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TMI Blog2011 (8) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... IL KURESHI, SONIA GOKANI MS., JJ. JUDGMENT Akil Kureshi J.- 1. The petitioner-company, registered under the Companies Act, 1956, has challenged the communication dated February 16, 2009, issued by respondent No. 2 proposing to withdraw the approval of an industrial park constructed by the petitioner. The petitioner has further prayed for a direction to respondent No. 1 to notify the said industrial park of the petitioner under rule 18C of the Income-tax Rules, 1962. The issue arises in the following factual background : 2. The petitioner desired to develop an industrial park in the nature of "pharmaceutical park" in terms of the Industrial Park Scheme, 2002 (hereinafter referred to as, "the Scheme"). The petitioner applied for the above purpose to the Ministry of Commerce on August 6, 2002, for granting approval for setting up of such a park in terms of the said Scheme. The said approval was granted by the ministry on November 5, 2004. 3. It is the case of the petitioner that the petitioner completed all works by developing infrastructural facilities. The petitioner was also required to make six monthly progress reports. Eventually, according to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging 32 units, only four units had been set-up and none of the units were functional as on April 25, 2008. Based on such material, Central Board of Direct Taxes sent a communication to the Ministry of Commerce and Industries dated December 24, 2008, stating as under : "The undersigned is directed to refer to DIPP OM No. 15/21/04 IP and ID dated January 2, 2008, on the subject above and to enclose herewith a copy of the report of the Chief Commissioner of Income-tax, Ahmedabad, in the matter, I am further directed to request you to consider withdrawing the approval accorded to the undertaking, viz., M/s. Ganesh Housing Corporation Ltd., vide letter No. 15/21/04-IP and ID dated November 5, 2004, under clause 8 of the Industrial Park Scheme, 2002, for the failure to develop the industrial park by the prescribed date." 8. On the basis of such communication, the Ministry sent the impugned communication dated February 16, 2009, to the petitioner indicating that the Central Board of Direct Taxes had, in view of the fact that only four units having come up in the park, requested to withdraw the approval accorded to the petitioner. Under the circumstances, it is proposed to withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ministry which was necessary. It could not have been guided by the opinion of the Central Board of Direct Taxes. 13. On the other hand, learned counsel for the Central Board of Direct Taxes took us through various provisions of the Scheme and other related documents to contend that the Scheme envisages creation of the industrial parks which should become functional before the last date, i.e., March 31, 2006. He submitted that mere providing infrastructural facilities would not satisfy such a requirement. In the present case, upon verification, it was found that only four out of 32 units had put up their plants and on the date of inspection not a single unit was functional. He, therefore, submitted that the proposal for withdrawal of the approval of the park was justified. The petition should, therefore, be dismissed. 14. Learned Assistant Solicitor General Mr. P. S. Champaneri appearing for the Ministry submitted that the petitioner had approached against a show- cause notice. The petition, therefore, should not be entertained. He submitted that the petitioner would have full opportunity to raise all contentions before the authorities. 15. Having thus heard learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk for development of infrastructural facilities or built-up space with common facilities in any area allotted or earmarked for the purposes of industrial use specified in Explanation to paragraph 6 sub-clause (c)". 20. The Explanation to paragraph 6 sub-clause (c) of the Scheme provides that for the purpose of this clause, the industrial use shall include any activity defined in the National Industrial Classification 1987 Code except certain industries excluded therein. 21. We may notice that clauses 5 and 6 of the said Scheme pertain to automatic approval and criteria for automatic approval of such industrial parks. Whereas clause 7 pertains to non-automatic approval. We are, however, not directly concerned with such niceties, except for recording that in cases of an industrial park referred to in clause (b) of paragraph 4, viz., industrial park for development of infrastructural facilities, the minimum number of units to be provided in such park is 30. 22. Clause 8 of the Scheme pertains to withdrawal of approval and reads as under : "8. Withdrawal of approval.-The Central Government may withdraw the approval given to an undertaking under this Scheme when s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... *Expected/actual date of commencement of industrial model town/industrial park/growth centre. * The expected/actual date of commencement of industrial model town/industrial park/growth centre denotes the date when all the infrastructural facilities for the proposed number of industrial units have been provided. If the park is proposed to be developed in phases, the details information on the same may be also suitably mentioned along with the application. 24. In terms of paragraph 9(5) of the Scheme, the developer has to submit 6 monthly progress reports. Form IPS-II prescribes proforma for such reports. Paragraph 5 thereof, inter alia, pertains to number of industrial units in the project ; paragraph 7 requires developer to indicate briefly the effective steps taken towards implementation, e.g., installation of common facilities, number of units sold or leased, number of units commencing the industrial activity. 25. Having taken note of the provisions of the Scheme and other related documents, we may also, at this stage, take note of rule 18C of the Income- tax Rules, 1962, which pertains to eligibility of industrial parks and special economic zones for benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... park. In view of this, one has to ascertain what exactly were requirements which the petitioner was to fulfil. Section 80-IA(4)(iii) of the Income-tax Act, 1961, as applicable at the relevant time, read as under : "80-IA. Deductions in respect of profits and gains from industrial undertakings or enterprise engaged in infrastructure development, etc.-(1) . . . (iii) Any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997, and ending on the 31st day of March, 2006 : Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999, or a special economic zone on or after the 1st day of April, 2001, and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner had fulfilled all the requirements for availing of the tax benefits. The petitioner was required to develop the infrastructural facilities. In short, the petitioner was required to set up an industrial park with all infrastructural facilities to enable the pharmaceutical industries to set up their units on the plots so allotted. The term "locate" used in sub-clause (2) of clause 9 of the Scheme must be viewed from the angle of having allocated the plots to the producing industries. 31. In the Advanced Law Lexicon by P. Ramanatha Aiyar (2009 edition), while explaining the term "locate", it is stated that according to the context the word may be employed as meaning : To ascertain and determine the place of ; to state the locality of ; to designate the site or place of ; to determine the situation or limits. So, according to the context, it may mean to direct, or to lead to ; to fix in place ; to select or determine the bounds or place ; to set in a particular spot or position ; as applied to land, to select, survey, and settle the boundaries of a particular tract of land, or to designate a particular portion of land by limits. 32. Similarly, in Black's Law Dictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries to set up their industry in such a park. Such manufacturing units or the intending industries were in no way under the control of the petitioner. There can be variety of reasons why such industries may not be able to start their units, such as, non-availability of funds for setting up of the units, pending approval and clearances from the Government and other agencies and such similar reasons which can be attributed only to the intending industries and not to the petitioner. In fact, the scheme requires that the petitioner not only fulfil but continue to fulfil all conditions of approval assessing the period when the tax benefit is available. If we accept the strict requirements insisted by the respondents, it would mean that not only that to that number of industrial units indicated in the application for approval of industrial park must be operational on the last date of expiry of the Scheme, they must continue to operate till the petitioner avails of all the tax benefits. In a given situation, it may happen that the number of units, after initially coming into existence, may have to be closed down for variety of reasons such as non-availability of market for their produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly sold by the petitioner before the last date envisaged under the Scheme, i.e., March 31, 2006. There is no allegation that infrastructural facilities were not provided because of which industrial units of the industries which purchased such plots could not be set up. It is also not an allegation of the respondents that the petitioner had only shown benami sales of the plots and had indirectly held on to such property for profiteering at a future date, only seeking to derive the benefit of price escalation in real estate. That being the situation, to our mind as per the Scheme, what was required to be done by the petitioner was to provide for infrastructural facilities before the last date envisaged under the Scheme. Thereafter, there was no obligation on the part of the petitioner to ensure that industrial units on such plots must also come into existence and commence their production activities. 37. In view of the above conclusion, we are of the opinion that the petitioner has made out a case for interference even at this stage. We are conscious that the petitioner has approached the court at a stage where the Government has issued a show-cause notice calling upon the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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