TMI Blog2018 (2) TMI 2040X X X X Extracts X X X X X X X X Extracts X X X X ..... dition it reads that operation and maintenance of the facilities will be met as per the standard in the specific manner and proposition of the user. In view of our above discussion as well as observation made by Id. CIT(A), we are of the view that assessee being a developer of SEZ is eligible for deduction u/s 80-IAB for income earned from operation and maintenance of SEZ - Decided in favour of assessee. - I.T.A. No.1088/Ahd/2015 - - - Dated:- 2-2-2018 - SHRI RAJPAL YADAV AND SHRI PRADIP KUMAR KEDIA, JJ. Appellant by : Shri Jigar M. Patel, A.R Respondent by : Shri Dinesh Singh, Sr. DR ORDER PRADIP KUMAR KEDIA, J. The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax(Appeals)-4, Ahmedabad [CIT(A) in short] dated 13/02/2015 arising in the Assessment order dated 31.01.2014 passed by the A.O under section 143(3) of the Act relevant to assessment year 2011-12. 2. The solitary issue raised in the Revenue s appeal is whether assessee being a developer of Special Economic Zone (SEZ) was eligible for deduction under section 80IAB in respect of income earned from operation and maintenance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Hon ble High Court of Gujarat in the case of Core Healthcare Ltd. 251 ITR 61. The A.O. dismissed the claim of deduction. The A.O. further restricted the claim of depreciation @ 60% on computer software license to 25%. 5. Assessee carried the matter before the ld. CIT(A) and was successful in getting the relief. While allowing the relief to the assessee, the ld. CIT(A) followed the order of his predecessor for A.Y. 2009-10. The relevant findings of the ld. CIT(A) reads as under:- My predecessor vide order No.CIT(A)XIV/Jt.CIT.R.8/2011-12 dated 30.04.201 2 in appellant's own case for A. Y.2009-1 0 held as under: I have carefully perused the assessment order and the submissions given by the appellant. The appellant has submitted that since the software involves rapid obsolescence, the claim of revenue expenditure should be allowed. I am not inclined to agree with the submission of the appellant. The appellant has bought software licenses which are valid for long term and -the expenditure incurred thereon is, therefore, not in the nature of revenue. Therefore, the plea of the appellant that expenditure is in the nature of revenue is dismissed. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Economic Zones Act, 2005, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for ten consecutive assessment years The word 'developer has further been defined in Explanation to Section 80IAB which reads as under: Developer shall have the meaning as assigned under clause (g) of Sec. 2 of the Special Economic Zones Act. Further, section 2(g) of the SEZ Act has defined the term developer as under: Sec. 2(g) - Developer means a person who, or a State Government which, has been granted a letter of approval under sub-section (10) of Sec. 3 and includes an authority and a Co-Developer. Section 3(10) of the SEZ Act provides that the Central Government shall on receipt of communication by the Board, grant a letter of approval on such 'terms and conditions' and obligations and entitlements as may be approved by the Board to the Developer, being the person or the State Government concerned. A combined reading of the provisions of section 80IAB of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not possible that all the plots will be sold simultaneously and further it is also not possible that all the persons who have purchased plots will start functioning after complete sell out of the SEZ. It is therefore most likely that the activity of development, operation and maintenance will go on simultaneously. It is a different fact that once all the plots aredeveloped and sold, the operation and maintenance can be transferred to some other party and for this purpose, the proviso to section 80IAB has been incorporated. In the case of the appellant, the approval given is for all the activities. It would not be out of place to mention here that the provisions of section 80IA(4) initially had the words developing, maintaining and operating or developing, maintaining and operating. However, once the difficulty or anomaly in implementation of the language was observed, the provisions were subsequently amended from 01/04/2001 and the words or were introduced to take the work of development or development and operation or development operation and maintenance for entitlement of deduction. In view of the preceding discussion, I am of the considered opinion that the appellant is enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der considered the total claim of appellant of deduction u/s 80IAB for ₹ 5,65,36,415/-. At para 6.3 of the impugned order, the rental income of ₹ 3,45,000/- comprised in total claim was allowed by A.O.. Further, Misc. income of ₹ 77,000/- which was comprised of ₹ 59,138/- as interest from M/s UGVCL and ₹ 18,250/- as scrape vide para 6.14 of impunged order, A.O. did not considered ₹ 59,138/- being same were offered by appellant as income from other sources, while, ₹ 18,250/- was disallowed. It is therefore out of ₹ 5,65,36,415/- claim, the A.O. disallowed claim of ₹ 3,25,07,625/- being income from operation maintenance of SEZ and ₹ 18,250/- being receipt from scrape sale related to SEZ. I am inclined with appellant that on similar issue and similar facts, my predecessor vide order dt. 30/04/2012 considered the similar contention of A.O. on these issue and after considering the appellant's contention and legal proposition allowed the claim of appellant u/s 80IAB for these two receipts. Respectfully following the same, the A.O. is directed to allow the claim of appellant for deduction u/s 80IAB of the Act of ₹ 3,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (1) shall be allowed to such transferee Developer for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee Developer. (3) The provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA shall apply to the Special Economic Zones for the purpose of allowing deductions under sub-section (1). Explanation.-For the purposes of this section, Developer and Special Economic Zone shall have the same meanings respectively as assigned to them in clauses (g) and (za) of section 2 of the Special Economic Zones Act, 2005.]' 24. From going through the proviso (2) of section 80-IAB of the Act as referred above, which says that if the work of operation and maintenance of SEZ is transferred from one developer to another then the deduction allowable in sub-sec. (1) of sec. 80-IAB will be allowed to transferee developer for the remaining period of the remaining of consecutive 10 years. This proviso gives a very clear picture that when the transferee is eligible for deduction u/s 80-IAB for the income from operation and maintenance of SEZ then certainly transferor i.e. develope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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