The DCIT, (OSD), Circle-8, Ahmedabad V. Zydus Infrastructure Pvt.Ltd., Ahmedabad

ITA 1088/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6177 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIGAR M PATEL A R
• Assessee Lawyers: DINESH SINGH
• Keywords: Depreciation
• Section: 143(3); 6

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.1088/AHD/2015 ( / ASSESSMENT YEAR: 2011-12) THE DCIT, CIRCLE-4(1)(2), AHMEDABAD / VS. ZYDUS INFRASTRUCTURE PVT. LTD., ZYDUS TOWER, OPP. ISKON TEMPLE SATELLITE CROSS ROADS, AHMEDABAD ' ./ # ./ PAN/GIR NO. : AAACZ0629H ( '$ / APPELLANT ) .. ( % '$ / RESPONDENT ) '$ & / APPELLANT BY : SHRI JIGAR M. PATEL, A.R % '$ ' & / RESPONDENT BY : SHRI DINESH SINGH, SR. DR () ' * / DATE OF HEARING 31/01/2018 +,-. ' * / DATE OF PRONOUNCEMENT 02/02/2018 / / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX(APPEALS)-4, AHMEDABAD [CIT(A) IN SHORT] DATED 13/02/2015 ARISING IN THE ASSESSMENT ORDER DATED 31.01.2014 PASSED BY THE A.O UNDER SECTION 143(3) OF THE ACT RELEVANT TO ASSESSM ENT YEAR 2011-12. ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 2 - 2. THE SOLITARY ISSUE RAISED IN THE REVENUES APPEA L IS WHETHER ASSESSEE BEING A DEVELOPER OF SPECIAL ECONOMIC ZONE (SEZ) WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IAB IN RESPE CT OF INCOME EARNED FROM OPERATION AND MAINTENANCE OF (SEZ). 3. THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR HAS CLAIMED DEDUCTION UNDER SECTION 80IAB AMOUNTING TO RS. 13,4 3,36,398/- WHICH ENTER ALIA INCLUDES PROFIT ON BUSINESS OF OPERATION AND MAINTENANCE OF (SEZ) AMOUNTING TO RS. 1,94,12,129/-. THE A.O HELD THAT INCOME DERIVED FROM OPERATION AND MAINTENANCE ACTIVITY O F (SEZ) IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IAB OF THE A CT. THE A.O ACCORDINGLY DENIED DEDUCTION CLAIM AMOUNTING TO RS. 1,94,12,129/- ATTRIBUTABLE TO OPERATION AND MAINTENANCE ACTIVITIE S. 4. IN THE FIRST APPEAL AGAINST THE ACTION OF THE A. O. THE CIT(A) REVERSE THE ACTION OF THE A.O BY FOLLOWING ITS APPE LLATE ORDER CONCERNING PRECEDING ASSESSMENT YEARS 2009-10 & 201 0-11 WHERE SIMILAR ISSUE ON SIMILAR FACTS WAS DECIDED IN FAVOU R OF THE ASSESSEE. 5. AGGRIEVED, THE REVENUE IN APPEAL BEFORE THE TRIB UNAL. ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 3 - 6. WE HAVE CAREFUL CONSIDERED THE RIVAL SUBMISSIONS . THE SOLE ISSUE FOR CONSIDERATION IS MAINTAINABILITY OF DEDUCTION O F INCOME ARISING FROM OPERATION AND MAINTENANCE ACTIVITY OF (SEZ) UN DER THE UMBRELLA OF SECTION 80IAB OF THE ACT. WE FIND THAT THE ISSUE IS NO LONGER RES INTEGRA. THE CO-ORDINATE BENCH OF TRIBUNAL IN REVENUES APPE AL RELEVANT ASSESSMENT YEAR 2010-11 IN ITA NO. 2236/AH D/2014 HAS DISMISSED THE APPEAL OF THE REVENUE AND THUS ALLOWE D THE DEDUCTION CLAIMED ON OPERATION AND MAINTENANCE ACTIVITY. WHIL E DOING SO CO- ORDINATE BENCH IN TURN RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE RELEVANT A .Y. 2009-10 REPORTED IN (2013) 72 TAXMAN.COM 199 (AHMEDABAD). T HE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CO-ORDINATE BENC H IS REPRODUCED HEREUNDER:- 4. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW AND HAVE CAREFULLY PERUSED THE DECISIONS RELI ED UPON BY BOTH SIDES. THE ASSESSEE CARRIES ON THE BUSINESS OF DEVELOPMENT OPERATION AND MAINTENANCE OF SPECIAL ECONOMIC ZONE (SEZ). THE ASS ESSEE CLAIMED DEDUCTION U/S. 80-IAB OF THE ACT. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS AND ON EXAMINING THE CLAIM O F DEDUCTION U/S. 80- IAB OF THE ACT, THE A.O. WAS OF THE OPINION THAT TH E ASSESSEE IS NOT ELIGIBLE FOR THE CLAIM OF SAID DEDUCTION. THE A.O. WAS OF TH E FIRM BELIEF THAT THE SECOND PROVISO TO SECTION 80-IAB OF THE ACT IS SPEC IFICALLY APPLICABLE IN CASE OF TRANSFEREE DEVELOPER AND IN CASE OF A DEVEL OPER OF SEZ. RELYING UPON THE DECISION OF THE HONBLE HIGH COURT OF GUJA RAT IN THE CASE OF CORE HEALTHCARE LTD. 251 ITR 61. THE A.O. DISMISSED THE CLAIM OF DEDUCTION. ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 4 - THE A.O. FURTHER RESTRICTED THE CLAIM OF DEPRECIATI ON @ 60% ON COMPUTER SOFTWARE LICENSE TO 25%. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND WAS SUCCESSFUL IN GETTING THE RELIEF. WHILE ALLOWING THE RELIEF TO TH E ASSESSEE, THE LD. CIT(A) FOLLOWED THE ORDER OF HIS PREDECESSOR FOR A.Y. 2009 -10. THE RELEVANT FINDINGS OF THE LD. CIT(A) READS AS UNDER:- MY PREDECESSOR VIDE ORDER NO.CIT(A)XIV/JT.CIT .R.8/2011-12 DATED 30.04.201 2 IN APPELLANT'S OWN CASE FOR A. Y.2009-1 0 HELD AS UNDER: 'I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT SINCE THE SOFTWARE INVOLVES RAPID OBSOLESCENCE, THE CLAIM OF REVENUE E XPENDITURE SHOULD BE ALLOWED. I AM NOT INCLINED TO AGREE WITH THE SUBMIS SION OF THE APPELLANT. THE APPELLANT HAS BOUGHT SOFTWARE LICENSES WHICH AR E VALID FOR LONG TERM AND -THE EXPENDITURE INCURRED THEREON IS, THEREFORE , NOT IN THE NATURE OF REVENUE. THEREFORE, THE PLEA OF THE APPELLANT THAT EXPENDITURE IS IN THE NATURE OF REVENUE IS DISMISSED. HOWEVER, THE TREATMENT OF THE SOFTWARE BY THE A. O. AS INTANGIBLE ASSET AND ALLOWING INTEREST @ 25% IS NOT JUSTIFIED AS THE COMPUTER SOFTWARE HAS BEEN GROUPED AS ELIGIBLE TO RATE OF DEPRECIATION @ 60% AND, THEREFORE, A. O. SHOULD' HAVE ALLOWED THE DEPRECIATION @ 60% IN P LACE OF 25% ALLOWED BY HIM. THE APPELLANT HAS ALSO DISPUTED THE FINDING OF THE A. O. THAT THE SOFTWARE WERE USED FOR LESS THAN 180 DAYS. THE A. O . IS DIRECTED TO VERIFY THE CLAIM FROM THE FACTS AVAILABLE ON RECORD AND ALLOW THE DEPRECIATION ACCORDINGLY AS PER THE PROVISIONS OF THE ACT. THE GROUNDS