TaxTMI 
TaxTMI 
2017 (11) TMI 582
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....vailable to such park from the date of its commencement i.e. 05.09.2010. Condition no. 7 of the notification granted such benefit to the undertaking from such date of commencement. Rectification of this condition sought was rejected. 3. The petition arises under the following facts: 3.1 The petitioner is a closely held limited company. By an application dated 23.05.2006 it applied for approval for setting up an industrial park at village Piplaj, Dist. Ahmedabad. This application was made for claiming and availing deduction under Section 80IA(4)(iii) of the Act. After having acknowledged the application so made, the Ministry of Commerce and Industry, New Delhi returned the application by a letter of 05.01.2009 advising the petitioner to apply under the Industrial Park Scheme, 2008. Accordingly, the petitioner applied under the Scheme of 2008, in the prescribed form IPS-I on 27.01.2009. The application was acknowledged by the Ministry by a letter of 09.02.2009. 3.2 According to the petitioner, the petitioner had completed the development of the park much before the date envisaged under the Scheme i.e. 31.03.2011. The case of the petitioner was that even according to the Scheme fra....
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....Scheme, this Court observed that in its opinion the CBDT had brought in the element of completion of industrial units on the proposed industrial park instead of completion of project. According to the Court, the insistence of the CBDT to proceed on the basis that AUDA, which was the local authority had not given any clear certificate that the industrial park was completed with constructed units by 31.03.2011, was impermissible. This Court in its order held as under: 16. Ignoring such evidence, CBDT proceeded on the basis that AUDA which was a local authority had not given any clear certificate that the industrial park was completed with constructed units by 31.3.2011. This insistence from CBDT was impermissible for two reasons. Firstly, the scheme pertained to certificate from a local authority and could not confine its purview to certification by AUDA alone and second that the insistence on demonstrating completion of industrial units by the leasing industries was not part of the requirement of the scheme at all, as held in case of Ganesh Housing Corporation Ltd. (supra). For such reasons, the second part of the CBDT's objection must fail. 17.Coming back to the first objec....
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....ficate so produced, the court observed that the CBDT shall approve the petitioner for grant of deduction under Section 80IA(4) of the Act and issue necessary notification in this respect. 3.6 It is in this background that the Central Board of Direct Taxes issued a notification dated 26.12.2016 granting permission to the petitioner. The condition of the notification reads as under : "Now, therefore, in exercise of the powers conferred by clause (iii) of sub-section (4) of secton 80-IA of the said Act, read with rule 8C of the Income-tax Rules, 1962, the Central Government hereby notifies the undertaking from the date of commencement of the industrial park the 5th September, 2010 being developed and being maintained and operated by M/s Devraj Infrastructure Ltd., for the purposes of the said clause (iii) subject to the terms and conditions mentioned in the Annexure to this notification. ANNEXURE The terms and conditions on which the approval of the Government of India has been accorded for setting up of an industrial park by Devraj Infrastructures Ltd. (i) Name of the industrial undertaking : Devraj Infrastructures Ltd. (ii) Location :Survey numbers : 99 to 102, 108, 112 to 1....
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....g a condition in the notification of the date of commencement of 05.09.2010. In other words, rectification was sought of condition no. 7 as under: Condition No. 7 "The undertaking subject to the fulfillment of the term and conditions mentioned in this notification, may as its option claim deduction under clause (iii) of sub-section 80IA of the Income Tax Act, 1961 for any ten consecutive assessment year relevant to the date of commencement of industrial park mentioned in this notification" Rectification Sought(Last Para) Undertaking has sought that it may be alloed to claim deduction under section 80-IA (4)(iii) of the Income-tax Act, 61 for any ten consecutive assessment years out of fifteen years beginning from the assessment year of development of industrial Park begun i.e. previous year 2008-09 relevant to A.Y. 2009- 10. This application for rectification was rejected giving rise to the present petition. 4. Mr. R.K. Patel, learned advocate appearing for the petitioner has taken us through the impugned order dated 17.03.2017 together with the notification granting the benefit of option of deduction with effect from the date of commencement of 05.09.2010. According to Mr. P....
