TMI Blog2016 (2) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of the assessing authority is not correct. The contention of the AO that the fresh approval was required under the non-automatic route for more than the minimum number of units required to be established in the industrial park is not correct because the approval was for minimum number of units and there was no restriction imposed for increasing the number of units and hence no fresh approval is required under the current scenario. Further, assessee sent all the details to CBDT for notification on the basis of the first approval as well as after receipt of the renewed approval. The new notification and the Industrial policy 2008 has come subsequently. Assessee has given a representation to the Chairman of Empowered Committee the Director of CBDT for giving an opportunity to assessee. The Empowered Committee has still not withdrawn the approval granted and hence its validity cannot be disputed. As regards the approval issued by the DIPP, Ministry of Commerce and Industry, we are of the view that the said approval was for non-automatic route and the said approval so granted by the Ministry of Commerce and Industry has not been cancelled till date. Such change has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s issue is covered as per explanation 5 to sec. 32 of the Act which makes it very clear that the allowance of depreciation is mandatory and has to be considered whether or not the assessee makes a claim in this respect or not. Even otherwise, the CIT(A) after admitting additional issue has remitted the matter back to the file of the AO for verification of facts and figure and applicable rates for claim of depreciation and also verification on assets used in the business only. We find no infirmity in the order of CIT(A) and hence, the same is confirmed. This issue in both the years, of revenue s appeal is dismissed. Addition on account of difference in the statement of accounts declared by assessee - AO has made addition on account of difference on the disclosure made by assessee as per the actual receipt and as per the rent received as per TDS certificate - HELD THAT:- Petitioner has received a total of ₹ 57,43,973/- and this rent of ₹ 5,91,292/- was received only in next year. Similar is the explanation in the case of M/s. Carrier Net Technologies Pvt. Ltd. amounting to ₹ 18,62,059/-. It was explained to the AO that the assessee was entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)-XXXVI/Kol/10-11, both of even date 21.01.2011. Assessments were framed by JCIT, Range-56, Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2008-09 2009-10 vide his orders of different date 31.12.2010 30.12.2011. 2. The first common issue, in these two appeals of assessee in ITA No. 665 666/kol/2013 for the AYs 2008-09 2009-10, is as regards to the order of CIT(A) confirming the disallowance of deduction u/s 80IA(4)(iii) of the Act with respect to new industrial undertaking with development of industrial park. For this assessee has raised identically worded grounds in both the years and hence, we will take up the facts and issue from lead assessment year 2008-09, wherein the grounds raised are as under:- 1. For that in view of the fact and circumstances the AO is wholly unjustified in not allowing benefit of exemption u/s 80IA (4)(iii) to your appellant and in view of the facts and in the circumstances the CIT(A) is wholly unjustified in confirming the action of the AO. 2. For that in view of the facts and circumstances and the new industrial undertaking of your petitioner in connection with developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the income earned from software park mainly on the following grounds: i) Completion certificate of the building of Bangalore Development Authority was not furnished. ii) The appellant has constructed 15 units instead of 3 units approved by the Ministry of Commerce when the appellant himself has admitted in IPSII before the appropriate authority as on 1st July, 2007. 4. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO by observing as under: However, the fact remains that the appellant has not been able to produce the notification issued by CBDT which is being issued by the board and which entitles the appellant for deduction u/s 80IA(4)(iii). It remains to fact that the said unit has been developed as Industrial park as approved by Ministry of Commerce vide its letter no. 15/23/ 2006/ IP ID dt 25.7.2006. However, the appellant has not been able to furnish the evidence of completion of said unit before the prescribed date i.e. 31.3.2007. Indeed, the copy of certificate as having been obtained from the Bangalore Development Authority shows the date of completion is 23.6.2007 only. Hence, the appellant cannot under any circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 417,Vol-II. The assessee also submitted application to Bangalore Development Authority on 29.12.06. Further since 3 lessees were given space in the said Industrial Park much before 31.03.07, hence, it cannot be said that the Industrial Park had not commenced before 31.03.07. More so, since application for completion certificate was made on 29.12.06, hence, completion of such Industrial Park has to be reckoned from the date of application i.e. 29.12.06 and hence the Industrial park has to be held as completed much before 31.3.2007. As regards AO's contention of CBDT having not notified it as eligible for deduction u/s. 80IA(4)(iii), a number of Courts have already held that once approval is granted by Ministry of Commerce, Notification by CBDT is mere formality and cannot be determinant for eligibility for deduction u/s. 80IA(4)(iii), which we will discuss in the later part of this order. Further, even if there is a variation in the project the approval so granted by Ministry of Commerce and Industry has not been withdrawn till date. 6. But CIT(A) confirmed the action of AO denying such benefit only on the ground that assessee had not been notified by CBDT and further that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which occupation/ handing over was scheduled N.I. System (India) Pvt. Ltd. 25.09.2006 1.12.2006 Carrier Net Technologies (P) Ltd. 25.10.2006 15.11.2006 Timken Engineering Research India (P) Ltd. 01.12.2006 10.02.2007 7. In view of the above factual position, we are of the view that the entire Industrial Park was completed and all the Units were located in the Industrial Park much before expiry of one year from the date of commencement as mentioned in the application and which was duly approved by the Empowered Committee. The assessee had already enclosed a copy of the approval dated 25.07.2006 at assessee s paper book page 52, Vol-I. We are reproducing the relevant para 5(2i) of the Scheme which reads as under: In case the commencement of the Industrial Park is delayed by more than one year from the date as indicate in Para 4(xi) of the approval letter, fresh approval shall be required under the Industrial Park Scheme, 2002, for availing benefits under Sub-section 4(iii) of Section 80IA of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the transformers and other electrical equipments and the official memorandum was issued by the Chief Electrical Inspector to Govt. of Karnataka, Bangalore dated 20.03.2007, which proves that all the equipments and electrical works were completed before 31.03.2007. The amount of the electrical bills is always based on the consumption made by the clients. Assessee has no control over the consumption. The infrastructure for the electrical connection in the industrial park was ready on 20.03.2007. The date of occupation certificate issued by the Bangalore Development Authority on 23.06.2007 for which the assesse had Bangalore Development Authority on 29.12.2006 with a provisional Completion Certificate issued by the Architect. It is not within the control of the assessee company to obtain completion certificate from Bangalore Development Authority and the contention of the assessing authority is not correct. The Provisional completion certificate issued by M/s Venkataramanan Associates dated 26.12.2006 was submitted along with the application made to Bangalore Development Authority for completion certificate on 29.12.2006. Subsequently another inspection was done by 10.01.2007 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f controversy is regarding the date on which the project was completed to be eligible for the benefit of the said provision. The Revenue contends, the completion certificate issued by the Village Panchayat is not valid and therefore the assessee is not entitled to the said benefit. Admittedly the plan is sanctioned by the BDA. The BDA has not issued any completion certificate. The reason being, in the BDA Act or the Karnataka Municipal Corporation Act, there is no provision for issue of completion certificate. The provision in the Karnataka Municipal Corporation Act is for issuance of occupancy certificate. When the statute does not provide for issue of a completion certificate, if the authorities were insisting on such certificate, the assessee has gone to the Village Panchayat within whose limits the property is situated and has obtained the completion certificate and has produced the same for availing the benefit. Whether that certificate would satisfy the requirement of law need not be gone into in these proceedings because, when the statute does not provide for issue of such a certificate, if the Revenue insists on such certificate, the assessee would be left with no option ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied benefit of deduction u/s. 80IA(4)(iii) of the Act. Hon ble High Court finally held as under: Once approval is given by the Commerce Ministry to the petitioner in terms of sub-rule [2] of Rule l8C, the Board is duty bound to notify the industrial parks for benefits under Section 80-IA without any further investigation as to whether the petitioner has complied with the terms and conditions envisaged in the scheme. Since the power of grant of approval has been conferred upon the Commerce Ministry, in the absence of any express provision in the Rules, it should be presumed that the authority, which has given approval, has the power of revocation and examination of compliance of the conditions upon which the approval has been accorded. Therefore, it is the duty of the Commerce Ministry to decide whether an industrial undertaking is complying with the conditions envisaged in the scheme and if the undertaking fails to comply with those conditions, it is the Commerce Ministry alone, which has the right to withdraw the benefit granted under sub-rule [2J of Rule 18C of the Rules. As soon as the approval under sub- rule [2] of Rule 18C is given, it is obligatory on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel appearing on behalf of the Revenue relied on the fact that though the Petitioners had initially stated in their application that they would have eight units in the industrial park, this