ACIT, Circle-6, Pune V. Kumar Housing Corporation Ltd., Pune

ITA 1191/PUN/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1090 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Capital asset; Depreciation; Earning of tax free income; Reassessment proceedings
• Section: 5(2); 80HHC; 14A; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NOS. 1190 & 1191/PN/2013 %' ( ')( / ASSESSMENT YEARS : 2007-08 & 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE ....... / APPELLANT ' / V/S. KUMAR HOUSING CORPORATION LIMITED, 10 TH FLOOR, KUMAR BUSINESS CENTRE, OPP. PUNE CENTRAL, BUND GARDEN ROAD, PUNE 411001 PAN : AACCS9537K / RESPONDENT / ITA NOS. 1271 & 1272/PN/2013 %' ( ')( / ASSESSMENT YEARS : 2007-08 & 2008-09 M/S. KUMAR HOUSING CORPORATION LIMITED, 10 TH FLOOR, KUMAR BUSINESS CENTRE, OPP. PUNE CENTRAL, BUND GARDEN ROAD, PUNE 411001 PAN : AACCS9537K ....... / APPELLANT ' / V/S. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 6, PUNE / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI K.K. MISHRA / DATE OF HEARING : 15-06-2016 / DATE OF PRONOUNCEMENT : 12-08-2016 2 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 * / ORDER PER VIKAS AWASTHY, JM : THESE APPEALS BY THE DEPARTMENT AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS )-III, PUNE DATED 28-03-2013 COMMON FOR THE ASSESSMENT YEARS 200 7-08 AND 2008-09. SINCE, THE ISSUES RAISED BY THE DEPARTMENT IN IT S APPEALS FOR THE IMPUGNED ASSESSMENT YEARS AND IN THE CROSS APPEALS BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE COMMON, TH ESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECIDED VIDE THIS COMMON ORDER. HOWEVER, FOR THE SAKE OF CONVENIENCE WE WILL FIRST TAKE UP T HE APPEALS FILED BY THE DEPARTMENT. 2. THE ISSUES RAISED BY THE DEPARTMENT IN BOTH THE AP PEALS ARE SUMMARIZED AS UNDER : I. ALLOWING OF DEDUCTION U/S. 80IB(10) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT); II. DISALLOWANCE U/S. 14A R.W. RULE 8D (ISSUE RAISED ONLY IN A.Y. 2007-08); III. DEPRECIATION ON MOTOR CARS REGISTERED IN THE NAME OF DIR ECTORS; AND IV. ALLOWING OF DEDUCTION U/S. 80IA(4)(III) OF THE ACT. DEDUCTION U/S. 80IB(10) OF THE ACT : 3. THE ASSESSEE IS A BUILDER AND DEVELOPER. THE ASSESSE E DEVELOPED A HOUSING PROJECT KUMAR PURAM AND CLAIMED DEDUCTION U/S. 80IB(10) OF THE ACT AMOUNTING TO ` 51,37,746/- ON THE SAID PROJECT. THE 3 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IB(10 ) TO THE ASSESSEE ON THE GROUND THAT THE PROJECT WAS SANCTION ED ON 24-04-1998 AND THE CONSTRUCTION ON THE SAID PROJECT HAD STARTED IMMEDIATELY THEREAFTER. FOR CLAIMING DEDUCTION U/S. 80IB(10) THE PROJ ECT SHOULD HAVE COMMENCED ON OR AFTER 01-10-1998. THE ASSESSING OFFICER FURTHER HELD THAT THE COMMERCIAL AREA IN THE PROJECT IS MORE THA N 5% OF THE TOTAL AREA OF PROJECT WHICH IS IN VIOLATION OF PUNE MUNICIPAL C ORPORATION (PMC) NORMS. ANOTHER REASON FOR DISALLOWING THE DEDUCTION WAS THAT THE ASSESSEE HAD DEVELOPED HOUSING PROJECT KUMAR PUR AM AND COMMERCIAL PROJECT BUSINESS COURT IN THE SAME PLOT BEA RING S. NO. 411/2. THE ASSESSEE DIVIDED THE PLOT BY MAKING SUB-PLOTS . HOWEVER, BOTH THE PROJECTS ARE WITHIN THE SAME SINGLE LARGER PLOT. 3.1 SHRI K.K. MISHRA REPRESENTING THE DEPARTMENT SUBMITTED THAT THE BUILDING COMMENCEMENT CERTIFICATE WAS ISSUED ON 24-04-1998 IN THE NAME OF V R SUPEKAR AND VIMAL KUMAR JAIN FOR CONSTRUCTION OF BUILDING ON PLOT NO. 411/2. THE SAID PLOT WAS DIVIDED INTO 6 SUB-PLOTS. THE COMMENCEMENT CERTIFICATE DATED 24-04-1998 WAS IN RE SPECT OF BUILDING TO BE CONSTRUCTED WITH AREA MEASURING 10,323 SQ. MTRS. ON PLOT NO. 4, I.E. KUMAR PURAM PROJECT ON WHICH THE ASSESS EE HAS CLAIMED DEDUCTION U/S. 80IB(10) OF THE ACT. THEREAFTER, A REVISED LAY OUT PLAN WAS FURNISHED, IN WHICH THE HOUSING PROJECT KUMA R PURAM WAS SHIFTED TO SUB-PLOT NO. 6 AND THE COMMERCIAL PROJECT BUSINESS COURT WAS LOCATED ON SUB-PLOT NO. 5. AFTER THE ISSUAN CE OF COMMENCEMENT CERTIFICATE IN APRIL, 1998 THE RCC FRAMEWORK U P TO THE GROUND FLOOR WAS ALSO COMPLETED TILL SEPTEMBER, 1998. THE LD. DR CONTENDED THAT AS PER THE PROVISIONS OF SECTION 80IB(10 ), THE HOUSING PROJECT IS ELIGIBLE TO CLAIM DEDUCTION ONLY IF THE UNDERTAKING HAS COMMENCED CONSTRUCTION OR DEVELOPMENT AND CONSTRUCTION OF THE 4 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 HOUSING PROJECT ON OR AFTER 01-10-1998. THE FACTS ON R ECORD CLEARLY SHOW THAT THE ASSESSEE HAD COMMENCED THE HOUSING PRO JECT MUCH PRIOR TO 01-10-1998, THEREFORE, THE HOUSING PROJECT KUMAR PU RAM IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10). THE LD. DR VEHEMENTLY DE FENDED THE FINDINGS OF ASSESSING OFFICER AND PRAYED FOR REVERSING TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 3.2 SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT THE ASSESSEE HAD DEVELOPED COMMERCIAL COMPLEX BUS INESS COURT AND RESIDENTIAL PROJECT KUMAR PURAM ON INDEPENDENT PLO TS. BOTH THE PLOTS ARE SEPARATED BY LAND WHICH DOES NOT BELONG TO TH E ASSESSEE. THE LD. AR CONTENDED THAT SIMILAR DISALLOWANCE WAS MADE IN RESPE CT OF PROJECT KUMAR PURAM BY THE ASSESSING OFFICER IN ASSESS MENT YEAR 2001-02. THE MATTER TRAVELLED UP TO THE TRIBUNAL. THE T RIBUNAL IN ITA NO. 336/PN/2006 TITLED M/S. SUKUMAR ESTATES LTD. VS. ACIT FOR ASSESSMENT YEAR 2001-02 DECIDED ON 08-02-2013 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD. AR CLARIFIED THAT EARLIER THE NAME OF ASSESSEE COMPANY WAS M/S. SUKUMAR ESTATES LTD. WHICH W AS SUBSEQUENTLY CHANGED TO KUMAR HOUSING CORPORATION LTD . THE LD. AR PLACED ON RECORD A COPY OF THE ORDER OF TRIBUNAL IN ITA N O. 336/PN/2006 (SUPRA). 3.3 WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE OBSERVE THAT THE ASSESSING OFFICER IN THE ASSESSMENT YEA R 2001-02 HAD RAISED SIMILAR OBJECTIONS IN DISALLOWING THE CLAIM OF DEDUCTION U /S. 80IB(10) ON THE HOUSING PROJECT KUMAR PURAM DEVELOPED BY THE ASSESSEE. IN APPEAL FILED BY THE ASSESSEE BEFORE THE TRIB UNAL, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE 5 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNED ORDER HAS FOLLOWED THE ORDER OF TRIBUNAL IN ITA NO. 336/PN/2006 (SUPR A) AND ACCEPTED THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEARS UNDER APPEAL. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL IN ASSESSEE S OWN CASE IN ASSESSMENT YEAR 2001-02 IS REPRODUCED HERE-IN-UNDER : 9. IN CASE BEFORE US, WHETHER SUB-PLOT NO.6 IS A P ART OF PLOT NO.411 AT MUKUND NAGAR, PUNE, THOUGH THE BUILDING PLAN IN RES PECT OF SAID PLOT AS A WHOLE WAS OBTAINED ON 24.04.1998. HOWEVER, ASSESS EE DID NOT START ANY CONSTRUCTION ON THE SAID PLOT IN THE YEAR RELEV ANT TO THE F.Y. 1998-99. CONSTRUCTION WAS STARTED ONLY ON 18.04.1999 AS INDI CATED BY THE ASSESSEE TO THE PUNE MUNICIPAL CORPORATION ON 05.05 .1999 EVIDENT FROM THE PAGE 300. AS PER THE RULE 7.2 OF DC RULES OF PM C, ASSESSEE HAS TO INTIMATE THE CORPORATION ABOUT STARTING OF THE PROJ ECT. HENCE, THE INTIMATION OF STARTING OF DEVELOPMENT OF PROJECT WA S GIVEN BY ASSESSEE IN APRIL, 1998 WHICH MAKES IT CLEAR THAT CONSTRUCTION WAS NOT COMMENCED BEFORE 1.10.1998 EVEN THOUGH PLAN WAS APPROVED PRIO R TO 01.10.1998. THE ESSENCE OF STARTING OF DEVELOPMENT AND CONSTRUC TION IS THAT SAME STARTED ON 18.04.1999. THE CONSTRUCTION STARTED ON 18.04.1999 AND SAME WAS INTIMATED BY THE ASSESSEE TO CONCERNED MUN ICIPAL CORPORATION ON 05.05.1999. 