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....ion to the impugned communication dated 17.03.2017 particularly on para 13 which reads as under: "13. Here it is important to bear in mind the condition specified at para 5(11) of the IPS 2008 Scheme, wherein it is clearly specified that the "tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park." Hence, merely the beginning of the development of the industrial park is not suffice to claim deduction as contended by the undertaking but its complete development along with the location of industrial units is a prerequisite so as to start availing deduction." 4.5 According to Mr. Patel, even according to the authority tax benefits under the Act would be available once the minimum number of 30 units are located in the industrial park. 5. On the other hand Mr. Bhatt, learned advocate for the Revenue contended that it was apparent from the earlier order dated 05.11.2014 that the local authority namely AUDA had given a completion certificate dated 08.05.2013. According to Mr. Bhatt, who invited our attention to clause (2) (f) of the scheme suggested that the phrase "date of commencement " has been de....
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.... the assessment year 2010-11, as prayed for by the Petitioner. 7. In order to appreciate the controversy at hand, before we may consider the factual aspects of the matter, a brief recapitulation of the legal provisions would be necessary. Section 80IA of the Act provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development etc. The provision, as far as is relevant for our purposes reads as under: "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment year s. (2) The deduction specified in sub-section (1) may, at....
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....his section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. Explanation.-For the purposes of this clause, "infrastructure facility" means- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway, inland port or navigational channel in the sea; (ii) any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, 2005. Explanation.-For the purposes of this clause, "domest....
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....g scheme for Industrial Parks, namely: 1. Short title, commencement and application.-(1) This Scheme may be called the Industrial Park Scheme, 2008. 2. It shall come into force on the date of its publication in the Official Gazette. 3. The scheme shall be applicable for any undertaking which develops, develops and operates or maintains and operates an industrial park. 2. Definitions.- In this Scheme, unless the context otherwise requires,- (a)"Act" means the Income-tax Act, 1961 (43 of 1961); (b)"allocable area" means area available for allocation to the units for industrial activity or commercial activity and shall exclude the area utilized for providing common facility or infrastructure facility; (c)"associated enterprise" shall have the same meaning as assigned to it in section 92A of the Act; (d)"commercial activity" means any activity which is not an industrial activity; (e)"common facility" means facilities required for proper functioning of industrial park and commonly shared by all the units located in the industrial park and include facilities like lifts, corridors, industrial canteens, convention/ conference halls, parking, travel desks, securit....
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....clause (iii) of sub-section (4) of section 80-IA of the Act, if it fulfills all of the following conditions, namely:- 1. The date of commencement of the Industrial Park should be on or after the 1st day of April 2006 and not later than 31st of March 2009; 2. The area allocated or to be allocated to industrial units shall not be less than ninety per cent of the allocable area; 3. There shall be a minimum of thirty industrial units located in a industrial park; 4. For the purpose of computing the minimum number of industrial units; all units of a person and his associated enterprises will be treated as a single unit. 5. The minimum constructed floor area shall not be less than 50,000 square meters; 6. No industrial unit, along with the units of an associated enterprise, shall occupy more than twenty five per cent of the allocable area; 7. The industrial park should be owned by only one undertaking; and 8. Industrial units shall undertake only manufacturing activity as defined in section D of the National Classification, 2004, Code issued by the Central Statistical Organisation, Department of Statistics. 5.General Conditions.- (1) The industrial park shall b....
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....182 units were to be located at the Park. However, as is evident from the schedule of requirements vis-a-vis the implementation furnished, that as per the scheme 34 Units were located in the park in the Financial Year 2009-2010. In the first round in the petitioner's case where the CBDT had rejected the application for approval, the Court reproduced the observations of the CBDT, which weighed with the authority to reject the application. Reproduction of the para could be of help. The same reads as under: "5. CBDT noted that the petitioner had produced various documents including the completion report dated 5.9.2010 of MARS Planning & Engineering Services Pvt. Ltd., an agency approved by Government of Gujarat for Third Party Quality Assurance, a project completion certificate dated 8.4.2013 issued by the Industries Commissioner, Government of Gujarat. CBDT also referred to certain certificates and letters issued by Ahmedabad Urban Development Authority (AUDA for short). Such evidence was however, discarded by the CBDT making the following observations : SI. No. Document Inference Work completion certificate dated 08/5/2013 issued by AUDA in which details of project....
