M/s. Tidel Park Limited, CHENNAI V. ACIT, CHENNAI

CO 16/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8478 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-03-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 31-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R VIJAYARAGHAVAN
• Assessee Lawyers: DR S MOHARANA
• Keywords: Business income; Depreciation; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 43B; 143(3); 80IB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENN AI BEFORE SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER .. ITA NOS.2120 & 2121/MDS./2011 ASSESSMENT YEARS:2003-04 & 2005-06 & C.O. NO.16/MDS./12 ( ITA NO.2120/MDS/12) C.O. NO.17/MDS./12 ( ITA NO.2121/MDS/12) THE ASSISTANT COMMISSIONER OF INCOME- TAX, COMPANY CIRCLE III(2), NEW BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S.TIDEL PARK LIMITED, 4,RAJIV GANDHI SALAI, TARMANI, CHENNAI 600 113. PAN AABCT 0666 R ( APPELLANT ) ( RESPONDENT / CROSS OBJECTOR ) APPELLANT BY : DR.S.MOHARANA, CIT D.R. RESPONDENT BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 12 .03.13 DATE OF PRONOUNCEMENT : 11.04 .13 O R D E R PER ABRAHAM P GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS BY ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS DIRECTED AGAINST ORDERS DATED 30.09.11 OF CIT(A)-VI , CHENNAI. M/S.TIDEL PARK LTD. 2 2. APPEAL OF REVENUE FOR 2003-04 IS TAKEN UP FIRST FOR DISPOSAL. EFFECTIVE GROUNDS TAKEN BY THE REVENUE READ AS UNDE R:- 2.1 THE LD. CIT(A) ERRED IN HOLDING THAT THAT NOT ICE UNDER SECTION 148 ISSUED ON 17.3.2010 HAS NOT BEEN ISSUED VALIDLY. 2.2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT WHILE REOPENING THE ASSESSMENT THE ASSESSING OFFICER HAD RECORDED THREE REASONS OUT OF WHICH ONE PERTAINED T O DISALLOWANCE UNDER SECTION 43B. EVEN ASSUMING BUT NOT CONCEDING THAT THE ASSESSING OFFICER HAD APPLIED HI S MIND WHILE COMPLETING THE ASSESSMENT EARLIER AND THAT TH ERE WAS A CHANGE OF OPINION ON HIS PART WHILE REOPENING THE ASSESSMENT ON 17.03.10, THE ISSUE RELATING TO SEC.4 3B WAS NOT CONSIDERED IN THE EARLIER ASSESSMENT AND THEREF ORE THE CIT(A) SHOULD HAVE UPHELD THE REOPENING OF ASSESSME NT AT LEAST ON THIS GROUND. 3. FACTS APROPOS ARE THAT ASSESSEE IS A COMPANY PR OMOTED AS A JOINT VENTURE BY M/S.TIDCO & M/S.ELCOT. BOTH M/S .TIDCO & M/S.ELCOT ARE GOVERNMENT OF TAMIL NADU UNDERTAKING S. ASSESSEE IS ENGAGED IN DEVELOPING, OPERATING AND MA INTAINING INFORMATION TECHNOLOGY PARKS. THE NAME OF THE PARK DEVELOPED, MAINTAINED, AND OPERATED DURING THE RELEVANT PREVIO US YEAR WAS TIDEL PARK. ASSESSEE IS HAVING APPROVAL FOR SET TING UP INDUSTRIAL M/S.TIDEL PARK LTD. 3 PARK BY MINISTRY OF INDUSTRY, GOVERNMENT OF INDIA. CBDT HAS ALSO NOTIFIED IT AS AN INDUSTRIAL PARK UNDER SECTI ON 80 IA(4)(III) OF THE ACT. FOR IMPUGNED ASSESSMENT YEAR, ASSESSEE FIL ED RETURN DECLARING AN INCOME OF ` 76,67,750/-. DEDUCTION OF ` 6,73,15,795/- WAS CLAIMED UNDER SECTION 80 IA (4)(I II) OF THE ACT. THEREAFTER, ASSESSMENT WAS COMPLETED ON 10.03.06 UN DER SECTION 143(3) OF THE ACT. ON 26.03.08, ASSESSEE W AS SERVED WITH A NOTICE PROPOSING A REOPENING. ASSESSEE IN I TS REPLY FILED ON 17.04.08 REQUESTED THE ASSESSING OFFICER TO TREA T THE RETURN ORIGINALLY FILED AS A RETURN FILED IN PURSUANCE OF SUCH NOTICE. ASSESSEE ALSO REQUESTED THE ASSESSING OFFICER TO GI VE REASONS FOR RESORTING TO THE REOPENING. SUCH REASONS WERE FURNISHED, WHICH INTER ALIA MENTIONED THAT ASSESSEE HAD NOT FI LED AUDITED REPORT IN FORM NO.10CCB ALONG WITH RETURN, WHICH WA S REQUIRED FOR AVAILING A DEDUCTION UNDER SECTION 80-IA OF THE ACT. THEREAFTER THE REASSESSMENT WAS COMPLETED ON 26.12.08 WITHDRAW ING DEDUCTION UNDER SECTION 80-IA OF THE ACT. ASSESSEE THEREAFTER MOVED IN APPEAL BEFORE THE CIT(A) ASSAILING THE WIT HDRAWAL OF SUCH DEDUCTION AND LD. CIT(A) DIRECTED THE ASSESSIN G OFFICER TO ACCEPT THE REPORT IN FORM NO.10CCB FILED BY THE ASS ESSEE DURING THE COURSE OF REASSESSMENT PROCEEDINGS AND ALLOW TH E DEDUCTION CLAIMED UNDER SECTION 80-IA OF THE ACT. M/S.TIDEL PARK LTD. 4 4. ASSESSING OFFICER THEREUPON PASSED ORDER DATED 30.06.09 GIVING EFFECT TO THE CIT(A) DIRECTIONS. THEREAFTER ON 17.03.10, A FRESH NOTICE UNDER SECTION 148 WAS ISSUED. ASSESSEE THIS TIME ALSO REQUESTED FROM THE ASSESSING OFFICER REASONS F OR THE FRESH REOPENING. REASONS FURNISHED BY THE ASSESSING OFFIC ER READ AS UNDER:- THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2003-04 ON 28.11.03. THE ASSESSMENT WAS COMPL ETED UNDER SECTION 143(3) ON 10.03.06 AND THE REOPENED ASSESSM ENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 ON 26.12. 08. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) AN D THE REOPENED UNDER SECTION 143 R.W.S. 147 DEDUCTION UND ER SECTION 80IA WAS ALLOWED IN EXCESS AS BELOW: (I) THE ASSESSEE HAS DECLARED INCOME FROM THE FOLLO WING AS BUSINESS INCOME AND CLAIMED DEDUCTION UNDER SECTION 80 IA. RENT FROM PREMISES 46,13,72,089 RENT FROM AUDITORIUM 9,96,446 RENT OTHER 1,02,04,239 TOTAL 47,25,72,774 BUT THE ASSESSEES CLAIM UNDER SECTION 80IA TAKING THE ABOVE INCOME AND THE BUSINESS INCOME IS INCORRECT AS PER THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS CHENNAI PROPERTIES AND INVESTMENTS LTD 274 ITR 117 (MAD) SU PPORTED BY IOB VS CIT 246 ITR 206 (MAD), CIT VS. INDIAN METAL AND METALOGICAL CORPORATION 215 ITR 424(MAD). (II) THE ASSESSEE HAS DECLARED THE INCOME COLLECTED FROM THE OCCUPANTS OF FOOD COURT, FLORISTS ETC. AS LEASE REN T CALCULATED AS THE PERCENTAGE OF THEIR SALES AS BUSI NESS INCOME. THE ABOVE INCOME SHOULD BE BROUGHT TO TAX U NDER M/S.TIDEL PARK LTD. 5 OTHER SOURCES AND THE DEDUCTION UNDER SECTION 80IA IS NOT ALLOWABLE ON THIS INCOME. (III) THE GOVT OF TN ALLOTTED LAND FOR TIDEL PARK A ND ORDERED PAYMENT OF CONSIDERATION OF ` 28.5 CRORE. OUT OF THE CONSIDERATION PAYABLE THE ASSESSEE ISSUED EQUITY SH ARES FOR VALUE OF ` 6.75 CRORES TO TIDCO AND THE BALANCE OF ` 21.7 CRORES WAS CONVERTED AS LOAN REPAYABLE TO TIDCO. TH E INTEREST PAYABLE OF ` 1,94,04,211/- WAS DEBITED IN THE P&L ACCOUNT. NON-PAYMENT OF INTEREST ATTRACTS PROVISION S OF SEC 43B AND ACCORDINGLY DISALLOWANCE. 