The Commissioner Of Income Tax Chennai v. M/S.tidel Park Ltd., 4, Rajiv Gandhi Salai, Taramani, Chennai – 600 113

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE DR.JUSTICE VINEET KOTHARI &THE HONOURABLE MR.JUSTICE KRISHNAN RAMASAMY T.C.A.Nos.972 to 974 of 2013 The Commissioner of Income TaxChennai. ... Appellant in all 3 PetitionsVersus M/s.Tidel Park Ltd.,4, Rajiv Gandhi Salai, Taramani,Chennai – 600 113.... Respondents in all 3 Petitions Common Prayer: Tax Case Appeals filed under section 260-A of theIncome Tax Act, 1961 against the order of the Income TaxAppellate Tribunal Madras, 'B' Bench, Chennai, dated 11.04.2013in ITA No.2120/Mds/2011, ITA No.2121/Mds/2011, and ITANo.2121/Mds/2011 respectively as against the orders dated30.09.2011 passed by the Office of the Commissioner of IncomeTax, Chennai in I.T.A. No.54/2011-2012 in I.T.A. No. 61/2011-2012 for the assessment year 2005-2006 of 2003-2004, and asagainst the orders of dated 31.12.2010, passed by the AssistantCommissioner of Income Tax, Chennai for the Assessment year2003-2004 and 2005-2006 for the PAN/GIR No. AABCT0666Rrespectively. For Appellant: Mr.M.Swaminathan, for Ms.V.Puspha, Standing Counsel For Respondent : Mr.R.Venkatnarayanan for M/s.Subbaraya Aiyar Padmanabhan (Judgment of the Court was delivered by KRISHNAN RAMASAMY, J.) The Court was held by Video Conference, as per theResolution of the Full Court dated 3 July 2020, by Judges attheir respective residences and the counsel, staff of the Courtappearing from their respective residences. 2. Mr.M.Swaminathan, learned Standing Counsel appearedfor the appellant/department and Mr.R.Venkatnarayanan, learnedcounsel appeared for the respondent/assessee. https://hcservices.ecourts.gov.in/hcservices/ 3.All these Tax Case Appeals have been filed againstthe common order dated 11.04.2013 of the Income Tax AppellateTribunal, Madras “B” Bench, Chennai. TCA No.972 of 2013 has beenfiled against the order passed in I.T.A.Nos.2120/Mds/2011 (forthe assessment year 2003-04) and TCA Nos.973 & 974 of 2013 havebeen filed against the order passed in ITA No.2121/Mds/2011 (forthe assessment year 2005-06) and Cross Objection No.17/Mds/2012. 4. The brief facts relevant to the case of TCA.No.972 of2013 are as follows:- 4.1. The assessee is a company promoted as a joint ventureby M/s TIDCO & M/s ELCOT and both are Government of Tamil NaduUndertakings. Assessee is engaged in developing, operating andmaintaining information technology parks and the name of thepark developed, maintained and operated during the relevantprevious year was "Tidel Park". Assessee has obtained approvalfor setting up industrial park from the Ministry of Industry,Government of India. CBDT had also notified it as an industrialpark under section 80IA(iii) of the Act. 4. The brief facts relevant to the case of TCA.No.972 of2013 are as follows:- 4.1. The assessee is a company promoted as a joint ventureby M/s TIDCO & M/s ELCOT and both are Government of Tamil NaduUndertakings. Assessee is engaged in developing, operating andmaintaining information technology parks and the name of thepark developed, maintained and operated during the relevantprevious year was "Tidel Park". Assessee has obtained approvalfor setting up industrial park from the Ministry of Industry,Government of India. CBDT had also notified it as an industrialpark under section 80IA(iii) of the Act. 4.2. For the relevant Assessment Year, the assessee filedits return declaring an income of Rs.76,67,750/- and claimeddeduction of Rs.6,73,15,795/- under section 80-IA (4)(iii) ofthe Income Tax Act. Thereafter the assessment was completed on10.03.2006 under section 143(3) of the Act. On 26.03.2008,assessee was served with a notice proposing to reopen theassessment. The assessee, in its reply filed on 17.04.2008,requested the Assessing Officer to treat the return originallyfiled as the return filed in pursuance of such notice and alsorequested the Assessing Officer to give reasons while resortingfor re-assessment. The department furnished the reasons interalia mentioned that the assessee had not filed the audit reportin Form No.10CCB along with return, which was required foravailing the deduction under section 80 IA of the Act.Thereafter, the re-assessment was completed on 26.12.2008withdrawing the deduction made under section 80-IA of the Act. 4.3. Aggrieved by the same, the assessee filed an appealbefore the CIT(A) questioning the withdrawal of deduction madeunder Section 80lA. The CIT(A) allowed the appeal of theassessee by directing the Assessing Officer to accept