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2016 (11) TMI 967 - GUJARAT HIGH COURT

2016 (11) TMI 967 - GUJARAT HIGH COURT - [2016] 388 ITR 99 - Grant of deduction under section 80-IA(4) - Held that:- MARS Planning and Engineering Services Pvt. Ltd. was appointed by GIDC for the purpose of certifying the quality control and completion of the project for State subsidy. MARS Planning and Engineering Services Pvt. Ltd. had already given such completion certificate well before March 31, 2011, on the basis of which the State Level Committee had approved the petitioner for grant of s .....

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wever, a more liberal or practical approach could be that when MARS Planning and Engineering Services Pvt. Ltd. was appointed by GIDC who had certified that the project was completed before March 31, 2011 and when the State Government had acted on such report and approved the subsidy, this should have been seen as a substantial compliance of such requirement. However, to put the issue beyond any controversy, we permit the petitioner to produce such certificate from GIDC, which is also a local au .....

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- 6-8-2016 - Akil Kureshi And A. J. Shastri, JJ. For the Petitioner : R. K. Patel with B. D. Karia, with Darshan R. Patel, Advocates For the Respondent : Mauna M. Bhatt, Advocate JUDGMENT Akil Kureshi, J. 1. The petitioner has challenged an order dated November 5, 2014 passed by the Central Board of Direct Taxes ("CBDT" for short) on which the petitioner's application for approval and for notification of its industrial part under the Industrial Park Scheme, 2008 came to be rejected .....

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e and Industry informed the petitioner on January 5, 2009 that the petitioner should apply under the new Industrial Park Scheme, 2008. The petitioner accordingly applied for approval under application dated January 27, 2009. According to the petitioner, the petitioner completed the development of the industrial park on September 5, 2010 which was well before the extended last date of March 31, 2011 envisaged in the Industrial Park Scheme, 2008. According to the petitioner as many as 182 units we .....

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the industrial park which was examined by the agency appointed by the GIDC. On the basis of certificate issued by such agency, the State Government had also noted that the petitioner had completed the development of industrial park before March 31, 2011 and on the basis of which the payable subsidy was released in favour of the petitioner. 4. The petitioner produced such materials before the Central Board of Direct Taxes and sought approval that the industrial park was duly developed before the .....

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MARS Planning and Engineering Services Pvt. Ltd., an agency approved by the Government of Gujarat for third party quality assurance, a project completion certificate dated April 8, 2013 issued by the Industries Commissioner, Government of Gujarat. The Central Board of Direct Taxes also referred to certain certificates and letters issued by the Ahmedabad Urban Development Authority ("AUDA" for short). Such evidence was however, discarded by the Central Board of Direct Taxes making the f .....

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ce to, letter dated March 4, 2012 from M/s. Devraj Infrastructure Ltd., Ahmedabad requesting to issue a completion certificate for the Development work of infrastructure of Devraj Industrial Park. This indicates that the applicant had approached AUDA on March 4, 2012 to issue a completion certificate. The question that arises is why the applicant approached the authority almost one year late to issue completion certificate and not immediately after the project was completed as per the claimed da .....

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ne 17, 2010 given by AUDA to one of the units of the said project. It was issued after verification of the site and after satisfying that the required infrastructure under General Development Control Regulation (GDCR) has been completed This certificate issued by the AUDA in Gujarati, is in respect of occupation of the first unit only and does not cover the occupation of 182 units that form part of the entire project. It also gives area related information pertaining to that first unit and not t .....

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only one unit was complete before the cut-off date, the applicant obtained this certificate and has been using it as an evidence under the camouflage that the entire project was complete by this date and the applicant can avail huge tax benefits for ten years. It may further be clarified here that the completion of project not only means completion of basic infrastructure but also industrial units which are the integral part of any industrial park. Hence, the date of completion would mean not on .....

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ssurance (TPQA) as per requirement of Industries Commissioner, Government of Gujarat. M/s. MARS Planning and Engineering Service Pvt. Ltd. (MARS) Ahmedabad is an entity appointed by the applicant as a Third Party Quality Assurance (TPQA). This was done as a matter of compliance of State Level Approval Committee (SLAC) with the purpose of monitoring the quality of infrastructure work. This is not a local authority as stipulated under IPS 2010 but a private entity appointed by the applicant itself .....