5. THOUGH THE ASSESSEE OBJECTED TO THE SECOND REOP ENING AS WELL, ASSESSING OFFICER CHOSE TO PROCEED WITH REAS SESSMENT AND COMPLETED SUCH REASSESSMENT ON 31.12.2010 DENYING DEDUCTION CLAIMED UNDER SECTION 80-IA OF THE ACT. IN SUCH REASSESSMENT, ASSESSING OFFICER TOOK A VIEW THAT DE DUCTION UNDER SECTION 80-IA (4)(III) COULD BE AVAILED ONLY FOR PROFITS DERIVED FROM DEVELOPING, OPERATING AND MAINTAININ G FACILITIES OF THE NATURE MENTIONED THEREIN AND COULD NOT BE APPLI ED FOR RENTALS RECEIVED FROM PROPERTY. ASSESSEE DID CONTENT THAT DURING THE COURSE OF ORIGINAL PROCEEDINGS ITSELF, DETAILS OF I TS CLAIM UNDER SECTION 80-IA WAS CALLED FOR BY THE ASSESSING OFFIC ER AND SUCH DETAILS FURNISHED. ASSESSEE POINTED OUT THAT ONE OF THE QUESTIONS RAISED BY THE ASSESSING OFFICER IN HIS LETTER DATED 11.02.06 WAS TO EXPLAIN HOW IT COULD CLAIM RENTAL INCOME, INTERE ST INCOME, OTHER INCOME, REVENUE SHARES FROM LESSEES, AND OPERATION AND MAINTENANCE CHARGES RECEIVED, AS ELIGIBLE FOR DEDUC TION UNDER SECTION 80-IA OF THE ACT. ACCORDING TO ASSESSEE, D ETAILED M/S.TIDEL PARK LTD. 6 REASONS, WHICH WERE FURNISHED IN REPLY WAS CONSIDER ED BY THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) OF THE ACT, ORIGINALLY. 6. HOWEVER, THE ASSESSING OFFICER WAS NOT IMPRESSE D. ACCORDING TO HIM, PRODUCTION OF ACCOUNT BOOKS AND O THER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE BE DISCOVERED, WOULD NOT AMOUNT TO DISCLOSURE REQUI RED UNDER SECTION 147 OF THE ACT. RELIANCE WAS PLACED IN THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CONSOLIDATE D PHOTO AND FINVEST LTD. VS. ACIT 281 ITR 394. 7. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A), ASS AILING THE REASSESSMENT AS WELL AS THE DENIAL OF DEDUCTION UND ER SECTION 80-IA OF THE ACT. AS PER THE ASSESSEE, REOPENING WA S BASED ON A CHANGE OF OPINION AND THAT TOO AFTER FOUR YEARS FRO M THE END OF THE IMPUGNED ASSESSMENT YEAR. ARGUMENT OF THE ASS ESSEE WAS THAT DURING THE COURSE OF ORIGINAL ASSESSMENT P ROCEEDINGS ITSELF, VARIOUS DETAILS REGARDING ITS CLAIM UNDER S ECTION 80-IA(4) WAS CALLED FOR BY ASSESSING OFFICER AND FURNISHED. ACCORDING TO IT, THE CASES RELIED ON BY THE ASSESSING OFFICER F OR RESORTING TO A SECOND REOPENING, WERE NOT RELEVANT ON FACTS SINCE THOSE CASES M/S.TIDEL PARK LTD. 7 WERE ALL ON RENTING OUT OF A PROPERTY PERSE AND NOT THAT OF LEASING OUT OF SOFTWARE OR INDUSTRIAL PARK UNITS. AS PER A SSESSEE, IT WAS AFTER DUE CONSIDERATION OF THE REPLIES GIVEN BY THE ASSESSEE, DEDUCTION UNDER SECTION 80-IA(4) OF THE ACT WAS ORI GINALLY ALLOWED. RELIANCE WAS PLACED ON THE FULL BENCH DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. K ELVINATOR OF INDIA (2002) 256 ITR 1 AND CIT VS. EICHER LTD. (20 07) 294 ITR 310. LD.CIT(A) WAS APPRECIATIVE OF THESE CONTENTIO NS. ACCORDING TO HIM, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS REQUIRED FOR THE ASSESSMENT. HE HELD THE REASSESSMENT PROCEEDINGS I NVALID. 8. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STRONGLY ASSAILING THE ORDER OF CIT(A) SUBMITTED THAT REOPEN ING WAS RESORTED NOT ONLY FOR THE PURPOSE OF WITHDRAWING T HE DEDUCTIONS CLAIMED UNDER SECTION 80IA OF THE ACT, BUT THERE WA S A SECOND REASON AS WELL. INTEREST SHOWN AS PAYABLE TO TIDCO WAS ALLOWED, WITHOUT CONSIDERING SEC 43B OF THE ACT. ACCORDING TO HIM, UNLESS AND UNTIL THE INTEREST SHOWN AS OUTSTAN DING IN THE ACCOUNTS TO GOVERNMENT OR A GOVERNMENT ENTERPRISE W AS PAID BEFORE THE END OF THE PREVIOUS YEAR OR BEFORE THE DUE DATE OF FILING THE RETURN, CLAIMS IN THIS REGARD COULD NOT BE ALLOWED. THIS M/S.TIDEL PARK LTD. 8 WAS NEVER CONSIDERED BY THE ASSESSING OFFICER AT TH E STAGE OF ORIGINAL ASSESSMENT OR AT THE STAGE OF FIRST REOPEN ING. A.O HAD ALLOWED THE CLAIM IN FULL WITHOUT VERIFYING, HOW FA R ASSESSEE HAD COMPLIED WITH THE REQUIREMENTS OF SEC.43B. JUST BEC AUSE ASSESSEE HAD FILED A PROFIT AND LOSS ACCOUNT WILL N OT ABSOLVE IT FROM ITS DUTY TO EXPLAIN HOW THE CLAIM WAS ALLOWABL E. JUST BECAUSE A.O COULD HAVE WITH DUE DILIGENCE FOUND THI S OUT FROM THE RECORDS FILED BY THE ASSESSEE, WOULD NOT BE A R EASON TO HOLD THAT ASSESSEE HAD NOT FAILED TO MAKE DISCLOSURE, SU FFICIENT ENOUGH TO RULE OUT A REOPENING. THEREFORE, ACCORDI NG TO HIM, THE REOPENING WAS RIGHTLY DONE AND CIT(A) FELL IN ERROR IN HOLDING REOPENING TO BE INVALID. 9. PER CONTRA, LD. A.R, SUPPORTING THE ORDER OF C IT(A) SUBMITTED THAT IN THE COURSE OF ORIGINAL ASSESSME NT PROCEEDINGS ITSELF, A.O. HAD ISSUED A LETTER DATED 11.02.06 ( P LACED AT PAGE NO.116 & 117 OF PAPER BOOK). ACCORDING TO HIM QUES TION NO.4 THEREIN WAS WITH REGARD TO INTEREST OF ` 6.69 CRORES SHOWN AS PAYABLE AS ON 31.03.03. A.O. HAD REQUIRED THE DATE S OF PAYMENT OF SUCH INTEREST AND THE AMOUNT WHICH STOOD UNPAID TILL THE DATE OF FILING OF THE RETURN. THIS WAS DULY REPLIED BY THE ASSESSEE VIDE ITS LETTER DATED 24.02.06 (PLACED AT PAGE NO.112 TO 115 OF PAPER M/S.TIDEL PARK LTD. 9 BOOK). ACCORDING TO A.R., THE DATE OF THE PAYMENT OF EACH OF THE AMOUNT COMPRISED IN ` 6.69 CRORES WAS GIVEN TO THE ASSESSING OFFICER. ASSESSING OFFICER HAD COMPLETED THE ORIG INAL ASSESSMENT ON 10.03.06 AFTER CONSIDERING ALL THESE RECORDS. THEREFORE, ACCORDING TO HIM, IT WAS BASED ON A CHAN GE OF OPINION THAT REOPENING WAS RESORTED TO. THERE WAS NO TANGI BLE MATERIAL WITH THE ASSESSING OFFICER FOR TAKING A DIFFERENT V IEW AND RESORTING TO A REOPENING, BASED ON A CHANGE OF VIEW WAS NOT POSSIBLE. ASSESSING OFFICER HAD IN THE ORIGINAL ASS ESSMENT CONSIDERED THE NATURE OF EACH ITEM OF INCOME OF ASS ESSEE IN A DETAILED MANNER AND HELD IT TO BE ELIGIBLE FOR DEDU CTION UNDER SECTION 80-IA OF THE ACT. THEREFORE, ACCORDING TO HIM, LD. CIT(A) WAS JUSTIFIED IN RELYING ON THE DECISION OF HONBL E APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA, (320 ITR 561) AND HOLDING THE REASSESSMENT PROCEEDINGS INVALID. 10. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHOR ITIES AND HEARD RIVAL CONTENTIONS. REASONS FOR REOPENING HA VE BEEN REPRODUCED BY US AT PARA FOUR ABOVE. THERE ARE TWO REASONS, MENTIONED, FIRST ONE IS THAT SOME OF THE ITEMS OF T HE INCOME ON WHICH ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80-IA OF THE ACT OUGHT NOT HAVE BEEN ALLOWED, IN VIEW OF THE DECISION OF M/S.TIDEL PARK LTD. 10 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD. (274 ITR 117), IOB VS. CIT (246 ITR 206, AND CIT VS. INDIAN METAL AND METALLURGICAL CORPORATION ( 215 ITR 424). SECOND REASON MENTIONED IS THAT IN TEREST OF ` 1,94,04,211/- PAYABLE ON A CONVERTED LOAN OF ` 21.7 CRORES TO M/S.TIDCO, THOUGH DEBITED IN THE PROFIT AND LOSS A CCOUNT, ATTRACTED SEC.43B OF THE ACT. IN SO FAR AS FIRST R EASON MENTIONED IS CONCERNED, PREAMBLE OF THE ORIGINAL ASSESSMENT O RDER DATED 10.03.06 REPRODUCED HEREUNDER IS VERY RELEVANT. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FO R ASSESSMENT YEAR 2003-04 ON 28.11.2003 SHOWING A TOTAL INCOME O F ` 76,67,750/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(3) ON 30.02.04. THE CASE WAS SELECTED FOR REGULAR SCRUTI NY. IN RESPONSE TO NOTICE UNDER SECTION 143(2)/142(1) SHRI I. SUBRAMA NIAN, ACCOUNTS OFFICER OF THE COMPANY ATTENDED. HE FILED THE DETA ILS CALLED FOR. HE PRODUCED BOOKS/BILLS CALLED FOR AND THE CASE IS DIS CUSSED WITH HIM. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPING, OPERATING AND MAINTAINING INFORMATION TECHNOLOGY PA RK. GOVERNMENT OF INDIA NOTIFIED THE ASSESSEE COMPANY AS AN INDUST RIAL PARK FOR THE PURPOSE OF 80IA. THE ASSESSEE COMPANY IS A PUBLIC S ECTOR UNDERTAKING OF GOVT. OF TAMILNADU. THE ASSESSEE COM PANY CLAIMED THE ENTIRE INCOME AS EXEMPT UNDER SECTION 80IA. THE ISSUES INVOLVED IN THIS CASE ARE DISCUSSED AS UNDER:- IT IS CLEAR FROM THE ABOVE THAT THE ASSESSING OFFIC ER WAS AWARE THAT THE ASSESSEE WAS A COMPANY NOTIFIED BY THE GOV ERNMENT OF M/S.TIDEL PARK LTD. 11 INDIA AS INDUSTRIAL PARK AND HAD CLAIMED ITS INCOM E EXEMPT UNDER SECTION 80-IA OF THE ACT. 11. PARA-2 OF THE SAME ASSESSMENT ORDER CLEARLY DE ALS WITH THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80I A OF THE ACT. THIS IS REPRODUCED HEREUNDER:- 2. INTEREST INCOME, MISCELLANEOUS INCOME AND OTHE R RENT ARE NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 80IA. THE ASSESSEE COMPANY DURING THE YEAR HAS SHOWN INTE REST INCOME OF ` 4,79,21,227/- WHICH INCLUDES INTEREST INCOME FROM B ANK DEPOSITS OF ` 4,57,07,096/- AND INTEREST FROM OTHERS OF ` 22,14,131/- AND MISCELLANEOUS OTHER INCOME OF ` 46,72,181/- (WHICH INCLUDES INCOME FROM OPERATION OF STD/PCO BOOTHS, PLAY AREA AND OTH ER MISCELLANEOUS INCOME) AND OTHER RENTS OF ` 1,01,78,239/-, WHICH INCLUDE RENT FOR CAR PARKING, TWO WHEELER PARKING, TERRACE RENT FOR ERECTION MOBILE PHONE NETWORK TOWERS FROM THE TELEC OM COMPANIES, SWIMMING POOL USAGE CHARGES, ETC. IT IS SUBMITTED THAT THE COMPANY HAS TAKEN THE LAND ON LEASE FROM THE ADJACENT PROPE RTY WITH M.G.R. FILM CITY AND IN THIS LAND THE FACILITIES OF SWIMMI NG POOL, PLAY AREA, PARKING ARE PROVIDED TO THE MEMBER ` THE MISCELLANEOUS INCOME/OTHER RENT INCLUDE SERVICES FROM THE ABOVE LEASED PROPERT Y. THE LEASE PROPERTY IS NOT AN INFRASTRUCTURAL PROJECT. THE ASS ESSEE COMPANY HAS CLAIMED 80IA DEDUCTION ON THE ABOVE INCOMES. THE AS SESSEE M/S.TIDEL PARK LTD. 12 COMPANY WAS REQUESTED TO EXPLAIN WHY INTEREST INCOM E, MISCELLANEOUS INCOME AND OTHER RENTS ARE ALLOWABLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. THE ASSESSEE COMPANY IN ITS REPLY SUBMITTED THAT TH E ENTIRE INCOME ARISING TO THE COMPANY IS INEXTRICABLY CONNE CTED WITH THE INFRASTRUCTURE PROJECT AND CANNOT BE TREATED SEPARA TELY FROM THE INFRASTRUCTURE PROJECT, AND, THEREFORE, IT IS ENTIT LED FOR 80IA DEDUCTION EVEN ON THE INTEREST INCOME AND OTHER INCOME LIKE M ISCELLANEOUS INCOME, OTHER RENT, ETC. THE ASSESSEE COMPANYS EXP LANATION IS CONSIDERED AND FOUND TO BE NOT ACCEPTABLE FOR THE F OLLOWING REASONS: (A) IT IS SUBMITTED THAT EVERY NATURE OF INCOME WHI CH IS DERIVED BY THE INDUSTRIAL UNDERTAKING IS NOT ELIGIBLE FOR EXEMPTIO N/S 80IA OF THE ACT. IN THIS CONNECTION, THE MADRAS HIGH COURT IN T HE CASE OF CIT VS. MENON IMPEX PRIVATE LIMITED REPORTED IN (259 IT R 403) HAS CLEARLY HELD THAT INTEREST ON DEPOSITS KEPT IN BANK S ARE NOT ELIGIBLE FOR 10B/10A EXEMPTION. THE RATIO OF THE DECISION I N THE ABOVE CASE SQUARELY APPLIES TO THE FACTS OF THE ASSESSEE S CASE ALSO. THE MADRAS HIGH COURT IN THIS CASE HELD THAT THE IN TEREST ON DEPOSITS IS NOT DERIVED FROM EXPORT AND, THEREFORE, NOT ENTITLED TO EXEMPTION IN RELATION TO EXEMPTION UNDER SECTION 10 A/10B THE COURT IN THIS CASE HAS HELD AS UNDER: INTEREST RECEIVED BY THE ASSESSEE WAS ON DEPOSI TS MADE BY IT IN THE BANKS. THE MERE FACT THAT THE DEPOSIT WAS MADE FOR THE PURPOSE OF OBTAINING LETTERS OF CREDIT WHICH WERE I N TURN USED FOR THE PURPOSE OF BUSINESS OF INDUSTRIAL UNDERTAKING D ID NOT ESTABLISH A DIRECT NEXUS BETWEEN THE INTEREST AND THE INDUSTR IAL UNDERTAKING M/S.TIDEL PARK LTD. 13 AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO GET THE BENEFIT OF 10A/10B IN RELATION TO THE