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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF MARCH 2016 BEFORE THE HONOURABLE MR. JUSTICE ANAND BYRAREDDY WRIT PETITION No.3574 OF 2010 (T-IT) CONNECTED WITH WRIT PETITION No.25321 OF 2009 (T-IT) WRIT PETITION Nos.14987 AND 15295 OF 2009 (T-IT) IN W.P.No.3574 OF 2010 BETWEEN: M/s. Salarpuria Properties Private Limited, No.3, Salarpuria Windsor, 4th Floor, Ulsoor Road, Bangalore 560 042. [represented by it’s Managing Director, Mr. Bijay Kumar Agarwal, Aged about 47 years, Son of Ratanlal Agarwal] …PETITIONER
(By Shri Chythanya K.K. and Shri Sharath .S, Advocates)
AND:
Union of India,
Represented by its Secretary,
Department of Industrial Policy
And Promotion,
Ministry of Commerce and Industry,
Government of India,
Udyog Bhavan,
New Delhi 110 107.
Central Board of Direct Taxes,
Department of Revenue,
Ministry of Finance,
New Delhi. …RESPONDENTS (By Shri N.R.Bhaskar, Central Government Standing Counsel for Respondent No.1; Shri K.V.Aravind, Advocate for Respondent No.2) *****
This Writ Petition filed under Articles 226 and 227 of the Constitution of India, praying to quash as far as the petitioner is concerned by an appropriate writ or order in the nature of certiorari or otherwise the impugned endorsement issued by the first respondent dated 3.2.2009 enclosed in Annexure-A and etc;
IN W.P.No.25321 OF 2009
BETWEEN:
Confederation of Real Estate Developer’s Associations of India – Karnataka, No.607/608, 6th Floor,
3 Barton Centre, No.84, M.G.Road, Bangalore 560 001, Represented by its President Sri. Raj A Menda, Son of Sri. Arjun M Menda, Aged about 47 years.
…PETITIONER (By Shri Balram R Rao, Advocate for Shri K.S.Ramabhadran, Advocate)
AND:
Union of India,
Ministry of Finance,
Department of Revenue,
5th Floor, Mayur Bhawan,
Connaught Circus,
New Delhi 110 001.
Represented by its Under Secretary.
Government of India,
Ministry of Commerce and Industry,
Department of Industrial Policy and
Promotion, Udyog Bhavan,
New Delhi 110 107.
Represented by its under Secretary,
Secretariat for Industrial Assistance,
Infrastructure Development Cell.
Central Board of Direct Taxes,
Represented by under Secretary,
O.T.Division, Fourth Floor,
Jeevandeep Building,
Parliament Street,
New Delhi 110 001.
RESPONDENTS
(By Smt. E. Sanmathi Indrakumar, Advocate for Respondent No.1; Shri K.V.Aravind, Advocate for Respondent No.3) *****
This Writ Petition filed under Articles 226 and 227 of Constitution of India praying to declare the amended Rule 18C of the Income Tax Rules, 1961 substituted by the income tax (first amendment) Rules, 2008 with effect from 08.01.2008 as ultra vires Section 80-IA(4)(III) of the Income Tax Act, 1961, in so far as the members of the petitioner are concerned and etc;
IN W.P.Nos.14987 AND 15295 OF 2009
BETWEEN:
M/s. Millennia Infrastructure
Private Limited,
Level-II, 12-14,
“Millennia” Tower-B,
No.1-2, Murphy Road,
Bangalore 560 008.
Represented by its Director
Sri. Raj A Menda,
Aged about 47 years.
M/s.Millennia Realtors Private Limited,
The Millennia, Tower-B,
No.1-2, Murphy Road,
Bangalore 560 008.
Represented by its Director,
Sri. Manoj A Menda,
Son of Sri. Arjun M Menda,
Aged about 41 years.
…PETITIONERS
(By Shri Balram R Rao, Advocate for Shri K.S. Ramabhadran, Advocate)
AND:
Union of India,
Ministry of Finance,
Department of Revenue,
5th Floor, Mayur Bhawan,
Connaught Circus,
New Delhi 110 001.
Represented by its under Secretary.
Government of India,
Ministry of Commerce and Industry,
Department of Industrial Policy and
Promotion, Udyog Bhavan,
New Delhi 110 107,
Represented by its under Secretary,
Secretariat for Industrial Assistance,
Infrastructure Development Cell.
Central Board of Direct Taxes,
Represented by under Secretary,
O T Division, Fourth Floor,
Jeevandeep Building,
Parliament Street,
New Delhi 110 001.
