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TMI Blog2018 (2) TMI 2040X X X X Extracts X X X X X X X X Extracts X X X X ..... income derived from "operation and maintenance" activity of (SEZ) is not eligible for deduction under section 80IAB of the Act. The A.O accordingly denied deduction claim amounting to Rs. 1,94,12,129/- attributable to operation and maintenance activities. 4. In the first appeal against the action of the A.O. The CIT(A) reverse the action of the A.O by following its appellate order concerning preceding assessment years 2009-10 & 2010-11 where similar issue on similar facts was decided in favour of the assessee. 5. Aggrieved, the Revenue in appeal before the Tribunal. 6. We have careful considered the rival submissions. The sole issue for consideration is maintainability of deduction of income arising from operation and maintenance activity of (SEZ) under the umbrella of section 80IAB of the Act. We find that the issue is no longer res integra. The Co-ordinate bench of Tribunal in Revenue's appeal relevant assessment year 2010-11 in ITA No. 2236/Ahd/2014 has dismissed the appeal of the Revenue and thus allowed the deduction claimed on operation and maintenance activity. While doing so Coordinate bench in turn relied upon the decision of the Co-ordinate bench of Tribunal in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant has also disputed the finding of the A. O. that the software were used for less than 180 days. The A. O. is directed to verify the claim from the facts available on record and allow the depreciation accordingly as per the provisions of the Act. The grounds of appeal are accordingly partly allowed." I am inclined with appellant and ratio of my predecessor order. It is therefore A.O. is directed to allow rate of depreciation at 60% after verification of period for which such software put to use. The appellant gets part relief from the addition of Rs. 10,163/-. This ground being related to adoption of rate of depreciation, the same is treated as allowed since rate of depreciation is directed to be adopted at 60%. 5.4 Ground No. 4 is against the disallowance of deduction u/s 80IAB in respect of Rs. 3,25,07,625/- being income from operation & maintenance and Rs. 18,250/- being income from sale of scrap related to SEZ. The appellant relied on the appeal order dt. 30/04/2012 in the case of appellant for A.Y. 09-10 on this issue where Ld. CIT(A)XIV, Ahmedabad on similar facts & contention allowed such deduction. My predecessor vide order No.CIT(A)XIV/Jt.CIT.R.8/2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, if the approval has been granted for developing, operating and maintaining the SEZ, the term 'developer' would include operation and maintenance also. Further an examination of the letter of approval bearing no. F.2/44/2005- EPZ, dated 21st June, 2006, issued by the Central Government in favour of the appellant as the Developer show that the very first condition under which the approval is granted states that "the Developer shall develop, operate and maintain the Special Economic Zone in terms of the Special Economic Zones Act, 2005 and the Rules made there under." Thus, it is clear from the letter of approval that development, operation and maintenance of the Special Economic Zone are an integral part of the terms and conditions and obligations and entitlements granted to the Developer. Therefore, in view of the preceding discussion, the word 'developer' also includes the activities of operation and maintenance of the SEZ in the case of the appellant. The interpretation by the A. O. that operation and maintenance are different to that of development and legislature were fully aware of this fact and, therefore, the words 'operation and maintenance' ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has been generated from sale of scrap of iron and steel which was used for infrastructure development. The appellant has relied on the decision of Hon'ble Gujarat High Court in the case of DCIT Vs. Core Healthcare Ltd. [308 ITR 263]. Considering the judgment of Hon'ble Gujarat High Court, I am of the opinion that sale of scrap of iron and steel which is generated from the activity of construction of the infrastructure facility should betreated as derived from the activity and, therefore, the appellant is entitled for deduction on the same. The claim of deduction on professional income on account of receipt of plan approval fee collected by the appellant also has a direct nexus with the activity of the appellant business. Therefore, the appellant is also entitled for the deduction on that income. The claim regarding prior period income of Rs. 23,09,372/- has been disallowed by the A. O. on the ground that the income pertained to earlier year and only the income of current year can be considered for deduction. The appellant has submitted that it had started recovering the raw water charges from the current Financial Year, and the charges for earlier years were also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction u/s 80-IAB for the income earned from operation and maintenance, we find that provisions of section 80-IAB is self-explanatory which reads as under: - '[Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone. 80-IAB. (1) Where the gross total income of an assessee, being a Developers, includes any profits and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after the 1st day of April, 2005 under the Special Economic Zones Act, 2005, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which a Special Economic Zone has been notified by the Central Government : Provided that where in computing the total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition it reads that operation and maintenance of the facilities will be met as per the standard in the specific manner and proposition of the user. 26. In view of our above discussion as well as observation made by Id. CIT(A), we are of the view that assessee being a developer of SEZ is eligible for deduction u/s 80-IAB for income earned from operation and maintenance of SEZ. In the result ground no. 3 (a) of Revenue is dismissed. 7. Insofar as the claim of depreciation is concerned, the relevant findings of the Co-ordinate Bench is as under:- 15. It is almost a settled issue that software application which are having validity for long term period are basically system software on which computer hardware runs and it is impossible to use computer without having such software installed on it and, therefore, such licensed software are subject to depreciation @ 60% and Id. CIT(A) has done so. We find no reason to interfere with the order of Id. CIT(A) on this issue. This ground of Revenue is dismissed. 8. Respectfully following the findings of the Co-ordinate Bench, we decline to interfere. Appeal of the Revenue is accordingly dismissed. 9. Before parting, the reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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