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2021 (8) TMI 768 - AT - Income TaxBenefit of section 80IA(4)(iii) - independent and distinct units - DR submitted that the Hon ble High Court has directed that the assessee would be entitled to tax exemption only in accordance with law and the CIT(A) without examining whether the assessee is operating more than three independent units, had allowed the appeals of the assessee - HELD THAT - Hon ble High Court has restored the approval dated 13.04.2016 in 2015 (11) TMI 1735 - KARNATAKA HIGH COURT and held no condition imposed in the non-automatic route has been violated. It was held by the Hon ble High Court that the conditions enumerated in section 6(f) of IPS 2002 is only applicable to automatic route. The Hon ble High Court further held that the assessee has established 16 independent and distinct units allocated to TCS and this is evident from the documentary evidence that are placed on record, such as certificate issued by the Joint Director, District Industrial Centre, Certificate from the Department of Information Technology, Biotechnology and Science and Technology, Government of Karnataka,etc. The judgment of the single Bench of the Hon ble jurisdictional High Court was confirmed by the Division Bench of the Hon ble High Court in 2019 (8) TMI 1597 - KARNATAKA HIGH COURT . Since the Hon ble High Court has categorically held that there is no violation of the condition imposed and has restored the approval dated 13.04.2016 and has further found that the assessee is having independent and distinct 16 units, i.e., let out to TCS, we hold that the CIT(A) is justified in directing the A.O. to grant deduction u/s 80IA(4)(iii) - Decided against revenue.
Issues Involved:
1. Interpretation of the interim order dated 16.03.2017 by the Karnataka High Court regarding tax exemption. 2. Compliance with conditions for treating 16 ODCs of M/s TCS as separate units. 3. Adherence to the Industrial Scheme 2002 conditions. 4. Validity of the CIT(A)'s acceptance of the 16 ODCs as independent taxable units. 5. Requirement of notification by CBDT for tax benefits under section 80IA(4)(iii). Detailed Analysis: 1. Interpretation of the Interim Order Dated 16.03.2017: The Revenue argued that the CIT(A) misinterpreted the Karnataka High Court's interim order, which stated that the assessee shall be entitled to tax exemption "in accordance with law," and not mandating compulsory tax exemption. The CIT(A) was claimed to have erred in interpreting the order as granting unconditional tax exemption to the assessee. 2. Compliance with Conditions for Treating 16 ODCs as Separate Units: The Revenue contended that the CIT(A) erred in accepting the 16 ODCs of M/s TCS as separate units without considering the conditions necessary to treat them as such. The conditions laid down in Para 4 of the CBDT notification dated 01.03.2018 remained in dispute. The Assessing Officer (A.O.) had earlier observed that the 16 units were not independent and distinct, leading to the denial of the benefit under section 80IA of the I.T. Act. 3. Adherence to the Industrial Scheme 2002 Conditions: The assessee was required to comply with the Industrial Park Scheme 2002 conditions, which included not allowing any single unit to occupy more than 50% of the allocable industrial area. The A.O. found that the assessee had breached this condition, as TCS occupied more than 90% of the area. The DIPP had withdrawn the approval granted to the assessee, which was later contested in court. 4. Validity of the CIT(A)'s Acceptance of the 16 ODCs as Independent Taxable Units: The CIT(A) accepted the 16 ODCs as independent taxable units based on the Karnataka High Court's judgment, which restored the approval granted to the assessee. The High Court found that the conditions for the non-automatic route were not violated and that the 16 units were independent and distinct. The CIT(A) directed the A.O. to grant the benefit of section 80IA(4)(iii) of the I.T. Act. 5. Requirement of Notification by CBDT for Tax Benefits: The Revenue argued that the CIT(A) allowed the appeals without examining whether the assessee had obtained the necessary notification from the CBDT, which was essential for claiming tax benefits under section 80IA(4)(iii). The CBDT issued the notification on 01.03.2018, subject to the outcome of the Writ Appeal. Conclusion: The Tribunal upheld the CIT(A)'s order, stating that the Karnataka High Court had categorically held that there was no violation of the conditions imposed and had restored the approval dated 13.04.2016. The High Court found that the assessee had established 16 independent and distinct units allocated to TCS. Consequently, the CIT(A) was justified in directing the A.O. to grant the deduction under section 80IA(4)(iii) of the I.T. Act. The appeals filed by the Revenue were dismissed. Order Pronounced: The appeals were dismissed, and the CIT(A)'s order was upheld as correct and in accordance with law. The judgment was pronounced on 17th August 2021.
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