10. XXXXXXXXXX 11. XXXXXXXXXX 12. THE OTHER OBJECTION OF THE REVENUE IS THAT THAT BUILDING BUSINESS COURT CONSTRUCTED ON PLOT NO.5 IS A COMMERCIAL BUI LDING, HENCE, THE ASSESSEE HAS CONSTRUCTED COMMERCIAL AREA IN EXCESS OF 2000 SQ.FT. OR 5% OF THE BUILT UP AREA WHICHEVER IS LESS, AS DISCUSSE D IN PRECEDING PARAS OF THIS ORDER. IN THIS REGARD, STAND OF THE ASSESSEE H AS BEEN THAT THE PROJECT BUSINESS COURT IS CONSTRUCTED ON PLOT NO.5 WHICH IS AN INDEPENDENT PLOT. IT WAS SPECIFICALLY POINTED OUT FROM THE LAYO UT PLAN THAT PLOTS NOS.5 AND 6 ARE NOT EVEN ADJOINING PLOTS. THEY ARE SEPARA TE AS SHOWN IN THE CITE PLAN SUBMITTED ON BEHALF OF THE ASSESSEE. IN T HIS BACKGROUND, IT WAS SUBMITTED BUSINESS COURT IS NOT PART OF PROJECT K UMAR PURAM AND HENCE, CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT ASS ESSEE HAS CONSTRUCTED COMMERCIAL PROJECT KUMAR PURAM. THE ASSESSEE HAS FI LED THE FACTUAL SITUATION WITH REGARD TO THE LAYOUT OF PROJECT KUMA R PURAM WHEREIN KUMAR PURAM PROJECT IS ON PLOT NO.6 WHILE BUSINESS COURT IS ON PLOT NO.5 ON PLOT NO.411 AND THEY ARE NOT ADJOINING PLOT S. IN THIS SITUATION, IT IS NOT JUSTIFIED ON THE PART OF THE CIT(A) TO MIX T WO ISSUES OF TWO PLOTS 6 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 WHICH ARE DISTANTLY LOCATED. THE THIRD OBJECTION OF THE REVENUE HAS BEEN THAT EXPENDITURE HAS BEEN INCURRED ON ITEMS OF IRON AND STEEL, SECURITIES CHARGES, LABOUR CHARGES, LABOUR CONTRACTOR CHARGES IN F.Y. 1998-99 WHICH INDICATED THAT ASSESSEE HAS STARTED CONSTRUCTION OF THE PROJECT BEFORE 01.10.1999. IN THIS REGARD, WE FIND THAT BUILDING P LAN IN RESPECT OF PLOT NO.6 WAS OBTAINED ON 24.04.1998. THERE IS NOTHING O N RECORD TO SUGGEST THAT ASSESSEE STARTED CONSTRUCTION ON THE SAID PLOT . THE EXPENDITURE INCURRED BY THE ASSESSEE AS POINTED OUT BY THE CIT( A) IS SMALL ITEMS LIKE PURCHASE OF IRON AND STEEL, SECURITY CHARGES, LABOU R CHARGES AND LABOUR CONTRACTOR CHARGES WHICH WERE INCURRED FOR UPKEEP, FENCING CHARGES, SECURITY EXPENSES ETC., AND IT CANNOT BE SAID TO BE INCURRED FOR THE DEVELOPMENT AND CONSTRUCTION OF THE PROJECT. FOR AC TUAL DEVELOPMENT, EXPENDITURE INCURRED ON A BIG WAY AS HAS BEEN DONE IN F.Y. 1999-2000. EVEN THE BOOKING OF THE FLATS STARTED IN F.Y. 1999- 2000. THE FACT HAS BEEN INTIMATED BY THE ASSESSEE TO THE PUNE MUNICIPA L CORPORATION ON 05.05.1999 WHEREIN IT WAS SUBMITTED THAT AS PER RUL E 7.2 OF DC RULES OF PMC, ASSESSEE HAS TO INTIMATE THE CORPORATION ABOUT THE STARTING OF THE PROJECT. HENCE, THE ESTIMATION OF STARTING OF THE D EVELOPMENT OF THE PROJECT WAS GIVEN BY THE ASSESSEE IN APRIL, 1999 WHICH SHOW S THAT CONSTRUCTION HAS NOT COMMENCED BEFORE 01.10.1999. EVEN THOUGH PL AN WAS APPROVED PRIOR TO 01.10.1999, THE DEVELOPMENT AND CONSTRUCTI ON OF HOUSING PROJECT STARTED AFTER 01.10.1999 AND CONSTRUCTION IN FACT H AS COMMENCED ONLY AFTER APRIL, 1999. IT HAS BEEN THE CONSISTENT STAND OF THE ASSESSEE THAT BUILDING BUSINESS COURT STARTED BY SHRI SUPNEKAR EVEN IN THE AGREEMENT FOR PURCHASE OF LAND, IT WAS MENTIONED TH AT BUILDING IS PARTLY CONSTRUCTED. THE AMOUNT OF RS.23,00,000/- INCURRED ON CONSTRUCTION WAS SHOWN BY SHRI SUPNEKAR IN HIS BALANCE SHEET. THUS, THE SAID EXPENDITURE WAS INCURRED BY SHRI SUPNEKAR. THEREFOR E, THE ASSESSEE DID NOT RECORD THE SAME IN ITS BOOKS OF ACCOUNT. THE AS SESSEE HAS DEMOLISHED THE CONSTRUCTION AND NEW CONSTRUCTION WA S STARTED SUBSEQUENTLY AS INDICATED ABOVE. THEREFORE, NO WIP WAS SHOWN IN THE BOOKS FOR BUSINESS COURT UPTO 31.03.2000. FOR THE BUSINESS COURT, THE ARCHITECT WAS M/S.PUNDALIK & PUNDALIK WHILE FOR KUM AR PURAM PROJECT THE ARCHITECT WAS M/S.BUTALA AND NIVSARKAR AS EVIDE NT FROM THE DETAILS ON PAGE 300 OF THE PAPER BOOK. THUS, THE LETTER OF ARCHITECT M/S.BUTALA AND NIVSARKAR DATED 18.03.1999 REFERRED TO BY THE A SSESSING OFFICER IN THE REMAND REPORT AS MENTIONED AT PAGE 34 OF THE OR DER OF THE CIT(A) DOES NOT PERTAIN TO KUMAR PURAM PROJECT BUT IT PERT AINS TO BUSINESS COURT. IN VIEW OF ABOVE, THE CIT(A) WAS NOT JUSTIF IED IN OBSERVING THAT PROJECT HAS COMMENCED PRIOR TO 01.10.1998 BY RELYIN G ON THE CERTIFICATE FROM M/S.PUNDALIK & PUNDALIK WHO IS THE ARCHITECT O F BUSINESS COURT. AT PAGE 37, THE CIT(A) HAS OBSERVED THAT COMMENCEME NT CERTIFICATE WAS 7 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 ISSUED ON 10.03.2000 AND ACCORDING TO HIM, IT WAS R EVISED CERTIFICATE. IT IS REVISED COMMENCEMENT CERTIFICATE AND PROJECT KUM AR PURAM IS DIFFERENT IDENTITY. FACTUALLY, ENTIRE LAND ON PLOT NO.411 AS STATED ABOVE WAS ALREADY DIVIDED INTO VARIOUS PLOTS WHICH WAS PU RCHASED BY VARIOUS PARTIES SO IT WAS NOT JUSTIFIED ON PART OF THE REVE NUE TO HOLD THAT ALL CONSTRUCTION ON THE TOTAL LAND WAS ONE PROJECT. THI S VIEW IS SUPPORTED BY THE DECISIONS IN THE CASES OF M/S.RAHUL CONSTRUCTIO NS (SUPRA), M/S.ADITYA DEVELOPERS (SUPRA) AND VANDANA PROPERTIE S (SUPRA) AND MUDIT MADANLAL GUPTA VS. ACIT 51 DTR 217 (BOM) AND BRIGADE ENTERPRISES (P) LTD. 119 TTJ 269 (BANG.). IN VIEW O F ABOVE, WE HOLD THAT ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80IB(10) WIT H REGARD TO KUMAR PURAM PROJECT CONSTRUCTED ON PLOT NO.6 OF ORIGINAL PLOT NO.411. 3.4 A PERUSAL OF THE ORDER OF TRIBUNAL SHOWS THAT THE ISS UE IN THE PRESENT APPEALS IS IDENTICAL. THE LD. DR HAS NOT PLACED ON RECORD ANY MATERIAL TO CONTROVERT THE FINDINGS OF TRIBUNAL. IN THE AB SENCE OF ANY CONTRARY MATERIAL, WE FIND NO INFIRMITY IN THE ORDER OF COMMIS SIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY, THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE ARE AFFIRM ED AND THE GROUND RAISED BY THE DEPARTMENT AGAINST ALLOWING CLAIM OF DEDUCTION U/S. 80IB(10) OF THE ACT TO THE ASSESSEE IS DISMISSED. DISALLOWANCE U/S. 14A R.W. RULE 8D : 4. DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2007- 08 THE ASSESSEE HAS RECEIVED EXEMPT INCOME IN THE SHAPE OF S HARE IN PROFIT FROM PARTNERSHIP FIRM ` 8,05,01,863/- AND DIVIDEND INCOME ` 4,40,540/-. THE ASSESSING OFFICER MADE DISALLOWANCE OF ` 2,28,76,123/- BY INVOKING THE PROVISIONS OF SECTION 14A R.W. RULE 8D. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) RES TRICTED THE ADDITION TO 10% OF THE EXEMPT INCOME EARNED BY THE ASS ESSEE BY APPLYING THE ANALOGY OF DEDUCTION U/S. 80HHC OF THE ACT. 8 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 4.1 THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF ASSESS ING OFFICER IN MAKING DISALLOWANCE U/S. 14A. THE LD. DR CONTENDED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME, HOWEVER, NO DISALLOWAN CE WAS MADE BY THE ASSESSEE FOR EARNING INCOME EXEMPT FROM TAX. 4.2 ON THE OTHER HAND THE LD. AR CONTENDED THAT THE PR OVISIONS OF RULE 8D HAVE BEEN WRONGLY INVOKED BY THE ASSESSING OFF ICER. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOY CE MFG. CO. LTD VS DY. CIT REPORTED AS 328 ITR 81 (BOM) HAS HELD THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE W.E.F. ASSESSMENT YEAR 2 008-09. THUS, IN THE ASSESSMENT YEAR 2007-08 THE PROVISIONS OF R ULE 8D HAVE NO APPLICATION AND THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY HELD THAT THE PROVISIONS OF RULE 8D WILL NOT APPLY. THE LD. AR CONTENDED THAT ALTHOUGH THE DISALLOWANCE MADE BY THE CO MMISSIONER OF INCOME TAX (APPEALS) IS ON THE HIGHER SIDE BUT THE ASSE SSEE IS NOT CONTESTING THE SAME. 4.3 BOTH SIDES HEARD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF ` 8,09,42,403/- FROM SHARE OF PROFIT FROM THE PARTNERSHIP FIRM AND DIVIDEND. THE DISALLOWANCE HAS BEEN MA DE BY THE ASSESSING OFFICER U/S. 14A READ WITH RULE 8D. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD VS DY. CIT (SUPRA) HAS HELD THAT RULE 8D WOULD APPLY FROM ASSESSMENT YEAR 2008-09. HOWEVER, SOME REASONABLE DISALLOWANCE HAS TO BE ESTIMATED U/S. 14A FOR EARNING INCOME EXEMPT FROM TAX. TH E COMMISSIONER OF INCOME TAX (APPEALS) HAS RESTRICTED THE DIS ALLOWANCE TO 10% OF THE EXEMPT INCOME I.E. ` 80,94,240/-. THE ASSESSEE HAS ACCEPTED THE SAME. WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, THE ISSU E RAISED 9 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 BY THE DEPARTMENT AGAINST RESTRICTING THE DISALLOWANCE U/S. 14A TO 1 0% OF THE EXEMPT INCOME IS DEVOID OF ANY MERIT. ACCORDINGLY, T HIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. DEPRECIATION ON MOTOR CARS : 5. THE ASSESSEE HAS CLAIMED DEPRECIATION OF ` 5,29,627/- ON MOTOR CARS REGISTERED IN THE NAME OF DIRECTORS. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION ON MOTOR CARS ON THE G ROUND THAT TWIN CONDITIONS FOR CLAIMING DEPRECATION U/S. 32 I.E. : (I) THE ASSETS SHOULD BE USED FOR THE PURPOSE OF BUSINESS; AND (II) THE ASSETS SHOULD BE OWNED BY THE ASSESSEE, ARE NOT SATISFIED. IN THE PRESENT CASE THE ASSET I.E. THE MOTOR CARS ARE REGISTERED IN THE NAME OF INDIVIDUAL DIRECTORS OF THE COMPANY AND NOT T HE ASSESSEE COMPANY. THEREFORE, DEPRECIATION CANNOT BE ALLOWED ON THE ASSETS WHICH ARE NOT OWNED BY THE ASSESSEE COMPANY. 