TaxTMI 
TaxTMI 
2016 (2) TMI 1293
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.... raised identically worded grounds in both the years and hence, we will take up the facts and issue from lead assessment year 2008-09, wherein the grounds raised are as under:- "1. For that in view of the fact and circumstances the AO is wholly unjustified in not allowing benefit of exemption u/s 80IA (4)(iii) to your appellant and in view of the facts and in the circumstances the CIT(A) is wholly unjustified in confirming the action of the AO. 2. For that in view of the facts and circumstances and the new industrial undertaking of your petitioner in connection with development of an industrial park having been duly approved by ministry of commerce and industry being the authorised person under the income tax Act to approve the same for the purpose of exemption u/s 80IA(4)(iii) under the then existing scheme, and such ministry of commerce and industry having duly notified the approval of such industrial undertaking of your appellant, the same was fully eligible for exemption u/s 80IA (4)(iii) and in view of the facts and circumstances the AO is wholly unjustified in not allowing the exemption and CIT(A) is wholly unjustified in confirming the said action of the AO in view of th....
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....d by the board and which entitles the appellant for deduction u/s 80IA(4)(iii). It remains to fact that the said unit has been developed as Industrial park as approved by Ministry of Commerce vide its letter no. 15/23/ 2006/ IP & ID dt 25.7.2006. However, the appellant has not been able to furnish the evidence of completion of said unit before the prescribed date i.e. 31.3.2007. Indeed, the copy of certificate as having been obtained from the Bangalore Development Authority shows the date of completion is 23.6.2007 only. Hence, the appellant cannot under any circumstances be allowed deduction u/s. 80IA(4)(iii). As regards the contention of the appellant regarding the power and architecture's certificate the same cannot be treated as conclusive since the certificate issued by Bangalore Development Authority i.e. local authority in this respect can only be considered as sacrosanct. The appellant claimed that the application in this regard was made earlier cannot be also considered since the appellant failed to furnish any copy of such application and even otherwise only from the date of certificate being granted by Bangalore Development Authority, the building is considered as ....
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....IA(4)(iii), a number of Courts have already held that once approval is granted by Ministry of Commerce, Notification by CBDT is mere formality and cannot be determinant for eligibility for deduction u/s. 80IA(4)(iii), which we will discuss in the later part of this order. Further, even if there is a variation in the project the approval so granted by Ministry of Commerce and Industry has not been withdrawn till date. 6. But CIT(A) confirmed the action of AO denying such benefit only on the ground that assessee had not been notified by CBDT and further that the assessee has not completed the Industrial Park before 31.03.2007 but for that we have to see the dates, which are under: (i) Relevant dates: - a) Application for approval of Industrial Park was filed before Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, New Delhi, (which was Empowered Committee) during relevant time for approval of such park\under Non-automatic route. on 11.02.2006 b) The aforesaid application was duly registered within Empowered Committee on 20th February, 2006 under Registration no. 23/SIAlIP/2006 dt. 20.02.2006. on 20.02.2006 Subsequently, approval f....
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....d the magnitude of electricity bill from March 2007 to till March 2008. (b) Further, he contended that the architect's completion certificate was dt. 16.01.2007 whereas the assessee had applied for completion certificate before the Bangalore Development Authority vide letter dated 29.12.2006. (c) The assessee had increased the number of Industrial Units in the project from 3 units in the original proposal to 15 units. (d) In view of the deviation from the original proposal and the deviation not having been accepted in CBDT's Office Memorandum, disallowance u/s 80IA(4)(iii) was made. We find from the facts that Date of Lease Agreement with the Clients to lease out space in "Salarpuria Softzone" shows and proves that the agreement have been entered with the parties for a definite area located in the industrial park. The assessee has entered agreement with the clients before 31.03.2007 and the date of lease deed only indicates the date of registration of an agreement and is done only at the behest of client's requirement. The contention taken by the AO is that the date of lease deeds are different from the agreement is not correct. As per the approval letter dated 2....
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.... the AO about the details of the IPS-II as on 01.07.2007 filed on 19.07.2008 and IPS-II as on 01.07.2008 should be read as 01.01.2008 filed on 19.07.2008. Since all other facts remains the same except that the number of units lease out are different & have been mentioned correctly. The contention of the AO that the fresh approval was required under the non-automatic route for more than the minimum number of units required to be established in the industrial park is not correct because the approval was for minimum number of units and there was no restriction imposed for increasing the number of units and hence no fresh approval is required under the current scenario. Further, assessee sent all the details to CBDT for notification on the basis of the first approval as well as after receipt of the renewed approval. The new notification and the Industrial policy 2008 has come subsequently. Assessee has given a representation to the Chairman of Empowered Committee & the Director of CBDT for giving an opportunity to assessee. The Empowered Committee has still not withdrawn the approval granted and hence its validity cannot be disputed. As regards the approval issued by the DIPP, Ministry....