…RESPONDENTS
(By Shri K.V.Aravind, Advocate for Respondent No.3)
These Writ Petitions filed under Articles 226 and 227 of the Constitution of India praying to declare the amended Rule 18C of the Income Tax Rules 1961 substituted by the Income Tax (First Amendment)Rules, 2008, with effect from 8.1.2008 as ultra vires Section 80-IA(4)(iii) of the Income Tax Act, 1961, in so far as the petitioners are concerned and etc;
These Writ Petitions coming on for Final Hearing this day, the court made the following:
ORDER
Heard the learned counsel for the petitioners.
These petitions would seek to raise a common issue and hence are considered and disposed of together.
The petitioner is said to be a private limited company incorporated under the Companies Act, 1956 and the petitioner being a property developer had proposed to set up an industrial park called ‘Salarpuria Touch Stone’ in Bangalore. The said industrial park is said to be a joint venture between the petitioner and one T.Narayan and others under a Joint Development Agreement dated 9.2.2004. The industrial park measures an extent of 440,033.21 square feet,
7 out of which, 2,97,861 square feet is to the account of the petitioner. The petitioner had filed an application for approval in Form IPS-I for setting up an industrial park under non- automatic route dated 15.12.2006. The acknowledgement was obtained on 21.12.2006 from the respondent. It transpires that the first respondent namely, the Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India, had addressed a letter dated 4.1.2007, to the Director of Industries and Commerce, Government of Karnataka and called upon to furnish a report on certain queries raised and sending its recommendation for the consideration and approval of Form IPS-I application of the petitioner. The petitioner had furnished the details as required before the Joint Director of Industrial Development, Department of Industries and Commerce, Government of Karnataka. A report was thereafter filed on
8 1.3.2007, furnishing requisite opinion and recommending the proposal for consideration for approval. On 4.9.2007, the petitioner is said to have addressed a letter to the first respondent insofar as the approval of IPS-I filed under the Industrial Park Scheme – 2002 (Hereinafter referred to as ‘IPS-2002’, for brevity) and requested that the same be taken up in the agenda at the forthcoming meeting for consideration. Additional information was sought, which was furnished by the petitioner. Thereafter, an endorsement was issued only as on 3.2.2009 stating that the petitioner’s application is not covered under the IPS 2002 as notified by the Department of Industrial Policy and Promotion and has been returned without affording an opportunity to the petitioner before taking such action. It is in this background that the present petition is filed.
The connected petition in WP 25321/2009 is filed by a Confederation of Real Estate Developers Association of India and is raising academic issues, by which the petitioner in WP
9 3574/2010 is directly affected and therefore, the decision which would be rendered in WP 3574/2010 would be applicable to those members of the Confederation, who may be similarly placed and the law decided therein would apply to the respective members of the petitioner – Federation.
The second petitioner in WP 14987/2009 had filed an application seeking approval of the First Phase of Industrial Park by an application dated 29.11.2005. The second respondent had granted approval to the second petitioner on the condition that the Industrial Park should commence from June 2004, failing which a fresh approval was to be obtained under the IPS 2002. The first respondent however inserted a proviso to Section 80-1A(4)(iii) of the Income Tax Act, 1961, extending the benefit to the Industrial Parks developed on or before 31.3.2009. It is only as on 28.5.2007, the first petitioner had filed an application seeking approval under the IPS 2002 and as in the case of the petitioner in WP 3574/2010, the respondents have held that the petitioners were no longer under
10 the IPS-2002, as they had not completed the development before 31.3.2006 and intimated however that it is the IPS 2005, which would apply. Hence, the petitioners are before this court.
It is claimed that the Central Government, vide notification dated 1.4.2002, issued in exercise of powers conferred under Section 80-1A(4)(iii) of the Income Tax Act, 1961, has framed a Scheme called the ‘Industrial Park Scheme 2002’. The Scheme was applicable for any undertaking which developed and operated or maintained and operated as an Industrial Park for the period beginning 1.4.1997 and ending 31.3.2006. In a case where an undertaking developed an Industrial Park on or after 1.4.1999 and transferred the operation and maintenance of such industrial park to another undertaking, the benefits shall be allowed to such transferee undertaking for the remaining period in ten consecutive assessment years in a manner as if the operation and maintenance were not so transferred to the transferee undertaking.
11 The objectives of the Industrial Park were that any project, being an industrial park, should aim at setting up an industrial model town for development of industrial infrastructure for carrying out integrated manufacturing activities including research and development by providing plots or sheds and common facilities within its precincts; or an Industrial Park for development of infrastructure facilities or built-up space with common facilities in any area allotted or earmarked for the purposes of industrial use specified in Explanation to Para-6 sub-clause (c) or a growth centre under the Growth Centre Scheme of the Government of India. The procedures were prescribed as to the manner of approval, which can be automatic approval, which was applicable dependant on the number of units and non-automatic approval in respect of other units not covered under the automatic route. The general conditions prescribed included that the tax benefit under the IT Act can be availed only after the number of units indicated in the application are located in the industrial park,
12 meaning thereby that not only was the park to be developed, but also was to be occupied by units in the form. It was also provided under the general conditions in case the commencement of the Industrial Model Town or Industrial Park or Growth Centre gets delayed by more than one year from the date indicated in the application, fresh approval may have to be obtained to get the benefits under the Act.
