Gujarat High Court
Devraj Infrastuctures Ltd vs Chairman/Member(Industrial Park) on 3 November, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
C/SCA/7098/2017 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 7098 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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DEVRAJ INFRASTUCTURES LTD....Petitioner(s)
Versus
CHAIRMAN/MEMBER(INDUSTRIAL PARK)....Respondent(s)
==========================================================
Appearance:
MR RK PATEL, ADVOCATE WITH MR DARSHAN R PATEL, ADVOCATE for
the Petitioner(s) No. 1
MR MANISH R BHATT, SENIOR ADVOCATE WITH MRS MAUNA M BHATT,
ADVOCATE for the Respondent(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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C/SCA/7098/2017 CAV JUDGMENT
Date : 03/11/2017
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE BIREN VAISHNAV)
1. By way of this petition, under Article 226 of the Constitution of India, the petitioner has prayed for quashing of the communication dated 17.03.2017. By the impugned communication, the application of the petitioner, seeking rectification in the notification dated 26.12.2016, has been rejected.
2. By the notification dated 26.12.2016, the petitioner's undertaking was notified as eligible for the benefit of deduction of tax under the provisions of Clause (iii) of sub- section (4) of Section 80IA of the Income Tax Act, 1961 ('the Act' for short). According to the notification, the benefit of deduction to the petitioner's industrial park would be available to such park from the date of its commencement i.e. 05.09.2010. Condition no. 7 of the notification granted such benefit to the undertaking from such date of commencement. Rectification of this condition sought was rejected.
3. The petition arises under the following facts:
3.1 The petitioner is a closely held limited company. By an application dated 23.05.2006 it applied for approval for setting up an industrial park at village Piplaj, Dist.
Ahmedabad. This application was made for claiming and availing deduction under Section 80IA(4)(iii) of the Act. After Page 2 of 43 HC-NIC Page 2 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT having acknowledged the application so made, the Ministry of Commerce and Industry, New Delhi returned the application by a letter of 05.01.2009 advising the petitioner to apply under the Industrial Park Scheme, 2008. Accordingly, the petitioner applied under the Scheme of 2008, in the prescribed form IPS-I on 27.01.2009. The application was acknowledged by the Ministry by a letter of 09.02.2009.
3.2 According to the petitioner, the petitioner had completed the development of the park much before the date envisaged under the Scheme i.e. 31.03.2011. The case of the petitioner was that even according to the Scheme framed by the State Government, for setting up an industrial park, the State had examined the infrastructural development of the project and granted subsidy of Rs.92,63,000 to such park. The Gujarat Industrial Development Corporation ('GIDC' for short) had appointed one MARS Planning and Engineering Services for assessing the third party quality assurance vis-a-vis the project of the petitioner. Such agency had supervised the entire development work of the industrial park and had submitted a progress report from time to time finally giving a completion report dated 05.09.2010.
3.3 Based on this material, the petitioner sought approval from the Central Board of Direct Taxes ('CBDT' for short) requesting that since the park was duly developed before the specified date i.e. 31.03.2011, a notification be issued so that the petitioner can claim deduction under section 80IA(4) of the Act. That application was rejected by the CBDT by a communication dated 05.09.2014. Aggrieved by this communication, the petitioner had approached this Court by Page 3 of 43 HC-NIC Page 3 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT filing Special Civil Application No. 17118 of 2014.
3.4 According to the CBDT, from the documents produced before it including the report dated 05.09.2010 of MARS Planning and Engineering Services Private Limited, certain letters and certificates were issued by the Ahmedabad Urban Development Authority ('AUDA' for short) making certain observations. CBDT had insisted that a completion certificate must be obtained from AUDA and it was only on 08.05.2013 that AUDA certified that the petitioner had carried out and completed the work of infrastructural development and construction as per AUDA rules and regulations. The certificate of AUDA recorded that the petitioner had set up a sewerage system and therefore the project was completed after the final date of 31.03.2011. In other words, the main objection of CBDT in the order impugned in the said petition was that the evidence suggested that on 05.09.2010 only one industry was set up. The project was not developed and completed in accordance with the provisions of Section 80IA of the Act and therefore permission was refused. In such background, this Court examined the question whether the CBDT was right in holding that the factual aspect of the matter on the basis of the availability of the evidence that the petitioner's project was completed before 31.03.2011. Having examined the Scheme, this Court observed that in its opinion the CBDT had brought in the element of completion of industrial units on the proposed industrial park instead of completion of project. According to the Court, the insistence of the CBDT to proceed on the basis that AUDA, which was the local authority had not given any clear certificate that the industrial park was completed with constructed units by Page 4 of 43 HC-NIC Page 4 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT 31.03.2011, was impermissible. This Court in its order held as under:
16. Ignoring such evidence, CBDT proceeded on the basis that AUDA which was a local authority had not given any clear certificate that the industrial park was completed with constructed units by 31.3.2011. This insistence from CBDT was impermissible for two reasons. Firstly, the scheme pertained to certificate from a local authority and could not confine its purview to certification by AUDA alone and second that the insistence on demonstrating completion of industrial units by the leasing industries was not part of the requirement of the scheme at all, as held in case of Ganesh Housing Corporation Ltd.
(supra). For such reasons, the second part of the CBDT's objection must fail.
17.Coming back to the first objection, of the petitioner having failed to produce a completion certificate from the local authority, we have noticed that MARS Planning & Engineering Services Pvt. Ltd. was appointed by GIDC for the purpose of certifying the quality control and completion of the project for State subsidy. MARS Planning & Engineering Services Pvt.
Ltd. had already given such completion certificate well before 31.3.2011, on the basis of which State Level Committee had approved the petitioner for grant of subsidy, which was also granted along with completion certificate. There was thus voluminous evidence on record to suggest that the project was completed before 31.3.2011.
However, we do appreciate the anxiety of CBDT that such task should normally not be part of its responsibility. It is in this regard that completion certificate should be provided by a local authority. In strict sense of the term, perhaps the petitioner did not fulfill this requirement.
However, a more liberal or practical approach Page 5 of 43 HC-NIC Page 5 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT could be that when MARS Planning & Engineering Services Pvt. Ltd. was appointed by GIDC who had certified that the project was completed before 31.3.2011 and when the State Government had acted on such report and approved the subsidy, this should have been seen as a substantial compliance of such requirement. However, to put the issue beyond any controversy, we permit the petitioner to produce such certificate from GIDC, which is also a local authority, before CBDT which may be done latest by 30.9.2016. If such certificate providing that the project of the petitioner is completed before 31.3.2011, is issued, CBDT shall approve the petitioner for grant of deduction under section 80IA(4) of the Act and issue necessary notification in this respect, within three months from the date of receipt of such certificate.
