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TMI Blog2021 (5) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... s alleged by Pr. CIT. Therefore, we quash the order passed by the Pr. CIT u/s 263 of the Act in the impugned AY and restore the order of AO. Appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... er has not verified these aspects which are at the root of the assessee's claim u/s 80IA(4)(iii), the impugned Order allowing the said deduction is clearly erroneous and as substantial amount of deduction u/s 80IA(4)(iii) was allowed incorrectly, the impugned Order is also prejudicial to the interest of revenue. Therefore, the impugned Assessment Order dated 27.03.2014 is revised u/s 263 and the Assessing Officer is directed to revise the Assessment Order by disallowing the deduction claim u/s 80IA(4)(iii) and issue the revised demand notice to the assessee." 4. Aggrieved by the order of the Pr. CIT, the assessee is in appeal before the ITAT raising two grounds of appeal on validity of jurisdiction u/s 263 of the Act and denial of deduction u/s 80IA of the Act. 5. Before us, the ld. AR of the assessee filed elaborate written submissions in support of his oral arguments which are as under: "2. The Appellant company is engaged in the business of developing Industrial and Non-Industrial Park in Cyberabad located in Hyderabad. 3. The appellant company, through Form No. IPS-1 dated 20.10.2004, had made an application under the Industrial Park Scheme, 2002 (IPS, 2002). The Mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after discussing and verifying the eligibility of the deduction u/s 80-IA(4)(iii) of the Act allowed a deduction under that section to the extent of ₹ 13,67,23,850. The matter pertaining to head of taxation of the Income from leasing activities was then subject to litigation. Since the same is not a subject matter of dispute before Your Honours, it has not been discussed in detail in the present written submission. Suffice to state that the CIT(A) confirmed the action of the Ld AG. and thereafter before the Tribunal, the appellant had conceded it's ground of appeal. The Hon'ble Tribunal vide order dated 22.01.2021 upheld the treatment given by the Ld AG. Thus, finally, the income from leasing activities is taxed under the head 'Profits and Gains from business or profession' . 8. In the meanwhile, vide show cause notice issued u/s 263 of the Act dated 23.01.2015 (enclosed in the paper book at pages 148-149) the Ld. PCIT, on the basis of the order passed u/s 263 of the Act for AY. 2006-07, 2007-08 and 2009-10, proposed to hold the assessment order passed for AY. 201112 u/s 143(3) of the Act as prejudicial to the interest of revenue and sought to revise u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not eligible for the deduction u/s 80IA(4) of the Act. He has, accordingly, directed the A.O. to withdraw the deduction. The appellant most humbly submits that the impugned order is unsustainable on jurisdictional ground as well as on merits. The appellant challenges the revisionary proceedings on the basis of following propositions; a. When deduction u/s 80-IA(4) of the Income-tax Act, 1961 has been granted in first year of claim, the same cannot be declined in subsequent years; b. Without prejudice to the above, the Ld. PCIT has no jurisdiction to adjudicate on the compliance to the conditions of approval granted by the Ministry of Commerce and Industry; c. Without prejudice to the above, the approval has been granted to the appellant under the Industrial Park Scheme, 2002 (IPS 2002) wherein there is no requirement to obtain building DC to mark the commencement of the Industrial Park. The requirement under the Industrial Park Scheme 2008 can not be applied to the appellant; d. Without prejudice to the above, all the buildings were ready before the cut-off date of 31.01.2007 and hence the condition was complied with. We submit our detailed arguments in respect of each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arely covered in favour of the appellant. Appellant's own case in AY 2009-10 16. At the cost of repetition, we would like to submit that the first year for the claim of deduction was AY 2009-10. A brief background of the proceedings for A.Y. 2009-10 is as under: a. The return of income was furnished wherein rental income was offered to tax under the head 'Income from House Property' and maintenance Income was offered under the head 'Profits and Gains from business or profession'. Being the year in which the 30 units were located in the Industrial Park, deduction u/s 80-IA(4)(iii) of the Act was claimed by the appellant. b. The assessment order u/s 143(3) of the Act was passed on 30 December 2011 accepting the claim of the appellant. c. Thereafter, the Hon'ble Commissioner of Income Tax-II (CIT), issued a notice u/s 263 of the Act dated 27 January 2014 stating that the order passed on 30 December 2011 is erroneous and prejudicial to the interest of revenue and thus needs to be revised. Subsequently, the order u/s 263 of the Act was passed holding that i) the income of the appellant is to be taxed as income from business and ii) since the minimum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.01.2015, the assessee received a notice u/s 263 of the Act for AY. 2010-11 from the office of the Ld. Pr.CIT seeking to tax the income from lease rental under the head 'Profits and Gains from business or profession'. The assessee raised its objections which were rejected and an order u/s 263 of the Act was passed