Case Law Details
Brief of the Case
ITAT Hyderabad held In the case of VITP Pvt. Ltd vs. DCIT that as per sub-rule (4) of Rule 18C of Income Tax Rules, it is clear that on approval by the central govt., CBDT is only required to notify the industrial park for benefit u/s 80IA (4)(iii).Therefore, when the central govt. in the Ministry of Commerce and Industry is the competent authority to grant approval to an industrial park u/s 80IA (4) (iii) and such authority having not imposed any condition, stipulating that no single unit shall occupy more than 50% of the allocable industrial area, CBDT being merely a notifying authority cannot impose any fresh condition. Therefore, assessee’s claim of deduction u/s 80IA (4) (iii) cannot be rejected.
Facts of the Case
The assessee is engaged in the business of providing infrastructure facilities, which inter-alia, includes developing, operating and maintenance of industrial park. For the AY under consideration, assessee filed its return of income on declaring total income of Rs. 14,48,61,750 after claiming deduction u/s 80IA(4)(iii) for an amount of Rs. 33,36,38,229. Assessee’s case was selected for scrutiny and AO after verifying the books of account as well as other details and making necessary enquiry, completed assessment u/s 143(3).
While completing assessment, AO made a number of additions/disallowances, as a result of which gross income was determined at Rs. 46,17,01,813 after allowing deduction under Chapter-VA, taxable income was determined at Rs. 20,54,38,350. Subsequently, assessment records of assessee relating to AY under consideration came up to be examined by CIT in exercise of power conferred u/s 263. While examining the records of assessee, CIT noticed that assessee has claimed deduction u/s 80IA(4)(iii) for four units in industrial park out of total five units. He found that out of four units, assessee has claimed deduction for Rs. 5,77,76,303 in respect of unit named Capella and in course of assessment proceeding, AO accepting assessee’s submission that it has complied to the conditions prescribed by Department of Industrial Policy and Promotion (DIPP), Govt. of India has allowed assessee’s claim of deduction u/s 80IA(4)(iii). He observed, while doing so AO did not verify whether assessee has violated conditions laid down in the notification No. 244/07 dated 28/09/07 issued by CBDT.
The assessee submitted a detailed reply stating therein that assessee has not violated any of the conditions while claiming deduction u/s 80IA (4)(iii). Assessee also submitted, it has obtained necessary approval from DIPP and CBDT as required under Rule 18C of Income-tax Rules. It was submitted by assessee that as far as industrial park named Capella is concerned, he has applied for approval of DIPP under non-automatic route and the Central Govt. through DIPP has approved industrial park Capella through notification dated 10/04/07. It was submitted that in consequence to the notification of DIPP, CBDT has also notified industrial park Capella for availing deduction u/s 80IA (4)(iii) vide notification dated 28/07/07. It was submitted by assessee that the condition imposed in the notification issued by CBDT to the effect that no single unit shall occupy more than 50% of the allocable industrial area of an industrial park is not applicable to non-automatic route. It was further submitted by assessee that since all these issues were enquired in detail by AO and he completed the assessment allowing assessee’s claim of deduction u/s 80IA (4)(iii) after proper enquiry, assessment order cannot be considered to be erroneous and prejudicial to the interests of revenue.
Contention of the Assessee
The ld counsel of the assessee submitted that assessee has applied for approval of Capella Industrial Park through non-automatic route as per the Industrial Park Scheme, 2002. He submitted, the condition in the CBDT notification, which stipulates that no single unit should occupy more than 50% of the allocable industrial area is applicable only in case of approval granted under automatic route. Ld. AR submitted, as per Rule 18C of IT Rules the competent authority for granting approval is Central Govt. through DIPP. As per sub-rule (2), CBDT does not have authority to prescribe any conditions for approval of industrial park, but, only after approval is granted by DIPP, CBDT is required to issue a notification in terms with sub-rule (4) of Rule 18C notifying assessee for availing deduction u/s 80IA(4)(iii). It was submitted by ld. AR, DIPP while granting approval has not put any condition that no single unit shall occupy more than 50% of the allocable industrial area. That being the case, condition imposed by CBDT in its notification is not valid.
In this context, ld. AR relied upon the decision of ITAT, Hyderabad Bench in case of Meenakshi Infrastructure Pvt. Ltd. Vs. CIT, ITA No. 313 /H/10. Ld. AR submitted, once the central govt. approves the project under the industrial park scheme, the conditions u/s 80IA (4)(iii) are satisfied and the notification from CBDT is only a procedural formality. In this context, he relied upon the following decisions: Creative Infocity Ltd. Vs. Under Secretary [2012] 19 Taxmann.com 270 (Guj.), CIT Vs. M/s Ackruti City Ltd., ITA 71 of 2012 (Bom.) and ACIT Vs. M/s Annapurna Builders, Hyd. ITA No. 1177/Hyd/2011. For the proposition that under non-automatic route, the condition that no single unit shall occupy more than 50% of the allocable industrial area is not applicable, ld. AR relied upon the decision of ITAT, Hyderabad Bench in case of L&T Infocity Ltd. Vs. CIT, ITA No. 1515/Hyd/11 and others, dated 22/01/2015.
