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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 ..... 3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of construction. The assessee's income includes income from house property and business income derived from sale of flats in Block Nos. I and II of White House constructed by it. The assessee had shown sale proceeds in respect of Block II at Rs. 79,04,900 besides showing rental income of Rs. 5,22,23,691 from the said block. The entire net profit from Block II shown at Rs. 3,93,90,365 had been claimed as deduction u/s. 80IA(4)(iii) on the ground that Block III of White House has been notified as an Industrial Park under the Industrial Park Scheme, 2002. According to the assessee, Block III had been operated and maintained as an industrial park in terms of section 80IA(4)(iii) after obtaining approval from the Ministry of Commerce, Government of India, as well as from the CBDT, New Delhi. According to the Assessing Officer, the assessee has not complied with the conditions specified by the approving authority, viz. the Ministry of Commerce. The assessing officer extracted para 4 of the letter of Ministry of Commerce dated 25.9.2006 in this behalf, which reads as follows- "4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer that excluding the floor area of 12968 sq. ft for common facilities, the total area available for leasing out is 154671, and deducting therefrom the area sold in the ground floor, duly offering the income from such sale to tax, of 5293 sq. ft., balance area comes to 149378. On that basis, submitting a list of tenants with the area under their occupation and activities undertaken by them, assessee submitted before the assessing officer that more than 90% area was allocated for use by the tenants for approved activities. 5. The assessing officer was not convinced with the above explanation of the assessee. According to him, as per the assessee's application, the total area of the industrial park was 281273.97 sq. ft, and deducting therefrom the area of common facilities of 104108, the net allocable area works out to 177165 sq. ft. As against this, the assessing officer noted, the assessee constructed a total area of 2,72,829, which is less than the approved area of 281273.97 sq. ft. On this count itself, according to the assessing officer, assessee violated one of the conditions, subject to which approval was granted by the Government. Besides, assessee has sold o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for office purpose only as against he claim of 'Research and Medical Testing'. Besides the total area under the said company was 13941 sq. ft. as per the lease deed as against 16643 sq. ft. mentioned by the assessee. 9. In view of the above, the assessing officer, concluding that the assessee has failed to fulfil the conditions mentioned in para-1 of the letter of the Government, granting approval to the assessee, which were as per the proposal made by the assessee itself, rejected the claim of the assessee for deduction under S.80IA(4)(iii) of the Act. 10. On appeal, the CIT(A) after noting the facts of the assessee and the submissions of the parties at length, noted in the first place that as per the approval received, the proposed area of the Industrial park was 26,130.99 sq.mts. and the percentage of allocable area earmarked for industrial use was 90% whereas that earmarked for commercial use was 10% and the proposed number of Industrial units to be located in the industrial park was 03. He also noted that in view of the approval given by the Central Government, the CBDT, vide notification dated 20.2.2006 notified the undertaking, being developed and maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it is the total area specified in the agreements that is to be considered as used for specified industrial purposes by the respective parties. Taking note of the areas let out for commercial purposes, the CIT(A) observed that even if the area sold of 5,293 sq. ft. is considered as used for commercial purposes, the total of the area used for commercial purposes comes to 16,901, and consequently, after excluding the area of 16,901 considered as used for commercial purposes, the allocable area left is 1,50,718, which happens to be 89.92% of the total area, i.e. almost 90%. 12. The CIT(A) found no merit in the view taken by the assessing officer 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, and for this purpose relied on the decision of the Hyderabad Bench of the Tribunal in the case of Meenakshi Infrastructures P. Ltd. V/s. DCIT (44 SOT 59) in this behalf. 13. The CIT(A) ultimately held that the assessee would be enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under S.80IA(4)(iii)." 