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TMI Blog2012 (5) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... ions prescribed therein have not been adhered to - Decided in favor of the assessee - ITA No. 1177/Hyd/2011 - - - Dated:- 10-10-2011 - G.C. Gupta, Chandra Poojari, JJ. K. Mythili Rani for the Appellant K.C. Devadas for the Respondent ORDER Chandra Poojari: This appeal by the Revenue is directed against the order of the CIT(A)-IV, Hyderabad dated 15.3.2011 for the assessment year 2007-08. 2. The Revenue raised the following grounds of appeal: 1. The ld. CIT(A) erred in holding that the assessee has received 'approval' and 'notification' from the Central Government and the same has not been withdrawn till date for any reasons and, as such the assessee is entitled to the benefit of exemption u/s. 80IA(4)(iii) of the Act. 2. The ld. CIT(A) erred in following the decision of the ITAT in the case of M/s. Meenakshi Infrastructure P. Ltd. vs. DCIT reported in 44 SOT 59. 3. The ld. CIT(A) failed to appreciate the fact that the assessee has failed to fulfil the conditions laid down by the Ministry of Commerce/CBDT that 90% of allocable area shall be earmarked for industrial use. 3. Brief facts of the case are that the assessee is a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who submitted a detailed report furnishing details of the tenants occupying the premises. Assessee also submitted details regarding the occupancy of the building. Lease deed copies with the tenants were obtained by the assessing officer from the assessee. Assessee also submitted certificates from the tenants, with regard to the activities being carried out by them. The information collected through filed enquiry as well as the information furnished by the assessee was summarised by the assessing officer in a chart which was made Annedure- 1 to the assessment order. On analysis of the details, it was noticed that the total area occupied by the tenants carrying out the proposed activities, as mentioned in the letter of approval of the Government of India, is much less than 90% of the total area. Assessee submitted a measurement certificate of the building from the architect M/s. Raga, according to which the total area of the Industrial park is 2,72,829 sq. ft. and the percentage of area occupied under the proposed activities to the total area worked out only to 34.91%. Assessee submitted before the assessing officer that excluding the floor area of 12968 sq. ft for common facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1389 sq.ft. (28.10%). 7. For the above reasons, 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. 8. The assessing officer further noted that the assessee in its explanation showed that an area under occupancy of M/s. India Cement Ltd. admeasuring 9699 sq.ft is utilised for 'Engineering Consultancy and partly commercial'. However, in the certificate issued by M/s. India Cement Ltd., it is mentioned that the space is used as regional office only. Besides the total area under the company is 78790 sq. ft. as per lease deed against 9699 sq. ft. as mentioned by the assessee. Besides, he noted, the assessee showed that the area under occupancy of M/s. Reddy's Laboratory admeasuring 16643 sq. ft. is utilized for 'Research and Medical Testing'. However, in the certificate issued by the said tenant company, it is mentioned that the space is used for 'the purpose of office support for RandD/Marketing Research'. From the certificate, it is clear that the space was utilized for office purpose only as against he claim of 'Research and Medical Testing'. Besides the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 'commercial purposes. With regard to the objection regarding difference in mentioning of the 'purpose of use' by M/s. India Cements Ltd. and M/s. Dr.Reddy's Laboratories Ltd., observing that the subsequent verification of the facts by the assessing officer showed that the said tenants were carrying out approved activities, he concluded that the objection raised is not sustainable. 11. Dealing with the working out of 90% of the net allocable area which is required to eb used for specified industrial purposes, the CIT(A) determined the total allocable area after exclusion of common facilities at 1,67,619, and accordingly took 90% thereof usable for specific industrial purposes at 1,50,857 and 10% thereof at 16,762. As for the correctness of the action of the assessing officer in adopting plinth area of the premises, for determining the percentage of usage for specific industrial purposes, the CIT(A) observed that it was after considering the total area comprising of both plinth area and common area that the rent for each premises was decided under the agreements, and as such it is the total area specified in the agreements that is to be considered as used for specified industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble ITAT in the case of Meenakshi Infrastructure P. Ltd. V/s. DCIT supra have opined that "when the Central Government approves the assessee's project under Industrial Park Scheme framed by the Central Government, the conditions under Sec.80IA(4)(iii) are satisfied". It is clear that while the appellant has received such 'Approval' and 'Notification' the same has not been withdrawn till the date for contravention of any of the conditions, even though there is a specific provision for withdrawal, in case the Central Government finds that he conditions prescribed therein have not been adhered. However, it is also clear that such withdrawal has to be done by the Central Government only and as long as this is not done, the assessee having such approval and notification cannot be denied the deduction. Under the circumstances, I am of the view that since the appellant had 'developed' the Industrial Park duly approved and notified by the Central Government and the same has not been withdrawn for any reason, the appellant would be entitled to the benefit of deduction under S.80IA(4)(iii)." 