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pect of entire project by June 17, 2010. Further M/s. MARS, in this certificate has confined itself to development pertaining to infrastructure only, as evident from para. (B) and not to construction of units, which is an important constituent of development work. In para. (C), it gives the status of park as follows (c) Status of Industrial Park is as follows (1) No of units sold 180 (2) Out of which agreement executed 99 (3) Out of which construction is in progress 19 (4) Out of which commencem .....

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only one unit was fit for occupation. Moreover, it specifically mentions that Construction in progress is in respect of 19 units and therefore the completion of project as a whole on that day remains unsubstantiated. Therefore, this document does not prove completion of project by September 5, 2010. 4. A letter dated April 8, 2013 related to project completion certificate issued by Industries Commissioner, Government of Gujarat This letter issued by the Industrial Commissioner, Gandhinagar date .....

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table to throw light on the present issue. At the end, it relies on the report of M/s. MARS (as discussed at Sl No.3 above) to repeat that project was completed. However, neither the date of completion has been mentioned, not any independent finding has been given. Since this letter is dated April 8, 2013 what can at best be inferred is that the project was completed on April 8, 2013. 12. Thus the above documents do not provide any specific date of completion. What definitely emerges is that the .....

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: (i) The AUDA carried out an inspection on the 'specific request' of the applicant and issued a work completion certificate. However, as discussed at Sl. No.(1) at the above table, it does not provide any certain or worthwhile evidence in support of the applicant's claim. (ii) The AUDA does not mention that the applicant had made a request for inspection when all the 182 units were completed. Instead, it has given occupancy certificate dated June 17, 2010, when only one unit was re .....

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h software. It does not clearly provide the number of units situated therein and it is not known whether these are plots or units. Even if these are presumed to be constructed areas, it is not ascertainable whether these are warehouses, first aid centre, canteen, sewage plant etc. constituting the common facility or industrial units. Hence, it has no evidentiary value. (v) The AUDA's letter also suggests that 'the decision regarding the actual date or final completion of said project may .....

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not been met in this case. Accordingly, I have been directed to state that it has not been found to be a fit case for notification under section 80- IA(4)(iii) of the Act. Hence, the competent authority has decided to reject the application." 6. If one analyses this order of the Central Board of Direct Taxes, it has principally two elements. One is the objection of the Central Board of Direct Taxes that no completion certificate was issued by the local authority, one of the requirements und .....

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time being, we will keep aside the question of non- production of completion certificate from a local authority and focus our attention to the later of the two objections of the Central Board of Direct Taxes. In this context, we have noted that the State Government had also framed a scheme for subsidy for setting up an industrial park under Government Resolution dated June 10, 2004. The scheme envisages grant of subsidy relatable to the investment made by the developer. Some of the conditions f .....

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tee consisting of Industries Commissioner as chairman and various other Government officials as its members and provided that : "The disbursement of subsidy will be after physical verification of the investment made in industrial park under the project proposal. The application under the scheme will be received by the Indus tries Commissionerate and place before the committee for decision." 9. In the background of this scheme, the petitioner had claimed the subsidy. The state level app .....

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tated that the developer has created infrastructure as per the guidelines. Out of the said investment, ₹ 463.12 lakhs is eligible for subsidy and on the basis of which the Committee has recommended that subsidy of ₹ 92.63 lakhs be granted. The State level approval committee thereupon resolved to grant subsidy of ₹ 92.63 lakhs at the rate of 20 per cent. eligible on investment of ₹ 463.12 lakhs. 10. On March 14, 2011, the Additional Industries Commissioner conveyed to the .....

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plot area of 387500 sq. mtrs., number of plots being 180 on the basis of which subsidy of ₹ 92.63 lakhs was already sanctioned. It was lastly conveyed as under : "The State Level Approval Committee (SLAC) has decided that the developer of industrial park shall have to follow Third Party Quality Assurance (TPQA) system towards quality of entire infrastructure development. As per approved TPQA the developer appointed one of them M/s. Mars Planning and Engineering Service Pvt. Ltd. Ahme .....

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the AUDA on May 8, 2013, certified that the petitioner had carried out and completed the work of infrastructure development and construction work as per the AUDA rules and regulations. The certificate also recorded that the petitioner had set up sewerage system, storm water drain, rain water harvesting system, street light, garden, parking, compound wall, tree plantations etc. and also constructed utility plots for common amenities like conference hall, first aid centre, library, ware house, ad .....

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on certificate dated May 8, 2013 issued by the AUDA, it was observed that there is no specified date of completion in such certificate. Regarding occupancy certificate dated June 17, 2010 issued by the AUDA, it was observed that such certificate mentions only one unit out of 102 units which were part of the project. This would mean that as on June 17, 2010 only one unit had occupied the premises. Regarding the completion certificate issued on September 5, 2010 by MARS Planning and Engineering Se .....

