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TMI Blog2016 (2) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... tect. It is not within the control of the assessee company to obtain completion certificate from Bangalore Development Authority and the contention of the assessing authority is not correct. The contention of the AO that the fresh approval was required under the non-automatic route for more than the minimum number of units required to be established in the industrial park is not correct because the approval was for minimum number of units and there was no restriction imposed for increasing the number of units and hence no fresh approval is required under the current scenario. Further, assessee sent all the details to CBDT for notification on the basis of the first approval as well as after receipt of the renewed approval. The new notification and the Industrial policy 2008 has come subsequently. Assessee has given a representation to the Chairman of Empowered Committee the Director of CBDT for giving an opportunity to assessee. The Empowered Committee has still not withdrawn the approval granted and hence its validity cannot be disputed. As regards the approval issued by the DIPP, Ministry of Commerce and Industry, we are of the view that the said approval was for non-automatic rou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f facts and figures claimed now vis- -vis the relevant rate of depreciation as applicable. We find that the assessee s issue is covered as per explanation 5 to sec. 32 of the Act which makes it very clear that the allowance of depreciation is mandatory and has to be considered whether or not the assessee makes a claim in this respect or not. Even otherwise, the CIT(A) after admitting additional issue has remitted the matter back to the file of the AO for verification of facts and figure and applicable rates for claim of depreciation and also verification on assets used in the business only. We find no infirmity in the order of CIT(A) and hence, the same is confirmed. This issue in both the years, of revenue s appeal is dismissed. Addition on account of difference in the statement of accounts declared by assessee - AO has made addition on account of difference on the disclosure made by assessee as per the actual receipt and as per the rent received as per TDS certificate - HELD THAT:- Petitioner has received a total of 57,43,973/- and this rent of 5,91,292/- was received only in next year. Similar is the explanation in the case of M/s. Carrier Net Technologies Pvt. Ltd. amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2008-09 & 2009-10 vide his orders of different date 31.12.2010 & 30.12.2011. 2. The first common issue, in these two appeals of assessee in ITA No. 665 & 666/kol/2013 for the AYs 2008-09 & 2009-10, is as regards to the order of CIT(A) confirming the disallowance of deduction u/s 80IA(4)(iii) of the Act with respect to new industrial undertaking with development of industrial park. For this assessee has raised identically worded grounds in both the years and hence, we will take up the facts and issue from lead assessment year 2008-09, wherein the grounds raised are as under:- "1. For that in view of the fact and circumstances the AO is wholly unjustified in not allowing benefit of exemption u/s 80IA (4)(iii) to your appellant and in view of the facts and in the circumstances the CIT(A) is wholly unjustified in confirming the action of the AO. 2. For that in view of the facts and circumstances and the new industrial undertaking of your petitioner in connection with development of an industrial park having been duly approved by ministry of commerce and industry being the authorised person under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Development Authority was not furnished. ii) The appellant has constructed 15 units instead of 3 units approved by the Ministry of Commerce when the appellant himself has admitted in IPSII before the appropriate authority as on 1st July, 2007." 4. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO by observing as under: "However, the fact remains that the appellant has not been able to produce the notification issued by CBDT which is being issued by the board and which entitles the appellant for deduction u/s 80IA(4)(iii). It remains to fact that the said unit has been developed as Industrial park as approved by Ministry of Commerce vide its letter no. 15/23/ 2006/ IP & ID dt 25.7.2006. However, the appellant has not been able to furnish the evidence of completion of said unit before the prescribed date i.e. 31.3.2007. Indeed, the copy of certificate as having been obtained from the Bangalore Development Authority shows the date of completion is 23.6.2007 only. Hence, the appellant cannot under any circumstances be allowed deduction u/s. 80IA(4)(iii). As regards the contention of the appellant regarding the power and architecture's ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said Industrial Park much before 31.03.07, hence, it cannot be said that the Industrial Park had not commenced before 31.03.07. More so, since application for completion certificate was made on 29.12.06, hence, completion of such Industrial Park has to be reckoned from the date of application i.e. 29.12.06 and hence the Industrial park has to be held as completed much before 31.3.2007. As regards AO's contention of CBDT having not notified it as eligible for