Itxa/838/2016 Of The Pr.commissiner Of Income-Tax (Central).Pune v. Kolte Patil Developers Ltd

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.838 OF 2016 The Pr.Commissioner of Income-Tax(Central), Pune. … Appellant V/s.M/s Kolte Patil Developers Ltd. … Respondent --- Mr.Tejveer Singh for the Appellant.Mr.Percy Pardiwalla, Senior Counsel with Mr.Nitesh Joshi withMr. Bharat Damodar i/by M/s Kanga & Co. for the Respondent. --- CORAM : AKIL KURESHI AND B.P.COLABAWALLA, JJ. DATE : FEBRUARY 11, 2019. P.C.:- 1.Revenue has filed this appeal against the judgment of theIncome Tax Appellate Tribunal (“Tribunal” for short) raisingfollowing questions for our consideration:- “I.Whether on the facts and circumstances ofthe case and in law, the ITAT has erred in ignoringthe provisions of section 80IA(2) while adjudicatingthe issue of claim of deduction u/s 80IA(4) in favourof the assessee for the impugned assessment year?”II.Whether on the facts and circumstances of thecase and in law, the ITAT has erred in liberallyinterpreting the Income Tax Rule 18C and the Industrial Parks Scheme 2008 where the word“shall” has been used to emphasize strictcompliance of the conditions laid down for claimingdeduction u/s 80IA(4)?” 2.The respondent-assessee is a private limited company andis engaged in Infrastructure Development Project. For theassessment year 2007-08, the assessee had filed a return ofincome claiming deduction of the income arising out of suchactivity, in terms of Section 80IA(4)(iii) of the Income Tax Act,1961 (“the Act” for short). The Assessing Officer rejected theclaim on the ground that the assessee failed to fulfill essentialconditions of the scheme for grant of such benefit. He was ofthe opinion that a minimum 30 units were not located in theIndustrial Park and further that Completion Certificate showingthat a minimum of 30 units were located in the Industrial Parkwas not issued by the Competent Authority. When the issuereached the Tribunal, the Tribunal by the impugned judgmentallowed the assessee's appeal and granted benefit of thededuction. The Tribunal noted that the assessee during theperiod relevant to the assessment year had already allotted 21units to different individual industries and such units were also 31 itxa 838-16-o located in the Industrial Park. Such units were also operational. The Tribunal also noted that the certificate from the localauthority was obtained on 9[th] May, 2007. The Tribunal did notaccept the revenue's contention that under the circumstances thedate of commencement of the Industrial Park should beunderstood as 9[th] May, 2007. 3.The Tribunal recorded that admittedly the date ofcommencement of the Industrial Park was between the two cut-off dates of 1[st] April, 2006 and 31[st] March, 2009. Even theAssessing Officer does not dispute such position namely thatthe undertaking of the assessee was approved under the relevantscheme since the Assessing Officer had granted the benefit ofdeduction under Section 80IA of the Act for the subsequentassessment year. 4.The Tribunal referred to sub-Rule 18C of the Income TaxRules 1962, which uses expression “undertaking shall begin todevelop; develop and operate; and maintain and operate ......”and held that the benefit would be available to the assessee who 41 itxa 838-16-o 3.The Tribunal recorded that admittedly the date ofcommencement of the Industrial Park was between the two cut-off dates of 1[st] April, 2006 and 31[st] March, 2009. Even theAssessing Officer does not dispute such position namely thatthe undertaking of the assessee was approved under the relevantscheme since the Assessing Officer had granted the benefit ofdeduction under Section 80IA of the Act for the subsequentassessment year. 4.The Tribunal referred to sub-Rule 18C of the Income TaxRules 1962, which uses expression “undertaking shall begin todevelop; develop and operate; and maintain and operate ......”and held that the benefit would be available to the assessee who 41 itxa 838-16-o had admittedly begun to develop the Industrial Park. It wasnoted that the assessee had already sold 21 units during therelevant period which had yielded profits during the said year forwhich the assessee was claiming necessary deduction. TheTribunal was of the opinion that such profits would be eligiblefor deduction under the current year as the assessee had bookedthe profit in its account for the same year. The Tribunal alsonoted that clause 6 of the scheme authorized the CentralGovernment to withdraw the approval granted under the schemeif the undertaking failed to comply with the conditions listed inparagraphs 4 and 5 of the scheme. 