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Sri Gavva Amarender Reddy Versus The Deputy Commissioner of Income Tax, Circle-2 (3) , Hyderabad and The Asst. Commissioner of Income Tax, Circle-2 (3) , Hyderabad

2016 (3) TMI 867 - ITAT HYDERABAD

Denial of relief under Section 80IA(4) - AO denied exemption u/s 80IA(4)(iii) on the ground that the building-in-question had been constructed prior to 15-09-1999 and that Assessee had been already deriving rental income from it - Held that:- deduction can be allowed only if there is income from the head Business. Sub-Section (4) applies to any enterprise carrying on business of (i) developing or (ii) operating and maintaining (or) (iii) developing, operating and maintaining any infrastructure f .....

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r, AO did not make any enquiry into the present state of affairs of Assessee establishing a Cyber Centre as ‘Industrial Park’ and the extent of property leased and the nature of incomes earned which may effect in claim of deduction. In our view further enquiry may be required, if the claims are to be allowed. Since incomes are assessed under the head ‘income from house property, there is no need to set aside the orders of AO and CIT(A) on the issue of claim under Section 80IA and adjudicate the .....

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08 and 2009-10 to 2011-12 and order dt. 24-04-2015 for AY. 2008-09, which was separately passed. Since common issue is involved in all these appeals, these are heard together and decided by this common order. 2. The following are the Grounds of Appeal commonly raised in all appeals: 1. On the facts and circumstances of the case, the learned CIT (A) erred in confirming the decision of the Assessing Officer by denying the relief under Section 80IA(4)(iii) of the Income Tax Act, 1961 and without go .....

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that Section 80IA (4) (iii) does not prohibit issue of notification as an industrial park under Section 80IA (4) (iii) for an existing property. 4. The learned CIT (A) erred in not considering the claim of the Assessee that there was no prerequisite of seeking approval for property that was completed in the year 1999, as it is not provided for under Section 80lA (4) (iii) . 5. The learned CIT (A) failed to appreciate the fact that the year of construction of the property is irrelevant for claim .....

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ii) of the Income Tax Act [Act] on the industrial park stated to have been developed by Assessee in his individual capacity. Brief facts are that, Assessee Sri Gavva Amarender Reddy, along with his mother Smt. Gavva Laxmi Devi was a co-owner of the plot at 8-2-681/3 & 3A, and 8-2-682, Road No.12, Banjara Hills, Hyderabad. After getting requisite permissions from the MCH on 14-09-1995, they together constructed a commercial complex in the name of 'Laxmi Cyber Centre' on the aforementi .....

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istry of Commerce & Industry, Government of India, for setting up an Industrial Park in terms with the Industrial Park Scheme, 2002. This application was made by Assessee in the capacity of an individual promoter. According to the terms and conditions mentioned in the said application, Assessee proposed to set up/construct the Industrial Park on the land at 8-2-681/3&3A, Road No.12, Banjara Hills, Hyderabad on a total area of 75,918 sq.ft i.e. on the same address where a building had bee .....

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April, 2005. The mother of Assessee, Smt. Gavva Laxmi Devi, also filed an application before the DIPP in similar fashion and the total investment proposed by her was to the tune of ₹ 8.27 Crores. 3.2. Assessee got approval to set up the Industrial Park on the basis of the above-mentioned proposal from the DIPP on 05-12-2006 w.e.f. 01-04-2005. It was stated in the letter of approval that any failure to comply with any of the conditions or misinformation of the facts may result in withdrawal .....

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ncome from it. According to the AO, assessee had sought approval of setting up of the Industrial Park on an already existing infrastructure. He further added that the Industrial Park was not developed/constructed in the individual capacity by Assessee as stated by him in his application before the DIPP. Instead, Assessee along with Mrs. G. Laxmi Devi jointly owned the said property and building, wherein their respective shares were also not clearly divided and demarcated. As the terms and condit .....

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set up after the notification was issued by the DIPP and that once an industrial park was notified by the DIPP and the CBDT, exemption u/s 80IA(4)(iii) had to be granted by the AO. Assessee also relied on the legal opinion which had been obtained by him on 25-09-2008. 4. Ld. CIT(A) however, did not agree and decided the issue against Assessee by stating as under: 07.0 Decision: The assessment order and the written submissions .submitted by the appellant were carefully considered. On a perusal of .....

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of commencement of the Industrial Park i.e. 01.4.2005. 07.1 According to the IPSS -II Form (statutory requirement of half yearly statements to be filed before the DIPP), and the Tax Audit Reports (balance sheets, profit & loss accounts) of the Assessee an investment of only ₹ 2.56 crores was claimed to have been made instead of the proposed amount of ₹ 10.48 crores. The reason for this variatlon is mentioned in Annexure II of IPSS Form against Column I under the item, 'Capit .....