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....ding is completed, the assessee is entitled to the said benefit. In that view of the matter, we do not see any merit in these appeals. Accordingly the appeals are dismissed. 9. Further, exactly on the same issue Hon'ble Bombay High court in the case of CIT Vs. - Ackruti City Ltd. (2013) 214 Taxman 398 (Bom) has held that once Industrial Park was approved by Ministry of Commerce & Industry, CBDT has to suo motto issue notification. Any delay on the part of the CBDT in issuing notification would not warrant assessee being denied benefit of deduction u/s. 80IA(4)(iii) of the Act. Hon'ble High Court has decided this issue as under: "3.............The CIT(A) as well as the Tribunal have held that the Ministry of Commerce and Industry had finally by letter dated 31st December, 2004 approved the industrial park and a copy of the same 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 w....
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....rejecting the application for notification of approved units u/s. 80IA(4)(iii) of the Act under the Industrial Park Scheme of 2002 only on the ground that development of Industrial Part was completed beyond 31.03.2006. Hon'ble Bombay High Court held as under: "21. We find merit in the contention of the Petitioners that if the position which has been adopted by the Empowered Committee were to be accepted, that would result in virtually defeating the salutary public purpose which underlies Section 80-IA (4) (iii). Notice would have to be taken of the fact that infrastructural projects require a considerable amount of investment and a time lag is involved in the completion of the project. The view of the Empowered Committee is that Para 9 of the Scheme would apply to a delay in a project beyond one year but that the delayed date of completion should not in any event fall beyond 31 March 2006. If this were to be accepted as the correct interpretation, that will denude the benefit ofSection 80-IA to project where approvals were granted a few months before 31 March 2006 and the completion date spills over beyond that date. There is no indication either in the statute or in the schem....
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.... for a modification of the number of approved units was not allowed purely on the ground that the development of the industrial park was completed beyond 31 March 2006. For the reasons already indicated by us in the earlier part of this judgment, we have come to the conclusion that the Respondents were not justified in rejecting the application purely on the ground that the development of the park was not complete by 31 March 2006. In holding thus, the Empowered Committee disabled itself from exercising the power and jurisdiction which it had under Para 9(1) of the Scheme." 12. In view of the above facts and circumstances, the issue is covered by the decision of Hon'ble Bombay High court and Hon'ble Karnataka High Court, cited supra. Hence, this issue of assessee's appeal is allowed. 13. The second common issue in these two appeals of assessee in ITA Nos. 665 and 666/Kol/2013 for AYs 2008-09 and 2009-10 is as regards to disallowance of interest on interest free advances and further in AY 2008-09 there is enhancement of disallowance of interest. For this, assessee has raised following ground nos. 4 and 5 in AY 2008-09: "AY 2008-09" 4. For that in view of the facts and circumst....
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....terest disallowance if any, has to be restricted to Rs. 51.0 cr. out of which a sum of Rs. 16.0 cr. has already been refunded back in AY 2009-10 and as such, effective advance under challenge by revenue is only to the extent of Rs. 35.0 cr. The AO in AY 2009-10 has allowed Rs. 7.42 cr. out of Rs. 14.84 cr. on estimate basis and treating the same as allowable u/s. 24(b) of the Act, since rental receipt was treated as assessable as income from house property. But CIT(A) restricted the disallowance to Rs. 2.18 cr. (being interest on Rs. 35 cr. ). The CIT(A) in AY 2008-09 noted that the assessee advanced a sum of Rs. 51 cr. out of loan amount received to its sister concerns and group companies without charging any interest. However, the assessee paid interest on bank loan but no property was purchased against advance shown for purchase of property and transaction was reversed later on. He also observed that similar amount was transferred in the form of share application money to escape from disallowance of interest. Hence, the interest was disallowed by CIT(A) u/s. 36(1)(iii) of the Act at Rs. 3,68,48,359/-, being enhancement u/s. 251(1) of the Act being capital borrowed was not used f....
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....nor CIT(A) is able to establish the nexus between interest borrowed funds and interest free funds that interest bearing borrowed funds are utilized for advancing the same as interest free funds to sister concerns who are in the real estate business in which the assessee is. Ld. Counsel for the assessee heavily relied on the decision of Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. Vs. CIT in Civil Appeal No. 514 of 2008 dated 05.11.2015, wherein Hon'ble Supreme Court has considered the aspect of commercial expediency as well as nexus of the funds and finally held as under: "We are of the opinion that such an approach is clearly faulty in law and cannot be countenanced. Insofar as loans to the sister concern / subsidiary C.A. No. 514/2008 5 http://www.itatonline.org company are concerned, law in this behalf is recapitulated by this Court in the case of 'S.A. Builders Ltd. v. Commissioner of Income Tax (Appeals) and Another' [2007 (288) ITR 1 (SC)]. After taking note of and discussing on the scope of commercial expediency, the Court summed up the legal position in the following manner: - "26. The expression "commercial expediency" is an expression of wide imp....
