AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 319
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....and AO after verifying the books of account as well as other details and making necessary enquiry completed assessment u/s 143(3) of the Act vide order dated 28/03/13. While completing assessment, AO made a number of additions/disallowances, as a result of which gross income was determined at Rs. 46,17,01,813 after allowing deduction under Chapter-VA, taxable income was determined at Rs. 20,54,38,350. Subsequently, assessment records of assessee relating to AY under consideration came up to be examined by ld. CIT in exercise of power conferred u/s 263 of the Act. While examining the records of assessee, ld. CIT noticed that assessee has claimed deduction u/s 80IA(4)(iii) for four units in industrial park out of total five units. He found that out of four units, assessee has claimed deduction for Rs. 5,77,76,303 in respect of unit named Capella and in course of assessment proceeding, AO accepting assessee's submission that it has complied to the conditions prescribed by Department of Industrial Policy and Promotion (DIPP), Govt. of India has allowed assessee's claim of deduction u/s 80IA(4)(iii). He observed, while doing so AO did not verify whether assessee has violated conditions ....
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....4/07 dated 28/09/09 and more specifically para No. 4 of the said notification, ld. CIT observed, the condition imposed therein stipulates that no single unit shall occupy more than 50% of the allocable industrial area of the industrial park, whereas, one of the unit Viz.; CA Computer Association India Pvt. Ltd. occupies more than 50% of the industrial space, hence, assessee has violated the conditions imposed in the CBDT Notification. Ld. CIT observed, though, assessee has violated the aforesaid condition as per the notification issued by CBDT, but, AO without verifying this aspect has completed the assessment allowing assessee's claim of deduction u/s 80IA(4)(iii). He held that decision taken by AO without requisite verification or enquires cannot constitute formation of an opinion. He observed that change of opinion is possible only when there exists a valid opinion. As far as the decision of ITAT in case of L&T Infocity is concerned, ld. CIT observed, since the decision was not part of record at the time of finalization of assessment, the same cannot be taken into consideration. With the aforesaid observations, ld. CIT set aside the assessment order with a direction to re-do ass....
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....al Park. In this context, he drew our attention to the notice issued by AO on 26/07/11 during the assessment proceeding. Referring to the said notice, ld. AR submitted, AO specifically enquired into the condition imposed in para 4 of the CBDT notification. It was submitted, in response to the query raised by AO, assessee submitted a reply before him on 18/10/11 explaining in detail why the condition imposed in para 4 of CBDT notification will not apply to assessee. Ld. AR submitted, when AO after conducting necessary enquiry and applying relevant statutory provision has taken a view, which is a possible view while granting deduction u/s 80IA(4)(iii) to assessee, the order passed cannot be considered to be erroneous and prejudicial to the interests of revenue. Ld. AR submitted, the fact that the view taken by AO is one of the possible view is also proved from the fact that ITAT Hyderabad Bench in case of L&T Infocity Vs. CIT (supra) held that condition imposed in para 4 of CBDT notification would not apply to approval granted under non-automatic route. Thus, it was submitted by ld. AR when AO has taken a possible view after proper enquiry and application of mind, ld. CIT cannot hold....
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....ught approval for Capella Industrial Park under non-automatic route. The conditions imposed for automatic route and non-automatic route are different. As far as automatic route is concerned, conditions imposed are as under: "5. Automatic approval - (1) An undertaking shall make an application in the Form-IPS-1 along with an affidavit certifying the details given in such application for obtaining approval for setting up an industrial park. (2) An application under sub-paragraph (1) shall be made to the Entrepreneurial Assistance Unit of the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion in the Ministry of Commerce & Industry, Udyhog Bhawan, New Delhi- 110011. (3) The Secretariat for Industrial Assistance referred to in subparagraph (2) shall, upon receipt of application, give acknowledgement for receipt of such applications along with, registration number allotted by such Secretariat. (4) Every application under sub-paragraph (1) sha....
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....ure development shall not be less than 50% of the total project cost. In the case of an Industrial Park and Growth Centre which provides built up space for industrial use, the minimum expenditure on infrastructure development including cost of construction of industrial space, shall not be less than 60% of the total project cost; (f) No single unit referred to in column (2) of the Table given in the subparagraph (b) of paragraph 6 shall occupy more than fifty per cent of the allocable industrial area of an industrial model town or industrial park or Growth Centre; (g) Every undertaking being an industrial park shall obtain approval for Foreign Direct Investment or non resident Indian investment from the Foreign Investment Promotion Board or Reserve Bank of India, or any authority specified under any law for the time being in force, as the case may be. 6.1 The conditions for approval under non-automatic route are as under: 7. Non Automatic Approval: (1) All applications not eligible for Automatic approval under paragraph 6 shall require the approval of Empowered Committee, constitute by the Central Government and all such applications shall be placed before the Empowered....
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.... park. Whereas, such condition is absent in non-automatic approval route. Thus, on a plain reading of the scheme and conditions of approval under both automatic and non-automatic route, it is very much clear that condition stipulating that no single unit can occupy more than 50% of the allocable industrial area is not applicable to an industrial park approved under non-automatic route. At this stage, it would be relevant to note that rule 18C of the IT Rules, prescribes the conditions for granting benefit u/s 80IA(4)(iii). As per sub-rule (2) of Rule 18C, the undertaking shall have to be duly approved by the Ministry of Commerce and Industry in the central govt. under scheme for industrial park. It is seen from the record that the Ministry of Commerce and Industry vide notification dated 10/04/07, has granted approval to Capella Industrial park under industrial park scheme, 2002 for availing benefit u/s 80IA(4)(iii). On a careful reading of approval granted as aforesaid, a copy of which is at page 230 of assessee's paper book, it is seen that Ministry of Commerce and Industry of Govt. of India has not put any condition stipulating that no single unit shall occupy more than 50% of a....