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letion of the project as on September 5, 2010, as claimed by the petitioner. 14. In our opinion the Central Board of Direct Taxes has brought in the element of completion of industrial units on the proposed industrial park instead of completion of the project, a distinction made by this court in the case of Ganesh Housing Corporation Ltd. v. Padam Singh, Under Secretary reported in [2011] 339 ITR 441 (Guj). This question had come up in the background of the assessee's claim therein for deduc .....

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e Scheme, as already noted, provides such general conditions. Sub-clause (2) of clause 9 requires that the tax benefits under the Act can be availed of only after the number of units indicated in the application are located in the industrial park. Sub-clause (5) of clause 9 further requires the developer to submit six monthly progress report. Much has been argued by the counsel for the respondents with respect to such requirements. They have tried to link the application form in format IPSI, whi .....

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;unit' has been defined in Definition clause 2(i) to mean, 'any separate and distinct entity for the purpose of one or more State or Central tax laws'. The question arises-Did the petitioner fulfils this requirement ? For this purpose, we may note that the entire infrastructural facilities were created by the petitioner before the last date envisaged under the Scheme by providing various facilities such as roads, drainage, electricity, lights, water, etc. The entire plot on which the .....

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he Scheme, the petitioner had fulfilled all the requirements for availing of the tax benefits. The petitioner was required to develop the infrastructural facilities. In short, the petitioner was required to setup an industrial park with all infrastructural facilities to enable the pharmaceutical industries to setup their units on the plots so allotted. Term 'locate' used in sub-clause (2) of clause 9 of the Scheme must be viewed from the angle of having allocated the plots to the produci .....

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r spot or position ; as applied to land, to select, survey, and settle the boundaries of a particular tract of land, or to designate a particular portion of land by limits. Similarly, in Black's Law Dictionary, the term 'location' has been explained as to mean, 'the specific place or position of a person or things ; the act or process of locating'. In context of real estate to mean, 'the designation of the boundaries of a particular piece of land, either on the record or .....

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the industries, as indicated in the application approved, by the Government were located before the last date prescribed, was thus fulfilled. Counsel for the respondents, however, relied on Forms of Declaration annexed along with the Scheme to contend that the requirement went much beyond and the petitioner was required to ensure that such industries must set up their units on the plots so allotted. To our mind, such requirement can neither be read in the Scheme nor can it be fastened on the pe .....

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n short, the duty and responsibility of the petitioner was to ensure that the industrial activity is facilitated on the industrial park so developed by it. It was thereafter not responsible to ensure that industries do in fact set up their units and commence production activities on such units-that too before the last date envisaged in the Scheme. To our mind, such responsibility fastened on the petitioner is not borne out from the Scheme. The duty and responsibility of the petitioner was to pro .....

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ilar reasons which can be attributed only to the intending industries and not to the petitioner. In fact, the scheme requires that the petitioner not only fulfil but continue to fulfill all conditions of approval assessing the period when the tax benefit is available. If we accept the strict requirements insisted by the respondents, it would mean that not only that to that number of industrial units indicated in the application for approval of industrial park must be operational on the last date .....

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quot; 15. One of the main objections of the Central Board of Direct Taxes in the said order that the evidence suggested that as on September 5, 2010 only one industry had set up its unit which would imply non completion of the project, would not survive. In other words, if there was other independent evidence of completion of the project, the same would have to be looked into. In this context, we have referred to the documents on record. To begin with the Central Board of Direct Taxes is not acc .....

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ated September 5, 2010 certified that the infrastructure work was completed and the assessee should be approved as having completed the project of industrial park. It was on the basis of such recommendations from MARS Planning and Engineering Services Pvt. Ltd., and GIDC that the specially constituted committee in its meeting dated February 28, 2011 decided to grant the subsidy under the said scheme at the rate of 20 per cent. of the eligible investment in such park. A final approval in this res .....

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cted units by March 31, 2011. This insistence from the Central Board of Direct Taxes was impermissible for two reasons. Firstly, the scheme pertained to certificate from a local authority and would not confine its purview to certification by the AUDA alone and secondly, that the insistence on demonstrating completion of industrial units by the leasing industries was not part of the requirement of the scheme at all, as held in case of Ganesh Housing Corporation Ltd. (supra). For such reasons, the .....

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