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TMI Blog2024 (1) TMI 1392X X X X Extracts X X X X X X X X Extracts X X X X ..... eas the IPS 2002 & 2008 provide that deduction is allowable only to those undertakings which were notified between the period 1.4.1997 and 31.03.2011. 2.3 The Id CIT(A) failed to note that as per Industrial Park Scheme, 2008 superceded the earlier schemes, whereby both the transferor and transferee entities have to be notified under the scheme to become eligible for claiming the deduction ; the transferor Industrial Park was notified as per IPS, 2002, whereas the transferee entity was not notified under any of the two scheme~ 3.1 The Id CIT(A) erred in directing the AO to allow deduction u/ s 80I(4)(iii) on the entire income of the undertaking, including the income attributable to the development of the industrial park such as rent, operation and maintenance and fit out. 3.2 The ld CIT(A) failed to note that as per the proviso to Sec.80IA(4)(iii), only the transfer of operation and maintenance of the industrial park has to be considered for the deduction in the hands of the transferee and not the entire income due to transfer of the industrial park itself lock stock and barrel. 3.3 The Id CIT(A) ought to have noted that three categories of business activities have been ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed u/s. 80IA(4)(iii) of the Act. In response, the assessee submitted that the company, M/s. Khivraj Tech Park Pvt Ltd., is engaged in developing, operating and maintenance of the Industrial parks. The industrial park developed by the company was duly approved by the Department of Industrial Policy and Promotion (DIPP) under Ministry of Commerce and Industry vide notification no. 15/12/2005-IP&ID, dated 25.07.2016. The said industrial park was also notified by the CBDT vide notification no. 331/2006 dated 30.11.2006, in accordance with the Industrial Park Scheme, 2002. The assessee further stated that, during the financial year relevant to assessment year 2012-13, the company along with four other companies formed a partnership firm under name and style of 'M/s. Khivraj Tech Park' and the company M/s. Khivraj Tech Park Pvt Ltd has transferred the industrial park as its capital contribution as a going concern. The partnership firm has been subsequently converted into a company under the name and style of 'M/s. Olympia Tech Park (Chennai) Private Limited' under Part IX of Companies Act, 1956. Since, the Industrial park was approved by the Ministry of Commerce, Government of India, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion claimed u/s. 80IA(4)(iii) of the Act to interest received from bank and assessed under the head income from other source. 5. Being aggrieved by the assessment order, the assessee preferred appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has challenged the findings of the Assessing Officer in denying deduction u/s. 80IA(4) of the Act, on the ground that as per provisions of section 80IA(4)(iii) of the Act, the successor company is eligible to claim deduction for the remaining period and the same has been recognized by the Industrial Park Scheme, 2002. The ld. CIT(A), after considering relevant submissions of the assessee and also taken note of relevant facts observed that, the assessee is eligible for deduction u/s. 80IA(4) of the Act, for the remaining period because the industrial park developed by the assessee company was approved by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industries, Government of India and was also duly notified by the CBDT. The ld. CIT(A), further held that on transfer of an undertaking, the successor company can claim deduction and the same has been recognized by the Industrial Park Scheme, 2002. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her submitted that, the ld. CIT(A) failed to appreciate the fact that provisions of section 80IA(4)(iii) of the Act, provides deduction for different kinds of activities and as such, if the assessee undertakes development activity, deduction can be allowed only to the extent of income generated from said activity and if the assessee undertakes operation and maintenance, then deduction should be allowed only to income generated from said activity. The ld. DR further submitted that, the ld. CIT(A) erred in allowing deduction towards interest income earned from bank without appreciating fact that interest income from bank is not derived from industrial undertaking, which is engaged in the business of development and maintenance of industrial park. The ld. CIT(A) also failed to note that the Assessing Officer has rightly treated the appellant firm as AOP, because the Memorandum and Articles of Association of the partner companies did not authorize to enter into partnership firm and that while subsequent resolution passed by the partner companies much after the formation of the firm is only an afterthought and does not find any ratification with the business of the companies. 7. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s. Khivraj Tech Park Pvt Ltd was duly approved by the Department of Policy and Promotion, Ministry of Commerce and Industries, Government of India vide notification no. 15/12/2005-IP&ID, dated 25.07.2016 and was also duly notified by the CBDT vide notification no. 331/2006, dated 30.11.2006, in accordance with Industrial Park Scheme, 2002 is not disputed by the Assessing Officer. In fact, the Assessing Officer categorically admitted that the industrial park developed by the assessee was approved under the Industrial Park Scheme, 2002. It is also not in dispute that the assessee has claimed deduction u/s. 80IA(4) of the Act from assessment year 2011-12 and the same has been denied by the Assessing Officer. On appeal, ld CIT(A) allowed deduction u/s. 80IA(4) of the Act and the same has been approved by the Tribunal. Although the department filed an appeal before the Hon'ble High Court of Madras, but subsequently the department had withdrawn the appeal filed before the Hon'ble High Court by filing memo that the industrial park developed by the assessee was approved by the competent authority. Therefore, from the above it is undoubtedly clear that the industrial park developed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, in right perspective because as we have stated in earlier part of this order transfer u/s. 80IA(4)(iii) of the Act is qua the undertaking and not qua the assessee. The undertaking owned by the transferor is same undertaking owned by the transferee. It is not a case of the department that the undertaking and industrial park transferred by the transferor is not notified. Further, as per Paragraph 9(4) of the Industrial Park Scheme, 2002 and Paragraph 10 of CBDT notification, if there is a transfer of undertaking, the transferor and transferee should jointly intimate to the DIPP. The said compliance was duly complied by the assessee vide letter dated 12.04.2011 and DIPP as acknowledged the transfer vide letter dated 01.02.2012 with a copy to the CBDT. In our considered view said compliance is sufficient for the transferee undertaking to claim deduction u/s. 80IA(4)(iii) of the Act for remaining period. This fact is further strengthened by Circular no. 10/2014 issued by the CBDT, where it has been clearly explained the concept of deduction and as per said circular, if an undertaking is transferred to another undertaking other than by way of amalgamation and demerger and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f deposits cannot form part of eligible income in context of section 80IA(4) of the Act. Although, in principle we agree with the contention of the revenue that interest income earned from fixed deposits kept with bank cannot be considered as income derived from industrial undertaking, but facts of the present case has to seen in light of the conditions for keeping mandatory security deposit with the banks. As per the Ld. Counsel for the assessee, the appellant company has availed loan from consortium of team of bank and as per agreement with banks, the company should maintain a sum of Rs. 15 crores in Debts Service Reserve Account (DSRA) under lien to lenders to guard against account any temporary mismatch in cash flows for repayment of loan installments. This Debt Service Reserve to be maintained with one of the lenders. Accordingly, the assessee has kept fixed deposits of Rs. 15 crores in two banks and earned interest. Therefore, the assessee argued that interest income earned from bank deposit is inextricably linked with business activity of the assessee and accordingly, is eligible for deduction u/s 80IA(4)(iii) of the Act. We find that there is a condition from the lending ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which partnership firm can be treated as AOP. The conditions of section 184 of the Act have been duly complied and same is not under dispute. Further, the MOA of partner companies authorizes to enter into partnership arrangements as required under the Companies Act. The Department has also considered the same in the remand report dated 08.12.2017. Therefore, we are of the considered view that the ground taken by the revenue in so far as assessment of the appellant as AOP instead of partnership firm is devoid of merits and thus, rejected.
16. In this view of the matter and considering facts and circumstances of the case, we are of the considered view that the ld. CIT(A) after considering relevant facts has rightly allowed deduction claimed u/s. 80IA(4)(iii) of the Act, by the appellant in respect of income derived from an industrial undertaking which operate and maintains industrial park developed under Industrial Park Scheme, 2002. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.
17. In the result, appeal filed by the revenue is dismissed.
Order pronounced in the court on 03rd January, 2024 at Chennai. X X X X Extracts X X X X X X X X Extracts X X X X
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