the reportin Form No.10CCB filed by the assessee during the course of re-assessment proceedings and to allow the deduction claimed undersection 80-IA of the Act. 4.4. The Assessing Officer, pursuant to the directions ofCIT(A), issued fresh notice to the assessee under Section 148.Though the assessee objected to the second re-opening ofassessment, the Assessing officer chose to proceed with the re-assessment and completed the same on 31.12.2010 denyingdeductions claimed under section 80-IA of the Act. In the saidre-assessment proceedings, the Assessing Officer took a view that the deduction under section 80IA(4)(iii) could be availedonly for the profits derived from developing, operating andmaintaining facilities of the nature mentioned therein and couldnot be applied for the rentals received from the property. Theassessee contended that during the course of originalproceedings itself, the details of its claim under section 80IA(4)(iii) was called for by the Assessing Officer and they werefurnished. The Assessee also pointed out that one of thequestions raised by the Assessing Officer in his letter dated11.02.2006 was to explain how it could claim rental income,interest on income, other income, revenue shares from lessees,and operation and maintenance charges received as eligiblededuction under section 80lA of the Act. However, the Assessingofficer was not impressed with the reasons given by the assesseeand he was of the view that since the production of books ofaccount, evidence from which material evidence could, with duediligence, be discovered, would not amount to disclosurerequired under section 147 of the Act, rejected the claim ofthe assessee. 4.5. Against the said order, the Assessee went on appeal tothe CIT(A), assailing the re-assessment as well as the denial ofdeduction under section 80-IA of the Act. According to theassessee, reopening of assessment, which was based on a changeof opinion and that too, after four years from the end of therelevant Assessment Year, was not proper. The CIT(A) allowed theappeal of the assessee on the ground that there was no failureon the part of the assessee to disclose fully and truly thematerial facts required for the assessment and thus held thatthe reassessment proceedings was invalid. 4.6. Aggrieved by the order of the CIT(A), the Revenue hadfiled an appeal before the ITAT which had rejected the appeal onthe grounds that there was no tangible material with theAssessing Officer for taking a different view and that resortingto reopening of assessment was based on change of opinion whichwas not possible and thus, the very basis for assumption ofjurisdiction for reopening of assessment was absent and upheldthe finding of CIT(A) and dismissed the appela filed by theRevenue. 5. The brief facts relevant to the case of TCA.Nos.973 &974 of 2013 are as follows:- 5.1. The assessee company claimed deduction under Section80-IA(4)(iii) of the Act for the relevant Assessment Year. Thiswas allowed in the original assessment under Section 143(3) ofthe Act, completed on 19.12.2007. The Assessing Officer issuednotice on 17.03.2010 under section 148 proposing re-assessment.The Assessee's reasons for objecting to the re-assessment wasthat the interest from sinking fund was one of the items onwhich such details were furnished and deduction under section 80-IA of the Act was allowed to it only after considering itsreply. The contention of the assessee was rejected by theAssessing Officer as he was of the view that since production ofbooks of account and evidence from which material evidencecould, with due diligence, be discovered, would not amount todisclosure required under Section 147 of the Act. 5.2. Aggrieved by the same, the Assessee went on appeal tothe CIT(A), assailing the re-assessment as well as the denial ofdeduction under section 80-IA of the Act. Acoording to theassessee, re-opening of assessment was based on a change ofopinion and that too after four years from the end of therelevant Assessment Year. The CIT(A) allowed the appeal of theassessee on the ground that there was no failure on the part ofthe assessee to disclose fully and truly material facts requiredfor the assessment and thus held the reassessment proceedings tobe invalid. 5.3. Aggrieved by the order of the CIT(A), the Revenue hadfiled an appeal before the Income Tax Appellate Tribunal (ITAT)which had also rejected its appeal on the ground that there wasno tangible material with the Assessing Officer for taking adifferent view and resorting to re-opening, based on change ofview, which was not possible and thus the very basis forassuming a jurisdiction for reopening was absent. Therefore, itheld that the CIT(A) was right in invalidating the re-assessmentand dismissing the Revenue's appeal. 