TMI Blog2021 (5) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned AY and restore the order of AO. Appeal of the assessee is allowed. - ITA No. 691/H/2016 - - - Dated:- 6-5-2021 - Shri Satbeer Singh Godara, Judicial Member And Laxmi Prasad Sahu, Accountant Member Shri For the Assessee : Shri Vijay Mehta And Ms. Aarthi Sathe For the Revenue : Shri YVST Sai ORDER PER L.P. SAHU, A.M.: This appeal filed by the assessee is directed against Pr. CIT - 2, Hyderabad s order dated 30/03/2016 involving proceedings u/s 263 of the Income- Tax Act, 1961; in short the Act. 2. Briefly the facts of the case are that the assessee company, engaged in the business of developing industrial and non-industrial parks, filed its return of income for the AY 2011-12 on 29/11/2011 declaring total income of ₹ 15,30,02,887/- after claiming deduction u/s 80IA(4) amounting to ₹ 14,97,83,693/-. Subsequently, the case was selected for scrutiny and the assessment was completed u/s 143(3) on 27/03/2014 by determining the total income at ₹ 28,18,46,030/-. 3. By exercising powers vested u/s 263 of the Act, the Pr. CIT called for assessment records of the assessee and on perusal of the same, he observed that, prima fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these aspects which are at the root of the assessee's claim u/s 80IA(4)(iii), the impugned Order allowing the said deduction is clearly erroneous and as substantial amount of deduction u/s 80IA(4)(iii) was allowed incorrectly, the impugned Order is also prejudicial to the interest of revenue. Therefore, the impugned Assessment Order dated 27.03.2014 is revised u/s 263 and the Assessing Officer is directed to revise the Assessment Order by disallowing the deduction claim u/s 80IA(4)(iii) and issue the revised demand notice to the assessee. 4. Aggrieved by the order of the Pr. CIT, the assessee is in appeal before the ITAT raising two grounds of appeal on validity of jurisdiction u/s 263 of the Act and denial of deduction u/s 80IA of the Act. 5. Before us, the ld. AR of the assessee filed elaborate written submissions in support of his oral arguments which are as under: 2. The Appellant company is engaged in the business of developing Industrial and Non-Industrial Park in Cyberabad located in Hyderabad. 3. The appellant company, through Form No. IPS-1 dated 20.10.2004, had made an application under the Industrial Park Scheme, 2002 (IPS, 2002). The Ministry of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld AO., after discussing and verifying the eligibility of the deduction u/s 80-IA(4)(iii) of the Act allowed a deduction under that section to the extent of ₹ 13,67,23,850. The matter pertaining to head of taxation of the Income from leasing activities was then subject to litigation. Since the same is not a subject matter of dispute before Your Honours, it has not been discussed in detail in the present written submission. Suffice to state that the CIT(A) confirmed the action of the Ld AG. and thereafter before the Tribunal, the appellant had conceded it's ground of appeal. The Hon'ble Tribunal vide order dated 22.01.2021 upheld the treatment given by the Ld AG. Thus, finally, the income from leasing activities is taxed under the head 'Profits and Gains from business or profession' . 8. In the meanwhile, vide show cause notice issued u/s 263 of the Act dated 23.01.2015 (enclosed in the paper book at pages 148-149) the Ld. PCIT, on the basis of the order passed u/s 263 of the Act for AY. 2006-07, 2007-08 and 2009-10, proposed to hold the assessment order passed for AY. 201112 u/s 143(3) of the Act as prejudicial to the interest of revenue and sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained on 31/01/07 was partial OC and not final OC 2. NOC from fire department was received after 31/01/2007 4 3A 24/03/06 15/06/05 5 3B 31/01/07 29/01/07 1. OC obtained on 31/01/07 was partial OC and not final OC 6 6 28/06/04 25/06/04 7 7 28/06/05 06/05/05 8 8 13/06/05 06/05/05 Based on the above objections, the Ld. PC IT has held that the appellant is not eligible for the deduction u/s 80IA(4) of the Act. He has, accordingly, directed the A.O. to withdraw the deduction. The appellant most humbly submits that the impugned order is unsustainable on jurisdictional ground as well as on merits. The appellant challenges the revisionary proceedings on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkers employed, filing of audit report etc. 14. For deduction u/s 80-IA of the Act, the test of eligibility has to be done in the first year and the department is not entitled to withdraw the deduction in the subsequent year. It would be truly unfair to the businessman if he is kept under uncertainty for each of the 10 years if the department were to test the eligibility criteria on a year on year basis. 