It is not in dispute that the petitioner in WP 3574/2010 had in his application indicated that the probable date of completion of the development would be 28.2.2007. This was obviously beyond 31.3.2006, by which time, the Scheme contemplated that the development should be completed. Therefore, the indication by the petitioner that the development would be completed by 28.2.2007 could not be availed of by the petitioner. In other words, any date of completion could not be beyond 31.3.2006. The condition that there would be a grace period for those units which are not completed, for the development of the park, as on 31.3.2006, they can be
13 completed within one year therefrom would be inapplicable if the date of completion is indicated as 31.3.2006. Hence, notwithstanding the date indicated by the petitioners, it can only be taken as 31.3.2006.
Consequently, the petitioner’s application having been returned with an observation that since the authorities have no power to consider cases where the completion of development is beyond 31.3.2006, the date indicated by the petitioner was invalid and could not therefore be considered, is not fair to the petitioner. For it was evident that under the general conditions there was a grace period of one year from 31.3.2006 within which the development could be completed and the petitioner having ultimately completed the development and an “Occupation Certificate” possibly having been obtained as on 28.2.2007, it is well within the period of one year grace period from 31.3.2006 to 31.3.2007. Therefore, the petitioner being denied the benefit only on the ground that the date of completion had been indicated as something beyond 31.3.2006
14 and therefore could not be considered would obviously deny the petitioner the benefit of the grace period, which is contemplated under the general conditions. If the petitioner had indeed completed the development before 31.3.2007, it is inexplicable that with the coming into force of the 2008 Scheme, which was gazetted only as on 8.1.2008 and since it was with retrospective effect from 1.4.2006, to indicate to the petitioner that it was covered under 2008 Scheme and not under IPS 2002, is wholly unreasonable for the reason that the completion certificate of the petitioner’s park was of 28.2.2007 and logically, the petitioner’s application for approval was well within 31.3.2007. By the operation of IPS 2002 as on the date of completion, the petitioner was certainly entitled to the benefit. It is only with effect from 8.1.2008 albeit that it was brought into force with retrospective effect, namely, 1.4.2006. The petitioner being denied the benefit of IPS 2002 is unreasonable and unfair. Therefore, the petitioner having completed the development before 31.3.2007 notwithstanding
15 that the last date for completion prescribed was 31.3.2006, since the Scheme itself contemplated a grace period of one year and the petitioner having completed the development within one year from 31.1.2006, is held entitled to the benefit contemplated under IPS 2002. Notwithstanding that 2008 Scheme has been made effective from 1.4.2006 in respect of those parks which commenced development from 1.4.2006, certainly 2008 Scheme would apply it would be possible for the respondents to take a view on that. Insofar as the petitioner is concerned, the tax benefits being denied under the IPS 2002 is unlawful and illegal. Since the authorities are yet to adjudicate on the petitioner’s claim and a mere endorsement having been issued that he should make a fresh application under the 2008 Scheme, it may be necessary for the Empowered Committee under IPS 2002 to take a call on the petitioner’s application for approval in the light of the observations made hereinabove and dispose of the same with expedition.
16 Since there was obvious delay in completion of the development beyond 31.3.2006, the worst that could affect the petitioner is denial of a tax holiday by one year since he has completed development only in the year 2007 and almost at the fag end of the financial year of 2006-07. Consequently, the petitioner could at best be denied tax benefit or tax holiday for one financial year namely 2006-07. Since the tax holiday sought for by the petitioner dates back to almost a decade, it is necessary that the petitioner be granted the benefit one way or the other. Hence, it is imperative that the Committee adjudicates and passes an order within a period of three months, if not earlier, from the date of receipt of a copy of this order.
The connected petitions are disposed of in the light of the observations made and the opinion expressed in terms of the order passed in WP 3574/2010. Insofar as the connected petition in WP 25321/2009, the learned counsel for the revenue would point out that the petition is couched in generalities and there are various members of the
17 petitioner - federation who would generally seek to reopen the closed issues and would seek that the benefit of the order passed would apply to them across the board. This may not be possible for the reason that each of those members of the federation would have to demonstrate that the sequence of events and the dates involved would enable them to claim the benefit of the order and not otherwise. Hence it would be considered on a case to case basis. It is for the respondents to consider any such claim set up by the members of the Federation and it is made clear that it is only in respect of any applications that are pending that the benefit would be claimed by the members of the Federation and not by filing any fresh application.
Sd/-
JUDGE