M/S. Rr Industries Limitedchennai-600 032 v. The Income Tax Officer (Osd)Company Circle V(4)Chennai – 34

In the High Court of Judicature at Madras Dated: 26.06.2013 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMANandThe Honourable Ms.JUSTICE K.B.K.VASUKI Tax Case (Appeal) Nos. 139 to 145 of 2012and MP.Nos. 1 of 2012 (7MPs) M/s. RR Industries LimitedChennai-600 032. ... Appellant/Respondent in all T.C.As Vs. The Income Tax Officer (OSD)Company Circle V(4)Chennai – 34 ... Respondent/Appellant in all T.C.As The Tax Case (Appeals) filed under Section 260 A of the IncomeTax Act against the order of the Income Tax Appellate Tribunal,Chennai 'B' Bench, dated 18.11.2011 passed in I.T.A Nos.2194, 2195,2196, 2197, 2198 and 2199 /MDS/2010 for the assessment years 2002 -2003 to 2007 - 2008 and I.T.A.No. 1256/ MDS/ 2011 dated 17.02.2012passed by the ITAT, Chennai, 'A' Bench for the assessment year 2008-2009 Officer (OSD) Company Circle V(4) Chennai dated 18.11.2010 forthe Assessment year 2008-2009 arising against the Common order of theCommissioner of Income Tax (Appeals) Chennai-34 and made inI.T.A.Nos.191/05-06, 64/06-07, 382/06-07, 374/07-08, 454/08-09 and343/09-10 dated 04.10.2010 and in I.T.A.No.111/10-11 dated 28.04.2011respectively arising against the Assessment orders of the DeputyCommissioner (Appeals) of Income Tax company Circle V(4) Chennai madein: P.A.No./G.I.R.No.AAA CR 35944/137-R dated1)30-03-2005 for Assessment year 2002-03.2)29-03-2006 for Assessment year 2003-04.3)16-11-2006 for Assessment year 2004-05.4)27-12-2007 for Assessment year 2005-06.5)30-12-2008 for Assessment year 2006-07.6)17-12-2009 for Assessment year 2007-08. respectively for the Appellant Assessee M/s.R.R.Industries Ltd. andagainst the Assessment order of the Income Tax. https://hcservices.ecourts.gov.in/hcservices/ For Appellant : Mr.Aravind P. Datar, Senior Counselfor Mr.N.Senthil KumarFor Respondent: Mr.N.V.Balaji COMMON JUDGMENT (Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.) The above Tax Case (Appeals), filed at the instance of theassessee as against the order of the Income Tax Appellate Tribunalfor the assessment years 2002-03 to 2008-09, allowing the Revenue'sappeal thereby remanding the matter back to the Assessing Officer forconsideration on the question of character of a receipt, by raisingthe following substantial questions of law: "1.Whether the ITAT has erred in considering an issue,which has attained finality and not been challenged by therespondent in their appeal before the ITAT? 2. Whether the Tribunal has the jurisdiction to go intoissues (like deduction under Section 80IA (4)) that are notsubject matter of the appeal or have never been raised inthe grounds of appeal without following the procedure setout in Rule 11 of the Income Tax (Appellate Tribunal)Rules, 1962?. 3. Whether ITAT is right in setting aside the matter to thefiles of the respondent when there was no grievance in theappeal of the respondent before the ITAT? 4. Whether in the facts and circumstances of the case, theITAT is right in setting aside the matter to the respondentfor re-examination without considering the paper bookscontaining details materials filed by the appellant? 5. Whether in the facts and circumstance of the case, theITAT is right in setting aside the matter to the files ofthe respondent on issues, towards which specific findingsof facts are already recorded by the learned CIT (A)? 6. Whether in the facts and circumstances of the case, theITAT also failed to consider that the notification issuedby CBDT is binding on the respondent? 7. Whether in the facts and circumstances of the case, theITAT is right in setting aside the matter to the files ofthe respondent for re-examination without consideration theapproval of the appellant's buildings as "Industrial Park"pursuant to the Industrial Park Scheme, 1999 framed by theCentral Government under Section 80IA(4) of Act? 5. Whether in the facts and circumstance of the case, theITAT is right in setting aside the matter to the files ofthe respondent on issues, towards which specific findingsof facts are already recorded by the learned CIT (A)? 6. Whether in the facts and circumstances of the case, theITAT also failed to consider that the notification issuedby CBDT is binding on the respondent? 