18.For such purpose, impugned order dated 5.11.2014 is set aside. The Petition is allowed and disposed of.
3.5 In other words, the order dated 05.09.2014 impugned in the petition was set aside noticing that the MARS Planning and Engineering Service Private Limited, an agency appointed by the GIDC for the purpose of certifying quality control and completion of the project had already given a completion certificate stating that the project was completed well before 31.03.2011. Petitioner was permitted to produce such certificate from the GIDC before the CBDT and if the certificate so produced, the court observed that the CBDT shall approve the petitioner for grant of deduction under Section 80IA(4) of the Act and issue necessary notification in this respect.
3.6 It is in this background that the Central Board of Direct Page 6 of 43 HC-NIC Page 6 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT Taxes issued a notification dated 26.12.2016 granting permission to the petitioner. The condition of the notification reads as under :
"Now, therefore, in exercise of the powers conferred by clause (iii) of sub-section (4) of secton 80-IA of the said Act, read with rule 8C of the Income-tax Rules, 1962, the Central Government hereby notifies the undertaking from the date of commencement of the industrial park the 5th September, 2010 being developed and being maintained and operated by M/s Devraj Infrastructure Ltd., for the purposes of the said clause (iii) subject to the terms and conditions mentioned in the Annexure to this notification.
ANNEXURE The terms and conditions on which the approval of the Government of India has been accorded for setting up of an industrial park by Devraj Infrastructures Ltd.
(i) Name of the industrial undertaking : Devraj Infrastructures Ltd.
(ii) Location :Survey numbers : 99
to 102, 108,
112 to 116,
118 to 124,
126, 127 &
129 of Village
Piplaj and
Survey nos.
774, 776,
778, 780 to
784 & 789 to
792 of village
Lambha
(iii) Minimum constructed
floor area : 15000 square meters.
(iv) Proposed industrial : As defined in
Industrial
Park Scheme,
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activities
2008 notified
by the
Government
of India,
Ministry of
Finance
(Department
of Revenue,
Central
Board of
Direct Taxes)
vide
notification
Number. S.O.
51€, dated
the 8th
January,
2008.
(v) Percentage of allocable area earmarked for industrial use : 75% or more
(vi) Percentage of allocable area earmarked for commercial use : 10% or less
(vii) Minimum number of industrial units :30 units
(viii) Date of commencement :5th September, 2010 "
3.7 Further condition no. 7 of the notification also reads as under:
"(vii) Minimum number of industrial units : 30 units"
3.8 In other words, by the notification of 26.12.2016, the undertaking was granted the benefit of the option to claim deduction under clause (iii) of sub-section (4) of Section 80IA of the Act for any ten consecutive assessment years out of Page 8 of 43 HC-NIC Page 8 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT fifteen years beginning from the assessment year relevant to the date of commencement of industrial park mentioned in the notification.
3.9 The petitioner on receipt of such notification granting the benefit of deduction with effect from 05.09.2010 as stipulated in condition no. 7 of the said notification, approached CBDT for request of a rectification in the notification dated 26.12.2016. Rectification was sought in condition no. 7 of the notification on the ground that the development of the industrial park was initiated from the year 2008-09. The project was launched in 2009 for setting up 182 units. Between April 2009 and March 2011 as many as 135 units were booked, allotment was processed, possession of land was handed over to them. Sale deed was executed and consideration was also received by them. The date of commencement of 05.09.2010 would postpone the benefit of option of deduction to assessment year 2010-11, the date of commencement being 05.09.2010.
3.10 According to the petitioner, once the tax returns and the financial statements were filed establishing the location of the minimum number of 30 units in the assessment year 2010-11, the benefit of the option of deduction ought to have been given to the petitioner from the assessment year 2009-10 and not assessment year 2011-12 by recording a condition in the notification of the date of commencement of 05.09.2010. In other words, rectification was sought of condition no. 7 as under:
Page 9 of 43HC-NIC Page 9 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT Condition No. 7 "The undertaking subject to the fulfillment of the term and conditions mentioned in this notification, may as its option claim deduction under clause
(iii) of sub-section 80IA of the Income Tax Act, 1961 for any ten consecutive assessment year relevant to the date of commencement of industrial park mentioned in this notification"
Rectification Undertaking has sought that Sought(Last Para) it may be alloed to claim deduction under section 80-IA (4)(iii) of the Income-tax Act, 61 for any ten consecutive assessment years out of fifteen years beginning from the assessment year of development of industrial Park begun i.e. previous year 2008-09 relevant to A.Y. 2009- 10.
This application for rectification was rejected giving rise to the present petition.
4. Mr. R.K. Patel, learned advocate appearing for the petitioner has taken us through the impugned order dated 17.03.2017 together with the notification granting the benefit Page 10 of 43 HC-NIC Page 10 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT of option of deduction with effect from the date of commencement of 05.09.2010. According to Mr. Patel, the rectification sought for, ought to have been considered, in light of the observation made by this Court in the previous order dated 09.08.2016 passed in Special Civil Application No. 17118 of 2014.
4.1 According to Mr. Patel, who invited our attention to page 39 of the petition and the scheme namely Industrial Park Scheme of 2008, once the minimum number of units stipulated in the scheme namely 30 units were located in the industrial park in the assessment year 2010-11, tax benefits under the Act namely under Section 80IA of the Act ought to have been made available to the petitioner during the financial year 2009-10, relevant assessment year being 2010-
11. The conditions stipulated in the scheme for availing benefits under section 80IA of the Act had been complied with and, as observed by the Court in its earlier petition, by stipulating a condition of extending such benefits of option of deduction from the date of commencement i.e. 05.09.2010 was against the spirit of the Section and also brought in an element of completion of industrial units in the proposed industrial park instead of completion of the project. According to Mr. Patel this was in clear violation of the opinion observed by this Court earlier and in the judgement in the case of Ganesh Housing Corporation Limited vs Padam Singh reported in (2011) 339 ITR 441 (Guj).
4.2 According to Mr. Patel, in short, it was the duty and responsibility of the petitioner to ensure that the industrial activity is facilitated by the industrial park so developed by it.
Page 11 of 43HC-NIC Page 11 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT It was thereafter not responsible to ensure that the industries do in fact set up their units and commence production activities on such units. On facts it was even not disputed by the CBDT that the minimum number of units stipulated in the Scheme had been located.