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....the applicant obtained this certificate and has been using it as an evidence under the camouflage that entire project was complete by this date and the applicant can avail huge tax benefits for ten years. It may further be clarified here that the completion of project not only means completion of basic infrastructure but also industrial units which are the integral part of any industrial park. Hence, the date of completion would mean not only completion of infrastructure but also the completion of all industrial units as well. Hence, the only information this document provides is that the first unit was completed and was ready for occupation by 17.06.2010 and no light is thrown upon the completion/occupation of the remaining around 180 industrial units 3. Completion report dated 05/09/2010 of MARS Planning and Engineering Services Pvt. Ltd and agency approved by Government of Gujarat undertakings for Third Part Quality Assurance (TPQA) as per requirement of Industries Commissioner, Government of Gujarat. M/s. MARS Planning and Engineering Service Pvt. Ltd. (MARS) Ahmedabad is an entity appointed by the applicant as a Third Party Quality Assurance (TPQA). This was done as a matte....
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....icate about two years subsequent to the claimed date of completion i.e. 05.09.2010 is not understood. Further, the text of the letter indicates that the same is in context of releasing financial grant to the applicant as per State Government Scheme linked to the development work and hence is not suitable to throw light on the present issue. At the end, it relies on the report of M/s. MARS (as discussed at Sl No.3 above) to repeat that project was completed. However, neither the date of completion has been mentioned, not any independent finding has been given. Since this letter is dated 08.04.2013 what can at best be inferred is that the project was completed on 08.04.2013. 12. Thus the above documents do not provide any specific date of completion. What definitely emerges is that the project was actually completed sometime in 2013 and not before 31.03.2011 as claimed by the applicant. Xxx 14. In order to verify the applicant's claim, independent enquiries were made from AUDA vide letter dated 29.08.2014 to inform the actual date of completion of the project based on their own records and documents. After reminders, the reply from AUDA dated 30.10.2014 was received on 3....
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....ices Private Limited indicated as under: (1) No. Of Units sold - 180. (2) Out of which agreement executed - 99 (3) Out of which construction in progress - 19 (4) Out of which production started in - 4. 11. According to the CBDT, since the number of agreements in respect of industrial units executed as on 5.09.2010 is 99 only, this would not necessarily mean that units were were actually ready for possession since agreements can be made for unconstructed and under constructed units. Therefore according to the Board this document does not prove completion of the project by 5.09.2010. 12. As far as the letter dated 8.04.2013 is concerned, CBDT observed that the letter dated 5.9.2010 does not mention or throw light on the completion of the Project. It is only from the letter dated 8.4.2013 it can be inferred that the project was completed on 8.4.2013. It observed that what definitely emerges is that the project was actually completed in 2013 and not before 31.3.2011 as claimed. It was in this context that the Court made its observations in paras 15 and 16 which read as under: "15. Ignoring such evidence, CBDT proceeded on the basis that AUDA which was a local authority had ....
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....s from the date of receipt of such certificate." 13. In other words, the notification dated 26.12.2016 and the impugned order dated 17.3.2017 would indicate that the CBDT is of the opinion that unless the Park develops and begins to operate i.e. unless the entire Park is set up with all the units in place, as applied for and undertaking their manufacturing activities, such project cannot be said to be completed. It is in this context that the date of commencement is notified as 5.09.2010. Whereas the petitioner would suggest that they had begun development of the Industrial Park during the year 2008-2009 after purchasing the land in earlier years. As required under the Scheme, particularly under Clause 4 thereof, they had 30 units located in the Park in the FY-2009-2010 which were the minimum number required under the Scheme for the Criteria of Approval. According to the General Conditions in sub clause (2) of Clause 5 of the Scheme, tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. According to the petitioner, once the minimum number stipulated for the scheme were located, benefit of claim....