7. Whether in the facts and circumstances of the case, theITAT is right in setting aside the matter to the files ofthe respondent for re-examination without consideration theapproval of the appellant's buildings as "Industrial Park"pursuant to the Industrial Park Scheme, 1999 framed by theCentral Government under Section 80IA(4) of Act? 8. Whether the ITAT erred in holding that unless the incomefalls under the head of 'profits and gains from business',no deduction under Section 80IA is available?" 2. It is seen from the facts narrated that the assessee is acompany engaged in the business of manufacture and export of leathergoods. Subsequently, it diversified its business into developing,operating and maintaining an Industrial Park and leasing out thepremises after making suitable alterations as required by the lessee.Admittedly, the assessee, being a developer of industrial park wasduly recognised by Investment Promotion & Infrastructure DevelopmentCell of the Secretariat of Industrial Assistance of the Department ofIndustrial Policy & Promotion in Ministry of Commerce and Industry,the Government of India under the Industrial Park Scheme, 1999 framedby the Central Government under Section 80IA(4) of the Income TaxAct. The recognition was given as early as August 2001. It is statedby the assessee that it constructed towers in the Industrial Park andlet them out to software concerns providing a platform with plug andplay infrastructure. Pointing out to the various facilities offeredin the buildings let out treating the rental income as businessincome, the assessee claimed deduction under Section 80IA of theIncome Tax Act. The Assessing Officer however rejected the contentionof the assessee and assessed the income as income from the houseproperty and disallowed the assessee's claim for deduction underSection 80IA of the Act. This led to the assessee filing an appealbefore the Commissioner of Income Tax (Appeals). 3. Before the Commissioner of Income Tax (Appeals) the assesseeraised two questions, one as regards the assessment of the monthlyrental income as income from the house property and secondly as aconsequence, the disallowance of claim of deduction under Section80IA of the Act. The Commissioner of Income Tax (Appeals) held thatthe assessee had borrowed large sums of money from financialinstitution against the mortgage of the property as well as againstthe future rent receivables to develop the state of the artinfrastructure, which went much beyond the construction of thebuilding. Thus it provided plug and play environment for the softwarecompanies, so that the lessee could start its operations therein.Thus, the assessee was not merely exploiting the property as a owner,but was venturing into the realm of business, by providing anenvironment for software companies to function. Considering the factthat the assessee had obtained recognition for its infrastructureunder the Industrial Park Scheme of the Government of India and thescheme has defined the undertaking to mean any undertaking which isengaged in the business of developing and operating or maintainingthe industrial park notified by the Central Government in accordancewith the scheme, the first Appellate Authority held that incomederived by the assessee from letting out of industrial park was to beregarded as income from business. Having held so, the Commissioner ofIncome Tax (Appeals) held that in any event, for the purpose of considering the deduction under Section 80IA of the Income Tax Act,the question of considering the character of the receipts wasimmaterial. Once the approval of the Ministry was there, then theassessee was eligible for deduction under Section 80IA(4)(iii) of theIncome Tax Act. Considering the fact that the scheme recognise theactivity of any undertaking engaged in the development ofinfrastructural facilities or in any area allotted or earmarked forthe purposes of software development eligible as an Industrial Parkand such activity being a business activity, the claim of theassessee under Section 80IA would be maintained in law. Thus, theCommissioner of Income Tax (Appeals) agreed with the contention ofthe assessee that even if the income was to be treated as income fromhouse property, yet, the assessee would be entitled to the reliefunder Section 80IA of the Act. Thus, the Commissioner of Income Tax(Appeals) allowed the appeals in part holding that the assessee wasentitled to claim deduction under Section 80IA of the Act. As againstthe order of the Commissioner of Income Tax (Appeals), the Revenuewent on appeal before the Income Tax Appellate Tribunal. 4. It is seen from the order of the Tribunal that the theRevenue challenged the view of the Commissioner of Income Tax(Appeals) only on his holding the income derived from letting out ofindustrial park buildings as income from business as against thefinding made by the Assessing Officer that it was to be treated asincome from house property. Admittedly no question was raised on theview of the Commissioner that irrespective of the character of thereceipt, the deduction was available. On considering the nature ofthe receipt, the Tribunal agreed with the submission of the assesseethat income derived by developing and operating or maintaining anindustrial park was assessable under the head of Profit and Gains ofbusiness or profession as could be inferred from the provisions ofSection 80IA(4)(iii) of the Act. Pointing out to the view of theCommissioner of Income Tax (Appeals) that the relief under Section80IA(4)(iii) of the Act would be available even if the property inquestion was treated as income from house property, the Tribunal heldthat the assessee as well as the Revenue had not brought out anymaterials to show that the facilities developed by the assessee aftercompletion of the development was treated as an industrial park byany authority and it was not clear that whether the allegedindustrial park was so notified by the Central Government or not. Inthe absence of any material to show that what was predominant in theletting out of the building and whether the facilities wereincidental, the Tribunal viewed that it was necessary to restore theissue back to the Assessing Officer for proper verification.Aggrieved by this, the above appeals by the Revenue. 5. By consent of both the parties, even at the time of admissionstage, the main appeals are taken up for consideration. 6. Learned senior counsel for the appellant pointed out that on 5. By consent of both the parties, even at the time of admissionstage, the main appeals are taken up for consideration. 6. Learned senior counsel for the appellant pointed out that on the admitted fact that the Revenue had not challenged the issue underSection 80IA of the Income Tax Act before the Tribunal, the order nowpassed by the Tribunal directing the Assessing Officer to go into thecharacter of the receipt, is too academic on facts and the order ofremand is wholly unjustified. To that end, he referred to Section80IA(4) of the Income Tax Act and submitted that the relief underSection 80IA of the Act is available only for the undertaking whichare eligible as per the eligibility criteria given under sub Section4 of Section 80IA. Thus when, once the Department had accepted thereasoning of the Commissioner of Income Tax (Appeals), thatirrespective of the character of the receipt, the assessee wasentitled to the relief under Section 80IA with other conditionstherein under Section 80IA(4) thus admittedly stood satisfied, theremand order of the Tribunal by directing the Assessing Officer tofind out the nature of the receipt is not sustainable in law. Hesubmitted that such enquiry is inconsequential as to the relief underSection 80IA. 7. We agree with the submissions made by learned senior counselfor the assessee. As already seen, two questions were raised beforethe Commissioner of Income Tax (Appeals), one relating to nature ofreceipt on letting out the property as an industrial park as approvedby designated authority from the Investment Promotion &Infrastructure Development Cell of the Secretariat of IndustrialAssistance of the Department of Industrial Policy and promotion inMinistry of Commerce and Industries of the Government of India andother relating to disallowance of claim of deduction under Section80IA of the Act on the ground of the receipt being held as incomefrom house property. On analysing the facts and on going through thecertificate issued, the first Appellate Authority held that the unitwas eligible for relief under Section 80IA of the Act. As to thecharacter of the receipt, he held that income received by theassessee was to be assessed as income from business only. Thus, onthe claim of deduction for the