4.3 Heavy reliance was placed by Mr. Patel on the CBDT circular dated 15.02.2016. According to Mr. Patel, sub-section (2) of Section 80IA of the Act read together with the circular of 15.02.2016 provided that the deduction would be available beginning from the year in which the undertaking commences operation, begins development or starts providing services etc. Therefore, according to Mr. Patel, even when an undertaking begins development or starts providing services, the condition stipulated under section 80IA stands satisfied.
4.4 Further Mr. Patel has invited our attention to the impugned communication dated 17.03.2017 particularly on para 13 which reads as under:
"13. Here it is important to bear in mind the condition specified at para 5(11) of the IPS 2008 Scheme, wherein it is clearly specified that the "tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park." Hence, merely the beginning of the development of the industrial park is not suffice to claim deduction as contended by the undertaking but its complete development along with the location of industrial units is a prerequisite so as to start availing deduction."
4.5 According to Mr. Patel, even according to the authority tax benefits under the Act would be available once the Page 12 of 43 HC-NIC Page 12 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT minimum number of 30 units are located in the industrial park.
5. On the other hand Mr. Bhatt, learned advocate for the Revenue contended that it was apparent from the earlier order dated 05.11.2014 that the local authority namely AUDA had given a completion certificate dated 08.05.2013. According to Mr. Bhatt, who invited our attention to clause (2)
(f) of the scheme suggested that the phrase "date of commencement " has been defined to mean as the date of obtaining the completion certificate or occupation certificate as the case may be from the local authority certifying thereby that all the required activities have been completed.
5.1 According to Mr. Bhatt, since the completion certificate issued by GIDC clearly stated that as per available records, in the respect of work of development of common infrastructure facilities like road, water system, sewerage system, storm water, drainage system, first aid center, street lights were completed on or before 05.09.2010 i.e. the date of certificate of completion, the date of commencement in the notification of 26.12.2016 showing the date of commencement as 05.09.2010 was correct.
5.2 According to Mr. Bhatt, as per Section 80IA of the Act, it is only when one develops and begins to operate any infrastructure facility, that the benefit of the option of deduction under section 80IA of the Act begins to operate. Condition no. 5 (1) which stipulates the location of minimum of 30 units cannot be read so as to suggest that once the 30 units have come up, it is open for the undertaking to avail the Page 13 of 43 HC-NIC Page 13 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT option of deduction. Section 80IA of the Act nowhere stipulates such a condition.
5.3 According to Mr. Bhatt, even the form prescribed to be filled in by the undertaking which needs such an option, clearly stipulates that it has to show the actual date of commencement of the industrial park. Once the completion certificate by the agency categorically stated that the park was completed with effect from 05.09.2010, the date of commencement has to be from the assessment year relevant to the financial year in which the completion certificate was granted and therefore the order rejecting the rectification application was just and proper.
6. Having thus seen the facts of the case, we need to consider whether the petitioner's contention that the notification dated 26.12.2016 granting the benefit of availing deduction of taxes under Section 80IA(4)(iii) from the date of commencement i.e. 5/09/2010 is valid. The question is whether such benefit has to be granted to the petitioner's project from the date of commencement as notified or allow the claim of deduction under clause (iii) of sub-section(4) of Section 80IA of the Income Tax Act beginning from the assessment year of development of Industrial Park begun i.e. previous year 2009-10 relevant to the assessment year 2010- 11, as prayed for by the Petitioner.
7. In order to appreciate the controversy at hand, before we may consider the factual aspects of the matter, a brief recapitulation of the legal provisions would be necessary. Section 80IA of the Act provides for deductions in respect of Page 14 of 43 HC-NIC Page 14 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT profits and gains from industrial undertakings or enterprises engaged in infrastructure development etc. The provision, as far as is relevant for our purposes reads as under:
"Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), 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 hundred per cent of the profits and gains derived from such business for ten consecutive assessment years.
(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops a special economic zone referred to in clause (iii) of sub-section (4) or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines :
Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to clause (i) of sub-section (4), the provisions of this sub-Page 15 of 43
HC-NIC Page 15 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT section shall have effect as if for the words "fifteen years", the words "twenty years" had been substituted.
...........
............
(4) This section applies to--
(i) any enterprise carrying on the business of
(i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :--
(a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;
(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;
(c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:
Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee Page 16 of 43 HC-NIC Page 16 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place.
Explanation.--For the purposes of this clause, "infrastructure facility" means--
(a) a road including toll road, a bridge or a rail system;
(b) a highway project including housing or other activities being an integral part of the highway project;
(c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system;
(d) a port, airport, inland waterway, inland port or navigational channel in the sea;
(ii) any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, 2005.
Explanation.--For the purposes of this clause, "domestic satellite" means a satellite owned and operated by an Indian company for providing telecommunication service;
(iii) any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006 :
Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day Page 17 of 43 HC-NIC Page 17 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub- section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking :
Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, 2011" had been substituted"
7.1 Rule 18C of the Income Tax Rules, which provides for legibility of Industrial Parks for the benefits of Section 80IA (4)(iii), reads as under:
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 first day of April 2006,and ending on the 31st day of March,2011.
(2).The undertaking and Industrial Park shall be notified by the Central Government under the Industrial Park Scheme,2008. (3).The undertaking shall continue to fulfill the conditions envisaged in the Industrial Park Scheme,2008.
7.2 Relevant portion of The Industrial Park Scheme,2008 is Page 18 of 43 HC-NIC Page 18 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT as under:
" NOTIFICATION NO. 3/2008, DATED 8-1-2008 S.O. 51 (E) In exercise of the powers conferred by clause (iii) of sub- section (4) of section 80-IA of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby frames the following scheme for Industrial Parks, namely:
1. Short title, commencement and application.-(1) This Scheme may be called the Industrial Park Scheme, 2008.
2. It shall come into force on the date of its publication in the Official Gazette.
3. The scheme shall be applicable for any undertaking which develops, develops and operates or maintains and operates an industrial park.
2. Definitions.- In this Scheme, unless the context otherwise requires,-
(a)"Act" means the Income-tax Act, 1961 (43 of 1961);
(b)"allocable area" means area available for allocation to the units for industrial activity or commercial activity and shall exclude the area utilized for providing common facility or infrastructure facility;
(c)"associated enterprise" shall have the same meaning as assigned to it in section 92A of the Act;
(d)"commercial activity" means any activity which is not an industrial activity;
(e)"common facility" means facilities required for proper functioning of industrial park and commonly shared by all the units located in the industrial park and include facilities like lifts, corridors, industrial canteens, convention/ conference halls, parking, travel desks, security service, first aid centre, ambulance, safety service training facilities;
(f)"date of commencement" means the date of obtaining the 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;
(g)"Form" means a form appended to this Scheme;
(h) "industrial park" means a project in which plots of developed space or built up space or a combination, with common facilities and quality infrastructure facilities, is developed and made available to the units for the purposes of industrial activities or commercial activities in accordance with this scheme;
(i) "infrastructure facility" means facilities required for development, operation and maintenance of the industrial park and include roads (including approach roads), water supply, sewerage and effluent treatment facilities, solid waste management facilities, telecom network, generation and distribution of power, air conditioning;
(j) "industrial activity" means manufacturing activity as defined in section D of the National Classification, 2004, Code issued by the Central Statistical Organisation, Department of Statistics;
(k) "industrial unit" means a unit which is,-
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(i)located in the Industrial Park;
(ii) a separate and distinct entity assessable to tax under the provisions of the Act having a separate Permanent Account Number (PAN); and
(iii) carrying out industrial activity;
(l)words and expressions used in this Scheme and not defined but defined in the Act, shall have the same meanings respectively assigned to them in the Act.
