Income Tax Appellate Tribunal - Hyderabad
Vitp Private Limited, Hyd, Hyderabad vs Assessee on 4 September, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No. 729/Hyd/2015
Assessment Year: 2009-10
VITP Pvt. Ltd., Hyderabad vs. Dy. Commissioner of Income-
tax, Circle - 3(3), Hyderabad.
PAN - AACCV 2672 G
(Appellant) (Respondent)
Assessee by : Shri Raghunathan S
Revenue by : Shri Konda Ramesh
Date of hearing : 31-08-2015
Date of pronouncement : 04-09-2015
O RDE R
PER SAKTIJIT DEY, J.M.:
This appeal by assessee is directed against the order dated 27/03/2015 passed u/s 263 of the IT Act by ld. CIT - 5, Hyderabad for the AY 2009-10.
2. Assessee has raised a number of grounds challenging the order passed u/s 263 both on the issue of jurisdiction as well as on merits.
3. Briefly the facts are, assessee an Indian company is engaged in the business of providing infrastructure facilities, which inter-alia, includes developing, operating and maintenance of industrial park. For the AY under consideration, assessee filed its return of income on 17/09/09 declaring total income of Rs. 14,48,61,750 after claiming deduction u/s 80IA(4)(iii) of the Act for an amount of Rs. 33,36,38,229. Assessee's case was selected for scrutiny and AO after verifying the books of account as well as other details and making 2 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
necessary enquiry completed assessment u/s 143(3) of the Act vide order dated 28/03/13. While completing assessment, AO made a number of additions/disallowances, as a result of which gross income was determined at Rs. 46,17,01,813 after allowing deduction under Chapter-VA, taxable income was determined at Rs. 20,54,38,350. Subsequently, assessment records of assessee relating to AY under consideration came up to be examined by ld. CIT in exercise of power conferred u/s 263 of the Act. While examining the records of assessee, ld. CIT noticed that assessee has claimed deduction u/s 80IA(4)(iii) for four units in industrial park out of total five units. He found that out of four units, assessee has claimed deduction for Rs. 5,77,76,303 in respect of unit named Capella and in course of assessment proceeding, AO accepting assessee's submission that it has complied to the conditions prescribed by Department of Industrial Policy and Promotion (DIPP), Govt. of India has allowed assessee's claim of deduction u/s 80IA(4)(iii). He observed, while doing so AO did not verify whether assessee has violated conditions laid down in the notification No. 244/07 dated 28/09/07 issued by CBDT. Thus, ld. CIT was of the opinion that because of failure on the part of AO to verify the fact whether assessee has complied to the conditions of section 80IA(4)(iii), while allowing deduction, assessment order passed is erroneous and prejudicial to the interests of revenue. Accordingly, he issued a notice to assessee on 14/03/15 requiring him to show cause as to why assessment order shall not be revised/set aside.
3.1 In response to the said show cause notice, assessee while objecting to the proposed revision of the assessment order, submitted a detailed reply stating therein that assessee has not violated any of the conditions while claiming deduction u/s 80IA(4)(iii). Assessee also submitted, it has obtained necessary approval from DIPP and CBDT as required under Rule 18C of Income-tax Rules. It was submitted by assessee that as far as industrial park named Capella is concerned, 3 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
assessee has applied for approval of DIPP under non-automatic route and the Central Govt. through DIPP has approved industrial park Capella through notification dated 10/04/07. It was submitted that in consequence to the notification of DIPP, CBDT has also notified industrial park Capella for availing deduction u/s 80IA(4)(iii) vide notification dated 28/07/07. It was submitted by assessee that the condition imposed in the notification issued by CBDT to the effect that no single unit shall occupy more than 50% of the allocable industrial area of an industrial park is not applicable to non-automatic route. It was further submitted by assessee that since all these issues were enquired in detail by AO and he completed the assessment allowing assessee's claim of deduction u/s 80IA(4)(iii) after proper enquiry, assessment order cannot be considered to be erroneous and prejudicial to the interests of revenue. For the proposition that condition imposed in CBDT notification to the extent that no single unit shall occupy more than 50% of allocable industrial area of an industrial park is not applicable to approval granted under non- automatic route, assessee relied upon a number of decisions including the decision of ITAT, Hyderabad Bench in case of L&T Infocity Ltd. Vs. CIT.