15. It is submitted that the above is settled legal proposition duly supported by the series of the decisions. Before coming to the decided cases, the appellant would like to refer to proceedings in its own case for A.Y. 2009-10 and 2010-11, which is as under. However, it is worthwhile to note at this stage that the proposition that the deduction can not be withdrawn in subsequent year has been laid down in appellant's own case by the coordinated bench in A.Y. 2010-11 and thus the issue is squarely covered in favour of the appellant. Appellant's own case in AY 2009-10 16. At the cost of repetition, we would like to submit that the first year for the claim of deduction was AY 2009-10. A brief background of the proceedings for A.Y. 2009-10 is as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax under the head 'Income from House Property' and maintenance Income was offered under the head 'Profits and Gains from business or profession'. A deduction of ₹ 13,02,62,800 was claimed u/s 80-IA(4)(iii) of the Act. b. Vide order dated 31 March 2013, the Ld AD. disallowed the claim of deduction u/s 80-IA of the Act on the ground that the appellant has offered the income under the head income from house property and deduction u/s 80lA (4) is not allowable in respect of such income. c. The CIT(A) confirmed the action of the AD. vide order dated 12 September 2014. He further held that the appellant has failed to comply with the directions of the CSOT notification to locate 30 units in the industrial park. He also directed the AD. to verify whether in AY 2009-10, the deduction is given correctly or not. d. This order was further challenged by the appellant before the Hon'ble Tribunal. e. Meanwhile, on 23.01.2015, the assessee received a notice u/s 263 of the Act for AY. 2010-11 from the office of the Ld. Pr.CIT seeking to tax the income from lease rental under the head 'Profits and Gains from business or profession'. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, is not sustainable. The CIT(A) can only deal with the appeal before him and cannot give a direction with regard to another assessment year not before him. Therefore, such direction is not sustainable and is hereby quashed. (Emphasis supplied) 19. Based on the above, the appellant strongly contends that the eligibility of the deduction under section 80-IA(4)(iii) of the Act must be tested in the first year of the claim. The department is not empowered to test the requirement of the section for each of the 9 consecutive years. This argument has been upheld by the Hon'ble ITAT in the appellant's own case in A.Y. 2010-11 and in the year under consideration a different view can not be taken. No new facts have been pointed out which were not existing in the earlier years. 20. Further, there are various judicial pronouncements holding that where deduction under section 80-IN80HH/80J has been granted in the first year of the claim, it is not open for the department to challenge the same in subsequent years. These decisions are not discussed elaborately but are listed below for the purpose of record: a. CIT v. Tata Communications Internet Services Ltd. [251 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government on t January and t July of every year a report in the form Number IPS-II during the period in which the benefits under the Act are to be availed. 23. At this juncture it shall not be out of place to draw Your Honours' attention to para 8 of the Scheme which deals with withdrawal of approval. The Scheme empowers the Central Government to withdraw the approval if there is a failure on the part of the undertaking in complying with any of the conditions. The relevant extract of the said para is reproduced as under: 8. Withdrawal of approval- The Central Government may withdraw the approval given to an undertaking under this Scheme when such undertaking fails to comply with any of the conditions of grant of approval: Provided that before withdrawal of approval, the undertaking being industrial park, shall be given an opportunity of being heard. 24. The appellant had made an application for registration on 20 October 2004. Thereafter, the MCI accorded approval on 24 November 2004. Your Honours' attention is drawn to para 4 of the approval, which is at page 29 of the paper book. The relevant extract has been reproduced below for the sake of br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing paragraphs wherein the proposition raised by the appellant has been upheld and matter has been adjudicated in favour of the assessee. 