3. Procedure for approval. - (1) Any undertaking which develops, develops and operates or maintains and operates an industrial park may make an application for notification under clause (iii) of sub- section (4) of section 80-IA of the Act, in the prescribed form, IPS-I, to the Secretary (ITA-1 section), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, North Block, New Delhi. (2)The Central Board of Direct Taxes shall process the application for approval and notification by the Central Government and for this purpose it may call for reports from other Departments or agencies, as it may deem fit.
4. Criteria for approval.- An undertaking shall be considered for notification under clause (iii) of sub-section (4) of section 80-IA of the Act, if it fulfills all of the following conditions, namely:-
1. The date of commencement of the Industrial Park should be on or after the 1st day of April 2006 and not later than 31st of March 2009;
2. The area allocated or to be allocated to industrial units shall not be less than ninety per cent of the allocable area;
3. There shall be a minimum of thirty industrial units located in a industrial park;
4. For the purpose of computing the minimum number of industrial units; all units of a person and his associated enterprises will be treated as a single unit.
5. The minimum constructed floor area shall not be less than 50,000 square meters;
6. No industrial unit, along with the units of an associated enterprise, shall occupy more than twenty five per cent of the allocable area;
7. The industrial park should be owned by only one undertaking; and
8. Industrial units shall undertake only manufacturing activity as defined in section D of the National Classification, 2004, Code issued by the Central Statistical Organisation, Department of Statistics.
5.General Conditions.- (1) The industrial park shall be construed as developed on the date of commencement.
2. Tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park.
3. The tax benefits under the Act will be available to the undertaking only if the undertaking and the industrial park have been notified by Central Board of Direct Taxes under section 80-IA of the Act.
4. The tax benefits under the Act will be available only to the undertaking notified by the Central Government and not to any other person who may subsequently develop, develops and operates or maintains and operates the notified industrial park, for any reason.
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5. The undertaking must keep separate book of accounts for the industrial park and must file its income tax returns by the due date to the Income-tax department.
6. An industrial park approved under Industrial Park Scheme, 2002 will continue to be governed by the provisions of that Scheme to the extent it is not in contravention with the provisions of Act, as amended from time to time.
7. The undertaking shall electronically furnish an annual report to the Central Board of Direct Taxes in Form IPS-II.
6.Withdrawal of approval.-The Central Government may withdraw the approval given to an undertaking under this Scheme if the undertaking fails to comply with any of the conditions listed in paragraph 4 and 5 of this Scheme:
Provided that before withdrawal of approval, the undertaking shall be given an opportunity of being heard by the Central Government."
8. The Petitioner's case is that it applied for approval for the Industrial Park under the Industrial Park Scheme, 2008 on 27.1.2009 to claim deduction under Section 80IA(4)(iii) of the Income Tax Act,1961. An agency known as MARS Planning & Engineering Services Pvt Ltd, a consultant agency appointed on behalf of GIDC, supervised the development work and submitted a progress report dated 5.09.2010 stating that the entire project was completed on 5.9.2010 i.e. before 31.3.2011, the date relevant before which the project had to be established as per the Scheme. The State, based on the facts recorded in the meeting of the State Level Approval committee on 28/2/2011 granted a subsidy of Rs 92,63,000/-
Therefore the petitioner's project had been completed before the statutory date of 31.3.2011.
9. As per the application, a total of 182 units were to be located at the Park. However, as is evident from the schedule of requirements vis-a-vis the implementation furnished, that as per the scheme 34 Units were located in the park in the Financial Year 2009-2010. In the first round in the petitioner's case where the CBDT had rejected the application for approval, the Court reproduced the observations of the Page 21 of 43 HC-NIC Page 21 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT CBDT, which weighed with the authority to reject the application. Reproduction of the para could be of help. The same reads as under:
"5. CBDT noted that the petitioner had produced various documents including the completion report dated 5.9.2010 of MARS Planning & Engineering Services Pvt. Ltd., an agency approved by Government of Gujarat for Third Party Quality Assurance, a project completion certificate dated 8.4.2013 issued by the Industries Commissioner, Government of Gujarat. CBDT also referred to certain certificates and letters issued by Ahmedabad Urban Development Authority (AUDA for short). Such evidence was however, discarded by the CBDT making the following observations :
Sl No. Document Inference Work completion In the entire text of the letter, there is no certificate dated mention of the date of completion, It only 08/5/2013 issued gives the details of infrastructure work that by AUDA in which was undertaken by the applicant and details of project mentions survey numbers on which infrastructure has construction was permitted. been mentioned as per site condition.
Further, this letter in the beginning mentions as follows'with reference to, letter dated 04.03.2012 from M/s. Devraj Infrastructure Ltd., Ahmadabad requesting to issue a Completion Certificate for the Development work of infrastructure of Devraj Industrial Park...
This indicates that the applicant had approached AUDA on 04.03.2012 to issue a completion certificate. The question that Page 22 of 43 HC-NIC Page 22 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT arises is why the applicant approached the authority almost one year late to issue completion certificate and not immediately after the project was completed as per the claimed date.
Further, on the basis of this, request the 'work' completion certificate (being discussed here) is dated 08.05.2013. In the absence of any specified date of completion in the letter, the certificate can be treated to be valid as on 08.05.2013. Hence, even if this document is relied for ascertaining the date of completion, the same can be inferred to be between 04.03.2012 (date of request by the applicant) and 08.05.2013 (date of issue of certificate).