5.1 THE LD. AR SUBMITTED THAT THOUGH THE VEHICLES WERE PU RCHASED IN THE NAME OF DIRECTORS, HOWEVER, THE SAME WERE USED FOR B USINESS PURPOSE. THE PAYMENTS AND OTHER FORMALITIES FOR PURCHASE OF VEHICLES WERE COMPLIED WITH ON BEHALF OF THE ASSESSEE. THE DIRECTOR S SIGNED THE DOCUMENTS MERELY ON BEHALF OF THE ASSESSEE. SINCE, THE V EHICLES WERE ASSIGNED TO THE ASSESSEE COMPANY THE ULTIMATE OWNERSH IP LIES WITH THE ASSESSEE COMPANY. THE VEHICLES WERE PURCHASED IN THE N AME OF DIRECTORS FOR THE SAKE OF CONVENIENCE. THE FUNDS FOR PURC HASE OF VEHICLES WERE PROVIDED BY THE ASSESSEE COMPANY AND ARE DULLY REFLECTED IN THE SCHEDULE OF FIXED ASSETS IN THE BALANCE SHEET OF THE ASSESSEE. 10 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 5.2 BOTH SIDES HEARD. THE DEPARTMENT HAS ASSAILED THE FIN DINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ACCEPTING THE CLAIM OF THE ASSESSEE IN GRANTING DEPRECIATION ON THE MOTOR VEHICLES R EGISTERED IN THE INDIVIDUAL NAME OF THE DIRECTORS OF ASSESSEE COMPANY. WE OBSERVE THAT THE ASSESSING OFFICER HAD DECLINED THE CLAIM OF DEPREC IATION ON MOTOR VEHICLES ON THE GROUND THAT THE TWIN CONDITIONS FOR CLAIMING DEPRECIATION U/S. 32 I.E. THE ASSET SHOULD BE OWNED BY THE ASSESSEE AND THE ASSET SHOULD BE USED FOR BUSINESS PURPOSE ARE NOT SATISFIED. THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE CLAIM OF A SSESSEE ON THE GROUND THAT THE MOTOR VEHICLES WERE PURCHASED IN THE NAME OF INDIVIDUAL ONLY FOR THE SAKE OF CONVENIENCE. THE FUNDS FOR PURCHASE OF MOTOR VEHICLES WERE PROVIDED BY THE ASSESSEE COMPANY A ND THE MOTOR VEHICLES WERE USED FOR OFFICE PURPOSE. UNDISPUTEDLY, THE MO TOR VEHICLES ARE PART OF BLOCK OF ASSETS SHOWN IN THE BALANCE SHEET O F THE ASSESSEE. THE DIRECTORS OF THE ASSESSEE HAD ASSIGNED THE VEHICLES TO THE COM PANY. RELIANCE HAS BEEN PLACED ON THE DECISION OF CO-ORDINATE BE NCH OF THE TRIBUNAL IN THE CASE OF MANRAJ MOTORS PVT. LTD. VS. TH E DY. COMMISSIONER OF INCOME TAX IN ITA NO. 2002/PN/2013 FOR AS SESSMENT YEAR 2010-11 DECIDED ON 30-04-2015. IN THE SAID CASE, THE ASSESSEE CLAIMED DEPRECIATION ON VEHICLES WHICH WERE REGISTERED IN TH E NAME OF DIRECTORS OF THE COMPANY, HOWEVER, THE MOTOR VEHICLES WER E SHOWN IN THE BALANCE SHEET OF THE COMPANY. THE CONTENTIONS OF TH E ASSESSEE WERE THAT THE REAL AND BENEFICIAL OWNER IS ENTITLED TO CLAIM OF DEPRECIATION ON THE VEHICLES, WHICH IN THE SAID CASE WAS TH E ASSESSEE COMPANY. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRE CIATION. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) UPH ELD THE FINDINGS OF ASSESSING OFFICER. THE ASSESSEE CARRIED THE MATTER IN SEC OND 11 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD CLAIM ED DEPRECIATION ON VEHICLES WHICH WERE REGISTERED IN THE NAME OF ONE O F ITS DIRECTORS. THE COST OF THE SAID VEHICLES WERE ADMITTEDLY BORNE BY THE ASSESSEE COMPANY OUT OF ITS OWN FUNDS AND THE SAID VEHICLES WERE REF LECTED AS ASSETS OF THE ASSESSEE COMPANY IN THE LIST OF FIXED ASSETS AS ON THE END OF THE YEAR. THE EXPENDITURE OF RUNNING AND REPAIRS OF THE SAID VEHICLES HAS BEEN BORNE BY THE ASSESSEE COMPANY. THE SAID VEHICLES WE RE BEING USED BY THE ASSESSEE COMPANY FOR ITS BUSINESS, THE EXPLANAT ION OF THE ASSESSEE FOR REGISTERING THE SAME IN THE NAME OF THE DIRECTO RS OF THE ASSESSEE COMPANY WAS THAT THERE WAS SAVING IN THE REGISTRATI ON COST. BUT MERELY BECAUSE THE VEHICLES WERE REGISTERED IN THE NAME OF THE DIRECTORS OF THE ASSESSEE COMPANY DOES NOT ESTABLISH THE CASE OF THE REVENUE FOR NOT ALLOWING DEPRECIATION ON SUCH ASSETS. THE CONCEPT O F FINANCIAL OWNERSHIP HAS BEEN LAID DOWN BY THE HONBLE SUPREME COURT IN MYSORE MINERALS LTD. VS. CIT, (1999) 239 775 (SC) AND HENCE FOLLOWE D IN SERIES OF DECISIONS ADMITTEDLY WHERE THE FUNDS OF THE ASSESSE E COMPANY HAVE BEEN UTILIZED FOR THE PURCHASE OF VEHICLES, EVEN TH OUGH THE VEHICLES ARE NOT REGISTERED IN THE NAME OF THE ASSESSEE COMPANY, DOES NOT ESTABLISH THE CASE OF THE REVENUE ESPECIALLY WHERE THE DOMAIN /CONTROL OF THE SAID ASSETS WAS WITH THE COMPANY ITSELF AND THE VEHICLES WERE BEING UTILIZED FOR THE PURPOSE OF CARRYING ON BUSINESS OF THE ASSE SSEE COMPANY. WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIATION ON SUCH VEHICLES WHICH WERE OWNED BY IT AND WAS BEING USED FOR ITS BUSINESS THOUGH IT WAS REGISTERED IN THE NAME OF THE DIRECTO RS. IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE PUNE B ENCH OF THE TRIBUNAL IN ACIT VS. TALERA MOTORS PVT. LTD. IN ITA NO.1208/ PN/2009 RELATING TO ASSESSMENT YEAR 2006-07 ORDER DATED 11.05.2011, W HEREIN RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY ANOTHER DECISI ON OF THE PUNE BENCH OF THE TRIBUNAL IN ROHAN BUILDERS AND DEVELOPERS PV T. LTD. VS. ACIT IN ITA NO.942/PN/2006 RELATING TO ASSESSMENT YEAR 2004 -05, ORDER DATED 29.08.2008 AND IT WAS HELD AS UNDER :- 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS SQU ARELY COVERED BY THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ROHAN BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HE LD THAT THE DEPRECIATION WAS ALLOWABLE TO BE ASSESSEE IN RESPEC T OF THE MOTOR CARS PURCHASED BY IT AND USED FOR THE PURPOSE OF ITS BUS INESS, THOUGH REGISTERED IN THE NAME OF THE MANAGING DIRECTOR. IN THE PRESENT CASE, THE 12 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 ASSESSEE PURCHASED THE VEHICLES CALLED DEMO CARS IN THE NAME OF THE DIRECTORS THOUGH OWNERSHIP THEREOF DID NOT LIE WITH THE ASSESSEE. THE FACTS OF THE PRESENT CASE ARE IN PARI MATERIA WITH THOSE IN THE CASE OF ROHAN BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA). SO , RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE. WE UPHOLD THE SAME. 10. SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE P UNE BENCH OF THE TRIBUNAL IN ITO VS. SHREE PANCHGANGA AGRO IMPEX PVT . LTD. (SUPRA). THE CIT(A) HAD DENIED THE CLAIM OF DEPRECIATION ON VEHI CLES, IN TURN, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE MUMBAI BEN CH OF THE TRIBUNAL IN EDWISE CONSULTANTS PVT. LTD. VS. ADDL.CIT (SUPRA ). WE FIND NO MERIT IN THE SAID RELIANCE PLACED UPON BY THE CIT(A) ESPECIA LLY IN CIRCUMSTANCES WHERE SIMILAR ISSUE OF ALLOWANCE OF DEPRECIATION ON VEHICLES WHICH WERE REGISTERED IN THE NAME OF THE DIRECTORS OF THE ASSE SSEE COMPANY AND CLAIM OF DEPRECIATION IN THE HANDS OF THE COMPANY I TSELF, THE MUMBAI BENCH OF THE TRIBUNAL HAD ALLOWED THE CLAIM OF THE ASSESSEE. IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE MUMBAI BENCH IN M/S ORBIT MARKETING PVT. LTD. VS. ITO (SUPRA) AND N AVJEEVAN SYNTHETICS PVT. LTD. VS. ACIT (SUPRA). IN VIEW OF THE ISSUE BE ING SETTLED IN FAVOUR OF THE ASSESSEE BY SERIES OF DECISIONS OF PUNE BENCH O F THE TRIBUNAL AND MUMBAI BENCH OF THE TRIBUNAL, WE REVERSE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE ASSESSEE S CLAIM OF DEPRECIATION OF RS.7,04,516/- ON VEHICLES OWNED BY THE ASSESSEE COMPANY, WHICH WERE REGISTERED IN THE NAME OF THE DIRECTORS OF THE ASSESSEE COMPANY . THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 5.3 WE FIND THAT THE FACTS IN THE PRESENT CASE ARE SOME WHAT SIMILAR. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE CLA IM OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF THE CO-ORDINATE BENC H OF THE TRIBUNAL IN THE CASE OF ROHAN BUILDERS AND DEVELOPERS PVT. LTD. VS. ACIT IN ITA NO. 942/PN/2006 FOR ASSESSMENT YEAR 2004-0 5 DECIDED ON 29-08-2008. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS) IN ACCEPTING THE CLAIM OF THE ASSESS EE. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE DECISION OF CO-OR DINATE BENCH, THE GROUND OF APPEAL RAISED BY THE DEPARTMENT AGAINST A LLOWING OF 13 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 DEPRECIATION ON MOTOR VEHICLES REGISTERED IN THE NAME OF D IRECTORS OF THE ASSESSEE COMPANY IS DISMISSED. DEDUCTION U/S. 80IA(4)(III) : 6. THE ASSESSEE HAD DEVELOPED INDUSTRIAL PARK NAMED CE REBRUM AT PUNE AND HAD CLAIMED DEDUCTION U/S. 80IA(4)(III) OF THE ACT. T HE ASSESSING OFFICER REJECTED THE CLAIM OF ASSESSEE U/S. 80IA (4)(III) FOR THE FOLLOWING REASONS : I. THE SCHEME IS NOT NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH SUB RULE 4 OF RULE 18C OF THE INCOME TAX RULE 1962. II. THE INDUSTRIAL PARK DID NOT COMMENCE ON 01.01.2006 AS PE R THE APPROVAL. III. THE PROPOSED AREA OF THE INDUSTRIAL PARK 29,827 SQ. MTRS . AS PER THE APPROVAL HAS NOT BEEN CONSTRUCTED COMPLETELY . THE ASSESSEE CONSTRUCTED ONLY 23,976.47 SQ. MTRS. IV. THE ASSESSEE HAS NOT ALLOCATED 'AREA EARMARKED FOR INDUSTRIAL USE I.E. 91% AS PER THE APPROVAL. THE ASSESSEE ALLOCATED 12,303.77 SQ. MTRS. I.E. 41% TILL 31.03.2007. V. PROPOSED NUMBER OF INDUSTRIAL UNITS TO BE LOCATED ARE 12 AS PER' THE APPROVAL AND ALSO FOR CLAIMING BENEFIT U/S. 80- IA(4)(III). BUT THE ASSESSEE HAS LOCATED 7 UNITS ONLY TILL 31.03.2007. VI. THE INDUSTRIAL PARK SHOULD BE IN OPERATION DURING THE PERIO D IN WHICH THE BENEFITS UNDER SUB SECTION (4)(III) OF SECTION 80IA OF THE ACT, ARE TO BE AVAILED. BUT ENTIRE INDUSTRIAL PARK IS NOT IN OPERATION IN THE ASSESSEES CASE. 14 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 VII. THE ASSESSEE HAS NOT FULFILLED THE PRE-CONDITIONS FOR CLAIMING DEDUCTION. 6.1 THE ASSESSEE CHALLENGED THE FINDINGS OF ASSESSING OFFICER BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLAT E AUTHORITY AFTER EXAMINING THE INDUSTRIAL PARK SCHEMES FLOAT ED BY THE CENTRAL GOVERNMENT, THE FACTS OF THE CASE AND THE INSTRU CTIONS OF THE BOARD HELD THAT THE ASSESSEE HAS COMPLIED WITH ALL THE C ONDITIONS LAID DOWN UNDER THE INDUSTRIAL PARK SCHEME, 2008 AND THUS, T HE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S. 80IA(4)(III) OF THE ACT. 6.2 THE LD. DR DEFENDING THE FINDINGS OF ASSESSING OFFICER SUBM ITTED THAT THE ASSESSEE HAS NOT COMPLIED WITH THE CONDITIONS LA ID DOWN UNDER THE SCHEME FOR SETTING UP OF INDUSTRIAL PARK. THE INDUS TRIAL PARK SET UP BY THE ASSESSEE HAS NOT COME INTO OPERATION BEFORE DUE DATE I.E. 31-03-2006 AS PER THE INDUSTRIAL PARK SCHEME, 2002 (HER EINAFTER REFERRED TO AS THE (IPS, 2002). FURTHER, ACCORDING TO T HE SCHEME THE ASSESSEE SHOULD HAVE MINIMUM 30 IT/ITES UNITS IN THE IND USTRIAL PARK DEVELOPED UNDER THE SCHEME. THE ASSESSEE HAS SOLD SUB STANTIAL PART OF THE PROJECT TO TWO COMPANIES ONLY I.E. POONAWALLA GROUP A ND MILESTONE GROUP. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DED UCTION U/S. 80IA(4)(III) OF THE ACT. THE LD. DR CONTENDED THAT IF AT ALL TH E ASSESSEE IS FOUND TO BE ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80IA(4)(III) THE SA ME SHOULD BE ALLOWED IN THE ASSESSMENT YEAR AFTER THE DATE OF NOTIFICATION DECLARING THE PROJECT AS INDUSTRIAL PARK AND NOT IN THE A SSESSMENT YEARS UNDER APPEAL. 6.3 THE LD. AR VEHEMENTLY SUPPORTING THE FINDINGS OF COMMIS SIONER OF INCOME TAX (APPEALS) SUBMITTED THAT THE ASSESSEE MADE FIRST 15 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 APPLICATION FOR DEVELOPMENT OF INDUSTRIAL PARK UNDER INDUS TRIAL PARK SCHEME, 2002. THEREAFTER, THE ASSESSEE FILED SECOND APPLICA TION UNDER THE INDUSTRIAL PARK SCHEME, 2008 UNDER WHICH THE ASSESS EE WAS REQUIRED TO COMPLETE THE INDUSTRIAL PARK UP TO 31-03-20 11. THE ASSESSEE COMPLIED WITH ALL THE TERMS AND CONDITIONS OF THE SCHEME AND HENCE ELIGIBLE TO CLAIM DEDUCTION U/S. 80IA(4)(III) OF THE ACT. THE LD. AR SUBMITTED THAT POONAWALLA GROUP AND MILESTONE GROUP ARE INVESTORS AND HAVE PURCHASED BUILDINGS FROM THE ASSESSEE IN THE IND USTRIAL PARK DEVELOPED BY THE ASSESSEE. THE SAID GROUPS HAVE NOT O CCUPIED THE BUILDINGS FOR THEIR OWN USE BUT HAVE LEASED/RENTED OUT TH E AREA TO IT AND ITES COMPANIES WHO WOULD BE ACTUALLY UTILIZING THE SPA CE. THE OBJECTION OF THE LD. DR IS UNWARRANTED AS BY 31-03-201 1 THERE WERE 33 UNITS IN THE PROJECT AS AGAINST THE MINIMUM REQUIREMENT OF 30 UNITS. NONE OF THE UNITS HAD OCCUPIED AREA MORE THAN 25% OF TH E TOTAL AREA AS WAS ENVISAGED UNDER THE SCHEME. THE LD. AR FURTHER CONT ENDED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE D ECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. KOLTE PATIL DEVELOPERS LTD. VS. DY. COMMISSIONER OF INCOME TAX IN ITA NOS. 1411 TO 1415/P N/2013 FOR ASSESSMENT YEARS 2003-04, 2005-06, AND 2007-08 TO 2009-10 DECIDED ON 20-02-2015. 6.4 WE HAVE HEARD THE SUBMISSIONS OF RIVAL SIDES AT LENGTH AND HAVE CAREFULLY PERUSED THE DETAILED FININGS OF COMMISSIONER OF INC OME TAX (APPEALS) ON THE ISSUE. BEFORE PROCEEDING FURTHER IT WOULD B E NECESSARY TO HAVE GLANCE AT THE FACTS OF THE CASE. THE ASSESSEE DEVELOPED AN INDUSTRIAL PARK UNDER THE NAME CEREBRUM IT PARK. THE A SSESSEE INITIALLY MADE AN APPLICATION FOR NOTIFICATION OF THE SAID IT PAR K UNDER INDUSTRIAL PARK SCHEME, 2002 (HEREINAFTER REFERRED TO AS IPS 2002) . THE INDUSTRIAL PARK WAS NOTIFIED UNDER NON-AUTOMATIC APPROVAL O N 16 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 15-02-2005. AS PER IPS 2002, THE ASSESSEE WAS REQUIRE D TO COMPLETE THE PROJECT BY 31-03-2006. SINCE, THE PROJECT OF THE A SSESSEE WAS NOWHERE NEAR COMPLETION, THE ASSESSEE MADE AN APPLICATION FOR EXTENSION. SINCE, THE PROJECT OF THE ASSESSEE WAS NOT C OMPLETE EVEN BY 31-03-2007, THE ASSESSEE MADE AN APPLICATION TO THE BOA RD FOR NOTIFYING THE INDUSTRIAL PARK DEVELOPED BY ASSESSEE IN THE SUBSEQUENT SCHEME. THE SUBSEQUENT SCHEME I.E. INDUSTRIAL PARK SCHEM E, 2008 (IPS, 2008) WAS NOTIFIED IN THE OFFICIAL GAZETTE OF GOVERNMENT OF INDIA ON 08-01-2008. IN THE LATTER SCHEME THE PROCEDURE FOR SE EKING APPROVAL FOR SETTING UP AN INDUSTRIAL PARK WAS MUCH SIMPLIFIED. THE AS SESSEE MADE AN APPLICATION FOR NOTIFYING THE INDUSTRIAL PARK DEVELOP ED BY THE ASSESSEE ON 11-09-2008 UNDER IPS, 2008. THE CBDT VIDE NOTIFICATION DATED 9 TH JULY, 2010 NOTIFIED THE ASSESSEES PROJECT UNDER IPS, 2 008 SCHEME. AS PER THE GOVERNMENT NOTIFICATION THE DATE OF COMMENCEMENT OF INDUSTRIAL PARK DEVELOPED BY THE ASSESSE E WAS 31-03-2010. IN THE INDUSTRIAL PARK DEVELOPED BY THE ASS ESSEE, THREE SEPARATE BUILDINGS WERE CONSTRUCTED IN RESPECT OF WHICH C OMPLETION CERTIFICATES FROM THE PUNE MUNICIPAL CORPORATION WERE OBTA INED ON DIFFERENT DATES, WHICH ARE AS UNDER : BLDG. NO. DATE OF CERTIFICATE B1 1 ST FLOOR 18/11/2006 2 ND FLOOR 10/11/2006 3 RD TO 7 TH FLOOR 09/11/2006 B2 GROUND TO 7 TH FLOOR 12/06/2008 B3 1 ST TO 3 RD FLOOR 21/03/2009 GROUND FLOOR 31/12/2009 4 TH TO 7 TH FLOOR 31/03/2010 THE ASSESSEE ENTERED INTO AGREEMENT OF SALE WITH THE PR OSPECTIVE BUYERS FOR THE SALE OF BUILT UP AREA IN THE BUILDINGS B1 AND B2. THE 17 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 ASSESSEE RECOGNIZED INCOME FROM THE PROJECT ON PERCENT AGE COMPLETION METHOD. THE ASSESSEE OFFERED INCOME FROM PROJECT FOR TAX IN DIFFERENT ASSESSMENT YEARS, THE DETAILS OF WHICH ARE AS UNDER : ASSTT. YEAR BUILDING NO. AMOUNT (RS.) 2006 - 07 B1 2 ND FLOOR 9,91,24,893/ - 2007 - 08 B1 ENTIRE BUILDING EXCLUDING 2 ND FLOOR 120,20,70,010/ - 2008 - 09 B2 139,00,00,000/ - 2009 - 10 B2 9,28,68,636/ - B3 89,67,82,844/ - 2010 - 11 B3 60,56,86,161/ - TOTAL 428,65,32,544/- FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE CLAIMED DEDUCTION U/S. 80IA(4)(III) AT ` 3,47,04,325/- UNDER THE IPS 2002 AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER. THE ASSESSEE SOLD ONE FLOOR OF THE BUILDING B1 TO MASTEK LTD. DURING THE FINANCIAL YEAR 2005-06 AND THE REMAINING FLOORS OF BUILDING B1 WERE SOLD TO POONAWALA GROUP DURING THE FINANCIAL YEAR 2006-07. THE ENTIRE BUILDING B2 WAS SOLD BY THE ASSESSEE TO M/S. M ILESTONE DEVCON P. LTD. DURING THE FINANCIAL YEAR 2008-09. THE ASS ESSEE SOLD BUILDING B3 TO ONE OF ITS SISTER CONCERNS, M/S. CEREBRUM IT PARK PVT. LTD. DURING THE FINANCIAL YEAR 2008-09. IT IS PERTINENT TO NOTE HERE THAT NONE OF THE AFORESAID COMPANIES/GROUPS RETAINED THE BUILDIN GS FOR THEIR OWN USE. THE BUILDINGS WERE GIVEN ON LEASE/RENT TO VARIO US IT AND ITES COMPANIES. THERE WERE 33 UNITS AS ON 31-03-2011 IN THE INDUSTRIAL PARK. THE ASSESSEE FURNISHED AGREEMENT FOR SALE /LEASE OF THE UNITS LOCATED IN THE INDUSTRIAL PARK ALONG WITH THE CONFIRMAT ION LETTERS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMIS SIONER 18 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 OF INCOME TAX (APPEALS) GAVE CATEGORIC FINDING THAT NO INDUS TRIAL UNIT IN THE PARK DEVELOPED BY THE ASSESSEE HAS ALLOCABLE AREA O F MORE THAN 25%. THE ASSESSEE FILED A LIST OF ALL THE IT/ITES COMPANIES ALONG WITH THE AREA UNDER LEASE OR SALE AGREEMENT BEFORE THE COMM ISSIONER OF INCOME TAX (APPEALS). 