OF APPEAL ARE ACCORDINGLY PARTLY ALLOWED.' I AM INCLINED WITH APPELLANT AND RATIO OF MY PREDEC ESSOR ORDER. IT IS THEREFORE A.O. IS DIRECTED TO ALLOW RATE OF DEPRECI ATION AT 60% AFTER VERIFICATION OF PERIOD FOR WHICH SUCH SOFTWARE PUT TO USE. THE APPELLANT GETS PART RELIEF FROM THE ADDITION OF RS. 10,163/-. THIS GROUND BEING RELATED TO ADOPTION OF RATE OF DEPRECIATION, THE SA ME IS TREATED AS ALLOWED SINCE RATE OF DEPRECIATION IS DIRECTED TO BE ADOPTE D AT 60%. ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 5 - 5.4 GROUND NO. 4 IS AGAINST THE DISALLOWANCE OF D EDUCTION U/S 80IAB IN RESPECT OF RS. 3,25,07,625/- BEING INCOME FROM OPER ATION & MAINTENANCE AND RS. 18,250/- BEING INCOME FROM SALE OF SCRAP RE LATED TO SEZ. THE APPELLANT RELIED ON THE APPEAL ORDER DT. 30/04/2012 IN THE CASE OF APPELLANT FOR A.Y. 09-10 ON THIS ISSUE WHERE LD. CI T(A)XIV, AHMEDABAD ON SIMILAR FACTS & CONTENTION ALLOWED SUCH DEDUCTIO N. MY PREDECESSOR VIDE ORDER NO.CIT(A)XIV/JT.CIT .R.8/2011-12 DATED. 30.04.201 2 IN APPELLANT'S OWN CASE FOR A. Y.2009-1 0 HELD AS UNDER: 'I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. THE A. O. HAS DISALLOWED THE CLAI M OF INCOME OF THE APPELLANT BY OPERATION AND MAINTENANCE OF THE SEZ A S THE SECTION 80IAB MENTIONS ONLY THE WORD 'DEVELOPING'. THE APPELLANT HAS SUBMITTED THAT THE CLAIM IS IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 80IAB AND SHOULD THEREFORE BE ALLOWED. IN ORDER-TO CLEARLY UNDERSTAN D THE CONTROVERSY, VARIOUS PROVISIONS WHICH ARE RELEVANT ARE QUOTE HER EUNDER: SECTION 80IAB OF THE I. T. ACT. ' (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE, BEING A DEVELOPER, INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERT AKING OR AN ENTERPRISE FROM ANY BUSINESS OF DEVELOPING A SPECIAL ECONOMIC ZONE, NOTIFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 UNDER THE SPECIAL ECONOMIC ZONES ACT, 2005, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT T O THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO ONE HUNDRED PER CEN T OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIV E ASSESSMENT YEARS' THE WORD 'DEVELOPER HAS FURTHER BEEN DEFINED IN EXPLANATION TO SECTION 80IAB WHICH READS AS UNDER: 'DEVELOPER SHALL HAVE THE MEANING AS ASSIGNED UNDER CLAUSE (G) OF SEC. 2 OF THE SPECIAL ECONOMIC ZONES ACT.' FURTHER, SECTION 2(G) OF THE SEZ ACT HAS DEFINED TH E TERM DEVELOPER AS UNDER: SEC. 2(G) - 'DEVELOPER' MEANS A PERSON WHO, OR A ST ATE GOVERNMENT WHICH, HAS BEEN GRANTED A LETTER OF APPROVAL UNDER SUB-SECTION (10) OF SEC. 3 AND INCLUDES AN AUTHORITY AND A CO-DEVELOPER . ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 6 - SECTION 3(10) OF THE SEZ ACT PROVIDES THAT THE CENT RAL GOVERNMENT SHALL ON RECEIPT OF COMMUNICATION BY THE BOARD, GRANT A L ETTER OF APPROVAL ON SUCH 'TERMS AND CONDITIONS' AND OBLIGATIONS AND ENT ITLEMENTS AS MAY BE APPROVED BY THE BOARD TO THE DEVELOPER, BEING THE P ERSON OR THE STATE GOVERNMENT CONCERNED. A COMBINED READING OF THE PROVISIONS OF SECTION 80I AB OF THE INCOME TAX ACT WITH SECTION 2(G) AND SECTION 3(10) OF THE SPEC IAL ECONOMIC ZONE ACT SHOW THAT A PERSON WOULD BE CONSIDERED AS A DEVELOP ER IN ACCORDANCE WITH THE GRANT OF LETTER OF APPROVAL ON THE BASIS O F TERMS AND CONDITIONS AND OBLIGATION AND ENTITLEMENT AS MAY BE APPROVED B Y THE BOARD WHO IS APPROVING THE SETTING UP OF THE SEZ. THEREFORE, IF THE APPROVAL HAS BEEN GRANTED FOR DEVELOPING, OPERATING AND MAINTAINING T HE SEZ, THE TERM 'DEVELOPER' WOULD INCLUDE OPERATION AND MAINTENANCE ALSO. FURTHER AN EXAMINATION OF THE LETTER OF APPROVAL BE ARING NO. F.2/44/2005- EPZ, DATED 21 ST JUNE, 2006, ISSUED BY THE CENTRAL GOVERNMENT IN FA VOUR OF THE APPELLANT AS THE DEVELOPER SHOW THAT THE VER Y FIRST CONDITION UNDER WHICH THE APPROVAL IS GRANTED STATES THAT 'THE DEVE LOPER SHALL DEVELOP, OPERATE AND MAINTAIN THE SPECIAL ECONOMIC ZONE IN T ERMS OF THE SPECIAL ECONOMIC ZONES ACT, 2005 AND THE RULES MADE THERE U NDER.' THUS, IT IS CLEAR FROM THE LETTER OF APPROVAL THAT DEVELOPMENT, OPERATION AND MAINTENANCE OF THE SPECIAL ECONOMIC ZONE ARE AN INT EGRAL PART OF THE TERMS AND CONDITIONS AND OBLIGATIONS AND ENTITLEMEN TS GRANTED TO THE DEVELOPER. THEREFORE, IN VIEW OF THE PRECEDING DISC USSION, THE WORD 'DEVELOPER' ALSO INCLUDES THE ACTIVITIES OF OPERATI ON AND MAINTENANCE OF THE SEZ IN THE CASE OF THE APPELLANT. THE INTERPRETATION BY THE A. O. THAT OPERATION AND MAINTENANCE ARE DIFFERENT TO THAT OF DEVELOPMENT AND LEGISLATURE WE RE FULLY AWARE OF THIS FACT AND, THEREFORE, THE WORDS 'OPERATION AND MAINT ENANCE' HAVE NOT BEEN INTENTIONALLY OMITTED IS NOT JUSTIFIED. A HARMONIOU S INTERPRETATION OF THE PROVISIONS OF VARIOUS ACTS, AS DISCUSSED ABOVE, CLE ARLY SHOW THAT IN THE CASE OF THE APPELLANT, THE DEDUCTION IS AVAILABLE F OR OPERATION AND MAINTENANCE ALSO IN ACCORDANCE WITH THE TERMS AND A PPROVAL. THE OBSERVATIONS OF THE A. O. THAT THE SECOND PROVI SO TO SECTION 80IAB WHERE THE ACT PROVIDES FOR DEDUCTION IN RESPECT OF PROFITS AND GAINS ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 7 - DERIVED FROM OPERATION AND MAINTENANCE ACTIVITIES I N THE HANDS OF TRANSFEREE DEVELOPERS, IF .ANY DEVELOPER AFTER DEVE LOPING A SEZ TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH SEZ TO ANOTHE R DEVELOPER IS ALSO, IN MY OPINION, NOT JUSTIFIED. THE ACTIVITY OF DEVEL OPMENT, OPERATION AND MAINTENANCE ARE CONTINUOUS IN NATURE. ONCE A PERSON TAKES UP THE WORK OF DEVELOPMENT OF A FACILITY AND STARTS ALLOTTING OR S ELLING PLOTS IN THE SEZ, IT IS NOT POSSIBLE THAT ALL