2 Occupancy This certificate issued by AUDA in Gujarati, certificate dated is in respect of occupation of the first unit 17/06/2010 given only and does not cover the occupation of by AUDA to the one 182 units that form part of the entire of the unit of the project. It also gives area related said project. It was information pertaining to that first unit and issued after not the entire project. The certificate is verification of the dated 17.06.2010 and as mentioned in the site and after text, it is based on physical verification by satisfying that the AUDA.
required infrastructure under General Development The Applicant has placed reliance on this Control Regulation document to contend that the project was (GDCR) has been completed on 17.06.2010. This is certainly completed not the position. The occupancy certificate was issued by AUDA on applicant's request and the vital question is why such request was made when only one unit was complete and not all the units. The obvious indication is that since only one unit was complete before the cutoff date, the applicant obtained this certificate and has been using it as an evidence under the Page 23 of 43 HC-NIC Page 23 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT camouflage that entire project was complete by this date and the applicant can avail huge tax benefits for ten years. It may further be clarified here that the completion of project not only means completion of basic infrastructure but also industrial units which are the integral part of any industrial park. Hence, the date of completion would mean not only completion of infrastructure but also the completion of all industrial units as well.
Hence, the only information this document provides is that the first unit was completed and was ready for occupation by 17.06.2010 and no light is thrown upon the completion/occupation of the remaining around 180 industrial units
3. Completion report M/s. MARS Planning and Engineering dated 05/09/2010 Service Pvt. Ltd. (MARS) Ahmedabad is an of MARS Planning entity appointed by the applicant as a Third and Engineering Party Quality Assurance (TPQA). This was Services Pvt. Ltd done as a matter of compliance of State and agency Level Approval Committee (SLAC) with the approved by purpose of monitoring the quality of Government of infrastructure work. This is not a local Gujarat authority as stipulated under IPS 2010 but undertakings for a private entity appointed by the applicant Third Part Quality itself. This letter has been claimed to be a Assurance (TPQA) Completion Report dated 05.09.2010. This as per requirement certificate mentions under the heading of Industries Ref...3) our progress report up to Commissioner, 16.06.2010 (a) work completed Rs.1393.49 Government of lakh and (b) work yet to be completed Gujarat. Rs.160.29 lakh.
This itself shows that as on 16.06.2010, work was pending completion. This strengthens our observations regarding document at Sr.no.2 above that the occupancy certificate issued by AUDA does not prove completion of work in respect of entire project by 17.6.2010. Further M/s.
Page 24 of 43HC-NIC Page 24 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT MARS, in this certificate has confined itself to development pertaining to infrastructure only, as evident from para (B) and not to construction of units, which is an important constituent of development work.
In para(C), it gives the status of park as follows
(c) Status of Industrial Park is as follows (1) No of units sold 180 (2) out of which agreement executed 99 (3) Out of which construction is in progress 19 (4) out of which commencement/ production / manufacturing started 04 As can be seen, number of agreements in respect of industrial units executed as on 05.09.2010 is 99 only. This does not necessarily mean that units were actually ready for possession since the agreements can be made for unconstructed or under construction units (The copies of agreements are not on record although the applicant has made such a claim). This is supported by the certificate of AUDA dated 17.06.2010 (at SL No.1 of this table) that only one unit was fit for occupation.
Moreover, it specifically mentions that 'Construction in progress' is in respect of 19 units and therefore the completion of Page 25 of 43 HC-NIC Page 25 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT project as a whole on that day remains unsubstantiated. Therefore, this document does not prove completion of project by 05.09.2010.
4 A letter dated This letter issued by the Industrial 08/04/2013 Commissioner, Gandhinagar dated related to Project 08.04.2013 is in response to applicant's completion request for issuing completion certificate certificate issued by made vide its letter dated 14.03.2013. Why Industries the applicant applied for the issue of Commissioner, completion certificate about two years Government of subsequent to the claimed date of Gujarat completion i.e. 05.09.2010 is not understood.
Further, the text of the letter indicates that the same is in context of releasing financial grant to the applicant as per State Government Scheme linked to the development work and hence is not suitable to throw light on the present issue. At the end, it relies on the report of M/s. MARS (as discussed at Sl No.3 above) to repeat that project was completed. However, neither the date of completion has been mentioned, not any independent finding has been given. Since this letter is dated 08.04.2013 what can at best be inferred is that the project was completed on 08.04.2013.
12. Thus the above documents do not provide any specific date of completion. What definitely emerges is that the project was actually completed sometime in 2013 and not before 31.03.2011 as claimed by the applicant.
Xxx
14. In order to verify the applicant's claim, independent enquiries were made from AUDA vide letter dated 29.08.2014 to inform the actual date of completion of Page 26 of 43 HC-NIC Page 26 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT the project based on their own records and documents. After reminders, the reply from AUDA dated 30.10.2014 was received on 31.10.2014 (Copy enclosed as Annexure5). It mentions the following facts :
i. AUDA carried out an inspection on the 'specific request' of the applicant and issued a work completion certificate. However, as discussed at Sl No.(1) at the above table, it does not provide any certain or worthwhile evidence in support of applicant's claim. ii. AUDA does not mention that applicant had made a request for inspection when all the 182 units were completed. Instead, it has given occupancy certificate dated 17.06.2010, when only one unit was ready. It is rather clearly pointed out in the said letter that AUDA could not certify the date of final completion earlier iii. AUDA suggests to make reliance to the four documents already relied upon by the applicant listed in the above table. As discussed above, these documents indicate that project was completed after 31.03.2011 only and not before as claimed by the applicant.
iv. AUDA also attached a copy of satellite image of project site available on Google Earth Software. It does not clearly provide the number of units situated therein and it is not known whether these are plots or units. Even if these are presumed to be constructed areas, it is not ascertainable whether these are warehouses, First Aid Centre, Canteen, Sewage Plant etc. constituting the common facility or industrial units. Hence, it has no evidentiary value.
v. AUDA's letter also suggests that the decision regarding the actual date or final completion of said project may be taken at your level.'
15. In view of the above, the only choice that remains with us is to decide the date of completion based on the information contained in the said four documents. As already discussed, after analyzing these documents, the Page 27 of 43 HC-NIC Page 27 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT date of completion/occupation is established to be certainly beyond 31.03.2011 and hence the applicant has failed to meet the deadline regarding completion of the project. Thus, the condition at para 4(1) of the Industrial Park Scheme, 2010 has not been met in this case. Accordingly, I have been directed to state that it has not been found to be a fit case for notification u/s 80IA(4)(iii) of the Act. Hence, the competent authority has decided to reject the application."
10. The reading of the table above indicates that according to CBDT, the completion report dated 5/09/2010 of MARS Planning and Engineering Services Private Limited indicated as under:
(1) No. Of Units sold - 180.
(2) Out of which agreement executed - 99 (3) Out of which construction in progress - 19 (4) Out of which production started in - 4.