Further, Ld. AR submitted, when AO after conducting necessary enquiry and applying relevant statutory provision has taken a view, which is a possible view while granting deduction u/s 80IA(4)(iii) to assessee, the order passed cannot be considered to be erroneous and prejudicial to the interests of revenue. In support of such contention, he relied upon the following decisions: Bharti Airtel Ltd. Vs. CIT, ITA No. 3120/Del/2014, Satyam Ventures Engg Services Pvt. Ltd. Vs. DCIT, ITA No. 492/H/08, Dr. William Britto Vs. CIT, Karnatala (Central), [2015] 56 taxmann.co. 170 (Panaji Trib.), Happy Forgings Ltd. Vs. JCIT, [2015] 58 taxmann.com 65 (Chandigarh Trib.), CIT Vs. Leisure Wear Exports Ltd. [2012] 341 ITR 166/202, Taxman 130 (Del.) and DIT Vs. Jyoti Foundation [2013], 357 ITR 388/219.
Held by the Revenue
The ld counsel of the revenue relied upon the reasoning of CIT.
Held by CIT (A)
CIT (A) upheld the revision order. Referring to the notification issued by CBDT vide notification NO. 244/07 dated 28/09/09, CIT observed that the condition imposed therein stipulates that no single unit shall occupy more than 50% of the allocable industrial area of the industrial park, whereas, one of the unit Viz.; CA Computer Association India Pvt. Ltd. occupies more than 50% of the industrial space, hence, assessee has violated the conditions imposed in the CBDT Notification. Ld. CIT observed, though, assessee has violated the aforesaid condition as per the notification issued by CBDT, but, AO without verifying this aspect has completed the assessment allowing assessee’s claim of deduction u/s80IA(4)(iii). He held that decision taken by AO without requisite verification or enquires cannot constitute formation of an opinion. He observed that change of opinion is possible only when there exists a valid opinion. As far as the decision of ITAT in case of L&T Infocity is concerned, ld. CIT observed, since the decision was not part of record at the time of finalization of assessment, the same cannot be taken into consideration. With the aforesaid observations, CIT set aside the assessment order with a direction to re-do assessment denovo.
Held by ITAT
ITAT held that there is no dispute to the fact that assessee has developed industrial park, which is an eligible business activity u/s 80IA (4)(iii), hence, assessee is entitled to avail deduction in respect of the profit derived from such eligible business. There is also no dispute to the fact that industrial park developed by assessee is in terms with industrial parks scheme, 2002 of the central govt. As per the scheme formulated by central govt. in the Ministry of Commerce and Industry, approval for industrial park can be obtained from the Ministry of Commerce and Industry, Govt. of India through DIPP either under automatic route or non automatic route. As far as the present assessee is concerned, there is no dispute to the fact that it has sought approval for Capella Industrial Park under non-automatic route. The conditions imposed for automatic route and non-automatic route are different.
A comparative analysis of the automatic approval route and non-automatic approval route, would clearly suggest that conditions imposed therein are different. Clause (f) of automatic approval route stipulates that no single unit shall occupy more than 50% of the allocable industrial area of an industrial park. Whereas, such condition is absent in non-automatic approval route. Thus, on a plain reading of the scheme and conditions of approval under both automatic and non-automatic route, it is very much clear that condition stipulating that no single unit can occupy more than 50% of the allocable industrial area is not applicable to an industrial park approved under non-automatic route. At this stage, it would be relevant to note that rule 18C of the IT Rules, prescribes the conditions for granting benefit u/s 80IA (4)(iii). As per sub-rule (2) of Rule 18C, the undertaking shall have to be duly approved by the Ministry of Commerce and Industry in the central govt. under scheme for industrial park. It is seen from the record that the Ministry of Commerce and Industry vide notification dated 10/04/07, has granted approval to Capella Industrial park under industrial park scheme, 2002 for availing benefit u/s 80IA(4)(iii). It is seen that Ministry of Commerce and Industry of Govt. of India has not put any condition stipulating that no single unit shall occupy more than 50% of allocable industrial area. However, such condition has been put in the notification issued by CBDT pursuant to the approval granted by DIPP.
On reading of sub-rule (4) of Rule 18C of IT Rules, it is seen that on approval by the central govt., CBDT is only required to notify the industrial park for benefit u/s 80IA (4)(iii). Therefore, in our view, when the central govt. in the Ministry of Commerce and Industry is the competent authority to grant approval to an industrial park u/s 80IA (4)(iii) and such authority having not imposed any condition, stipulating that no single unit shall occupy more than 50% of the allocable industrial area, CBDT being merely a notifying authority cannot impose any fresh condition. Therefore, for aforesaid reasons, assessee’s claim of deduction u/s 80IA (4)(iii) cannot be rejected.
Further, once AO has conducted enquiry on a particular issue and has taken a decision after proper application of mind and if such view taken by AO is one of the possible view, then, even if it is not discussed elaborately in the assessment order, it cannot be said assessment order passed is erroneous and prejudicial to the interests of revenue. The principle of law laid down in various judicial precedents in this context being too well-known; there is no need for us to deliberate on them here. For the aforesaid reason, assumption of jurisdiction u/s 263 by ld. CIT for revising the assessment order, in our view, is not valid. Thus, assessee deserves to succeed both on merits as well as on jurisdictional issue.
Accordingly appeal of the assessee allowed.
