TaxTMI 
TaxTMI 
2013 (9) TMI 1090
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....ery Village, Tambaram Taluk, effected by it on 23.4.2008 and 14.7.2008. Claim of the assessee was that the land was urban in nature coming within the meaning of Section 54G of the Act, sold in connection with shifting of its industrial undertaking from an urban area to a non-urban area, i.e. shifting of industrial undertaking from Chemmenchery to Koppur which was a non-urban area. As per the assessee, Chemmenchery Village, where the land sold was situated, was an urban area and therefore it was eligible for claiming the benefits under Section 54G of the Act. 4. Assessing Officer, however, was of the opinion that Chemmenchery Village was included in Chennai City Corporation only from 2011 through Government Order D No.256 dated 26.12.2009. According to the A.O., assessee's averment that the land in Chemmenchery Village was an urban area could not be accepted. Authority for recognizing any land as an urban land, for the purpose of Section 54G, in the opinion of the A.O., was the Central Government. Government of India had issued a Notification No.10076 on 2.4.1996, notifying areas comprised in Corporation of Chennai (then Madras), along with certain other towns and cities as u....
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....financial years 2007-08 and 2008-09 and for land purchased at Venkateshpuram Village in Koppur hamlet of Tiruvallur District, in 2010. As per the A.O., the claim for exemption were in respect of assets added in preceding previous years 2007-08 and 2008-09, and for assets purchased during 2009-10 and 2010-11. Out of the above, latter purchases alone were made utilizing funds drawn from deposits of Rs. 19.6 Crores made under Capital Gains Deposits Scheme. In other words, according to A.O., there was nothing to show that assessee had shifted any industrial undertaking from Chemmenchery Village to Koppur. As per A.O., the list of machinery added by the assessee during the material period, were ones used in construction and earth moving, and had no use as such in a fabrication unit. 8. Assessee had also filed an expert opinion of an Advocate as well as a Chartered Accountant in which it was stated that Chemmenchery Village was in urban area. Nevertheless, as per the A.O., though the Chemmenchery Village could be considered as urban area within the meaning of Tamil Nadu Urban Land (Ceiling and Regulation) Act, 1978, it would not be an "urban area" falling within Section 54G of the Act....
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.... was clearly mentioned in the preamble thereof. Notification only recognized what had already happened. It would not mean that such areas were not part of Chennai city. 11. Continuing his arguments, ld. counsel for the assessee referred to Section 6-A of Tamil Nadu Urban Land Tax Act, 1966. According to him, "urban area" was defined therein as area comprised in city of Madras as also those areas in Madras city belt area. Further, according to him, by virtue of Section 3(o) of Tamil Nadu Urban Land (Ceiling & Regulation) Act, 1978, any land situated within the limits of an urban agglomeration fell within the ambit of urban land. "Urban agglomeration" was defined in Section 3(n) of the same Act to mean the area comprised in Schedule I thereto. Schedule I specified that St. Thomas Mount-cum-Pallavaram Cantonment to be within Madras urban agglomeration. Chemmenchery Village fell within St. Thomas Mount-cum-Pallavaram Cantonment and hence it was nothing but urban land. According to him, it was required to give a harmonious construction to the term "urban area" while interpreting Section 54G of the Act, since Central Government notification dated 2nd April, 1996 itself mentioned limit....
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....see's claim for exemption were on plant and machinery acquired from 23rd April, 2007 and not for any date prior to that. Total value of plant and machinery came to Rs. 22,32,81,824/- and the cost of the land acquired came to Rs. 18,70,89,122/-. According to him, authorities below gave a very narrow interpretation of Section 54G and denied a legitimate claim available to the assessee. Assessee had moved out of an urban area to a rural area and despite that, it was not given the benefit of Section 54G. Relying on a decision of Hon'ble Karnataka High Court in the case of CIT v. Sambandam Udaykumar [2012] 206 Taxman 150/345 ITR 389/19 taxmann.com 17 (Kar.), learned A.R. submitted that object of Section 54G was to encourage shifting of industrial undertaking from urban area to rural area and considering such object, a liberal interpretation was required to be given. 14. Per contra, learned D.R., strongly supporting the orders of authorities below, submitted that Assessing Officer had no confusion regarding the claim of shifting of undertaking made by the assessee. Assessee was only trying to create confusion by stating that shifting of undertaking was from Chemmenchery to Kop....
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.... overstep the limits provided in the Act. If the land sold was situated in urban area, assessee could claim such exemption under Section 54G of the Act, but not otherwise. The land sold, on the other hand, at the time of sale, was not a part of Chennai city limits and therefore, not an urban area. 17. Ad libitum reply of the learned A.R. was that assessee in its letter dated 8.12.2011, placed at paper-book pages 12 to 18, had clearly stated before the Assessing Officer that claim of deduction under Section 54G was for shifting of its undertaking from Chemmenchery to Koppur Village. Assessee had also given a legal opinion by Shri L.S.M. Hasan Fizal, B.A., M.L., Government Advocate, Madras High Court, which clearly stated that Chemmenchery was an urban area. As for the pleading of the learned D.R. that copy of assessment order filed alongwith appeal was incomplete and was not having the notifications appended thereto, learned A.R. submitted that such notifications were in public domain and not any private documents. 18. We have perused the orders and heard the rival submissions. There is no dispute that claim of deduction under Section 54G has been made by the assessee on a lan....
