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TMI Blog2014 (5) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... b) subrule (3) of Rule 46A, the AO is duty bound to examine the evidence or document produced by the appellant and/or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant – the evidences are in the nature of further clarifications, form integral part of the correspondence between Department of Commerce and Department of Revenue before granting the approval vide letter dated 01.06.2009, go to the very root of matter in deciding the eligibility or otherwise of the appellant's claim of deduction u/s. 80IAB of the Act and need to be taken into account in deciding major grounds of appeal - the provisions of clause (c) and (d) of sub-rule (1) of Rule 46A are clearly attracted in the assessee's case – the order of the FAA is comprehensive and reasoned, thus, there is no reason to interfere in the order – Decided against Revenue. Allowability of claim of deduction u/s 80IAB of the Act - Profits derived from transfer of bare shells buildings - Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone – Held that:- There was clear approval to both the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be denied - The AO does not have any jurisdiction to question the validity or the legality of authorized operations which have been approved by the BOA/Central Government - all the conditions as required to be specified under the SEZ Act/Rules are fulfilled and the assessee is approved developer for all the intent and purposes of Section 80 IAB of the Act – Decided in favour of Assessee. - I.T.A .No.-5469 & 5366/Del/2012, I.T.A No. 5470 & 5367/Del/2012, I.T.A No. 5469/ Del/2012, I.T.A. 5366/Del/2012, I.TA 5470/Del/2012, I.T.A No. 5367/Del/2012 - - - Dated:- 21-2-2014 - Shri I. C. Sudhir And Shri Shamim Yahya,JJ. For the Petitioner : Dr. Sudha Kumari, CIT For the Respondent : Mr. R. S. Singhvi, CA ORDER Per I. C. Sudhir, JM ITA No. 5469 5366/DEL/2012 These cross-appeals by the parties have been preferred against the common first appellate order for the assessment year 2008-09. 2. The assessee has impugned first appellate order on the following grounds:- 1. That on the facts and in the circumstances of the case, the impugned order passed by the learned CIT (Appeals) is bad in law and wrong on facts. 2. That on the facts and in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifications referred above as additional evidence by holding that the c1arifjcation have been issued based on evidences already available in the file with BOA, whereas no such materials was available on records i.e. in the note sheets of BOA and thus such a findings is against the facts on records. 5. That the Ld CIT (A) has erred in law and on facts of the case in holding that the provisions of clause (c) (d) of sub rule (1) of Rule 46A are attracted in the case of assessee in respect of clarifications referred above ignoring the fact that such clarifications neither existed in the files of BOA nor were issued by the Competent Authority i.e. BOA. 6. That the Ld CIT (A) has erred in law and on facts of the case in holding the transfer of bare shells by assessee to its co-developer was an authorized operation on the ground that the agreement of assessee with co developer regarding transfer of bare shells for development consideration was approved by BOA ignoring the fact that such transfer was not an authorized operation as per Notification No. SO 1846 E dated 27/10/2006, that the BOA had only allowed such transfer subject to the condition that taxability of such transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby holding development consideration @ Rs. 6,225 per sq.feet corresponds to the market value of bare shells and thus treating the same as reasonable ignoring the relevant considerations/factors such as other methods of determination of sale consideration, prevalent rate of such type of commercial properties in the area etc and thereby restricting disallowance to Rs. 174.27 cr. 12. That the Ld CIT (A) has erred in law on facts in holding capitalization rate of 10% as reasonable ignoring the fact that normal capitalization rate in the area of Chennai is 10.5%. 13. That the Ld CIT (A) is not justified in determining development consideration of bare shells at Rs. 1178.05 cr and thereby restricting the disallowance u/s 80lAS to Rs. 174.27 cr ignoring the facts brought on record in the assessment order as well as facts mentioned in the remand reports. 14. That the Ld CIT (A) has erred in law on facts in holding that the bare shell buildings transferred to co-developer was stock in trade as against capital asset treated by the AO ignoring the facts mentioned in the assessment order. 4. Besides the revenue has also moved application for permission to raise the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the above said land. Accordingly the assessee company was granted approval as developer by the Deptt of Commerce (SEZ Section), Ministry of Commerce and Industry, Govt. of India vide approval letter F.2/124/2005 EPZ dated 22/6/2006 for setting up IT/ITEs Special Economic Zone at the above said land and vide its letter dated 29/8/2006, the Ministry of Commerce and Industry, Deptt of Commerce (SEZ) Govt. of India, the authorized operations in respect of IT ITEs Special Section SEZ) proposed to be developed by the assessee were approved which inter alia included construction of office and commercial complexes not related to bareshell facility and or fully furnished office space etc. Further vide notification dated 19/3/2007 an additional area of 3.43 84 hectares of land was notified for the above said purpose. 