DCIT, Circle-2(1), Hyderabad, Hyderabad V. Janapriya Properties Private Limited, Hyderabad, Hyderabad

ITA 1746/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2644 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 29-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: P RAGHAVA NARAYANA
• Keywords: Reasonable cause
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1746/HYD/2016 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(1), HYDERABAD. VS. JANAPRIYA PROPERITES PVT. LTD., HYDERABAD. PAN AABCJ 9001E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.J. RAO ASSESSEE BY : SHRI P. RAGHAVA NARAYANA DATE OF HEARING : 23-03-2017 DATE OF PRONOUNCEMENT : 07-04-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - 2, HYDE RABAD, DATED 29/01/ 2016 FOR AY 2006-07. 2. ON PERUSAL OF RECORD, WE FIND THAT THERE WAS A D ELAY OF 236 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. IN T HIS CONNECTION, THE ASSESSEE FILED AN AFFIDAVIT FOR CONDONATION OF THE SAID DELAY. IN THE AFFIDAVIT, IT WAS STATED THAT THE DELAY IN FILING O F SECOND APPEAL IS DUE TO LATE RECEIPT OF THE AUTHORISATION LETTER FROM TH E OFFICE OF THE PR. CIT 2, HYDERABAD ON ACCOUNT OF TRANSFERS OF THE PR. C ITS AND ALSO THEIR BUSY SCHEDULES DUE TO INCOME DECLARATION SCHEME 2 016. 2 ITA NO. 1746/H/16 JANAPRIYA PROPERTIES PVT. LTD. 2.1 REFERRING TO THE ABOVE FACTUAL BACKGROUND, THE LD. DR SUBMITTED THAT REVENUE WAS PREVENTED BY REASONABLE CAUSE IN F ILING THE APPEAL BELATEDLY, THE DELAY MAY BE CONDONED AND THE APPEAL BE ADMITTED. 3. AFTER HEARING THE SUBMISSIONS OF THE LD. DR IN F ILING THE APPEAL BELATEDLY, WE CONDONE THE DELAY AND ADMIT THE APPE AL. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRUCTION. A SEARCH OPERATION WAS CONDU CTED ON 19.02.2008 ON THE GROUP. IN RESPONSE TO THE NOTICE THE ASSESSEE FILED A RETURN OF INCOME OF ADMITTING INCOME OF RS.81,72, 1589/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS CO MPLETED ON 06.08.2010 ON A TOTAL INCOME OF RS.3,77,69,417/-. 4.1 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COM MISSIONER OF INCOME TAX APPEALS-III, HYDERABAD AND THEN TOOK THE MATTER UP TO THE HON'BLE ITAT. THE HON'BLE ITAT VIDE ITS ORDER DATE 29.11.2013, IN APPEAL NO.ITA 1577/H/2012 SET-ASIDE THE ORDER OF TH E APPELLATE COMMISSIONER AND DIRECTED THE A.O TO REDO THE ASSES SMENT AFTER PROVIDING AN OPPORTUNITY TO THE ASSESSEE. 4.2 THE A.O TOOK UP THE CASE FOR SCRUTINY AND PASSE D AN ORDER U/S.143(3) R.W.S 254 OF THE INCOME TAX ON 28.02.201 4, ON A TOTAL INCOME OF RS.2,51,75,680/- AS AGAINST RS.81,72,158/ - DECLARED BY THE ASSESSEE. WHILE DOING SO THE A.O MADE THE FOLLOWING ADDITIONS: PARTICULARS RS. 1. DISALLOWANCE OF DIRECT/INDIRECT EXPENSES 49,63 ,343/- 2. ADDITION ON UNDISCLOSED SALES 7,00,000/- 3. DISALLOWANCE U/S 40A(3) 12,28,980/- 4. DISALLOWANCE U/S 40(A)(IA) 1,01,11,201 /- THE A.O ALSO DID NOT ALLOW THE CLAIM OF DEDUCTION U /S.801A(4)(III). 3 ITA NO. 1746/H/16 JANAPRIYA PROPERTIES PVT. LTD. 5. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DELETED THE DISALLOWANCES MADE BY THE AO. 6. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT (A) HAS ERRED BOTH ON FACTS AND LAW. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE CIT(A) IS CORRECT IN ALLOWING THE GROUND OF THE ASSESSEE T HAT THE AO CANNOT DENY THE DEDUCTION UNLESS THE CENTRAL GOVERN MENT RESCIND THE APPROVAL AND NOTIFICATION ISSUED, BY FO LLOWING THE JURISDICTIONAL TRIBUNAL'S DECISION IN THE CASE OF M /S. ANNAPURNA BUILDERS IN ITA NO.1006/HYD/2012 DATED 27.11.2012? 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE CIT(A) IS CORRECT IN ALLOWING THE GROUND OF THE ASSESSEE E VEN WHEN THE ASSESSEE DEVIATED FROM THE SPECIFIC CONDITION IMPOS ED BY THE CBDT THAT NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AREA OF AN INDUSTRIAL PARK? 4. IN THE FACTS AND CIRCUMSTANCE OF THE CASE, WHETH ER THE CIT(A) IS CORRECT IN ALLOWING THE GROUND OF THE ASSESSEE T HAT PROVISIONS OF SECTION 40(A)(IA) NOT APPLICABLE BY FOLLOWING TH E DECISION OF THE VIZAG SPECIAL BENCH'S DECISION IN THE CASE OF M /S MERLYN SHIPPING PVT LTD., WHEN THE SAID DECISION WAS SUSPE NDED BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH? 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 7. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE. 8. AS REGARDS GROUND NOS. 2 & 3 RELATING TO ALLOWAB ILITY OF DEDUCTION U/S 80IA(4) OF I.T. ACT, 1961, IT IS OBSE RVED THAT THE ASSESSEE OWNS, MAINTAINS AND OPERATES AN INDUSTRIAL PARK BY NAME FORTUNE 9, SOMAJIGUDA. THE ASSESSEE CLAIMED RELIE F U/S 80IA(4) OF THE ACT, IN RESPECT OF LEASE INCOME DERIVED FROM TH E UNITS LEASED OUT IN THIS INDUSTRIAL PARK. THE AO OBSERVED THAT THE A SSESSEE OUT OF ALLOCABLE CONSTRUCTED AREA OF 1,64,632 SFT., MORE T HAN 50% AREA I.E. 1,25,515 GIVEN TO M/S ADP PVT. LTD. THUS, THE ASSES SEE DEVIATED 4 ITA NO. 1746/H/16 JANAPRIYA PROPERTIES PVT. LTD. FROM THE SPECIFIC CONDITION IMPOSED BY THE CBDT THA T NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUSTR IAL AREA OF AN INDUSTRIAL PARK. HE, THEREFORE, DENIED THE ASSESSEE S CLAIM OF DEDUCTION U/S 80IA(4)(IV) OF THE ACT. 9. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) AND SUBMITTED AS UNDER: 1. THE ASSESSEE SUBMITS THAT IT IS COVERED UNDER S .0.354(E) OF THE NOTIFICATION ISSUED BY THE MINISTRY OF COMMERCE OF INDUSTRY DATED 01.04.2002. ANNEXURE: 1 TO 10 CLAUSE 5 OF THE ABOVE NOTIFICATION GIVES THE PROC EDURE OF THE AUTOMATIC APPROVAL ROUTE CLAUSE 6 OF THE ABOVE NOTIFICATION REFERS TO CRIT ERIA FOR AUTOMATIC APPROVAL SUB-CLAUSE F OF CLAUSE 6 STIPULATES THAT NO SINGL E UNIT CAN OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AR EA CLAUSE 7 REFERS TO THE PERMISSION TO BE GRANTED F OR UNDER NON- AUTOMATIC ROUTE AND THE APPROVAL OF THE EMPOWERED C OMMITTEE IN SUCH SCENARIO ON CASE TO CASE BASIS. CLAUSE 8 REFERS TO WITHDRAWAL OF APPROVAL BY THE CENTRAL GOVERNMENT ON FAILURE TO COMPLY WITH CONDITIONS OF THE GRANT OF APPROVAL. 2. WITH RESPECT TO THE ABOVE NOTIFICATION, THE ASSE SSEE HAS APPLIED PERMISSION UNDER NON AUTOMATIC ROUTE. COPY OF THE APPLICATION IS GIVEN AT PAGES 17 TO 24. IT CAN BE S EEN AT PAGE 17 AND AT PAGE 19, THAT THE APPLICATION IS UNDER THE N ON-AUTOMATIC ROUTE. 