TaxTMI 
TaxTMI 
2014 (5) TMI 960
X X X X Extracts X X X X
X X X X Extracts X X X X
....33/- u/s 80IAB of the I.T Act. The revised return was filed on account of demerger of non SEZ activities from the assessee company w.e.f. 1/4/2008, as per scheme of amalgamation and approval granted by Delhi High Court. In the assessment order passed for the year under consideration, the Assessing Officer disallowed the deduction claimed by the assessee u/s 80-IAB of the I. T. Act amounting to Rs. 400,33,67,733/- for developing special economic zone at Hyderabad. 3. The Ld. CIT(A), by virtue of the impugned order, deleted the disallowance made by the AO. 4. The Ld. DR has contended that the Ld. CIT(A) has erroneously deleted disallowance/addition correctly made by the AO, wrongly treating the incomes of the assessee from the sale of assets as business income, whereas the same has rightly been assessed by the AO as capital gain. 5. The Ld. Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. It has been submitted that the matter stands squarely covered in favour of the assessee by the decision dated 13/12/2013 of the Delhi Bench of the Tribunal in the assessee's own case for the immediately preceding assessment year, i.e. A.Y, 2008-09, in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ountants or India. The Assessing Officer's observations by referring to the classification of assets shown by the codeveloper was a sale of capital asset subjected to capital gain is against the very principle of the Act when the bare shell buildings were neither part of capital work in progress nor fixed assets of the appellant. A perusal of the assessment order reveals that the Assessing Officer has not categorically held the income of the appellant under the head 'Capital Gains' as no such specific addition has been made. The Assessing Officer has only made his observations without prejudice to his decision in disallowing the entire claim of deduction u/s 80IAB. It is seen that observations of the Assessing Officer are not based on correct appreciation of facts. The appellant has shown work in progress in the business of construction and by no stretch of imagination work in progress can be treated as capital asset. The stock in trade is specifically excluded from the definition of 'Capital asset'. The stock in trade is specifically excluded from the definition of 'Capital Asset' u/s 2 (14) of the Act. The development of the bare shell buildings in the SEZ and subsequent transfe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(SEZ Section) vide letter dated 18/6/2007 which included an operation of development of office space (Warm Shell). In order to consolidate the MOU and addendums thereto a co-developer agreement was entered into between the appellant and DLF Assets Pvt. Ltd on 20/3/2008 which was also filed before the Board of Approvals and the approval was also granted to this agreement vide letter dated 1/6/2009 by the Ministry of Commerce & Industry (SEZ Section). The appellant has filed all these approvals and notifications which are contained in the paper book. In support of its claim the appellant has also filed copies of POCM chart, a certificate from the Chartered Account in Form No. 10CCB which is placed in the paper book. It is seen that as per the MOU dated 29/11/2006 the developer agreed to appoint DLF Assets Pvt. Ltd as co-developer for developing, operating and maintaining the said SEZ by granting DAPL the exclusive right to execute a part of the authorized operations and the co-developer has agreed to fund and execute the said authorized operations specifically allocated to it by the developer. In this MOU it was stated that the developer will create in favour of the codeveloper i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ings vide clause 2.6 of the agreement." 6.1 The Ld. CIT(A), it is seen, has further taken into consideration the following facts:- " Consequent upon the decision taken in the 32nd meeting of the Board of Approvals on 23/2/2009 to examine the matter on file, the note sheet was prepared, which the appellant has filed and accepted as additional evidence collected by the appellant under the Right to Information Act. It is seen from the additional evidences filed by the appellant that the matter was referred to director (ITA-1) CBDT pursuant to objections raised by the representative of the Department of Revenue (DOR) in the 32nd meeting after the Board of Approvals clarifying the position as under:- 1. The developer is not selling the land to the co-developer but is only leasing it out. 2. Normally after the land is released, the co-developer will construct the building. In this case the developer has already constructed the shell which is being transferred to the co-developer for a consideration. The co-developer will finish the shells, leased it out to the units and collect rentals. In other cases also, the same activity is carried, the only difference in this case is the ready