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2021 (5) TMI 280 - AT - Income TaxRevision u/s 263 - deduction u/s 80IA(4)(iii) - HELD THAT - We find force in the contention of the ld. AR of the assessee that when deduction u/s 80IA(4) has been granted in first year of claim the same cannot be denied in subsequent years, unless the assessee has changed the original terms and conditions in the first year while fulfilling for the granting deduction in the first year of operation. On perusal of the documents, we did not notice any deviation from the first year of operation. The revenue side also could not bring any such deviation to establish that the assessee has changed the original terms and conditions from the first year of operation. Even the coordinate benches of this Tribunal in assessee s own case in earlier AYs has allowed the assessee s claim of deduction u/s 80IA(4) of the Act. In view of this, in our considered opinion, the order passed by the AO is not erroneous and prejudicial to the interests of revenue as alleged by Pr. CIT. Therefore, we quash the order passed by the Pr. CIT u/s 263 of the Act in the impugned AY and restore the order of AO. Appeal of the assessee is allowed.
Issues Involved:
1. Validity of jurisdiction under section 263 of the Income Tax Act. 2. Denial of deduction under section 80IA of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of Jurisdiction under Section 263 of the Income Tax Act: The Principal Commissioner of Income Tax (Pr. CIT) exercised powers under section 263 of the Income Tax Act, 1961, to revise the assessment order passed under section 143(3). The Pr. CIT observed that the assessment order was erroneous and prejudicial to the interests of revenue because the Assessing Officer (AO) did not verify the conditions for deduction under section 80IA(4)(iii). The Pr. CIT noted that the AO failed to examine whether the industrial park commenced operations before the stipulated date and whether the required number of units was established. The Pr. CIT issued a show cause notice to the assessee and subsequently directed the AO to revise the assessment order by disallowing the deduction under section 80IA(4)(iii). 2. Denial of Deduction under Section 80IA of the Income Tax Act: The assessee claimed a deduction under section 80IA(4)(iii) for developing an industrial park. The Pr. CIT observed that the assessee did not fulfill the conditions for this deduction, specifically the commencement date and the establishment of the required number of units. The Pr. CIT noted discrepancies in the occupancy certificates and fire NOCs for some buildings, leading to the conclusion that the industrial park was not completed by the stipulated date. Detailed Analysis: Jurisdictional Validity: The assessee argued that once the deduction under section 80IA(4) was granted in the first year, it could not be denied in subsequent years unless there was a change in the original terms and conditions. The assessee relied on the decisions of the ITAT in its own case for earlier years, where it was held that the eligibility for deduction should be tested in the first year of the claim. The ITAT had previously ruled that the Central Government's approval for the industrial park was valid and not withdrawn, entitling the assessee to the deduction. The assessee contended that the Pr. CIT had no jurisdiction to adjudicate on compliance with the conditions of approval granted by the Ministry of Commerce and Industry. The power to withdraw approval rested with the Central Government, not the tax authorities. Merits of the Deduction: The assessee argued that the approval for the industrial park was granted under the Industrial Park Scheme, 2002, which did not require obtaining a building occupancy certificate (OC) to mark the commencement of the park. The requirement for an OC was introduced in the Industrial Park Scheme, 2008, which was not applicable to the assessee. The assessee maintained that all buildings were ready before the cut-off date, and any delays in obtaining fire NOCs were due to procedural issues, not non-compliance. The ITAT examined the facts and found that the assessee had applied for the necessary approvals before the stipulated date. The ITAT referred to various judicial pronouncements supporting the view that once a deduction is granted in the first year, it cannot be withdrawn in subsequent years unless there are significant changes in the conditions. Conclusion: The ITAT quashed the order passed by the Pr. CIT under section 263, restoring the original assessment order. The ITAT held that the AO's order was not erroneous and prejudicial to the interests of revenue. The ITAT emphasized that the eligibility for deduction under section 80IA(4)(iii) should be tested in the first year, and the tax authorities could not re-examine the conditions in subsequent years without new facts. The ITAT also noted that the Pr. CIT had no jurisdiction to adjudicate on compliance with the conditions of approval granted by the Ministry of Commerce and Industry.
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