Madras High Court
The Commissioner Of Income Tax vs M/S.Tidel Park Ltd on 19 August, 2020
Author: Krishnan Ramasamy
Bench: Vineet Kothari, Krishnan Ramasamy
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 19.08.2020
CORAM
THE HONOURABLE DR.JUSTICE VINEET KOTHARI
&
THE HONOURABLE MR.JUSTICE KRISHNAN RAMASAMY
T.C.A.Nos.972 to 974 of 2013
The Commissioner of Income Tax
Chennai. ... Appellant
Versus
M/s.Tidel Park Ltd.,
4, Rajiv Gandhi Salai, Taramani,
Chennai – 600 113. ... Respondent
Common Prayer: Tax Case Appeals filed under section 260-A of the Income
Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Madras,
'B' Bench, Chennai, dated 11.04.2013 in ITA No.2120/Mds/2011, ITA
No.2121/Mds/2011, and ITA No.2121/Mds/2011 respectively.
For Appellant : Mr.M.Swaminathan,
for Ms.V.Puspha, Standing Counsel
For Respondent : Mr.R.Venkatnarayanan
for M/s.Subbaraya Aiyar Padmanabhan
COMMON JUDGEMENT
(Judgment of the Court was delivered by KRISHNAN RAMASAMY, J.)
The Court was held by Video Conference, as per the Resolution of the
Full Court dated 3 July 2020, by Judges at their respective residences and the
counsel, staff of the Court appearing from their respective residences.
http://www.judis.nic.in
1/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
2. Mr.M.Swaminathan, learned Standing Counsel appeared for the
appellant/department and Mr.R.Venkatnarayanan, learned counsel appeared
for the respondent/assessee.
3.All these Tax Case Appeals have been filed against the common
order dated 11.04.2013 of the Income Tax Appellate Tribunal, Madras “B”
Bench, Chennai. TCA No.972 of 2013 has been filed against the order passed
in I.T.A.Nos.2120/Mds/2011 (for the assessment year 2003-04) and TCA
Nos.973 & 974 of 2013 have been filed against the order passed in ITA
No.2121/Mds/2011 (for the assessment year 2005-06) and Cross Objection
No.17/Mds/2012.
4. The brief facts relevant to the case of TCA.No.972 of 2013 are as
follows:-
4.1. The assessee is a company promoted as a joint venture by M/s
TIDCO & M/s ELCOT and both are Government of Tamil Nadu
Undertakings. Assessee is engaged in developing, operating and maintaining
information technology parks and the name of the park developed, maintained
and operated during the relevant previous year was "Tidel Park". Assessee has
obtained approval for setting up industrial park from the Ministry of Industry,
Government of India. CBDT had also notified it as an industrial park under
http://www.judis.nic.in
2/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
section 80IA(iii) of the Act.
4.2. For the relevant Assessment Year, the assessee filed its return
declaring an income of Rs.76,67,750/- and claimed deduction of
Rs.6,73,15,795/- under section 80-IA (4)(iii) of the Income Tax Act.
Thereafter the assessment was completed on 10.03.2006 under section 143(3)
of the Act. On 26.03.2008, assessee was served with a notice proposing to
reopen the assessment. The assessee, in its reply filed on 17.04.2008,
requested the Assessing Officer to treat the return originally filed as the return
filed in pursuance of such notice and also requested the Assessing Officer to
give reasons while resorting for re-assessment. The department furnished the
reasons inter alia mentioned that the assessee had not filed the audit report in
Form No.10CCB along with return, which was required for availing the
deduction under section 80 IA of the Act. Thereafter, the re-assessment was
completed on 26.12.2008 withdrawing the deduction made under section 80-
IA of the Act.
4.3. Aggrieved by the same, the assessee filed an appeal before the
CIT(A) questioning the withdrawal of deduction made under Section 80lA.
The CIT(A) allowed the appeal of the assessee by directing the Assessing
Officer to accept the report in Form No.10CCB filed by the assessee during
the course of re-assessment proceedings and to allow the deduction claimed
under section 80-IA of the Act.