deduction u/s. 80IA(4)(iii), a number of Courts have already held that once approval is granted by Ministry of Commerce, Notification by CBDT is mere formality and cannot be determinant for eligibility for deduction u/s. 80IA(4)(iii), which we will discuss in the later part of this order. Further, even if there is a variation in the project the approval so granted by Ministry of Commerce and Industry has not been withdrawn till date. 6. But CIT(A) confirmed the action of AO denying such benefit only on the ground that assessee had not been notified by CBDT and further that the assessee has not completed the Industrial Park before 31.03.2007 but for that we have to see the dates, which are under: (i) Relevant dates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the approval letter, fresh approval shall be required under the Industrial Park Scheme, 2002, for availing benefits under Sub-section 4(iii) of Section 80IA of the Income Tax Act, 1961." Further, the AO in his remand report, given at page 86 of assessee's Paper book Volume - Ill had merely contended that - (a) The date of lease agreements prior to 31.03.2007 cannot be construed as to the actual date of commencement of lease rental and for which he also submitted the magnitude of electricity bill from March 2007 to till March 2008. (b) Further, he contended that the architect's completion certificate was dt. 16.01.2007 whereas the assessee had applied for completion certificate before the Bangalore Development Authority vide letter dated 29.12.2006. (c) The assessee had increased the number of Industrial Units in the project from 3 units in the original proposal to 15 units. (d) In view of the deviation from the original proposal and the deviation not having been accepted in CBDT's Office Memorandum, disallowance u/s 80IA(4)(iii) was made. We find from the facts that Date of Lease Agreement with the Clients to lease out space in "Salarpuria Softzone" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted along with the application made to Bangalore Development Authority for completion certificate on 29.12.2006. Subsequently another inspection was done by 10.01.2007 and accordingly completion certificate was issued on 16.01.2007 and the same was submitted to Bangalore Development Authority. The copy of the Provisional Completion Certificate dated 26.12.2006 has been filed before AO and his contention of make - believe is only to create unnecessary doubt. The observation made by the AO about the details of the IPS-II as on 01.07.2007 filed on 19.07.2008 and IPS-II as on 01.07.2008 should be read as 01.01.2008 filed on 19.07.2008. Since all other facts remains the same except that the number of units lease out are different & have been mentioned correctly. The contention of the AO that the fresh approval was required under the non-automatic route for more than the minimum number of units required to be established in the industrial park is not correct because the approval was for minimum number of units and there was no restriction imposed for increasing the number of units and hence no fresh approval is required under the current scenario. Further, assessee sent all the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings because, when the statute does not provide for issue of such a certificate, if the Revenue insists on such certificate, the assessee would be left with no option except to get such certificate with some authority which would be called as a local authority. In the facts of this case, we are of the view that the Tribunal has recorded a finding that the building was completed within the stipulated period and therefore de hors this certificate issued by the Panchayat after the building is completed, the assessee is entitled to the said benefit. In that view of the matter, we do not see any merit in these appeals. Accordingly the appeals are dismissed. 9. Further, exactly on the same issue Hon'ble Bombay High court in the case of CIT Vs. - Ackruti City Ltd. (2013) 214 Taxman 398 (Bom) has held that once Industrial Park was approved by Ministry of Commerce & Industry, CBDT has to suo motto issue notification. Any delay on the part of the CBDT in issuing notification would not warrant assessee being denied benefit of deduction u/s. 80IA(4)(iii) of the Act. Hon'ble High Court has decided this issue as under: "3………….The CIT(A) as well as the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which has the right to withdraw the benefit granted under sub-rule [2J of Rule 18C of the Rules. As soon as the approval under sub- rule [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." 