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.... put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. Applying the aforesaid ratio to the facts of this case as already noted above, it is manifest that the advance to M/s. Hero Fibres Limited became imperative as a business expediency in view of the undertaking given to the financial institutions by the assessee to the effect that it would provide additional margin to M/s. Hero Fibres Limited to meet the working capital for meeting any cash loses. It would also be significant to mention at this stage that, subsequently, the assessee company had off-loaded its share holding in the said M/s. Hero Fibres Limited to various companies of Oswal Group and at that time, the assessee company not only refunded back the entire loan given to M/s. Hero Fibres Limited by the assessee but this was refunded with interest. In the year in which the aforesaid interest was received, same was shown as income and offered for tax. Insofar as the loans to Directors are concerned, it could not be disputed by the Revenue that the assessee had a credit balance in the B....
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....31.12.2012. The AO has not responded to CIT(A) and accordingly, CIT(A) directed the AO to allow depreciation on assets used in the business but after verification of facts and figures claimed now vis-à-vis the relevant rate of depreciation as applicable. We find that the assessee's issue is covered as per explanation 5 to sec. 32 of the Act which makes it very clear that the allowance of depreciation is mandatory and has to be considered whether or not the assessee makes a claim in this respect or not. Even otherwise, the CIT(A) after admitting additional issue has remitted the matter back to the file of the AO for verification of facts and figure and applicable rates for claim of depreciation and also verification on assets used in the business only. We find no infirmity in the order of CIT(A) and hence, the same is confirmed. This issue in both the years, of revenue's appeal is dismissed. 20. The next issue in revenue's appeal in ITA No.581/Kol/2013 for AY 2008-09 is as regards to the order of CIT(A) deleting the addition made by AO on account of difference in the statement of accounts declared by assessee. For this, revenue has raised following ground: "Ld. CIT(A)-XXXVI,....
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.... It was explained that a sum of Rs. 1,63,02,907/- was shown in the TDS certificate included service tax @ 12.36% on actual rent of Rs. 1,45,09,600/- and this difference was on account of service tax at Rs. 17,93,387/-. Hence the entire difference of Rs. 56,66,732/- was explained. The CIT(A) accepted the explanation of the assessee. Now before us Ld. CIT, DR fairly conceded the position. Accordingly, we feel that factually the assessee has not received excess rent of Rs. 56,66,732/- added by the AO. We find that the CIT(A) has rightly deleted the addition in the given facts and circumstances of the case and we confirm the same. This issue of revenue's appeal is dismissed. 22. The next issue in this appeal of revenue in ITA No. 813/Kol/2013 for AY 2009-10 is as regards to the order of CIT(A) deleting the addition made by AO by treating the receipt from the occupants of Industrial Parks and income from house property instead of the same as assessable as income from business. For this, revenue has raised following ground: "i) considering the nature of income derived by the assessee, which is discussed in detail in the assessment order and on the basis of different case laws, income ....
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....ssessee is to earn income by commercial exploitation of the property. For that purpose, every activity of the assessee has been directed towards developing the properties as industrial estate/business centers and so many workers (as is evident from the list enclosed) are employed for providing various services and amenities to the users. Thus, the facts that the Ld. Commissioner of Income Tax (Appeals) held that the income earned by Sambhu Investment (P.) Ltd. -Vs- CIT [2003] 263 ITR 143 is assessable as property income has no relevance in the facts and circumstances of the present case as because in that case the facts showed that the main intention was to earn rental income and that is why the entire cost of the property was recovered from the tenants by way of interest-free advance. In view of the foregoing, after carefully analyzing the facts of the instant case and following the consensus of judicial opinion on the issue, it is submitted that, the mere fact that the income is attached to immovable property, cannot be the sole criterion for assessment of such income as income from house property. It is necessary to dig further to find out what is the primary object of the ass....
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....e. We find that this issue is covered by the decision of Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd. Vs. CIT (2015) 373 ITR 673 (SC) wherein it is held as under: "4. We have heard the learned counsel for the parties on the aforesaid issue. Before we narrate the legal principle that needs to be applied to give the answer to the aforesaid question, we would like to recapitulate some seminal features of the present case. 5. The memorandum of association of the appellant-company which is placed on record mentions main objects as well as incidental or ancillary objects in clause III (A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as "Chennai House" and "Firhavin Estate" both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. What we emphasise is that holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. It may further be recorded that in the return that was filed, the entire income which accrued and was assessed in the sai....
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.... as coal fields and then sub-leasing them to collieries and other companies. Thus, in the said case, the leasing out of the coal fields to the collieries and other companies was the business of the assessee. The income which was received from letting out of those mining leases was shown as business income. Department took the position that it is to be treated as income from the house property. It would be thus, clear that in similar circumstances, identical issue arose before the court. This court first discussed the scheme of the Income-tax Act and particularly six heads under which income can be categorised/classified. It was pointed out that before income, profits or gains can be brought to computation, they have to be assigned to one or the other head. These heads are in a sense exclusive of one another and income which falls within one head cannot be assigned to, or taxed under another head. Thereafter, the court pointed out that the deciding factor is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them. It was highlighted and stressed that the objects of the company must also be kept in view t....