28. We would like to draw Your Honours' attention to the decision of the Hon'ble Hyderabad bench of the Tribunal in the case of ACIT v. Annapurna Builders [I.T.A 1177/Hyd/2011] (a copy of the said decision has been enclosed as Annexure 1). The relevant extract of the said decision has been reproduced below: 27. Further, it is seen that this Tribunal in the case of Meenakshi Infrastructures P. Ltd. vs. DCIT (supra) have opined that 'when the Central Government approves the assessee's project under Industrial Park Scheme framed by the Central Government, the conditions under sec. 80lA (4)(iii) are satisfied. ' It is clear that while the assessee has received such approval and notification, the same has not been withdrawn till date for contravention of any of the conditions, even though there is a specific provision for Withdrawal, in case the Central Government finds that the conditions prescribed therein have not been adhered to. However, it is also clear that such withdrawal has to be done bv the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [2] of Rule 1BG of the Rules. As soon as the approval under sub-rule [2] of Rule 1BG is given, it is obligatory on the part of the Central Board of Direct Taxes to notify industrial parks in terms of sub-rule [4] of Rule 18C. 31. Further, we would like to draw Your Honours' attention to the decision of the Hon'ble Gujarat High Court in the case of PCIT v, B.A. Research Ltd [tax Appeal 233 and 234 of 2016] (a copy of the same has been enclosed as Annexure 4) wherein the department contended before the Hon'ble High Court that the Hon'ble ITAT has erred in holding that once the prescribed authority has granted approval, the revenue department cannot deny deduction u/s 8018 of the Act. While adjudicating the matter, the Hon'ble High Court has held that the tax authorities cannot go behind the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls obtained. More so, when the Revenue's seeking to get approval cancelled from the DSIR stands declined. We hold the assessee entitled for Section 80 IB (8A) deduction accordingly on merits in both the assessment years. (Emphasis supplied) 33. Also, we would like to draw Your Honours' attention to Rule 18C of the Income-tax Rules, 1962 (Rules). The said rule has been reproduced below for the sake of brevity: [Eligibility of Industrial Parks for benefits under section 80-IA(4)(iii). 18C. (1) The undertaking shall begin to develop, develop and operate or maintain and operate an industrial park any time during the period beginning on the 1st day of April, 2006, and ending on the 31st day of March, [2011]. (2) The undertaking and the Industrial Park shall be notified by the Central Government under the Industrial Park Scheme, 2008. (3) The undertaking shall continue to fulfil the conditions envisaged in the Industrial Park Scheme, 2008.] 34. Thus, it is humbly submitted that the Central Government (Ministry of Commerce and Industry) is the relevant authority to approve the Industrial Park under the 2008 scheme (Prior to that, similar position p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27-30), accorded it's approval to the appellant for setting up an Industrial Park, in terms of the IPS 2002. 38. Thereafter, the CSOT vide it's notification dated 22 August 2006 notified the appellant as an Industrial Park eligible for deduction u/s 80-IA(4)(iii) of the Act (a copy of the said notification is available at pages 31-35 of the paper book). Thus, there is no doubt about the fact that the appellant applied and got approved by the Ministry of Commerce and Industry and the CSOT under the IPS, 2002. 39. Accordingly, the appellant was supposed to fulfill the conditions mentioned in the IPS, 2002. At this juncture, we would like to submit that the appellant was required to commence Industrial Park on or before 31.01.2007. In case, the commencement of the IP is delayed beyond 31.01.2007, then the appellant ought to obtain a fresh approval from the Ministry of Commerce and Industry. It is the case of the appellant that the appellant had commenced the Industrial Park as per the condition of approval. Further, the approval was subject to the condition that the appellant had a minimum of 30 units located in the Industrial Park. As mentioned above, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes under Section 801A4(iii) on 08.01.2008 also defines the 'date of commencement' which means the date of obtaining of completion certificate or occupation certificate as the case may be from the relevant local authority, certifying thereby that