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TMI Blog2011 (11) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ₹ 79,04,900 besides showing rental income of ₹ 5,22,23,691 from the said block. The entire net profit from Block II shown at ₹ 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 R D/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 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 receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof 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 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawal 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 Learned Departmental Representative strongly supporting the order for 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 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 extract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding common area is at 1,49,543 sq. ft. which he has reconciled with reference to the assessment order as follows: 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered as outside the approved activities. These entities are carrying on R D/technical services and marketing research and office support for R 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 use 90% of the net allocable area for the specified industrial purposes, it cannot be denied that the assessee had constructed total area of 2,72,809 sq. ft. Out of the same, the area meant for parking and terrace was 1,05,190 sq. ft. Therefore, the total allocable area, after excluding such common facilities came to 1,67,619 sq. ft. As per the approval, 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, compris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. 26. On the other hand, it can be seen that out of the total area of 16,901 sq. ft. used for the commercial purposes, 8,373 sq. ft. was used for being let out to a restaurant . It is further seen that in the letter dated 14.10.2006 to the Board, the assessee had proposed providing the facility of a restaurant also in the industrial 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 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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