on 30 March 2015 pursuant to which the lease rental was assessed under the head 'Profits and Gains from business or Profession'. This order was also challenged before the Hon'ble Tribunal. f. The Hon'ble ITAT passed its order on 11 July 2016, which is enclosed at pages 314-337 of the paper book. It was held y the Hon'ble Tribunal that once the deduction u/s 80-IA(4)(iii) of the Act has been granted in AY. 2009-10, it is not open for the department to dispute it in the second year, being AY. 2010-11. The relevant extracts of the decision are reproduced below for the sake of ready reference; Page No. 16 of the ITAT order, Page No. 329 of the Paperbook: "19. Further, we also find that this is the second year of the claim of deduction under section 80lA of the I. T. Act. The Coordinate Bench of this Tribunal in the cases of ACIT vs. Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not open for the department to challenge the same in subsequent years. These decisions are not discussed elaborately but are listed below for the purpose of record: a. CIT v. Tata Communications Internet Services Ltd. [251 CTR 290 (Del)] b. CIT Vs Paul Brothers [216 ITR 548(Bom)] c. Saurashtra Cement and Chemical Industries Ltd. v. CIT [123 ITR 669 (Guj)] d. CIT v. Western Outdoor Interactive (P.) Ltd. [254 CTR 593 (Bom)] e. lAC v. Hoechst India Ltd. [32 ITO 689 (Mum)] f. CIT v. Fateh Granite (P) Ltd. [314 ITR 32 (Bom)] g. CIT v. AR.J. Security Printers [264 ITR 276 (Del)] Contention II: Without prejudice to the above, the Ld. PCIT has no jurisdiction to adjudicate on the compliance to the conditions of approval granted by the Ministry of Commerce and Industry 21. At the outset, we would like to draw Your Honours' attention to the IPS 2002. A copy of the same is enclosed in the Paper book at Page No.1. The said scheme was introduced by the MCI (DIPP) on behalf of the Central Government. As per the scheme, undertakings engaged in the business of developing, developing and operating or maintaining and operating an industrial park notified by the Central Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d approval on 24 November 2004. Your Honours' attention is drawn to para 4 of the approval, which is at page 29 of the paper book. The relevant extract has been reproduced below for the sake of brevity; "4. The conditions mentioned in para 1 above are as per the proposal made by the undertaking and are within the provisions of the Industrial Park Scheme, 2002, notified by this Department vide S.D. No. 354 € dated 01.04.2002. The conditions mentioned in this letter as well as those included in the Industrial Park Scheme, 2002 should be adhered to during the period when benefits under this Scheme are to be availed. The Government may withdraw the above approval in case of failure to comply with any of the conditions" (Emphasis supplied) 25. Thereafter this approval has been notified by the Ministry of Finance through the CBDT vide notification dated 22 August 2006 which has been enclosed at pages 31-35 of the paper book. In that notification as well, it is mentioned that the approval may be withdrawn by the Central Government. The relevant extract of the notification has been reproduced below: "11. The conditions mentioned in this notification as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for Withdrawal, in case the Central Government finds that the conditions prescribed therein have not been adhered to. However, it is also clear that such withdrawal has to be done bv 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 assessee had developed the industrial park duly approved and notified by the Central Government and the same has not been withdrawn for any reasons, the assessee would be entitled to the benefit of deduction u/s. 80lA (4)(iii). II (Emphasis supplied) 29. Further, we would like to draw Your Honours' attention to the decision of the Hon'ble Tribunal in the case of DCIT v. Janapriya Properties Pvt Ltd [ITA No. 1746/Hyd/2016] (a copy of the decision has been enclosed as Annexure 2). While adjudicating the matter, the Hon'ble Tribunal relied on the decision of the Annapurna Builders. The relevant extract of the decision has been reproduced as under: "11. Considered the rival submissions and perused the material facts on record. The issue under consideration is squarely covered by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed authority has granted approval, the revenue department cannot deny deduction u/s 8018 of the Act. While adjudicating the matter, the Hon'ble High Court has held that the tax authorities cannot go behind the approval granted by the prescribed authority and re-examine it. The relevant extract of the decision has been reproduced as under for the sake of ready reference: "18. Under the circumstances, once such authority grants approval and such approval holds the field, it would not be open for the Assessing Officer or any other revenue authority to go behind such approval certificate and reexamine for himself, the fulfillment of the conditions contained in sub-rule(1) of rule 18DA. These conditions are prescribed in terms of clause no. (iv) of Subsection(8A) of section 80lB of the Act. The Commissioner was therefore, completely in error in observing that even though the assessee company had valid approval issued by the prescribed authority, the Assessing Officer still had to examine whether such company had fulfilled the conditions referred to in clause(iv), as such other conditions as may be prescribed, reference to which we find in rule 18DA. Any other view would cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 34. Thus, it is humbly submitted that the Central Government (Ministry of Commerce and Industry) is the relevant authority to approve the Industrial Park under the 2008 scheme (Prior to that, similar position prevailed for 2002 scheme also). The same authority has been given power to withdraw the approval in the event of non-compliance with the conditions governing the approval. Therefore, the income-tax authorities should be driven by the approval accorded by the Central Government pursuant to IPS 2002. The Central Government is the only authority to grant the approval and withdraw it in the event of non-compliance to the conditions of the approval. 