http://www.judis.nic.in
3/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
4.4. The Assessing Officer, pursuant to the directions of CIT(A),
issued fresh notice to the assessee under Section 148. Though the assessee
objected to the second re-opening of assessment, the Assessing officer chose
to proceed with the re-assessment and completed the same on 31.12.2010
denying deductions claimed under section 80-IA of the Act. In the said re-
assessment proceedings, the Assessing Officer took a view that the deduction
under section 80IA(4)(iii) could be availed only for the profits derived from
developing, operating and maintaining facilities of the nature mentioned
therein and could not be applied for the rentals received from the property. The
assessee contended that during the course of original proceedings itself, the
details of its claim under section 80IA(4)(iii) was called for by the Assessing
Officer and they were furnished. The Assessee also pointed out that one of the
questions raised by the Assessing Officer in his letter dated 11.02.2006 was to
explain how it could claim rental income, interest on income, other income,
revenue shares from lessees, and operation and maintenance charges received
as eligible deduction under section 80lA of the Act. However, the Assessing
officer was not impressed with the reasons given by the assessee and he was of
the view that since the production of books of account, evidence from which
material evidence could, with due diligence, be discovered, would not amount
to disclosure required under section 147 of the Act, rejected the claim of the
assessee.
http://www.judis.nic.in
4/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
4.5. Against the said order, the Assessee went on appeal to the
CIT(A), assailing the re-assessment as well as the denial of deduction under
section 80-IA of the Act. According to the assessee, reopening of assessment,
which was based on a change of opinion and that too, after four years from the
end of the relevant Assessment Year, was not proper. The CIT(A) allowed the
appeal of the assessee on the ground that there was no failure on the part of the
assessee to disclose fully and truly the material facts required for the
assessment and thus held that the reassessment proceedings was invalid.
4.6. Aggrieved by the order of the CIT(A), the Revenue had filed an
appeal before the ITAT which had rejected the appeal on the grounds that
there was no tangible material with the Assessing Officer for taking a different
view and that resorting to reopening of assessment was based on change of
opinion which was not possible and thus, the very basis for assumption of
jurisdiction for reopening of assessment was absent and upheld the finding of
CIT(A) and dismissed the appela filed by the Revenue.
5. The brief facts relevant to the case of TCA.Nos.973 & 974 of 2013
are as follows:-
5.1. The assessee company claimed deduction under Section
80-IA(4)(iii) of the Act for the relevant Assessment Year. This was allowed in
http://www.judis.nic.in
5/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
the original assessment under Section 143(3) of the Act, completed on
19.12.2007. The Assessing Officer issued notice on 17.03.2010 under section
148 proposing re-assessment. The Assessee's reasons for objecting to the re-
assessment was that the interest from sinking fund was one of the items on
which such details were furnished and deduction under section 80-IA of the
Act was allowed to it only after considering its reply. The contention of the
assessee was rejected by the Assessing Officer as he was of the view that since
production of books of account and evidence from which material evidence
could, with due diligence, be discovered, would not amount to disclosure
required under Section 147 of the Act.
5.2. Aggrieved by the same, the Assessee went on appeal to the
CIT(A), assailing the re-assessment as well as the denial of deduction under
section 80-IA of the Act. Acoording to the assessee, re-opening of assessment
was based on a change of opinion and that too after four years from the end of
the relevant Assessment Year. The CIT(A) allowed the appeal of the assessee
on the ground that there was no failure on the part of the assessee to disclose
fully and truly material facts required for the assessment and thus held the
reassessment proceedings to be invalid.
5.3. Aggrieved by the order of the CIT(A), the Revenue had filed an
appeal before the Income Tax Appellate Tribunal (ITAT) which had also
rejected its appeal on the ground that there was no tangible material with the
http://www.judis.nic.in
6/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
Assessing Officer for taking a different view and resorting to re-opening,
based on change of view, which was not possible and thus the very basis for
assuming a jurisdiction for reopening was absent. Therefore, it held that the
CIT(A) was right in invalidating the re-assessment and dismissing the
Revenue's appeal.
6. The appellant/department in TCA.No.972 of 2013 suggested the
following substantial questions of law:-
“1.Whether on the facts and circumstances of the case,
the Income Tax Appellate Tribunal was right in invalidating
the reopening of the assessment despite the fact that the
Assessing Officer had not considered the issue relating to
Section 43B in the original assessment completed on
17.03.2010?
2.Whether on the facts and circumstances of the
case, the assessee is eligibile for deduction under Section 80IA
on the lease rental income from Industrial Park to be assessed
under the head Profits and gains of Business or Profession?”
6.2. The appellant/department in TCA.Nos.973 & 974 of 2013
suggested the following substantial questions of law:-
“1.Whether on the facts and in the circumstances of
the case, the Income Tax Appellate Tribunal was right in
http://www.judis.nic.in
7/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
invalidating the reopening of the assessment?
2.Whether on the facts and in the circumstances of
the case, the assessee is eligibile for deduction under Section
80IA on the lease rental income from Industrial Park to be
assessed under the head Profits and gains of Business or
Profession?”