6. The appellant/department in TCA.No.972 of 2013 suggestedthe following substantial questions of law:-“1.Whether on the facts and circumstances ofthe case, the Income Tax Appellate Tribunal wasright in invalidating the reopening of theassessment despite the fact that the AssessingOfficer had not considered the issue relating toSection 43B in the original assessment completed on 17.03.2010? 2.Whether on the facts and circumstances of thecase, the assessee is eligibile for deduction underSection 80IA on the lease rental income fromIndustrial Park to be assessed under the headProfits and gains of Business or Profession?” 6. The appellant/department in TCA.No.972 of 2013 suggestedthe following substantial questions of law:-“1.Whether on the facts and circumstances ofthe case, the Income Tax Appellate Tribunal wasright in invalidating the reopening of theassessment despite the fact that the AssessingOfficer had not considered the issue relating toSection 43B in the original assessment completed on 17.03.2010? 2.Whether on the facts and circumstances of thecase, the assessee is eligibile for deduction underSection 80IA on the lease rental income fromIndustrial Park to be assessed under the headProfits and gains of Business or Profession?” 6.2. The appellant/department in TCA.Nos.973 & 974 of 2013suggested the following substantial questions of law:-“1.Whether on the facts and in thecircumstances of the case, the Income Tax AppellateTribunal was right in invalidating the reopening ofthe assessment? 2.Whether on the facts and in the circumstancesof the case, the assessee is eligibile for deductionunder Section 80IA on the lease rental income fromIndustrial Park to be assessed under the headProfits and gains of Business or Profession?” 7. The learned counsel appearing for the appellant submittedthat the deduction under Section 80IA could be available onlyfor the profits derived from developing, operating andmaintaining facilities of the nature mentioned therein and couldnot be applied for rentals received from property. Therefore, hecontended that in the present case, the lease rentals receivedby the Assessee is not eligible for deduction under Section 80IAand however, all these facts have not been considered by theCommissioner of Income Tax (Appeals)-VI, Chennai as well as theTribunal. 8. The learned counsel for the revenue further contendedthat the re-opening of assessment under Section 147 read withSection 148 of the Income Tax Act, 1961 was resorted not onlyfor the purpose of withdrawal under Section 80IA, but for theother reason that the interest shown as payable towardsdeduction was allowed without considering Section 43(b) of theAct. According to the appellant, unless and until the interestshown as outstanding in the accounts of the company or a companyenterprise was paid before the end of the previous year orbefore the due date of filing of the return, claims in thisregard could not be allowed. In the present case, the interestshown as outstanding was not paid before the end of the previousyear, and therefore, the Assessee is not entitled to deductionand these aspects were not considered at that time of originalassessment proceedings and therefore, the re-opening of theassessment under Section 147 is valid. 9. The learned counsel also contended that for theassessment year 2005-06, the assessment was reopened within theperiod of limitation under Section 148 and notice was issued on17.03.2010 for reassessment. Since the Assessing Officer had nottaken any view on the rent received from the premises, theAssessee is eligible for deduction under Section 80IA of theAct. However, through the re-assessment proceedings underSection 147, the Assessing Officer reached a conclusion that theAssessee was not eligible for deduction under Section 80IA.Further he stated that both the CIT(A) and the Tribunal have notconsidered the submissions of the department regarding theeligibility of deduction under Section 80IA, since the incomederived from the lease rentals has not fallen under the head ofprofit and gains of the business and profession and it shouldhave been considered under the head of income and profits. 