35. Further, in the appellant's own case for A.Y. 2010-11, the Hon'ble ITAT at paragraph 19 of the order (Page No. 329 of the Paper book) has held as under: "19. Further, we also find that this is the second year of the claim of deduction under section 80-IA of the I.T. Act. The Coordinate Bench of this Tribunal in the case of ACIT Vs Annapurna Builders and Janapriya Properties P Ltd Vs DCIT (cited Supra), has held that as long as the approval given by the Central Government is valid and not withdrawn by it, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Park as per the condition of approval. Further, the approval was subject to the condition that the appellant had a minimum of 30 units located in the Industrial Park. As mentioned above, the appellant had located 30 units in the Industrial Park in A.Y. 2009-10 for the first time and thus has rightly claimed the deduction for the first time in A.Y. 2009-10. 40. Further, we would like to state that the IPS, 2002 had no specific definition of the date of commencement. It is only the Form IPS-I which defines the expected/actual date of commencement to be: "The 'Expected/Actual date of commencement of Industrial Model Town/ Industrial Park/ Growth Centre' denotes the date of when all infrastructural facilities for the proposed number of industrial units have been provided. If the Park is proposed to be developed in Phases, the detailed information on the same may be also suitably mentioned along with the application." 41. Upon perusal of the above paras, it becomes clear that the appellant was governed by IPS 2002. It is nobody's case that the appellant has not satisfied the condition of the commencement within the meaning of IPS 2002. Now attention is draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble Karnataka High Court in the case of Softzone Tech Park Ltd v. CIT [421 ITR 398] (a copy of the said order has been enclosed as Annexure 6). In the said case, the Ld. counsel of the Revenue argued that the assessee has not complied with the conditions mentioned under the IPS, 2008 Scheme. While adjudicating the matter, the Hon'ble Karnataka High Court held that the Scheme of 2002 is applicable to the assessee and the assessee could not have visualized the scheme of 2008 in the year 2002. The relevant portion of the decision has been reproduced as under for the sake of ready reference: "9. .. .. In the absence of any definition of date of commencement in the Scheme 2002, the definition clause of Scheme 2008 cannot be borrowed/adopted to deny the benefit of Scheme 2002. The arguments of the learned counsel for the revenue that issue of Occupation Certificate by the competent Authority is the relevant date for the date of commencement cannot be countenanced, there being no such reference made in the Scheme 2002. In the year 2002 the petitioner would not have visualized the Scheme of 2008 coming with specific definition clause." 44. To put t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid building has been inspected by me and found fit for occupation'. 50. In this regard, we would like to submit that the Ld. PCIT is reading the OC for building No.1A hyper technically. The Ld. PC IT has failed to notice the covering letter to the Final OC. In the covering letter to the Final OC, the subject clearly states 'Final Occupancy Certificate-issued-reg'. The body of the covering letter also states 'With reference to the above, I enclose herewith Final Occupancy Certificate in respect of Building NO.1A'. Further, the OC itself contains heading 'Final Occupancy Certificate'. Also, the body of the OC states 'This building has been completed under the supervision of the Structural Engineers Mis Potential Services Consultants (License No. 240/SEITP10 /MCH/04) and Architect Sri Bihari Lund) CA 80/5547.' 51. All the above highlighted portions clearly substantiate that the OC issued on 31.01.2007 is Final OC and the apprehensions drawn by the Ld. PCIT are clearly misplaced. Further, at page 8 of the order u/s 263, the Ld. PCIT is referring to the Fire NOC of the building no. 1A. The relevant extract of the Ld. PCIT's observation has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate would not obliterate the rights of the petitioner to avail the benefit under Section 801A(4) of the Act vitiating the very purpose of the approval granted by the respondent NO.2. If the compliance is made on the part of the petitioner, the same cannot be frustrated on technicalities or minor deviations by applying the IPS scheme 2008 which was not in force during the relevant period. The arguments of the learned counsel for the revenue on these grounds requires to be negated. " 55. The Hon'ble Karnataka High Court has further relied upon following decisions in support of the proposition that the relevant date is the date of application made by the assessee; a) CIT v. Tarnetar Corporation 362 ITR 174 (Guj) b) CIT v. Ceebros Hotels P. Ltd. 409 ITR 423 (Mad) c) PCIT v. Ambey Developers P. Ltd. 399 ITR 216 (P&H) 56. Further, we would like to draw Your Honours' attention to the decision of the Hon'ble Bombay High Court in the case of CIT v. Hindustan Samuh Awas Ltd [2015] [62 taxmann.com 175 (Bombay)] (a copy of the said order has been enclosed as Annexure 7) wherein it is held that if an application is moved quite in time, for seeking completion certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility. (iii)argued that once deduction is granted in the first year, the same cannot be denied in the later year. (iv)argued that even on merits, the industrial park was set up by 31.1.2007. 