DCIT., Circle-16(1), Hyderabad, Hyderabad V. L & T Infocity Limited, Hyderabad

ITA 1591/HYD/2014

• Counselvise Citation: 159122514 RSA 2014
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-08-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 16-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S V S S PRASAD
• Assessee Lawyers: ADITYA BAJORIA; RAVI BHARDWAJ
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 142(1); 14A

Judgement Text

ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1627/HYD/2014 (ASSESSMENT YEAR: 2011-12) L&T INFOCITY LIMITED HYDERABAD PAN: AAACL 5895 R VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(1) HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.1591/HYD/2014 (ASSESSMENT YEAR: 2011-12) DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(1) HYDERABAD VS. L&T INFOCITY LIMITED HYDERABAD PAN: AAACL 5895 R ( APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI RAVI BHARDWAJ & SHRI ADITYA BAJORIA FOR REVENUE : SHRI S.V.S.S. PRASAD, CIT (DR) DATE OF HEARING : 19 .08.2015 DATE OF PRONOUNCEMENT : 04 .09 .2015 O R D E R PER SMT.P. MADHAVI DEVI, J.M. BOTH ARE CROSS APPEALS FOR A.Y 2011-12 AGAINST THE ORDER OF THE CIT (A)-V, HYDERABAD DATED 14.07.2014. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF DEVELOPMENT, MAINTENANCE AND CONSULTANCY IN RESPECT OF INFRASTRUCTURE FACILITIES FOR INFORMATION TECHNOLOGY AND RELATED ACTIVITIES, FURNISHED ITS RE TURN OF INCOME FOR A.Y 2011-12 ON 29.09.2011 ADMITTING TOTAL INCOM E OF RS.152,09,93,529. THE RETURN WAS INITIALLY PROCESSE D U/S 143(1) ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 2 OF 12 OF THE ACT. SUBSEQUETLY THE CASE WAS TAKEN UP FOR S CRUTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE I.T. ACT ON 1. 8.2012. THEREAFTER NOTICE U/S 142(1) OF THE ACT DATED 6.8.2 013 WAS ALSO ISSUED TO THE ASSESSEE ALONGWITH THE QUESTIONAIRE C ALLING FOR VARIOUS INFORMATION. ASSESSEE APPEARED AND FILED TH E REQUIRED DOCUMENTS. ON PERUSAL OF THE SAID DOCUMENTS, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA OF THE ACT ON THE INCOME RECEIVED DURING THE PREVIOUS YEAR FROM T HE PROJECTS PHASE-II AND PHASE-III. IT WAS OBSERVED THAT THE DE DUCTION U/S 80IA OF THE ACT IN RESPECT OF PHASE-II HAS BEEN ALL OWED BASED ON THE CBDT NOTIFICATION DATED 13.02.2004 AND IN PHASE -III, ASSESSEE HAS CONSTRUCTED BUILT TO SUIT (BTS) PROJ ECTS FOR THE FOLLOWING 5 UNITS: I) HSBC EDP INDIA PVT LTD (2,36,776 SFT) II) MOTOROLA INDIA PVT LTD (1,52,917 SFT) III) DELOITTE CONSULTING INDIA PVT LTD (1,28,200 SF T) IV) DELOITTE TOUCHE AUDIT SERVICES INDIA PVT LTD (4 7,680 SFT) V) DELOITTE SUPPORT SERVICES INDIA PVT. LTD (10,070 SFT) 3) AO OBSERVED THAT AS PER THE INDUSTRIAL PARK SCHE ME, THE PROJECT (PHASE-III) SHALL HAVE A MINIMUM OF 30 UNIT S AND NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF THE ALLOC ABLE INDUSTRIAL AREA/PARK. HE OBSERVED THAT IN ASSESSEE S CASE, THERE ARE ONLY 5 UNITS IN TOTAL AND FURTHER THAT THE SAID UNITS OCCUPY ALL THE THREE TOWERS OF THE PROJECT. HE OBSERVED TH AT WHILE HSBC & MOTOROLA OCCUPPIED ONE TOWER EACH, THE THIRD TOWE R IS OCCUPPIED BY THE 3 