THE PLOTS WILL BE SOLD SIM ULTANEOUSLY AND FURTHER IT IS ALSO NOT POSSIBLE THAT ALL THE PERSONS WHO HAVE PURCHASED PLOTS WILL START FUNCTIONING AFTER COMPLETE SELL OUT OF THE SE Z. IT IS THEREFORE MOST LIKELY THAT THE ACTIVITY OF DEVELOPMENT, OPERATION AND MAINTENANCE WILL GO ON SIMULTANEOUSLY. IT IS A DIFFERENT FACT THAT ONCE ALL THE PLOTS ARE- DEVELOPED AND SOLD, THE OPERATION AND MAINTENANCE C AN BE TRANSFERRED TO SOME OTHER PARTY AND FOR THIS PURPOSE, THE PROVISO TO SECTION 80IAB HAS BEEN INCORPORATED. IN THE CASE OF THE APPELLANT, TH E APPROVAL GIVEN IS FOR ALL THE ACTIVITIES. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE THAT T HE PROVISIONS OF SECTION 80IA(4) INITIALLY HAD THE WORDS DEVELOPING, MAINTAI NING AND OPERATING OR DEVELOPING, MAINTAINING AND OPERATING. HOWEVER, ONC E THE DIFFICULTY OR ANOMALY IN IMPLEMENTATION OF THE LANGUAGE WAS OBSER VED, THE PROVISIONS WERE SUBSEQUENTLY AMENDED FROM 01/04/2001 AND THE W ORDS OR WERE INTRODUCED TO TAKE THE WORK OF DEVELOPMENT OR DEVEL OPMENT AND OPERATION OR DEVELOPMENT OPERATION AND MAINTENANCE FOR ENTITL EMENT OF DEDUCTION. IN VIEW OF THE PRECEDING DISCUSSION, I AM OF THE CO NSIDERED OPINION THAT THE APPELLANT IS ENTITLED FOR DEDUCTION U/S. 80IAB FOR THE INCOME EARNED FROM OPERATION AND MAINTENANCE, AS THE ACTIVITIES A RE COVERED BY THE LETTER OF APPROVAL AND ACCORDINGLY MAKE THE APPELLA NT ENTITLED FOR DEDUCTION. THE APPELLANT HAS FURTHER CLAIMED DEDUCTION ON MISC ELLANEOUS INCOME OF RS.91,000/- FROM SALE OF SCRAP. IT IS NOTED THAT TH E INCOME HAS BEEN GENERATED FROM SALE OF SCRAP OF IRON AND STEEL WHIC H WAS USED FOR INFRASTRUCTURE DEVELOPMENT. THE APPELLANT HAS RELIE D ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. CORE HEALTHCARE LTD. [308 ITR 263]. CONSIDERING THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT, I AM OF THE OPINION THAT SALE OF SCRAP OF IRON AND STEEL WHICH IS GENERATED FROM THE ACTIVITY OF CONSTRUCTION OF THE INFRASTRUC TURE FACILITY SHOULD BE ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 8 - TREATED AS DERIVED FROM THE ACTIVITY AND, THEREFORE , THE APPELLANT IS ENTITLED FOR DEDUCTION ON THE SAME. THE CLAIM OF DEDUCTION ON PROFESSIONAL INCOME ON AC COUNT OF RECEIPT OF PLAN APPROVAL FEE COLLECTED BY THE APPELLANT ALSO H AS A DIRECT NEXUS WITH THE ACTIVITY OF THE APPELLANT BUSINESS. THEREFORE, THE APPELLANT IS ALSO ENTITLED FOR THE DEDUCTION ON THAT INCOME. THE CLAIM REGARDING PRIOR PERIOD INCOME OF RS.23,09 ,372/- HAS BEEN DISALLOWED BY THE A. O. ON THE GROUND THAT THE INCO ME PERTAINED TO EARLIER YEAR AND ONLY THE INCOME OF CURRENT YEAR CAN BE CON SIDERED FOR DEDUCTION. THE APPELLANT HAS SUBMITTED THAT IT HAD STARTED REC OVERING THE RAW WATER CHARGES FROM THE CURRENT FINANCIAL YEAR, AND THE CH ARGES