INTEREST INCOME. THE MADRAS HIGH COURT RELIED IN THIS CASE ON THE FO LLOWING SUPREME COURT DECISIONS ON THIS ISSUE. (A) CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO LTD VS. C IT (1978)(113 ITR 84)(SC) (B) CIT V STERLING FOODS (1999) (237 ITR 579)(SC) (C) CIT V PANDIAN CHEMICALS LTD (2003) 129 TAXMAN 5 39 (D) CIT VS. TUTICORIN ALKALI & CHEMICALS & FERTILIS ERS LTD. THE SUPREME COURT IN THE ABOVE CASES CLEARLY HELD T HAT THE WORD DERIVED HAS NARROWER MEANING THAN THE WORD ATTRIBUTABLE TO. THE WORD DERIVED IS FOLLOWED BY THE WORD FROM . THIS CLEARLY SHOWS THAT THERE SHOULD BE A DIRECT NEXUS BETWEEN THE SOURCE AND THE INCOME GENERATED. IT IS SUBMITTED THAT INTEREST INCOME FROM DEPOSIT S, MISCELLANEOUS INCOME AND OTHER RENTS ARE NOT DERIVE D FROM INFRASTRUCTURE PROJECT. IN THE ABOVE CASE THE ASSE SSEE COMPANY KEPT THE BANK DEPOSITS FOR OPENING LETTERS OF CREDIT AND BANK DEPOSITS HAS A CLOSE CONNECTION WITH THE E XPORT BUSINESS. INSPITE OF THIS CLOSE RELATION TO THE BU SINESS OF THE ABOVE COMPANY, THE MADRAS HIGH COURT HELD THAT INTE REST INCOME CANNOT BE TREATED AS INCOME DERIVED FROM E XPORT BUSINESS. THE WORD USED DERIVED IN SECTION 10A/1 0B, 80HHC, 80IA, AND 80IB HAS THE SAME MEANING. IN THE PRESENT CASE THE INTEREST INCOME WAS RECEIVED FROM THE SURP LUS FUNDS/PAST PROFITS OF THE COMPANY AND, THEREFORE, T HE INTEREST INCOME ON THESE DEPOSITS CANNOT BE TREATED AS DERIV ED FROM THE INFRASTRUCTURE PROJECT MAINTAINED BY THE ASSESS EE. SIMILARLY MISCELLANEOUS INCOME AND OTHER RENT AS DISCUSSED AB OVE MAY M/S.TIDEL PARK LTD. 14 BE ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE BUT CANNOT BE TREATED AS DERIVED FROM THE INFRASTRUCTURE PROJECT. IN VIEW OF THE ABOVE REFERRED JUDICIAL DECISIONS, THE EXEMPTION CL AIMED BY THE ASSESSEE UNDER SECTION 80IA ON INTEREST INCOME MISCELLANEOUS INCOME AND OTHER RENTS ARE EXCLUDED F ROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF 80IA. 12. IT IS CRYSTAL CLEAR FROM THE ABOVE THAT ASSES SING OFFICER HAD, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS ITS ELF CONSIDERED THE DEDUCTIBILITY OF EACH OF THE ITEMS O F INCOME CLAIMED BY THE ASSESSEE UNDER SECTION 80-IA OF THE ACT. ASSESSING OFFICER HAS MADE AN OBSERVATION THAT EVER Y NATURE OF INCOME DERIVED FROM INDUSTRIAL UNDERTAKING WAS NOT ELIGIBLE FOR SUCH EXEMPTION. HE HAD THEREAFTER HELD THAT INTERE ST INCOME, MISCELLANEOUS INCOME AND OTHER RENT WERE NOT ELIGIB LE FOR SUCH EXEMPTION. IN THE FACE OF THE ABOVE, IT IS DIFFICU LT TO ACCEPT THE PLEA OF THE LD. D.R THAT ASSESSING OFFICER HAD NOT APPLIED HIS MIND WITH REGARD TO THE DEDUCTION CLAIMED BY THE AS SESSEE UNDER SECTION 80-IA OF THE ACT. NO DOUBT, ASSESSING OFF ICER, HAS NOT, IN SO MANY WORDS MENTIONED ANYTHING ABOUT THE DECIS IONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD.(SUPRA). BUT IN THE SAID CASE, ASSESSEE WAS A COMPANY DERIVING, INTER ALIA, RE NTAL INCOME FROM LETTING OUT OF TWO BUILDINGS CALLED CHENNAI HOUSE AND M/S.TIDEL PARK LTD. 15 FIRHAVAN ESTATE. ASSESSEE CONCERNED WAS EXPLOITI NG THE PROPERTIES AS OWNER BY A SIMPLE LEASE AND WAS NOT E NGAGED IN LEASING OF AN ADVANCED FACILITY LIKE SOFT WARE PARK . IT IS DIFFICULT TO PLACE A SIMPLE LEASE OF PROPERTY AND A LEASE OF A S PECIALIZED FACILITY WITH A NUMBER OF FUNCTIONALITIES ON THE SA ME FOOTING. IT IS ALSO NOTEWORTHY TO MENTION THE OBSERVATIONS OF THEI R LORDSHIPS IN CHENNAI PROPERTIES AND INVESTMENTS LTD.(SUPRA). IT WAS OBSERVED THAT THE QUESTION WHETHER INCOME OF LEASIN G OUT SHOULD BE TREATED AS INCOME FROM PROPERTY OR BUSINESS MUST BE CONSIDERED IN THE CIRCUMSTANCES OF EACH CASE. WE A LSO FIND THAT THIS POSITION OF LAW HAS BEEN REITERATED BY HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S.ELNET TECHNOL OGIES LTD. ( TCA NO.2336 & 2623 OF 2006 AND 2169 OF 2008 DATED 0 9.10.12) WHEREIN DECISION OF HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD. WAS CONSIDERED. THUS, WHAT COMES OUT CLEARLY IS THAT N OT ONLY ASSESSING OFFICER HAD APPLIED HIS MIND ON THE APPLI CABILITY OF SEC.80-IA TO VARIOUS CATEGORIES OF INCOME OF THE AS SESSEE, BUT HAD ALSO REACHED A LAWFUL CONCLUSION THAT ASSESSEE WAS ELIGIBLE FOR CLAIMING SUCH DEDUCTION, EXCEPT ON SOME OF SUCH CATEGORIES. M/S.TIDEL PARK LTD. 16 13. COMING TO THE SECOND ITEM REGARDING INTEREST PAYABLE OF ` 1,94,04,211/-, THERE IS NO MENTION WHATSOEVER IN T HE REASON ITSELF THAT SUCH INTEREST WAS NOT PAID. ASSESSING O FFICER HAD SIMPLY STATED THAT NON-PAYMENT OF INTEREST ATTRACTE D SEC 43B OF THE ACT. THIS IS ONLY THE POSITION OF LAW AS PER THE STATUTE. HOW FAR THE ASSESSEE HAD FAILED TO COMPLY WITH IT, IS NOT MENTIONED. IT IS NOT THAT INTEREST PAYABLE AS ON 31.03.03 STOOD U NPAID UP TO THE DATE OF FILING OF THE RETURN. ASSESSEE HAD IN ITS L ETTER DATED 24.02.00, FILED DURING THE COURSE OF ORIGINAL ASSES SMENT PROCEEDINGS CLEARLY MENTIONED THAT INTEREST OF ` 6.69 CRORES STANDING AS PAYABLE IN ITS BALANCE SHEET AS ON 31.0 3.03 WERE DULY PAID BEFORE DATE OF FILING OF THE RETURN. DAT ES OF PAYMENT AND THE PARTICULARS OF PAYMENTS WERE ALSO FURNISHED BY THE ASSESSEE. THE CITED REASON SHOW THAT ASSESSING OFF ICER HAS TAKEN A WRONG PRESUMPTION THAT THE WHOLE OF THE IN TEREST DEBITED IN THE P&L ACCOUNT, WAS REMAINING UNPAID AND ALSO T OOK A FURTHER PRESUMPTION THAT SUCH INTEREST STOOD UNPAID EVEN B Y THE DUE DATE OF FILING OF THE RETURN. IN FACT, ASSESSING OF FICER HAD REQUIRED THE ASSESSEE TO GIVE DETAILS ON THE AMOUNTS OF INTE REST STANDING AS PAYABLE AS ON 31.03.03 VIDE HIS LETTER DATED 11. 