2012 (11) TMI 1214 - AT - Income Tax

Partnership firm wins ITAT appeal for deduction under section 80IA(4)(iii) for AY 2008-09

ACIT, Cir-6 (1), Hyderabad Versus M/s. Annapurna Builders, Begumpet, Hyderabad

ACIT, Cir-6 (1), Hyderabad Versus M/s. Annapurna Builders, Begumpet, Hyderabad - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the Assessing Officer can deny deduction under section 80IA(4)(iii) where the assessee has obtained Central Government approval/notification under the Industrial Park Scheme, despite alleged non-compliance with conditions (shortfall in constructed area, sale of part of allocable area, and less than 90% utilisation for specified industrial activities). 2. Whether fulfilment of conditions attached to the Government approval is a matter exclusively for the Central Government to determine, and whether only the Central Government (by withdrawal of approval/notification) can deprive the assessee of deduction under section 80IA(4)(iii). 3. Whether facts identical to those decided by a coordinate Tribunal bench constitute bindingly persuasive authority warranting following that decision in the absence of changed circumstances. ISSUE-WISE DETAILED ANALYSIS Issue 1 - AO's power to deny section 80IA(4)(iii) deduction despite Central Government approval Legal framework: Section 80IA(4)(iii) grants deduction to undertakings as per conditions laid down; the Industrial Park Scheme and Central Government approval/notification prescribe conditions and contain mechanism for withdrawal of approval if conditions are not met. Precedent Treatment: A coordinate Tribunal decision adjudged that where Central Government has approved and notified an industrial park under the Scheme, the statutory conditions for section 80IA(4)(iii) are satisfied absent withdrawal of approval; a High Court decision (Ganesh Housing principle) held that obligation is to provide infrastructure by the scheme deadline and subsequent non-commencement by industrial units does not mandate withdrawal absent exercise of power by Central Government. Interpretation and reasoning: The Court reasoned that the existence of Central Government approval/notification constitutes compliance with the statutory scheme for entitlement to deduction. The Tribunal emphasised that the statutory scheme provides Central Government with the power to withdraw approval if conditions are contravened, and in the absence of such withdrawal the entitlement remains. Administrative determinations about compliance with scheme conditions are therefore for the Central Government to act upon; the AO cannot independently effectuate denial of deduction founded on alleged non-compliance when approval/notification remains extant. Ratio vs. Obiter: Ratio - Where an assessee has obtained Central Government approval/notification under the Industrial Park Scheme and such approval has not been withdrawn by the Central Government, the assessing authority cannot deny deduction under section 80IA(4)(iii) on grounds of alleged non-compliance with approval conditions. Obiter - Observations about the precise scope of AO's fact-finding powers and the interplay with administrative withdrawal procedures beyond the facts of the case. Conclusions: The Tribunal held that the AO erred in denying deduction on factual grounds of shortfall/sale/occupancy when Central Government approval remained in force; entitlement to deduction must be recognised unless the Central Government withdraws the approval. Issue 2 - Effect of alleged shortfall in constructed area, sale of part of allocable area, and less than 90% utilisation Legal framework: Conditions attached to approval under the Industrial Park Scheme include specified total/allocable area and utilisation thresholds (e.g., 90% utilisation for specified industrial activities) as prerequisites for the section 80IA(4)(iii) benefit; the approval/notification mechanism and express withdrawal power reside with the Central Government. Precedent Treatment: The coordinate Tribunal (and authority relied upon) treated similar alleged breaches - constructed area lower than proposed, sale of a portion of allocable area, differing tenant usage, and shortfall in 90% utilisation - and still upheld deduction where approval remained unwithdrawn. Interpretation and reasoning: The Tribunal examined the AO's threefold grounds of denial (constructed area shortfall, sale of part of allocable area, and utilisation under 90%). It noted the factual parity with an earlier Tribunal decision in the assessee's own case and found no intervening change in circumstances. The Tribunal accepted the assessee's explanations (measurement variance, sale of commercial portion that was not part of allocable industrial area, earlier-year sale, treatment of common facilities) and concluded that the threshold condition of effective utilisation for specified purposes (over 90% of net allocable area) was, on the assessee's case and relevant prior decision, effectively met or did not justify denial while approval/notification continued to stand. The tribunal also relied on the principle that the scheme contemplates administrative withdrawal, not unilateral assessment-stage denial. Ratio vs. Obiter: Ratio - Alleged deviations such as minor construction shortfall, sale of area allocated for non-industrial/commercial purposes, or contested occupancy percentages do not permit the AO to deny deduction under section 80IA(4)(iii) so long as Central Government approval/notification remains unwithdrawn; factual disputes of this character should not be converted into denial of benefit absent administrative action by the approving authority. Obiter - Factual findings specific to measurement/calculation differences and treatment of common facility areas that were resolved on the specific record. Conclusions: The findings of shortfall and sale were insufficient to justify denial of deduction by the AO; the assessee remained entitled to the benefit under section 80IA(4)(iii) because the approval/notification had not been withdrawn and the earlier coordinate decision on identical facts supports allowance. Issue 3 - Role and precedential effect of a coordinate Tribunal decision in identical facts Legal framework: Principles of consistency and application of precedents by coordinate benches; a Tribunal may follow decisions of a co-ordinate Bench in identical or substantially similar facts unless distinguishable or there are changed circumstances. Precedent Treatment: The Tribunal explicitly followed the co-ordinate Bench's earlier decision in the assessee's own case for a prior assessment year where identical grounds were considered and deduction was allowed. The Tribunal also cited supporting High Court authority reinforcing the administrative exclusive domain for withdrawal. Interpretation and reasoning: The Tribunal found the factual matrix for the impugned year to be identical to the earlier year and observed no change in circumstances that would call for deviation. Absent any distinguishing factors, the Tribunal invoked the co-ordinate Bench's reasoning as persuasive and binding for purposes of consistent adjudication in the Tribunal forum. Ratio vs. Obiter: Ratio - A coordinate Tribunal decision on identical facts is to be followed in the absence of changed circumstances or distinguishing facts; such precedent supports the substantive conclusion that deduction should be allowed. Obiter - Broader commentary on deference to administrative withdrawal mechanisms beyond the immediate binding effect of the earlier decision. Conclusions: The Tribunal followed the co-ordinate Bench decision and held that identical factual circumstances required the same legal outcome: allowance of deduction under section 80IA(4)(iii). Overall Conclusion The Court upheld the appellate authority's allowance of deduction under section 80IA(4)(iii), holding that where Central Government approval/notification under the Industrial Park Scheme exists and has not been withdrawn, the Assessing Officer cannot deny the statutory deduction on grounds of alleged non-compliance with scheme conditions (including minor construction shortfall, sale of non-allocable/commercial area, or occupancy percentages), and a coordinate Tribunal decision on identical facts must be followed in the absence of changed circumstances.