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....ction. The 'initial assessment year' therefore would mean the first year opted for by the assessee for claiming deduction under Section 80IA.It need not necessarily mean the year of commencement/operation. The deduction once claimed would be for a maximum of ten years. In other words, once the Park is set up, the assessee can opt to claim deductions either from the first year itself or opt to wait for a few years and begin claiming such deductions once there are enough profits ploughed in, subject to the maximum available for a period of ten years. 18. Therefore, what the Circular does is only clarify the misconception that the Assessing Officers harboured regarding the starting point of the option to claim deduction under Section 80IA.It nowhere suggests the interpretation of the question of "date of commencement" as stipulated in the Scheme and the Section. The language of the Circular therefore may not be of assistance to the Petitioner. Except for clarifying and extending the concept of "initial assessment year" to that of the year opted for claiming deductions which not necessarily being the year of commencement,the circular goes no further. 19. It will be in the fit....
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....nless the State Governments and the Central Government provide guarantees and counter-guarantees to reassure the private sector producers that they will be paid for the power they generate. Such counter guarantees are justifiable only if they are viewed as providing temporary breathing space, during which State Electricity Boards undertake necessary reforms of their institutional structure, operating practices and pricing policies. In the long run, we cannot escape the reality that the users of electricity must pay for its cost. The same criterion holds for other infrastructure sectors also. Once financial viability is assured, we can expect a renewed surge of both public sector and private sector investments in these areas." 21. Therefore, what is evident from the purpose of introduction of Section 80IA in the Act, is that it was with a view to provide impetus to the growth of infrastructure. The concession is to attract private investment is such sector. Let us now therefore appreciate these facets of the Section, the Rule and the Scheme in light of the facts on hand. (i) The Petitioner applied for setting up an Industrial Park under the Scheme of 2008 on 27.1.2009, after havi....
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....g on 31st March 2011 shall be eligible for the benefits under Section 80IA(4)(iii) of the Act. According to Section 80IA(2) of the Act, the assessee may at his option claim deduction for a period of ten consecutive assessment years beginning from the year in which the undertaking or enterprise develops and begins to operate any infrastructure facility. The Scheme, though defines the date of commencement in 2 (f) to mean the date of obtaining the completion certificate or occupation certificate from the relevant local authority, the criteria for the approval suggests that it will be approved when there shall be a minimum of thirty units located in a industrial park. General Conditions prescribe that Tax benefits under the Act will be available to the undertaking only after the minimum number of thirty units are located in the Industrial Park. 25. This Court, while examining the impugned order passed in the first round, where the Board was of the view that the project was not completed before the date prescribed i.e. 31.3.2011 examined the scheme. While focussing its attention to such objection, the Court held that the CBDT had brought in the element of completion of industrial park....
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....availability of funds for setting up of the units, pending approval and clearances from the Government and other agencies and such similar reasons which can be attributed only to the intending industries and not to the petitioner. In fact, the scheme requires that the petitioner not only fulfill but continue to fulfill all conditions of approval assessing the period when the tax benefit is available. If we accept the strict requirements insisted by the respondents, it would mean that not only that to that number of industrial units indicated in the application for approval of Industrial Park must be operational on the last date of expiry of the Scheme, they must continue to operate till the petitioner avails of all the tax benefits. In a given situation, it may happen that the number of units, after initially coming into existence, may have to be closed down for variety of reasons such as non-availability of market for their product or non-availability of raw materials, or even labour problems. Would in such a case the petitioner be denied tax benefits ? To our mind, the answer has to be empathetically in the negative." 27. According to the Court, the duty and responsibility of th....
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....of deduction is deferred till all units are sold, the assessee would get no deduction on the income arising out of sale of units in earlier years. For example, if the industrial park consists of 100 units, it is possible that the assessee may sell 30 units in the first year, 30 more units in the second year and 30 more in the third year. Remaining 10 units may be sold in the fourth year. As per the Revenue, the deduction would be available only during the year when the sale of these last 10 units are completed. This in turn would mean that the assessee would get no deduction on the sale of 90 units in the earlier years, completely defeating the object of the provisions. We may recall the deduction is available to any enterprise carrying on business of developing or developing and maintaining or developing, operating and maintaining any infrastructural facility. The deduction is spanned over a number of years. The interpretation given by the Revenue would mean that this availability of deduction over a span of year would not occur in case of an enterprise carrying on the business of developing any infrastructural facility and would be confined to only one assessment year. 29. Once,....