TMI Blog2011 (11) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... k should have started functioning before 14 March 2007( including one year grace period conferred by Scheme). Since the Petitioners had completed the work of the building on 08.03.2007, they should be regarded as having complied with the norms of the Industrial Park Scheme, 2002. Further, the Empowered Committee while granting approval did not treat the requirement that the industrial park should commence on 15 March 2006 as inviolable and petitioners had in their original application stated that there would be eight units. Hence, the order of the Empowered Committee is set aside and committee is directed to consider the application filed by the Petitioners including for the reduction of units without holding the Petitioners to be disentitled on the ground that has been found to be erroneous in the judgment of this Court. - Decided in favor of assessee. - W.P. No. 744 of 2011 - - - Dated:- 16-11-2011 - DR. SHRI D.Y.CHANDRACHUD AND SHRI A.A. SAYED, JJ. Represented By: Mr. Aspi Chinoy, Sr. Adv. with Mr. Vinay Sonpal and Mr. B.R. Vishwakarma for the Petitioners. Mr. B.M. Chatterjee with Mr. Rajinder Kumar and Ms. Anamika Malhotra for R. Nos. 1 2. Mr. Suresh Kumar fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ending on the 31st day of March, 2006. In a case, where an undertaking develops an Industrial Park on or after the 1st day of April, 1999 and transfers the operation and maintenance of such Industrial Park to another undertaking (transferee undertaking), the benefits shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years in a manner as if the operation and maintenance were not so transferred to the transferee undertaking. Para 4 defines the objectives of an industrial park which includes, inter alia, in sub-para (b) "an industrial park for development of infrastructural facilities or built-up space with comon facilities in any area allotted or earmarked for the purposes of industrial use". The Scheme provides two modes for the grant of approval; (i) automatic approval and (ii) non-automatic approval. The case of the Petitioners is admittedly governed by the non-automatic approval route. In such cases para 7 of the Scheme stipulated that all applications which were not eligible for automatic approval shall require the approval of the Empowered Committee constituted by the Central Government. The Empowered Committee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Park should be in operation during the period for which the benefits under Section 80-IA (4)(iii) are to be availed of. Para 5 (ii) of the letter which was in terms of para 9 of the Scheme then contains the following stipulation : (ii) In case the commencement of the Industrial Park is delayed by more than one year from the date as indicated in Para 1 (xi) of this approval letter, fresh approval shall be required under the Industrial Park Scheme, 2002, for availing benefits under Sub-Section 4 (iii) of Section 80-IA of the Income Tax Act, 1961. 6. On 26 October 2006 the Petitioners addressed a communication to the Union Ministry of Commerce and Industry stating that the project would require a likely period of two months for completion. The Petitioners stated that in view of the then existing circumstances they would be able to accommodate three units in the I.T. Park and consequently sought a change in the number of units allowed from eight to three. The proposed area of the I.T. Park was maintained at 8261.56 sq. mt. and similarly there was no change in the proposed allocable area. The expected date of completion was set back from 15 March 2006 to 31 March 2006. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addressed to the Petitioners to clarify as to when the park had actually become functional. In a reply dated 25 July 2007, the Petitioners stated that as on 14 March 2007 three units were located in I.T. Park, namely, (1) M/s. Tata Consultancy Services Ltd., (2) M/s. Polaris Software Lab Ltd. and (3) M/s. Bharti Airtel Ltd. 9. On 3 August 2007, the Union Government sought a No Objection Certificate from the land owner to the effect that only the Petitioners shall claim benefit under Section 80 IA. The NOC was furnished on 14 August 2007. On 21 September 2007 the Petitioners addressed a communication to the Union Government stating that subsequently an additional unit, namely, of M/s. Citigroup Global Services Ltd. had been located in the I.T. Park and permission was sought. On 12 November 2007 the Petitioners stated that they had anticipated that they will be allotted three industrial units. However, they were in a position to accommodate five units for which an amendment in the approval was sought. 10. On 25 August 2008, the Union Government in the Ministry of Commerce and Industry rejected the application of the Petitioners on the ground that since the expected date of comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, a further hearing took place before the Empowered Committee on 21 December 2009. During the course of the hearing, a representative of the Central Board of Direct Taxes contended that an industrial park which commences operation after 31 March 2006 and before 31 March 2009 shall be governed by the Scheme of 2008. Hence, according to the CBDT, since the Petitioners had commenced operation of the industrial park after 31 March 2006 and even after allowing the grace period of upto one year that should not extend later than 31 March 2006. The Empowered Committee took the view that the issue of the grace period should be resolved first before the CBDT, the Department of Revenue and the Department of Industrial Policy and Promotion and a fresh meeting of the Committee should be convened thereafter. 