a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome by way of lease rentals/down payment/premium etc. for the purposes of assessment under the prevalent Income Tax Act and Rules. The Assessing Officer will have the right to examine the taxability of these amounts under the Income Tax Act." 7. The Ld. CIT(A) also observed that as per the qua letters dated 18/1/2011 & 20/1/2011 issued by the Ministry of Commerce, Deptt of SEZ, as filed by the assessee, the assessee and the co-developer had performed the authorized operations duly approved by the Board of Approvals. It was observed that these letters had been field before the AO in the assessment proceedings; that the letter dated 20/1/2011 made it clear that the assessee could transfer bare shell and cold shell buildingsto the co-developer by executing transfer and handing over deed and in consideration thereof, the co-developer would make payment of such amount as development consideration in favour of the developer, as agreed to between the parties; and that in view of such clarification, the AO's observation that the transfer of bare shell buildings by the assessee to the co-developer was not an authorized operation, was not based on the correct appreciation of the documents f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....payments/premiums etc. which tantamount to sale of land in the guise of long term lease. The appellant has obtained requisite approval from the Board of Approvals by disclosing all facts. The entire controversy as to whether the transfer of bare shell buildings to the codeveloper was an authorized operation has been set at rest by the correspondents made between the Ministry of Commerce and Department of Revenue and also by clarification letters issued dated 18/1/2011 & 20/1/2011 by Ministry of Commerce. The appellant has made an agreement with the co-developer giving the land on lease for 49 years and yearly lease rentals are being received by the appellant. There is no lumsum payment in the form of lease rentals/down payments/premiums etc. received by the appellant against the land during the year. I as satisfied that all the conditions as required to be satisfied under the SEZ Act/Rules are fulfilled and the appellant is an approved developer for all intent and purpose of Section 8oIAB of the Act. Consequent upon approval granted by the Board of Approvals for the transfer of bare shells to the codeveloper for a consideration is an authorized operation and income derived from suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re shell buildings to co-developers constitute authorized activity. Thus, we see no error on any count as held by CIT in the order of assessing officer allowing deduction u/s 80-IAB." 11. In the case of the sister concern of the assessee, DLF Info City Developers, the Tribunal has held, inter-alia, Page 40 to 41. "36. Thus, as discussed above, the admitted and undisputed fact remain that the assessee has been duly approved by the BOA as a developer, the land owned by the assessee at Chennai was notified by the Govt. of India for establishment of SEZ, the authorized operations to be under taken in the said SSEZ were approved by BOA, the co-developer agreement dated 20/3/2008 executed with the co-developer contemplating transfer of "bare shells" to the co-developer has been duly approved by the BOP; the DAPL has been approved as a co-dev eloper, the transfer of bare shell to the codeveloper has been approved as an authorized operation b y the BOP and the disclaimer contained in Clauses 3(XVII) of the approval letter dated 1/6/2009 applies only to the lease of land as clarified by the approval letter dated 1/6/2009 applies only to the lease of land as clarified by the Ministry of Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en the terms like SEZ, authorized operations, developers etc have been specifically defined under the SEZ Act, it is not open to any authority to relook at the meaning of terms already defined under the SEZ Act." Page 45. "39. We thus find that assessee is a developer under the SEZ Act and is in the business of developing a SEZ, the SEZ has been notified on the first day of April 2005 under the Special Economic Zone Act 2005; and the profits have been derived from the business of development, operation and maintenance of SEZ. We thus fully agree with the finding of the Ld. CIT(A) that all the conditions as required to the satisfied under the SEZ Act/ Rules are fulfilled and the assessee is approved developer for all the intent and purposes of Section 80IAB of the I.T. Act. Consequent upon approval granted by the BOA for transfer of bare shell to the co-developer, the profits arising to the assessee from such an authorized transaction are eligible for deduction u/s 80IAB of the Act." Page 45 "40. Thus, we find that the issues discussed and view suppressed thereon hereinabove in the preceding paragraphs will cover the issue raised in additional ground of the appeal preferred by t....