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TMI Blog2015 (10) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... ommerce and Industry, govt. of India under non-automatic route, the condition imposed under para 4 of CBDT notification stipulating that no single unit should have more than 50% of the allocable industrial area is not applicable to present assessee. Moreover, as held in case of Creative Infocity Ltd. Vs. Under Secretary [2012 (4) TMI 117 - GUJARAT HIGH COURT] Commerce Ministry being the competent authority for granting approval, they only have the power to verify whether conditions of the scheme have been violated and if it is found so, only they can withdraw the benefit. Therefore, for aforesaid reasons, assessee’s claim of deduction u/s 80IA(4)(iii) cannot be rejected. It is very much evident that not only AO enquired into the issue of claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park with reference to the condition imposed in para 4 of CBDT notification, but, assessee also submitted a detailed reply explaining why such condition will not apply to assessee. Thus, AO after conducting necessary enquiry and applying his mind to the issue having taken a decision allowing assessee’s claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of providing infrastructure facilities, which inter-alia, includes developing, operating and maintenance of industrial park. For the AY under consideration, assessee filed its return of income on 17/09/09 declaring total income of ₹ 14,48,61,750 after claiming deduction u/s 80IA(4)(iii) of the Act for an amount of ₹ 33,36,38,229. Assessee s case was selected for scrutiny and AO after verifying the books of account as well as other details and making necessary enquiry completed assessment u/s 143(3) of the Act vide order dated 28/03/13. While completing assessment, AO made a number of additions/disallowances, as a result of which gross income was determined at ₹ 46,17,01,813 after allowing deduction under Chapter-VA, taxable income was determined at ₹ 20,54,38,350. Subsequently, assessment records of assessee relating to AY under consideration came up to be examined by ld. CIT in exercise of power conferred u/s 263 of the Act. While examining the records of assessee, ld. CIT noticed that assessee has claimed deduction u/s 80IA(4)(iii) for four units in industrial park out of total five units. He found that out of four units, assessee has claimed deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py more than 50% of allocable industrial area of an industrial park is not applicable to approval granted under nonautomatic route, assessee relied upon a number of decisions including the decision of ITAT, Hyderabad Bench in case of L T Infocity Ltd. Vs. CIT. 3.2 Ld. CIT, however, did not find merit in the submissions of assessee. Referring to the notification issued by CBDT vide notification NO. 244/07 dated 28/09/09 and more specifically para No. 4 of the said notification, ld. CIT observed, the condition imposed therein stipulates that no single unit shall occupy more than 50% of the allocable industrial area of the industrial park, whereas, one of the unit Viz.; CA Computer Association India Pvt. Ltd. occupies more than 50% of the industrial space, hence, assessee has violated the conditions imposed in the CBDT Notification. Ld. CIT observed, though, assessee has violated the aforesaid condition as per the notification issued by CBDT, but, AO without verifying this aspect has completed the assessment allowing assessee s claim of deduction u/s 80IA(4)(iii). He held that decision taken by AO without requisite verification or enquires cannot constitute formation of an opinion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon the decision of ITAT, Hyderabad Bench in case of L T Infocity Ltd. Vs. CIT, ITA No. 1515/Hyd/11 and others, dated 22/01/2015. 4.2 Challenging the assumption of jurisdiction u/s 263 of the Act by ld. CIT, ld. AR submitted, AO in course of assessment proceeding has conducted extensive enquiry with regard to assessee s claim of deduction u/s 80IA(4)(iii) of the Act in respect of Capella Industrial Park. In this context, he drew our attention to the notice issued by AO on 26/07/11 during the assessment proceeding. Referring to the said notice, ld. AR submitted, AO specifically enquired into the condition imposed in para 4 of the CBDT notification. It was submitted, in response to the query raised by AO, assessee submitted a reply before him on 18/10/11 explaining in detail why the condition imposed in para 4 of CBDT notification will not apply to assessee. Ld. AR submitted, when AO after conducting necessary enquiry and applying relevant statutory provision has taken a view, which is a possible view while granting deduction u/s 80IA(4)(iii) to assessee, the order passed cannot be considered to be erroneous and prejudicial to the interests of revenue. Ld. AR submitted, the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with industrial parks scheme, 2002 of the central govt. As per the scheme formulated by central govt. in the