13. On 7 July 2010 the Empowered Committee came to the conclusion that the Petitioners should not be granted the benefit of the Industrial Park Scheme, 2002. In taking this view the Committee noted that it had obtained the views of the Revenue Department and the Department of Legal Affairs. According to the clarification issued by CBDT on 2 June 2008 para 9 (1) of the Scheme only provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to give the benefit of a deduction for developing infrastructural facilities continues to exist until date; (ii) Under Section 80-IA (4) (iii) a benefit is available to (i) either an assessee who is a developer; or (ii) an assessee who develops and operates an industrial park; or (iii) an assessee who maintains and operates an industrial park in accordance with the Scheme notified by the Central Government. Para 9(1) of the Scheme does contemplate a situation where the commencement of the industrial park is delayed by more than one year from the date indicated in the application in which case a fresh approval has to be obtained to get the benefit under the Act. This condition has been also applied to existing approvals under the Industrial Park Scheme which had envisaged the commissioning of the park, latest by 31 March 2002. Clause 5 (2) of the letter of approval that was granted to the Petitioners was inserted specifically with reference to the expected date of completion of 15 March 2006 and was in terms of Para 9 of the 2002 Scheme; (iii) The subsequent scheme which has been framed by the Central Government in 2008 has liberalised the provisions even further by merely r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, while computing the total income of the assessee of an amount equal to hundred per cent of the profits and gains derived from an eligible business for ten consecutive assessment years out of fifteen years beginning from the year in which inter alia the assessee develops an industrial park or facility. The eligible businesses to which the provisions are attracted are specified in sub-section (4) of Section 80-IA. The object and purpose of Section 80-IA was to provide an impetus to the growth of infrastructure in the country. Clause (iii) of sub-section (4) of Section 80-IA makes eligible an undertaking which (i) develops; or (ii) develops and operates; or (iii) maintains and operates an industrial park notified by the Central Government in accordance with the Scheme framed for the period beginning on 1 April 1997 and ending on 31 March 2006. An undertaking is eligible if it has either developed; or developed and operated; or operated and maintained an industrial park in accordance with the Scheme. The first aspect of the matter which needs emphasis is that clause (iii) of Section 80-IA (4) requires that the Scheme has to be notified for the period between 1st April 1997 and 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 2006 noting that the expected date of completion was 15 March 2006. The letter of approval is significant because clause 5(2) of the letter stipulates that in case the commencement of the park is delayed by more than one year from the date as indicated in Para 1 (11) 15 March 2006 a fresh approval would be required under the Industrial Park Scheme, 2002 for availing of benefits under Section 80-IA (4) (iii). Obviously therefore, when the Empowered Committee granted its approval on 24 July 2006 it did so conscious of the circumstance that the expected date of completion was 31 March 2006. The Empowered Committee took note of the possibility that the commencement of the industrial park may be delayed by more than one year from this date. The letter thereafter proceeded to stipulate that in such an event a fresh approval was required. This is an important circumstance, which has a bearing on the manner in which the provisions of the Scheme were construed by the Empowered Committee. At least when it granted its approval on 27 July 2006 the Empowered Committee did not treat the requirement that the industrial park should commence on 15 March 2006 as inviolable. In this regard it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Industrial Park Scheme, 2002 was notified on 1.4.2002, the main section 80-IA[4(iii)] only applied to undertakings which were to commence operation by 31st March, 2006. Thus, para 9(1) of the scheme cannot be interpreted in a manner which would extend the scope of exemption beyond what was intended in the main statute. Hence, if an industrial park has not commenced operation by 31st March, 2006, it shall not be governed by the provision of the Industrial Park Scheme, 2002". (emphasis supplied). The view which finds acceptance by the Department of Legal Affairs postulates that when the Industrial Park Scheme of 2002 was notified on 1 April 2002, Section 80-IA(4)(iii) only applied to undertakings which were to commence operations by 31 March 2006. This conclusion is not a correct reading of Section 80-IA(4)(iii). What Section 80-IA(4)(iii) postulated was that the section would apply to any undertaking which develops, develops and operates or maintains and operates an industrial park notified by the Central Government in accordance with a Scheme framed for the period beginning on 1 April 1997 and ending with 31 March 2006. The provision does not contain a condition to the effect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion either in the statute or in the scheme that Parliament or its delegate intended to deprive the assessee of the benefit of Section 80IA(4)(iii). Para 9 of the Scheme would in fact indicate an intent not to deprive the benefit of Section 80IA (4) (iii) save and except that if the commencement of the project is delayed beyond one year a fresh approval would have to be obtained to get the benefits under the Act. The Court cannot also ignore the fact that the intent of the legislature and its executive is not to discontinue the benefits available in law. The Union Government has further liberalised the scheme in 2008 by requiring that the undertaking shall begin to develop the industrial park by a stipulated date. In this case, approvals had been granted on 24 July 2006 which was several months after 31 March 2006 when the Scheme of 2002 was to expire. 22. During the course of the hearing, learned Counsel appearing on behalf of the Revenue relied on the fact that though the Petitioners had initially stated in their application that they would have eight units in the industrial park, this figure was sought to be reduced to three. Learned Counsel submitted that Para 9(2) of the Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X
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