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d building (Rs.2.56 crores) as on 31.3.2006 had been adopted as the cost of the Industrial Park as on 1.4.2006. A similar treatment was done in the case of the mother also. Thus, neither the Assessee nor his mother spent a single paisa towards the "setting up of the Industrial Park" as per the proposal submitted before the DIPP. The building which had been constructed in 1999 and had been yielding rental income since then was only presented in the garb of the 'Industrial Park ' .....

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discussed above, no such proposal was made by him and no such approval was granted. Therefore, there is no occasion to even consider such argument. Further, it is seen that the 'Industrial Park' proposed by the Assessee for which approval was given by the Competent Authority was never set up by him. Instead the Assessee has claimed deduction u/s 80IA(4)(iii) of the Act for the building which was in existence before 1999 and for which no approval was taken by him. Thus deduction u/s 80IA .....

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d not set up the Industrial Park for which the approval was given, he cannot use that approval as the basis for claiming the deduction in respect of the rental income from a property which he had constructed as early as in 1999 and the existence of which was not even disclosed to the Competent Authority. 07.3 According to the Assessee, he claimed the deduction on the basis of the legal opinion obtained on 25.9.2008 from Mr. Nihal Dalvi, Advocate, and the instructing chartered accountant for BSR .....

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Industrial Park in 2005, could be considered as the approval for the building which had been constructed as early as in 1999; even though the vital fact that the building had been constructed in 1999 was withheld from the authorities and the investment proposed in the application was never made. 07.4 The Assessee represented before the D1PP that the investment could not be made because the tenants wanted the bare premises. But he conveniently suppressed the fact, that out of the proposed investm .....

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of the sum (Rs.2.56 crores) had actually been invested and the balance (Rs.7.92 crores) was not required to be invested due to the demands of the tenants. This conclusion is also supported by the legal opinion (supra) which shows clearly that the intention from the very beginning was to claim deduction in respect of existing rental income from the existing building. 07.5 Coming to the head of income under which the income to be taxed, it is settled law that the heads of income are mutually exclu .....

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;profits from business'. A perusal of the financial statement also makes it clear that the Assessee has simply let out the premises, and has earned rental income without doing any activity which could justify the letting out to be called a business. The Assessing Officer is, therefore, directed to re-compute the income under the head, 'Income from House Property' as per law. Needless to say that while doing so, he will allow only such deduction which is allowable under that head and .....

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istence of building and existence of tenants. The mother and son jointly owned the property and applied separately and the same were approved by the relevant authorities. Therefore, AO cannot reject the claim, once the industrial park was approved. It was the submission that the subordinate authority like AO or CIT(A) cannot consider that the approval that was granted was automatically withdrawn. It was submitted that there was no proposal for its revocation as well. It was submitted that Assess .....

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supposed to invest moneys. Therefore, Assessee is not entitled to claim deductions. 7. We have perused the rival contentions and the documents placed on record in the form of Paper Book. Assessee has placed the copies of DIPP application, approval, application to CBDT and approval order. As seen from the facts of the case, Assessee did indeed develop a building as a co-owner on the plot at # 8-2-681/3 & 3A at Road No. 12, Banjara Hills, Hyderabad. Assessee s address is 8-2-682 in Laxmi Cybe .....

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918 sq. ft., and out of this 63,018 sq. ft., was proposed to be earmarked for industrial use. A minimum of three industrial units were proposed to be set up and a total investment of 10.48 Crores including ₹ 6 Crores for built up space was proposed for set up for this Industrial Park. The expected date of commencement was stated as April, 2005. And in fact, Assessee applied for the necessary permission vide his application dt. 04-10-2005 i.e., after the commencement of Industrial Park prop .....

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orthcoming from the record. Out of these four units, AO noted that the agreement with SIS Infotech occupying 17,804 sq. ft., to be an unit established much earlier, on a ten year lease. It is also on record that Assessee did not invest any amount for infrastructure stating that the same would be taken up by the occupants of the place, as they wanted bare structure lease. Even though Assessee obtained the approvals for development and maintaining and operate an Industrial Park, the record do supp .....

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of the Industrial Park are same as that of # 8-2-682. The facts indicate that both the property at # 8-2-682 and # 8-2-681/3 & 3A seems to be one and the same, with two different but common ownership. The same four companies have occupied the space in that building also partly owned by the mother of Assessee to an extent of 37,174 sq. ft., as can be seen from the Column 13 in the application to CBDT vide letter dt. 24-01-2007. 9. Be that as it may, the issue before us is whether AO is corre .....

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teps have been taken so far by either the AO or by any other authority to withdraw the approval so granted by the CBDT on the so called allegations of misrepresentation/misinformation. In view of this, we cannot appreciate the action of the AO and CIT(A) in denying the benefit to the Industrial Park. To that extent, the orders of AO and CIT(A) cannot be approved and has to be set aside. 10. On Assessee s grounds so raised, the issue has to be decided in favour of Assessee. But what we noticed fr .....

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m business only. Section 80IA(1) is as under: 80-IA(1): Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits a .....

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