7. The learned counsel appearing for the appellant submitted that the
deduction under Section 80IA could be available only for the profits derived
from developing, operating and maintaining facilities of the nature mentioned
therein and could not be applied for rentals received from property. Therefore,
he contended that in the present case, the lease rentals received by the
Assessee is not eligible for deduction under Section 80IA and however, all
these facts have not been considered by the Commissioner of Income Tax
(Appeals)-VI, Chennai as well as the Tribunal.
8. The learned counsel for the revenue further contended that the re-
opening of assessment under Section 147 read with Section 148 of the Income
Tax Act, 1961 was resorted not only for the purpose of withdrawal under
Section 80IA, but for the other reason that the interest shown as payable
towards deduction was allowed without considering Section 43(b) of the Act.
According to the appellant, unless and until the interest shown as outstanding
http://www.judis.nic.in
8/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
in the accounts of the company or a company enterprise was paid before the
end of the previous year or before the due date of filing of the return, claims in
this regard could not be allowed. In the present case, the interest shown as
outstanding was not paid before the end of the previous year, and therefore,
the Assessee is not entitled to deduction and these aspects were not considered
at that time of original assessment proceedings and therefore, the re-opening of
the assessment under Section 147 is valid.
9. The learned counsel also contended that for the assessment year
2005-06, the assessment was reopened within the period of limitation under
Section 148 and notice was issued on 17.03.2010 for reassessment. Since the
Assessing Officer had not taken any view on the rent received from the
premises, the Assessee is eligible for deduction under Section 80IA of the Act.
However, through the re-assessment proceedings under Section 147, the
Assessing Officer reached a conclusion that the Assessee was not eligible for
deduction under Section 80IA. Further he stated that both the CIT(A) and the
Tribunal have not considered the submissions of the department regarding the
eligibility of deduction under Section 80IA, since the income derived from the
lease rentals has not fallen under the head of profit and gains of the business
and profession and it should have been considered under the head of income
and profits.
http://www.judis.nic.in
9/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
10. Per contra, the learned counsel for the respondent/assessee would
submit that in the present case, lease rental received by the assessee was from
and in the course of the business, which will clearly amount to profit derived
from the business out of developing, operating and maintaining facilities
provided to the Software or Industrial park units, which is eligible for
deduction. Therefore, the lease rentals received could be treated as business
income and not as an income derived from the house properties. In this regard,
the Counsel referred this Court's Judgment in the case of CIT vs. M/s. Elnet
Technologies Ltd., passed in TCA.Nos.2336 & 2623 of 2006, dated
09.10.2012.
11. The learned counsel also referred to another Judgment, which was
rendered by a co-ordinate bench of this Court in the case of CIT vs. Chennai
Properties and Investments Ltd. He contended that the income of lease rental
laid on and from the house properties could be considered only as income
from the business and not as income from the house properties. He further
submitted that it is well a settled principle that the lease rental income derived
from the Software Park could be considered only as income from the business
and not income from the house properties as contended by the department.
http://www.judis.nic.in
10/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
12. The learned counsel for the respondent/assessee contended that the
assessment has been completed on 31.03.2008, for the assessment year 2003-
04, whereas the notice for re-assessment proceeding under Sections 147 and
148 of the Act has been issued by the department on 17.03.2010. Therefore,
the notice issued under Section 148 of the Act was beyond the four year
period of limitation as prescribed therein. That apart, no other new material
was found by the department to show that the income has escaped assessment,
to initiate the proceedings under Section 148. Therefore, he submitted that the
appeal is also barred by limitation and it is liable to be dismissed.
13. Furthermore, the learned counsel for the respondent/assesee
contended with regard to the payment of interest that in the course of the
original assessment proceeding itself, the Assessing Officer had issued a letter
on 11.02.2006, with regard to the interest shown as Rs.6.69 crore was payable
as on 31.03.2003. The Assesee in his reply letter dated 24.02.2006 had clearly
stated that the payment of amount of Rs.6.69 crore was made before the
completion of the relevant assessment year and in that regard, all the
particulars had been provided by the Assessee to the Assessing Officer. After
perusal of all the particulars, the Assessing Officer had passed the detailed
assessment order. Therefore, there is no concealment of any material fact
during the course of the assessment, so as to enable the department to reopen
http://www.judis.nic.in
11/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
the assessment under Sections 147 and 148 of the Act. Thus, both the CIT(A)
-VI as well as the Tribunal have considered the facts elaborately and given its
finding and the same does not require any re-consideration as contended by
the department. Hence, he prayed for dismissal of the appeals.
14. We have heard elaborately the submissions made by the both sides
on all the appeals and perused the materials available on record.
15. These appeals are relating to the assessment year 2003-04 and
2005-06. In all the three appeals, the department had taken a view that the
income earned by the Assessee will be treated as income from the house
property and not income from the business or profession, so as to become
eligible for deduction under Section 80IA. We are unable to understand as to
how the department has taken such a view against the Assessee when the main
object of the company is to construct, maintain and lease out of the Software
Technologies Park and the main income of the Assessee was lease rentals.
16. We have perused the entire order passed by the Assessing Officer
under Section 147. But, we are unable to find anything in the order as to what
was the object of the assessee company etc., It shows that the Assessing
Officer, without application of mind, had passed the re-assessment order, with
http://www.judis.nic.in
12/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
assumption, presumption and surmise, which will not be permissible under
any of the statute. We also tried to find something in statutes to support the
finding of the Assessing Officer, but found none.
17. Further, both the CIT(A)-VI and the Tribunal have thoroughly
scrutinised the entire facts and passed the order. The original assessment order
was passed by the Assessing Officer after taking into consideration of all the
material facts. During the course of the re-assessment proceeding also, the
Assessing Officer has not found any tangible material by which income has
escaped from the assessment. Therefore, we are of the opinion that without
any application of mind, the Assessing Officer re-opened the assessment
under the pretext that income has escaped assessment and passed the re-
assessment order under Section 147, which is a patent error committed by the
Assessing Officer. Under these circumstances, we do not find any merit in all
these three appeals filed by the Revenue and the same are liable to be
dismissed on the above said point also.
18. The present issue is squarely covered by the Judgment of this Court
passed in the case of CIT vs. M/s.Elnet Technologies Ltd., and CIT vs.
Chennai Properties and Investments Ltd., in which the judgment in the case
of The Commissioner of Income Tax, Chennai Vs. M/s.Tidel Park Ltd.,
http://www.judis.nic.in
13/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
passed in TCA.No.901 of 2015, dated 03.08.2020 has been followed, wherein
we have passed a detailed order, referring to the decision of this Court
rendered in the case of Principal Commissioner of Income Tax-4, Vs.
M/s.Khivraj Motors Pvt. Ltd., in TCA.Nos.314&315 of 2017, dated
27.07.2020.
19. In TCA.No.972 of 2013 (for the assessment year 2003-04), the
learned counsel for the appellant/department has raised one more issue with
regard to non-payment of interest. As contended by the Assessee and upon
perusal of all the records, it is clear that the Assessee had paid the interest
amount of Rs.6.69 crore within the relevant assessment year and all these facts
have been disclosed by the Assessee to the Assessing Officer. After taking
into consideration all these aspects, the Assessing Officer had passed the
original assessment order. Therefore, we do not find any merit in the
submissions of the learned counsel on the basis that the deduction was granted
without payment of any interest during the relevant financial year and hence,
the appeal is liable to be dismissed well on this point also.
20. Yet another issue also raised with regard to limitation for reopening
the assessment under Section 147. The notice under Section 148, for
reopening of the assessment was issued on 17.03.2010 for the assessment year
http://www.judis.nic.in
14/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
2003-04. If at all, if the department intended to reopen the assessment under
Sections 147 and 148, it should have issued the notice under Section 148
within four years from the end of the relevant assessment year. In the present
case, after completion of the period i.e., on 31.03.2008, the department issued
a notice under Section 148 for re-assessment. Therefore, we are of the view
that the re-opening of the assessment for the assessment year 2003-04 was
beyond the period of limitation and accordingly, the Tax Case Appeals in
TCA.Nos.972, 973 & 974 of 2013 are liable to be dismissed on this point also.
21. As aforesaid, in all the three appeals, the re-opening of the
assessment by the department was without any evidence to show concealment
on material facts on the part of the Assessee. The department tried to provide
its second opinion, under that pretext the original assessment proceedings of
the Assessing Officer was sought to be re-opened without providing any
opinion with respect to the rental income. We would stress upon to state that
the department should not have come to the conclusion and re-opened the
assessment under Sections 147 and 148 of the Act under the pretext that the
Assessing Officer has not provided any opinion. In fact, the Assessing
Officers cannot make any assessment without forming any opinion and pass
the assessment order. Therefore, the question of the Assessing Officer failing
to provide any opinion does not arise. Accordingly, on this point also, the
http://www.judis.nic.in
15/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
appeals of the department are liable to be dismissed.
