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2011 (10) TMI 641 - HC - Income TaxBenefit of Section 80IA - grant the approval under Section 10(23G) - Held that - A reading of Section 10(23G) of the Income Tax Act shows that where an assessee makes an application in respect of the income by way of dividend or by way of long term funding in any enterprise or undertaking engaged in the business referred to under Section 80IA (4) or (3) or Section 80IB(10) approved by the Central Government, the same shall be exempted in the computation of income. Explanation (1) to Section 10(23G) defines infrastructure capital company and infrastructure capital fund . As far as infrastructure capital company is concerned, it is defined to mean company, which had made investment by way of acquiring shares or providing long term finance to an enterprise wholly engaged in the business referred to in this clause. It is no doubt true that Section 10(23G), inserted with effect from 01.04.1997, was subsequently omitted from the Statute. As the law then stood, given the definition of an eligible business under the provisions of Section 80IA and the fact that the assessee has taken on lease the windmill, which is infrastructure facility, I have no hesitation in allowing the Writ Petition, thereby quashing the order passed by the Central Board of Direct Taxes. Touching on the scope of Section 84 as it originally stood, later on substituted as Section 80J before its repeal, the Central Board of Direct Taxes, vide F.No15/5/63-IT (AI) dated 13.12.1963, pointed out that the benefit of Section 84 of the Income Tax Act 1961 (now Section 80J) attaches to the undertaking and not to the owner thereof. The successor will be entitled for the unexpired period of five years provided the undertaking is taken over as a running concern . As far as the present case is concerned, the reasoning of the Board went on the aspect of lease, a fact which does not stand in the way of the assessee claiming approval under Section 10(23G) or the relief under Sec 80IA(4).
Issues Involved:
1. Validity of the rejection of approval under Section 10(23G) of the Income Tax Act. 2. Interpretation of Section 80IA(4)(iv) and its applicability to the petitioner's case. 3. Consideration of lease agreements and their impact on eligibility under Section 80IA. 4. Compliance with principles of natural justice in the decision-making process by the Central Board of Direct Taxes (CBDT). Detailed Analysis: 1. Validity of the Rejection of Approval under Section 10(23G): The petitioner sought a Writ of Certiorarified Mandamus to quash the CBDT's order dated 11th April 2011, rejecting their application for approval under Section 10(23G) of the Income Tax Act. The petitioner had previously approached the Court challenging the rejection of approval, which was set aside due to a violation of natural justice principles. The case was remanded to the CBDT for reconsideration. Upon reconsideration, the CBDT rejected the application again, citing substantial changes in project verification, number of projects, and locations, as well as the nature of the lease agreements, which were not previously examined. 2. Interpretation of Section 80IA(4)(iv) and its Applicability: The petitioner argued that Section 80IA(4)(iv) does not distinguish between an owner and a lessee. The petitioner had previously received approval for the assessment years 2000-2001 to 2002-2003. They contended that the amendment to Section 80IA, which substituted 'industrial undertaking' with 'undertaking,' widened the scope of the benefit. The CBDT, however, rejected the application, stating that the petitioner did not have any windmill on lease before the agreements dated 28.03.2003, 30.03.2003, and 16.03.2002, and thus did not qualify for renewal under Section 10(23G). 3. Consideration of Lease Agreements: The petitioner had entered into lease agreements with M/s. Khivraj Motors Ltd. for the operation of windmills. The CBDT argued that the petitioner had taken over running windmills and attached equipment on lease, making the project ineligible under Section 80IA. The Board emphasized that Section 80IA(4) does not provide for approval to an undertaking that is only operating and maintaining a power plant. The petitioner countered that the section does not restrict the benefit to owners alone and that the lease agreements should not disqualify them from approval. 4. Compliance with Principles of Natural Justice: The Court noted that the petitioner had previously approached the Court due to the non-application of mind and violation of natural justice principles by the CBDT. The Court had directed the CBDT to reconsider the application, allowing the petitioner to file a fresh application and providing an opportunity for a hearing. Despite this, the CBDT rejected the application again, leading to the present writ petition. Conclusion: The Court held that the petitioner is entitled to the benefit under Section 80IA(4)(iv) as the section does not restrict the benefit to owners alone. The mere fact that the petitioner is a lessee does not disqualify them from claiming the deduction. The Court found that the CBDT had committed an error in rejecting the application based on the lease agreements and changes in project details. The Court allowed the writ petition, quashing the CBDT's order and directing them to grant approval under Section 10(23G) within eight weeks. Order: The Writ Petition is allowed, and the CBDT's order is set aside. The respondents are directed to grant approval under Section 10(23G) of the Income Tax Act and pass orders in accordance with law within eight weeks. No costs.
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