14. Aggrieved by the order of the CIT(A), Revenue is in appeal before us. 15. The Learned Departmental Representative strongly supporting the order fo the assessing officer submitted that the assessee has failed to fulfil the conditions laid down by the Ministry of Commerce/CBDT that 90% of the allocable area shall be earmarked for industrial use, and consequently the assessee is not entitled for the relief under S.80IA(4)(iii) of the Act. He submitted that the decision of the Hyderabad Bench of the Tribunal in the case of Meenakshi Infrastructure P. Ltd. (supra) has no application to the facts of the present case, and therefore, the CIT(A) was not justified in following the same. 16. The learned counsel for the assessee, on the other hand, strongly relying on the order of the CIT(A), submitted that the assessee is very much entitled to the relief under S.80IA(4)(iii) of the Act. Reiterating the contentions urged before the lower authorities, he submitted that the industrial park constructed by the assessee has been approved by the Ministry of Commerce, Government of India, as per Industrial Park Scheme, 2002 notified by the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 Software (P) Ltd on 6th Floor and 6944 Sq. ft. of office given to Bharti Telecom Ltd. on 7th floor, besides committing small errors in the areas mentioned. In addition, the assessing officer has also taken extra area of 1782 sq. ft. on 4th floor of office given to Aurona Technologies. He further submitted that in the case of India Cements Ltd. and Dr.Reddy's Labs Ltd., the assessing officer has taken the area excluding common area on which also the assessee gets lease rent, whereas in all other cases, he has included common area which is specifically mentioned in the lease deeds. He also took us through the reconciliation statement extracted by the CIT(A) in para 5.6 of the impugned order, and submitted that the net allocable area is only 149396 sq.ft. and out of it the assessee has used almost 97% of the area for specified purpose and has let out only about 3% of the allocable area for commercial purpose. He further submitted that though the assessee has sold a small portion of the area in the ground floor, which can be used only for commercial p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... san Infra Ltd. 1st Consultancy 1604 Barti Telecom. Ltd. 7th Tele-communication 6944 Papyrus Software P. Ltd. 6th Technology 3364 22173 Less: Area excess taken Aurona Technologies Ltd. 4th 1782 20390 157916 Less: Area for common facility offered (restaurant) 8373 Allocable area 149543 20.1 Further, the calculation of the allocable area by the assessee is as follows: (In Sq. ft.) Total area 272829 Less: Area meant for parking and terrace 105190 167639 Less: Area meant for restaurant and other common facility (The assessee was found to provide eating facility as common facility as mentioned in Annexure-5 of the application) 12950 154689 Less: Area sold 5293 Allocable area 149396 21. However, it was found that 97.79% of allocable area had been used for specified purposes as below: (In sq. ft.) Total area as per assessment order (Annexure -I) 137526 Add: Area for which rental agreements are filed and not consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval, 90% thereof, being 1,50,857 sq. ft. was to be used for specified industrial purposes, while up to 16,762 sq. ft. being 10%, could have been used for commercial purposes. 23. In this regard, it is seen that the Assessing Officer opined that the 'plinth area' of the premises let out to various parties only was to be considered as used for 'specified industrial purposes'. However, it is seen that the agreements with the lessors are for spaces comprising of both 'plinth area' and 'common area'. It was after considering the total area, comprising of both plinth area and common area, that the rent for each premises was decided under such agreements. Accordingly, we are of the view that it is the total area specified in the agreements that is to be considered as used for specified industrial purposes by the respective parties. 24. So far as the commercial user is concerned, the area let out to M/s. Doosan Heavy Industries and Constructions Co. Ltd., 1582 sq. ft., Mrs. Naina thakkar, 1653 sq. ft. and used for the restaurant, 8373 sq. ft. totalling to 11,608 sq. ft. have been considered by the Assessing Officer as used for 'commercial purposes'. No other area was found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial park. While no other area has been found as used for 'restaurant', it cannot be denied that part of the restaurant being run in 8373 sq. ft. of the industrial park, is being used by the occupants/tenants of the industrial park as a common facility also. The total area used for commercial purposes by M/s. Doosan Heavy Industries and Construction Co. Ltd. was 1582 sq. ft., while that used by Mrs. Naina Thakkar was 1653 sq. ft. Even if the area sold of 5293 sq. ft. is considered under commercial user, the total comes to 11,608 sq. ft. only. Therefore, even if a small fraction of the area of 8373 sq. ft. let out to the restaurant is considered in the nature of common facility provided in the industrial park by the developer, the user for commercial purposes would not be more than 10%. 27. Further, it is seen that this Tribunal in the case of Meenakshi Infrastructures P. Ltd. vs. 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 assessee has received such approval and notification, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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