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.... was forwarded to the CBDT. In terms of Rule 18C(4) of the Rules, once the indusrrial park is approved by the Ministry of Commerice and Industry, the CBDT has to suomotto issue the notification. The Tribunal, on examination of all facts concluded that all the requisite conditions for claiming benefit under Section 80IA(4)(iii) of the Act has been complied with by the respondent assessee during the assessment year in question. Further, there is no reason to hold the benefit under Section 80IA(4)(iii) of the Act is available only prospectively from the date of the issue of Notification by the CBDT. In these circumstances, as the decision of the Tribunal is based on finding of fact and mere delay on the part of the Central Board of Direct Taxes in issuing the notification would not warrant the respondent - assessee being denied the benefit of Section 80IA(4)(iii). " 6.4 The other decisions of ITAT referred to by ld. AR also express similar view. In fact, ITAT, Hyderabad Bench while considering identical issue in case of L&T Infocity Ltd. (supra) after analyzing the scheme for approval both under automatic and non-automatic route, held that condition imposed in para 4 of CBDT notifi....
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....an industrial park. For this purpose a unit means any separate and distinct enty for the purpose of one and more state or Central tax laws". Since both the Assessing Officer and the Ld.CIT(A) considered the application under automatic rule, they have raised objection whereas assessee's application does not fall under Automatic Approval Scheme, but under Non-automatic Approval Scheme. In view of this, since there is already approval from the relevant authorities and also from the CBDT, we direct the Assessing Officer to grant the deduction u/s.80IA subject to verification of computation. Assessee's ground on this issue is allowed." 6.5 Thus, considering the facts of assessee's case in the light of judicial precedents referred to above, the only rational conclusion would be, Capella industrial park developed by assessee having been approved by Ministry of Commerce and Industry, govt. of India under non-automatic route, the condition imposed under para 4 of CBDT notification stipulating that no single unit should have more than 50% of the allocable industrial area is not applicable to present assessee. Moreover, as held by Hon'ble Gujarat High Court (supra), Commerce Min....
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....pproval of the Capella IP under lIoll-automatic route in FormIPS-l dated 12 October 2006. Accordingly, the above mentioned condition is not applicable to the Capella IF. Copy of the application seeking approval is attached herewith and marked as Enclosure 1 C. The salient features as mentioned in the application are as under: Proposed number of Industrial Units 4 4 Total investment Proposed Rs. 28,69,00,000 Proposed investment on built up space for Industrial use Rs.24,33,00,000 I Allocable area marked for industrial use 90% Allocable area marked for commercial use 10% Subsequent to the application, after thorough verification, the Company has been granted approval for setting up Capella IP by DIPP vide letter no. 15/112/2006-10 dated 10 April 2007 subject to complying with terms and conditions as mentioned therein. Copy of the letter of approval is attached herewith and marked as Enclosure ID. The DIPP has granted the said approval based 011 the same parameters as requested by the Company in the application, as mentioned above. The Company would like to draw your attention to the following relevant points as mentioned in the said DIPP app....
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....ty for the purpose of one and more state and Central tax laws. " The above condition docs not form part of the terms and conditions as stipulated by the DIPP and was erroneously included by the CBDT. The same is apparent from the reading of the CBDT notification which states that the terms and conditions as approved by DIPP is being reproduced in the Annexure to the CBDT notification. Further, it may be noted that the conditions as mentioned by the CBDT as reproduced above refers to Paragraph 6(b) of the scheme which is applicable for approval under the automatic route as already mentioned earlier. The prerogative to approve and stipulate any conditions while approving any Industrial park was always with the DIPP. The CBDT was only authorized to notify the park as per the approval granted by the DlPP. It did not have any power to put additional conditions while notifying the Industrial Park. To elaborate further, the Company would like to bring attention to the conditions as required to be fulfilled by Industrial Parks seeking approval under non-automatic route as given under Paragraph 7 of the Scheme. The relevant extracts of sub-paragraph (1) & (3) of Para 7 read as unde....
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....ut additional conditions while notifying the Industrial Park. Reliance in this regard is placed on the following decision: * CIT vs. Elgi Equipments Ltd. (2000) 242 ITR 460 (Mad) The Hon'ble Madras High Court in the said case held that conditions laid down by CBDT vide its notification 8.0. No. 3433 dated 21 October 1965, are not within the scope of power conferred on CBDT by section 36(1 )(iv) of the Act. The said notification limits the amount of deduction to 80% of the contribution (thereby denying 20% of the amount paid) without a rule having been made to that effect. It was further held that it is not permissible for CBDT to whittle down the rule and alter the limits of contributions whether annual or initial, that would qualify as deduction under section 36(1)(iv) of the Act. Based on the above facts and judicial precedent, we submit that the CBDT has erroneously included an additional condition (of not allotting more than fifty percent of the allocable industrial area to a single occupant) while notifying the Capella IP which was approved under non-automatic route. Even otherwise, if it is considered that the CBDT intended to include the additional condition, th....