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TMI Blog2021 (8) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... al Projects Private Limited are identical had not entered a factual finding of the claim of the assessee that each of the five floors in the industrial park is separate and independent units, capable of function on its own. Therefore, the assessee has to factually establish that it has 4 units or more and that no unit has occupied more than 50% allocable area. No unit should occupy more than 50% of the allocable area, whereas in this case one tenant, namely M/s.I-Flex Solutions is occupying more than 50% of the total constructed area - The criteria relating to restriction of leasing of allocable area to any particular tenant is redundant in view of the functionality test prescribed in the case of CIT v. M/s.Primal Projects Pvt. Ltd. [ 2020 (11) TMI 778 - KARNATAKA HIGH COURT ]- we are of the view that the matter needs to be examined afresh by the A.O. Accordingly, the cases are restored to the files of the A.O. The A.O. is directed to come to a factual finding that assessee s claim of five floors of the industrial park are independent and separate units as prescribed in the judgment of Hon ble High Court in the case of CIT v. M/s.Primal Projects Private Limited. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed revised grounds, which is identical for all the assessment years, except for variance in figures. The revised grounds pertaining to assessment year 2006- 2007, read as follow:- 1. The order of the Learned CIT(Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2 The learned CIT(A) erred in allowing the deduction claimed by the assessee U/S 80IA(4)(iii) of ₹ 2,13,81,501 though the assessee had not fulfilled the conditions for the approval granted by the Ministry of Commerce and Industry. 3. The Ld. CIT(A) erred in holding that the objections of the Assessing Officer that there were less than 4 tenants in the industrial park and the super built up area of 1,38,000 sq.ft was leased to M/s I-Flex Solutions Ltd., which is more than 60% of the total allocable area, are found to be invalid. 4. The learned CIT(A) erred in not appreciating the fact that as against the first condition that 4 units should be located in the industrial park on physical verification it was seen that only three companies were in the industrial park. 5. The learned CIT(A) erred in not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2004-2005, allowed the claim of benefit u/s 80IA(4)(iii) of the I.T.Act. The Tribunal confirmed the view of the CIT(A). The Hon ble High Court on further appeal by the Revenue has restored the matter to the files of the ITAT with the above directions. On a query from the Bench, the learned Departmental Representative submitted that for assessment years 2004-2005, 2005-2006 and 2007-2008, the appeals were not preferred to the Hon ble High Court on account of the tax effect being less than the monetary limit. The learned DR has filed a written submission. The gist of the written submission reads as follow:- (i) The Govt. of India, Ministry of Finance in its Notification No.212/207 dated 31.07.2007 had given approval to the assessee company for claiming deduction u/s 80IA(4)(iii) subject to two conditions. (a) There should be 04 units in the Undertaking; (b) Each unit should occupy less than 50% of the total built-up area. Both these conditions have not been complied with the assessee and resultantly the assessee s claim of deduction was rejected by the AO as being legally untenable. (ii) The Assessing Officer had conducted physical verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Industrial Units to be located from 32 to only 4 units. On the basis of the revised application and the documents, the Ministry of Commerce and Industrial has approved the proposal of 4 units to be located in the Industrial Park vide their letter No.15/07/04-IP ID dated 31.12.2004 on certain terms and conditions, viz.. (a) That the conditions mentioned in the approval letter as well as those included in the Industrial Park Scheme 2002 should be adhered to during the period when benefits under the scheme are to be availed. (b) That the income tax benefits u/s 80IA(4)(iii) of the I.T.Act will be available only after the 4 proposed number of Industrial units mentioned in the approval letter are located in the Industrial Park. (c) That the assessee company shall submit half yearly report to the Ministry of Industry and Commerce in IPS-2 Form on 1st Jan and 1st July each year during the period in which the benefits u/s 80IA(4)(iii) of the I.T.Act are to be available. 6.1 Further, as per the provisions of Rule 18C(4) of the Income Tax Rules, 1962, for the purpose of getting eligibility of benefits u/s 80IA(4)(iii) of the I.T.Act to the Industrial Park, the CBDT h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has further been held that each floor is physically identified for all functional purposes. 6.4 Viewed from the ratio decidendi laid down by the Hon ble High Court in the case of CIT v. M/s.Primal Projects Pvt. Ltd. (supra), let us examine the facts of the instant case and whether the assessee has satisfied conditions as stipulated under the provisions of section 80IA(4)(iii) of the I.T.Act read with Rules 18C of the I.T.Rules and Notification dated 31.07.2007. The two reasons of the A.O. for the denial of benefit of deduction u/s 80IA(4)(iii) of the I.T.Act read as follows:- (i) One Tenant,i.e., M/s.I-Flex solutions is occupying 1,38,000 sq.ft. out of total constructed built up area / allocable area of 2,54,110 sq.ft. Hence it amounts to that one tenant is in occupation of more than 50% of the total allocable area. (ii) The Income tax benefits u/s 80IA(4)(iii) of the I.T.Act will be available only after the proposed number of Industrial units mentioned in the approval letter i.e. 4 units are located in the Industrial Park. Let us examine each of the reasons:- (i) One Tenant,i.e., M/s.I-Flex solutions is occupying 1,38,000 sq.ft. out of total constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f functioning on its own. Therefore, there should be a factual finding by the A.O. on the above issue. (ii) The Income tax benefits u/s 80IA(4)(iii) of the I.T.Act will be available only after the proposed number of Industrial units mentioned in the approval letter i.e. 4 units are located in the Industrial Park. The assessee had constructed multistoried buildings for the purpose of developing infrastructure facilities as approved by the Ministry of Commerce and Industry. As mentioned earlier, the test to be applied is the functional test, i.e., the unit must be physically independent with independent facilities and instrumentation, power connection, door number and the facility of functioning independently, i.e., every unit must be in a position to carry on its activities without depending upon other units even though all the units are situated under the same roof but in different floors. The assessee has to successfully satisfy the above stated functional test of an independent unit, which has not undertaken by the A.O. nor the CIT(A) in this case. Even for A.Y. 2004-2005, though the A.O. in his remand report, had stated that the case of the assessee and of Primal Proje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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