02.06 ISSUED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S AND ASSESSEE HAD DULY REPLIED THERETO. THERE IS NO NEW TANGIBLE M/S.TIDEL PARK LTD. 17 MATERIAL AVAILABLE WITH THE ASSESSING OFFICER FOR A RRIVING AT A REASON THAT SEC.43B STOOD ATTRACTED ON ANY PART OF THE INTEREST SHOWN AS PAYABLE BY THE ASSESSEE. THUS, BOTH THE R EASONS MENTIONED BY THE ASSESSING OFFICER, WERE NOTHING BU T A CHANGE OF OPINION. THERE WAS NO FAILURE ON THE PART OF TH E ASSESSEE TO DISCLOSE FULLY ALL MATERIAL FACTS RELEVANT TO ITS A SSESSMENT. ASSESSMENT WAS COMPLETED, AFTER CONSIDERING THE RET URNS AND DETAILS FILED BY THE ASSESSEE. IN OUR OPINION, THE REASONS MENTIONED DID NOT SATISFY THE TEST OF REQUIREMENT S PECIFIED IN SEC 147 OF THE ACT. THERE WAS ONLY A CHANGE OF VIEW AN D THERE WAS NO MATERIAL FOR REACHING A BELIEF THAT ANY INCOME H AD ESCAPED ASSESSMENT. ASSESSING OFFICER HAD NO TANGIBLE MATER IALS TO COME TO A CONCLUSION THAT THERE WAS ANY ESCAPEMENT OF INCOME FROM ASSESSMENT. WE ARE OF THE OPINION THAT THE VE RY BASIS FOR ASSUMING A JURISDICTION FOR REOPENING WAS ABSENT. REASSESSMENT WAS RIGHTLY INVALIDATED BY THE CIT(A). WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT( A). APPEAL OF REVENUE STANDS DISMISSED. SINCE APPEAL OF REVENUE I S DISMISSED, CROSS OBJECTIONS FILED BY THE ASSESSEE H AS BECOME INFRUCTUOUS. M/S.TIDEL PARK LTD. 18 14. NOW THE APPEAL OF THE REVENUE AND CROSS OBJECTI ON OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 ARE TAKEN UP. SINCE C.O. OF THE ASSESSEE ASSAILS THE REOPENING, THIS IS CONSIDERED FIRST. 15. FACTS APROPOS ARE THAT ASSESSEE HAD FOR THE IM PUGNED ASSESSMENT YEAR CLAIMED DEDUCTION UNDER SECTION 80- IA(4)(III) OF THE ACT. THIS WAS ALLOWED IN THE ORIGINAL ASSES SMENT UNDER SECTION 143(3) OF THE ACT, COMPLETED ON 19.12.07. ASSESSING OFFICER THEREAFTER ISSUED A NOTICE ON 17.03.10 UNDE R SECTION 148 PROPOSING A REASSESSMENT. REASONS GIVEN FOR SUC H REOPENING READ AS UNDER:- IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) D EDUCTION UNDER SECTION 80-IA WAS ALLOWED IN EXCESS AS BELOW: THE ASSESSEE HAS DECLARED INCOME FROM THE FOLLOWING AS BUSINESS INCOME AND CLAIMED DEDUCTION UNDER SECTION 80 IA. RENT FROM PREMISES 52,85,43,673 RENT FROM AUDITORIUM 31,60,823 RENT OTHER 1,83,79,315 TOTAL 55,00,83,811 BUT THE ASSESSEES CLAIM UNDER SECTION 80IA TAKING THE ABOVE INCOME AND THE BUSINESS INCOME IS INCORRECT AS PER THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS CHENNAI PROPERTIES AND INVESTMENTS LTD 274 ITR 117 (MAD) SU PPORTED BY IOB VS CIT 246 ITR 206 (MAD), CIT VS. INDIAN METAL AND METALOGICAL CORPORATION 215 ITR 424(MAD). IN THE ASSESSMENT ORDER UNDER SECTION 143(3), INTER EST FROM SINKING FUND OF ` 1,94,68,487/- HAS BEEN ASSESSED UNDER INCOME FROM OTHER SOURCES AND DEDUCTION UNDER SECTION.80IA ALL OWED ON THIS INCOME. M/S.TIDEL PARK LTD. 19 16. ASSESSEE OBJECTED TO THE REOPENING VIDE ITS L ETTER DATED 18.11.10. CONTENTION OF THE ASSESSEE WAS THAT DURIN G THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, ASSESSING OFFIC ER HAD CALLED FOR VARIOUS PARTICULARS RELATING TO THE DEDUCTION C LAIMED BY IT UNDER SECTION 80-IA OF THE ACT AND IT HAD ALSO ANSW ERED VARIOUS QUERIES RAISED BY THE ASSESSING OFFICER IN THIS REG ARD. AS PER THE ASSESSEE, ORIGINAL ASSESSMENT WAS COMPLETED AFTER CONSIDERING SUCH DETAILS FURNISHED BY IT AND THE ASSESSING OFFI CER HAD TAKEN A LAWFUL VIEW TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80-IA OF THE ACT. AS PER THE ASSESSEE, INTEREST FROM SIN KING FUND WAS ONE OF THE ITEMS ON WHICH SUCH DETAILS WERE FURNISH ED AND DEDUCTION UNDER SECTION 80-IA OF THE ACT WAS ALLOWE D TO IT ONLY AFTER CONSIDERING ITS REPLY. CONTENTION OF THE ASS ESSEE IN A NUTSHELL WAS THAT RE-ASSESSMENT PROCEEDINGS WERE I NITIATED BASED ON A CHANGE OF OPINION AND IN VIEW OF THE DE CISION OF HONBLE APEX COURT IN THE CASE CIT VS. KELVINATOR OF INDIA (SUPRA), IT COULD NOT HAVE BEEN DONE. 17. HOWEVER, ASSESSING OFFICER WAS NOT IMPRESSED. HE PROCEEDED WITH THE REASSESSMENT. ACCORDING TO HIM, ASSESSEE COULD NOT PLEAD THAT PRODUCTION OF ACCOUNT BOOKS AN D OTHER M/S.TIDEL PARK LTD. 20 EVIDENCES WOULD AMOUNT TO DISCLOSURE WITHIN THE MEA NING OF EXPLANATION -1 TO SEC.147 OF THE ACT. ASSESSING OF FICER ALSO RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CONSOLIDATED PHOTO AND FINVEST LTD.(SUPRA). FINALL Y, IN THE REASSESSMENT DONE, ASSESSEE WAS DENIED DEDUCTION C LAIMED UNDER SECTION 80-IA(4) OF THE ACT, CONSIDERING IT S INCOME TO BE ONLY FROM RENTALS OF PROPERTY. HOWEVER, THERE WA S NO ADDITION FOR INTEREST ON SINKING FUND, ON WHICH ASPECT ASSES SING OFFICER CONSIDERED THE EXPLANATION OF THE ASSESSEE TO BE SA TISFACTORY. 18. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A), BO TH AGAINST REOPENING AS WELL AS THE DENIAL OF THE DEDUCTION C LAIMED UNDER SECTION 80-IA OF THE ACT. ARGUMENT OF THE ASSESSEE WAS THAT IT HAD FULLY DISCLOSED ALL THE INFORMATION AND MATERIA L NECESSARY FOR THE ASSESSMENT AND ASSESSING OFFICER HAD REACHED A LAWFUL VIEW THAT IT WAS ELIGIBLE FOR THE DEDUCTION CLAIMED. ACCORDING TO THE ASSESSEE, RE-OPENING WAS BASED ON A MERE CHANGE OF OPINION. RELIANCE WAS ONCE AGAIN PLACED IN THE DECISION OF CIT VS. KELVINATOR OF INDIA (SUPRA). 