22. At this juncture, we would like to stress that the re-assessment
proceedings under Section 147 of the Act do not provide for re-assessment on
a mere change of opinion. The re-assessment on a mere of change of opinion
is not permissible under law. Such change of opinion amounts to review of
the order of the assessment, which is not permissible under law. In support of
our opinion, we would like to press into service the Judgment of the Hon'ble
Supreme Court in the case of Commissioner of Income Tax, Delhi Vs.
Kelvinator of India Ltd., reported in (2010) 187 Taxman 312 or 320 ITR 561
(SC). The extract of the relevant Paragraph No.4 which reads as follows:-
“4.On going through the changes, quoted above,
made to Section 147 of the Act, we find that, prior to direct
Tax laws (Amendment) Act, 1987, re-opening could be done
under above two conditions and fulfilment of the said
conditions alone conferred jurisdiction on the Assessing
officer to make a back assessment, but in Section 147 of the
Act [with effect from 1-4-1989], they are given a go-by and
only one condition has remained, viz., that where the
Assessing Officer has reason to believe that income has
escaped assessment, confers jurisdiction to re-open the
assessment. Therefore, post 1-4-1989, power to reopen is
much wider. However, one needs to give a schematic
interpretation to the words “reason to believe” failing which,
http://www.judis.nic.in
16/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
we are afraid, section 147 would give arbitrary powers to the
Assessing Officer to re-open assessments on the basis of
“mere change of opinion”, which cannot be per se reason to
reopen. We must also keep in mind the conceptual difference
between power to review and power to re-assess. The
Assessing Officer has no power to review; he has the power to
reassess. But reassessment has to be based on fulfilment of
certain pre-condition and if the concept of “change of
opinion” is removed, as contended on behalf of the
Department, then, in the garb of re-opening the assessment,
review would take place. One must treat the concept of
“change of opinion”as an in-built test to check abuse of
power by the Assessing Officer. Hence, after 1-4-1989,
Assessing Officer has power to reopen, provided there is
“tangible material” to come to the conclusion that there is
escapement of income from assessment. Reasons must have a
live link with the formation of the belief. Our view gets
support from the changes made to section 147 of the Act, as
quoted hereinabove. Under the Direct Tax Laws (Amendment)
Act, 1987, Parliament not only deleted the words “reasons to
believe” but also inserted the word 'opinion' in section 147 of
the Act. However, on receipt of representations from the
Companies against omission of the words “reason to
believe”, Parliament re-introduced the said expression and
deleted the word “opinion”on the ground that it would vest
arbitrary powers in the Assessing Officer. We quote herein
below the relevant portion of Circular No.549, dated
http://www.judis.nic.in
31.10.1989, which reads as follows:-
17/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
“7.2. Amendment made by the Amending Act, 1989 to
reintroduce the expression 'reason to believe' in section 147.-
A number of representations were received against the
omission of the words 'reason to believe' from section 147 and
their substitution by the 'opinion' of the Assessing Officer. It
was pointed out that the meaning of the expression, 'reason to
believe' had been explained in a number of court rulings in
the past and was well settled and its omission from section
147 would give arbitrary powers to the Assessing Officer to
reopen past assessments on mere change of opinion. To allay
these fears, the Amending Act, 1989, has again amended
section 147 to reintroduce the expression 'has reason to
believe' in place of the words 'for reasons to be recorded by
him in writing , is of the opinion'. Other provisions of the new
section 147, however, remain the same.” ”
23. In view of the reasons stated above, we do not find any question of
law arising for our consideration in all the three appeals viz.,
TCA.Nos.972,973 & 974 of 2013. We do not find any illegality or error in the
decision making process of the CIT(A)-VI and the Tribunal and therefore, the
orders passed by the both Courts below are correct and sustainable and do not
require any interference. Hence, all the appeals filed by the department
deserves to be dismissed.
http://www.judis.nic.in
18/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
24. In the result, the Tax Case Appeal Nos.972, 973 & 974 of 2013 are
dismissed. No costs.
[V.K., J.] [K.R., J.]
19.08.2020
klt
To
The Income Tax Appellate Tribunal Madras, 'B' Bench, Chennai.
http://www.judis.nic.in
19/20
TCA.Nos.972 to 974 of 2013, dt.19.08.2020
DR. VINEET KOTHARI, J.
and KRISHNAN RAMASAMY, J.
klt T.C.A.Nos.972 to 974 of 2013 19.08.2020 http://www.judis.nic.in 20/20