3.2 Ld. CIT, however, did not find merit in the submissions of assessee. Referring to the notification issued by CBDT vide notification NO. 244/07 dated 28/09/09 and more specifically para No. 4 of the said notification, ld. CIT observed, the condition imposed therein stipulates that no single unit shall occupy more than 50% of the allocable industrial area of the industrial park, whereas, one of the unit Viz.; CA Computer Association India Pvt. Ltd. occupies more than 50% of the industrial space, hence, assessee has violated the conditions imposed in the CBDT Notification. Ld. CIT observed, though, assessee has violated the aforesaid condition as per the notification issued by CBDT, but, AO without verifying this aspect has completed the assessment allowing assessee's claim of deduction u/s 4 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
80IA(4)(iii). He held that decision taken by AO without requisite verification or enquires cannot constitute formation of an opinion. He observed that change of opinion is possible only when there exists a valid opinion. As far as the decision of ITAT in case of L&T Infocity is concerned, ld. CIT observed, since the decision was not part of record at the time of finalization of assessment, the same cannot be taken into consideration. With the aforesaid observations, ld. CIT set aside the assessment order with a direction to re-do assessment de- novo. Being aggrieved assessee is before us.
4. Ld. AR made detailed submissions both orally as well as through writing. Primary contention of ld. AR is, assessee has applied for approval of Capella Industrial Park through non-automatic route as per the Industrial Park Scheme, 2002. He submitted, the condition in para 4 of the CBDT notification, which stipulates that no single unit should occupy more than 50% of the allocable industrial area is applicable only in case of approval granted under automatic route. Ld. AR submitted, as per Rule 18C of IT Rules the competent authority for granting approval is Central Govt. through DIPP. As per sub-rule (2), CBDT does not have authority to prescribe any conditions for approval of industrial park, but, only after approval is granted by DIPP, CBDT is required to issue a notification in terms with sub-rule (4) of Rule 18C notifying assessee for availing deduction u/s 80IA(4)(iii). It was submitted by ld. AR, DIPP while granting approval has not put any condition that no single unit shall occupy more than 50% of the allocable industrial area. That being the case, condition imposed by CBDT in its notification is not valid. In this context, ld. AR relied upon the decision of ITAT, Hyderabad Bench in case of Meenakshi Infrastructure Pvt. Ltd. Vs. CIT, ITA No. 313 /H/10. Ld. AR submitted, once the central govt. approves the project under the industrial park scheme, the conditions u/s 80IA(4)(iii) are satisfied and the notification from CBDT is only a procedural formality. In this context, he relied upon the following decisions:
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1. Creative Infocity Ltd. Vs. Under Secretary [2012] 19 Taxmann.com 270 (Guj.)
2. CIT Vs. M/s Ackruti City Ltd., ITA 71 of 2012 (Bom.)
3. ACIT Vs. M/s Annapurna Builders, Hyd. ITA No. 1177/Hyd/2011.
4.1 For the proposition that under non-automatic route, the condition that no single unit shall occupy more than 50% of the allocable industrial area is not applicable, ld. AR relied upon the decision of ITAT, Hyderabad Bench in case of L&T Infocity Ltd. Vs. CIT, ITA No. 1515/Hyd/11 and others, dated 22/01/2015.
4.2 Challenging the assumption of jurisdiction u/s 263 of the Act by ld. CIT, ld. AR submitted, AO in course of assessment proceeding has conducted extensive enquiry with regard to assessee's claim of deduction u/s 80IA(4)(iii) of the Act in respect of Capella Industrial Park. In this context, he drew our attention to the notice issued by AO on 26/07/11 during the assessment proceeding. Referring to the said notice, ld. AR submitted, AO specifically enquired into the condition imposed in para 4 of the CBDT notification. It was submitted, in response to the query raised by AO, assessee submitted a reply before him on 18/10/11 explaining in detail why the condition imposed in para 4 of CBDT notification will not apply to assessee. Ld. AR submitted, when AO after conducting necessary enquiry and applying relevant statutory provision has taken a view, which is a possible view while granting deduction u/s 80IA(4)(iii) to assessee, the order passed cannot be considered to be erroneous and prejudicial to the interests of revenue. Ld. AR submitted, the fact that the view taken by AO is one of the possible view is also proved from the fact that ITAT Hyderabad Bench in case of L&T Infocity Vs. CIT (supra) held that condition imposed in para 4 of CBDT notification would not apply to approval granted under non-automatic route. Thus, it was submitted by ld. AR when AO has taken a possible view after proper enquiry and application of mind, ld. CIT cannot hold such view to be erroneous 6 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
and prejudicial to the interests of revenue only because it is not to his liking, thus, he wants to substitute his view. In support of such contention, he relied upon the following decisions:
1. Bharti Airtel Ltd. Vs. CIT, ITA No. 3120/Del/2014
2. Satyam Ventures Engg Services Pvt. Ltd. Vs. DCIT, ITA No. 492/H/08.
3. Dr. W illiam Britto Vs. CIT, Karnatala (Central), [2015] 56 taxmann.co. 170 (Panaji Trib.)
4. Happy Forgings Ltd. Vs. JCIT, [2015] 58 taxmann.com 65 (Chandigarh Trib.)
5. CIT Vs. Leisure Wear Exports Ltd. [2012] 341 ITR 166/202, Taxman 130 (Del.)
6. DIT Vs. Jyoti Foundation [ 2013], 357 ITR 388/219 4.3 Ld. AR submitted, only because AO has not discussed in detail all these facts in assessment order will not lead to a conclusion that he has not made enquiry on the issue. Ld. AR also challenged the impugned order of ld. CIT on various other issues such as (i) ld. CIT cannot set aside the entire assessment order, but, has to confine the issue on which he considers the assessment order to be erroneous and prejudicial to the interests of revenue, (ii) assessment order passed is void-ab-initio as AO has passed final assessment order u/s 143(3) of the Act in stead of a draft assessment order u/s 144C.
Since, the issue is under challenge before ld. CIT(A), revisional authority cannot exercise jurisdiction u/s 263.
5. Ld. DR, on the other hand, relied upon the reasoning of ld. CIT.
6. We have considered the submissions of the parties and perused the materials on record as well as the orders of revenue authorities. We have also applied our mind to the decisions cited by ld. AR. There is no dispute to the fact that assessee has developed industrial park, which is an eligible business activity u/s 80IA(4)(iii), hence, assessee is entitled to avail deduction in respect of the profit derived from such 7 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
eligible business. There is also no dispute to the fact that industrial park developed by assessee is in terms with industrial parks scheme, 2002 of the central govt. As per the scheme formulated by central govt. in the Ministry of Commerce and Industry, approval for industrial park can be obtained from the Ministry of Commerce and Industry, Govt. of India through DIPP either under automatic route or non- automatic route. As far as the present assessee is concerned, there is no dispute to the fact that it has sought approval for Capella Industrial Park under non-automatic route. The conditions imposed for automatic route and non-automatic route are different. As far as automatic route is concerned, conditions imposed are as under:
"5. Automatic approval - (1) An undertaking shall make an application in the Form-IPS-1 along with an affidavit certifying the details given in such application for obtaining approval for setting up an industrial park.
(2) An application under sub-paragraph (1) shall be made to the Entrepreneurial Assistance Unit of the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion in the Ministry of Commerce & Industry, Udyhog Bhawan, New Delhi-
110011.
(3) The Secretariat for Industrial Assistance referred to in sub- paragraph (2) shall, upon receipt of application, give acknowledgement for receipt of such applications along with, registration number allotted by such Secretariat.
(4) Every application under sub-paragraph (1) shall be accompanied by a fee of six thousand rupees payable by a demand draft drawn in favour of Pay and Accounts Officer, Department of Industrial Development payable at State Bank of India, Nirman Bhawan Branch, New Delhi-110011.
(5) All applications made under sub-paragraph (1) and eligible for Automatic approval in accordance with paragraph 6 shall be disposed of within fifteen days of making such application and the decision for such approval shall be communicated to the applicant immediately on disposal of such application.
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6. Criteria for automatic approval - An undertaking which seeks approval under paragraph 5, shall fulfil the following conditions, namely:-
(a) The minimum area required to be developed for an Industrial Model Town shall be 1000 acres:
Provided that minimum area for specified industrial park referred to in clause (b) and (c) of paragraph 4 may vary depending upon their activities;
(b) The project referred to in clauses (a), (b) and (c) of paragraph 4 shall have provision for the location of minimum number of industrial units as follows:-
Type of Industrial park Minimum number of units to be provided in the Industrial Model Town/Industrial Park/Growth Centre (1) (2)
(i) Industrial Model Town 50 units;
referred to in clause (a) of paragraph 4.
(ii) Industrial park referred to in 30 units; clause (b) of paragraph 4. (iii) Growth centre referred to in 30 units; clause (c) of paragraph 4.
(c) The minimum percentage of the area to be allocated for industrial use shall not be less than sixty six percent of the total allocable area. Explanation: For the purpose of this clause, the Industrial use shall include any activity defined in the National Industrial Classification 1987 Code issued by Central Statistical Organisation, Department of Statistics, Ministry of Planning and Programme Implementation, except the following:
Section 0 Section 8 excluding Group 892, 893, 894, 895 Section 1 Section 9 Section 5 Section X Section 7 Section XI;
Excluding Division 75 9 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
(d) The percentage of land to be earmarked for commercial use shall not be more than ten per cent of the allocable area;
(e) In case of an Industrial Model Town, Industrial Park and Growth Centre, the minimum investment on infrastructure development shall not be less than 50% of the total project cost. In the case of an Industrial Park and Growth Centre which provides built up space for industrial use, the minimum expenditure on infrastructure development including cost of construction of industrial space, shall not be less than 60% of the total project cost;
(f) No single unit referred to in column (2) of the Table given in the sub-
paragraph (b) of paragraph 6 shall occupy more than fifty per cent of the allocable industrial area of an industrial model town or industrial park or Growth Centre;
(g) Every undertaking being an industrial park shall obtain approval for Foreign Direct Investment or non resident Indian investment from the Foreign Investment Promotion Board or Reserve Bank of India, or any authority specified under any law for the time being in force, as the case may be.
6.1 The conditions for approval under non-automatic route are as under:
7. Non Automatic Approval: (1) All applications not eligible for Automatic approval under paragraph 6 shall require the approval of Empowered Committee, constitute by the Central Government and all such applications shall be placed before the Empowered Committee within fifteen days of receipt of applications.
(2) The Empowered Committee shall consist of the following, namely:-
(a) Secretary, Department of Industrial Policy and Promotion, Government of India Chairman
(b) Chairman, Central Board of Direct Taxes, Member Government of India, or his representative
(c) Secretary, Department of Urban Development, Government of India, or his representative Member
(d) A representative of the State Government to which the project relates Member 10 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
(e) Joint Secretary, Department of Industrial Policy and Promotion, Government of India Member Secretary Provided that the Empowered Committee may co-opt other Secretaries to the Government of India and officials of financial institutions, banks and professional experts from Industry and Commerce as Co-opted members of the Committee and such co-
opted members, however, shall not have any voting right.
(3) The Empowered Committee shall consider each application on a case to case basis, subject to its complying with the statutory requirements as prescribed by the Ministry of Finance under the Income Tax, 1961, and other applicable statutory rules/obligations. The Committee will consider each case on its merit and grant approval subject to such other conditions as may be deemed fit by it. However, in all cases of rejection of proposals, the applicants shall be afforded an opportunity of being heard by the Committee and the orders shall be passed and communicated within twelve weeks. The Committee may also periodically review implementation of the approved proposals.
(4) The Empowered Committee will hold meetins whenever necessary. All Industrial Model Town/Industrial Park/Growth Centre proposal received shall be placed before the Committee within 15 days of receipt. The Committee, as far as possible, would ensure that the Government decision on each proposal is communicated to the applicant within six weeks. The Committee will adopt its own mode and working procedure, keeping in view the requirement of each proposal.
6.2 Thus, a comparative analysis of the automatic approval route and non-automatic approval route, would clearly suggest that conditions imposed therein are different. Clause (f) of automatic approval route stipulates that no single unit shall occupy more than 50% of the allocable industrial area of an industrial park. Whereas, such condition is absent in non-automatic approval route. Thus, on a plain reading of the scheme and conditions of approval under both automatic and non-automatic route, it is very much clear that condition stipulating that no single unit can occupy more than 50% of the allocable industrial area is not applicable to an industrial park approved under non-automatic route. At this stage, it would be 11 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
relevant to note that rule 18C of the IT Rules, prescribes the conditions for granting benefit u/s 80IA(4)(iii). As per sub-rule (2) of Rule 18C, the undertaking shall have to be duly approved by the Ministry of Commerce and Industry in the central govt. under scheme for industrial park. It is seen from the record that the Ministry of Commerce and Industry vide notification dated 10/04/07, has granted approval to Capella Industrial park under industrial park scheme, 2002 for availing benefit u/s 80IA(4)(iii). On a careful reading of approval granted as aforesaid, a copy of which is at page 230 of assessee's paper book, it is seen that Ministry of Commerce and Industry of Govt. of India has not put any condition stipulating that no single unit shall occupy more than 50% of allocable industrial area. However, such condition has been put in para 4 of the notification issued by CBDT pursuant to the approval granted by DIPP. On reading of sub-rule (4) of Rule 18C of IT Rules, it is seen that on approval by the central govt., CBDT is only required to notify the industrial park for benefit u/s 80IA(4)(iii). Therefore, in our view, when the central govt. in the Ministry of Commerce and Industry is the competent authority to grant approval to an industrial park u/s 80IA(4)(iii) and such authority having not imposed any condition, stipulating that no single unit shall occupy more than 50% of the allocable industrial area, CBDT being merely a notifying authority cannot impose any fresh condition. The Hon'ble Gujarat High Court in case of Creative Infocity Ltd. Vs. Under Secretary (supra) while interpreting rule 18C of the IT Rules, held as under:
"Once approval is given by the Commerce Ministry to the petitioner in terms of sub-rule [2] of Rule l8C, the Board is duty bound to notify the industrial parks for benefits under Section 80-IA without any further investigation as to whether the petitioner has complied with the terms and conditions envisaged in the scheme. Since the power of grant of approval has been conferred upon the Commerce Ministry, in the absence of any express provision in the Rules, it should be presumed that the authority, which has given approval, has the power of revocation and examination of compliance of the conditions upon which the approval has been accorded. Therefore, it is 12 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
the duty of the Commerce Ministry to decide whether an industrial undertaking is complying with the conditions envisaged in the scheme and if the undertaking fails to comply with those conditions, it is the Commerce Ministry alone, which has the right to withdraw the benefit granted under sub-rule [2J of Rule 18C of the Rules. As soon as tlte approval under sub- rule [2] of Rule 18C is given, it is obligatory on the part of the Central Board of Direct Taxes to notify industrial parks in terms of sub-rule [4] of Rule 18C."
6.3 The Hon'ble Bombay High Court in case of M/s Ackruti City Ltd. (supra) has also expressed similar view as under:
"3.............The CIT(A) as well as the Tribunal have held that the Ministry of Commerce and Industry had finally by letter dated 31 st December, 2004 approved the industrial park and a copy of the same was forwarded to the CBDT. In terms of Rule 18C(4) of the Rules, once the indusrrial park is approved by the Ministry of Commerice and Industry, the CBDT has to suomotto issue the notification. The Tribunal, on examination of all facts concluded that all the requisite conditions for claiming benefit under Section 80IA(4)(iii) of the Act has been complied with by the respondent assessee during the assessment year in question. Further, there is no reason to hold the benefit under Section 80IA(4)(iii) of the Act is available only prospectively from the date of the issue of Notification by the CBDT. In these circumstances, as the decision of the Tribunal is based on finding of fact and mere delay on the part of the Central Board of Direct Taxes in issuing the notification would not warrant the respondent - assessee being denied the benefit of Section 80IA(4)(iii). "
6.4 The other decisions of ITAT referred to by ld. AR also express similar view. In fact, ITAT, Hyderabad Bench while considering identical issue in case of L&T Infocity Ltd. (supra) after analyzing the scheme for approval both under automatic and non-automatic route, held that condition imposed in para 4 of CBDT notification is not applicable to approval granted under non-automatic route. For better clarity we reproduce herein the observations made by the coordinate bench in this regard:
Thus, as can be seen, the conditions as specified under Automatic Approval Scheme are not specified under Non-automatic Scheme and assessee having applied separately and Empowered Committee having examined 13 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
the proposal 'case by case' has granted the sanction vide letter dt.11-04- 2007 in which it was clearly specified as under:
This is to convey the approval of the Government of India to your proposal for claiming Income Tax benefit of your Industrial Park, in terms of the Industrial Park Scheme, 2002, notified by this Department in exercise of power under section 80 IA, Sub Section 4(iii) of the Income Tax Act, 1961, subject to the following terms and conditions:
i) Name of the Industrial undertaking M/s. L&T Infocity Ltd., Hyderabad
ii) Address of the proposed location of the Madhapur Village, Industrial Park Serilingampalli Municipality, District - Ranga Reddy, AP -
500 033.
iii) Proposed Aras of the Industrial Park 9.16 Acres
iv) Proposed Activities
Section Division Group Class
A 8 89 892 - Data processing, software
development and computer
consultancy
B 8 89 893 - Business and management
consultancy activities
C 8 89 894 - Architectural and engineering
and other technical
consultancy activities.
v) Percentage of allocable area earmarked 100%
for industrial use
vi) Percentage of allocable area earmarked Nil
for commercial use
vii) Proposed number of industrial units 5 Units
viii) Total investment proposed Rs.1,69,00,19,108/-
ix) Investment on built up space for Rs.1,55,29,28,658/-
industrial use
14
ITA No. 729 /Hyd/2015
VITP Pvt. Ltd.
x) Investment on Infrastructure Rs.1,60,79,28,658/-
Development including investment on
built up space for industrial use
xi) Expected date of commencement of the 31-03-2006 Industrial Park Not only that, the CBDT has also notified vide notification dt.28th September, 2007, extracting the same table, which was in the approval letter, with a further condition as under:
"4. No single unit referred to in column (2) of the Table given in sub- paragraph (b) of paragraph 6 of S.O.354(E) dated the 1st April, 2002, shall occupy more than fifty percent of the allocable industrial area of an industrial park. For this purpose a unit means any separate and distinct enty for the purpose of one and more state or Central tax laws".
Since both the Assessing Officer and the Ld.CIT(A) considered the application under automatic rule, they have raised objection whereas assessee's application does not fall under Automatic Approval Scheme, but under Non-automatic Approval Scheme. In view of this, since there is already approval from the relevant authorities and also from the CBDT, we direct the Assessing Officer to grant the deduction u/s.80IA subject to verification of computation. Assessee's ground on this issue is allowed."
6.5 Thus, considering the facts of assessee's case in the light of judicial precedents referred to above, the only rational conclusion would be, Capella industrial park developed by assessee having been approved by Ministry of Commerce and Industry, govt. of India under non-automatic route, the condition imposed under para 4 of CBDT notification stipulating that no single unit should have more than 50% of the allocable industrial area is not applicable to present assessee. Moreover, as held by Hon'ble Gujarat High Court (supra), Commerce Ministry being the competent authority for granting approval, they only have the power to verify whether conditions of the scheme have been violated and if it is found so, only they can 15 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
withdraw the benefit. Therefore, for aforesaid reasons, assessee's claim of deduction u/s 80IA(4)(iii) cannot be rejected.
6.6 On merit having held that assessee is eligible for claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park, now we will proceed to examine whether assumption of jurisdiction u/s 263 by ld. CIT while holding assessment order to be erroneous and prejudicial to the interests of revenue is valid. As could be seen from the show cause notice issued u/s 263 as well as the impugned order passed u/s 263, the only issue on which ld. CIT has considered assessment order to be erroneous and prejudicial to the interests of revenue is, AO has failed to enquire or verify whether assessee has complied to the condition imposed under para 4 of CBDT notification while allowing assessee's claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park. As could be seen from the material on record, AO in course of assessment proceeding has specifically enquired into assessee's claim of deduction u/s 80IA(4)(iii). Letter dated 26/07/11 issued by AO clearly bears testimony to this fact. Further, in reply to the said query raised by AO, assessee in its reply submitted before AO, has stated as under:
"The Industrial Park Scheme, 2002 (r Policv") dared I April 2002 issued by the Ministry of Commerce and Industry, under which the Capella IP has been approved, is attached as Enclosure lB. The Policy prescribes the following two methods in order to be eligible to claim deduction under section 80IA (4)(iii) of the Act:
• Automatic route - The conditions to be fulfilled are prescribed in paragraph 5 and 6 of the Policy.
• Non-Automatic route / Approval route - The conditions to be fulfilled are prescribed in paragraph 7 of the Policy.
We submit that sub-paragraph m of Paragraph 6 prescribes that no single unit seeking approval under the automatic route should allot more than 50% of the total allocable industrial area to a single occupant. However, the said condition does not find any mention in Paragraph 7 of the Policy which is applicable to industrial Parks seeking approval under non-automatic route.
The Company has made application for approval of the Capella IP under lIoll-automatic route in FormIPS-l dated 12 October 2006. Accordingly, the above mentioned condition is not applicable to the Capella IF. Copy of the application seeking approval 16 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
is attached herewith and marked as Enclosure 1 C. The salient features as mentioned in the application are as under:Proposed number of Industrial Units 4 4
Total investment Proposed Rs. 28,69,00,000
Proposed investment on built up space for Industrial use Rs.24,33,00,000
I Allocable area marked for industrial use 90%
Allocable area marked for commercial use 10%
Subsequent to the application, after thorough verification, the Company has been granted approval for setting up Capella IP by DIPP vide letter no. 15/112/2006-10 dated 10 April 2007 subject to complying with terms and conditions as mentioned therein. Copy of the letter of approval is attached herewith and marked as Enclosure ID. The DIPP has granted the said approval based 011 the same parameters as requested by the Company in the application, as mentioned above. The Company would like to draw your attention to the following relevant points as mentioned in the said DIPP approval-
"4. The conditions mentioned in Para J above are as per the proposal made by the undertaking and are within the provisions oj the Industrial Park Scheme, 2002. notified by this Department vide S.O. No. 35·/fE) dated 1.4.2002. The conditions mentioned in this letter and those included in the Industrial Park Scheme.2002, should be adhered to during the period when benefits under this Scheme are to be availed.
5. Following conditions in Para 9 oj the Industrial Park Scheme, 2002, may particularly be noted for suitable compliance:
(i) The income tax benefits under Sub section 4(iii) oj Section 80IA of the Income Tax Act. 1961 'will be available only after the proposed number of industrial units mentioned in Para 1 (vi) of this approval letter, are located in the Industrial Park. The benefit will be available only after notification of the Industrial Park by Central Board of Direct Taxes. "
Further, the Company would like to submit that in the said approval, the DIPP did not prescribe any condition restricting the Company from allotting more than fifty percent of the allocable industrial area to any single occupant/tenant.
Subsequent to the approval granted by the DIPP, the CBDT has notified the Capella IP in exercise of the power conferred by section 80IA(4)(iii) of the Act vide Notification No. 244/2007 dated 28 September 2007 as eligible to claim deduction under the Act. Copy of the CBDT notification is attached herewith and marked as Enclosure 1 E. The Company would like to draw your attention to the following relevant points as per the said CBDT notification-17 ITA No. 729 /Hyd/2015
VITP Pvt. Ltd.
"And whereas the Central Government has approved the said Industrial Park vide Ministry of Commerce and Industry letter No. 15/112/2006-1 D dated 10-4-2007 subject to the terms and conditions mentioned in the annexure to this notification;"
However, while reproducing the said terms and conditions as provided by the DIPP, the CBDT had erroneously referred to one of the condition which is applicable for Industrial parks seeking approval under automatic route, which reads as under-
"No single unit referred to in column (2) of Table given in sub-paragraph (b) of paragraph 6 of S. 0. 354(£) dated the r April, 2002. shall occupy more than fifty percent of the allocable industrial area of an industrial park. For this purpose a unit means any separate and distinct entity for the purpose of one and more state and Central tax laws. "
The above condition docs not form part of the terms and conditions as stipulated by the DIPP and was erroneously included by the CBDT. The same is apparent from the reading of the CBDT notification which states that the terms and conditions as approved by DIPP is being reproduced in the Annexure to the CBDT notification. Further, it may be noted that the conditions as mentioned by the CBDT as reproduced above refers to Paragraph 6(b) of the scheme which is applicable for approval under the automatic route as already mentioned earlier.
The prerogative to approve and stipulate any conditions while approving any Industrial park was always with the DIPP. The CBDT was only authorized to notify the park as per the approval granted by the DlPP. It did not have any power to put additional conditions while notifying the Industrial Park.
To elaborate further, the Company would like to bring attention to the conditions as required to be fulfilled by Industrial Parks seeking approval under non-automatic route as given under Paragraph 7 of the Scheme. The relevant extracts of sub-paragraph (1) & (3) of Para 7 read as under:
"(f) All applications not eligible for Automatic approval under paragraph 6 shall require the approval of the Empowered Committee, constituted by the Central Government (2) .....
(3) The Empowered Committee shall consider each application on a case to case basis, subject to its complying with the statutory requirements as prescribed by the Ministry of Finance under the Income Tax Act, 1961, and other applicable statutory rules/obligations. The Committee will consider each case on its merit and grant approval subject to such other conditions as may be deemed fit by it.. ... ·' Thus, it could be inferred from sub-paragraph (1) read with sub-paragraph (3) that the empowered committee of the DIPP duly considers the application made by the Company, from the perspective of 80lA of the Act, for granting approval under the non-automatic route. The same is also evident from letter of approval provided by the DIPP (refer Enclosure lD). The relevant extracts of the said approval are as under:18 ITA No. 729 /Hyd/2015
VITP Pvt. Ltd.
"I am directed to refer to your application dated 12 October 2006 and letter dated 29 September 2006. This is to convey the approval of the Government of India to your proposal for claiming Income Tax benefit of your Industrial Park. Scheme, 2002, notified by this Department in exercise of powers under Section 80-lA, Sub Section 4
(iii) of the Income Tax Act, I961, subject to the following terms and conditions .... "
In this regard, the Company would like to submit mat the power conferred to the CBDT under section 80IA( 4) of the Act read with Rule 18C of the Income Tax Rules, 1962 is only to notify the Industrial parks which are approved by the DIPP.
The provisions of section 80IA(4)(iii) read with Rule 18C does not authorize CBDT to put any additional condition for claiming deduction under the said section. Thus in the present case CBDT has erroneously included the condition applicable to Automatic route. Hypothetically, if it is considered that the CBDT intended to prescribe the said condition then the very purpose of getting the approval under non-automatic route would get defeated.
As discussed above, the right to approve and put any conditions while granting approval for setting up any Industrial park was always with the DIP? The CBDT was only authorized to notify the park as per the approval provided by the DIPP. It did not have any power to put additional conditions while notifying the Industrial Park. Reliance in this regard is placed on the following decision:
• CIT vs. Elgi Equipments Ltd. (2000) 242 ITR 460 (Mad) The Hon'ble Madras High Court in the said case held that conditions laid down by CBDT vide its notification 8.0. No. 3433 dated 21 October 1965, are not within the scope of power conferred on CBDT by section 36(1 )(iv) of the Act. The said notification limits the amount of deduction to 80% of the contribution (thereby denying 20% of the amount paid) without a rule having been made to that effect. It was further held that it is not permissible for CBDT to whittle down the rule and alter the limits of contributions whether annual or initial, that would qualify as deduction under section 36(1)(iv) of the Act.
Based on the above facts and judicial precedent, we submit that the CBDT has erroneously included an additional condition (of not allotting more than fifty percent of the allocable industrial area to a single occupant) while notifying the Capella IP which was approved under non-automatic route. Even otherwise, if it is considered that the CBDT intended to include the additional condition, then we would like to submit that the CBDT has surpassed its jurisdiction and hence it is void-ab-initio.
In view of above, the Company has complied with all the conditions laid by the DIPP and the additional condition prescribed by CBDT, forming part of Automatic route, being erroneous, is eligible for claiming deduction under section 80IA of the Act."
6.7 Thus, from the aforesaid facts, it is very much evident that not only AO enquired into the issue of claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park with reference to the condition imposed in para 4 of CBDT notification, but, assessee also submitted a detailed reply explaining why such condition will not apply to 19 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
assessee. Thus, AO after conducting necessary enquiry and applying his mind to the issue having taken a decision allowing assessee's claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park, the decision so taken, cannot be considered to be erroneous and prejudicial to the interests of revenue. In fact, though, ld. CIT accepts the fact that AO did make enquiry with regard to assessee's claim of deduction u/s 80IA(4)(iii) and assessee also explained its stand before AO, but, he nevertheless contradicts himself by observing that AO did not conduct proper enquiry and verify whether assessee has complied to the condition imposed in para 4 of CBDT's notification. In our view, such conclusion drawn by ld. CIT is not only contrary to the material on record, but, also does not stand the test of legal scrutiny. Once AO has conducted enquiry on a particular issue and has taken a decision after proper application of mind and if such view taken by AO is one of the possible view, then, even if it is not discussed elaborately in the assessment order, it cannot be said assessment order passed is erroneous and prejudicial to the interests of revenue. The principle of law laid down in various judicial precedents in this context being too well-known, there is no need for us to deliberate on them here.
6.8 Moreover, as could be seen, the coordinate bench in case of L&T Infocity (supra) after going through the conditions imposed under automatic and non-automatic route held that the restriction imposed under the automatic approval route stipulating that no single unit shall exceed 50% of the allocable industrial area is not applicable to approval granted under non-automatic route. Therefore, the view taken by AO while accepting assessee's claim being in consonance with the view expressed by the coordinate bench, as aforesaid, certainly can be considered to be a possible view. That being the case, ld. CIT has no authority to invoke his power u/s 263 of the Act only because he does not agree with the view expressed by AO and wants to substitute his view. For the aforesaid reason, assumption of 20 ITA No. 729 /Hyd/2015 VITP Pvt. Ltd.
jurisdiction u/s 263 by ld. CIT for revising the assessment order, in our view, is not valid. Thus, assessee deserves to succeed both on merits as well as on jurisdictional issue. In view of the above, we quash the impugned order of ld. CIT and restore the order passed by AO. In view of our decision hereinbefore, we do not think it necessary to deal with other issues raised by assessee.
7. In the result, assessee's appeal is allowed.
Pronounced in the open court on 4 th September, 2015.
Sd/- Sd/-
(P.M. JAGTAP) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 4 th September, 2015
kv
Copy to:-
1) VITP Pvt. Ltd., Plot No. 17, Software Units Layout, Hi-tech City, Madhapur, Hyderabad - 500 081, Telengana, India.
2) DCIT, Circle - 3(3), Income Tax Towers, Hyd.
3) CIT-5, Hyderabad
4) Addl. CIT, Range - 17, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.