3. It is humbly submitted that in a scrutiny or revisionary proceedings, the Department has every right to examine the eligibility conditions. Approval by the Department of Commerce & Industries and notification by CBDT are the essential requirements. These approvals presume that the assessee will meet the conditions. In a case where the assessee resorts to violation or non-compliance of the said conditions and such violations are not in the notice of the approving Authority, it does not mean that the assessee is eligible for deduction even when the assessee does not meet the required conditions. The argument that the provisions of Section 80IA have to be applied automatically as long as approval is not revoked is devoid of merit because verification of eligibility conditions by the LT. Authorities is an inherent statutory duty. Accepting such a plea would defeat the purpose of granting of deduction. Therefore, the Income Tax Authorities are well within their statutory power to examine whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for one of the buildings, the Fire Inspection Committee has issued report at a prior date are squarely in contradiction of the actual facts. 8. Before the Hon'ble ITAT, the assessee filed four documents as additional evidence and it is humbly submitted that with regard to three documents which are in the nature of application for fire safety NOC are not admissible as additional evidence because the assessee did not cite any reasons as to why he was prevented by any sufficient cause for not filing the same before lower authorities. Also, the said three documents involves matters necessitating detailed factual enquiry and therefore on this ground also, the same are not admissible. 9. With regard to fourth document which is a confirmation letter of issuing occupancy certificate at an earlier date by TSIIC Ltd on 9.10.2020, it is submitted that this document is of no relevance because it is again a routine certificate issued on the basis of earlier routine occupancy certificate. 10. Lastly, reliance is placed on the decision of Hon'ble Supreme Court in the case of Dilip Kumar & Company [95 taxmann.com 325] wherein the Constitutional Bench of Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thereafter before the Tribunal, the appellant had conceded it's ground of appeal. The Hon'ble Tribunal vide order dated 22.01.2021 upheld the treatment given by the Ld. AO. Thus, finally, the income from leasing activities is taxed under the head 'Profits and Gains from business or profession'. 7.1 The Pr.CIT relying on the orders passed u/s 263 of the Act for AY 2006-07, 2007-08 and 2009-10, held that the assessment order passed for AY 2011-12 is prejudicial to the interests of the revenue and directed the AO to revise the assessment order by disallowing the assessee's claim of deduction u/s 80IA of the Act as the assessee has not fulfilled the eligibility conditions for claiming deduction u/s 80IA. 7.2 The contention of the ld. AR of the assessee before us is that when deduction u/s 80IA(4) has been granted in the first year of claim, the same cannot be declined in the subsequent years. In this connection, ld. AR of the assessee relied on the decision of the ITAT in assessee's own case for AY 2009-10 wherein the ITAT decided the issue in favour of the assessee. In assessee's own case for AY 2010-11 in ITA No. 1774/Hyd/2014 and others, dated 11/07/2016, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed under the head "Business" or under the head "House Property" in the impugned assessment years in the absence of complete details. Suffice to say that for analyzing the issue in respect of jurisdiction under section 263 by Ld, CIT, we are convinced that the orders of A.O. are not either erroneous or prejudicial to the interests of Revenue. In A.Ys. 2006-07 and 2007-08, since the issues were concluded in earlier orders and not in the orders sought to be revised, they are also time barred. In view of this, in all the impugned assessment years assessee's contentions are accepted and the orders of Ld, CIT under section 263 are set aside. We restore the orders of Assessing Officer in respective years. Accordingly, in all the three appeals, grounds raised by assessee are allowed." 7.4 Referring to the above decisions of coordinate bench in assessee's own case, the ld. AR of the assessee strongly contended that the eligibility of the deduction under section 80-IA(4)(iii) of the Act must be tested in the first year of the claim. The department is not empowered to test the requirement of the section for each of the 9 consecutive years. This argument has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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