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TMI Blog2017 (10) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility condition to claim deduction under section 80IA in the initial year, then the benefit of deduction would be extended for next 10 years irrespective of whether after initial year there was an expansion of industrial undertaking by increased investment in plant & machinery that have taken it outside ambit and scope of that provision. Here in this case, not only in the initial assessment year but also in subsequent assessment year also, the similar issue of claim of deduction under section 80IAB has been discussed and analysed in detail and thereafter the said claim has been allowed in third and fourth year, therefore, the said deduction now cannot be disallowed on same set of facts. If the Revenue is aggrieved by the order of the Tribunal in earlier years, the right recourse would be to approach the higher judicial forum, that is, Hon’ble High Court under section 260A - Decided against revenue - I.T.A. No.6801/DEL/2014 - - - Dated:- 23-10-2017 - Shri Amit Shukla, Judicial Member And Shri Waseem Ahmed, Accountant Member Appellant by : Ms. Rachna Singh, CIT (DR) Respondent by : Shri R.S. Singhvi, C.A. ORDER Per Amit Shukla, J. M. The aforesaid appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under the Special Economic Zones Act, 2005 and Special Economic Zone Rules, 2006 . The Assessing Officer was of the view that deduction under section 80IAB is admissible only on profits from operation and maintenance of SEZ and not on profit on sale of assets earned by the assessee from transfer of bare shell building to the co-developer. The Assessing Officer, while coming to this conclusion, has also referred to the disclaimer clause contained in clause 3(xvii) of the approval letter dated 1/6/2009 issued in the case of co- developer by the Board of Approval, SEZ section, Department of Commerce and Industry, Government of India. The said disclaimer mentions that particular terms and conditions of lease agreement will not have any bearing on the treatment of income by way of lease rentals/down payments/premium, etc. for the purpose of assessment under the Income Tax Act and the Assessing Officer will have to examine the taxability of the income under the Income Tax Act. On the strength of such disclaimer, the Assessing Officer disallowed the entire claim of deduction under section 80IAB made by the assessee. The Assessing Officer further held that income from transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITEs Special Economic Zone on the above said land. 16. The land was notified in the Gazette of India vide Notification No. S.O. 1978(E) dated 16.11.2006 wherein it was stated that the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the Special Economic Zones Act, 2005 and other related requirements are fulfilled and the approval is granted for development and operation of the sector specific Special Economic Zone for Information Technology and Information Technology Enabled Services at the said place in Chennai in the State of Tamil Nadu. In the notification, land admeasuring 13.29 hectares was notified giving the details of Survey Nos. etc. Further vide notification No.S0396(E) Dt.19.03.2007 an additional area of 3.4384 Hectares had been notified for the above project. 17. The authorized operations in respect of IT and ITES Special Economic Zone proposed to be developed by the appellant were approved by the Government of India, Ministry of Commerce Industry, Department of Commerce (SEZ Section), Udyog Bhawan, New Delhi vide its letter dated 29.08.2006 which inter alia included office and commercial complex, roads with street ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IAB was decided. The list of such decisions considered by the ld. CIT(A) are as under:- S.No. Name of Appellant A.Y. Relief by CIT(A) Relief by ITAT 1 DLF Cyber City Developer Pvt. Ltd 2008-09 Allowed Upheld 2009-10 Allowed Upheld 2 DLF Commercial Developers Ltd. 2009-10 Allowed Upheld 2010-11 Allowed Appeal pending for disposal 3 DLF Limited 2008-09 Allowed Appeal pending for disposal 8. The ld. CIT (A), after considering the detailed submissions made by the assessee as well as the order of the Assessing Officer and other relevant materials placed before him, accepted that the facts and the issues involved are exactly identical to the assessment years 2008-09 and 2009-10, wherein these issues have been thrashed out in detail a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espectfully following the decision of the Hon'ble ITAT in appellant's own case for the AY 2008-09, I decide the issue in favour of the appellant regarding eligibility of deduction U/s 80 IAB of the Act. In the return filed by the appellant a deduction of ₹ 202,52,07,111 has been claimed by the appellant U/s 80 IAB. During the assessment proceedings the AO has disallowed the entire claim of the appellant. However during the appellate hearing the AO has raised an issue on the reasonableness of deduction in terms of its calculation. Absolutely similar submission has been made by the AO in her remand report during the appellate proceedings for the assessment year 2008-09 also. The Hon ble ITAT has dealt with the observations of the AO on this issue in para 23 of its order (supra) and has held that the entire deduction claimed by the appellant needs to be allowed u/s 80 IAB. Accordingly, it is held that the appellant is eligible for its claim of deduction U/s 80 IAB of the Act amounting to ₹ 202,52,07,111. 9. Regarding the issue with regard to the treatment of income derived from transfer of bare shell building to the co- developer for consideration in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue from Operation 369.35 1350.53 2 Cost Written off 166.90 367.91 3 POCM Profit 202.45 982.62 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 53. It is seen that in accordance with the notified accounting standards AS 7 and AS 19, the appellant has regularly followed the accounting policy for recognizing the revenue from development and sale of bare shell buildings and recording of lease rentals. It is also observed that the Assessing Officer has not rejected either the method of accounting followed by it or its books of accounts. 54. Therefore, by regularly following the mercantile system of accounting, the appellant has recognized the revenue as per AS-I notified by the Govt.; followed Percentage of Completion Method (POCM) as per AS-7 issued by the institute of Chartered Accountants of India in conformity with all intent and purposes of AS-I notified vide notification dated 25.01.1996; has recognized lease rentals notified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of my predecessor for the AY 2008-09 2009- 10, as well as of the Hon'ble ITAT for the AY 2007-08 and 2008-09, it is held that the profits derived on account of development consideration of bare shells would constitute the 'profits and gains' derived from development, operation and maintenance of SEZ within the meaning of section 80IAB. Accordingly, it is held that the appellant is eligible for claim of deduction u/s 80 IAB of the Act. The ground No.3 of appeal is allowed. 10. Thus, the ld. CIT (A) has followed the decision of the Tribunal for earlier years in the assessee s own case on similar set of facts, which are admittedly permeating in this year also. 11. However, the ld. CIT-D.R. in her written submission has highlighted the points which have been raised by the Assessing Officer in the assessment order and also summarized her submissions rebutting the order of the ld. CIT(A) in the following manner:- The CIT(A) is not justified in relying upon the clarification issued by ministry of Commerce (SEZ) section, New Delhi that have been issued by the BOA without following proper procedure and also without consulting CBDT before issue of such cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in law and on facts in holding that AO has no jurisdiction to challenge the validity of approval given by ministry of Commerce ignoring the fact that approval given by BOA or Ministry of Commerce was not absolute but subject to condition that the treatment of income arising out of transaction of transfer of bare shells by co-developer would be decided as per relevant provisions of IT Act. CIT (A) has erred in law and on facts of the case in accepting the development consideration received by the assessee summarily accepting rent capitalization method for determining development consideration of bare shells ignoring the relevant considerations/factors such as other method of determination of sale consideration, prevalent rate of such type of commercial property in the area etc. CIT (A) has failed to appreciate that Ministry of Commerce could not have issued clarification regarding approval given by BOA and whether such a clarification issued by and authority other that BOA has any legal sanctity or evidentiary value particularly when relevant activities mentioned in the clarifications are not mentioned in the approval given by BOA to the assessee or to its co- develope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended for next 10 years irrespective of whether after initial year there was an expansion of industrial undertaking by increased investment in plant machinery that have taken it outside ambit and scope of that provision. Thus, the Hon'ble High Court highlighted the principles of consistency, especially in the case of allowability of deduction under Chapter VIA and similar other sections in the said chapter that once in the initial year, claim has of deduction has been allowed, then such a claim for deduction cannot be disturbed in succeeding years if the same material facts are permeating. Here in this case, not only in the initial assessment year but also in subsequent assessment year also, the similar issue of claim of deduction under section 80IAB has been discussed and analysed in detail and thereafter the said claim has been allowed in third and fourth year, therefore, the said deduction now cannot be disallowed on same set of facts. If the Revenue is aggrieved by the order of the Tribunal in earlier years, the right recourse would be to approach the higher judicial forum, that is, Hon ble High Court under section 260A. Thus, on similar set of facts and without there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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