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TMI Blog2017 (12) TMI 1762X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the main object of the assessee is to form an association of the owners of the land, into a society, for applying and obtaining "Co-developer" status under the Special Economic Zones (SEZ) Act of 2005 on behalf of its members and to comply with its rule on behalf of the members and to manage, maintain, operate, lease and receive rentals for the constructed spaces that would be delivered to the members of the society. The AO observed that it is M/s. L & T Phoenix Infoparks Private Ltd which has developed the infrastructure and the Ministry of Commerce & Industry has given the status of "Co-developer" to the assessee for particular terms and conditions of the agreement and that such lease agreement will not have any bearing on the treatment of the income by way of lease rentals/down, payment/premium etc., for the purpose of assessment under the prevalent Income Tax Act and Rules and that the AO will have the right to examine the taxability of these amounts under the Income Tax Act. It was also observed that the assessee has simply let out the property for making it suitable for letting out and that the entities which have occupied the premises have deducted TDS under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any owner of a property would render to a tenant. He submitted that the certificate given by the Ministry of Commerce is relevant only for getting approval for SEZ purposes but under the I.T. Act, it is only the AO, who can verify the head under which the income is assessable to tax. He further referred to the provisions of section 80IAB of the Act where there is a reference to an undertaking or an enterprise. He submitted that being an Association of Person (AOP), the assessee society cannot be treated as an "undertaking" or an "enterprise" and therefore, it does not satisfy the basic conditions for claiming deduction u/s 80IAB of the Act. He thus supported the orders of the AO. 6. The learned Counsel for the assessee, on the other hand, submitted that the assessee is a society formed by the owners of the land on which the infrastructure has been constructed and that the main and only objective of the assessee society is to create infrastructure for SEZ purposes and to operate and maintain such infrastructure. He submitted that u/s 80IAB, deduction is allowable not only for developing the infrastructure but is also available for operation & maintenance or only operation of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval from various statutory authorities under the relevant statutes and regulations of the Govt. of India and the State Govt. and local bodies and that the co-developer shall conform to the environmental requirements, local laws, rules & regulations or bye-laws in regard to area planning, sewerage disposal, pollution control, labour laws and that it shall raise required fund for the facilities being created and also that the approval is valid for a period of three years within which time, the co-developer shall create the approved facilities and the progress of implementation will be submitted to the Govt. of India every six months. It is also mandated that the operation, maintenance of the facility will be made as per the standards specified in the proposal and to the satisfaction of the users and that it shall maintain adequate manpower to provide the facilities. It is also mandated that the codeveloper shall obtain the approval of Board for specific activities proposed to be undertaken for development, operation and maintenance of SEZ and based on the activities approved by the Board, the co-developer shall be entitled for duty free import or domestic procurement and for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly to the lease of land as clarified by the Ministry of Commerce in the clarification dated 18/1/2011 and not to the transfer of bare shells. Noting these material facts we are of the view that the Ld. CTI(A) has rightly agreed with the plea of the assessee that the tax disclaimer condition mentioned in the co-developer approval is primarily to be in by the BOA in the approvals granted to put a curb on the wrong practice of leasing the land for long periods and receiving one time payment in the form of lease rentals/down payments/premium etc which tantamount to sale of land in the guise of long term lease. The assessee has obtained requisite approvals from the BOA in most transparent manner by disclosing not only development consideration but also the basis for determining the same. The entire controversy as to whether transfer of bare shell buildings to the co-developer was an authorized operation has been set at rest by further clarifications dated 18/1/2011 and 20/1/2011 issued by the Ministry of Commerce. The BOA, being the statutory authority under the SEZ Act, has granted various approvals by a statutory process of law after duly considering and examining all the facts and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 'warm shell by the Co-Developer as 'Authorized Operations' Page 21 para 5.15 Assessee received clarification from BOA/Government of India, Ministry of Commerce and Industry, Deptt of Commerce (SEZ Section), Udyog Bhawan, New Delhi dated 18/1/2011 & 20/1/2011 BOA in exercise of its statutory powers approved business model of the Assessee clarified that under Rule 11(9) 'sale of land' is not permissible in a SEZ. However CoDeveloper can take land on lease from Developer for definite period. Further SEZ buildings i.e. bare shell/cold shell can be transferred and handed over to the Co-developer on payment of consideration to Developer, this transfer is permissible and authorized as per SEZ Act and Rules. The correspondence with the SEZ Authorities on this issue is placed on the P.B at Pages 122 to 130 and its contents are referred to by the ld. Counsel. Thus as per specific clarifications by BOA the transfer of bare shell building on long term lease to approved codeveloper are authorized activities under SEZ Act & Rules. Thus these clarifications also dispel the findings of CIT revising the asse4ssment order and setting aside the same. 263 order and findings the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 1992 (60) ELT 161 (SC); The assessee has not sold any land but only transferred the bare shell buildings on lease. Therefore, there is no error as pointed out by Ld. CIT. Page 42 Para 9 The condition mentioned in Notification dated 27/10/2006 giving to assessing officer the right to examine the taxability of issue of 80IAB in the spirit of SEZ provision stands vindicated. Besides, we may hasten to add that apparently this rider appear to be made while approving the co- developer agreement. This is possible applicable to co-developer and not the assessee as the condition was put during the course of approval of the agreement between assessee and the co-developer. Page 46 para 9.5 Apropos the issue of sale of bare shell buildings being authorized activity, it is amply clear that the SEZ Act authorizes activities include construction of bare shell/cold shell/warm shell buildings and transfer thereof, BOA has approved it and clarified the same. There is enough material on the record to hold that the transfer of bare shell buildings to co-developers constitute authorized activity. Thus, we see no error on any count as held by CIT in the order of assessing officer allowing deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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