all the required development activities for the project have been completed. II (Emphasis supplied) 42. Thus, upon perusal of the order of the Ld. PC IT, it can be seen that suddenly the Ld. PCIT has deviated to the Industrial Park Scheme, 2008 wherein the requirement of OC has been prescribed. But the Ld. PCIT failed to appreciate that the appellant is governed by the provisions of IPS 2002 where there is no glimpse of obtaining any OC. Thus, the Ld. PCIT has read in the conditions of IPS 2008 in the IPS 2002 which is patently impermissible and illegal. Strangely, the Ld. PCIT do not cite any reasoning for adopting such illogical untenable view. 43. At this juncture, we would like to draw Your Honours' attention to the decision of the Hon'ble Karnataka High Court in the case of Softzone Tech Park Ltd v. CIT [421 ITR 398] (a copy of the said order has been enclosed as Annexure 6). In the said case, the Ld. counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1B 31/01/07 29/01/07 1. OC obtained on 31/01/07 was partial OC and not final OC 3 2B 31/01/07 06/02/07 1. OC obtained on 31/01/07 was partial OC and not final OC 2. NOC from fire department was received after 31/01/2007 4 3B 31/01/07 29/01/07 1. OC obtained on 31/01/07 was partial OC and not final OC 47. We would first like to make our submissions with respect to the OC received by the appellant from the relevant authorities for the above mentioned four buildings. 48. At the outset, we would like to draw Your Honours' attention to page no. 44 of the paper book filed which contains the OC for Building No.1 A. This submission will hold good even for Building No. 1 B, 2B and 3B. The Ld. PC IT has observed the following portion of the OC to hold that the OC dated 31.01.2007 is a partial OC: The Completed portion of the said Building No. 1A was inspected by me and are found fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 31.01.2007. In any case the relevant date in this kind of situation is the date of application made to the concerned authority and not the date of certificate. This is duly supported by several decisions referred to herein below. The Ld. PC IT, having not inquired and having not brought on record the relevant date, has erred in arriving at incorrect conclusion. 53. In respect of the building no. 28 the date of inspection report is 29.01.2007 which is prior to 31.01.2007 (enclosed at page 48 of the paper book). Therefore, the delay in obtaining the Fire NOC cannot be attributed to the appellant. 54. In this regard, once again reliance is placed on the decision of the Hon'ble Karnataka High Court in the case of Softzone Tech Park Ltd v. CIT [421 ITR 398]. While adjudicating the matter, the Hon'ble Karnataka High Court held that the assessee had applied for the DC before the stipulated time and thus, it will not obliterate the assessee to avail the benefits u/s 80IA(4) of the Act. The relevant portion of the decision has been reproduced as under: 13. It is not in dispute that the petitioner had applied for the Occupancy Certificate along with Architect's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2008 and an application is moved quite in time, for seeking Completion Certificate from the Municipal authorities, and if they do not take steps urgently and delay the issuance of Completion Certificate from their side, can it be said that such certificate would alone decide the date of completion of the project? The answer is in negative. In view of the above contentions, the ld. AR prayed for allowing deduction u/s 80IA(4)(iii) of the Act. 6. The ld. DR, on the other hand, also filed synopsis of arguments , which are as under: 1. In the proceedings ix] s 143(3) of the Act, AO mentioned that the assessee fulfilled the conditions required to be met for claiming deduction ul s 80IA(4)(iii) of the Income Tax Act. The Pr.CIT examined the record and noticed that the twin conditions of approval of the Industrial Park viz., (a) date of commencement before 31.01.2007 and (b) establishment of minimum 30 industrial units were not met. As the order ix] s 143(3) is erroneous and prejudicial to the interest of revenue by way of grant of ineligible deduction, the Pr.CIT revised the assessment. 2. During the course of hearing before the Hon'ble ITAT, the Ld.AR (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that principle of consistency applies only to such cases wherein the entire gamut of facts were examined in prior year and a considerate decision was taken. In the present case, no such considered decision exists for earlier years. 