19. HOWEVER, LD. CIT(A) WAS NOT IMPRESSED. ACCORD ING TO HIM, ASSESSING OFFICER HAD EXAMINED ONLY RECEIPTS UNDER THE HEAD O M/S.TIDEL PARK LTD. 21 & M CHARGES, INTEREST INCOME, REVENUE SHARING FROM LESSEES, OTHER INCOME, RENT FROM AUDITORIUM AND RENT FROM O THERS. AS PER LD. CIT(A) ASSESSING OFFICER HAD NOT TAKEN ANY VIEW ON THE RENT FROM PREMISES CLAIMED BY THE ASSESSEE AS ELIGIBLE F OR DEDUCTION UNDER SECTION 80IA OF THE ACT. WHAT HAD COME OUT I N A SUBSEQUENT ASSESSMENT COULD VERY WELL BE A REASON F OR REOPENING FOR A PRECEDING YEAR, ACCORDING TO LD. CI T(A). IN HIS OPINION, ADDITIONAL MATERIALS WERE WITH THE ASSESSI NG OFFICER FOR REACHING A CONCLUSION THAT ASSESSEE WAS NOT ELIGIBL E FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. IN THIS V IEW OF THE MATTER, HE HELD THAT RE-OPENING WAS VALIDLY DONE. H OWEVER, ON MERITS, LD. CIT(A) HELD THE ASSESSEE TO BE ELIGIBL E FOR DEDUCTION UNDER SECTION 80 IA ON ITS INCOME FROM LEASING OF THE UNITS IN THE INDUSTRIAL PARK. AS PER THE LD. CIT(A) SUCH RECEIPT S FELL UNDER THE HEAD PROFITS AND GAINS ON BUSINESS OR PROFESSION , AND WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE A CT. 20. NOW BEFORE US, ASSESSEE IN ITS C.O. IS AGGRIEV ED ON THE VIEW TAKEN BY THE CIT(A), THAT REOPENING WAS VALIDL Y DONE, WHEREAS THE REVENUE IN ITS APPEAL IS AGGRIEVED ON THE DIRECTION OF THE CIT(A) TO ALLOW DEDUCTION CLAIMED UNDER M/S.TIDEL PARK LTD. 22 SECTION 80-IA OF THE ACT ON THE LEASE RENT RECEIVED BY THE ASSESSEE . 21. LD. A.R SUPPORTING THE CROSS OBJECTION SUBM ITTED THAT REOPENING WAS ON A MERE A CHANGE OF OPINION WITH NO NEW TANGIBLE MATERIAL OR EVIDENCE WAS AVAILABLE WITH TH E REVENUE. ASSESSEE HAD GIVEN ALL DETAILS AND INFORMATION CALL ED FOR BY THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASS ESSMENT PROCEEDINGS. IT WAS AFTER CONSIDERING SUCH DETAILS, WHICH INTER ALIA, INCLUDED DETAILS ON ITS CLAIM OF DEDUCTION UN DER SECTION 80-IA OF THE ACT AS WELL AS ITS CLAIM DEDUCTION OF INTEREST ON SINKING FUND THAT ASSESSING OFFICER ALLOWED THE CLA IMS. IN ANY CASE, ACCORDING TO HIM, IN THE FRESH ASSESSMENT ALS O ASSESSING OFFICER HAD CONSIDERED THE EXPLANATIONS G IVEN BY THE ASSESSEE ON INTEREST ON SINKING FUND TO BE SATI SFACTORY. RELIANCE WAS ONCE AGAIN PLACED ON THE DECISION OF H ONBLE APEX COURT IN THE CASE CIT VS. KELVINATOR OF INDIA (SUPRA). 22. PER CONTRA, LD. D.R STRONGLY SUPPORTING THE OR DER OF THE CIT(A) IN SO FAR AS IT RELATED TO THE REOPENING, A ND ASSAILING HIS ORDER FOR ALLOWING THE CLAIM OF THE ASSESSEE ON MER ITS, SUBMITTED THAT FOR THE IMPUGNED ASSESSMENT YEAR, THE REOPENIN G WAS M/S.TIDEL PARK LTD. 23 WITHIN FOUR YEARS FROM THE END OF THE IMPUGNED ASSE SSMENT YEAR. THEREFORE, ACCORDING TO HIM, PROVISO 1 TO SEC.147 D ID NOT APPLY. EVEN IN A CASE, WHERE ESCAPEMENT OF INCOME WAS NOT DUE TO ANY FAULT OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY I NFORMATION REQUIRED FOR AN ASSESSMENT, STILL A REOPENING COULD BE DONE. WHAT WAS REQUIRED HAS ONLY A REASON. AS PER LD. D.R SUFFICIENCY OF THE REASON WAS NOT JUSTICIABLE. ONLY THE RELEVA NCY COULD BE LOOKED INTO. A.O HAD RELEVANT REASON FOR INITIATIN G THE RE- ASSESSMENT PROCEEDINGS. LD. D.R. SUBMITTED THAT A.O . HAD NOT, IN THE ORIGINAL ASSESSMENT, CONSIDERED THE POSITION OF LAW WITH REGARD TO TREATMENT OF RENTAL INCOME, AS LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CH ENNAI PROPERTIES AND INVESTMENTS LTD.(SUPRA). LD. A.O. DI D NOT CONSIDER THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT I N THE CASE OF CIT VS. NOVAPAN INDIA LTD. , 236 ITR 746 OR TH E DECISION OF HONBLE APEX COURT IN THE CASE OF A.L.A. FIRM IN 18 9 ITR 285. ACCORDING TO THE LD. D.R., THEIR LORDSHIPS IN THE C ASE OF A.L.A. FIRM (SUPRA) HAD HELD THAT NON-CONSIDERATION OF A J URISDICTIONAL HIGH COURT DECISION WAS GOOD ENOUGH A REASON FOR R ESORTING TO A REOPENING. THEREFORE, ACCORDING TO HIM, CIT(A) WA S JUSTIFIED IN APPROVING THE REOPENING. M/S.TIDEL PARK LTD. 24 23. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHO RITIES AND HEARD RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT FOR THE IMPUGNED ASSESSMENT YEAR RE-OPENING WAS DONE WITHIN A PERIOD OF FOUR YEAR FROM THE END OF THE IMPUGNED ASSESSMEN T YEAR. THEREFORE, FIRST PROVISO TO SEC 147, AS MENTIONED B Y LD. D.R., DOES NOT APPLY. THE ONLY REQUIREMENT IS THAT A.O. SHOULD HAVE A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. HOWEVER, SUCH REASON SHOULD BE A REASO N THAT REASONABLE MAN WILL HAVE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE. ASSESSEE HAD DURING THE COURSE OF ORIGINAL A SSESSMENT PROCEEDINGS, REPLIED TO A NOTICE DATED 23.10.07, GI VING THE DETAILS OF THE RENTAL INCOME RECEIVED BY IT, DETAILS OF THE OTHER INCOME RECEIVED BY IT AND DETAILS OF VARIOUS EXPENSES CLAI MED BY IT. IT HAD ALSO GIVEN A NOTE ON ITS OWN FUNCTIONING, WHERE IT WAS MENTIONED THAT ITS OBJECT WAS TO PROVIDE COMPREHENS IVE FACILITIES UNDER ONE ROOF TO ATTRACT MULTI-NATIONAL INFORMATIO N TECHNOLOGY COMPANIES INTO TAMILNADU. ASSESSEE HAD FURTHER BROU GHT TO THE ATTENTION OF THE ASSESSING OFFICER THE FEATURES OF THE TIDEL PARK WHICH READ AS UNDER:- THE BUILT U AREA OF TIDEL PARK IS 1.28 MILLION SQ.FT. AN ISO 9001/ISO 14001 COMPANY AMPLE COVERED AND OPEN CAR PARKING FACILITIES LOCATED ON THE SIX-LANE EXPRESS WAY(IT CORRIDOR). M/S.TIDEL PARK LTD. 25 CONNECTIVITY-HIGH SPEED DATA/VOICE COMMUNICATION BY MULTIPLE SERVICE PROVIDE ` 100% BACK UP FOR POWER AND COMMUNICATION FACILITIES . RECREATION FACILITIES IBMS FACILITY CONNECTED TO ALL KEY UTILITIES. VIDEO CONFERENCING FACILITY. WORLDS 3 RD LARGEST TES FOR ACMV. 24 X 7 SERVICE TO OCCUPANTS MORE THAN 12,000 SOFTWARE PROFESSIONALS EMPLOYED IN THE PARK. WELL EQUIPPED AUDITORIUM/CONFERENCE HALL FOR USE OF OCCUPANT COMPANIES. PREMISES & FACILITY MANAGEMENT BY A MULTINATIONAL C OMPANY. FACILITATION/CONSULTANCY SERVICE FOR NEW JV IN IT I NFRASTRUCTURE PROJECTS. SUPPORT FACILITIES LIKE BANKS/ATMS, FOOD COURT, MED IAL CENTRE, COURIER SERVICE, TRAVEL SERVICE, BOOK SHOP, POST OFFICE, INSURANCE COMPANIES ETC. 24. IN ADDITION TO ABOVE, ASSESSEE HAD ALSO GIV EN DETAILS OF RENTAL RECEIVED FOR TIDEL PARK FACILITIES GIVEN OUT ON LEASE AND ALSO INFORMATION ON THE SINKING FUND, AS ANNEXURE F OUR TO ITS LETTER. ASSESSING OFFICER HAD IN HIS NOTICE DATED 23.10.07, REQUIRED THE ASSESSEE TO GIVE BREAK-UP OF THE RENTAL INCOME RECE IVED, AND ALSO A NOTE ON SINKING FUND. ASSESSEE HAD REPLIED THAT SINKING FUND WAS KEPT AS A SEPARATE FIXED DEPOSIT AND INTEREST W AS TRANSFERRED TO THE SAID FUND. AFTER CONSIDERING THE ABOVE DETA ILS FILED BY THE ASSESSEE, ASSESSMENT WAS FINALLY COMPLETED ON 19.12 .07 UNDER M/S.TIDEL PARK LTD. 26 SECTION 143(3) OF THE ACT. THE PREAMBLE OF THE SAID ASSESSMENT ORDER READS AS UNDER:- 1. THE ASSESSEE COMPANY IS GOVERNMENT OF TAMIL NAD U UNDERTAKING, ENGAGED IN DEVELOPING, OPERATING AND M AINTENANCE OF INFORMATION TECHNOLOGY PARK. THE ASSESSEE COMPANY HAS BEEN NOTIFIED BY THE GOVERNMENT OF INDIA AS AN INDUSTRI AL PARK FOR THE PURPOSE OF SEC 80-IA OF THE ACT. THE ASSESSEE COMPA NY FILED ITS RETURN OF INCOME FOR THIS ASSESSMENT YEAR ON 31.10. 