TMI Blog2012 (5) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial park. There is no reason why similar benefit should not be extended to Assessee claiming benefit u/s.80-IA(4)(iii) of the Act when the conditions for grant of deduction were satisfied by the Assessee even before the AO passed the order of assessment. The facts of the present case justify considering the plea of the Assessee for grant of deduction u/s.80-IA(4)(iii) of the Act in respect of profits declared in AY 04-05 and 05-06 and allowing the same as admittedly the conditions for grant of such deduction were satisfied though at a later point of time - Decided in favor of assessee. - ITA No.1828/Mum/2009 & 1829/Mum/2009 - - - Dated:- 24-2-2012 - N V Vasudevan, R K Panda, JJ. For Appellant: Mr Percy Pardiwala For Respondent: Mr V V Shastry ORDER Per: N V Vasudevan: These are appeals by the Assessee against the common order dt.21.1.2009 of CIT(A)-Central-I, Mumbai, relating to AY 04-05 05-06. The grounds of appeal raised by the Assessee are common in both the appeals. The grounds raised by the Assessee read as follows: 1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in not accepting the plea of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, (at the relevant point of time) as follows: 18C. Eligibility of Industrial Parks and Special Economic Zones for benefits under section 80-IA(4)(iii) of the Income-tax Act, 1961.--(1) The undertaking shall begin to operate an industrial park during the period beginning on the 1st day of April, 1997, and ending on the 31st day of March, 2002. (1A) The undertaking shall begin to develop or develop and operate or maintain and operate a special economic zone any time during the period beginning of the 1st day of April, 2001 and ending on 31st day of March, 2006. (2) The undertaking shall be duly approved by the Ministry of Commerce and Industry in the Central Government under the scheme for industrial park or special economic zones notified by that Ministry. (3) The undertaking shall continue to fulfill the conditions envisaged in the scheme. (4) On approval under sub-rule (2), the Central Board of Direct Taxes shall notify industrial parks for benefits under section 80-IA. 3. The assessee decided to develop an Industrial Park at CTS No. 1406A/10(Pt), Malad (W), Mumbai-400 064, under the Industrial Park Scheme, 2002 notified by the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s. 80-IA of I.T. Act to the tune of Rs. 6,42,09,914/-. As already stated, the Assessee requested the AO in the course of assessment proceedings that the claim for deduction is being withdrawn and that the Assessee be permitted to withdraw the income from industrial park offered to tax in the original return of income. 6. During the assessment proceeding for AY 05-06, the assessee submitted before the AO a copy of notification of CBDT, New Delhi dated 12- 07-2006 for perusal alongwith other relevant communications. The annexure attached to the said notification indicated terms and condition on which approval of Govt. of India has accorded for setting up of an Industrial Park by M/s. Ferrani Hotels(P) Ltd. As per clause(vii) of para 1 of the annexure, the minimum no. of Industrial units required to be developed was 33 . During the assessment proceeding, the AO called upon the assessee to produce the details along with supporting evidence to established that they complied the above terms and condition as on 31-3-2005. The assessee admitted that all the 33 units were not developed as on 31-3-2005. In view of the fact that the Assessee did not develop 33 units as on 31.3.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o complete the project by the stipulated date of the deadline for completion as per the Industrial Park Scheme which was 31.03.2006. The Assessee was apprehensive that it would be exposed to the charge of not following its own method of recognizing revenue consistently. Thus, it could have attracted even the charge of concealment. The Assessee therefore, decided to play safe and to offer to tax the income from the project on the basis that the project would not be eligible to deduction u/s 80-lA(4)(iii). Simultaneously, it continued its efforts to complete all the 33 units by the stipulated date i.e. 31.03.2006. The efforts bore fruit when the assessment proceedings for A.Y. 2004 -05 were going on and it became clear to the assessee that it had become eligible for deduction u/s 80-lA(4)(iii) in the accounting period relevant to A.Y. 2006 07, when the requisite notification under rule 18C was issued by the CBDT. Had the assessee not completed the project by 3l.03.2006, it would have forfeited the benefit of deduction u/s 80IA(4)(iii). Therefore, the assessee offered to tax income which was part of income eligible for deduction u/s 80-IA-(4)(iii). 8. The Assessee explained as to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting period according to the Scheme of the Section cannot be taxed merely because the assessee had some misapprehension about meeting the deadline for completing the project u/s 801A and had returned such income under fear that it would not be able to meet the deadline originally fixed for completing the project i.e. by 31.03.2006. 