6.5 THE COMMISSIONER OF INCOME TAX (APPEALS) EXAMINED THE CLAIM OF DEDUCTION U/S. 80IA(4)(III) OF ASSESSEE THREAD BARE. THE FIRST APPELLATE AUTHORITY SEPARATELY DISCUSSED THE PROVISIONS OF SECTION 80IA(4)(III), IPS 2002 AND IPS 2008 VIZ-A-VIZ THE CLAIM OF ASSESSEE AND TH E CONDITIONS TO BE COMPLIED WITH FOR BEING ELIGIBLE TO CLAIM THE BENEFIT OF DEDU CTION U/S. 80IA(4)(III). THE COMMISSIONER OF INCOME TAX (APPEALS) IN A VERY DETAILED AND WELL REASONED ORDER HAS MET WITH EACH AND E VERY OBJECTION RAISED BY ASSESSING OFFICER IN DISALLOWING THE CLAIM OF DEDUCTIO N U/S. 80IA(4) OF THE ASSESSEE. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). WE CONC UR WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS IS SUE. FOR THE SAKE OF BREVITY WE ARE NOT REPRODUCING THE DET AILED FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE HON'BLE APE X COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. K.Y. PILLIAH & SONS REPORTED AS 63 ITR 411 (SC) HAS HELD THAT WHERE TRIBUNA L CONCURS WITH THE VIEW OF COMMISSIONER OF INCOME TAX (APPEALS), THERE IS NO NEED TO REPEAT THE REASONING GIVING BY COMMISSIONER OF INCOME TAX (APPEALS). THIS VIEW WAS AGAIN REITERATED BY THE HON'BLE DELHI HIGH CO URT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GLOBAL VENTEDGE (P.) L TD. REPORTED AS 354 ITR 21 (DEL). 6.6 THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. KOLTE PATIL DEVELOPERS LTD. VS. DY. COMMISSIONER OF INCOME TAX (S UPRA) HAD 19 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 THE OCCASION TO DEAL WITH THE ISSUE OF DISALLOWANCE OF DEDU CTION U/S. 80IA(4). THE DISALLOWANCE WAS MADE IN ASSESSMENT YEAR 200 7-08 ON TWO COUNTS : I. INDUSTRIAL PARK WAS NOT COMPLETE AS ON 31-03-2007 AS COMPLETION CERTIFICATE WAS OBTAINED BY THE ASSESSEE FROM LOCAL AUTHORITY ON 09-05-2007. II. INDUSTRIAL PARK DID NOT FULFILL THE CRITERIA OF LOCATING MINIMUM NUMBER OF 30 INDUSTRIAL UNITS. THE CO-ORDINATE BENCH OF THE TRIBUNAL STRUCK DOWN THE FIR ST OBJECTION RAISED BY THE DEPARTMENT IN DISALLOWING THE CLAIM OF DEDUCTION U/S. 80IA(4)(III) BY OBSERVING AS UNDER : 49. NOW, THE CLAIM OF THE ASSESSEE IS THAT IT STAR TED THE PROCESS OF DEVELOPMENT OF THE INDUSTRIAL PARK SOMEWHERE IN OCT OBER, 2004 AND THE CONSTRUCTION WAS SPREAD OVER A NUMBER OF YEARS. AS AND WHEN THE INDIVIDUAL UNITS WERE BEING COMPLETED, ASSESSEE SOL D IT TO THE CLIENTS. THE ASSESSEE WAS OFFERING AND RECOGNIZING INCOME ON SUCH SALES IN THE RESPECTIVE YEARS, AND THE INCOME UNDER CONSIDERATIO N THIS YEAR IS FROM THE SALE OF UNITS. DURING THE YEAR UNDER CONSIDERA TION, ASSESSING OFFICER HAS NOTED THAT ONLY 21 UNITS WERE LOCATED IN THE IN DUSTRIAL PARK. IN OTHER WORDS, ONLY 21 UNITS WERE OPERATIONAL AND NOT THE C OMPLETE 30 UNITS, I.E. THE TOTAL NUMBER OF UNITS WHICH WERE TO BE DEVELOPE D IN THE INDUSTRIAL PARK. THE ASSESSING OFFICER HAS REFERRED TO CLAUSE 2(F) OF THE SCHEME TO SAY THAT THE DATE OF COMMENCEMENT OF INDUSTRIAL P ARK IS THE DATE ON WHICH THE COMPLETION CERTIFICATE WAS OBTAINED FROM THE LOCAL AUTHORITY CERTIFYING THEREBY THAT ALL THE REQUIRED DEVELOPMEN T ACTIVITIES OF THE PROJECT HAS BEEN COMPLETED. AS PER THE ASSESSING O FFICER, IN THIS CASE, THE CERTIFICATE FROM THE LOCAL AUTHORITY HAS BEEN O BTAINED ON 09.05.2007 AND THEREFORE IN TERMS OF THE SCHEME, THE DATE OF C OMMENCEMENT OF THE INDUSTRIAL PARK IS TO BE UNDERSTOOD AS 09.05.2007 W HICH FALLS BEYOND THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ON THIS BASIS, IT IS SAID THAT THE INDUSTRIAL PARK OF THE ASSESSEE WAS NOT COMPLETE AS ON 31.03.2007, AND THUS DEDUCTION U/S 8 0-IA OF THE ACT COULD NOT BE ALLOWED FOR ASSESSMENT YEAR 2007-08. 50. IT IS TO BE APPRECIATED THAT CLAUSE 2(F) OF THE SCHEME DEFINING THE EXPRESSION DATE OF COMMENCEMENT IS RELEVANT IN TH E CONTEXT OF CONDITION 20 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 (1) OF CLAUSE 4 OF THE SCHEME WHICH PRESCRIBES THE CRITERIA FOR APPROVAL OF AN INDUSTRIAL PARK. CONDITION (1) OF CLAUSE 4 OF T HE SCHEME PRESCRIBES THAT AN UNDERTAKING SHALL BE CONSIDERED FOR NOTIFIC ATION UNDER CLAUSE (III) OF SUB-SECTION (4) OF SECTION 80-IA OF THE ACT IF T HE DATE OF COMMENCEMENT OF THE INDUSTRIAL PARK IS ON OR AFTER 01.04.2006 AN D NOT LATER THAN 31.03.2009. IN THIS CASE, DATE OF COMMENCEMENT OF 09.05.2007 DETERMINED IN ACCORDANCE WITH CLAUSE 2(F) OF THE SC HEME FULFILLS THE CONDITION (1) OF CLAUSE 4 OF THE SCHEME. PERTINENT LY, THE MEANING OF THE EXPRESSION DATE OF COMMENCEMENT CONTAINED IN CLAU SE 2(F) OF THE SCHEME IS TO BE UNDERSTOOD IN THE CONTEXT OF THE SC HEME. THE QUESTION IS AS TO WHETHER THE DATE OF COMMENCEMENT IN CLAUSE 2(F) OF THE SCHEME CAN BE USED TO DENY A CLAIM OF DEDUCTION U/S 80-IA( 4) OF THE ACT, ESPECIALLY IN THE FACE OF AN UNDISPUTED FACT-SITUAT ION THAT THE UNDERTAKING OF THE ASSESSEE CONTAINS TO BE APPROVED /NOTIFIED UNDER THE SCHEME. IF A CONDITION PRESCRIBED IN THE SCHEME IS FOUND TO FULFILLED FOR THE PURPOSES OF NOTIFICATION OF THE SCHEME U/S 80-I A(4)(III) OF THE ACT, CAN IT BE SIMULTANEOUSLY SAID THAT THE SAME CONDITION I S NOT FULFILLED IN THE CONTEXT OF APPLICATION OF SECTION 80-IA(4)(III) OF THE ACT R.W. RULE 18C OF THE RULES; AND, THE ANSWER, IN OUR VIEW, IS OBVIOUSLY N O. 51. AT THIS POINT, WE MAY ALSO REFER TO RULE 18C OF THE RULES WHICH PRESCRIBES THE ELIGIBILITY OF AN INDUSTRIAL PARK FO R BENEFITS OF SECTION 80- IA(4)(III) OF THE ACT. THE PROVISIONS OF THE RULE AS APPLICABLE FOR THE YEAR UNDER CONSIDERATION HAVE BEEN REPRODUCED BY US IN T HE EARLIER PARAGRAPHS. SUB-RULE (1) OF RULE 18C OF THE RULES SAYS THAT THE UNDERTAKING OUGHT TO BEGIN TO DEVELOP, DEVELOP AND OPERATE OR MAINTAIN AND OPERATE AN INDUSTRIAL PARK AT ANY TIME DURING T HE PERIOD BEGINNING ON 01.04.2006 AND ENDING ON 31.03.2009. SUB-RULE ( 2) OF RULE 18C OF THE RULES SAYS THAT THE UNDERTAKING OF AN INDUSTRIAL PA RK SHALL BE NOTIFIED BY THE CENTRAL GOVERNMENT UNDER THE IPS, 2008. SUB-RU LE (3) OF RULE 18C OF THE RULES SAYS THAT THE UNDERTAKING SHALL CONTINUE TO FULFILL THE CONDITIONS ENVISAGED THE IPS, 2008. NOTABLY, THERE IS NO DISP UTE THAT THE UNDERTAKING OF THE ASSESSEE I.E. INDUSTRIAL PARK GIGA SPACE IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT UNDER THE IPS, 2 008 AND IT CONTINUES TO FULFILL THE CONDITIONS ENVISAGED IN THE IPS, 200 8 INASMUCH AS THERE IS NO WITHDRAWAL OF APPROVAL BY THE CENTRAL GOVERNMENT , AS PROVIDED FOR IN CLAUSE 6 OF THE SCHEME. THEREFORE, TO SAY ON THE S TRENGTH OF CLAUSE 2(F) OF THE SCHEME THAT THE ASSESSEE HAS NOT COMPLIED WITH THE REQUIREMENTS OF THE SCHEME FOR STAKING CLAIM U/S 80-IA(4)(III) OF T HE ACT IN THE FACE OF THE FACT THAT THE UNDERTAKING I.E. THE AN INDUSTRIAL PA RK CONTINUES TO BE NOTIFIED BY THE CENTRAL GOVERNMENT, IS UNJUSTIFIED AND UNCALLED FOR. 21 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 52. THE REVENUE HAS EMPHASIZED THAT THE DEVELOPMENT ENVISAGED IN THE APPROVAL OUGHT TO HAVE BEEN COMPLETED BY THE AS SESSEE BEFORE 31.03.2007 ITSELF I.E. WITHIN THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, BEFORE IT COULD CLAIM THE BENEFITS OF SECTION 80- IA(4)(III) OF THE ACT. THERE IS NO DISPUTE THAT TH E UNDERTAKING OF THE ASSESSEE IS NOTIFIED BY THE CENTRAL GOVERNMENT IN A CCORDANCE WITH THE IPS, 2008 FOR THE PURPOSES OF CLAUSE (III) OF SECTI ON 80-IA(4) OF THE ACT. MOREOVER, THE ELIGIBILITY CONDITIONS PRESCRIBED IN RULE 18C OF THE RULES, WHICH