14. Aggrieved by the order of the CIT(A), Revenue is in appeal before us. 15. The Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer himself was totally confused as to the area constructed area, and the method of arriving at the allocable area, and though the assessee has furnished detailed clarifications and calculations including usage of the area for industrial activity purposes, and this fact has been acknowledged by the assessing officer himself, the assessing officer has not correctly understood the calculations, and proceeded to determine the matter in his own way. The learned counsel submitted that the CBDT, after analysing the details furnished by the assessee with the application for approval, and after satisfying itself as to the usage of the area, has notified the assessee's industrial park as an undertaking eligible for relief under S.80IA. He submitted that the occupants/users of the park as given to the assessing officer, are the same as in the list given to the CBDT. He submitted that list of tenants given in Annexure I of the assessment order is factually incorrect, as it leaves about 10260 sq. ft. of the office given to Avenion Limited on 1st Floor, 1604 sq. ft. office space given to Doosan Infrastructure Ltd. on the 1st floor of the complex; 3364 sq. ft. of office given to Papyrus S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other material on record. In this case the Assessing Officer denied the exemption u/s. 80IA of the Act on the sole reason that i) that the certified constructed area of 272829 sq. ft. was less than the area of 281273.97 sq. ft. proposed by the assessee. ii) that the assessee had sold out 5293 sq. ft. of the ground floor after receiving approval for the total area of the park. iii) that some of the tenants had shown different usage of the premises than that shown by the assessee. iv) that the assessee did not use 90% of the net allocable area for the specified industrial purposes. 20. According to the assessee total area including common area is at 1,49,543 sq. ft. which he has reconciled with reference to the assessment order as follows: (Figures in Sq. Ft.) Total area including common area as per Annexure-I of the Asst. Order 137526 Add: Area wrongly left out Name Floor Usage Area Avenion Ltd. 1st Software Devp. 10260 Doosan Infra Ltd. 1st Consultancy 1604 Barti Telecom. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,72,829 sq. ft. only. This 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. Further, out of the above developed area, the assessee sold 5,296 sq. ft. area. According to the Assessing Officer this is violation of conditions in the approval. Further the Assessing Officer objection is regarding the variation in the usage in the case of India Cements Ltd. and Dr. Reddy's Laboratory Ltd. but there is a clear-cut finding by the CIT(A) that sale of 10% out of the total allocable area cannot be considered as violation of the approval. The activity carried on by the India Cement Ltd. and Dr. Reddy's Laboratory Ltd., cannot be considered as outside the approved activities. These entities are carrying on R and D/technical services and marketing research and office support for R and D and marketing research. Being so, it is under the purview of the approved activities. Further as regards the objection that the assessee did not u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to 'to fix or to establish in a position, situation or locality, place, etc.'. It was held in the said case that since the assessee had completed the construction of all units and the entire infrastructure was ready, all the units had been made 'located' by the assessee in the industrial park. Applying the ratio of the above referred decision, therefore, it can be said that even if all of 1,50,718 sq. ft. had not been let out during the year, the entire area 'so developed' was ready and fit to be used for approved industrial purposes. Further, it has not been found that any part of such 1,50,718 sq. ft. was used for any commercial purpose during the year. In fact, it is contended by the assessee that out of the same, further areas, admeasuring 1434 sq. ft. and 1604 sq. ft. were let out and used for approved industrial purposes in the subsequent financial year, though the same were lying vacant in the year under consideration. The subsequent user of such area for specified purposes shows that those also were 'developed' and intended to be used for similar purpose in the year under appeal also, though the assessee had not been able to realise any rent from letting out the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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