7. The SEZ Act 2005 specifically allows the co-developer to inter into a project, recognizes and treats the co-developer at par with developer and defines co-developer under Section 2(f) of the SEZ Act 2005. In this definition the codeveloper has also been defined as developer . The assessee company had entered into a memorandum of understanding following with its ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same to be access deduction claimed rather than ignoring the same. 9. In support of the ground of its appeal, the Ld. AR has reiterated the submission made on behalf of the assessee before the authorities below. He submitted that the issue of allowability of the claimed deduction u/s 80IAB to the assessee under the similar set of facts has been decided in favour of the assessee by the Tribunal in the A. Y 2007-08 in ITA No. 2637/Del/2012 vide order dated 2/8/2013. The claim has also been accepted by the revenue in the first year out of 10 years of the scheme. 10. The Ld. DR on the other hand placed reliance on the assessment order. He submitted that in the assessment year 2007-08, the appeal before the Tribunal was preferred against the order passed u/s 263 of the Act, hence the immediate issue before the Tribunal was as to whether the assessment order questioned by the Ld. CIT in the revisional proceedings u/s 263 of the Act was erroneous and prejudicial to the interest of revenue or not. Thus any view expressed by the Tribunal about the allowability of claiming deduction u/s 80IAB therein is not relevant for the present case. The Ld. DR submitted further that approval of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, that the BOA had only allowed such transfer subject to the condition that taxability of such transaction would be examined by income tax authorities and also the fact that even the clarification dated 20/1/2011 only states that transfer of bare shells by assessee to its co-developer is allowed and it no where say that it was an authorized operation allowable for benefits under the SEZ Act. The validity of this finding of the Ld. CIT(A) has also been questioned with different arguments in the Ground Nos. 7 to 10. In support of Ground No. 7, Ld. DR submitted that the Ld. CIT(A) has accepted the allowability of the assessee for claiming deduction u/s 80IAB in respect of profits derived from transfer of build up bare shells buildings ignoring that as per proviso to Section 80IAB (2) only income from transfer of operation and maintenance of SEZ is allowable for deduction and not the profits derived from transfer of mere bare shell buildings and as such transfer of built up space is also against the spirit of SEZ Act as provisions of Section 11(5) of the SEZ Act expressly prohibits sale of land or built up area in SEZ. In support of the Ground No. 8, the Ld. DR contended that the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 26/5/2009 written by Sh. Raman Chopra Director (ITA-I), CBDT to Shri T. Srinidhi, Director, Deptt of Commerce, Ministry of Commerce Industry, New Delhi. 14. The Ld. CIT(A) forwarded the additional evidences to the AO in compliance of the requirement of Rule 46A (3) of I.T. Rules 1962. The AO objected the same for admission. The Ld. CIT(A) has however, admitted these additional evidences after discussing the issue in detail including provisions laid down under Rule 46A reasons shown by the assessee not filing these before the AO and the decisions relied upon. The relevant extract of Para 7 at page Nos. 106 to 111 of the First Appellate Order is being reproduced hereunder for ready reference: The additional evidence were forward to the AO in terms of the requirement of sub-rule(3) of Rule 46A for examination of their veracity and report on their admissibility. The AO has objected to the admission of additional evidences on the grounds that theses clarifications were not in existence till the completion of assessment but obtained thereafter ad, as such not relevant for deciding the assessment completed prior to coming in insistence of such clarifications; do not satisfy an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from the assessment order that the AO, while rejecting the claim of deduction u/s. 80IAB, has referred to and relied upon the minutes of 34th meeting of the Board of Approval held on 19.06.2009 without confronting the same to the appellant. The appellant, therefore, sought further clarifications from the Ministry of Commerce and collected information under the Right to Information Act relevant to issue in question which has gone in the background before granting approval to the Co-developer. The additional evidences form integral part of the decision making process of the Board of Approval and are necessary for arriving at correct legal conclusion These evidences are very crucial and necessary for deciding the legal status of the appellant under the SEZ Act as well as its consequential