FOR EARLIER YEARS WERE ALSO COLLECTED. THEREFORE, THE SAME SHOU LD BE ALLOWED AS THE APPELLANT WAS ALLOWED DEDUCTION IN EARLIER YEARS AL SO. IT IS NOTED THAT THE APPELLANT HAS COMMENCED THE BILLING PROCESS FOR THE WATER SERVICES FROM THE PRESENT YEAR. THE RAW WATER CHARGES HAVE BEEN BILLED AND COLLECTED IN THE CURRENT' ASSESSMENT YEAR ITSELF AND, THEREFO RE, THE INCOME HAS CRYSTALLIZED AND HAS BECOME DUE IN THE CURRENT ASSE SSMENT YEAR ITSELF. THEREFORE, THE APPELLANT HAS CORRECTLY SHOWN THE INCOME IN THE CURRENT ASSESSMENT YEAR AND THE SAME SHOULD BE TREATED AS I NCOME OF THE CURRENT YEAR. THE RELIANCE IS PLACED ON THE JUDGMENT OF HON 'BLE HIGH COURT O'F GUJ'ARAT IN THE CASE OF SAURASHTRA CEMENT AND CHEMI CALS INDUSTRIES LIMITED [80 TAXMAN 61]. THE CLAIM OF DEDUCTION IS, THEREFORE, ALLOWABLE AND A. O. IS DIRECTED ACCORDINGLY.' THE A.O. IN THE IMPUGNED ASSESSMENT ORDER CONSIDERE D THE TOTAL CLAIM OF APPELLANT OF DEDUCTION U/S 80IAB FOR RS. 5,65,36,41 5/-. AT PARA 6.3 OF THE IMPUGNED ORDER, THE RENTAL INCOME OF RS. 3,45,000/- COMPRISED IN TOTAL CLAIM WAS ALLOWED BY A.O.. FURTHER, MISC. INCOME OF RS. 77,000/- WHICH WAS COMPRISED OF RS. 59,138/- AS INTEREST FROM M/S UGVCL AND RS. 18,250/- AS SCRAPE VIDE PARA 6.14 OF IMPUNGED ORDER , A.O. DID NOT CONSIDERED RS. 59,138/- BEING SAME WERE OFFERED BY APPELLANT AS INCOME FROM OTHER SOURCES, WHILE, RS. 18,250/- WAS DISALLO WED. IT IS THEREFORE OUT OF RS. 5,65,36,415/- CLAIM, THE A.O. DISALLOWED CLA IM OF RS. 3,25,07,625/- BEING INCOME FROM OPERATION & MAINTENANCE OF SEZ AN D RS. 18,250/- BEING RECEIPT FROM SCRAPE SALE RELATED TO SEZ. I AM INCLINED WITH APPELLANT THAT ON SIMILAR ISSUE AND SIMILAR FACTS, MY PREDECESSOR VIDE ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 9 - ORDER DT. 30/04/2012 CONSIDERED THE SIMILAR CONTENT ION OF A.O. ON THESE ISSUE AND AFTER CONSIDERING THE APPELLANT'S CONTENT ION AND LEGAL PROPOSITION ALLOWED THE CLAIM OF APPELLANT U/S 80IA B FOR THESE TWO RECEIPTS. RESPECTFULLY FOLLOWING THE SAME, THE A.O. IS DIRECTED TO ALLOW THE CLAIM OF APPELLANT FOR DEDUCTION U/S 80IAB OF THE A CT OF RS. 3,25,07,625/- AND RS. 18.250/- AND DELETE THE ADDITION SO MADE. T HE APPELLANT GETS RELIEF ACCORDINGLY. THIS GROUND IS TREATED AS ALLOWED. 6. THE ORDER OF THE FIRST APPELLATE AUTHORITY FOR A.Y. 20090-10 WAS CONFIRMED BY THE TRIBUNAL IN ITA NO. 1464/AHD/2012. THE RELEV ANT FINDINGS OF THE CO- ORDINATE BENCH READS AS UNDER:- 23. NOW COMING TO THE MAIN ISSUE ABOUT THE ALLOWABI LITY OF DEDUCTION U/S 80-IAB FOR THE INCOME EARNED FROM OPERATION AND MAI NTENANCE, WE FIND THAT PROVISIONS OF SECTION 80-IAB IS SELF-EXPLANATO RY WHICH READS AS UNDER: '[DEDUCTIONS IN RESPECT OF PROFITS AND GAINS BY AN UNDERTAKING OR ENTERPRISE ENGAGED IN DEVELOPMENT OF SPECIAL ECONOM IC ZONE. 80-IAB. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE, BE ING A DEVELOPERS, INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS OF DEVELOPING A SPE CIAL ECONOMIC ZONE, NOTIFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 UND ER THE SPECIAL ECONOMIC ZONES ACT, 2005, THERE SHALL, IN ACCORDANCE WITH AN D SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO ONE HUN DRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TE N CONSECUTIVE ASSESSMENT YEARS. (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH A SPECIAL ECONOMIC ZONE HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT : PROVIDED THAT WHERE IN COMPUTING THE TOTAL INCOME OF ANY UND ERTAKING, BEING A DEVELOPER FOR ANY ASSESSMENT YEAR, ITS PROF ITS AND GAINS HAD NOT ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 10 - BEEN INCLUDED BY APPLICATION OF THE PROVISIONS OF S UB-SECTION (13) OF SECTION 80-IA, THE UNDERTAKING BEING THE DEVELOPER SHALL BE ENTITLED TO DEDUCTION REFERRED TO IN THIS SECTION ONLY FOR THE UNEXPIRED PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS AND THEREAFTER IT SHAL L BE ELIGIBLE FOR DEDUCTION FROM INCOME AS PROVIDED IN SUB-SECTION (1 ) OR SUB-SECTION (2), AS THE CASE MAY BE : PROVIDED FURTHER THAT IN A CASE WHERE AN UNDERTAKING, BEING A DEVELO PER WHO DEVELOPS A SPECIAL ECONOMIC ZONE ON OR AFTER TH E 1ST DAY OF APRIL, 2005 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH SPECIAL ECONOMIC ZONE TO ANOTHER DEVELOPER (HEREAFTER IN TH IS SECTION REFERRED TO AS THE TRANSFEREE DEVELOPER), THE DEDUCTION UNDER S UB-SECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE DEVELOPER FOR THE REMAIN ING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AN D MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRANSFEREE DEVELOPER. (3) THE PROVISIONS OF SUB-SECTION (5) AND SUB-SECTI ONS (7) TO (12) OF SECTION 80-IA SHALL APPLY TO THE SPECIAL ECONOMIC Z ONES FOR THE PURPOSE OF ALLOWING DEDUCTIONS UNDER SUB-SECTION (1). EXPLANATION.FOR THE PURPOSES OF THIS SECTION, 'DEV ELOPER' AND 'SPECIAL ECONOMIC ZONE' SHALL HAVE THE SAME MEANINGS RESPECT IVELY AS ASSIGNED TO THEM IN CLAUSES (G) AND (ZA) OF SECTION 2 OF THE SP ECIAL ECONOMIC ZONES ACT, 2005.]' 24. FROM GOING THROUGH THE PROVISO (2) OF SECTION 8 0-IAB OF THE ACT AS REFERRED ABOVE, WHICH SAYS THAT IF THE WORK OF OPER ATION AND MAINTENANCE OF SEZ IS TRANSFERRED FROM ONE DEVELOPER TO ANOTHER THEN THE DEDUCTION ALLOWABLE IN SUB-SEC. (1) OF SEC. 80-IAB WILL BE AL LOWED TO TRANSFEREE DEVELOPER FOR THE REMAINING PERIOD OF THE REMAINING OF CONSECUTIVE 10 YEARS. THIS PROVISO GIVES A VERY CLEAR PICTURE THAT WHEN THE TRANSFEREE IS ELIGIBLE FOR DEDUCTION U/S 80-IAB FOR THE INCOME FR OM OPERATION AND MAINTENANCE OF SEZ THEN CERTAINLY TRANSFEROR I.E. D EVELOPER IS ELIGIBLE FOR DEDUCTION U/S 80-IAB FROM OPERATION AND MAINTENANCE . 