above said receipt under Section 80IA,the Commissioner of Income Tax (Appeals) pointed out that theapproval of the Ministry stated that the assessee was eligible fordeduction under Section 80IA (4)(iii) of the Act which specificallyreferred to developing, operating and maintaining of industrial part.Admittedly the assessee had made the application for development ofan industrial park under the scheme notified by the Government inaccordance with law. The Commissioner of Income Tax (Appeals) furtherpointed out that the scheme recognised the activity of anyundertaking engaged in the development of infrastructure facilitiesor built up space with common facilities in any area allotted orearmarked for the purpose of software development as industrial parkas business activity. Thus, while agreeing with the assessee on thecharacter of the receipt of lease rental as business income, he alsoagreed in principle that the deduction under Section 80IA would beallowed, even if the rental income is assessed as income from houseproperty. Further he relied on the decision of the Apex Court reported in 57 ITR 306 - COMMR. OF INC. TAX v. COCANADA RADHASWAMIBANK LTD that the head under which income is assessed is not relevantfor the purpose of claiming exemption under the Act. When the Revenuehad accepted the view of the Commissioner of Income Tax (Appeals) onSection 80IA that the assessee had complied with Section 80IA(4)(iii)of the Act, there remains nothing for an enquiry either as to thenature of the receipt or for that matter the facilities developed tobe treated as an industrial park to consider the question ofdeduction under Section 80IA(4)(iii) of the Act. In the background ofthe above state of affairs, we hold that the view of the Commissionerof Income Tax (Appeals) in this regard does not call for anyinterference. For the reasons best known and we think, rightly so,the Revenue did not challenge order of the Commissioner of Income Tax(Appeals) on 80IA deduction before the Tribunal. The said fact isnot disputed by the Revenue too. Thus, when the character of thereceipt is not a question to be gone in the matter of considering theclaim of deduction under Section 80IA(4)(iii) of the Act, we do notfind that any useful purpose would be served for the Revenue to againinsist on a decision on the character of the receipt. 8. In the light of the above, the order of remand passed by theTribunal is only academic that the Tribunal cannot pass an order ofremand for further enquiry on the issue which had already reachedfinality. Even though learned standing counsel for the Revenue placedheavy reliance on Rule 11 of the Income Tax (Appellate Tribunal)Rules, 1962, we do not find any ground to uphold the said standconsidering the fact that the subject matter of the appeal before theTribunal being one on the character of the receipt and the issueregarding the deductibility under Section 80IB irrespective of thecharacter of the receipt not being an issue raised by the Revenueeven as an additional ground, when the Revenue had no grievance atall as regards the consideration for grant of relief under Section80IA(4)(iii) of the Act, we do not find any justification in theorder of the Tribunal, ordering remand on the issue which does notarise at all for the purpose of a decision thereon. Further there isnothing on record to show that the Revenue raised this as anadditional issue even for the purpose of considering Rule 11. 9. In the circumstances, the order of the Tribunal is set asideand the appeals filed by the assessee are allowed. No costs.Consequently, connected MPs are closed. //True Copy// Sub.Asst.Registrar To 1.The Registrar,Income Tax Appellate Tribunal,Chennai, 'B' Bench,2nd floor Rajaji Bhavan, Basant Nagar, Chennai - 90. 1A.1.The Registrar,Income Tax Appellate Tribunal,Chennai, 'A' Bench,2nd floor Rajaji Bhavan, Basant Nagar, Chennai - 90. 2.The Commissioner of Income Tax (A)-V,No.121, Mahatma Gandhi Road, Chennai - 34. 3.The Deputy Commissioner of Income Tax Company Circle-V(V)No.121, Mahatma Gandhi Road, Chennai - 34. 4.The Income Tax Officer (OSD)Company Circle V(4)Chennai – 34 5.The Secretary,Central Board of Direct Taxes,New Delhi. 1 CC to Mr.N.V.Balaji, Advocate, S.R.No.31847 3 CC to Mr.N.Senthil Kumar, Advocate, S.R.No.31716 SKD(CO)JJM 19.07.2013 Tax Case (Appeal) Nos.139to 145 of 2012