5.Having heard learned counsel for the parties and havingperused the documents on record, we do not find any error inview of the Tribunal. Section 80IA(4) of the Act recognizesdeductions to the assessee who is an undertaking which developsand operates or maintains and operates an Industrial Park. Theassessee fulfilled the said requirement as also the otherprocedural requirement laid down in the scheme. Rule 18C(i)itself as noted provided that the benefit would be available to Priya Soparkar 51 itxa 838-16-o an undertaking which begins to develop such Industrial Park.In the present case, the assessee had already developed theIndustrial Park and as many as 21 units were already operationalas admitted by the revenue. These units were sold during theassessment year in question. The profit arising out of such salewas accounted for in the said year and offered to tax. It wastherefore, that the assessee was entitled to deduction in respectof such profit. The assessee was following Percentage CompletionMethod and not Project Completion Method and was thereforeobliged to account for the revenue generated from the sale of theunits during the year in question itself. Any other view wouldamount to the assessee offering the income arising out of thesale of the units to tax during the current year on which nodeduction under Section 80IA of the Act would be available underthe Act. Gujarat High Court in case of Ganesh HousingCorporation Ltd. Vs. Padam Singh, Under Secretary and ors.[1]had occasion to examine some of the provisions of the samescheme. It was observed as under:- “33. On part of the petitioner, therefore, therequirement was to ensure that beforeclaiming the tax benefit, units indicated in theapplication are located in the Industrial Park.It is not in dispute that the petitioner inaddition to developing the entire park byproviding infrastructure, sub divided the plotsinto smaller units, sold the plots to individualindustries and such industries were allocatedspecific plots for such purpose. Therequirement of ensuring that the industries, asindicated in the application approved, by theGovernment were located before the last dateprescribed, was thus fulfilled. “33. On part of the petitioner, therefore, therequirement was to ensure that beforeclaiming the tax benefit, units indicated in theapplication are located in the Industrial Park.It is not in dispute that the petitioner inaddition to developing the entire park byproviding infrastructure, sub divided the plotsinto smaller units, sold the plots to individualindustries and such industries were allocatedspecific plots for such purpose. Therequirement of ensuring that the industries, asindicated in the application approved, by theGovernment were located before the last dateprescribed, was thus fulfilled. 34. Counsel for the respondents, however,relied on forms of declaration annexed alongwith the Scheme to contend that therequirement went much beyond and thepetitioner was required to ensure that suchindustries must set up their units on the plotsso allotted. To our mind, such requirement canneither be read in the Scheme nor can it befastened on the petitioner in any othermanner. The petitioner was a developer of theIndustrial Park. The duty and responsibility ofthe petitioner, to be able to claim taxdeductions, was to set-up an industrial park byproviding necessary infrastructural facilities.We have seen that the development of such apark would require providing of allinfrastructural facilities; sub plotting the entireplot and also ensuring that the number ofunits indicated in the application are sold tothe intending industries. In short, the duty andresponsibility of the petitioner was to ensurethat the industrial activity is facilitated on theIndustrial Park so developed by it. It wasthereafter not responsible to ensure that industries do in fact set-up their units andcommence production activities on such units--that too before the last date envisaged in theScheme. To our mind, such responsibilityfastened on the petitioner is not borne outfrom the Scheme. The duty and responsibilityof the petitioner was to provide infrastructuralfacilities which would be a catalyst forindustrial growth by enabling the intendingindustries to set-up their industry in such aPark. Such manufacturing units or theintending industries were in no way under thecontrol of the petitioner. There can be varietyof reasons why such industries may not be ableto start their units, such as, non-availability offunds for setting up of the units, pendingapproval and clearances from the Governmentand other agencies and such similar reasonswhich can be attributed only to the intendingindustries and not to the petitioner. In fact, thescheme requires that the petitioner not onlyfulfill but continue to fulfill all conditions ofapproval assessing the period when the taxbenefit is available. If we accept the strictrequirements insisted by the respondents, itwould mean that not only number of industrialunits indicated in the application for approvalof Industrial Park must be operational on thelast date of expiry of the Scheme, they mustcontinue to operate till the petitioner avails ofall the tax benefits. In a given situation, it mayhappen that the number of units, after initiallycoming into existence, may have to be closeddown for variety of reasons such as non-availability of market for their product or non-availability of raw materials, or even labourproblems. Would in such a case the petitionerbe denied tax benefits? To our mind, theanswer has to be empathetically in the Priya Soparkar negative.” 6. In the result, Income Tax Appeal is dismissed. (B.P.COLABAWALLA,J.) (AKIL KURESHI,J.) ….