WE HAVE REPRODUCED IN THE EARLIER PARAS AND W HICH IS RELEVANT FOR THE YEAR UNDER CONSIDERATION, BELIES THE STAND OF T HE REVENUE. THE OPENING SENTENCE IN SUB-RULE (1) OF RULE 18C OF THE RULES SAYS THAT THE UNDERTAKING SHALL BEGIN TO DEVELOP; DEVELOP AND OP ERATE; AND, MAINTAIN AND OPERATE . THE AFORESAID WORDINGS SHOW THAT THE INDUSTRIAL PARK IN QUESTION IS ELIGIBLE FOR THE BENEFIT OF SEC TION 80-IA(4)(III) OF THE ACT IN THE INSTANT YEAR ALSO. QUITE CLEARLY, AN UNDERT AKING WHICH BEGINS TO DEVELOP IS ALSO ELIGIBLE FOR THE BENEFIT OF SECTION 80-IA(4)(III) OF THE ACT. IN THIS CASE, IN THE INSTANT ASSESSMENT YEAR, ASSESSEE HAS DEVELOPED AND SOLD 21 UNITS OUT OF THE TOTAL 30 UNITS ENVISAGED I N THE APPROVAL AND IT HAS OBTAINED THE COMPLETION CERTIFICATE ON 09.05.20 07 AFTER COMPLETING THE BALANCE UNITS. THE UNITS SOLD BY THE ASSESSEE HAVE YIELDED PROFITS DURING THE YEAR UNDER CONSIDERATION WHICH THE ASSES SEE HAS DECLARED IN ITS PROFIT & LOSS ACCOUNT. THUS, GOING BY THE ELIG IBILITY CONDITIONS CONTAINED IN RULE 18C OF THE RULES, THE UNDERTAKING OF THE ASSESSEE WHICH STANDS NOTIFIED FOR THE PURPOSES OF SECTION 8 0-IA(4)(III) OF THE ACT, IS ENTITLED TO THE BENEFITS OF SECTION 80-IA(4)(III) O F THE ACT QUA THE PROFITS FROM SUCH DEVELOPMENT WHICH HAVE BEEN DECLARED BY T HE ASSESSEE IN ITS BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION. THE STAND OF THE REVENUE THAT THE CLAIM OF DEDUCTION CAN BE AVAILED O NLY AFTER THE PARK IS DEVELOPED I.E. ONLY AFTER ISSUANCE OF COMPLETION CE RTIFICATE BY THE LOCAL AUTHORITY DOES NOT EMERGE FROM THE READING OF SECT ION 80-IA(4)(III) OF THE ACT R.W. RULE 18C OF THE RULES, AS IT STANDS FOR TH E PERIOD UNDER CONSIDERATION. IN THE PRESENT CASE THE PROJECT OF THE ASSESSEE WAS INITIALLY APPROVED UNDER IPS 2002 ON 15-02-2005. THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IA(4)(III) IN ASSESSMENT YEAR 2006-07 WHICH W AS ALLOWED TO THE ASSESSEE. THE ASSESSEE COULD NOT COMPLET E THE PROJECT WITHIN THE TIME FRAME SPECIFIED IN IPS 2002 I.E. 31-03-2006. T HE ASSESSEE APPLIED FOR NOTIFICATION OF THE PROJECT UNDER IPS 2008. THE 22 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 PROJECT WAS NOTIFIED BY CBDT ON 09-07-2010. AFTER NOTIFICA TION OF THE PROJECT UNDER IPS 2008, THE ELIGIBILITY OF DEDUCTION HAS TO BE SEEN WITH RESPECT TO THE NEW SCHEME. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE OBSERVATIO NS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL WE FIND NO MERIT IN THE CONTENTIONS OF THE LD. DR THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDU CTION U/S. 80IA(4)(III) IN ASSESSMENT YEARS UNDER APPEAL. 6.7 THE SECOND OBJECTION OF THE REVENUE IS THAT MINIMUM 3 0 UNITS WERE NOT ESTABLISHED AS PER THE SCHEME. THE TRIBUNAL WH ILE DEALING WITH THE ISSUE RELATING TO FULFILLING THE CONDITION OF LOCATING 30 UNITS TO BE ELIGIBLE TO CLAIM DEDUCTION HAS HELD AS UNDER : 55. WE FIND ENOUGH MERIT IN THE INTERPRETATION PUT -FORTH BY THE ASSESSEE. OSTENSIBLY, THE CONDITIONS IN THE SCHEME HAVE BEEN INSERTED WITH AN OBJECTIVE THAT ONCE AN UNDERTAKING IS CONSI DERED FOR NOTIFICATION U/S 80-IA(4)(III) OF THE ACT, THERE IS A MECHANISM AVAILABLE TO CHECK AS TO WHETHER THE CONDITIONS PRESCRIBED IN THE SCHEME HAV E BEEN COMPLIED WITH. IN OTHER WORDS, IN THE CONTEXT OF THE PRESEN T CONTROVERSY VIS--VIS CLAUSE 5(2) OF THE SCHEME THE OBJECTIVE IS TO ENSUR E THAT THE ASSESSEE DOES NOT CLAIM DEDUCTION WITHOUT PUTTING THE PARK T O USE FOR MINIMUM 30 INDUSTRIAL UNITS IN ACCORDANCE WITH THE SCHEME APPR OVED BUT IT DOES NOT ENVISAGE THAT THE LOCATION OF MINIMUM 30 INDUSTRIAL UNITS BE SEEN FOR EVERY ASSESSMENT YEAR FOR WHICH THE CLAIM IS LODGED , MORESO, WHEN THE PROFITS ARE DECLARED BY AN ASSESSEE BASED ON ITS NO RMAL METHOD OF INCOME RECOGNITION. IT MAY BE POINTED OUT THAT THE PROVISIONS OF SECTION 80-IA(4)(III) OF THE ACT ITSELF ENVISAGES DEDUCTION IN CASE OF AN UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPERATES O R MAINTAINS AND OPERATES AN INDUSTRIAL PARK FOR THE PERIOD BEGINNIN G ON THE 1 ST APRIL, 2006 AND ENDING ON OR BEFORE 31 ST MARCH, 2009. SIMILARLY, THE SCHEME ALSO ENVISAGES THAT THE DATE OF COMMENCEMENT OF AN INDUS TRIAL PARK SHOULD BE ON OR AFTER 01.04.2006 BUT NOT LATER THAN 31.03. 2009. WHERE THE PROJECTS INVOLVE A PERIOD OF GESTATION IN ITS CONST RUCTION, THE PERIOD OF DEVELOPMENT MAY EXTEND BEYOND ONE ASSESSMENT YEAR. THEREFORE, ASSESSEE WOULD BE ELIGIBLE TO CLAIM DEDUCTION WITH RESPECT TO THE PROFITS FROM INDUSTRIAL PARK OVER MULTIPLE ASSESSMENT YEARS SO LONG AS THE DATES PRESCRIBED IN THE ACT AS WELL AS IN THE SCHEME FOR DEVELOPMENT OF THE 23 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 INDUSTRIAL PARK ARE ADHERED TO. THE ASSESSEE WOULD DECLARE PROFITS ON THE BASIS OF ITS METHOD OF ACCOUNTING AND IN OUR VI EW, IN RESPECT OF THE RELEVANT ASSESSMENT YEARS, ANY PROFITS DERIVED FROM THE ELIGIBLE BUSINESS CATEGORIZED IN SECTION 80-IA(4)(III) OF THE ACT SHA LL BE ENTITLED FOR A DEDUCTION U/S 80-IA(4)(III) OF THE ACT. IN OUR VIE W, SO LONG AS THE PROFITS ARE DERIVED FROM THE ELIGIBLE BUSINESS AND THE BUSI NESS OF THE UNDERTAKING HAS BEEN DEVELOPED IN ACCORDANCE WITH T HE SCHEME IN WHICH IT IS NOTIFIED, THEN ASSESSEE SHALL BE ELIGIB LE FOR THE BENEFIT OF SECTION 80-IA(4)(III) OF THE ACT. 56. IN THIS CONTEXT, WE MAY MENTION THAT A SIMILAR CONTROVERSY HAD ARISEN IN THE CONTEXT OF THE CLAIM OF DEDUCTION U/S 80-IB(10) OF THE ACT, WHEREIN AN ASSESSEE CAN CLAIM DEDUCTION IN THE YEAR S WHEN IT SELLS SOME OF THE RESIDENTIAL UNITS ALTHOUGH THE HOUSING PROJE CT IS STILL UNDER CONSTRUCTION PERIOD AS STIPULATED IN SECTION 80-IB( 10) OF THE ACT. THE CBDT VIDE INSTRUCTION NO.4 OF 2009 DATED 30.06.2009 CLARIFIED THAT THE DEDUCTION U/S 80-IB(10) OF THE ACT CAN BE CLAIMED O N A YEAR TO YEAR BASIS WHERE AN ASSESSEE WAS SHOWING PROFITS FROM PARTIAL COMPLETION OF THE PROJECT IN EVERY YEAR. IT HAS ALSO BEEN CLARIFIED BY THE CBDT THAT ON A LATER DATE, IF IT IS FOUND THAT THE CONDITION OF TH E COMPLETION OF PROJECT WITHIN THE STIPULATED TIME IS NOT FULFILLED BY THE ASSESSEE THEN THE ASSESSING OFFICER CAN WITHDRAW THE DEDUCTION ALLOWE D TO THE ASSESSEE IN EARLIER YEARS. IN OUR CONSIDERED OPINION, A SIMILA R ANALOGY HAS TO BE APPLIED IN THE PRESENT CASE TO UNDERSTAND THE IMPOR T AND MEANING OF CONDITION (2) OF CLAUSE 5 OF THE SCHEME. IN OUR CO NSIDERED OPINION, THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80-IA(4)(III) OF THE ACT MERELY BECAUSE THE MINIMUM NUMBER OF THIRTY UNITS ARE NOT LOCATED IN THE INDUS TRIAL PARK BEFORE 31.03.2007 WHEN OTHERWISE IT IS FACTUALLY TRUE THAT THE MINIMUM NUMBER OF UNITS HAVE BEEN LOCATED IN INDUSTRIAL PARK IN CO MPLIANCE WITH PERIOD STIPULATED AND APPROVED IN THE SCHEME. THEREFORE, ON THIS ASPECT, WE FIND NO REASON TO UPHOLD THE OBJECTION OF THE REVEN UE. 57. IN-FACT, THE CONTROVERSY BEFORE US IN RELATION TO THE CLAIM OF DEDUCTION U/S 80-IA(4)(III) OF THE ACT PERTAINING T O THE INSTANT ASSESSMENT YEAR IS SIMILAR TO WHAT WAS CONSIDERED BY THE MUMBA I BENCH OF THE TRIBUNAL IN THE CASE OF FERANI HOTELS PVT. LTD. VS. DCIT, VIDE ITA NOS.1828 & 1829/MUM/2009 DATED 24.02.2012 PERTAININ G TO ASSESSMENT YEARS 2004-05 AND 2005-06. THE AFORESAI D DECISION WAS RELIED UPON BY THE ASSESSEE IN THE COURSE OF HEARIN G. IN THE CASE BEFORE THE MUMBAI BENCH OF THE TRIBUNAL, ASSESSEE HAD CLAI MED DEDUCTION U/S 80-IA(4)(III) OF THE ACT IN RESPECT OF PROFITS FROM DEVELOPMENT OF AN INDUSTRIAL PARK. THE CLAIM WAS DISPUTED BY THE REV ENUE FOR ASSESSMENT 24 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 YEARS 2004-05 AND 2005-06. THE OBJECTION OF THE RE VENUE WAS THAT THE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT NOTIF YING THE INDUSTRIAL PARK WAS DATED 12.07.2006. IT WAS ALSO THE CASE OF THE REVENUE THAT AS ON THE LAST DAY OF THE RELEVANT ASSESSMENT YEARS I. E. 2004-05 AND 2005- 06, ALL THE 33 UNITS APPROVED IN THE SCHEME WERE NO T DEVELOPED IN THE INDUSTRIAL PARK. AS PER THE REVENUE, THE NOTIFICAT ION WAS ALSO ISSUED BY