25. FURTHER FROM GOING THROUGH THE LETTER ISSUED BY GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRIES DATED 21ST JUNE, 2006 TO THE ASSESSEE FOR SETTING UP OF A SECTOR SPECIFIC SPECIAL ECONOMI C ZONE FOR ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 11 - PHARMACEUTICALS AT AHMEDABAD, WE FIND THAT IN CLAUS E (II) UNDER THE MAIN CLAUSE (III) REFERRING TO GENERAL CONDITION IT READ S THAT OPERATION AND MAINTENANCE OF THE FACILITIES WILL BE MET AS PER TH E STANDARD IN THE SPECIFIC MANNER AND PROPOSITION OF THE USER. 26. IN VIEW OF OUR ABOVE DISCUSSION AS WELL AS OBSE RVATION MADE BY ID. CIT(A), WE ARE OF THE VIEW THAT ASSESSEE BEING A DE VELOPER OF SEZ IS ELIGIBLE FOR DEDUCTION U/S 80-IAB FOR INCOME EARNED FROM OPERATION AND MAINTENANCE OF SEZ. IN THE RESULT GROUND NO. 3 (A) OF REVENUE IS DISMISSED. 7. INSOFAR AS THE CLAIM OF DEPRECIATION IS CONCERNED, THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH IS AS UNDER:- 15. IT IS ALMOST A SETTLED ISSUE THAT SOFTWARE APPL ICATION WHICH ARE HAVING VALIDITY FOR LONG TERM PERIOD ARE BASICALLY SYSTEM SOFTWARE ON WHICH COMPUTER HARDWARE RUNS AND IT IS IMPOSSIBL E TO USE COMPUTER WITHOUT HAVING SUCH SOFTWARE INSTALLED ON IT AND, THEREFORE, SUCH LICENSED SOFTWARE ARE SUBJECT TO DE PRECIATION @ 60% AND ID. CIT(A) HAS DONE SO. WE FIND NO REASON T O INTERFERE WITH THE ORDER OF ID. CIT(A) ON THIS ISSUE. THIS GR OUND OF REVENUE IS DISMISSED . 8. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH, WE DECLINE TO INTERFERE. APPEAL OF THE REVENUE IS ACCORDINGLY DIS MISSED. 9. BEFORE PARTING, THE RELIANCE WAS PLACED ON THE JUDG MENT OF THE HONBLE SUPREME COURT IN THE CASE OF PRAKASH NATH KHANNA (S UPRA) BY THE LD. D.R. IS MISPLACED AS IN THE CASE IN HAND, THE ASSESSEE H AS CLAIMED DEDUCTION U/S. 80-IAB OF THE ACT WHEREIN THE LANGUAGE IS UNAMBIGUO US AND REQUIRES NO INTERPRETATION THEN WHAT IS COMING OUT FROM THE REL EVANT PROVISIONS. ITA NO.1088/AHD /2015 ZYDUS INFRASTRUCTURE PVT. LTD. VS. DCIT,CIR-4(1)(2) ASST.YEAR 2011-12 - 12 - FURTHER, THE CO-ORDINATE BENCH HAS CONSIDERED ALL T HE ISSUE RAISED BY THE REVENUE AND HAS DECIDED IN FAVOUR OF THE ASSESSEE. 7. IN PARITY WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEA RS. WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 02/ 02/ 2018 SD/- SD/- ( ) ( ) (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 02/02/2018 !' #' / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. % '$ / THE RESPONDENT. 3. 234* 5* / CONCERNED CIT 4. 5* ( ) / THE CIT(A)-5, AHMEDABAD 5. 678 *(34 , 34. , 9 2 / DR, ITAT, AHMEDABAD 6. 8 :) / GUARD FILE. $ % / BY ORDER, &/% '( ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 17.1.18