6. On the merits, it is submitted that the Pr.CIT examined the issue at length and pointed out the discrepancies in the occupancy certificates. The findings of Pr.CIT are not based upon surmises as alleged by the assessee but based on minute examination of facts. When the fire service authorities issued NOC on 23.3.2007, the claim of the assessee that there was occupancy by 31.1.2007 is in contradiction to the actual facts. Without fire safety clearance, it is illegal as well as hazardous to occupy a building on the basis of a routine certificate from Project Manager, APIIC. It is settled law that higher forums of appeal do not take cognizance of illegal practices. In the present case, the Pr.CIT examined the facts in detail and found that for building No.1A, NOC was issued by the Director General Fire Services on 23.3.2007. For the building No.2B, the said NOC was issued on 6.2.2007. The Pr.CIT also examined the discrepancy in occupancy certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/without prejudice argument, the additional evidence was not referred to during the course of the hearing as well as in the written submission dated 24.03.2021. 7. We have considered the rival submissions their written submissions quoted supra and the material on record as well as gone through the orders of the revenue authorities. It is observed that while filing the return of income for the year under consideration, the appellant had offered income from leasing of space under the head 'Income from House Property' while the Income from maintenance activities was offered under the head 'Profits and gains of business or profession'. It shall be pertinent to note that while furnishing it's return of income, the appellant had claimed a deduction u/s 80-IA(4)(iii) of the Act of ₹ 14,97,83,669. The said return of income was subject to scrutiny proceedings. Vide the assessment order passed u/s 143(3) of the Act dated 27.03.2014, the AO taxed the Income from leasing of space under the head 'Profits and gains of business or profession' as against 'Income from House Property' offered by the Appellant. Thereafter, the Ld AO., after discussing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdrawal of such deduction for the subsequent years for breach of certain conditions. 20. In the case before us, the assessee has been allowed deduction in the first year and it is the bounden duty of the A. 0. to examine the eligibility of the assessee to claim the deduction under section 801A(4) of the Act at the time of allowing such deduction. Since the claim has been allowed, it is to be presumed that the A.D. is satisfied about the allowability of the claim. This being the second year, unless there are distinguishing facts and circumstances for taking a different view and deny the claim of deduction, the A. O. cannot take a contrary stand. The CIT(A) has in fact, directed the A. O. to examine the assessment order for A. Y 2009-2010 and to see whether the A. O. has examined the eligibility of the assessee and to take suitable action. This direction, in our opinion, is not sustainable. The CIT(A) can only deal with the appeal before him and cannot give a direction with regard to another assessment year not before him. Therefore, such direction is not sustainable and is hereby quashed. (Emphasis supplied) 7.3 Further, the AR of the assessee relying on the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate along with Architect's Certificate before the BDA on 29.12.2006 well within the stipulated period of one year as enumerated in condition NO.5 (ii) of the approval under the Scheme 2002 and the said occupancy certificate was issued on 23.6.2007. The delay caused by the Authority in issuing the Occupancy Certificate would not obliterate the rights of the petitioner to avail the benefit under Section 801A(4) of the Act vitiating the very purpose of the approval granted by the respondent NO.2. If the compliance is made on the part of the petitioner, the same cannot be frustrated on technicalities or minor deviations by applying the IPS scheme 2008 which was not in force during the relevant period. The arguments of the learned counsel for the revenue on these grounds requires to be negated. 7.6 The ld. CIT-DR has pointed out that the buildings were not completed in all respects, but, the AR of the assessee drew our attention to the paper books filed by the assessee in this regard in respect of the final occupancy certificate dated 31/01/2007 issued by the Commissioner and Project Manager (IPU), APIIC IALA, Hyderabad and they have not given any adverse report 7.7 In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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