THE CENTRAL GOVERNMENT ON 12.07.2006, WHICH WAS POS TERIOR TO THE ASSESSMENT YEARS 2004-05 AND 2005-06. THE CLAIM OF THE ASSESSEE WAS THAT IT WAS FOLLOWING PERCENTAGE COMPLETION METHOD OF ACCOUNTING AND WAS OFFERING INCOME ON THE BASIS OF THE PERCENTAGE OF CONSTRUCTION COMPLETED. THUS, THE PROFITS FROM THE INDUSTRIAL P ARK WERE ALSO OFFERED FOR ASSESSMENT YEARS 2004-05 AND 2005-06 ON WHICH C LAIM FOR DEDUCTION U/S 80-IA(4)(III) OF THE ACT WAS MADE. A SSESSEE ALSO SUBMITTED THAT ULTIMATELY ALL THE CONDITIONS PRESCRIBED FOR D EDUCTION U/S 80-IA(4)(III) OF THE ACT WERE COMPLIED WITH AND THAT IN THE SUBSE QUENT ASSESSMENT YEAR 2006-07 ASSESSEE WAS INDEED ALLOWED THE DEDUCT ION BY THE ASSESSING OFFICER. THE TRIBUNAL HELD THAT THE DENI AL OF DEDUCTION ON THE AFORESAID GROUNDS IN ASSESSMENT YEAS 2004-05 AND 20 05-06 WAS NOT JUSTIFIED. IT WAS SPECIFICALLY NOTED THAT BECAUSE IN THE FIRST TWO YEARS THE MINIMUM NUMBER OF UNITS WERE NOT LOCATED IN THE IND USTRIAL PARK WAS NOT A VALID GROUND FOR DISALLOWING THE CLAIM ESPECIALLY WHEN IN THE ULTIMATE ANALYSIS THE INDUSTRIAL PARK WAS DEVELOPED IN ACCOR DANCE WITH THE APPROVAL GRANTED BY THE CENTRAL GOVERNMENT. THE FO LLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL WORTHY OF NOTICE :- 25. FROM THE REASONS ASSIGNED BY THE REVENUE AUTHO RITIES FOR REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U /S.80-IA(4)(III) OF THE ACT, IT IS CLEAR THAT AN ASSESSEE WHO ADOPTS THE PE RCENTAGE COMPLETION METHOD OF ACCOUNTING OF INCOME FROM DEVELOPING INDU STRIAL PARK CAN GET DEDUCTION OF ONLY THAT PART OF THE PROFITS THAT ARE OFFERED TO TAX IN THE YEAR IN WHICH THE NOTIFICATION IS RECEIVED. HAD THE ASSESSEE IN THE PRESENT CASE FOLLOWED PROJECT COMPLETION OF METHOD OF ACCOUNTING OF INCOME FROM DEVELOPING INDUSTRIAL PARK, THE ASSESSE E WOULD HAVE GOT THE BENEFIT OF DEDUCTION OF THE ENTIRE PROFITS FROM THE DEVELOPMENT OF INDUSTRIAL PARK. IT WILL RESULT IN A SITUATION WHER E THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE (SUCH AS THE ON E IN THE PRESENT CASE) WILL DENY THE BENEFIT AVAILABLE UNDER THE LAW . THE METHOD OF ACCOUNTING IS SUCH THAT THE ASSESSEE CAN NEVER GET THE BENEFIT EVEN IN A LATER YEAR. IT IS NO DOUBT TRUE THAT THE SATISFACTI ON OF THE CONDITIONS FOR GRANT OF DEDUCTION AS ON THE LAST DATE OF THE PREVI OUS YEAR IS NECESSARY. IF DUE TO SUBSEQUENT EVENTS THAT TAKE PLACE AFTER T HE LAST DATE OF THE PREVIOUS YEAR, CONDITIONS FOR GRANT OF DEDUCTION AR E SATISFIED, THEN THE ASSESSING OFFICER CAN TAKE COGNIZANCE OF THE SAME. THE CBDT IN INSTRUCTION NO.4/2009 DT. 30.06.2009 CLARIFIED THE POSITION WITH REGARD 25 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 TO ALLOWING DEDUCTION U/S.80-18(10) OF THE ACT. U/S .80-IB(10) OF THE ACT, DEDUCTION OF 100% PROFITS DERIVED FROM DEVELOPING A ND BUILDING HOUSING PROJECTS IS ALLOWED. ONE OF THE CONDITIONS TO BE SA TISFIED FOR CLAIMING SUCH DEDUCTION WAS THAT THE HOUSING PROJECT SHOULD HAVE COMMENCED CONSTRUCTION ON OR AFTER 1.10.1998 AND COMPLETED TH E CONSTRUCTION WITHIN 4 YEARS FROM THE FINANCIAL YEAR IN WHICH THE HOUSIN G PROJECT IS APPROVED BY THE LOCAL AUTHORITY. THE QUESTION AROSE WHETHER THE DEDUCTION CAN BE CLAIMED BY ASSESSEES WHO FOLLOW PERCENTAGE COMPLETI ON METHOD OF ACCOUNTING BY SHOWING PART OF THE PROFITS OR THE DE DUCTION WOULD BE AVAILABLE ONLY IN THE YEAR OF COMPLETION OF THE PRO JECT U/S.80-IB(10) OF THE ACT. THE CBDT CLARIFIED THAT DEDUCTION CAN BE CLAIM ED ON A YEAR TO YEAR BASIS WHERE THE ASSESSEE IS SHOWING PROFIT FROM PAR TIAL COMPLETION OF THE PROJECT EVERY YEAR. IT FURTHER CLARIFIED THAT IF TH E CONDITION FOR COMPLETION OF THE PROJECT WITHIN THE SPECIFIED TIME LIMIT IS N OT SATISFIED, THE DEDUCTION GRANTED TO AN ASSESSEE IN EARLIER YEARS CAN BE WITH DRAWN. WE ARE OF THE VIEW THAT THERE IS NO REASON WHY SIMILAR BENEFIT SH OULD NOT BE EXTENDED TO ASSESSEE CLAIMING BENEFIT U/S.80-IA(4)(III) OF T HE ACT WHEN THE CONDITIONS FOR GRANT OF DEDUCTION WERE SATISFIED BY THE ASSESSEE EVEN BEFORE THE AO PASSED THE ORDER OF ASSESSMENT. THE F ACTS OF THE PRESENT CASE JUSTIFY CONSIDERING THE PLEA OF THE ASSESSEE F OR GRANT OF DEDUCTION U/S.80-IA(4)(III) OF THE ACT IN RESPECT OF PROFITS DECLARED IN AY 04-05 AND 05-06 AND ALLOWING THE SAME AS ADMITTEDLY THE CONDI TIONS FOR GRANT OF SUCH DEDUCTION WERE SATISFIED THOUGH AT A LATER POI NT OF TIME BUT NEVERTHELESS BEFORE COMPLETION OF ASSESSMENT FOR TH OSE ASSESSMENT YEARS. WE DIRECT ACCORDINGLY. THE APPEALS OF THE ASSESSEE ARE ACCORDINGLY ALLOWED. 58. THE AFORESAID DECISION OF THE TRIBUNAL IN THE C ASE OF FERANI HOTELS PVT. LTD. (SUPRA), IN OUR VIEW, FULLY COVERS THE CO NTROVERSY BEFORE US. IN THE PRESENT CASE ALSO IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS DEVELOPED AND LOCATED THE MINIMUM NUMBER OF 30 INDUSTRIAL UNIT S IN THE INDUSTRIAL PARK WITHIN THE PERIOD SPECIFIED IN THE SCHEME AS W ELL AS THE PROVISIONS OF SECTION 80-IA(4)(III) OF THE ACT. IT IS ALSO NO T IN DISPUTE THAT IN THE SUBSEQUENT ASSESSMENT YEARS, THE ASSESSING OFFICER HAS ALLOWED THE DEDUCTION U/S 80-IA(4)(III) OF THE ACT. IN THE INS TANT ASSESSMENT YEAR, ASSESSEE HAS OPERATIONALISED 21 INDUSTRIAL UNITS OU T OF THE MINIMUM 30 REQUIRED TO BE DEVELOPED. THE BALANCE OF THE 9 UNI TS HAVE BEEN COMPLETED ON 09.05.2007 I.E. THE DATE ON WHICH ASSE SSEE HAS OBTAINED THE COMPLETION CERTIFICATE FROM THE PUNE MUNICIPAL CORPORATION. HYPOTHETICALLY SPEAKING, IF THE ASSESSEE HAD NOT RE COGNIZED THE PROFITS ON THE 21 UNITS SOLD DURING THE YEAR UNDER CONSIDER ATION BUT WOULD HAVE WAITED RECOGNITION OF INCOME AFTER THE COMPLETION O F THE COMPLETE 30 UNITS, THEN SUCH PROFITS WOULD HAVE BEEN OFFERED BY THE ASSESSEE TO TAX IN THE SUBSEQUENT ASSESSMENT YEAR, WHEREIN IN ANY C ASE THE ASSESSING OFFICER HAS HELD THE ASSESSEE ENTITLED FOR THE DEDU CTION U/S 80-IA(4)(III) OF 26 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 THE ACT. HOWEVER, ASSESSEE HAS DECLARED INCOME FRO M THE SALE OF UNITS ON A PROGRESSIVE BASIS I.E. IN THE YEAR IN WHICH TH E PARTICULAR INDUSTRIAL UNITS HAVE BEEN SOLD. THIS HAS LEAD TO A CONFLICT BETWEEN THE ASSESSEE AND THE REVENUE WITH REGARD TO THE ASSESSEES CLAIM FOR DEDUCTION U/S 80-IA(4)(III) OF THE ACT. THE MOOT QUESTION IS C AN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE BE DETERMINATIV E OF ASSESSEES CLAIM FOR DEDUCTION U/S 80-IA(4)(III) OF THE ACT ES PECIALLY IN A SITUATION WHERE ASSESSEE IS OTHERWISE SAID TO HAVE COMPLIED W ITH THE REQUIREMENTS OF SECTION 80-IA(4)(III) OF THE ACT RE AD ALONG WITH THE PROVISIONS OF THE IPS, 2008 UNDER WHICH THE INDUSTR IAL PARK OF THE ASSESSEE HAS BEEN NOTIFIED. IN-FACT, IF THE STAND OF THE REVENUE IS TO BE ACCEPTED, WHAT WOULD HAPPEN IS THAT ASSESSEES CLAI M FOR DEDUCTION U/S 80-IA(4)(III) OF THE ACT SHALL BE DENIED IN THE INS TANT YEAR AND IN THE SUBSEQUENT YEARS ALSO ASSESSEE WOULD NOT BE ABLE TO CLAIM THE BENEFIT BECAUSE THE IMPUGNED PROFITS WOULD NOT HAVE BEEN AC COUNTED FOR BY THE ASSESSEE IN THE SUBSEQUENT YEARS. THAT WOULD MEAN THAT THE ASSESSEE WOULD NEVER GET THE BENEFIT OF SECTION 80-IA(4)(III ) OF THE ACT QUA THE IMPUGNED PROFITS DERIVED FROM THE DEVELOPMENT OF TH E INDUSTRIAL PARK MERELY BECAUSE OF THE METHOD OF ACCOUNTING FOLLOWED . IN-FACT, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF FERANI HOTELS PVT. LTD. (SUPRA) OBSERVED THAT THE REVENUE DESERVES TO BE SA TISFIED THAT THE CONDITIONS FOR GRANT OF DEDUCTION ARE FULFILLED ON THE LAST DAY OF THE PREVIOUS YEAR, SO HOWEVER, IF THE SUBSEQUENT EVENTS AFTER THE LAST DATE OF THE PREVIOUS YEAR SHOW THAT THE CONDITIONS FOR GRAN T OF DEDUCTION ARE FULFILLED, THEN THE ASSESSING OFFICER OUGHT TO TAKE COGNIZANCE OF THE SAME AND ALLOW THE CLAIM OF THE ASSESSEE. FOLLOWING THE AFORESAID PARITY OF REASONING, IN OUR VIEW, IN THE PRESENT CASE TOO IT IS UNDENIABLE THAT ASSESSEE HAS COMPLIED WITH THE REQUIREMENT OF LOCAT ING MINIMUM OF 30 INDUSTRIAL UNITS IN THE INDUSTRIAL PARK WITHIN THE PERIOD PRESCRIBED IN THE SCHEME, AND THEREFORE ITS CLAIM FOR ASSESSMENT YEAR 2007-08 WAS UNJUSTLY DISALLOWED. THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. KOLTE PATIL DEVELOPERS LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) FU RTHER STRENGTHENS THE CASE OF ASSESSEE IN ALLOWING THE DEDUCTIO N U/S. 80IA(4)(III) OF THE ACT. ACCORDINGLY, THE GROUND OF APPEAL RAISED BY DEPARTMENT AGAINST ALLOWING DEDUCTION U/S. 80IA(4)(III) TO THE A SSESSEE IS DISMISSED. 