figure was sought to be reduced to three. Learned Counsel submitted that Para 9(2) of the Scheme speaks 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. In response to this, the attention of the Court was drawn by the learned Counsel for the Petitioners to the fact that the Petitioners had in their original application stated that there would be eight units; that the proposed area of the industrial park would be 8261-56 sq. mt.; and that the proposed allocable area of would be 6529.42 sq. mt. By their further application dated 26 October 2006 the Petitioners sought to alter the number of units from eight to three. However, there was no change proposed either in the area as declared earlier or in the allocable area. Learned Counsel submitted that the Petitioners fulfilled in substance the object and substance underlying the Scheme and the Department was notified on 25 July 2007 that three un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndly be held as allowable. and following ground no. 4 in AY 2009-10: 4. For that in view of the facts and circumstances the AO is wholly unjustified in disallowing ₹ 7,42,03,845/- being 50% of the interest paid on estimate and on suspicions and surmises and the CIT(A) is wholly unjustified to confirm the disallowance to the extent of ₹ 2,18,70,815/- and in view of the facts and in the circumstances the whole of interest expenditure having been incurred for the business and for the purposes of business and towards commercial expediency and being whole of revenue nature, the whole of such interest paid is allowable during the year and in view of the facts and in the circumstances the disallowance of ₹ 2,18,70,815/- by the CIT(A) may kindly be deleted. Similarly revenue has also raised a ground against deletion of disallowance restricted at 50% in AY 2009-10, which reads as under: vi) Despite affording several opportunities by the JCIT, Range-56, Kolkata as the assessee did not comply, the claim of interest was added back to the total income of the assessee. But Ld. CIT(A)- XXXVI, Kolkata, had erred in considering disallowance of interest @ 12.03% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by ld. Counsel was that AO has not proved nexus of interest bearing funds invested in interest free advances/loans given but it is only presumption of the CIT for enhancement u/s. 251 of the Act and also AO made disallowance on mere estimate basis without bringing any material on record of nexus. Ld. Counsel for the assessee filed complete cash flow statement which reads as under: As on 29.9.2008 Particulars Amount (Rs. In Crore) Amount Loans and advances Less: Current Liabilities Provisions (Non interest bearing) Partner s Capital Partner s current account (Net of Revaluation) 50.08 01.50 22.5 117.21 74.08 43.13 Less: Loan 7.43 35.66 In view of the above cash flow statement, Ld. Counsel for the assessee argued that the disallowance if any, could have been made in respect of interest corresponding to the sum of ₹ 35.66 cr., for which CIT(A) has restricted this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hav Prasad's case [1979 (118) ITR 200 (SC)], the borrowed amount was donated to a college with a view to commemorate the memory of the assessee's deceased husband after whom the college was to be named, it was held by this court that the interest on the borrowed fund in such a case could not be allowed, as it could not be said that it was for commercial expediency. 28. Thus, the ratio of Madhav Prasad Jatia's case [1979 (118) ITR 200 (SC)] is that the borrowed fund advanced to a third party should be for commercial expediency if it is sought to be allowed under section 36(1)(iii) of the Act. 29. In the present case, neither the High Court nor the Tribunal nor other authorities have examined whether the amount advanced to the sister concern was by way of commercial expediency. 30. It has been repeatedly held by this court that the expression for the purpose of business is wider in scope than the expression for the purpose of earning profits vide CIT v. Malayalam Plantations Ltd. [1964 53 ITR 140 (SC), CIT v. Birla Cotton Spinning and Weaving Mills Ltd. [1971 82 ITR 166 (SC)], etc. In the process, the Court also agreed that the view taken by the Delhi Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which were in same business as that of the assessee i.e. real estate business and hence, the said sum advanced are only in the nature of business of the assessee and are out of commercial expediency. Further, there is no nexus established between interest bearing funds borrowed and interest free funds advanced to sister concerns, no disallowance can be attributed to the assessee on account of interest bearing borrowed funds. Accordingly, this issue is decided in favour of assessee and against revenue in both the years. 