DELOITTEE GROUP OF COMPANIES. TH EREFORE, HE WAS OF THE OPINION THAT THE ASSESSEE HAS NOT FULFIL LED THE CONDITIONS OF THE INDUSTRIAL PARK SCHEME. HE ACCORD INGLY DISALLOWED THE CLAIM OF DEDUCTION U/S 80IA OF THE A CT AND THE ENTIRE INCOME OF RS.23,05,93,536 WAS ADDED TO THE R ETURNED INCOME OF THE ASSESSEE. FURTHER, HE ALSO OBSERVED T HAT THE ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 3 OF 12 ASSESSEE HAS EARNED DIVIDEND INCOME TO THE TUNE OF RS.7,10,16,692 FROM MUTUAL FUND AND RS.37,44,000 FR OM SUBSIDIARY COMPANIES DURING THE PREVIOUS YEAR. HE O BSERVED THAT THE ASSESSEE HAS CLAIMED THESE RECEIPTS AS EXEMPT F ROM TAX U/S 10(35) AND 10(34) OF THE ACT RESPECTIVELY. HE OBSER VED THAT THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE U/S 14A OF THE ACT, EVEN THOUGH SUCH EXEMPT INCOME DOES NOT FORM PART O F THE TOTAL INCOME. HE THEREFORE, APPLIED THE PROVISIONS OF SEC TION 2 OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I.T RULES AND DISALLOWED AN AMOUNT OF RS.14,79,388 AND BROUGHT IT TO TAX. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT (A), WHO CONFIRMED THE DISALLOWANCE OF THE CLAIM OF DEDU CTION U/S 80IA OF THE ACT, BUT GRANTED RELIEF AS REGARDS THE DISALLOWANCE OF U/S 14A IS CONCERNED. AGGRIEVED BY THE CONFIRMATION OF THE DISALLOWANCE BY THE CIT (A), ASSESSEE IS IN APPEAL BEFORE US, WHILE ON DELETION OF THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE ACT REVENUE IS IN APPEAL BEFORE US. ITA NO.1627/HYD/2014 (ASSESSEES APPEAL): 5. THE LD DR RELIED UPON THE ORDERS OF THE AUTHORIT IES BELOW. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THE CIT (A) HAD RELI ED UPON HIS OWN ORDER FOR THE A.Y 2009-10 TO DENY CLAIM, BUT THE TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y 2009-10 HAS DELETED THE DISALLOWANCE UNDER SECTION 80IA OF THE ACT. COPY OF THE SAID ORDER IS FILED BEFORE US. ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 4 OF 12 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE CIT (A) HAS CONSIDERED HIS OWN ORDERS FOR THE EARLIER A.Y TO CONFIRM THE DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S 80IA OF THE ACT. THEREFORE, THE DECIS ION OF THE TRIBUNAL FOR A.Y 2009-10 WOULD BE VERY MUCH APPLICA BLE TO THE YEAR UNDER CONSIDERATION BEFORE US. A COPY OF THE O RDER OF THE TRIBUNAL FOR A.Y 2009-10 (ITA NOS.1515/HYD/2011 & O THERS) IS FILED BEFORE US. ON GOING THROUGH THE SAME, WE FIND THAT THE TRIBUNAL HAS CONSIDERED THE ISSUE AT LENGTH TO DELE TE THE DISALLOWANCE U/S 80IA OF THE ACT AND ALLOWED THE CL AIM OF THE ASSESSEE. THE TRIBUNAL HAS CONSIDERED THIS ISSUE AT PARAS 8 AND 9 OF ITS ORDER WHICH IS REPRODUCED HEREUNDER FOR RE ADY REFERENCE. 