2005, DECLARING A TOTAL INCOME OF ` 282052670/- UNDER THE PROVISIONS OF SEC 115JB. THE RETURN WAS PROCESSED UNDER SECTION 143(1) ON 31.03. 2007. 25. THEREAFTER ASSESSING OFFICER HAD ALSO DONE A REWORKING OF THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80-IA OF THE ACT. HIS VIEWS ON THE CLAIM O F DEDUCTION MADE BY THE ASSESSEE UNDER VARIOUS HEADS APPEAR AT PARA FOUR OF THE SAID ASSESSMENT ORDER WHICH IS REPRODUCED HE REUNDER: REWORKING OF DEDUCTION UNDER SECTION 80-IA 4.1. FOR THE ASSESSMENT YEAR 2005-06, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80 IA TO THE TUNE O F ` 283264825/-. THE ASSESSEE HAS CREDITED THE FOLLOWING INCOMES IN ITS PROFIT AND LOSS ACCOUNT: (I) RENT FROM PREMISES 528543673 (II) RENT FROM AUDITORIUM 3160823 (III) RENT-OTHERS 18379315 (IV) OPERATING & MAINTENANCE CHARGES 86551361 M/S.TIDEL PARK LTD. 27 (V) INTEREST INCOME 31817559 (VI) REVENUE SHARING FROM LESSEES 4262435 (IV) OTHER INCOME 4213330 TOTAL(A) 676928496 FROM THE ABOVE INCOMES RECEIVED, THE ASSESSEE HAS D EBITED THE FOLLOWING SUMS, IN ARRIVING AT THE PROFIT OF THE BU SINESS. (I) EMPLOYEES COST 4727090 (II) MAINTENANCE EXPENSES 64674423 (III) ADMINISTRATION AND OTHER EXPENSES 25643017 (IV) MARKETING EXPENSES 2042540 (V) FINANCE CHARGES 96906884 (VI) DEVELOPMENT EXPENSES WRITTEN OFF 91,130 TOTAL(B) 194084084 THE ASSESSEE ARRIVED AT THE PROFIT OF THE BUSINESS AT ` 482844412/- FROM THE ABOVE PROFITS, THE DEPRECIATION AS PER I.T RULES WERE CLAIMED AT ` 204503772/- AND THE BALANCE OF ` 283264825/- WAS CLAIMED TO BE EXEMPTED UNDER SECTION 80IA. 4.2. THE ASSESSEE INCLUDED THE FOLLOWING SUMS AS INCOME FROM BUSINESS IN CLAIMING THE DEDUCTION UNDER SECTION 8 0 IA: (I) OPERATING & MAINTENANCE CHARGES 86551361 (II) INTEREST INCOME 31817559 (III) REVENUE SHARING FROM LESSEES 4262435 (IV) OTHER INCOME 4218330 TOTAL(A) 126844685 M/S.TIDEL PARK LTD. 28 A PLAIN READING OF SEC 80 IA REVEALS THT THE ASSESS EE IS ENTITLED FOR DEDUCTION OF ANY PROFITS DERIVED FROFM THE BUSINESS OF DEVELOPING AND MAINTENANCE OF INDUSTRIAL PARK. THE WORD DERIVED F ROM HAS NARROWER MEANING THAN THE EXPRESSION ATTRIBUTABLE TO. REL IANCE IS PLACED ON THE FOLLOWING CASE LAWS: (I) CAMBAY ELECTRIC SUPPLY INDUSTRIAL COMPANY LTD V S. CIT (113 ITR 84) (II) CIT VS. STERLING FOODS (237 ITR 579)(SC) (III) CIT VS. PANDIAN CHEMICALS LTD. (129 TAXMANN 5 39)(MAD.) IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, IT IS HELD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTIO N 80 IA ON THE ABOVE SUMS. CONSEQUENTLY, THE ABOVE SUMS ARE ASSESS ED UNDER THE HEAD OTHER SOURCES. 4.3. SCRUTINY OF THE RENTAL INCOME RECEIVED REVEALS THAT THE ASSESSEE HAS ACCOUNTED FOR THE FOLLOWING SUMS AS ITS RENTAL INCOME: (I) INTEREST FROM PREMISES 528543673 (II) RENT FROM AUDITORIUM 3160823 (IV) RENT-OTHERS 18379315 TOTAL 550083811 IN VIEW OF THE JUDICIAL DECISIONS REFERRED IN PARA 4.2. OF THIS ORDER, IT IS HELD THAT THE RENTAL INCOME FROM AUDITORIUM AND OTH ERS AMOUNTING TO ` 21540138/- CANNOT BE EQUATED AS INCOME FROM DERIVE D FROM M/S.TIDEL PARK LTD. 29 INFRASTRUCTURE PROJECT. HENCE THE SAME IS DISALLO WED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80-IA. 26. HIS VIEW ON THE CLAIM OF SINKING FUND IS ALSO APPEARING AT PARA FIVE OF THE ASSESSMENT ORDER. INTEREST FROM SINKING FUND: 5.1. IN THE NOTES OF ACCOUNTS FILED ALONG WITH THE RETUR N OF INCOME, IT IS SEEN THAT THE ASSESSEE RECEIVES CERTAIN AMOUNTS FROM THE BUYERS OF THE BUILDING FOR BETTERMENT AND MAINTENANCE OF TIDE L PARK. THIS IS IN THE FORM OF NON REFUNDABLE INTEREST FREE SUM EQUIVA LENT TO 1% OF THE TOTAL CONSIDERATION. THE SUM SO RECEIVED HAS BEEN KEPT AS A SINKING FUND CORPUS. THE AMOUNT LYING IN THIS FUND HAS BE EN DEPOSITED IN A SEPARATE FIXED DEPOSIT. THE INTEREST EARNED ON THE ABOVE SUM IS TRANSFERRED TO THE SINKING FUND ACCOUNT NET OF INCO ME TAX. THE TOTAL INTEREST INCLUDING TAX WORKS OUT TO ` 19468487/- [ ` 13793256 (+) ` 810378 (+) ` 4799760 (+) ` 65093) 27. ON THE FACE OF THE ABOVE, IT IS DIFFICULT TO C OME TO A CONCLUSION THAT ASSESSING OFFICER HAD NOT APPLIED H IS MIND ON THE CLAIMS OF ASSESSEE. ASSESSEE HAD FILED ALL PARTICUL A RS. THERE COULD HAVE BEEN A CASE OF REOPENING, IF THE PARTICU LARS FILED BY THE ASSESSEE, DID NOT REVEAL THE NATURE OF THE INCO ME, ON WHICH IT HAD CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT . THE NATURE OF INCOME WAS CLEAR. THE NATURE OF BUSINESS OF THE ASSESSEE WAS M/S.TIDEL PARK LTD. 30 ALSO CLEAR. ASSESSING OFFICER HAD CONSIDERED THE CL AIM, DISALLOWED SOME, AND ALLOWED OTHE RS. THEREFORE, THE REASON MENTIONED FOR RE-OPENING THAT ASSESSEE WAS NOT ELIG IBLE FOR A CLAIM OF DEDUCTION UNDER SECTION 80-IA OF THE ACT W AS NOTHING, BUT A CHANGE OF OPINION. NO DOUBT, ASSESSING OFFI CER PLACED RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHENNAI PROPERTIES AND INVESTM ENTS LTD. HOWEVER, WHAT WAS RENTED OUT THERE WAS A DIFFERENT TYPE OF PROPERTY THAN WHAT WAS LEASED OUT BY THE ASSESSEE. LEASING OUT OF A COMPLEX FACILITY LIKE A TECHNOLOGY PARK CO ULD NOT BE EQUATED WITH LEASING OUT OF A PROPERTY PERSE. HON BLE JURISDICTIONAL HIGH COURT ITSELF HAS TAKEN NOTE OF THIS IN THE CASE OF CIT VS. M/S.ELNET TECHNOLOGIES LTD.