18. The next common issue in these appeals of revenue in ITA Nos. 581 and 813/Kol/2013 for AY 2008-09 and 2009-10 is as regards to the order of CIT(A) deleting the disallowance of depreciation made by AO. For this, revenue has raised following ground in AY 2008-09: Ld. CIT(A)-XXXVI, Kolkata had allowed additional ground of appeal whereby depreciation of ₹ 12,31,96,184/-, which was not claimed in the computation. In this regard, Ld. CIT(A)-XXXVI, Kolkata had asked for Remand Report, but before sending the Remand Report he had passed the Appeal Order. Similar is the ground raised by revenue in AY 2008-09. The facts and circumstances are exactly ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. ₹ 14,20,000/- b) Xalted Information System Pvt. Ltd. ₹ 5,91,292/- c) Carrier Net Technologies Pvt. Ltd. ₹ 18,62,059/- d) Arivana Networks India Pvt. Ltd. ₹ 17,93,381/- ₹ 56,66,732/- Ld. Counsel for the assessee before us explained the party wise position which was explained before CIT(A) filing the details of gross lease rentals received from various parties amounting to ₹ 26,60,96,005/- and also enclosed the details of TDS amounting to ₹ 3,15,44,547/- deducted by the parties on these lease rentals. Ld. Counsel for the assessee before us filed complete details in respect of Symphony Marketing Solutions Pvt. Ltd. and stated that the cafeteria rent was only receivable from middle of March, 2008 and since rent was received only on 09.07.2008, it was duly accounted for in the next FY and offered for taxation. Accordingly, this amount of ₹ 14,20,000/- was already taxed in the immediate next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case. Briefly stated facts are that in AY 2008-09 the AO treated the such rental receipt while framing assessment u/s. 143(3) of the Act as income from business and CIT(A) issued notice u/s. 251 of the Act for enhancement with a proposal to treat such rental income as income from house property instead of income declared by assessee as income from business but CIT(A) after due consideration of entire facts dropped such proposal and revenue had not challenged the same. But now in AY 2009-10, the AO treated receipts from the occupants of Industrial Park as income from house property although the same is assessable as income from business as claimed by the assessee. The facts are that the assessee is in the business of developing and operating Industrial Park and was deriving income from such Industrial Park which was approved by Ministry of Commerce Industry u/s. 80IA(4)(iii) of the Act. The assessee claimed the income in its return of income as business income from developing and operating of Industrial Park. The assessee also claimed that it was not letting out bare structure but was providing whole lot of services/amenities for software and allied industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If, on the other hand, the main intention is found to be the exploitation of the immovable property by way of commercial activities, then the resultant income must be held as business income. Attention is drawn to the following facts which emerge in the present case of assessee: The assessee originally treated land as investment and later on converted as business asset/ stock in trade and started utilizing it commercially as business centre/Industrial Park. For this purpose, a host of facilities and amenities are provided by the assessee in an organized manner on a continuous basis. Several workers are also engaged for providing such services to the users. Undoubtedly, all these activities are directed for a set purpose with a view to earn profit. The property has been developed as Industrial Park under the approval of Ministry of Commerce and Industry. Department of Industrial Policy and Promotion which specially refers developing, operating and manufacturing of Industrial Park and that recognizes activities undertaking in the development of infrastructure facilities or built up space with common area allotted to Software concerns as an Industrial Park and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,030 was filed for the assessment year in question that is the assessment year 1983-84 and the entire income was through letting out of the aforesaid two properties, namely, Chennai House and Firhavin Estate . Thus, there is no other income of the assessee except the income from letting out of these two properties. We have to decide the issue keeping in mind the aforesaid aspects. 7. With this background, we first refer to the judgment of this court in East India Housing and Land Development Trust Ltd.'s case which has been relied upon by the High Court. That was a case where the company was incorporated with the object of buying and developing landed properties and promoting and developing markets. Thus, the main objective of the company was to develop the landed properties into markets. It so happened that some shops and stalls, which were developed by it, had been rented out and income was derived from the renting of the said shops and stalls. In those facts, the question arose for consideration was : whether the rental income that is received was to be treated as income from the house property or the income from the business. This court while holding that the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n note of. The position in law, ultimately, is summed up in the following words (page 377 of 44 ITR) : As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The dividing line is difficult to find ; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned. 9. After applying the aforesaid principle to the facts, which were there before the court, it came to the conclusion that income had to be treated as income from business and not as income from house property. We are of the opinion that the aforesaid judgment in Karanpura Development Co. Ltd.'s case squarely applies to the facts of the present case. 10. No doubt in Sultan Brothers (P.) Ltd.'s case, a Constitution Bench judgment of this court has clarified that merely an entry in the objects clause showing a particular object wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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