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TMI Blog2022 (4) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... ispose of by this common order. ITA No. 1607/Ahd/2018 for Assessment-Year 2010-11: 2. In this Appeal, the revenue has raised following Grounds: "1. That the ld. CIT(A) erred in law and on facts in deleting the disallowance of Rs. 16,77,93,761/- made u/s 80-IA of the Act. 2. The appellant craves to leave, to amend and / or to alter any ground or add a new ground which may be necessary." 3. In Ground No. 1, the issue involved is the allowablity of deduction of Rs. 16,77,93,761/- u/s 80-IA(4)(iii) of the Act. 4. The assessee is a company engaged in the business of development of industrial parks. The assessee developed one such industrial park named "Devraj Industrial Park" at Village - Piplaj, district - Ahmedabad. In order to avail the benefit of deduction u/s 80-IA(4)(iii) and as required by that section, the assessee applied to the Secretary, ITA-1, Department of Revenue, CBDT vide application No. F.No.178/07/2009-ITA-1 dated 27.01.2009 for notification of "Devraj Industrial Park" under Industrial Park Scheme, 2008. Vide letter dated 09.02.2009, the CBDT called for a report from Ld. AO on "Devraj Industrial Park", which the Ld. AO submitted. Much later thereafter on 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned 05.09.2010, the notification allowed deduction from assessment-year 2011-12 onwards only, which meant that the assessee was not eligible for deduction for assessment-year 2010-11. Hence the assessee again filed SCA No. 7098 / 2017 to Hon'ble Gujrat High Court, whereupon the Hon'ble High Court allowed deduction from assessment-year 2010-11 by observing as under in its order dated 03.11.2017: "31. As a result of a specific finding given by us that the petitioner is deemed to have been eligible for availing tax deduction under section 80-IA(4)(iii) from the financial year 2009-10, Assessment Year 2010-11, the order rejecting the Rectification Application dated 17.03.2017 deserves to be set aside. The condition in the Notification extending the benefit of availing of deductions under section 80-IA(4)(iii) from the date of commencement of 05.09.2010 is a condition not found in any of the other notifications vis-à-vis other such projects, produced in other such cases. Accordingly, the respondents are directed to delete the condition No. 7 in the Notification of 26.12.2016. The petitioner's claim for deduction at whichever stage pending before the assessing or appellate auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O by filing the aforesaid letter dated 25.02.2013 and 25.03.2013 which are very much embodied in the assessment-order itself. The Ld. AR further carried our attention to Para No. 4 on Page No. 2 to 22 of the appeal-order wherein the details of the project were fully available to the Ld. CIT(A). Therefore, the Ld. AR argued that all details were submitted before CBDT, Ld. AO and Ld. CIT(A) and nothing remains to be further verified. According to Ld. AR, the Ld. CIT(A) has therefore rightly allowed the deduction and his action must be upheld. 9. We have considered the rival submissions and contentions of both side and also perused the material held on record. We firstly observe that the Ld. AO has disallowed deduction for the sole reason that the notification required u/s 80-IA(4)(iii) was not issued by the CBDT till finalization of the assessment and there was no other reason. As discussed in the foregoing paragraphs, we also observe from the submissions made by the Ld. AR that the assessee has submitted full details of the park to the CBDT, Ld. AO and Ld. CIT(A). We also observe that the assessee has submitted audited P&L A/c, audited Balance-Sheet and Form 3CD alongwith the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to". The Ld. AO observed that the words "derived from" are much narrower than the words "attributable to" and the benefit of deduction is available in respect of the income of the first degree only. Placing reliance on Pandian Chemicals Ltd. 262 ITR 278 (SC) and Sterling Foods 237 ITR 53 (SC), the Ld. AO held the income of Rs. 4,70,567/- earned by the assessee may be attributable to the business of development of industrial park, but it is certainly not derived from the said business and therefore not eligible for deduction. Hence the Ld. AO disallowed the deduction in respect of other income. 16. During appellate proceeding, the Ld. CIT(A) found that the Ld. AO had taken wrong impression that the other income is from interest. In fact, the other income consists of Kasar Vatav of Rs. 1,10,567/- plus dividend of Rs. 3,60,000/- from shares of the Kalupur Commercial Co-operative Bank acquired for availing secured loan for business purpose. The Ld. CIT(A) found that both of these incomes are derived from the business of industrial park and eligible for deduction. Therefore, the Ld. CIT(A) allowed deduction. 17. Before us, the Ld. DR submitted emphasized the decisions of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore eligible for deduction u/s 80-IA(4)(iii). Accordingly, we allow deduction and dismiss Ground No. 2 of Assessment-Year 2011-12. 20. Therefore, revenue's ITA No. 1359/Ahd/2017 for Assessment-Year 2011-12 is also dismissed. 21. Now we take up the revenue's appeal for Assessment-Year 2012-13 i.e. ITA No. 2441/Ahd/2017. ITA No. 2441/Ahd/2017 for Assessment-Year 2012-13: 22. In this Appeal, the revenue has raised following Grounds: "1. That the ld. CIT(A) erred in law and on facts in deleting the disallowance of deduction u/s 80-IA(4)(iii) amounting to Rs. 1,69,73,423/-. 2. That the ld. CIT(A) erred in law and on facts by allowing the deduction u/s 80IA(4)(iii) in as much as the CBDT notification was issued after the completion of assessment and that the same was contingent upon fulfillment of conditions which remain to be verified. 3. That the ld. CIT(A) has erred in law and on facts in holding that the assessee is entitled to deduction u/s 80-IA of the Act in respect of other income of Rs. 4,00,637/-. 4. That the ld. CIT((A) has erred in law and on facts in holding that bogus purchase of Rs. 91,18,800/- and bogus expenditure of Rs. 26,67,267/- are entitled for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: (i) If an expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee's profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80-IB of the Act. This view was taken by the courts in the following cases: Income-tax Officer-Ward 5(1) v. Keval Construction [2013] 33 taxmann.com 277 (Guj.) Commissioner of Income-tax-IV, Nagpur v. Sunil Vishwambharnath Tiwari [2016] 63 taxmann.com 241 (Bom.) (ii) If deduction under section 40A(3) of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 80-IB of the Act. This view was taken by the court in the following case: Principal CIT, Kanpur v. Surya Merchants Ltd. [2016] 72 taxmann.co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in his gross total income." We observe that section 80-IA, with which we are concerned in this appeal, is included in Chapter VI-A under the heading "C. - Deduction in respect of certain incomes". We also note that the section 80-IA(4)(iii) which is a part of section 80-IA allows deduction in respect of income derived from the business of industrial park which is included in the Gross Total Income of assessee. Hence section 80AB is directly applicable, which mandates that the income computed in accordance with the provisions of this Act shall be deemed to be the income derived from the business of industrial park. In the present case, the Ld. AO has computed the income of the business of industrial park after making the disallowances of bogus purchases of Rs. 91,18,800/- and bogus expenditure of Rs. 26,67,267/- and therefore the amount arrived at after making these disallowance i.e. the enhanced profit of the industrial park, is the income computed in accordance with the provisions of this Act. Hence such enhanced profit is deemed to be the income derived from the business of industrial park and eligible for deduction. In view of this, we find no infirmity in the action of Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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