11. In similar circumstances Hon'ble Bombay High Court in the case of Silver Land Developers (P) Ltd. & Ors. Vs. Empowered Committee (2012) 343 ITR 0439 (Bom) has held that the Empowered Committee was not justified in rejecting the application for notification of approved units u/s. 80IA(4)(iii) of the Act under the Industrial Park Scheme of 2002 only on the ground that development of Industrial Part was completed beyond 31.03.2006. Hon'ble Bombay High Court held as under: "21. We find merit in the contention of the Petitioners that if the position which has been adopted by the Empowered Committee were to be accepted, that would result in virtually defeating the salutary public purpose which underlies Section 80-IA (4) (iii). Notice would have to be taken of the fact that infrastructural projects require a considerable amount of investment and a time lag is involved in the compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the allocable area. Learned Counsel submitted that the Petitioners fulfilled in substance the object and substance underlying the Scheme and the Department was notified on 25 July 2007 that three units located in the park as on 14 March 2007 were occupied by Tata Consultancy Services Ltd., Polaris Software Lab. Ltd., and Bharti Airtel Ltd. Subsequently, the Petitioners notified the Department that an additional unit had been occupied by Citigroup Global Services Ltd. 23. The application filed by the Petitioners for a modification of the number of approved units was not allowed purely on the ground that the development of the industrial park was completed beyond 31 March 2006. For the reasons already indicated by us in the earlier part of this judgment, we have come to the conclusion that the Respondents were not justified in rejecting the application purely on the ground that the development of the park was not complete by 31 March 2006. In holding thus, the Empowered Committee disabled itself from exercising the power and jurisdiction which it had under Para 9(1) of the Scheme." 12. In view of the above facts and circumstances, the issue is covered by the decision of Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not comply, the claim of interest was added back to the total income of the assessee. But Ld. CIT(A)- XXXVI, Kolkata, had erred in considering disallowance of interest @ 12.03% of the total claim without asking for any remand report in this regard." Since the issue is common in both the years, hence, we will decide this issue by this consolidated order. 14. Briefly stated facts are that the department has not challenged interest disallowance on the sum of ₹ 117.0 cr. - ₹ 51.0 cr. i.e. ₹ 66.0 cr. in AY 2008-09 and the interest disallowance if any, has to be restricted to ₹ 51.0 cr. out of which a sum of ₹ 16.0 cr. has already been refunded back in AY 2009-10 and as such, effective advance under challenge by revenue is only to the extent of ₹ 35.0 cr. The AO in AY 2009-10 has allowed ₹ 7.42 cr. out of ₹ 14.84 cr. on estimate basis and treating the same as allowable u/s. 24(b) of the Act, since rental receipt was treated as assessable as income from house property. But CIT(A) restricted the disallowance to ₹ 2.18 cr. (being interest on ₹ 35 cr. ). The CIT(A) in AY 2008-09 noted that the assessee advanced a sum of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ₹ 5618/- treating the income from Industrial Park as business income as against the action of the AO in not allowing such expenses by treating the same as income from house property. In view of such facts, Ld. CIT, DR supported the orders of the lower authorities. 16. We have heard rival contentions and gone through facts and circumstances of the case. The above facts are undisputed in respect to cash flow statement filed by the assessee as well as availability of funds. We find that neither the AO nor CIT(A) is able to establish the nexus between interest borrowed funds and interest free funds that interest bearing borrowed funds are utilized for advancing the same as interest free funds to sister concerns who are in the real estate business in which the assessee is. Ld. Counsel for the assessee heavily relied on the decision of Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. Vs. CIT in Civil Appeal No. 514 of 2008 dated 05.11.2015, wherein Hon'ble Supreme Court has considered the aspect of commercial expediency as well as nexus of the funds and finally held as under: "We are of the opinion that such an approach is clearly faulty in law and cannot be count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. Applying the aforesaid ratio to the facts of this case as already noted above, it is manifest that the advance to M/s. Hero Fibres Limited became imperative as a business expediency in view of the undertaking given to the financial institutions by the assessee to the effect that it would provide additional margin to M/s. Hero Fibres Limited to meet the working capital for meeting any cash loses. It would also be significant to mention at this stage that, subsequently, the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gone through facts and circumstances of the case. Briefly stated facts are that the assessee has not claimed depreciation in the computation of income but raised additional ground in view of the decision of Hon'ble Supreme Court in the case of NTPC Ltd. 229 ITR 387 (SC) and in view of this decision CIT(A) admitted the additional ground and adjudicated the claim of the assessee. The CIT(A) after taking into consideration the aspect of the assessee remanded the matter to the AO for his remand report vide letter dated 31.12.2012. The AO has not responded to CIT(A) and accordingly, CIT(A) directed the AO to allow depreciation on assets used in the business but after verification of facts and figures claimed now vis-à-vis the relevant rate of depreciation as applicable. We find that the assessee's issue is covered as per explanation 5 to sec. 32 of the Act which makes it very clear that the allowance of depreciation is mandatory and has to be considered whether or not the assessee makes a claim in this respect or not. Even otherwise, the CIT(A) after admitting additional issue has remitted the matter back to the file of the AO for