11. According to the CBDT, since the number of agreements in respect of industrial units executed as on 5.09.2010 is 99 only, this would not necessarily mean that units were were actually ready for possession since agreements can be made for unconstructed and under constructed units. Therefore according to the Board this document does not prove completion of the project by 5.09.2010.
12. As far as the letter dated 8.04.2013 is concerned, CBDT observed that the letter dated 5.9.2010 does not mention or throw light on the completion of the Project. It is only from the letter dated 8.4.2013 it can be inferred that the project was completed on 8.4.2013. It observed that what definitely Page 28 of 43 HC-NIC Page 28 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT emerges is that the project was actually completed in 2013 and not before 31.3.2011 as claimed. It was in this context that the Court made its observations in paras 15 and 16 which read as under:
"15. Ignoring such evidence, CBDT proceeded on the basis that AUDA which was a local authority had not given any clear certificate that the industrial park was completed with constructed units by 31.3.2011. This insistence from CBDT was impermissible for two reasons. Firstly, the scheme pertained to certificate from a local authority and would not confine its purview to certification by AUDA alone and second that the insistence on demonstrating completion of industrial units by the leasing industries was not part of the requirement of the scheme at all, as held in case of Ganesh Housing Corporation Ltd.(supra). For such reasons, the second part of the CBDT's objection must fail.
16. Coming back to the first objection, of the petitioner having failed to produce a completion certificate from the local authority, we have noticed that MARS Planning & Engineering Services Pvt. Ltd. was appointed by GIDC for the purpose of certifying the quality control and completion of the project for State subsidy. MARS Planning & Engineering Services Pvt. Ltd. had already given such completion certificate well before 31.3.2011, on the basis of which State Level Committee had approved the petitioner for grant of subsidy, which was also granted along with completion certificate. There was thus voluminous evidence on record to suggest that the project was completed before 31.3.2011. However, we do appreciate the anxiety of CBDT that such task should normally not be part of its responsibility. It is in this regard that completion certificate should be Page 29 of 43 HC-NIC Page 29 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT provided by a local authority. In strict sense of the term, perhaps the petitioner did not fulfill this requirement. However, a more liberal or practical approach could be that when MARS Planning & Engineering Services Pvt. Ltd. was appointed by GIDC who had certified that the project was completed before 31.3.2011 and when the State Government had acted on such report and approved the subsidy, this should have been seen as a substantial compliance of such requirement. However, to put the issue beyond any controversy, we permit the petitioner to produce such certificate from GIDC, which is also a local authority, before CBDT which may be done latest by 30.9.2016. If such certificate providing that the project of the petitioner is completed before 31.3.2011, is issued, CBDT shall approve the petitioner for grant of deduction under section 80IA(4) of the Act and issue necessary notification in this respect, within three months from the date of receipt of such certificate."
13. In other words, the notification dated 26.12.2016 and the impugned order dated 17.3.2017 would indicate that the CBDT is of the opinion that unless the Park develops and begins to operate i.e. unless the entire Park is set up with all the units in place, as applied for and undertaking their manufacturing activities, such project cannot be said to be completed. It is in this context that the date of commencement is notified as 5.09.2010. Whereas the petitioner would suggest that they had begun development of the Industrial Park during the year 2008-2009 after purchasing the land in earlier years. As required under the Scheme, particularly under Clause 4 thereof, they had 30 units located in the Park in the FY-2009-2010 which were the Page 30 of 43 HC-NIC Page 30 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT minimum number required under the Scheme for the Criteria of Approval. According to the General Conditions in sub clause (2) of Clause 5 of the Scheme, tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. According to the petitioner, once the minimum number stipulated for the scheme were located, benefit of claiming deductions would be available without waiting for the entire Park to have all the Units applied for being functional and working. Once having set up the Park and invested therein, it would be against the spirit of the Section 80IA to postpone the benefit of claiming deductions till the whole park with all Units start functioning when in effect the existing units have come up and working with an eye on claiming the benefit of the option to claim deductions under 80IA.
14. It is in this context that the petitioner wants the Court to read the Circular dated 15/2/2016 which according to the petitioner stipulates that the deduction under Section 80IA can be claimed by the assessee at his option, for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking commences operation,begins development or starts providing services etc as stipulated therein. In other words,in the submission of the Petitioner the language of Section 80IA which provides that the Park should be developed and begins to operate includes a condition where the Park begins to develop or starts providing services.
15. We, at the outset, before discussing the intent of the Section 80IA and the Scheme and the view we take on the Page 31 of 43 HC-NIC Page 31 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT question, do not agree with the interpretation canvassed by the Petitioner,seeking support of the Circular, for interpretation of Section 80IA,that benefit of deductions is available from the date the unit starts or begins to develop. The language of the Section when compared to that of the Circular of 15.2.2016 do not suggest that the intent of the Section is as wide as sought to be canvassed by the Petitioner.
16. The language professed in the Circular has other connotations. Assessing Officers while determining the quantum of deduction in reference to the term ' initial assessment year' were considering the first year of commencement/operation itself as the first year of commencement/operation. This was against the clear mandate provided under sub-section (2) which allowed a choice to the assessee for deciding the year from which it desires to claim deduction out of applicable slab of fifteen years.
17. After having examined the matter, the Board opined that it is abundantly clear from sub-section (2) that the assessee has the option to choose the initial/first year from which it may desire the claim of deduction. The 'initial assessment year' therefore would mean the first year opted for by the assessee for claiming deduction under Section 80IA.It need not necessarily mean the year of commencement/operation. The deduction once claimed would be for a maximum of ten years. In other words, once the Park is set up, the assessee can opt to claim deductions either from the first year itself or opt to wait for a few years and begin claiming such deductions once there are enough profits ploughed in, subject to the maximum available for a period of ten years.
Page 32 of 43HC-NIC Page 32 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT
18. Therefore, what the Circular does is only clarify the misconception that the Assessing Officers harboured regarding the starting point of the option to claim deduction under Section 80IA.It nowhere suggests the interpretation of the question of "date of commencement" as stipulated in the Scheme and the Section. The language of the Circular therefore may not be of assistance to the Petitioner. Except for clarifying and extending the concept of "initial assessment year" to that of the year opted for claiming deductions which not necessarily being the year of commencement,the circular goes no further.
19. It will be in the fitness of things to examine the Objects and Reasons for which Section 80IA was brought on the Statute Book. The provision for an efficient infrastructure services is essential to realise the full potential of growth in the economy. Industrial Parks are part of such services. It has been recognised that the government alone cannot fulfill the requirements of providing infrastructure and that the private sector also needs to be actively engaged in the process by providing such infrastructural services. In light of this,an appropriate policy framework which gives them adequate confidence and incentives to invest on a framework on a large scale was essential.
20. Section 80IA of the Income Tax Act, 1961 provides the extent and the scope of deductions available to undertakings involved in the business of infrastructure development. The intention behind this provision is to give a fillip of deduction against the total income of the assessee derived from the Page 33 of 43 HC-NIC Page 33 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT infrastructure project as the entire cost of the infrastructure was being borne by the assessee. Though in context of Section 80IA(4A), the Finance Minister made out a speech for the purposes of bringing about the change, the spirit behind enacting the provisions of Section 80IA also are somewhat similar. The extract of the speech reads thus:
8. "Infrastructure is another area of potential weakness. If we are to aim at economic growth of 7 to 8%, which has been achieved in other countries and which alone can provide the jobs we need for our growing labour force, then we need much larger investment and much greater efficiency in key infrastructure sectors such as power, roads, ports, irrigation, railways and telecommunications.
Sound financial management holds the key to progress in this area. Adequate supply of quality infrastructure depends crucially on the financial viability of these sectors, which in turn depends upon the adoption of reasonable cost recovery policies. To take the example of power, many State Governments are unable to finance new investment in power generation because of the financial weakness of the State Electricity Boards. Taking advantage of the Central Government's initiative to encourage private investment in power generation, many State Governments are actively trying to attract private sector investments into this area. But private sector investors are unwilling to invest in power unless the State Governments and the Central Government provide guarantees and counter-guarantees to reassure the private sector producers that they will be paid for the power they generate. Such counter guarantees are justifiable only if they are viewed as providing temporary breathing space, during which State Electricity Boards undertake necessary reforms of their institutional structure, operating practices and pricing policies. In the long run, we cannot escape the reality that the users of electricity must pay for its cost. The same criterion holds for other infrastructure sectors also. Once financial viability Page 34 of 43 HC-NIC Page 34 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT is assured, we can expect a renewed surge of both public sector and private sector investments in these areas."
21. Therefore, what is evident from the purpose of introduction of Section 80IA in the Act, is that it was with a view to provide impetus to the growth of infrastructure. The concession is to attract private investment is such sector. Let us now therefore appreciate these facets of the Section, the Rule and the Scheme in light of the facts on hand.
(i) The Petitioner applied for setting up an Industrial Park under the Scheme of 2008 on 27.1.2009, after having initially applied on 23.5.2006 under the Scheme of 2002.
(ii) According to the Petitioner it completed the development on 5.09.2010,well before the extended last date of 31.3.2011.
(iii) As many as 182 units were to be allocated to the Park.
The entire industrial development and plotting had been completed.
(iv) Even the State Government had based on its scheme for setting up an Industrial Park released the subsidy to the Petitioner.
(v)According to the criteria of approval as envisaged under the Scheme,as stipulated in Clause 4, there shall be a minimum of thirty industrial units located in the Industrial Park.
(vi) According to the Petitioner, which is also not in dispute, at the hands of the Respondents,30 Units were located in the Park in the FY.2009-2010 relevant Page 35 of 43 HC-NIC Page 35 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT to the Assessment Year 2010-2011.
22. According to the Revenue as on 5.09.2010 of the 180 Units sold, agreements were executed of 99. The Board opined that execution of agreements would not necessarily mean units were actually ready for possession. The revenue based on the letter of the local authority inferred that since the work completion certificate was issued by AUDA on 8/5/2013, the date of commencement, according to the Revenue is the "date of obtaining the completion certificate or occupation certificate". When read in conjunction with Clause 5(1) of the Scheme which states that the industrial park shall be construed as developed on the date of commencement, would indicate that, unless the Park had a completion certificate or occupation certificate it would not be deemed to have commenced.
23. As seen from the provision of Section 80IA, the intent behind this provision was to give an impetus to the development of infrastructure at the hands of the private players, as the Government could not be a participant in each and every activity to the fullest. A fillip to such projects would receive the necessary stimulus only if tax concessions are granted to the project aspirant so that the investments that go into the making of the project bear fruit,in as much as option is given to claim deductions in tax over profits arising out of setting up such facilities are given.
24. Rule 18C of the Income Tax Rules provide that if such an Industrial Park is begun to develop, developed or operated and maintained any time during the period beginning on the 1st day of April 2006 and ending on 31 st March 2011 shall be Page 36 of 43 HC-NIC Page 36 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT eligible for the benefits under Section 80IA(4)(iii) of the Act. According to Section 80IA(2) of the Act, the assessee may at his option claim deduction for a period of ten consecutive assessment years beginning from the year in which the undertaking or enterprise develops and begins to operate any infrastructure facility. The Scheme, though defines the date of commencement in 2 (f) to mean the date of obtaining the completion certificate or occupation certificate from the relevant local authority, the criteria for the approval suggests that it will be approved when there shall be a minimum of thirty units located in a industrial park. General Conditions prescribe that Tax benefits under the Act will be available to the undertaking only after the minimum number of thirty units are located in the Industrial Park.
25. This Court, while examining the impugned order passed in the first round, where the Board was of the view that the project was not completed before the date prescribed i.e. 31.3.2011 examined the scheme. While focussing its attention to such objection, the Court held that the CBDT had brought in the element of completion of industrial park instead of completion of the project. This observation was based on the distinction made by this court in the case of Ganesh Housing Corporation (supra).
26. Considering the scheme of industrial parks in context of pharmaceutical parks under the scheme of 2002, the court considered clause 9(2) of the General Conditions, which when read, were similar to the present clause (2) of General Conditions of the Scheme of 2008. On facts, the Court found that the minimum number stipulated was 30 and the Park had Page 37 of 43 HC-NIC Page 37 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT 32 units located. It addressed itself to the question whether the Petitioner fulfilled the requirement of the Scheme. In this context the Court observed as under:
"Counsel for the respondents, however, relied on Forms of Declaration annexed alongwith the Scheme to contend that the requirement went much beyond and the petitioner was required to ensure that such industries must set up their units on the plots so allotted. To our mind, such requirement can neither be read in the Scheme nor can it be fastened on the petitioner in any other manner. The petitioner was a developer of the Industrial Park. The duty and responsibility of the petitioner, to be able to claim tax deductions, was to set-up an industrial park by providing necessary infrastructural facilities. We have seen that the development of such a park would require providing of all infrastructural facilities; sub plotting the entire plot and also ensuring that the number of units indicated in the application are sold to the intending industries. In short, the duty and responsibility of the petitioner was to ensure that the industrial activity is facilitated on the Industrial Park so developed by it. It was thereafter not responsible to ensure that industries do in fact set-up their units and commence production activities on such units - that too before the last date envisaged in the Scheme. To our mind, such responsibility fastened on the petitioner is not borne out from the Scheme. The duty and responsibility of the petitioner was to provide infrastructural facilities which would be a catalyst for industrial growth by enabling the intending industries to set-up their industry in such a Park. Such manufacturing units or the intending industries were in no way under the control of the petitioner. There can be variety of reasons why such industries may not be able to start their units, such as, non-availability of funds for setting up of the units, pending approval and clearances from the Government and other agencies and such similar reasons which can be attributed only to the intending industries and not to the petitioner. In Page 38 of 43 HC-NIC Page 38 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT fact, the scheme requires that the petitioner not only fulfill but continue to fulfill all conditions of approval assessing the period when the tax benefit is available. If we accept the strict requirements insisted by the respondents, it would mean that not only that to that number of industrial units indicated in the application for approval of Industrial Park must be operational on the last date of expiry of the Scheme, they must continue to operate till the petitioner avails of all the tax benefits. In a given situation, it may happen that the number of units, after initially coming into existence, may have to be closed down for variety of reasons such as non-availability of market for their product or non-availability of raw materials, or even labour problems. Would in such a case the petitioner be denied tax benefits ? To our mind, the answer has to be empathetically in the negative."
