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2011 (11) TMI 775 - ITAT HYDERABAD

2011 (11) TMI 775 - ITAT HYDERABAD - TMI - I.T.A. No. 1177/Hyd/2011 - Dated:- 30-11-2011 - G. C. Gupta (Vice President) And Chandra Poojari (Accountant Member) For the Appellant : K. Mythili Rani For the Respondent : K. C. Devadas ORDER Chandra Poojari (Accountant Member) This appeal by the Revenue is directed against the order of the CIT(A)-IV, Hyderabad dated 15.3.2011 for the assessment year 2007-08. 2. The Revenue raised the following grounds of appeal: 1. The ld. CIT(A) erred in holding tha .....

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nditions laid down by the Ministry of Commerce/CBDT that 90% of allocable area shall be earmarked for industrial use. 3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of construction. The assessee s income includes income from house property and business income derived from sale of flats in Block Nos. I and II of White House constructed by it. The assessee had shown sale proceeds in respect of Block II at ₹ 79,04,900 besides showing rental inco .....

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m the CBDT, New Delhi. According to the Assessing Officer, the assessee has not complied with the conditions specified by the approving authority, viz. the Ministry of Commerce. The assessing officer extracted para 4 of the letter of Ministry of Commerce dated 25.9.2006 in this behalf, which reads as follows- "4. The conditions mentioned in para 1 above are as per the proposal made by the undertaking and are within the provisions of the Industrial Park Scheme, 2002. The conditions mentioned .....

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llocable Area' earmarked for industrial use is 90%, while as per item No. (vi) thereof, it was 10% for commercial use. Further, as per para 1(iv) of the letter of approval the proposed industrial activity of the 'Industrial Park' were communication services, data processing, software development, computer consultancy services, business and management consultancy activities, architectural and engineering and other technical consultancy activities, technical testing and analysis servic .....

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cted through filed enquiry as well as the information furnished by the assessee was summarised by the assessing officer in a chart which was made Annedure- 1 to the assessment order. On analysis of the details, it was noticed that the total area occupied by the tenants carrying out the proposed activities, as mentioned in the letter of approval of the Government of India, is much less than 90% of the total area. Assessee submitted a measurement certificate of the building from the architect M/s. .....

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comes to 149378. On that basis, submitting a list of tenants with the area under their occupation and activities undertaken by them, assessee submitted before the assessing officer that more than 90% area was allocated for use by the tenants for approved activities. 5. The assessing officer was not convinced with the above explanation of the assessee. According to him, as per the assessee s application, the total area of the industrial park was 281273.97 sq. ft, and deducting therefrom the area .....

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e area of the Industrial Park for which the Government approval was received. After receiving the approval, according to the assessing officer, the assessee cannot sell out a portion of the Industrial park for which the Government approval was received. At this point also, the assessing officer noted, the assessee has violated the conditions attached to the Government approval. The assessing officer further noted that the net allocable area, excluding common area, as per assessee s application i .....

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which is let out is 111700 sq. ft, out of which the total area under approved industrial activity is 80,311 sq.ft, working out to 71.989% only against the area under commercial activities admeasuring 31389 sq.ft. (28.10%). 7. For the above reasons, the assessing officer concluded that the assessee could not fulfil the conditions attached to the approval granted by the Ministry as well as CBDT for the Industrial Park. 8. The assessing officer further noted that the assessee in its explanation sho .....

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suring 16643 sq. ft. is utilized for Research and Medical Testing . However, in the certificate issued by the said tenant company, it is mentioned that the space is used for the purpose of office support for R&D/Marketing Research . From the certificate, it is clear that the space was utilized for office purpose only as against he claim of Research and Medical Testing . Besides the total area under the said company was 13941 sq. ft. as per the lease deed as against 16643 sq. ft. mentioned by .....

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s per the approval received, the proposed area of the Industrial park was 26,130.99 sq.mts. and the percentage of allocable area earmarked for industrial use was 90% whereas that earmarked for commercial use was 10% and the proposed number of Industrial units to be located in the industrial park was 03. He also noted that in view of the approval given by the Central Government, the CBDT, vide notification dated 20.2.2006 notified the undertaking, being developed and maintained and operated by th .....