10. Per contra, the learned counsel for therespondent/assessee would submit that in the present case, leaserental received by the assessee was from and in the course ofthe business, which will clearly amount to profit derived fromthe business out of developing, operating and maintainingfacilities provided to the Software or Industrial park units,which is eligible for deduction. Therefore, the lease rentalsreceived could be treated as business income and not as anincome derived from the house properties. In this regard, theCounsel referred this Court's Judgment in the case of CIT vs.M/s. Elnet Technologies Ltd., passed in TCA.Nos.2336 & 2623 of2006, dated 09.10.2012. 11. The learned counsel also referred to another Judgment,which was rendered by a co-ordinate bench of this Court in thecase of CIT vs. Chennai Properties and Investments Ltd. Hecontended that the income of lease rental laid on and from thehouse properties could be considered only as income from thebusiness and not as income from the house properties. He furthersubmitted that it is well a settled principle that the leaserental income derived from the Software Park could be consideredonly as income from the business and not income from the houseproperties as contended by the department. 12. The learned counsel for the respondent/assesseecontended that the assessment has been completed on 31.03.2008,for the assessment year 2003-04, whereas the notice for re-assessment proceeding under Sections 147 and 148 of the Act hasbeen issued by the department on 17.03.2010. Therefore, thenotice issued under Section 148 of the Act was beyond the fouryear period of limitation as prescribed therein. That apart, noother new material was found by the department to show that theincome has escaped assessment, to initiate the proceedings underSection 148. Therefore, he submitted that the appeal is alsobarred by limitation and it is liable to be dismissed. 13. Furthermore, the learned counsel for therespondent/assesee contended with regard to the payment ofinterest that in the course of the original assessmentproceeding itself, the Assessing Officer had issued a letter on11.02.2006, with regard to the interest shown as Rs.6.69 crorewas payable as on 31.03.2003. The Assesee in his reply letterdated 24.02.2006 had clearly stated that the payment of amountof Rs.6.69 crore was made before the completion of the relevantassessment year and in that regard, all the particulars had beenprovided by the Assessee to the Assessing Officer. After perusalof all the particulars, the Assessing Officer had passed thedetailed assessment order. Therefore, there is no concealment ofany material fact during the course of the assessment, so as toenable the department to reopen the assessment under Sections 147 and 148 of the Act. Thus, both the CIT(A) -VI as well as theTribunal have considered the facts elaborately and given itsfinding and the same does not require any re-consideration ascontended by the department. Hence, he prayed for dismissal ofthe appeals. 14. We have heard elaborately the submissions made by theboth sides on all the appeals and perused the materialsavailable on record. 15. These appeals are relating to the assessment year 2003-04 and 2005-06. In all the three appeals, the department hadtaken a view that the income earned by the Assessee will betreated as income from the house property and not income fromthe business or profession, so as to become eligible fordeduction under Section 80IA. We are unable to understand as tohow the department has taken such a view against the Assesseewhen the main object of the company is to construct, maintainand lease out of the Software Technologies Park and the mainincome of the Assessee was lease rentals. 14. We have heard elaborately the submissions made by theboth sides on all the appeals and perused the materialsavailable on record. 15. These appeals are relating to the assessment year 2003-04 and 2005-06. In all the three appeals, the department hadtaken a view that the income earned by the Assessee will betreated as income from the house property and not income fromthe business or profession, so as to become eligible fordeduction under Section 80IA. We are unable to understand as tohow the department has taken such a view against the Assesseewhen the main object of the company is to construct, maintainand lease out of the Software Technologies Park and the mainincome of the Assessee was lease rentals. 