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ACIT, Circle-6 (1) , Hyderabad Versus Annapurna Builders, Hyderabad

2011 (11) TMI 775 - ITAT HYDERABAD

Entitled to the benefit of exemption u/s. 80IA(4)(iii) - assessee has received 'approval' and 'notification' from the Central Government and the same has not been withdrawn till date - Held that:- Since the assessee had developed the industrial park duly approved and notified by the Central Government and the same has not been withdrawn for any reasons, the assessee would be entitled to the benefit of deduction u/s. 80IA(4)(iii). - I.T.A. No. 1177/Hyd/2011 - Dated:- 30-11-2011 - G. C. Gupta (Vic .....

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he same has not been withdrawn till date for any reasons and, as such the assessee is entitled to the benefit of exemption u/s. 80IA(4)(iii) of the Act. 2. The ld. CIT(A) erred in following the decision of the ITAT in the case of M/s. Meenakshi Infrastructure P. Ltd. vs. DCIT reported in 44 SOT 59. 3. The ld. CIT(A) failed to appreciate the fact that the assessee has failed to fulfil the conditions laid down by the Ministry of Commerce/CBDT that 90% of allocable area shall be earmarked for indus .....

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,365 had been claimed as deduction u/s. 80IA(4)(iii) on the ground that Block III of White House has been notified as an Industrial Park under the Industrial Park Scheme, 2002. According to the assessee, Block III had been operated and maintained as an industrial park in terms of section 80IA(4)(iii) after obtaining approval from the Ministry of Commerce, Government of India, as well as from the CBDT, New Delhi. According to the Assessing Officer, the assessee has not complied with the condition .....

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iod when benefits under this scheme are to be availed. The Government may withdraw the above approval in case of failure to comply with any of the conditions." 4. The Assessing Officer opined that the above clauses were not complied with by the assessee. He also noted that in para 1 of the above letter of the Ministry in item No. (v), it had been mentioned that the percentage of 'Allocable Area' earmarked for industrial use is 90%, while as per item No. (vi) thereof, it was 10% for .....

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or, who submitted a detailed report furnishing details of the tenants occupying the premises. Assessee also submitted details regarding the occupancy of the building. Lease deed copies with the tenants were obtained by the assessing officer from the assessee. Assessee also submitted certificates from the tenants, with regard to the activities being carried out by them. The information collected through filed enquiry as well as the information furnished by the assessee was summarised by the asses .....

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rea occupied under the proposed activities to the total area worked out only to 34.91%. Assessee submitted before the assessing officer that excluding the floor area of 12968 sq. ft for common facilities, the total area available for leasing out is 154671, and deducting therefrom the area sold in the ground floor, duly offering the income from such sale to tax, of 5293 sq. ft., balance area comes to 149378. On that basis, submitting a list of tenants with the area under their occupation and acti .....

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sessing officer noted, the assessee constructed a total area of 2,72,829, which is less than the approved area of 281273.97 sq. ft. On this count itself, according to the assessing officer, assessee violated one of the conditions, subject to which approval was granted by the Government. Besides, assessee has sold out a portion admeasuring 5293 sq. ft. in the ground floor out of the allocable area of the Industrial Park for which the Government approval was received. After receiving the approval, .....

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e 14813.2 sq.mtr (90% of 16459.12 sq. mtr.). He further took note that the assessee has to adhere to conditions mentioned in the letter of approval and those included in the Industrial Park Scheme, 2002, and the Government may withdraw the approval, in case of failure to comply with any of the conditions. 6. The assessing officer noted from the chart extracted that the total allocable area which is let out is 111700 sq. ft, out of which the total area under approved industrial activity is 80,311 .....

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ng Consultancy and partly commercial . However, in the certificate issued by M/s. India Cement Ltd., it is mentioned that the space is used as regional office only. Besides the total area under the company is 78790 sq. ft. as per lease deed against 9699 sq. ft. as mentioned by the assessee. Besides, he noted, the assessee showed that the area under occupancy of M/s. Reddy s Laboratory admeasuring 16643 sq. ft. is utilized for Research and Medical Testing . However, in the certificate issued by t .....

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ulfil the conditions mentioned in para-1 of the letter of the Government, granting approval to the assessee, which were as per the proposal made by the assessee itself, rejected the claim of the assessee for deduction under S.80IA(4)(iii) of the Act. 10. On appeal, the CIT(A) after noting the facts of the assessee and the submissions of the parties at length, noted in the first place that as per the approval received, the proposed area of the Industrial park was 26,130.99 sq.mts. and the percent .....

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onstructed area was 272829 sq. ft. only as against the proposed area of 281273.907 sq. ft, the CIT(A), concluded that slight variation in the total constructed area after actual measurement vis-avis the proposed area, cannot be considered as a violation of the terms of approval. He further observed that it cannot be said that the total constructed area so developed was not sufficient to locate the minimum number of three industrial units, as specified in the approval, and consequently minor vari .....

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units operating etc. are satisfied, subject, however, to the condition that even after such sale, only 10% of the total allocable area, including the area sold, can be used for commercial purposes. With regard to the objection regarding difference in mentioning of the purpose of use by M/s. India Cements Ltd. and M/s. Dr.Reddy s Laboratories Ltd., observing that the subsequent verification of the facts by the assessing officer showed that the said tenants were carrying out approved activities, .....

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for determining the percentage of usage for specific industrial purposes, the CIT(A) observed that it was after considering the total area comprising of both plinth area and common area that the rent for each premises was decided under the agreements, and as such it is the total area specified in the agreements that is to be considered as used for specified industrial purposes by the respective parties. Taking note of the areas let out for commercial purposes, the CIT(A) observed that even if t .....

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proved industrial purposes during the year, it cannot be denied that all of such area had been developed as per the approval of the Central Government and was fit to be used for the specified industrial purposes, and for this purpose relied on the decision of the Hyderabad Bench of the Tribunal in the case of Meenakshi Infrastructures P. Ltd. V/s. DCIT(44 SOT 59) in this behalf. 13. The CIT(A) ultimately held that the assessee would be entitled to the benefit of deduction under S.80IA(4)(iii) of .....

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enied that part of the restaurant , being run in 8373 sq. ft. of the Industrial Park, is being used by the occupants/tenants of the Industrial Park as a common facility also. The total area used for commercial purposes by M/s. Doosan Heavy Industries & Construction Co. Ltd. was 1582 sq. ft. while that used by M/s. 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 fractio .....

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iii) are satisfied . It is clear that while the appellant has received such Approval and Notification the same has not been withdrawn till the date for contravention of any of the conditions, even though there is a specific provision for withdrawal, in case the Central Government finds that he conditions prescribed therein have not been adhered. However, it is also clear that such withdrawal has to be done by the Central Government only and as long as this is not done, the assessee having such a .....

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assessing officer submitted that the assessee has failed to fulfil the conditions laid down by the Ministry of Commerce/CBDT that 90% of the allocable area shall be earmarked for industrial use, and consequently the assessee is not entitled for the relief under S.80IA(4)(iii) of the Act. He submitted that the decision of the Hyderabad Bench of the Tribunal in the case of Meenakshi Infrastructure P. Ltd. (supra) has no application to the facts of the present case, and therefore, the CIT(A) was n .....

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vide S.O. No.354(E) dated 1.4.2002. One of the conditions for approval is that percentage of allocable area for industrial use is to be 90% and for commercial use it is to be 10%. Approval also mentioned the proposed industrial activities which shall be the activities mentioned in National Industrial Classifications 1987 code issued by CSO excluding certain activities. Based on the approval obtained from the Ministry of Commerce, the assessee has applied to CBDT for notification of the assessee .....

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and on actual measurement of the area constructed by the Architect, small variance in the constructed area as compared to proposed and approved area, was found. The assessee however, was not claiming any extra deduction than what has been approved. 17. The learned counsel for the assessee further, submitted that the assessing officer himself was totally confused as to the area constructed area, and the method of arriving at the allocable area, and though the assessee has furnished detailed clar .....

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s industrial park as an undertaking eligible for relief under S.80IA. He submitted that the occupants/users of the park as given to the assessing officer, are the same as in the list given to the CBDT. He submitted that list of tenants given in Annexure I of the assessment order is factually incorrect, as it leaves about 10260 sq. ft. of the office given to Avenion Limited on 1st Floor, 1604 sq. ft. office space given to Doosan Infrastructure Ltd. on the 1st floor of the complex; 3364 sq. ft. of .....

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nt, whereas in all other cases, he has included common area which is specifically mentioned in the lease deeds. He also took us through the reconciliation statement extracted by the CIT(A) in para 5.6 of the impugned order, and submitted that the net allocable area is only 149396 sq.ft. and out of it the assessee has used almost 97% of the area for specified purpose and has let out only about 3% of the allocable area for commercial purpose. He further submitted that though the assessee has sold .....

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ugh the said certificate has been accepted by the CBDT while notifying the assessee as an eligible undertaking. The assessing officer also similarly ignored the certificate granted by the India Cements Ltd. occupying 9699 sq.ft. as regional office for carrying out technical consultancy, market research and partly for commercial purpose. 18. Placing strong reliance on the decision of the Apex Court in the case of Bajaj Tempo Ltd. V/s. CIT(62 Taxman 480) and the decision of the Hyderabad Bench of .....

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u/s. 80IA of the Act on the sole reason that i) that the certified constructed area of 272829 sq. ft. was less than the area of 281273.97 sq. ft. proposed by the assessee. ii) that the assessee had sold out 5293 sq. ft. of the ground floor after receiving approval for the total area of the park. iii) that some of the tenants had shown different usage of the premises than that shown by the assessee. iv) that the assessee did not use 90% of the net allocable area for the specified industrial purp .....

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plication) 12950 154689 Less: Area sold 5293 Allocable area 149396 21. However, it was found that 97.79% of allocable area had been used for specified purposes as below : (In sq. ft.) Total area as per assessment order (Annexure -I) 137526 Add: Area for which rental agreements are filed and not considered by Assessing Officer in assessment order but considered in remand report 19034 Add: Area lying vacant during A.Y. 2007-08 but lent subsequently in A.Y. 2008-09 for specified purposes. Avenion L .....

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ee constructed 2,72,829 sq. ft. only. This minor variation in construction cannot alter the fact that assessee made investment in developing the Industrial Park and also we cannot hold that the area so developed is not sufficient to locate the minimum number of three industrial units as specified in the approval by Ministry of Commerce, Government of India. Further, out of the above developed area, the assessee sold 5,296 sq. ft. area. According to the Assessing Officer this is violation of cond .....

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hnical services and marketing research and office support for R & D and marketing research. Being so, it is under the purview of the approved activities. Further as regards the objection that the assessee did not use 90% of the net allocable area for the specified industrial purposes, it cannot be denied that the assessee had constructed total area of 2,72,809 sq. ft. Out of the same, the area meant for parking and terrace was 1,05,190 sq. ft. Therefore, the total allocable area, after exclu .....

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are for spaces comprising of both plinth area and common area . It was after considering the total area, comprising of both plinth area and common area, that the rent for each premises was decided under such agreements. Accordingly, we are of the view that it is the total area specified in the agreements that is to be considered as used for specified industrial purposes by the respective parties. 24. So far as the commercial user is concerned, the area let out to M/s. Doosan Heavy Industries &am .....

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for commercial purposes, the allocable area left is 1,50,718 sq. ft. which happens to be 89.925 of the total area, i.e., almost 90%. 25. The Assessing Officer has opined that even if the assessee had not let out or used all of such 1,50,718 sq. ft. for approved industrial purposes during the year, it cannot be denied that all of such area had been developed as per the approval of the Central Government and was fit to be used for the specified industrial purposes. The Tribunal in its order in the .....

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8 sq. ft. had not been let out during the year, the entire area so developed was ready and fit to be used for approved industrial purposes. Further, it has not been found that any part of such 1,50,718 sq. ft. was used for any commercial purpose during the year. In fact, it is contended by the assessee that out of the same, further areas, admeasuring 1434 sq. ft. and 1604 sq. ft. were let out and used for approved industrial purposes in the subsequent financial year, though the same were lying v .....

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etter dated 14.10.2006 to the Board, the assessee had proposed providing the facility of a restaurant also in the industrial park. While no other area has been found as used for restaurant , it cannot be denied that part of the restaurant being run in 8373 sq. ft. of the industrial park, is being used by the occupants/tenants of the industrial park as a common facility also. The total area used for commercial purposes by M/s. Doosan Heavy Industries & Construction Co. Ltd. was 1582 sq. ft., .....

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