10. The Assessee relied on circular No. 14 (XL-35) of 1955 dated 11.04.1955. The circular reads as under: Officers of the department must not take advantage of ignorance of an appellant as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the mater of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the appellants on whom it is imposed by law. Officers should - (a) draw their atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits during the two assessment years under consideration are in accordance with both the relevant provisions of the ITA and established accounting standards. The CIT(A) also held that as per the annexure to the notification dated 12.7.2006 of CBDT bearing No. 175/2006, indicated that the Government of India had accorded approval for setting up of an Industrial Park by the assesse and as per the approval, minimum number of Industrial units to be developed were to be 33 and that the tax benefit under the ITA could be availed only subject to the fulfillment of the condition as stipulated in this clause. Since the assessee has itself admitted that all the 33 units were not developed as at 31 .3.2005, it was clear that the Assessee was not entitled to deduction u/s 801A(4)(iii) of the ITA during the A.Y. 04-05 2005-06 as all the 33 units were not developed by 31.3.2005. 12. In AY 06-07, the Assessee was allowed benefit u/s.80-IA(4)(iii) of the Act in respect of the profits to the extent of 30% of sales in that year by the CIT(A).. The Assessee had claimed that even in respect of profits declared in AY 04-05 and 05-06, the CIT(A) should allow similar deduction. The CIT(A) allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances existing at the point in time when these orders were passed and the appellant has also not disputed the grounds of the disallowance for these years. The disallowance for these years is thus final and sealed. The appellant has made the prayer only on the strength of a subsequent event, which cannot be taken into reckoning for allowing a claim, disallowed in the past for valid reasons. A claim cannot be entertained without an enabling provision and the appellant s claim suffers from this infirmity. The appellant s reliance on CBDT s Instruction No.4/2009 is also misplaced. This Instruction lays down guidelines on claim of deduction u/s.8OIB(10) where profit is shown from partial completion of project. The context of the appellant s claim is not this. The appellant s claim raises a technical improbability in that it seeks the CIT(A) to modify his earlier order without an appropriate enabling provision to do so. It has nothing to do with the substance of the claim u/s.801A(4)(iii) as such. The appellant s alternative claim of including the profits of the earlier years into the profits for the present year under consideration is also equally unacceptable. As may be noted, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standards followed by the appellant and accordingly, the accounts having been finalized by the appellant itself cannot be disturbed. It may thus be seen that offering of the profits during the two assessment years under consideration are in sync with both the relevant provisions of the ITA and established accounting standards. Accordingly, they cannot be artificially slotted into any other year. In tight of the foregoing, both the alternative prayers being not acceptable are dismissed. 2.6 In tight of the foregoing, this ground of appeal is partly allowed. 13. The learned counsel for the Assessee made statement across the bar that to the best of his knowledge the order of CIT(A) for AY 06-07 has been accepted by the Revenue and no further appeal has been preferred before the Tribunal. It is in the light of the above circumstances, the grounds of appeal raised by the Assessee have to be considered. 14. The learned counsel for the Assessee drew our attention to page-54 (containing approval of CBDT for the project of Industrial park) of the paper book and submitted that on 12.7.2006 the Ministry of Finance, Department of Revenue, CBDT approved the project for construction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessee in AY 04-05 and 05-06 should not be exempted u/s.80-IA(4)(iii) of the Act as by now the Assessee has satisfied the conditions requisite for grant of the said exemption. 16. The learned counsel for the Assessee gave the details of dates regarding grant of approval in terms of Sec.80-IA(4)(iii) of the Act. The Assessee applied for approval during previous year relevant to AY 04-05 i.e., on 8.10.2003. The prescribed authority had granted in principle approval on 21.3.2005. For AY 05-06 return of income was filed on 31.10.2005. Notification of CBDT was issued on 12.7.2006. The time for filing revised return of income for AY 04-05 ended on 31.3.2006. The order of assessment was passed for AY 04-05 and 05-06 on 21.12.2006 and 20.12.2007 respectively. It was highlighted by the learned counsel for the Assessee that prior to the passing of the order of assessment for AY 04-05 and 05-06, the Assessee satisfied the conditions for grant of exemption u/s.80-IA(4)(iii) of the Act. He drew our attention to the fact that out of the total sanction of locating 33 units in the industrial park, the Assessee had during the previous year relevant to AY 04-05 and 05-06 located 2 unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1970-71. On appeal, the AAC held that, since the decree had been challenged in appeal, the judgment had not become final, and the decretal amount was not liable to be taxed in the year when the decree was passed and allowed the assessee's appeal. On further appeal, the Tribunal held that, under the mercantile system of accounting, the taxability of an amount was not determined by the receipt of the amount and the amount should be credited in the books on accrual basis in the year when the decree was passed in favour of the assessee and the amount was taxable as the assessee's income in the assessment year 