27 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 7. THUS, IN VIEW OF OUR ABOVE FININGS, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED BEING DEVOID OF MERIT . ITA NOS. 1271 & 1272/PN/2013 8. NOW, WE PROCEED TO DECIDE THE APPEALS FILED BY THE A SSESSEE. IN ASSESSMENT YEAR 2007-08, THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING FOUR EFFECTIVE GROUNDS. IN GROUND NO. 1 THE ASSESSEE HAS CHALLENGED THE REASSESSMENT PROCEEDINGS U/S. 147/148 OF THE ACT. IN G ROUND NO. 2 THE ASSESSEE HAS ASSAILED THE DISALLOWANCE OF CLAIM OF DEPRE CIATION IN RESPECT OF CAPITAL ASSETS IN RESPECT OF CLUB HOUSE INCLUD ING SWIMMING POOL AND GYMNASIUM LEASED OUT TO KUMAR CITY CLUB PVT. LTD . IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED THE FINDINGS OF COM MISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING THE INTEREST EXPENDITURE PERTAINING TO INTEREST FEE ADVANCE GIVEN TO VARIOUS PARTIES ON THE GROUND THAT THE ASSESSEE HAS DIVERTED BORROWED FUNDS BY MAKING INTEREST FREE ADVANCE AND NOT ALLOWABLE U/S. 36(1)(III) OF THE ACT. IN GROUND NO. 4 TH E ASSESSEE HAS ASSAILED THE DISALLOWANCE MADE U/S. 14A OF THE ACT. THE LD. AR OF THE ASSESSEE STATED AT THE BAR THAT EXCE PT GROUND NO. 3, HE IS NOT PRESSING THE OTHER GROUNDS. THUS, IN VIEW OF THE STATEMENT MADE BY THE LD. AR OF THE ASSESSEE GROUND NO S. 1, 2 AND 4 RAISED IN THE GROUNDS OF APPEAL BY THE ASSESSEE ARE DISM ISSED AS NOT PRESSED. 9. IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING THE CLAIM O F ASSESSEE WITH RESPECT TO INTEREST EXPENDITURE PERTAINING TO INTEREST FREE ADVANCES GIVEN TO VARIOUS PARTIES. THE ASSESSEE HAS GIV EN ADVANCES TO THE TUNE OF ` 160,68,08,441/- TO THE FOLLOWING PARTIES. 28 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 SL. NO. NAME OF THE PARTY AMOUNT (RS.) REASON 1 KUMAR URBAN DEVELOPMENT LTD. 72,81,57,841 BUSINESS 2 PUNE MUMBAI REALTY PVT. LTD. 65,55,18,600 S HARE APPLICATION MONEY 3 RIVER VIEW PROPERTIES PVT. LTD. 21,31,32,000 S HARE APPLICATION MONEY 4 MR. RAJESH TIWARI 1,00,00,000 NO REASON GIVEN TOTAL 160,68,08,441 THE CONTENTION OF THE ASSESSEE IS THAT THE ADVANCES HA VE BEEN GIVEN TO THE AFORESAID PARTIES FOR BUSINESS PURPOSE AND FO R STRATEGIC INVESTMENT. THE LD. AR CONTENDED THAT THE ASSESSEE HAS GIVEN ADVANCES TO KUMAR URBAN DEVELOPMENT LTD. FOR ACQUISITION OF LAND AND DEVELOPMENT. BOTH, THE ASSESSEE AND KUMAR URBAN DEVELO PMENT LTD. ARE IN SAME LINE OF BUSINESS AND KUMAR URBAN DEVELOPMENT LTD. IS HOLDING COMPANY OF THE ASSESSEE. IN RESPECT OF ADVANCE S TO PUNE MUMBAI REALTY PVT. LTD. AND RIVER VIEW PROPERTIES PVT. LTD. , THE LD. AR CONTENDED THAT THE AMOUNT HAS BEEN ADVANCED AS SHAR E APPLICATION MONEY FOR ACQUIRING STAKES IN THE SAID COMPANIES BEING IN T HE SAME LINE OF BUSINESS. AS REGARDS ADVANCES TO MR. RAJESH TIWA RI THE LD. AR CONTENDED THAT THE AMOUNT WAS GIVEN AS ADVANCES FOR BUSINESS CONSIDERATION. THE LD. AR CONTENDED THAT SINCE THE ASSES SEE HAS ADVANCED THE AMOUNTS FOR BUSINESS PURPOSE, THE INTEREST EXPENDITURE CANNOT BE DISALLOWED. THE LD. AR MADE AN ALTERNATE SUBMISS ION THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN INTEREST FREE FUNDS TO THE TU NE OF ` 152.32 CRORES IN THE FORM OF SHARE CAPITAL, SHARE APPLICATION MONEY AND FREE RESERVES AS PER AUDITED FINANCIAL STATEMENT FOR T HE FINANCIAL YEAR ENDED ON 31-03-2008. THE ASSESSEE COULD HAVE EA SILY ADVANCED THESE AMOUNTS FROM OWN INTEREST BEARING FUNDS. THE LD. AR PLACING RELIANCE ON THE DECISION IN THE CASE OF COMMISSIONER OF INCO ME TAX VS. 29 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 RELIANCE POWER UTILITY LTD. REPORTED AS 313 ITR 340 (BOM) C ONTENDED THAT WHERE OWN INTEREST FREE FUNDS ARE SUFFICIENT TO COVER THE ADVANCES IT SHALL BE PRESUMED THAT THE ADVANCES ARE MADE FROM OW N FUNDS AND NOT THE BORROWED FUNDS. 9.1 PER CONTRA THE LD. DR VEHEMENTLY DEFENDED THE FINDING S OF COMMISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING THE INTERES T U/S. 36(1)(III) OF THE ACT. 9.2 WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS UP HELD THE FINDINGS OF ASSESSING OFFICER IN DISALLOWING THE INTEREST U/S. 36(1 )(III) OF THE ACT ON THE AMOUNTS ADVANCES TO VARIOUS PARTIES. T HE ASSESSING OFFICER HAS OBSERVED THAT THE AMOUNTS WERE ADVANCED TO THE SISTER CONCERNS FOR NON-BUSINESS PURPOSE AND THERE IS NO BENE FIT TO THE ASSESSEE FROM SUCH ADVANCES EITHER DIRECTLY OR INDIRECTL Y. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DISTINGUISHED THE D ECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER O F INCOME TAX VS. RELIANCE POWER UTILITY LTD. (SUPRA), ON FACTS. FROM THE PERUSAL OF IMPUGNED ORDER WE OBSERVE THAT THE ASSESSEE HAS ADVANCED MONEY TOWARDS SHARE APPLICATION MONEY TO PUNE MUMBAI REALTY PVT. LTD. AND RIVER VIEW PROPERTIES PVT. LTD. LONG T IME BACK. ALTHOUGH, THE ASSESSEE HAS ASSERTED THAT FUNDS HAVE BE EN ADVANCED TO THE SISTER CONCERN FOR HOLDING THE STAKE BUT FOR QUITE LO NG PERIOD THE AMOUNT IS SHOWN AS SHARE APPLICATION MONEY PENDING ALLOTM ENT. THUS, THE CONTENTION OF THE ASSESSEE THAT THE FUNDS HAV E BEEN ADVANCED FOR THE PURPOSE OF STRATEGIC INVESTMENT SEEMS TO BE FARCE. IN SO FAR AS ADVANCES TO MR. RAJESH TIWARI IS CONCERNED N O EXPLANATIONS WHATSOEVER HAS BEEN FURNISHED BY THE ASSESSEE AND NO BUSINESS 30 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 EXPEDIENCY HAS BEEN SHOWN. THE LD. AR OF THE ASSESSEE H AS CONTENDED THAT THE ASSESSEE IS HAVING OWN INTEREST FREE FUNDS SUFFICIE NT TO COVER THE INVESTMENTS AS PER THE BALANCE SHEET AS ON 31-03- 2008. HOWEVER, IT IS NOT EVIDENT FROM THE RECORDS AS TO WHETHER THE AS SESSEE WAS HAVING SUFFICIENT OWN INTEREST FREE FUNDS FOR MAKING INVESTMENT AT T HE TIME OF GIVING ADVANCES. THE AUTHORITIES BELOW HAVE NOT VERIFIED TH IS FACT WHICH IS MATERIAL FOR ADJUDICATING THE ISSUE. THUS, IN VIEW OF THE A BSENCE OF VITAL INFORMATION, WE ARE OF THE CONSIDERED VIEW THAT THIS ISS UE NEEDS A REVISIT TO THE FILE OF ASSESSING OFFICER TO ASCERTAIN THE FINAN CIAL POSITION OF THE ASSESSEE AT THE TIME OF GIVING ADVANCES. IN CASE OWN INTEREST FREE FUNDS OF THE ASSESSEE ARE SUFFICIENT TO COVER THE ADVANCE S AT THE TIME OF MAKING SUCH ADVANCES, NO DISALLOWANCE SHOULD BE MADE IN VIE W OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE POWER UTILITY LTD. (SU PRA). ACCORDINGLY, GROUND NO. 3 RAISED IN THE APPEAL OF THE ASSE SSEE FOR ASSESSMENT YEAR 2007-08 IS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE APPEAL FOR ASSESSMENT YEAR 2008-09 THE ASS ESSEE HAS RAISED THREE GROUNDS. THE LD. AR OF THE ASSESSEE STATED AT THE BAR THAT HE IS NOT PRESSING GROUND NO. 1 AND 3. THE GROUND NO. 2 IS IDENTICAL TO GROUND NO. 3 RAISED IN ASSESSMENT YEAR 2007-08. THE LD. AR OF THE ASSESSEE HAS CONTENDED THAT THERE IS NO CHANGE IN FACT S AND CIRCUMSTANCES IN ASSESSMENT YEAR 2008-09. THE REASONS GIVEN WHILE ADJUDICATING GROUND NO. 3 IN ASSES SMENT YEAR 2007-08 WOULD MUTATIS MUTANDIS APPLY TO GROUND NO. 2 IN ASSESSMENT YEAR 2008-09. ACCORDINGLY, GROUND NO. 2 IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 IS ALLOWED FOR STATISTICAL PURPOSE. 31 ITA NOS. 1190, 1191, 1271 & 1272/PN/2013, A.YS. 2007-08 & 2008-09 THE GROUND NO. 1 AND 3 RAISED IN THE APPEAL ARE DISMISSED AS NOT PRESSED. THE APPEAL OF THE ASSESSEE IN ASSESSMENT YEAR 2008-09 IS THUS, PARTLY ALLOWED FOR STATISTICAL PURPOSE. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 12 TH DAY OF AUGUST, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 12 TH AUGUST, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-III, PUNE 4. ' / THE CIT-III, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE