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2011 (2) TMI 92 - AT - Income TaxDeduction u/s 80-IA(4)(iii) - Test of an independent unit - The test is not that who operates the independent units run in the multistoried structure. It is also not the question whether all the stories are occupied by one tenant or different tenants - The test to be applied is the functional test. 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 successfully satisfied the above stated functional test of an independent unit – Thus, the objection raised by the assessing authority does not exist - The assessee was running five/four units as prescribed by the conditions of approval granted by the Ministry of Commerce and Industry. Approval and notification - Once the projects are approved and notifications are made by the appropriate authorities, the approval and the notification run back to the date of commencement of the activities - This is for the simple reason that once the assessee has acquired the land from a Government agency for a specific purpose, the assessee has to start complying with the conditions stipulated by the State Government agency. Developing of IT Parks takes sufficient long time. The assessee applies for the approval and notification as soon as the project is initiated. If the assessee waits to get order of approval and the notification order to initiate the project, the project would be a non-starter. It is on the basis of the applications already made to the concerned authorities that the assessee is carrying on the essential construction activities which consumes a lot of time - , it is almost impossible to insist that the assessee can initiate the project only after getting the final approval and the notification of the concerned authorities. The more equitable construction of the situation as always approved by law is that the Government approval and the CBDT notification once granted to the assessee, take care and cover of the earlier period as well - This is for the reason that the approval and notification have been granted to those eligible undertakings as such - The crucial question to be examined is whether the eligible undertaking for which the assessee has sought deduction has been in fact approved and notified - If the answer is yes, the assessee qualifies the condition laid down in the project scheme. - Therefore, it is not proper on the part of the Assessing Officer to decline the deduction on the ground that the assessee has started functioning even before the formal order of approval and notification - This is not a ground to deny exemption to the assessee. Hence ,both the grounds highlighted by the assessing authority to deny deduction to the assessee are not sustainable in the facts of the case – Thus the two appeals filed by the assessee are allowed
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