the reasons for

13 its conclusions. Since the Tribunal has failed to assign any reasons for recording the finding with regard to the fact whether or not the assessee has fulfilled with the terms and conditions laid down in the scheme, we are left with no option but to quash the order passed by the Tribunal. Therefore, it is not necessary to answer the substantial questions of law. The Tribunal shall decide the matter afresh and shall after affording an opportunity of hearing to the parties, shall record a finding whether the assessee has complied with the conditions laid down in the Industrial Park Scheme, 2002 and whether the assessee is eligible to claim deduction under Section 80IA(4)(iii) of the Act. In the result, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE RV