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ate the minimum number of three industrial units, as specified in the approval, and consequently minor variation after actual measurement cannot alter the fact that the assessee made investment in developing the industrial park, which the legislature intends to encourage by granting deduction under S.80IA(45)(iii). Even as for sale of 5293 sq. ft. of constructed area after approval, he was of the view that sale of any portion of the constructed area, even after getting approval, would not be vio .....

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of the facts by the assessing officer showed that the said tenants were carrying out approved activities, he concluded that the objection raised is not sustainable. 11. Dealing with the working out of 90% of the net allocable area which is required to eb used for specified industrial purposes, the CIT(A) determined the total allocable area after exclusion of common facilities at 1,67,619, and accordingly took 90% thereof usable for specific industrial purposes at 1,50,857 and 10% thereof at 16, .....

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ctive parties. Taking note of the areas let out for commercial purposes, the CIT(A) observed that even if the area sold of 5,293 sq. ft. is considered as used for commercial purposes, the total of the area used for commercial purposes comes to 16,901, and consequently, after excluding the area of 16,901 considered as used for commercial purposes, the allocable area left is 1,50,718, which happens to be 89.92% of the total area, i.e. almost 90%. 12. The CIT(A) found no merit in the view taken by .....

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(A) ultimately held that the assessee would be entitled to the benefit of deduction under S.80IA(4)(iii) of the Act, observing in the concluding paras of his order, as follows- 8.6.4. On the other hand, it can be seen that out of the total area of 16,901 sq. ft. used for the commercial purposes, 8,373 sq. ft. was used for being let out to a restaurant . It is further seen that in the Annexure VII to letter dated 14.10.2006 to the Board, the appellant had proposed providing the facility of a rest .....

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onsidered under commercial user, the total comes to 11,608 sq. ft. only. Therefore, even if a small fraction of the area of 8373 sq. ft. let out to the restaurant is considered in the nature of common facility provided in the Industrial Park by the developer, the user for commercial purposes would not be more than 10%. 8.6.4. Further, it is seen that the Hon ble ITAT in the case of Meenakshi Infrastructure P. Ltd. V/s. DCIT supra have opined that when the Central Government approves the assessee .....

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l has to be done by the Central Government only and as long as this is not done, the assessee having such approval and notification cannot be denied the deduction. Under the circumstances, I am of the view that since the appellant had developed the Industrial Park duly approved and notified by the Central Government and the same has not been withdrawn for any reason, the appellant would be entitled to the benefit of deduction under S.80IA(4)(iii). 14. Aggrieved by the order of the CIT(A), Revenu .....

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ucture P. Ltd. (supra) has no application to the facts of the present case, and therefore, the CIT(A) was not justified in following the same. 16. The learned counsel for the assessee, on the other hand, strongly relying on the order of the CIT(A), submitted that the assessee is very much entitled to the relief under S.80IA(4)(iii) of the Act. Reiterating the contentions urged before the lower authorities, he submitted that the industrial park constructed by the assessee has been approved by the .....

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l obtained from the Ministry of Commerce, the assessee has applied to CBDT for notification of the assessee s industrial park as eligible undertaking under S.80IA(4)(iii) of the Act, furnishing all the relevant details, including list of tenants, area occupied, purpose of occupation, etc. and the CBDT after considering all the details and ensuring the compliances made by the assessee, notified the assessee s industrial park as eligible under S.80IA(4)(iii) of the Act, vide notification dated 25. .....

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area, and the method of arriving at the allocable area, and though the assessee has furnished detailed clarifications and calculations including usage of the area for industrial activity purposes, and this fact has been acknowledged by the assessing officer himself, the assessing officer has not correctly understood the calculations, and proceeded to determine the matter in his own way. The learned counsel submitted that the CBDT, after analysing the details furnished by the assessee with the ap .....

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4 sq. ft. office space given to Doosan Infrastructure Ltd. on the 1st floor of the complex; 3364 sq. ft. of office given to Papyrus Software (P) Ltd on 6th Floor and 6944 Sq. ft. of office given to Bharti Telecom Ltd. on 7th floor, besides committing small errors in the areas mentioned. In addition, the assessing officer has also taken extra area of 1782 sq. ft. on 4th floor of office given to Aurona Technologies. He further submitted that in the case of India Cements Ltd. and Dr.Reddy s Labs Lt .....

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ut 3% of the allocable area for commercial purpose. He further submitted that though the assessee has sold a small portion of the area in the ground floor, which can be used only for commercial purpose, since what has been sold is the area meant for commercial purposes, it does not in any way violate the conditions mentioned in the industrial park scheme, 2002. He further submitted that the assessing officer has totally disregarded the certificate issued by Dr. Reddy s Laboratories Ltd., stating .....