8. GROUND NO.4 PERTAINS TO DISALLOWANCE OF DEDUCTION U/S.80IA OF THE ACT IN RESPECT OF THE PROFITS EARNED FROM EL IGIBLE AND NOTIFIED BTS PROJECT. THIS ISSUE ARISES AS THE ASSESSING OFFICER DISALLOW ED CLAIM U/S.80IA ON THE INFRASTRUCTURE PROJECT OF THE ASSES SEE. FACTS OF THE CASE ARE THAT ASSESSEE-COMPANY HAS BEEN GRANTED DEDUCTION U/S 80IA IN THE EARLIER ASST YEAR FOR PHASE-I AND P HASE-II OF ITS INFRASTRUCTURE PROJECTS BASED ON THE CBDT NOTIFICAT ION DATED 13.02.2004. IN PHASE-III, THE ASSESSEE HAS CONSTRUCT ED THREE TOWERS WITH INFRASTRUCTURE FACILITIES WHICH HAVE BE EN LET OUT TO FIVE COMPANIES VIZ, HSBC EDP INDIA PVT LTD (2,36,77 6 SFT), MOTOROLA INDIA PVT LTD (1,52,917 SFT), DELOITTEE CO NSULTING INDIA PVT LTD(1,28,200 SFT), DELOITTE TOUCHE AUDIT SERVIC ES INDIA PVT LTD (47,680 SFT) AND DELOITTE SUPPORT SERVICES INDIA PVT. LTD., (10,070SFT). THE PHASE-III HAS BEEN COMPLETED IN TH E PREVIOUS YEAR RELEVANT TO THE ASST. YEAR 2007-08. IN PHASE-I LL, THREE TOWERS HAVE BEEN DEVELOPED AS THREE SEPARATE, BUILT TO SUIT (BTS PROJECTS) INFRASTRUCTURE PROJECTS. HSBC OCCUPIES ON E TOWER FULLY. MOTOROLA INDIA OCCUPIES ONE TOWER OF PROJECT FULLY. THE THIRD ONE IS OCCUPIED BY THE THREE DELOITTE GROUP OF COMPANIE S. AO WAS OF THE OPINION THAT CBDT HAS ISSUED NOTIFICATION NO.246 /2007 IN F.NO.178/79/2007 -ITA-I DATED 28.09.2007 FOR THE IN DUSTRIAL PARK CONSISTING OF THE ABOVE SAID THREE TOWERS AND THE NOTIFICATION APPEARS TO HAVE BEEN OBTAINED ON AN 'A UTOMATIC APPROVAL' ROUTE. AO WAS OF FURTHER OPINION THAT AS PER THE SCHEME OF 'AUTOMATIC APPROVAL' (VIDE SO354 (E) DATED 01.04.2002), EACH INDUSTRIAL PARK SHALL HAVE MINIMUM 30 NO. OF UNITS AND NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AREA / PARK. AS COMPANY HAS DE VELOPED THREE ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 5 OF 12 SEPARATE TOWERS AND LEASED OUT TO THREE SEPARATE UN DERTAKINGS VIZ, HSBC, MOTOROLA AND DELOITTE AND AS EACH HAS BE EN DEVELOPED AS A SEPARATE UNDERTAKING, THE NOTIFICATI ON SHOULD HAVE BEEN OBTAINED SEPARATELY FOR THE THREE UNDERTA KINGS. AO CONSIDERED THE CONDITION THAT THERE SHOULD BE A MIN IMUM OF 30 UNITS HAS NOT BEEN FULFILLED BY THE COMPANY. FURTHE R CONDITION THAT EACH UNIT SHALL NOT OCCUPY MORE THAN 50% OF TH E ALLOCABLE AREA HAS ALSO NOT BEEN FULFILLED. THEREFORE, AO HEL D THAT THE PROFITS OF THE BTS PROJECTS ARE NOT ELIGIBLE FOR DE DUCTION U/S 80IA. ACCORDINGLY, INCOME FROM THE BTS PROJECTS AMO UNTING TO RS.58,57,542/- WAS TREATED AS TAXABLE. 8.1 ASSESSEE CONTENDED BEFORE THE LD.CIT(A) THAT 'A LLOCABLE AREA' REFERRED TO IN THE ABOVE NOTIFICATION PERTAINS TO T HE ALLOCABLE AREA OF TOTAL INDUSTRIAL PARK AND NOT BUILDING-WISE OR TOWER WISE ALLOCABLE AREA. FOR PROCESSING AND APPROVING AN APP LICATION FOR DEVELOPMENT OF INDUSTRIAL PARK AS ENVISAGED U/S 80I A, THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS AS STIPUL ATED AND GOT THE APPROVAL FROM THE MINISTRY OF COMMERCE. THE APP ROVAL BY CENTRAL GOVERNMENT (A) REFERS TO ONLY DEVELOPMENT O F INDUSTRIAL PARK AND (B) PARA 4 OF THE NOTIFICATION STIPULATES A CONDITION THAT NOT MORE THAN 50% OF THE ALLOCABLE AREA OF THE INDU STRIAL PARK SHALL BE ALLOTTED TO ONE UNIT. THEREFORE, AS PER TH E TERMS OF THE APPROVAL OF THE CENTRAL GOVERNMENT THE COMPANY SHAL L NOT AS A WHOLE ALLOT MORE THAN 50% OF THE ALLOCABLE AREA OF THE INDUSTRIAL PARK, THAT IS MORE THAN 2,87,731,50 SQ FEET (50% OF 5,75,643 SQUARE FEET) TO ONE SINGLE UNIT. AS CAN BE SEEN FRO M THE DETAILS, NO SINGLE UNIT HAS BEEN ALLOTTED MORE THAN 2,87,731.50 SQUARE FEET. THEREFORE, IT WAS SUBMITTED THAT THE TOTAL ALLOCABL E AREA OF THE INDUSTRIAL PARK DEVELOPED BY THE COMPANY SHALL BE C ONSIDERED FOR THE PURPOSE OF VERIFYING THE COMPLIANCE TO THE CONDITION WHETHER ONE SINGLE UNIT HAS BEEN ALLOTTED MORE THAN 50% OF THE ALLOCABLE AREA AND NOT TOWER WISE OCCUPANCY IN THE LIGHT OF THE INTENT OF THE NOTIFICATION ITSELF AND NOT OTHERWISE . FURTHER, THE GOVERNMENT MACHINERY SUPERVISING THE DEVELOPMENT OF THE INDUSTRIAL PARK HAS ALSO NEVER DISPUTED THE ALLOCAT ION MADE BY THE COMPANY, WHICH CLEARLY SUPPORTS THE CLAIM MADE BY THE COMPANY. FURTHER IT WAS SUBMITTED THAT ASSESSEE HAS APPLIED UNDER NON-AUTOMATIC ROUTE AND ITS APPLICATION WAS P ROCESSED AND APPROVED BY MINISTRY, THEREFORE AO WRONGLY CONS IDERED THE SAME AS UNDER AUTOMATIC ROUTE. 2 THE LD.CIT(A), HOWEVER, WITHOUT EXAMINING AN Y OF THE ISSUE REJECTED THE CONTENTION OF ASSESSEE BY BRIEFLY STAT ING AS UNDER: 8.2 WITHOUT GOING INTO OTHER DETAILS, I FIND THAT T HE FUNDAMENTAL CONDITIONS THAT THERE SHOULD BE A MINIMUM OF 30 UNI TS HAS NOT BEEN FULFILLED BY THE APPELLANT. THE SECOND CONDITI ON THAT EACH UNIT SHALL NOT OCCUPY MORE THAN 50% OF THE ALLOCABL E AREA WAS ALSO NOT BEEN FULFILLED BY THE APPELLANT. THE ASSES SING OFFICER HAS CLEARLY WRITTEN THESE FACTS IN HIS ORDER QUOTED ABO VE. SINCE THE APPELLANT HAS NOT FULFILLED THE ESSENTIAL REQUIREME NT, I CONFIRM THE DENIAL OF DEDUCTION UNDER SECTION 80IA . ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 6 OF 12 8.3 IT WAS THE CONTENTION OF THE LD.COUNSEL THAT TH ERE ARE TWO METHODS OF GETTING APPROVAL FROM MINISTRY OF COMMER CE AND INDUSTRY. AUTOMATIC ROUTE WHERE THE STIPULATION OF 30 UNITS IS PRESCRIBED AND NON-AUTOMATIC ROUTE WHERE SUCH STIPU LATION WAS NOT THERE. HIGH POWER COMMITTEE IN WHICH CBDT CHAIR MAN IS ALSO A MEMBER, EXAMINED THE ISSUE AND GRANTED APPRO VAL TO THE ASSESSEE. REFERRING TO THE SCHEME AND LETTER OF ALL OTMENT VIDE ORDER DT.11-04-2007 BY THE MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, INFR ASTRUCTURE DEVELOPMENT DESK, IT WAS SUBMITTED THAT GOVT. OF IN DIA HAS CONVEYED ITS APPROVAL FOR CLAIMING INCOME TAX BENEF IT UNDER THE INDUSTRIAL PARK SCHEME, 2002. LD.COUNSEL REFERRED T O THE SCHEME AND SPECIFICALLY TO PARA 6 WHERE PROPOSED NUMBER OF INDUSTRIAL UNITS ARE SPECIFIED AS FIVE UNITS. IT WAS SUBMITTED THAT BOTH THE ASSESSING OFFICER AND CIT(A) CONSIDERED IT AS AN 'A UTOMATIC APPROVAL ROUTE' WHEREIN UNDER THAT SCHEME, THERE SH OULD BE MINIMUM OF THIRTY UNITS AS SPECIFIED IN PARA 6 OF T HE SCHEME. HOWEVER, SUCH CONDITION DOES NOT APPLY FOR THE NON- AUTOMATIC ROUTE UNDER PARA 7 OF THE SCHEME WHEREIN EMPOWERED COMMITTEE EXAMINES THE APPLICATION ON A CASE TO CAS E BASIS AND GRANTS APPROVAL. SINCE THE APPROVAL WAS NOT WITHDRA WN, ASSESSING OFFICER IS BOUND TO GRANT DEDUCTION U/S.8 0IA, WHEN CHAIRMAN OF CBDT IS A MEMBER OF THE EMPOWERED COMMI TTEE WHICH GRANTED APPROVAL. LD.COUNSEL PLACED ON RECORD THE COPY OF APPLICATION FILED BEFORE THE DEPARTMENT OF INDUSTRIAL POLICY, APPROVAL RECEI VED FROM CENTRAL GOVERNMENT DT.11-04-2007, NOTIFICATION BY C BDT DT.28- 09-2007 AND THE INDUSTRIAL POLICY SCHEME 2002 TO EX PLAIN THE FACTS PERTAINED TO ASSESSEE AND HOW THE ASSESSING O FFICER AND CIT(A) WRONGLY CONSIDERED THEM. MOREOVER, IT IS ALS O SUBMITTED THAT DEDUCTION IN EARLIER YEARS WAS GRANTED ON SIMI LAR ISSUE ON PHASE-1 AND PHASE-2 OF THE PROJECT. 8.4 LD.DR, HOWEVER, SUBMITTED THAT ASSESSEE HAS NOT SATISFIED THE CONDITIONS AS PRESCRIBED UNDER THE INDUSTRIAL PARK SCHEME. 9. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE DO CUMENTS PLACED ON RECORD. AS FAR AS FACT OF THE APPROVAL IS CONCERNED, ASSESSEE HAS MADE AN APPLICATION UNDER NON-AUTOMATI C ROUTE AS PROVIDED UNDER INDUSTRIAL PARK SCHEME 2002. THE AUT OMATIC APPROVAL SCHEME AS CONTENDED BY THE ASSESSING OFFIC ER AND CIT(A) HAS THESE CONDITIONS: '5. AUTOMATIC APPROVAL - (1) AN UNDERTAKING SHALL M AKE AN APPLICATION IN THE FORM-IPS-1 ALONG WITH AN AFFIDAV IT CERTIFYING THE DETAILS GIVEN IN SUCH APPLICATION FOR OBTAINING APPROVAL FOR SETTING UP AN INDUSTRIAL PARK. (2) AN APPLICATION UNDER SUB-PARAGRAPH (1) SHALL BE MADE TO THE ENTREPRENEURIAL ASSISTANCE UNIT OF THE SECRETARIAT FOR INDUSTRIAL ASSISTANCE, DEPARTMENT OF INDUSTRIAL POLICY AND PRO MOTION IN ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 7 OF 12 THE MINISTRY OF COMMERCE & INDUSTRY, UDYHOG BHAWAN, NEW DELHI- 110011. (3) THE SECRETARIAT FOR INDUSTRIAL ASSISTANCE REFER RED TO IN SUB- PARAGRAPH (2) SHALL, UPON RECEIPT OF APPLICATION, G IVE ACKNOWLEDGEMENT FOR RECEIPT OF SUCH APPLICATIONS AL ONG WITH, REGISTRATION NUMBER ALLOTTED BY SUCH SECRETARIAT. (4) EVERY APPLICATION UNDER SUB-PARAGRAPH (1) SHALL BE ACCOMPANIED BY A FEE OF SIX THOUSAND RUPEES PAYABLE BY A DEMAND DRAFT DRAWN IN FAVOUR OF PAY AND ACCOUNTS OF FICER, DEPARTMENT OF INDUSTRIAL DEVELOPMENT PAYABLE AT STA TE BANK OF INDIA, NIRMAN BHAWAN BRANCH, NEW DELHI-110011. (5) ALL APPLICATIONS MADE UNDER SUB-PARAGRAPH (1) A ND ELIGIBLE FOR AUTOMATIC APPROVAL IN ACCORDANCE WITH PARAGRAPH 6 SHALL BE DISPOSED OF WITHIN FIFTEEN DAYS OF MAKING SUCH APPL ICATION AND THE DECISION FOR SUCH APPROVAL SHALL BE COMMUNICATE D TO THE APPLICANT IMMEDIATELY ON DISPOSAL OF SUCH APPLICATI ON. 6. CRITERIA FOR AUTOMATIC APPROVAL - AN UNDERTAKING WHICH SEEKS APPROVAL UNDER PARAGRAPH 5, SHALL FULFIL THE FOLLOW ING CONDITIONS, NAMELY:- (A) THE MINIMUM AREA REQUIRED TO BE DEVELOPED FOR A N INDUSTRIAL MODEL TOWN SHALL BE 1000 ACRES: PROVIDED THAT MINIMUM AREA FOR SPECIFIED INDUSTRIAL PARK REFERRED TO IN CLAUSE (B) AND (C) OF PARAGRAPH 4 MA Y VARY DEPENDING UPON THEIR ACTIVITIES; (B) THE PROJECT REFERRED TO IN CLAUSES (A), (B) AND (C) OF PARAGRAPH 4 SHALL HAVE PROVISION FOR THE LOCATION OF MINIMUM NUMBER OF INDUSTRIAL UNITS AS FOLLOWS:- TYPE OF INDUSTRIAL PARK MINIMUM NO. OF UNITS TO BE PROVIDED IN THE INDUSTRIAL MODEL TOWN/INDUSTRIAL PARK/ GROWTH CENTRE I) INDUSTRIAL MODEL TOWN REFERRED TO IN CLAUSE (A) OF PARA 4 50 UNITS II) INDUSTRIAL PARK REFERRED TO IN CLAUSE (B) OF PARA 4 30 UNITS III) GROWTH CENTRE REFERRED TO IN CLAUSE (C) OF PARA 4 30 UNITS (C) THE MINIMUM PERCENTAGE OF THE AREA TO BE ALLOCA TED FOR INDUSTRIAL USE SHALL NOT BE LESS THAN SIXTY SIX PER CENT OF THE TOTAL ALLOCABLE AREA. ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 8 OF 12 EXPLANATION: FOR THE PURPOSE OF THIS CLAUSE, THE IN DUSTRIAL USE SHALL INCLUDE ANY ACTIVITY DEFINED IN THE NATIONAL INDUSTRIAL CLASSIFICATION 1987 CODE ISSUED BY CENTRAL STATISTI CAL ORGANISATION, DEPARTMENT OF STATISTICS, MINISTRY OF PLANNING AND PROGRAMME IMPLEMENTATION, EXCEPT THE FOLLOWING: SECTION 0 SECTION 8 EXCLUDING GROUP 892, 893, 894, 895 SECTION 1 SECTION 9 SECTION 5 SECTION X SECTION 7 SECTION XI EXCLUDING DIVISION 75 (D) THE PERCENTAGE OF LAND TO BE EARMARKED FOR COMM ERCIAL USE SHALL NOT BE MORE THAN TEN PER CENT OF THE ALLOCABL E AREA; (E) IN CASE OF AN INDUSTRIAL MODEL TOWN, INDUSTRIAL PARK AND GROWTH CENTRE, THE MINIMUM INVESTMENT ON INFRASTRUC TURE DEVELOPMENT SHALL NOT BE LESS THAN 50% OF THE TOTAL PROJECT COST. IN THE CASE OF AN INDUSTRIAL PARK AND GROWTH CENTRE WH ICH PROVIDES BUILT UP SPACE FOR INDUSTRIAL USE, THE MINIMUM EXPE NDITURE ON INFRASTRUCTURE DEVELOPMENT INCLUDING COST OF CONSTR UCTION OF INDUSTRIAL SPACE, SHALL NOT BE LESS THAN 60% OF THE TOTAL PROJECT COST; (F) NO SINGLE UNIT REFERRED TO IN COLUMN (2) OF THE TABLE GIVEN IN THE SUB-PARAGRAPH (B) OF PARAGRAPH 6 SHALL OCCUPY MORE THAN FIFTY PER CENT OF THE ALLOCABLE INDUSTRIAL AREA OF AN IND USTRIAL MODEL TOWN OR INDUSTRIAL PARK OR GROWTH CENTRE; (G) EVERY UNDERTAKING BEING AN INDUSTRIAL PARK SHAL L OBTAIN APPROVAL FOR FOREIGN DIRECT INVESTMENT OR NONRESIDE NT INDIAN INVESTMENT FROM THE FOREIGN INVESTMENT PROMOTION BO ARD OR RESERVE BANK OF INDIA, OR ANY AUTHORITY SPECIFIED U NDER ANY LAW FOR THE TIME BEING IN FORCE, AS THE CASE MAY BE. HOWEVER, ASSESSEE'S APPLICATION IS NOT UNDER AUTOMA TIC APPROVAL SCHEME WHEREAS THE SAME WAS UNDER NON-AUTOMATIC APP ROVAL SCHEME UNDER PARA 7. PARA 7 IS AS UNDER: 7. NON AUTOMATIC APPROVAL: (1) ALL APPLICATIONS NOT ELIGIBLE FOR AUTOMATIC APPROVAL UNDER PARAGRAPH 6 SHALL REQUIRE THE APPROVAL OF EMPOWERED COMMITTEE, CONSTITUTE BY THE CENTRAL G OVERNMENT AND ALL SUCH APPLICATIONS SHALL BE PLACED BEFORE TH E EMPOWERED COMMITTEE WITHIN FIFTEEN DAYS OF RECEIPT OF APPLICA TIONS. (2) THE EMPOWERED COMMITTEE SHALL CONSIST OF THE FO LLOWING, NAMELY:- (A) SECRETARY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, GOVERNMENT OF INDIA CHAIRMAN (B) CHAIRMAN, CENTRAL BOARD OF DIRECT TAXES, MEMBER GOVERNMENT OF INDIA, OR HIS REPRESENTATIVE ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 9 OF 12 (C) SECRETARY, DEPARTMENT OF URBAN DEVELOPMENT, GOV ERNMENT OF INDIA, OR HIS REPRESENTATIVE MEMBER (D) A REPRESENTATIVE OF THE STATE GOVERNMENT TO WHI CH THE PROJECT RELATES MEMBER (E) JOINT SECRETARY, DEPARTMENT OF INDUSTRIAL POLIC Y AND PROMOTION, GOVERNMENT OF INDIA MEMBER SECRETARY PRO VIDED THAT THE EMPOWERED COMMITTEE MAY CO-OPT OTHER SECRETARIE S TO THE GOVERNMENT OF INDIA AND OFFICIALS OF FINANCIAL INST ITUTIONS, BANKS AND PROFESSIONAL EXPERTS FROM INDUSTRY AND COMMERCE AS CO- OPTED MEMBERS OF THE COMMITTEE AND SUCH CO- OPTED M EMBERS, HOWEVER, SHALL NOT HAVE ANY VOTING RIGHT. (3) THE EMPOWERED COMMITTEE SHALL CONSIDER EACH APP LICATION ON A CASE TO CASE BASIS, SUBJECT TO ITS COMPLYING WITH THE STATUTORY REQUIREMENTS AS PRESCRIBED BY THE MINISTRY OF FINAN CE UNDER THE INCOME TAX, 1961, AND OTHER APPLICABLE STATUTORY RULES/OBLIGATIONS. THE COMMITTEE WILL CONSIDER EACH CASE ON ITS MERIT AND GRANT APPROVAL SUBJECT TO SUCH OTHER COND ITIONS AS MAY BE DEEMED FIT BY IT. HOWEVER, IN ALL CASES OF REJEC TION OF PROPOSALS, THE APPLICANTS SHALL BE AFFORDED AN OPPORTUNITY OF BEING HEARD BY THE COMMITTEE AND THE ORDERS SHALL BE PASSED AND CO MMUNICATED WITHIN TWELVE WEEKS. THE COMMITTEE MAY ALSO PERIODI CALLY REVIEW IMPLEMENTATION OF THE APPROVED PROPOSALS. (4) THE EMPOWERED COMMITTEE WILL HOLD MEETINGS WHEN EVER NECESSARY. ALL INDUSTRIAL MODEL TOWN/INDUSTRIAL PAR K/GROWTH CENTRE PROPOSAL RECEIVED SHALL BE PLACED BEFORE THE COMMITTEE WITHIN 15 DAYS OF RECEIPT. THE COMMITTEE, AS FAR AS POSSIBLE, WOULD ENSURE THAT THE GOVERNMENT DECISION ON EACH PROPOSA L IS COMMUNICATED TO THE APPLICANT WITHIN SIX WEEKS. THE COMMITTEE WILL ADOPT ITS OWN MODE AND WORKING PROCEDURE, KEEP ING IN VIEW THE REQUIREMENT OF EACH PROPOSAL. THUS, AS CAN BE SEEN, THE CONDITIONS AS SPECIFIED U NDER AUTOMATIC APPROVAL SCHEME ARE NOT SPECIFIED UNDER NON-AUTOMAT IC SCHEME AND ASSESSEE HAVING APPLIED SEPARATELY AND EMPOWERE D COMMITTEE HAVING EXAMINED THE PROPOSAL 'CASE BY CAS E' HAS GRANTED THE SANCTION VIDE LETTER DT.11-04-2007 IN W HICH IT WAS CLEARLY SPECIFIED AS UNDER: THIS IS TO CONVEY THE APPROVAL OF THE GOVERNMENT OF INDIA TO YOUR PROPOSAL FOR CLAIMING INCOME TAX BENEFIT OF YOUR IN DUSTRIAL PARK, IN TERMS OF THE INDUSTRIAL PARK SCHEME, 2002, NOTIF IED BY THIS DEPARTMENT IN EXERCISE OF POWER UNDER SECTION 80 IA , SUB SECTION 4(III) OF THE INCOME TAX ACT, 1961, SUBJECT TO THE FOLLOW ING TERMS AND CONDITIONS: I) NAME OF THE INDUSTRIAL UNDERTAKING M/S. L&T INFOCITY LTD, HYDERABAD ADDRESS OF THE PROPOSED LOCATION OF THE INDUSTRIAL MADHAPUR VILLAGE, SERILINGAMPALLI MUNICIPALITY, RANGA REDDY 500033 PARK ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 10 OF 12 II) PROPOSED AREAS OF THE INDUSTRIAL PARK 9.16 ACRES III) PROPOSED ACTIVITIES IV) SECTION DIV. GROUP CLASS A 8 89 892 - B 8 89 893 - C 8 89 894 - V) PERCENTAGE OF ALLOCABLE AREA EARMARKED FOR INDUSTRIAL USE 100% VI) PERCENTAGE OF ALLOCAB LE AREA EARMARKED FOR COMMERCIAL USE NIL VII) PROPOSED NO. OF INDUSTRIAL UNITS 5 UNITS VIII) TOTAL INVESTMENT PROPOSED RS.1,69,00,19,108 IX) INVESTMENT ON BUILT UP SPACE FOR INDUSTRIAL USE RS.1,55,29,28,658 X) INVESTMENT ON INFRASTRUCTURE DEVELOPMENT INCLUDING INVESTMENT ON BUILT UP SPACE FOR INDUSTRIAL USE RS.1,60,79,28,65 8 XI) EXPECTED DATE OF COMMENCEMENT OF THE INDUSTRIAL PARK 31 - 03 - 2006 NOT ONLY THAT, THE CBDT HAS ALSO NOTIFIED VIDE NOTI FICATION DT.28TH SEPTEMBER, 2007, EXTRACTING THE SAME TABLE, WHICH W AS IN THE APPROVAL LETTER, WITH A FURTHER CONDITION AS UNDER: '4. NO SINGLE UNIT REFERRED TO IN COLUMN (2) OF THE TABLE GIVEN IN SUB- PARAGRAPH (B) OF PARAGRAPH 6 OF S.O.354(E) DAT ED THE 1ST APRIL, 2002, SHALL OCCUPY MORE THAN FIFTY PERCENT OF THE A LLOCABLE INDUSTRIAL AREA OF AN INDUSTRIAL PARK. FOR THIS PUR POSE A UNIT MEANS ANY SEPARATE AND DISTINCT ENTY FOR THE PURPOSE OF O NE AND MORE STATE OR CENTRAL TAX LAWS'. SINCE BOTH THE ASSESSING OFFICER AND THE LD.CIT(A) CONSIDERED THE APPLICATION UNDER AUTOMATIC RULE, THEY HAVE RAISED OBJECTION WHEREAS ASSESSEE'S APPLICATION DOES NOT FALL UNDER AUTOMATIC APPROVAL SCHEME, BUT UNDER NON-AUTOMATIC APPROVAL S CHEME. IN VIEW OF THIS, SINCE THERE IS ALREADY APPROVAL FROM THE RELEVANT AUTHORITIES AND ALSO FROM THE CBDT, WE DIRECT THE A SSESSING OFFICER TO GRANT THE DEDUCTION U/S.80IA SUBJECT TO VERIFICATION OF COMPUTATION. ASSESSEE'S GROUND ON THIS ISSUE IS ALL OWED. 7. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE BE FORE US ARE SIMILAR, WE FIND NO REASON TO TAKE A DIFFERENT VIEW FROM THE DECISION OF THE EARLIER BENCH IN ASSESSEES OWN CAS E. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO T O GRANT ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 11 OF 12 DEDUCTION U/S 80IA OF THE ACT SUBJECT TO VERIFICATI ON OF THE COMPUTATION AS DIRECTED BY THE TRIBUNAL IN THE A.Y 2009-10. 8. IN THE RESULT, ASSESSEES GROUNDS OF APPEAL IS A LLOWED. ITA NO. 1591/HYD/2014 (REVENUES APPEAL): 9. AS REGARDS DISALLOWANCE U/S 14A OF THE ACT IS CO NCERNED, WE FIND THAT THE CIT (A) HAS FOLLOWED HIS OWN ORDER FOR THE EARLIER A.Y FOR DELETING THE DISALLOWANCE. WE FIND THAT THE CIT (A) TO DELETE THE DISALLOWANCE HAS FOLLOWED THE DECISION O F THE ITAT KOLKATA BENCH IN THE CASE OF DCIT VS. ASHISH JHUNJH UNWALA (2013) IN ITA NO.1809/KOL/2012 DATED, 14.05.2013 AN D ALSO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ & BOYCE MFG. CO. LTD VS. DCIT (2010 (328 ITR 100) W HEREIN IT HAS BEEN HELD THAT THE SATISFICATION ENVISAGED BY S UB-SECTION OF 2 OF SECTION 14A IS AN OBJECTIVE SATISFACTION THAT HAS TO BE ARRIVED AT BY THE AO HAVING REGARD TO THE ACCOUNTS OF THE A SSESSEE AND MUST BE, THEREFORE, SCRUPULOUSLY FOLLOWED. WE FIND THAT THE CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSE E AT LENGTH HAS COME TO THE CONCLUSION THAT FOR THE APPLICATION OF RULE 8 D R.W.S 14A OF THE ACT, THERE SHOULD BE OBJECTIVE SAT ISFACTION OF THE AO THAT THE CLAIM MADE BY THE ASSESSEE IS INCORRECT AND THAT IN THE INSTANT CASE, THE AO HAS NOT ARRIVED AT SUCH SA TISFACTION HAVING REGARD TO ASSESSEES BOOKS OF ACCOUNT. FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THE AO HAS NO T VERIFIED THE BOOKS OF ACCOUNTS OF THE ASSESSEE TO DETERMINE THE CORRECTNESS OR OTHERWISE OF THE ASSESSEES CLAIM. EVEN DURING T HE HEARING OF THE APPEAL, THE LEARNED DR HAS NOT BEEN ABLE TO REB UT THIS FINDING OF THE CIT (A). THE CIT (A) HAS FOLLOWED JU DICIAL PRECEDENTS ON THE ISSUE. THEREFORE, WE SEE NO REASO N TO INTERFERE ITA NOS 1627 AND 1591 OF 2014 L&T INFOCITY LTD HYDE RABAD PAGE 12 OF 12 WITH THE ORDER OF THE CIT (A) ON THIS ISSUE. THEREF ORE REVENUES APPEAL IS DISMISSED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015. SD/ - SD/ - (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 4 TH SEPTEMBER, 2015. VNODAN/SPS COPY TO: 1. M/S. L&T INFOCITY LTD, 1-Q4-A FIRST FLOOR, CYBER TO WERS, HI- TECH CITY, MADHAPUR, HYDERABAD 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(1), ROOM NO.612, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 3. CIT(A)-V, HYDERABAD 4. CIT-IV HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER