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TMI Blog2012 (4) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the Commissioner (Appeals) and before the Income-tax Appellate Tribunal also, all these issues were decided on the merits. 3. It is averred that the respondents sought to reopen the assessment as could be seen from the communication dated October 1, 2009, made under section 148 read with section 147 of the Act for the assessment year 2005-06 mainly on the ground that the petitioner's industrial park was not notified by the Central Board of Direct Taxes till the end of relevant year and, there- fore, deduction made available under section 80-IA(4)(iii) of a sum of Rs.2,83,81,688 was wrongly claimed and granted. 3.1 The reasons for reopening also have been furnished which are recorded on September 24, 2009, and they read as under : "As per paragraph 5 of the letter of approval of the Investment Promotion and Infrastructure Development Cell, Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India, dated November 5, 2004, the following conditions in paragraph 9 of the Industrial Park Scheme, 2002, may particularly be noted for suitable compliance : (i) The inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for sale of 9 undertakings only. The indus- trial park did not commence during the year and there were no con- struction or manufacturing activities by any undertaking during the year. 2. As seen from the records that you have claimed deduction under section 80-IB(10) in respect of housing projects, the plots of which are owned by other companies and the BU certificate has also been received in the names of such companies. Give complete justification of deduction under section 80-IB(10) in respect of each project." 5. The assessee raised objections to the reassessment proceedings empha- sising therein that for the assessment year 2005-06, the assessee had filed return of income, declaring total loss of Rs. 67,45,092, where the assessee- company had claimed deduction under section 80-IA(4)(iii) for an amount of Rs. 2,83,81,688 and deduction under section 80-IB(10) of the Act for an amount of Rs. 8,05,36,675. The scrutiny assessment was finalised under section 143(3) of the Act on February 22, 2007, determining total income at Rs. 6,57,743 ; after allowing deduction under section 80-IA(4)(iii) and sec- tion 80-IA(10) of the Act. The loss denied to be carried forward was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company is engaged in the business of development of industrial parks pursuant to the Industrial Park Scheme, 2002, as per the approval granted by the Ministry of Commerce and Industry, vide its letter dated November 5, 2004. In short, the petitioner-assessee contended that all the requisite criteria for availing of the benefit under section 80-IA(4)(iii) of the Act are duly fulfilled by the petitioner and it has in turn made the petitioner eligible for the deductions. Accordingly, request is made to drop the proceedings under section 147 of the Act on all the grounds mentioned hereinabove. 8. The said objections have been dealt with at length by the Assessing Officer, vide its order dated December 8, 2010, while disposing of the objections raised against the reasons recorded for reopening the assess- ment of the petitioner-company for the year under consideration. The impugned order is also challenged along with the notice of reassessment. 9. On due service of notice, the Deputy Commissioner of Income-tax, Cir- cle IV, Ahmedabad, has filed an affidavit-in-reply urging, inter alia, that the petition is preferred at a pre-matured stage inasmuch as there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of Rs. 67,45,092. The petitioner filed a revised return on January 3, 2006, declaring the same amount of loss and also computing the book profit under section 115JB of the Act at Rs. 10,18,01,672 and paid tax on the MAT income. Assessment was finalised in February, 2007, where, its income was assessed to Rs.10,18,01,672 under section 115JB of the Act as the tax payable under the MAT provision was higher than the tax calculated under regular provisions of the Income-tax Act. This assessment order was challenged before the Commissioner of Income-tax (Appeals) which confirmed partly the view of the Assessing Officer and on the issue of taxability under section 115JB, it confirmed the Assessing Officer's findings. The Commissioner of Income- tax (Appeals)'s order was further carried in appeal before the Income-tax Appellate Tribunal and after elaborately dealing with the scheme of the Income-tax Act, it held that the petitioner could not be allowed deduction under section 80-IB while computing the book profit under section 115JB of the Act as the "book profit" and "total income" have to be computed independently. While arriving at such findings, the adjudicating authorities extens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilities for minimum 30 units and the last date for implementation of the Scheme was March 31, 2006, for those companies which provide such industrial parks at the relevant date, the tax benefit under section 80-IA(4)(iii) was available and such deduction was claimed for the assess- ment year 2005-06 and after scrutiny assessment, the same was allowed, however, when in subsequent year such benefit was claimed, the State did not notify the park in terms of sub-rule (2) of rule 18C of the Rules despite the petitioner having developed such a park and having completed all the developmental works within the stipulated period, i.e., March 31, 2006. After considering elaborate submissions of both the sides, that petition came to be allowed, vide order dated August 10, 2011. The impugned notice was quashed directing the respondents to take consequential steps for issuance of the notification in terms of rule 18C(4) of the Income-tax Rules, 1962, with respect to the said industrial park, by holding thus (pages 446-450) : "Having thus heard learned counsel for the parties, we would like to record relevant provisions of the Scheme and other connected documents. The said Scheme was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of industrial use specified in Explanation to paragraph 6 sub-clause (c)'. The Explanation to paragraph 6 sub-clause (c) of the Scheme pro- vides 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. 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. Clause (8) of the Scheme pertains to withdrawal of approval and reads as under : '8. Withdrawal of approval.-The Central Government may with- draw the approval given to an undertaking under this Scheme when such undertaking fails to comply with any of the conditions of grant of approval : Provided that before withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial 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. 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 indi- cate 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. Having taken note of the provisions of the Scheme and other related documents, we may also, at this stage, take note of rule 18C ofthe Income-tax Rules, 1962 which pertains to eligibility of industrial parks and special economic zones for benefits under section 80- IA(4)(iii). The said rule 18C of the Rules read as under : '18C. Eligibility of industrial parks and special economic zones for be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income-tax Act, 1961 ; as appli- cable 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 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 indus- trial 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 the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the trans- f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfrastructural 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. In the Advanced Law Lexicon by P. Ramanatha Aiyar (2009 edi- tion), 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 posi- tion ; 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. Similarly, in Black's Law Dictionary, the term 'location' has been explained as to mean, 'the specific place or position of a person or things ; the act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 con- ditions of approval assessing the period when the tax benefit is avail- able. 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 con- tinue 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 rea- sons such as non-availability of market for their product or non-avail- ability of raw materials, or even labour problems. Would in such a case the petitioner be den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sell of the plots and had indi- rectly 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 infrastruc- tural 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 exist- ence and commence their production activities. 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 Government has issued a show-cause notice calling upon the petitioner to answer to certain queries. However, the proposal to withdraw the approval is only on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue has become one of academic interest. We, therefore, leave this question open. In the result, the impugned notice dated February 16, 2009, is quashed. Consequently, the respondents, and in particular, respon- dent No. 2 shall take consequential steps to ensure that necessary notification in terms of rule 18C(4) of the Income-tax Rules, 1962 ; as prevalent at the relevant time, is issued by the Central Board of Direct Taxes with respect to the petitioner's industrial park. Direct service is permitted." 13. As held hereinabove, only on scrutiny assessment the total income of the petitioner was determined after allowing deductions under section 80-IA(4)(iii) and section 80-IA(10) and the assessment was finalised, assessing the income at Rs. 10,18,01,672, this matter was also carried right up to the Tribunal. There being nothing on record to point out any new material justifying issuance of the notice for reassessment ; the notice for reopening within the period of four years from the end of the relevant assessment year is not found sustainable. It is also required to be noted that while disposing of the objections, it was harped upon the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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