16. We have perused the entire order passed by theAssessing Officer under Section 147. But, we are unable to findanything in the order as to what was the object of the assesseecompany etc., It shows that the Assessing Officer, withoutapplication of mind, had passed the re-assessment order, withassumption, presumption and surmise, which will not bepermissible under any of the statute. We also tried to findsomething in statutes to support the finding of the AssessingOfficer, but found none. 17. Further, both the CIT(A)-VI and the Tribunal havethoroughly scrutinised the entire facts and passed the order.The original assessment order was passed by the AssessingOfficer after taking into consideration of all the materialfacts. During the course of the re-assessment proceeding also,the Assessing Officer has not found any tangible material bywhich income has escaped from the assessment. Therefore, we areof the opinion that without any application of mind, theAssessing Officer re-opened the assessment under the pretextthat income has escaped assessment and passed the re-assessmentorder under Section 147, which is a patent error committed bythe Assessing Officer. Under these circumstances, we do not findany merit in all these three appeals filed by the Revenue andthe same are liable to be dismissed on the above said pointalso. 18. The present issue is squarely covered by the Judgmentof this Court passed in the case of CIT vs. M/s.ElnetTechnologies Ltd., and CIT vs. Chennai Properties and Investments Ltd., in which the judgment in the case of TheCommissioner of Income Tax, Chennai Vs. M/s.Tidel Park Ltd.,passed in TCA.No.901 of 2015, dated 03.08.2020 has beenfollowed, wherein we have passed a detailed order, referring tothe decision of this Court rendered in the case of PrincipalCommissioner of Income Tax-4, Vs. M/s.Khivraj Motors Pvt. Ltd.,in TCA.Nos.314&315 of 2017, dated 27.07.2020. 19. In TCA.No.972 of 2013 (for the assessment year 2003-04), the learned counsel for the appellant/department has raisedone more issue with regard to non-payment of interest. Ascontended by the Assessee and upon perusal of all the records,it is clear that the Assessee had paid the interest amount ofRs.6.69 crore within the relevant assessment year and all thesefacts have been disclosed by the Assessee to the AssessingOfficer. After taking into consideration all these aspects, theAssessing Officer had passed the original assessment order.Therefore, we do not find any merit in the submissions of thelearned counsel on the basis that the deduction was grantedwithout payment of any interest during the relevant financialyear and hence, the appeal is liable to be dismissed well onthis point also. 20. Yet another issue also raised with regard to limitationfor reopening the assessment under Section 147. The notice underSection 148, for reopening of the assessment was issued on17.03.2010 for the assessment year 2003-04. If at all, if thedepartment intended to reopen the assessment under Sections 147and 148, it should have issued the notice under Section 148within four years from the end of the relevant assessment year.In the present case, after completion of the period i.e., on31.03.2008, the department issued a notice under Section 148 forre-assessment. Therefore, we are of the view that the re-openingof the assessment for the assessment year 2003-04 was beyond theperiod of limitation and accordingly, the Tax Case Appeals inTCA.Nos.972, 973 & 974 of 2013 are liable to be dismissed onthis point also. 21. As aforesaid, in all the three appeals, the re-openingof the assessment by the department was without any evidence toshow concealment on material facts on the part of the Assessee.The department tried to provide its second opinion, under thatpretext the original assessment proceedings of the AssessingOfficer was sought to be re-opened without providing any opinionwith respect to the rental income. We would stress upon to statethat the department should not have come to the conclusion andre-opened the assessment under Sections 147 and 148 of the Actunder the pretext that the Assessing Officer has not providedany opinion. In fact, the Assessing Officers cannot make anyassessment without forming any opinion and pass the assessment order. Therefore, the question of the Assessing Officer failingto provide any opinion does not arise. Accordingly, on thispoint also, the appeals of the department are liable to bedismissed. order. Therefore, the question of the Assessing Officer failingto provide any opinion does not arise. Accordingly, on thispoint also, the appeals of the department are liable to bedismissed. 