verification of facts and figure and applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent of ₹ 5,91,292/- was received only in next year. Similar is the explanation in the case of M/s. Carrier Net Technologies Pvt. Ltd. amounting to ₹ 18,62,059/-. It was explained to the AO that the assessee was entitled to receive rent w.e.f. 19.03.2007 @ ₹ 11,76,100/-, which amounts to ₹ 1,40,95,533/- for whole of the year but the AO computed the rent in view of the TDS Certificate at ₹ 1,58,57,591/-. Hence, difference. Similar is the position in respect to Arivana Networks India Pvt. Ltd. being the difference of ₹ 17,93,381/-. It was explained that a sum of ₹ 1,63,02,907/- was shown in the TDS certificate included service tax @ 12.36% on actual rent of ₹ 1,45,09,600/- and this difference was on account of service tax at ₹ 17,93,387/-. Hence the entire difference of ₹ 56,66,732/- was explained. The CIT(A) accepted the explanation of the assessee. Now before us Ld. CIT, DR fairly conceded the position. Accordingly, we feel that factually the assessee has not received excess rent of ₹ 56,66,732/- added by the AO. We find that the CIT(A) has rightly deleted the addition in the given facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that of industrial estate/business centre. Indeed both industrial estate and hotels constitute building or group of buildings providing accommodation for commercial use thereof. In the management of both hotels and industrial estate/business centre the predominant activity is commercial exploitation of the property. So applying the above principles laid down by the court the irresistible conclusion would be that the 'income derived by the assessee from the industrial estate/business centre is to be assessed as business income. In the instant case, the primary object of the assessee is to earn income by commercial exploitation of the property. For that purpose, every activity of the assessee has been directed towards developing the properties as industrial estate/business centers and so many workers (as is evident from the list enclosed) are employed for providing various services and amenities to the users. Thus, the facts that the Ld. Commissioner of Income Tax (Appeals) held that the income earned by Sambhu Investment (P.) Ltd. -Vs- CIT [2003] 263 ITR 143 is assessable as property income has no relevance in the facts and circumstances of the present case as because in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are in the nature of commercial activities. Accordingly, the income derived by the assessee from industrial Park/business centers is to be assessed as business income and' not as income from house property, as per findings of A.O. in assessment order." 24. We find that the facts are undisputed as above that the assessee was not letting out bare structure but was providing whole lot of services/amenities for software and allied industries as eligible for use of such Industrial Park. In such circumstances, the assessee claimed the rental receipts from the occupants of the Industrial park as business income. We find that this issue is covered by the decision of Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd. Vs. CIT (2015) 373 ITR 673 (SC) wherein it is held as under: "4. We have heard the learned counsel for the parties on the aforesaid issue. Before we narrate the legal principle that needs to be applied to give the answer to the aforesaid question, we would like to recapitulate some seminal features of the present case. 5. The memorandum of association of the appellant-company which is placed on record mentions main objects as well as incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because it was received by the company formed with the object of developing and setting up properties. 8. Before we refer to the Constitution Bench judgment in the case of Sultan Brothers (P.) Ltd., we would be well advised to discuss the law laid down authoritatively and succinctly by this court in Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC). That was also a case where the company, which was the assessee, was formed with the object, inter alia, of acquiring and disposing of the underground coal mining rights in certain coal fields and it had restricted its activities to acquiring coal mining leases over large areas, developing them as coal fields and then sub-leasing them to collieries and other companies. Thus, in the said case, the leasing out of the coal fields to the collieries and other companies was the business of the assessee. The income which was received from letting out of those mining leases was shown as business income. Department took the position that it is to be treated as income from the house property. It would be thus, clear that in similar circumstances, identical issue arose before the court. This court first discussed the scheme of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not fur ther think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred to support the proposition that certain assets are commercial assets in their very nature." 11. We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee, therefore, rightly disclosed the income under the head "Income from business". It cannot be treated as "Income from the house property". We, accordingly, allow this appeal and s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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