entitlement or otherwise of deduction u/s. 80IAB of the Act. While the appellant has, all along, contested its claim of deduction u/s. 80IAB on 'the strength of approval granted by the Board of Approval, the AO has held that the approval granted to the Co-developer was a conditional approval and the transfer of bare shell buildings to the Co-developer was not an authorized operation. It is see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pite of the provisions of rule 46A(1), the provisions of sec. 250 enable the CIT(A)s to accept additional evidence in appropriate cases which power has been preserved by sub-rule (4) of rule 46A also. If the provisions of rule 46A, sub-rule (4) thereof are held to be mandatory that would go against the provisions of sec. 250 conferring power on the first appellate authority to enquire into the matter and pass appropriate orders. In other words, rule 46A without sub-rule(4) would be open to challenge as ultra vires section 250 . Therefore, if the evidence is genuine and reliable, then the assessee should not be denied the opportunity to produce such evidence and it would be incorrect to shut out an assessee in the process of administration of justice from leading evidence to prove its case. As per the provisions of clause (a) and (b) subrule (3) of Rule 46A, the AO is duty bound to examine the evidence or document produced by the appellant and/or to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. The additional evidences, other than those collected under the Right to Information Act, have already been furnished during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s derived from transfer of bare shells buildings which as per the Ld. AR is covered by the decision of the Tribunal in the case of the assessee itself for the A.Y 2007-08, a copy whereof has been made available at page Nos. 1 to 47 of the paper book filed by the assessee and the relevant is para 9.5 thereof at page 46. 17. In rejoinder the Ld. DR pointed out that the issue raised in Ground No. 9 has not been discussed in the said order of this Tribunal for the A.Y 2007-08 that the co-developer can claim deduction for the remaining period in 10 consecutive years meaning thereby the right of developer to claim benefit of SEZ would seize on transfer of operation and maintenance of SEZ to co-developer. On this, the Ld. AR clarified that assessee has not claimed 80IAB on the part of co-developer. Regarding the issue raised in Ground No. 10 the Ld. AR submitted that the Tribunal in its order for the A.Y 2007-08 has dealt with this issue that AO has no jurisdiction to challenge the validity of approval given by Ministry of Commerce. 18. In support of Ground No. 11 of the appeal of the revenue, the Ld. DR submitted that the Ld. CIT(A) was not justified in accepting rent capitalizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round Nos. 6,7,8,9,10 14 revolve around the issue as to whether transfer of bare shell construction was not authorized operation and same is not in the nature of business income. 20. In ground Nos 11 to 13 (revenue s appeal) the issue raised is about the determination of development consideration. We find that the AO has not considered any factual aspect of the case as regards reasonableness of deduction and has disallowed entire deduction after considering the legal issues only. Section 80IA(8) provides for adjustment in the profit if the value of the goods or services does not correspondent to the market value of such goods or services on the date of such transaction. The assessee objected the applicability of S. 80IA(8) on the reasoning that there is no transaction of transfer of goods or services from one eligible business to any of its other non-eligible business. Since the transaction in the present case has been made only with the eligible business of separate and distinct assessee i.e co-developer who is also entitled to deduction u/s 80IAB of the Act, we are of the view that the Ld. CIT(A) has rightly accepted the above contention of the assessee. 21. The AO has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of the following formula: X= (A/B)-(C+D) X - Development Consideration A - Average rental value as on the project completion date for the Warm Shell buildings, as computed by the Co-Developer* t B - Prevailing Capitalisation rate for the Warm Shell buildings in accordance with international standards on the project completion date, as determined by the developer. C - Charged incurred by the Co-developer for conversion of Bare Shell buildings D - The rent for 1 year * For unoccupied portions of the Warm Shell buildings, the average rental value shall be calculated on the basis of the highest rental value mentioned in the last five agreements entered into eith tenants for the occupied portions of a Warm Shell Buildings. However, consideration so worked out shall be subject to minimum of Rs. 6550/- as per clause 2.6 (Paperbook Page 129) Clause 2.6 (Paperbook Page 129) In consideration for the developer agreeing to execute this agreement, the Co-developer shall make the payment of such amount as Development Consideration in favour of the Developer as is agreed to between the Parties, subject to minimum payment of Rs. 6,550.00 (Rupees Six Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (Schedule- III) Capitalization rate of 8% was provided for working out value of property. ix. The CIT(A) has even disregard the fact that co-developer's agreement was for 49 years and capitalize value was determined on the basis of present average rent. 24. We are thus of the considered view that the Ld. CIT(A) was not justified in adopting the capitalization sale of 9.5% as against 9% adopted by the assessee. While setting aside this action of the Ld. CIT(A), we direct the AO to accept the approved working of the assessee in this regard and allow the consequential relief. Ground No.2 of the appeal of the assessee is thus allowed. The Ground No. 3 is an alternative ground to Ground No. 2, hence it does not need adjudication. Issue raised in Ground Nos. 11 to 13 of the Revenue is thus decided against the revenue. 25. We find that the issue of allowability of the assessee for claiming deduction u/s 80IAB on the profits earned from transfer of bare shell building by it to its co developers involves 3 more issues namely: (a) As to whether the assessee is carrying out the activities as mentioned in the documents submitted to and the approval accorded by Board of Approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e co-developer. There is no doubt that the approved activities were carried out. The only question is as to whether the activities carried out by the co-developer will be covered under the approved activities which were assigned to be done by the developer assessee. That is why, the Issue No. (b) arises as to whether assessee is a developer within the meaning of Section 80 IAB for those activities out of the approved activities which were done by the co-developer under a memorandum of understanding arrived at between the assessee and the co-developer DLF Assets Pvt. Ltd vide agreement dated 29/11/2006. Under the said agreement the assessee had sold the bare shell buildings to the Co-developer and had claimed deduction u/s 80IAB on the income earned from the said transfer of bare shell buildings to the co-developer. Thus, a further issue arose as to whether the income arising out of the aforesaid operations was authorized by the Board of Approval to make the assessee eligible for the claimed deduction u/s 80 IAB. While denying the claimed deduction the AO has taken assistance of the disclaimer contained in Clause 3(XVII) of the approval letter dated 1/6/2009 issued by Board of Appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... space (warm shell) as an authorized operation. The approval letter dated 1/6/2009 issued by SEZ Section of the Deptt of Commerce also contained interalia a general condition at para 3 (VII), read as under:- Approval given by BOA for co-developer for particular terms and conditions of lease agreement will not have any bearing on the treatment of the income by way of lease rentals/down payment/premium etc for the purpose of assessment under the prevalent Income-tax Act Rules. The Assessing Officer will have the right to examine the taxability of these amounts under the Income Tax Act. 27. The submission of the Ld. AR remained that the approval granted by the Govt. of India, Ministry of Commerce and Industry to the assessee company as a developer continued and has no such clause therein, as it will be observed from the approval granted to the co-developer earlier (i.e approval dated 14/2/2007, applicable throughout the relevant previous year) did not contain any such para as mentioned in the letter dated 1/6/2009. In that approval the agreement with the co-developer was approved and informed as a part of the approval which permitted the assessee to transfer bare shell bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 08.01.2007 The DAPL filed an application before the Board of Approval, SEZ Section for approval as a Co-developer in the said SEZ project. 7 14.02.2007 The DAPL was granted approval as a Codeveloper by the Department of Commerce (SEZ Section), Ministry of Commerce Industry, vide approval letter F.2/124/2005-EPZ for co-development, operation and maintenance of aforesaid SEZ. 8 19.03.2007 The land admeasuring 3.438 hectares owned by the assessee at Nandampakkam Post, Ramapuram Chennai was further notified in the Gazette of India vide Notification No. S.O. 396 (E) dated 19.03.2007. 9 19.06.2007 The authorized operations to be carried out by the DAPL in respect of aforesaid SEZ proposed to be co- developed were approved by the Ministry of Commerce Industry , Department of Commerce (SEZ Section). 29. The relevant clauses of the memorandum of understanding for codeveloper agreement dated 29/11/2006 entered into by the assessee with DAPL read as under:- 1. The Developer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, modifications, equipments, etc. which are installed by the Co-developer in the Building of the Project. 8.2. The co-developer shall have exclusive right to let, sub-let, mortgage or allow use of all or any part of the facilities in the project to any Units or any other persons entitled to use the same in accordance with the SEZ Act, on such terms and conditions as Co-developer may impose. 