(SUPRA), THAT TOO AFTER CONSIDERING ITS EARLIER DECISION IN CIT VS. CHENNA I PROPERTIES AND INVESTMENTS LTD.(SUPRA). IN OUR OPINION, ASSES SING OFFICER HAD TAKEN A STUDIED VIEW THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT, IN ORIGIN AL ASSESSMENT PROCEEDINGS, AFTER CONSIDERING ALL THE ASPECTS. TH ERE WAS NO TANGIBLE MATERIAL OR EVIDENCE BEFORE THE ASSESSING OFFICER TO REACH A DIFFERENT CONCLUSION FOR ENABLING A RE-OPEN ING. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.SADDIQ UE LEATHERS VS. CIT (TCA NO.3806 OF 2006 DATED 10/7/2012) HAS H ELD THAT A M/S.TIDEL PARK LTD. 31 REOPENING, EVEN WHERE ORIGINAL RETURN WAS SELECTED ONLY TO A PROCESSING UNDER SECTION 143(1) OF THE ACT, NOT VA LID, UNLESS THE BELIEF WAS REACHED BASED TANGIBLE MATERIALS, WHICH COULD ALLOW A CONCLUSION THAT THERE WAS AN ESCAPEMENT OF INCOME F ROM ASSESSMENT. A CHANGE OF VIEW CANNOT BE CONSIDERED A S A RELEVANT REASON FOR RESORTING TO A REOPENING, EVEN WHEN REASSESSMENT PROCEEDINGS WERE INITIATED WITHIN FOUR YEARS PERIOD FROM THE END OF THE IMPUGNED ASSESSMENT YEAR. NO D OUBT, HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CI T VS. NOVAPAN INDIA LTD. (SUPRA) RELIED ON BY LD. D.R, HAS HELD THAT A JUDGEMENT, WHICH WAS NOT AVAILABLE AT THE TIME OF O RIGINAL ASSESSMENT, COULD BE A RELEVANT REASON FOR REOPENIN G. BUT HERE, JUDGEMENT CITED BY THE D.R, VIZ. THAT HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD.(SUPRA) WAS WITH REGARD TO THE RENTING OUT OF A PROPERTY WHICH WAS NOT AKIN TO A COMPLEX FACILITY IN THE NAT URE OF AN INDUSTRIAL PARK OR TECHNOLOGY PARK. THEREFORE, IN OUR OPINION THIS DECISION WILL NOT HELP THE CASE OF REVENUE. 28. AS FOR THE DECISION OF APEX COURT IN THE CASE OF A.L.A. FIRM(SUPRA) STRONGLY RELIED ON BY LD. D.R, RELEVANT PARA NO.17 IS REPRODUCED HEREUNDER: M/S.TIDEL PARK LTD. 32 17. WE THINK THERE IS FORCE IN THE ARGUMENT ON BE HALF OF THE ASSESSEE THAT, IN THE FACE OF ALL THE DETAILS AND STATEMENT PACED BEFORE THE ITO AT THE TIME OF THE ORIGINAL ASSESSMENT, IT IS DIFF ICULT TO TAKE THE VIEW THAT THE ITO HAD NOT AT ALL APPLIED HIS MIND TO THE QUES TION WHETHER THE SURPLUS IS TAXABLE OR NOT. IT IS TRUE THAT THE RET URN WAS FILED AND THE ASSESSMENT WAS COMPLETED ON THE SAME DATE. NEVERTH ELESS, IT IS OPPOSED TO NORMAL HUMAN CONDUCT THAT AN OFFICE WOUL D COMPLETE THE ASSESSMENT WITHOUT LOOKING AT THE MATERIAL PLACED B EFORE HIM. IT IS NOT AS IF THE ASSESSMENT RECORD CONTAINED A LARGE NUMB ER OF DOCUMENTS OR THE CASE RAISED COMPLICATED ISSUES RENDERING IT PROBABLE THAT THE ITO HAD MISSED THESE FACTS, IT IS A CASE WHERE THE RE IS ONLY ONE CONTENTION RAISED BEFORE THE ITO AND IT IS, WE THIN K, IMPOSSIBLE TO HOLD THAT THE ITO DID NOT AT ALL LOOK AT THE RETURN FILE D BY THE ASSESSEE OR THE STATEMENTS ACCOMPANYING IT. THE MORE REASONABLE VI EW TO TAKE WOULD, IN OUR OPINION, BE THAT THE ITO LOOKED AT THE FACTS AND ACCEPTED THE ASSESSEES CONTENTION THAT THE SURPLUS WAS NOT TAX ABLE. BUT, IN DOING SO, HE OBVIOUSLY MISSED TO TAKE NOTE OF THE LAW LAI D DOWN IN G.R.RAMACHARI & CO.(SUPRA) WHICH, THERE IS NOTHING TO SHOW, HAD BEEN BROUGHT TO HIS NOTICE. WHEN HE SUBSEQUENTLY BE CAME AWARE OF THE DECISION, HE INITIATED PROCEEDINGS UNDER SECTIO N 147(B). THE MATERIAL WHICH CONSTITUTED INFORMATION AND ON THE B ASIS OF WHICH THE ASSESSMENT WAS REOPENED WAS THE DECISION IN G.R.RAM ACHARI & CO(SUPRA). THIS MATERIAL WAS NOT CONSIDERED AT THE TIME OF THE ORIGINAL OF THE ORIGINAL ASSESSMENT. THOUGH IT WAS DECISION OF 1961 AND THE ITO COULD HAVE KNOWN OF IT HAD HE BEEN DILIGENT, TH E OBVIOUS FACT IS THAT HE WAS NOT ARE OF THE EXISTENCE OF THAT DECISI ON THEN AND, WHEN HE CAME TO KNOW ABOUT IT, HE RIGHTLY INITIATED PROCEED INGS FOR REASSESSMENT. OF COURSE, THE ABOVE WILL CLEARLY SHOW THAT MISSING OUT OF A DECISION RENDERED BY A HIGHER AUTHORITY CAN BE A RE ASON FOR RE-OPENING. BUT IN THE SAID CASE ALSO, THE DECISIO N MISSED OUT BY M/S.TIDEL PARK LTD. 33 THE ASSESSING OFFICER WAS ONE WHICH WAS SQUARELY AP PLICABLE ON THE FACTS AND NOT AT VARIANCE WITH FACTS. HERE, ON THE OTHER HAND AS MENTIONED BY US, HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF M/S.ELNET TECHNOLOGIES LTD.(SUPRA) HAS RECENTLY HELD THAT INCOME DERIVED FROM LETTING OUT OF PROPERTY WITH AL L AMENITIES AND FACILITIES OF A SOFTWARE TECHNOLOGY PARK, AS INCOME FROM BUSINESS. THIS BY ITSELF WILL SHOW THAT EARLIER DECISION OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CH ENNAI PROPERTIES AND INVESTMENTS LTD.(SUPRA) WAS ON A F ACTUALLY DIFFERENT SCENARIO. WE ARE THEREFORE, OF THE OPINIO N THAT THIS CASE WILL NOT ADVANCE THE CAUSE OF THE REVENUE. IN THE RESULT, WE HOLD THAT THE REOPENING WAS NOT VALIDLY INITIATED. SUCH REOPENING AND PURSUANT REASSESSMENT ARE QUASHED. 29. IN THE RESULT, CROSS OBJECTIONS FILED BY THE A SSESSEE IS ALLOWED. SINCE CROSS OBJECTION IS ALLOWED, APPEAL OF THE REVENUE HAS BECOME INFRUCTUOUS. 30. TO SUMMARISE THE RESULT, APPEAL OF REVENUE FOR ASSESSMENT YEAR 2003-04 IS DISMISSED AND CROSS OBJE CTION OF THE ASSESSEE FOR ASSESSMENT YEAR 2003-04 IS DISMISS ED AS INFRUCTUOUS. CROSS OBJECTION OF ASSESSEE FOR ASS ESSMENT YEAR M/S.TIDEL PARK LTD. 34 2005-06 IS ALLOWED AND APPEAL OF REVENUE FOR ASSESS MENT YEAR 2005-06 IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED ON THURSDAY, THE 11 TH APRIL, 2013 AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 11 TH APRIL, 2013 . K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE M/S.TIDEL PARK LTD. 35