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.... 6. Erode 7. Gobichettipalayam 8. Madras 9. Madurai 10. Mettupalayam 11. Namakkal 12. Pollachi 13. Salem 14. Tiruchirapalli 15. Udumalpet 16. Uthagamandalam (Ootacamund) 2. This Notification will come into effect from the date of its publication in the Official Gazette." 20. The above Notification states that areas within the limits of various Municipal Corporation or Municipality mentioned therein which, inter alia, includes "Madras" as well, would be urban area for the purpose of Section 54G of the Act. First question thus boils down to issue as to whether Chemmenchery was within the limits of Municipal Corporation of Madras. As per the Revenue, the sole authority to determine the limits of Municipal Corporation is Government of Tamil Nadu. Government of Tamil Nadu had through its Order No. D 256 dated 26.12.2009 mentioned about explanation of limits of various Municipal Corporation. Said Notification in 'Tamil'....
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....imits might have taken considerable time. Just because Notification dated 26.12.2009 state that Ward Divisions will as such continue upto 2011, would not mean that Chennai was a small city only of 174 sq. Kms ever since 1978 without any change. 21. While interpreting a provision in a statute, intention behind the enactment is extremely important. Enactment of Section 54G by the Legislature was with an intention to de-urbanise populated areas and de-industrialise such area by encouraging industrialization of areas, which were under developed. That Tamil Nadu Government itself had considered areas peripheral to city limits as urban area, is clear from the substitution of Section 6 by Section 6-A in Tamil Nadu Urban Land Tax Act, 1966, through an amendment Act of 1975. Section 6-A defined an "urban area" to include both city of Madras as well as the Madras city belt area. No doubt, as pointed out by learned D.R., Tamil Nadu Urban Land Tax Act, 1966 is a State enactment for levying urban land tax. But, nevertheless, if for the purpose of collection of urban land tax, an area is considered to be urban, we cannot say that for other purposes, it is not urban. Just because the Notificat....
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....y Chennai City Corporation (Chennai District), 16 Municipalities, 20 Town Panchayats & 214 Villages forming part of 10 Panchayat Unions in Thiruvallur and Kancheepuram Districts. Annexure XXVI of Second Master Plan gives the list of Corporation Division and Villages in Chennai Metropolitan Area. As per the said list, Item No.XXXXVI names St. Thomas Mount Panchayat Union, wherein Village No.190 Semmanchery in Tambaram Taluk, Kancheepuram District, is included in Serial No.297. 14. From the above discussions, I conclude that the above immovable properties being vacant lands in different Survey Numbers in Semmanchery Village, Tambaram Taluk, Kancheepuram District, measuring different extents of lands, covered within the Chennai Metropolitan Area are Urban Lands situated within the Urban Agglomeration of Chennai.' In our opinion, lower authorities fell in error in brushing aside the above legal opinion lightly. Explanation to Section 54G(1) of the Act has to be harmoniously interpreted so that it is in consonance with the needs of a developing city. Notification dated 26.12.2009 of Tamil Nadu Government, read along with the definition of "urban area" given in Section 6 A of T....
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....s) at 0.100, KOPPUR ROAD, VENKATESAPURAM VILLAGE, THIRUVALLUR, THIRUVALLUR, TAMIL NADU (address of the business premises) on the basis of the application received in this office on 21/01/2011 (date of receipt). Registration Number is AABCS0321GEM004 Sd/ 31.1.11 Date of issue of Assitant Commissioner of Central Excise, Original RC: 27/01/2011 Poonamaliee Division, Chennai-IV Commissionerate Conditions 1. This Registration Certificate is valid only for the premises and purposes specified in the application 2. Registration Certificate is not transferable. 3. No corrections in the certificate will be valid unless the request for any correction/change is applied for and the same is acknowledged. 4. This certificate shall remain valid till the Registrant carries on the activity for which it has been issued or surrenders it or till it is revoked or suspended. 5. The grant of this certificate shall be without prejudice to the rights of any other person (s) over the registered premises or purpose to which such pers....
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....ed for the purposes of the business of an industrial undertaking situate in an urban area, effected in the course of, or in consequence of, the shifting of such industrial undertaking (hereafter in this section referred to as the original asset) to any area (other than an urban area) and the assessee has within a period of one year before or three years after the date on which the transfer took place,- (a) purchased new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted ; (b) acquired building or land or constructed building for the purposes of his business in the said area ; (c) shifted the original asset and transferred the establishment of such undertaking to such area; and (d) incurred expenses on such other purpose as may be specified in a scheme framed by the Central Government for the purposes of this section, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain is grea....
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....nd land is not amenable to a shifting. Assessee had purchased land and established an undertaking in Koppur Village. What is to be seen is whether assessee had adhered to the time-window allotted for this purpose. Section provides for a time window of four years starting from one year prior to the date of transfer and ending three years after the date of transfer. Here the acquisition of plant and machinery was done and the land was acquired within this time-window. We are, therefore, of the opinion that the transaction of sale at Chemmenchery and setting up of an industrial undertaking at Koppur Village satisfied the requirement of "shifting" mentioned in Section 54G of the Act and the third question also has to be answered in favour of the assessee. 25. There can be no dispute that the object of enacting Section 54G was to de-urbanise and remove industries from populated area and promote industrialization in underdeveloped areas. Section 54G is a provision intended for promoting inclusive growth of the country. In such a situation, giving a very narrow interpretation to the said Section will defeat the very purpose thereof. We are thus of the opinion that the assessee was elig....
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....nity given. Shri N. Erulappan, one of the two persons, was shown by the assessee as a creditor for whole of the contract amount. A.O. also made enquiries with JSWERL as to whether any road construction was done by the assessee. They informed that no such road construction was done by the assessee. However, they did mention that assessee might have constructed roads for execution of work. Assessing Officer required the assessee to file any other credible proof for having done any road construction work. Assessee could file only measurement taken by an Engineer showing abstract quantities. He therefore concluded that the claim as such was bogus and disallowed the sum of Rs. 22,10,07,155/-. 29. Assessee's appeal on this issue before CIT(Appeals), did not meet with any success. According to the ld. CIT(Appeals), except for a ledger extract and documents in the nature of invoices raised by the two persons, there was nothing to show any road having been constructed by the assessee. Ld. CIT(Appeals) refused to consider pictures of road leveling and construction work filed by the assessee before him for the reason that it was never produced before the Assessing Officer. As per ld. C....
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....duced were proved by the A.O. to be fabricated ones. The construction of road, according to him, was nothing but a cock and bull story. No presumption could be taken that assessee had constructed any road without proper evidence. Claim was therefore rightly rejected by the A.O. As per the learned D.R., nothing stopped the assessee from producing the evidence in the nature of photos before the A.O. and hence these were rightly rejected by the ld. CIT(Appeals). 32. We have perused the orders and heard the rival submissions. Assessee had claimed before the A.O. that it had incurred road construction expenditure of Rs. 22,10,07,155/- through two sub-contractors, namely, Shri N. Erulappan and Shri S. Kesavan. Both the persons denied having done any such work. They also denied their signatures. They also stated that money credited in the accounts with ICICI were distributed by them to the persons nominated by Shri M. Nandakumar, Vice-President (Projects) of the assessee-company. Nevertheless, it remains a fact that money paid by assessee-company were credited in the bank accounts opened and operated by Shri N. Erulappan and Shri S. Kesavan. With banks strictly administering the KYC no....
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....he project had started in April, 2008 and would have significantly progressed by now. Temporary roads earlier laid, would no more be there and would have been replaced by pucca approaches and buildings. In such a situation, a remand for ascertaining the actual outgo may not serve any purpose. Hence to give a quietus to the issue, we are of the opinion that a disallowance of 25% on the total claim of Rs. 22,10,07,155/- will serve the ends of justice. We, therefore, set aside the orders of the authorities below on the issue and direct the A.O. to disallow Rs. 5,52,51,790/- out of the total claim of Rs. 22,10,07,155/- on roads, and allow the balance. 33. Ground No.2 of the assessee is partly allowed. 34. Vide its ground No.3, assessee is aggrieved on a disallowance under Section 40(a)(i) of the Act, which was confirmed by the CIT(Appeals). 35. Facts apropos are that assessee had entered into a contract with one M/s Gulf Spic Engineering (LLC), Dubai, for Mass Alkali Flushing work of Boiler unit of JSWERL, Torangallu, Karnataka. Assessee had not deducted any tax on payments effected by it. Assessing Officer required the assessee to explain why the expenses of Rs. 3,84,96,230/-....
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.... not be applied in view of the decision of Special Bench in the case of Merilyn Shipping and Transport v. Addl. CIT [2012] 136 ITD 23/20 taxmann.com 244 (Vishakhapatnam). 38. Ld. CIT(Appeals) was not impressed by any of the above contentions. According to him, work order was issued to a non-resident company. Invoice for the work was raised by the non-resident company. Therefore, income for the non-resident company accrued in India. Though the said work was sub-contracted to two Indian entities, this was done on behalf of the non-resident company. Assessee was obliged to deduct tax on payments effected to the non-resident company. Therefore, according to him, assessee failed to comply with provisions of Section 194C of the Act. Insofar as reliance placed on the decision of Merilyn Shipping and Transport (supra) was concerned, ld. CIT(Appeals) held that the said decision stood stayed by Hon'ble Andhra Pradesh High Court vide its order dated 8.10.2012. He thus confirmed the disallowance. 39. Now before us, learned A.R. submitted that assessee had given details of expenditure to the Assessing Officer through its letter dated 8th December, 2011, copy of which has been placed a....