30. The BOP granted approval to the co-developer (DAPL) vide letter dated 24/2/2007, Clause (2) thereof reads as under:- (2) Your agreement dated 29th November 2006 entered into with the developer of the aforesaid sector specific IT/ITES Special Economic Zone of DLF Info City Developers (Chennai) Ltd for provide infrastructure and other common facilities shall form part of this approval . 31. Thus, we find that there was clear approval to both the assessee and the co-developer for development, operation and maintenance of the SEZ wherein the initial arrangement by the assessee was to carry out part development and lease out the land and the building thereupon to co-developer for a lease period of 49 years. The assessee and co-developer later on executed an addendum to the co-deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of lease agreement will not have any bearing on the treatment of the income by way of lease rentals/down payment/premium etc. for purposes of assessment under the prevalent Income-tax Act and Rules. The Assessing Officer will have the right to examine the taxability of these amounts under the Income-tax Act. 33. The Special Economic Zone Act 2005, provide for the establishment, development and management of the Special Economic Zone for the promotion of exports and other matters connected therewith or incidental thereto. Section 3(3) of the SEZ Act, provides that any person, who intends to set up Special Economic Zone may, after identifying the area at his objection, make a proposal directly to the board for the purpose of setting of the Special Economic Zone. The Board of Approval constituted under Sub Section (1) of Section 8 of the SEZ Act is the itner ministerial statutory authority empowered to approve the proposal subject to such terms and conditions as it may deem it to impossible, or modify or reject the proposal, as provided in Section 3(7) of the said Act. Section 3(1) of SEZ Act provides that on receipt of communication from the Board of Approval, Central Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper or a co-developer may be suspended for violation of any terms and conditions of approval or for the reasons contained in Section 10(1) of the SEZ Act. In the present case, however, there is no dispute that no such case appears to either with the assessee or the DAPL so as to forfeit the status of a developer granted to the assessee under the SEZ Act. Now we have to examine the issue raised in the additional grounds in the appeal of the Revenue. The AO has disallowed the claimed deduction u/s 80IAB mainly on the ground (1) that the transfer of bare shell buildings by the assessee to the co-developer for a consideration was not an authorized operations as per the list contained in notification dated 27/10/2006 being S.O 1846(E); (2) the Board of Approval while approving the co-developer agreement has given a conditional approval in as much as the AO has been authorized to examine the taxability of lease rentals by way of lease premium/ one time payment etc by virtue of a disclaimer contained in Clause (3) (XVII) of the approval letter dated 1/6/2009 and (3) the Board of Approval for SEZ has not considered the income from specific transaction between developer and co-deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ze from time to time. Thus we find that adverse inference drawn by the AO that the transfer of bear shells by the assessee to the co-developer was not a notified authorized operation in our view does not stand. The AO has neither sought any further clarification on this specific issue from the Board of Approval nor has allowed opportunity to the assessee to clarify the matter further. On the contrary the assessee had filed additional evidences after seeking two clarifications from the Board of Approval. The clarification letters dated 18/1/2011 and 20/1/2011were admitted as additional evidence by the Ld. CIT(A). The Ld. CIT(A) has reproduced these clarifications at page no. 125 to 127 of the first appellate order. In these letters besides other it has also been clarified that all lease of land are subjected to the general condition contained in Para 3 (XVII) of letter dated 1/6/2009. It has been further clarified that general condition NO. 3 (XVII) in the co-developer approval dated 1/6/2009 is applicable to the terms and conditions of the lease agreement only in para no. 6 of the clarification dated 18/1/2011 it has been made clear that the developers business of development of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is contrary to the facts and evidences on record when such approval stood rectified by the Board of Approvals. 35. The only issue now remains to be decided is the facts and consequence of the disclaimer contained in Clause 3 (xvii) of the approval letter dated 1/6/2009 which the subject matter of the additional ground raised by the revenue in its appeal. From the clarifications dated 18/1/2011 and 20/1/2011 issued by the Ministry of Commerce as well as from the letter of Director CBDT their remains no scope for any doubt that this disclaimer is applicable only to transfer of land in the guise of long term lease by receiving lease rentals/down payments/premium etc commensurate with the sale value of land as is evident from para 4 of the letter dated 6/5/2009 of the Director CBDT in this Para No. 4 it has been mentioned that the issue regarding transfer of land by developers on an indefinite/land lease which virtually amounts to sale has been brought to the notice of DOC on earlier occasions. After protracted discussion on the issue and also taking into account the advise of Ministry of Law, it was agreed to approve such proposal subject to the inclusion of disclaimer in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no further requirement of getting the same authorized operations approved again in terms of approval letter dated 1/6/2009. No further approval of transfer of bare shell was required since the agreement dated 20/3/2008 providing for transfer of bare shell to the co-developer for an agreed development consideration forms integral part of approval letter dated 1/6/2009 issued by BOA. The para No.2 whereof reads that your revised agreement dated 20/3/2008 entered into with the developer of the aforesaid sector specific IT/ITES Special Economic Zone of DLF Info City Developers (Chennai) Ltd for providing infrastructure and other common facilities shall form part of this approval. We also agree with the finding of the Ld. CIT(A) that the AO was having no jurisdiction or authority to sit in the judgment of the Board of Approval and challenge the validity of approval given by the Ministry of Commerce. The objection of the AO that transfer of bare shell is not permitted in the SEZ is again misplaced and unjustified in view of the clarifications dated 18/1/2011 and 20/1/2011 issued by the Ministry of Commerce and Industries. The Development Commissioner of the concerned SEZ is the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oversy as to whether transfer of bare shell buildings to the co-developer was an authorized operation has been set at rest by further clarifications dated 18/1/2011 and 20/1/2011 issued by the Ministry of Commerce. The BOA, being the statutory authority under the SEZ Act, has granted various approvals by a statutory process of law after duly considering and examining all the facts and documents on record in accordance with relevant provisions of SEZ Act and SEZ Rules. Thus, the consequential benefits that is available to a developer under the Income Tax Act cannot be denied. The AO does not have any jurisdiction to question the validity or the legality of authorized operations which have been approved by the BOA/Central Government. Section 27 of SEZ Act provides for modification of Income Tax Act to the extent of second schedule of SEZ Act which reads as under:- 27. The provisions of the Income Tax Act, 1961, as in force for the time being, shall apply to, or in relation to, the Developer or entrepreneur for carrying on the authorized operations in a Special Economic Zone or Unit subject to the modifications specified in the Second Schedule. 37. The second schedule of SEZ A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its contents are referred to by the ld. Counsel. Thus as per specific clarifications by BOA the transfer of bare shell building on long term lease to approved co-developer are authorized activities under SEZ Act Rules. Thus these clarifications also dispel the findings of CIT revising the asse4ssment order and setting aside the same. 263 order and findings therein being contrary to legal provisions is liable to be quashed. The assessment order being is conformity with SEZ Act, Rules and provisions of Section 80IAB can neither be termed as erroneous or prejudicial to the interest or revenue. Page 28 Para 6.9 Ld. Counsel contends that Ld. CITs proposition to tax it as capital gains is against the basic principle of taxation as large scale real estate business activities continuously carried on by assessee and bare shell buildings declared as stock-in-trade in its books of accounts, as per its objects clause in its Memorandum and Articles of Association can be taxed only under the head Business Income. Page 35 para 6.16 The letter of approval is issued by the Board by a statutory process of law and once it has been issued by the exclusive sanctioning authority, the conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zes activities include construction of bare shell/cold shell/warm shell buildings and transfer thereof, BOA has approved it and clarified the same. There is enough material on the record to hold that the transfer of bare shell buildings to co-developers constitute authorized activity. Thus, we see no error on any count as held by CIT in the order of assessing officer allowing deduction u/s 80IAB. 39. We thus find that assessee is a developer under the SEZ Act and is in the business of developing a SEZ, the SEZ has been notified on the first day of April 2005 under the Special Economic Zone Act 2005 ; and the profits have been derived from the business of development, operation and maintenance of SEZ. We thus fully agree with the finding of the Ld. CIT(A) that all the conditions as required to be specified under the SEZ Act/Rules are fulfilled and the assessee is approved developer for all the intent and purposes of Section 80 IAB I.T of the Act. Consequent upon approval granted by the BOA for transfer of bare shell to the co-developer, the profits arising to the assessee froms such an authorized transaction are eligible for deduction u/s 80IAB of the Act. For a ready reference ..... X X X X Extracts X X X X X X X X Extracts X X X X
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