Ministry of Commerce and Industry, approval for industrial park can be obtained from the Ministry of Commerce and Industry, Govt. of India through DIPP either under automatic route or nonautomatic route. As far as the present assessee is concerned, there is no dispute to the fact that it has sought approval for Capella Industrial Park under non-automatic route. The conditions imposed for automatic route and non-automatic route are different. As far as automatic route is concerned, conditions imposed are as under: 5. Automatic approval (1) An undertaking shall make an application in the Form-IPS-1 along with an affidavit certifying the details given in such application for obtaining approval for setting up an industrial park. (2) An application under sub-paragraph (1) shall be made to the Entrepreneurial Assistance Unit of the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion in the Ministry of Commerce Industry, Udyhog Bhawan, New Delhi- 110011. (3) The Secretariat for Industrial Assistance ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 0 Section 8 excluding Group 892, 893, 894, 895 Section 1 Section 9 Section 5 Section X Section 7 Section XI; Excluding Division 75 (d) The percentage of land to be earmarked for commercial use shall not be more than ten per cent of the allocable area; (e) In case of an Industrial Model Town, Industrial Park and Growth Centre, the minimum investment on infrastructure development shall not be less than 50% of the total project cost. In the case of an Industrial Park and Growth Centre which provides built up space for industrial use, the minimum expenditure on infrastructure development including cost of construction of industrial space, shall not be less than 60% of the total project cost; (f) No single unit referred to in column (2) of the Table given in the subparagraph (b) of paragraph 6 shall occupy more than fifty per cent of the allocable industrial area of an industrial model town or industrial park or Growth Centre; (g) Every undertaking being an industrial park shall obtain app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red Committee will hold meetins whenever necessary. All Industrial Model Town/Industrial Park/Growth Centre proposal received shall be placed before the Committee within 15 days of receipt. The Committee, as far as possible, would ensure that the Government decision on each proposal is communicated to the applicant within six weeks. The Committee will adopt its own mode and working procedure, keeping in view the requirement of each proposal. 6.2 Thus, a comparative analysis of the automatic approval route and non-automatic approval route, would clearly suggest that conditions imposed therein are different. Clause (f) of automatic approval route stipulates that no single unit shall occupy more than 50% of the allocable industrial area of an industrial park. Whereas, such condition is absent in non-automatic approval route. Thus, on a plain reading of the scheme and conditions of approval under both automatic and non-automatic route, it is very much clear that condition stipulating that no single unit can occupy more than 50% of the allocable industrial area is not applicable to an industrial park approved under non-automatic route. At this stage, it would be relevant to note th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying with the conditions envisaged in the scheme and if the undertaking fails to comply with those conditions, it is the Commerce Ministry alone, which has the right to withdraw the benefit granted under sub-rule [2J of Rule 18C of the Rules. As soon as tlte approval under subrule [2] of Rule 18C is given, it is obligatory on the part of the Central Board of Direct Taxes to notify industrial parks in terms of sub-rule [4] of Rule 18C. 6.3 The Hon ble Bombay High Court in case of M/s Ackruti City Ltd. (supra) has also expressed similar view as under: 3 .The CIT(A) as well as the Tribunal have held that the Ministry of Commerce and Industry had finally by letter dated 31st December, 2004 approved the industrial park and a copy of the same was forwarded to the CBDT. In terms of Rule 18C(4) of the Rules, once the indusrrial park is approved by the Ministry of Commerice and Industry, the CBDT has to suomotto issue the notification. The Tribunal, on examination of all facts concluded that all the requisite conditions for claiming benefit under Section 80IA(4)(iii) of the Act has been complied with by the respondent assessee during the assessment year in question. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 89 893 - C 8 89 894 - Architectural and engineering and other technical consultancy activities. v) Percentage of allocable area earmarked for industrial use 100% vi) Percentage of allocable area earmarked for commercial use Nil vii) Proposed number of industrial units 5 Units viii) Total investment proposed Rs.1,69,00,19,108/- ix) Investment on built up space for industrial use Rs.1,55,29,28,658/- x) Investment on Infrastructure Development including investment on built up space for industrial use Rs.1,60,79,28,658/- xi) Expected date of commencement of the Industrial Park 31-03-2006 Not only that, the CBDT has also notified vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue is, AO has failed to enquire or verify whether assessee has complied to the condition imposed under para 4 of CBDT notification while allowing assessee s claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park. As could be seen from the material on record, AO in course of assessment proceeding has specifically enquired into assessee s claim of deduction u/s 80IA(4)(iii). Letter dated 26/07/11 issued by AO clearly bears testimony to this fact. Further, in reply to the said query raised by AO, assessee in its reply submitted before AO, has stated as under: The Industrial Park Scheme, 2002 (r Policv ) dared I April 2002 issued by the Ministry of Commerce and Industry, under which the Capella IP has been approved, is attached as Enclosure lB. The Policy prescribes the following two methods in order to be eligible to claim deduction under section 80IA (4)(iii) of the Act: Automatic route - The conditions to be fulfilled are prescribed in paragraph 5 and 6 of the Policy. Non-Automatic route / Approval route - The conditions to be fulfilled are prescribed in paragraph 7 of the Policy. We submit that sub-paragraph m of Paragraph 6 prescribes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be available only after the proposed number of industrial units mentioned in Para 1 (vi) of this approval letter, are located in the Industrial Park. The benefit will be available only after notification of the Industrial Park by Central Board of Direct Taxes. Further, the Company would like to submit that in the said approval, the DIPP did not prescribe any condition restricting the Company from allotting more than fifty percent of the allocable industrial area to any single occupant/tenant. Subsequent to the approval granted by the DIPP, the CBDT has notified the Capella IP in exercise of the power conferred by section 80IA(4)(iii) of the Act vide Notification No. 244/2007 dated 28 September 2007 as eligible to claim deduction under the Act. Copy of the CBDT notification is attached herewith and marked as Enclosure 1 E. The Company would like to draw your attention to the following relevant points as per the said CBDT notification- And whereas the Central Government has approved the said Industrial Park vide Ministry of Commerce and Industry letter No. 15/112/2006-1 D dated 10-4-2007 subject to the terms and conditions mentioned in the annexure to this notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from sub-paragraph (1) read with sub-paragraph (3) that the empowered committee of the DIPP duly considers the application made by the Company, from the perspective of 80lA of the Act, for granting approval under the non-automatic route. The same is also evident from letter of approval provided by the DIPP (refer Enclosure lD). The relevant extracts of the said approval are as under: I am directed to refer to your application dated 12 October 2006 and letter dated 29 September 2006. This is to convey the approval of the Government of India to your proposal for claiming Income Tax benefit of your Industrial Park. Scheme, 2002, notified by this Department in exercise of powers under Section 80-lA, Sub Section 4 (iii) of the Income Tax Act, I961, subject to the following terms and conditions .... In this regard, the Company would like to submit mat the power conferred to the CBDT under section 80IA( 4) of the Act read with Rule 18C of the Income Tax Rules, 1962 is only to notify the Industrial parks which are approved by the DIPP. The provisions of section 80IA(4)(iii) read with Rule 18C does not authorize CBDT to put any additional condition for claiming deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, but, assessee also submitted a detailed reply explaining why such condition will not apply to assessee. Thus, AO after conducting necessary enquiry and applying his mind to the issue having taken a decision allowing assessee s claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park, the decision so taken, cannot be considered to be erroneous and prejudicial to the interests of revenue. In fact, though, ld. CIT accepts the fact that AO did make enquiry with regard to assessee s claim of deduction u/s 80IA(4)(iii) and assessee also explained its stand before AO, but, he nevertheless contradicts himself by observing that AO did not conduct proper enquiry and verify whether assessee has complied to the condition imposed in para 4 of CBDT s notification. In our view, such conclusion drawn by ld. CIT is not only contrary to the material on record, but, also does not stand the test of legal scrutiny. Once AO has conducted enquiry on a particular issue and has taken a decision after proper application of mind and if such view taken by AO is one of the possible view, then, even if it is not discussed elaborately in the assessment order, it cannot be said assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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