2018 (9) TMI 956 - AT - Income Tax

Eligibility to deduction of Profits in terms of Section 80-IA(4)(iii) - Approval as granted by the Ministry of Commerce and Industry, Govt. of India - Held that - As decided in assessee s own case once approval was granted by the Ministry of Commerce and Industry, Govt. of India to the assessee, the CBDT was duty bound to notify the Industrial Park / STP for benefits under section 80 IA of the Act, without any further investigation as to whether the assessee had complied with the terms and conditions envisaged in the scheme. In the light of the decision in the case of Creative Infocity Ltd. (2012 (4) TMI 117 - GUJARAT HIGH COURT ), we find substantial merit in the contention of the assessee that the Notification to be issued by CBDT is only a formality once the approval is granted by the Ministry of Commerce & Industry, Govt. of India, and, therefore, hold that once the CBDT Notification is issued, the assessee is entitled to the benefits under section 80 IA (4)(iii) from the date of approval by Ministry of Commerce and Industry, Govt. of India, subject to the compliance of the terms and conditions specified therein. There is nothing to suggest that the benefits of the deduction under section 80 IA (4)(iii) of the Act are available only from the date of Notification by the CBDT. We, therefore, hold that the assessee is entitled for deduction under section 80 IA (4)(iii) of the Act for both Assessment Years 2007-08 & 2008-09; the two years under consideration - Decided in favour of assessee

Summary

Issues Involved:

1. Deduction of Profits under Section 80-IA(4)(iii)
2. Penalty Proceedings under Section 271(1)(c)
3. Stay on Collection of Penalty

Issue-wise Detailed Analysis:

1. Deduction of Profits under Section 80-IA(4)(iii):

The primary issue revolves around the deduction of profits under Section 80-IA(4)(iii) of the Income-tax Act, 1961. The assessee, engaged in the operation and maintenance of an industrial park, claimed this deduction for the assessment year 2012-13. The Assessing Officer (AO) denied the deduction, arguing that the assessee did not fulfill the necessary parameters. The AO’s contention was based on the fact that the assessee failed to provide sufficient evidence and approvals to justify the deduction.

Upon appeal, the Commissioner of Income-tax (Appeals) [CIT(A)] overturned the AO’s decision, citing previous ITAT rulings in favor of the assessee for earlier assessment years (2007-08 to 2011-12). The CIT(A) emphasized that there were no material changes in facts for the year under consideration compared to earlier years. The CIT(A) followed the precedent set by the ITAT and allowed the deduction.

The ITAT, upon reviewing the case, reiterated its earlier decisions. It noted that the assessee had obtained the necessary approval from the Ministry of Commerce and Industry and that the Central Board of Direct Taxes (CBDT) notification was merely a formality once such approval was granted. The ITAT referenced the Gujarat High Court’s decision in Creative Infocity Ltd., which supported the view that the CBDT was obligated to notify the industrial park for benefits under Section 80-IA without further investigation once the Ministry's approval was in place. Consequently, the ITAT upheld the CIT(A)’s decision, allowing the deduction for the assessee.

2. Penalty Proceedings under Section 271(1)(c):

The second issue pertains to the penalty proceedings initiated under Section 271(1)(c) of the Income-tax Act, which deals with penalties for concealment of income or furnishing inaccurate particulars of income. The AO had initiated these proceedings against the assessee.

However, given the ITAT’s ruling in favor of the assessee regarding the deduction under Section 80-IA(4)(iii), the basis for the penalty under Section 271(1)(c) was effectively nullified. Since the primary contention of the AO was dismissed, the penalty proceedings under Section 271(1)(c) were also set aside.

3. Stay on Collection of Penalty:

The third issue involved the assessee’s request to stay the collection of penalties until the disposal of the appeal. Given the ITAT’s decision to dismiss the Revenue’s appeal and uphold the CIT(A)’s order allowing the deduction, the request for a stay on the collection of penalties became moot. The penalty proceedings were set aside, and thus, there was no penalty to collect.

Conclusion:

The ITAT dismissed the Revenue’s appeal, upheld the CIT(A)’s decision to allow the deduction under Section 80-IA(4)(iii), and set aside the penalty proceedings under Section 271(1)(c). The ITAT’s decision was consistent with its earlier rulings in the assessee’s favor for previous assessment years. The order was pronounced in the open court on 10th September 2018.