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x Court in the case of Bajaj Tempo Ltd. V/s. CIT(62 Taxman 480) and the decision of the Hyderabad Bench of the Tribunal in the case of Meenakshi Infrastructure P. Ltd (supra), learned counsel for the assessee submitted that the CIT(A) was very much correct in holding that the assessee is entitled for relief under S.80IA(4)(iii) of the Act 19. We have considered the rival submissions and perused the orders of the lower authorities. We have also gone through the paper-book filed by the learned cou .....

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assessee. iv) that the assessee did not use 90% of the net allocable area for the specified industrial purposes. 20. According to the assessee total area including common area is at 1,49,543 sq. ft. which he has reconciled with reference to the assessment order as follows: 20.1 Further, the calculation of the allocable area by the assessee is as follows: (In Sq. ft.) Total area 272829 Less: Area meant for parking and terrace 105190 167639 Less: Area meant for restaurant and other common facility .....

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ea lying vacant during A.Y. 2007-08 but lent subsequently in A.Y. 2008-09 for specified purposes. Avenion Limited 1534 Doosan Infra Care Ltd. 1604 3138 159698 Less Area excess taken by A.O. in Asst. order 1782 Total area 157916 Less: Area used for common facility (Restaurant) 8373 149543 Less: Area lying vacant during A.Y. 2007-08 3138 Allocable area 146405 Used for Commercial purposes 3235 2.21% Used for specified purposes 143170 97.79% 146405 100.00% 22. As per approval letter the assessee has .....

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ed area, the assessee sold 5,296 sq. ft. area. According to the Assessing Officer this is violation of conditions in the approval. Further the Assessing Officer objection is regarding the variation in the usage in the case of India Cements Ltd. and Dr. Reddy s Laboratory Ltd. but there is a clear-cut finding by the CIT(A) that sale of 10% out of the total allocable area cannot be considered as violation of the approval. The activity carried on by the India Cement Ltd. and Dr. Reddy s Laboratory .....

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he area meant for parking and terrace was 1,05,190 sq. ft. Therefore, the total allocable area, after excluding such common facilities came to 1,67,619 sq. ft. As per the approval, 90% thereof, being 1,50,857 sq. ft. was to be used for specified industrial purposes, while up to 16,762 sq. ft. being 10%, could have been used for commercial purposes. 23. In this regard, it is seen that the Assessing Officer opined that the plinth area of the premises let out to various parties only was to be consi .....

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rties. 24. So far as the commercial user is concerned, the area let out to M/s. Doosan Heavy Industries & Constructions Co. Ltd., 1582 sq. ft., Mrs. Naina thakkar, 1653 sq. ft. and used for the restaurant, 8373 sq. ft. totalling to 11,608 sq. ft. have been considered by the Assessing Officer as used for commercial purposes . No other area was found used for commercial purposes. Even if the area sold, 5293 sq. ft., is considered as used for commercial purposes , the total of the above comes t .....

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l Government and was fit to be used for the specified industrial purposes. The Tribunal in its order in the case of Meenakshi Infrastructures P. Ltd. vs. DCIT (44 SOT 59) have opined that the word locate refers to to fix or to establish in a position, situation or locality, place, etc. . It was held in the said case that since the assessee had completed the construction of all units and the entire infrastructure was ready, all the units had been made located by the assessee in the industrial par .....

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ut and used for approved industrial purposes in the subsequent financial year, though the same were lying vacant in the year under consideration. The subsequent user of such area for specified purposes shows that those also were developed and intended to be used for similar purpose in the year under appeal also, though the assessee had not been able to realise any rent from letting out the same. 26. On the other hand, it can be seen that out of the total area of 16,901 sq. ft. used for the comme .....

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used for commercial purposes by M/s. Doosan Heavy Industries & Construction Co. Ltd. was 1582 sq. ft., while that used by Mrs. Naina Thakkar was 1653 sq. ft. Even if the area sold of 5293 sq. ft. is considered under commercial user, the total comes to 11,608 sq. ft. only. Therefore, even if a small fraction of the area of 8373 sq. ft. let out to the restaurant is considered in the nature of common facility provided in the industrial park by the developer, the user for commercial purposes wou .....

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