2020 (11) TMI 777 - HC - Income Tax

Deduction u/s 80IA(4)(iii) - 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 - tribunal allowed deduction holding that unit means separate floo r- HELD THAT - 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.

Summary

Issues involved:
1. Interpretation of eligibility criteria for deduction under section 80IA(4)(iii) of the Income Tax Act, 1961.
2. Definition of "unit" for the purpose of claiming deduction.

Analysis:

Issue 1: Interpretation of eligibility criteria for deduction under section 80IA(4)(iii) of the Income Tax Act, 1961

The appeal before the Karnataka High Court pertained to the Assessment Year 2006-07 and raised substantial questions of law regarding the eligibility of the assessee for claiming a deduction under section 80IA(4)(iii) of the Income Tax Act. The Tribunal had previously held that the assessee was eligible for the deduction despite the assessing officer noting non-fulfillment of conditions laid down by the Ministry of Commerce. The High Court, in its judgment dated 09.11.2020, decided to quash the Tribunal's order, emphasizing the need for a fresh decision. The Court directed the Tribunal to re-examine whether the assessee had complied with the conditions specified in the Industrial Park Scheme, 2002 to determine the eligibility for claiming the deduction under Section 80IA(4)(iii) of the Act.

Issue 2: Definition of "unit" for the purpose of claiming deduction

Another substantial question of law raised in the appeal was the interpretation of the term "unit" in the context of claiming deductions under the Income Tax Act. The Tribunal had construed "unit" to mean a separate floor, while the appellant argued that the legislative intent was to encourage the creation of more businesses rather than more floors in a building. The High Court did not delve into this issue in detail but directed the Tribunal to reconsider the matter afresh, indicating that the Tribunal should determine whether the assessee fulfilled the conditions of the Industrial Park Scheme, 2002 and was eligible for the deduction under Section 80IA(4)(iii) without specifically addressing the definition of "unit."

In conclusion, the High Court disposed of the appeal, setting aside the Tribunal's order and instructing a fresh examination of the matter to ascertain the assessee's compliance with the prescribed conditions for claiming the deduction under Section 80IA(4)(iii) of the Income Tax Act.