Income from Industrial Park Scheme exempt under section 80-IA(4)(iii) if conditions met pre-assessment.

The Tribunal allowed the assessee's appeals, ruling that the income from the Industrial Park Scheme declared in AY 04-05 and 05-06 should be exempted under section 80-IA(4)(iii) as the conditions for exemption were met before the assessment completion for those years. The Tribunal emphasized that accounting methods should not preclude statutory benefits and that subsequent events meeting exemption criteria should be recognized.

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Issues Involved:
1. Whether the income from the Industrial Park Scheme, 2002 should be reduced from the returned income.
2. Whether the income which had not accrued to the assessee could be reduced from the returned income in light of section 80-IA of the Income Tax Act, 1961, Industrial Park Scheme, 2002, and relevant rule 18C.
3. Whether the income returned by the assessee under the Industrial Park Scheme should be treated as income deductible under section 80-IA(4)(iii) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Income Reduction from Returned Income:
The assessee, engaged in the business of hotel, builders, and real estate developers, filed appeals against the order of CIT(A) for AY 04-05 and 05-06. The assessee argued that the income forming part of the Industrial Park Scheme, 2002, should be reduced from the returned income due to the peculiar circumstances of its case. The assessee had developed an Industrial Park and applied for approval under the Industrial Park Scheme, 2002. The project was completed by 31.03.2006, and the CBDT notified the project on 12.07.2006. During AY 04-05 and 05-06, the assessee offered profit on the 80IA project but later requested to withdraw this income as it became eligible for deduction under section 80-IA(4)(iii) in AY 06-07. The CIT(A) rejected this request, stating that the assessee rightly offered profits to tax in AY 04-05 and 05-06 and could not withdraw the profits due to subsequent events. The Tribunal, however, directed that the income from the Industrial Park Scheme declared in AY 04-05 and 05-06 should be exempted under section 80-IA(4)(iii) as the conditions for the exemption were satisfied before the completion of the assessment for those years.

2. Accrued Income and Reduction from Returned Income:
The assessee contended that the income which had not accrued should not be included in the returned income. The CIT(A) held that the assessee could not withdraw the profits offered in AY 04-05 and 05-06, as the accounts for those years were complete and irreversible. The CIT(A) referred to the decision of the Supreme Court in Goetze (India) Ltd vs CIT, which held that a relief if omitted to be sought has to be claimed only by filing a revised return. The Tribunal, however, noted that the assessee had followed the project completion method of accounting and the income offered in AY 04-05 and 05-06 was due to a misapprehension. The Tribunal directed that the income should be reduced from the returned income as the conditions for deduction under section 80-IA(4)(iii) were satisfied before the completion of the assessment.

3. Income Deductible under Section 80-IA(4)(iii):
The assessee argued that the income returned under the Industrial Park Scheme should be treated as income deductible under section 80-IA(4)(iii). The CIT(A) rejected this, stating that the assessee had not developed all 33 units by 31.03.2005, and thus, the conditions for deduction were not fulfilled. The Tribunal, however, noted that the assessee had completed the project by 31.03.2006 and the CBDT had notified the project. The Tribunal directed that the income declared in AY 04-05 and 05-06 should be considered for deduction under section 80-IA(4)(iii) as the conditions were satisfied before the completion of the assessment.

Conclusion:
The Tribunal allowed the appeals of the assessee, directing that the income from the Industrial Park Scheme declared in AY 04-05 and 05-06 should be exempted under section 80-IA(4)(iii) as the conditions for the exemption were satisfied before the completion of the assessment for those years. The Tribunal emphasized that the method of accounting should not deny the benefit available under the law and that subsequent events satisfying the conditions for exemption should be considered.

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