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2012 (5) TMI 501 - AT - Income TaxDeduction u/s 80IA(4)(iii) - the assessing officer concluded that the assessee could not fulfil the conditions attached to the approval granted by the Ministry as well as CBDT for the Industrial Park - minor variation in construction cannot alter the fact that assessee made investment in developing the Industrial Park and also we cannot hold that the area so developed is not sufficient to locate the minimum number of three industrial units as specified in the approval by Ministry of Commerce, Government of India - Assessing Officer has opined that even if the assessee had not let out or used all of such 1,50,718 sq. ft. for approved industrial purposes during the year, it cannot be denied that all of such area had been developed as per the approval of the Central Government and was fit to be used for the specified industrial purposes - Held that while the assessee has received such approval and notification, the same has not been withdrawn till date for contravention of any of the conditions, even though there is a specific provision for withdrawal, in case the Central Government finds that the conditions prescribed therein have not been adhered to - Decided in favor of the assessee
Issues Involved:
1. Whether the assessee is entitled to the benefit of exemption under Section 80IA(4)(iii) of the Income Tax Act. 2. Compliance with conditions laid down by the Ministry of Commerce/CBDT for the Industrial Park Scheme, 2002. 3. Validity of the CIT(A)'s reliance on the decision of ITAT in the case of M/s. Meenakshi Infrastructure P. Ltd. vs. DCIT. 4. Assessment of the allocable area for industrial and commercial use. Detailed Analysis: 1. Entitlement to Exemption under Section 80IA(4)(iii): The primary issue was whether the assessee, a partnership firm engaged in construction, was entitled to the benefit of deduction under Section 80IA(4)(iii) of the Income Tax Act. The assessee claimed deduction on the grounds that Block III of White House had been notified as an Industrial Park under the Industrial Park Scheme, 2002, and had received approval from the Ministry of Commerce and CBDT. The Assessing Officer (AO) denied this claim, arguing non-compliance with the conditions specified by the approving authority. 2. Compliance with Conditions Laid Down by the Ministry of Commerce/CBDT: The AO contended that the assessee failed to comply with the conditions specified in the approval letter from the Ministry of Commerce, which required 90% of the allocable area to be earmarked for industrial use. The AO's investigation revealed that only 34.91% of the area was used for the proposed industrial activities, contrary to the stipulated 90%. Furthermore, the AO noted discrepancies in the usage of space by tenants such as M/s. India Cement Ltd. and M/s. Dr. Reddy's Laboratories Ltd., which were used for office purposes rather than the approved industrial activities. 3. Validity of CIT(A)'s Reliance on ITAT Decision: The CIT(A) relied on the ITAT's decision in the case of M/s. Meenakshi Infrastructure P. Ltd. vs. DCIT, which held that once the Central Government approves a project under the Industrial Park Scheme, the conditions under Section 80IA(4)(iii) are satisfied. The CIT(A) noted that the Central Government's approval had not been withdrawn, and therefore, the assessee was entitled to the deduction. The CIT(A) also observed that minor variations in constructed area and the sale of a small portion of the area did not constitute a violation of the conditions laid down in the approval. 4. Assessment of Allocable Area: The AO and the CIT(A) had differing views on the calculation of the allocable area. The AO calculated the net allocable area as 177,165 sq. ft., while the assessee argued that the total allocable area was 149,396 sq. ft. The CIT(A) determined the total allocable area after excluding common facilities to be 1,67,619 sq. ft., with 90% (1,50,857 sq. ft.) to be used for industrial purposes and 10% (16,762 sq. ft.) for commercial purposes. The CIT(A) concluded that the assessee had used 89.92% of the total area for industrial purposes, which was almost 90%, thereby meeting the requirement. Conclusion: The ITAT upheld the CIT(A)'s decision, concluding that the assessee was entitled to the benefit of deduction under Section 80IA(4)(iii). The Tribunal noted that the Central Government's approval had not been withdrawn, and the conditions laid down in the approval were substantially met. The Tribunal emphasized that minor variations and the sale of a small portion of the area did not constitute a violation of the approval conditions. The appeal by the Revenue was dismissed, affirming the CIT(A)'s order. Order Pronounced: The appeal by the Revenue was dismissed, and the order was pronounced in the open court on 30.11.2011.
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