27. According to the Court, the duty and responsibility of the Petitioner was to ensure that the industrial activity is facilitated on the industrial park so developed by it. It was not the responsibility to ensure that the industries do in fact set up their units and commence production. The scheme envisaged that the scheme fulfills all requirements to avail tax benefits i.e. locate the units as per condition 5(2);(in the case on hand). Admittedly as is clear from the facts and chart at Page 39 of the Petition, the Petitioner had, in the FY 2009- 2010 relevant to the assessment year 2010-2011, 34 plots located in the Park. It was therefore fulfilling the requirement of availing tax benefits as it had the minimum number of plots located as per the Scheme to avail such Tax Benefits. Therefore before the last date of the Scheme the Park had provided the infrastructure facilities. The Industrial Park had been set up with a purpose that the Units allocated therein once set up, the Park could get its option for availing of tax deductions under Section 80IA(4)(iii). Once the minimum Page 39 of 43 HC-NIC Page 39 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT number of units are located, to expect the Park to postpone benefit of claiming deductions till the entire Park is set up and all the units are located, would be to leave the Park at the vagaries of uncertainty. Setting up of the remaining units, beyond 30 could be time consuming. The existing 30 Units have joined the Park project with an aim to have tax concessions; Impetus to set up such infrastructure facilities would receive a set back if the tax concession to such a Park is left to be opted for,only when the entire project is sold out. It could prove to be counter-productive to setting up such projects, if the developer has to wait to avail of tax concessions till such time. He could be left to fend for himself and be deprived of tax concessions though he opted to set up and develop an infrastructure facility with a view to avail of tax sops. This would go against the spirit of the purpose of the Section's object.
28. The issue can be looked from a slightly different angle. As per the Revenue's interpretation, an assessee cannot claim deduction under the said provision till all units are sold. This would have wholly unintended consequences. The assessee would have to recognize the income arising out of the sale of units in the year when such event happens. It may take number of years for all units to be sold. If the starting point of deduction is deferred till all units are sold, the assessee would get no deduction on the income arising out of sale of units in earlier years. For example, if the industrial park consists of 100 units, it is possible that the assessee may sell 30 units in the first year, 30 more units in the second year and 30 more in the third year. Remaining 10 units may be sold in the fourth year. As per the Revenue, the deduction would be Page 40 of 43 HC-NIC Page 40 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT available only during the year when the sale of these last 10 units are completed. This in turn would mean that the assessee would get no deduction on the sale of 90 units in the earlier years, completely defeating the object of the provisions. We may recall the deduction is available to any enterprise carrying on business of developing or developing and maintaining or developing, operating and maintaining any infrastructural facility. The deduction is spanned over a number of years. The interpretation given by the Revenue would mean that this availability of deduction over a span of year would not occur in case of an enterprise carrying on the business of developing any infrastructural facility and would be confined to only one assessment year.
29. Once, as held in the case of Ganesh Housing (supra) that the minimum number of units, namely 30 have been located, the Park becomes eligible to opt for the benefit under Section 80IA.It is then that,in accordance with the Circular dated 15.2.2016 that the Project Developer has the option to opt for such concession from the first year of setting up or in a subsequent year as the "initial assessment year" as clarified in the Circular dated 15.2.2016. Therefore, applying the principles enunciated in the case of Ganesh Housing (supra) to the facts of the case on hand the following points emerge:
(a) In accordance with condition no. 4 read with condition 5(2) of the Scheme of 2008 the Park had located more than 30 units in the Industrial Park during the Financial Year 2009-2010 relevant to the Assessment Year 2010-2011.Page 41 of 43
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(b) Tax benefits under Section 80IA(4)(iii) as per condition no.5(2) was therefore available to the Park from the time such 30 Units were located in the Project.
(c) It was in light of this fact that the date of commencement as notified as 5.09.2010 needs a relook, inasmuch as required under the Scheme, the Park had the minimum number of located units in the Assessment Year 2010-2011.
30. Keeping the basic objective in mind to give a fillip to infrastructure development it would be counter productive to the purpose of such a scheme if the deductions under Section 801A(4)(iii) are postponed till the entire project is set up which cannot be said to be the intention of the scheme. Once the minimum number of units, 30 in number are located, the Park can at its choosing, opt for availing the deductions under Section 80IA from the date of its first year or choose a subsequent year as its "initial assessment year"
31. As a result of a specific finding given by us that the petitioner is deemed to have been eligible for availing tax deduction under Section 80IA(4)(iii) from the Financial Year 2009-2010, Assessment Year 2010-11, the order rejecting the Rectification Application dated 17.3.2017 deserves to be set aside. The condition in the Notification extending the benefit of availing of deductions under Section 80IA(4)(iii) from the date of commencement of 5.09.2010 is a condition not found in any of the other notifications vis-a-vis other such projects, produced in other such cases. Accordingly, the respondents Page 42 of 43 HC-NIC Page 42 of 43 Created On Sat Nov 04 02:30:23 IST 2017 C/SCA/7098/2017 CAV JUDGMENT are directed to delete Condition No. 7 in the Notification of 26.12.2016. The petitioner's claim for deduction at whichever stage pending before the assessing or the appellate authority shall be governed by this declaration. Petition stands disposed of accordingly. Rule is made absolute accordingly.
(AKIL KURESHI, J.) (BIREN VAISHNAV, J.) divya Page 43 of 43 HC-NIC Page 43 of 43 Created On Sat Nov 04 02:30:23 IST 2017