22. At this juncture, we would like to stress that the re-assessment proceedings under Section 147 of the Act do notprovide for re-assessment on a mere change of opinion. The re-assessment on a mere of change of opinion is not permissibleunder law. Such change of opinion amounts to review of theorder of the assessment, which is not permissible under law. Insupport of our opinion, we would like to press into service theJudgment of the Hon'ble Supreme Court in the case ofCommissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd.,reported in (2010) 187 Taxman 312 or 320 ITR 561 (SC). Theextract of the relevant Paragraph No.4 which reads as follows:-“4.On going through the changes, quoted above,made to Section 147 of the Act, we find that, priorto direct Tax laws (Amendment) Act, 1987, re-openingcould be done under above two conditions andfulfilment of the said conditions alone conferredjurisdiction on the Assessing officer to make a backassessment, but in Section 147 of the Act [witheffect from 1-4-1989], they are given a go-by andonly one condition has remained, viz., that wherethe Assessing Officer has reason to believe thatincome has escaped assessment, confers jurisdictionto re-open the assessment. Therefore, post 1-4-1989,power to reopen is much wider. However, one needs togive a schematic interpretation to the words “reasonto believe” failing which, we are afraid, section147 would give arbitrary powers to the AssessingOfficer to re-open assessments on the basis of “merechange of opinion”, which cannot be per se reasonto reopen. We must also keep in mind the conceptualdifference between power to review and power to re-assess. The Assessing Officer has no power toreview; he has the power to reassess. Butreassessment has to be based on fulfilment ofcertain pre-condition and if the concept of “changeof opinion” is removed, as contended on behalf ofthe Department, then, in the garb of re-opening theassessment, review would take place. One must treatthe concept of “change of opinion”as an in-builttest to check abuse of power by the AssessingOfficer. Hence, after 1-4-1989, Assessing Officerhas power to reopen, provided there is “tangiblematerial” to come to the conclusion that there isescapement of income from assessment. Reasons musthave a live link with the formation of the belief. Our view gets support from the changes made tosection 147 of the Act, as quoted hereinabove. Underthe Direct Tax Laws (Amendment) Act, 1987,Parliament not only deleted the words “reasons tobelieve” but also inserted the word 'opinion' insection 147 of the Act. However, on receipt ofrepresentations from the Companies against omissionof the words “reason to believe”, Parliament re-introduced the said expression and deleted the word“opinion”on the ground that it would vest arbitrarypowers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549, dated31.10.1989, which reads as follows:-“7.2. Amendment made by the Amending Act, 1989to reintroduce the expression 'reason to believe' insection 147.- A number of representations werereceived against the omission of the words 'reasonto believe' from section 147 and their substitutionby the 'opinion' of the Assessing Officer. It waspointed out that the meaning of the expression,'reason to believe' had been explained in a numberof court rulings in the past and was well settledand its omission from section 147 would givearbitrary powers to the Assessing Officer to reopenpast assessments on mere change of opinion. To allaythese fears, the Amending Act, 1989, has againamended section 147 to reintroduce the expression'has reason to believe' in place of the words 'forreasons to be recorded by him in writing , is of theopinion'. Other provisions of the new section 147,however, remain the same.” ” 23. In view of the reasons stated above, we do not find anyquestion of law arising for our consideration in all the threeappeals viz., TCA.Nos.972,973 & 974 of 2013. We do not find anyillegality or error in the decision making process of the CIT(A)-VI and the Tribunal and therefore, the orders passed by theboth Courts below are correct and sustainable and do not requireany interference. Hence, all the appeals filed by the departmentdeserves to be dismissed. 24. In the result, the Tax Case Appeal Nos.972, 973 & 974of 2013 are dismissed. No costs. s/d- Assistant Registrar To 1.The Income Tax Appellate Tribunal Madras, 'B' Bench, Chennai. 2.The Commissioner of Income Tax, (Appeals)VI 121 Mahathma Gandhi Road, Chennai 3.The Assistant Commissioner of Income Tax,Company Circle IIIChennai 34.Company Circle IIIChennai 34. Copy to The Assistant RegistrarIncome Tax Appellate TribunalIII Floor, Rajaji BhavanBesant Nagar, Chennai 90. +1 CC to M/s. Subbaraya Aiyar Padmanabhan, Advocate sr 27186.T.C.A.Nos.972 to 974 of 2013SVI(CO)SP(16/10/2020)