1970-71. A penalty of Rs. 1,25,000 was also imposed because the assessee did not mention the decretal amount in the return for the relevant earlier period even though it had indicated the same in the balance-sheet which was produced before the I.T. authorities. The Tribunal waived the penalty. On a reference to the Hon ble High Court, it was held that the decretal amount could not be deemed to have accrued to the assessee in the assessment year in which the decree was passed. However, when the decretal amount reached the pocket of the assessee the question of accrual beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of time to the previous year, such completion will operate retrospectively. In this regard the argument was that the expression used in the Scheme as well as Rule 18 C was when the units are located and become operational. Our attention was drawn to the Oxford dictionary to show that the meaning of the words be located is be situated in a particular place . There were some units that were completed during the two previous years and to that extent they were located and consequently become operational. Alternatively it was argued that the fulfillment of condition as at the time of completion of the assessment ought to have been taken note of by the AO and as on that date all the units in the industrial park were located and became operational. In this regard reliance was placed on the decision in the case of Additional Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association 121 ITR 1(SC) the Hon ble Supreme Court held that the true meaning of the last ten words in section 2(15), viz., "not involving the carrying on of any activity for profit", is that when the purpose of a trust or institution is the advancement of an object of general public utility, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re language giving rise to linguistic problems and promoting interpretative litigation. The legislature would have used language leaving no doubt as to what was intended and not left its intention to be gathered by doubtful implication from an amendment made in the definition clause and that too in language far from clear. 21. The learned DR reiterated the stand of the CIT(A). 22. We have considered the rival submissions. A reading of the above requirements for getting deduction u/s.80-IA(4)(iii) of the Act, and the relevant rules referred to in the earlier part of this order, would show that the location and operation of the industrial park, the profits from development of which deduction is claimed, is the main condition. The Assessee was developing an industrial park at Bulding Nos. 7, 11, 16 CTS No.1406A/10 (Pt.), S.No.504 (Pt.), Off Link Road, Malad (W), Mumbai-400 064. On application by the Assessee the Ministry of commerce and industry vide letter No.15/29/03-IP ID dated 21.3.2005 approved the construction to be developed, maintained and operated by the Assessee as aforesaid, as industrial park for the purpose of Sec.80-IA(4)9(iii) of the Act subject to following of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessee had addressed letters to the AO in those assessment proceedings requesting the AO to allow the Assessee to withdraw income from the project offered to tax. The Assessee in those letters had highlighted as to how the project completion method would be the best method for recognising revenue in respect of a project, profits from development of which is claimed as deduction u/s.80-IA(4)(iii) of the Act because such deduction is allowed only on location of all the units proposed to be developed in the park. The AO rejected the claim of the Assessee for the reason that the project was not completed as on the last date of the previous year. The CIT(A) was of the view that the Assessee was free to follow any method of accounting for the project in question. Though notes to the account say that the Assessee was following project completion method of accounting in respect of the project of developing industrial park but the Assessee by filing return of income by offering 30% of the sales in AY 04-05 to 05-06 as profit of the project for those AYs respectively, had contradicted its claim made in the notes to accounts. The CIT(A) was therefore of the view that the request of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the reasons assigned by the revenue authorities for rejecting the claim of the Assessee for deduction u/s.80-IA(4)(iii) of the Act, it is clear that an Assessee who adopts the percentage completion method of accounting of income from developing industrial park can get deduction of only that part of the profits that are offered to tax in the year in which the notification is received. Had the Assessee in the present case followed project completion of method of accounting of income from developing industrial park, the Assessee would have got the benefit of deduction of the entire profits from the development of industrial park. It will result in a situation where the method of accounting followed by the Assessee (such as the one in the present case) will deny the benefit available under the law. The method of accounting is such that the Assessee can never get the benefit even in a later year. It is no doubt true that the satisfaction of the conditions for grant of deduction as on the last date of the previous year is necessary. If due to subsequent events that take place after the last date of the previous year, conditions for grant of deduction are satisfied, then the AO can t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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