3. THEREFORE CLAUSE 6 ON WHICH THE A. 0 HAS RELIED ON FOR NON GRANT OF THE DEDUCTION DOES NOT APPLY TO THE ASSESS EE. IN EFFECT THE LIMIT THAT 50% OR MORE SHOULD NOT BE GIVEN APPL IES ONLY TO AUTOMATIC ROUTE APPLICATION AND NOT TO ON AUTOMATIC APPLICATION. 4. THE ASSESSEE HAVING APPLIED UNDER THE NON AUTOMA TIC ROUTE HAS GIVEN IN THE SAID APPLICATION AT CLAUSE VII THA T THE PROPOSED NUMBER OF UNITS ARE ONLY 3. (PAGE 23). 5. IN RESPONSE TO THE APPLICATION UNDER THE NON AUT OMATIC ROUTE, THE MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT O F INDIA, 5 ITA NO. 1746/H/16 JANAPRIYA PROPERTIES PVT. LTD. VIDE ITS LETTER DATED 25.09.2006 HAS ACCORDED PERMI SSION FOR SETTING THE INDUSTRIAL PARK UNDER THE NON AUTOMATIC ROUTE.( PAGES 25 TO 28 ) 6. THE PERMISSION GIVEN HAS NOT RESTRICTED THE PERC ENTAGE OF THE LET OUT AREA SHOULD BE LESS THAN 50%. IT ONLY SAYS THAT THE PROPOSED NUMBER OF INDUSTRIAL UNITS AS MENTIONED ON CLAUSE 7 SHOULD BE LOCATED. 7. SUBSEQUENT TO THE NOTIFICATION ISSUED BY THE MIN ISTRY OF COMMERCE, THE CBDT VIDE ITS LETTER DATED 13.11.2006 HAS ISSUED A NOTIFICATION CONFIRMING THE CONDITIONS FOR THE NO N AUTOMATIC ROUTE. (PAGES 29 TO 33). IN VIEW OF THE ABOVE SUBMISSIONS, THE ASSESSING OFF ICER'S ACTION IN DENYING BENEFIT OF ULS.80IA IS CONTRARY TO THE L AW AND FACTS. THE A 0 OUGHT TO HAVE SEEN THAT THE ASSESSEE HAS NO T VIOLATED ANY OF THE CLAUSES OF THE APPLICATION MADE BY IT UN DER THE NON AUTOMATIC ROUTE. II. WITHOUT PREJUDICE TO THE SUBMISSION MADE ABOVE IT IS SUBMITTED THAT EVEN IF THE ASSESSEE HAS VIOLATED AN Y OF THE CONDITIONS AS LAID DOWN IN THE NOTIFICATION, THEN T HE PERMISSION ACCORDED HAS TO BE WITHDRAWN AND CANCELLED BY THE C ENTRAL GOVERNMENT. AND UNTIL THE PERMISSION HAS BEEN CANCE LLED, THE AO HAS NO JURISDICTION TO DENY THE EXEMPTION U/S. 8 0IA(4). THIS HAS BEEN LAID DOWN IN A NUMBER OF CASES AS GIVEN UN DER: ANNAPURNA BUILDERS ITANO.1177/H/2011 ANNAPURNA BUILDERS ITA NO.1006/H/2012 IT IS THEREFORE PRAYED THAT THE AO HAS GOT NO JURIS DICTION TO DENY EXEMPTION WHEN THE APPROVAL HAS BEEN GRANTED BY THE CENTRAL GOVERNMENT, UNLESS THE SAME HAS BEEN CANCELLED.' 10. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND FOLLOWING THE DECISION OF THE COORDINATE BENCH IN THE CASE OF ANNAPURNA BUILDERS IN ITA NO. 1006/H/12, ON WHICH RELIANCE PL ACED BY THE ASSESSEE, THE CIT(A) DIRECTED THE AO TO ALLOW THE D EDUCTION CLAIMED BY THE ASSESSEE U/S 80IA(4)(III) OF THE ACT. 11. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ISSUE UNDER CONSIDERATION IS SQUAREL Y COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF 6 ITA NO. 1746/H/16 JANAPRIYA PROPERTIES PVT. LTD. ANNAPURNA BUILDERS (SUPRA). THE LD. DR NEITHER CONT ROVERTED THIS FACT NOR BROUGHT ANY CONTRARY DECISION IN THIS REGARD. T HEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S80IA(4)(III) AS HIS DECISION IS IN CONSONANCE WI TH THE DECISION OF THE COORDINATE BENCH. ACCORDINGLY, WE DISMISS GROUN D NOS. 2 & 3 OF REVENUE. 12. AS REGARDS GROUND NO. 4 RELATING TO DISALLOWANC E OF RS. 1,01,11,201/- U/S 40(A)(IA) OF THE ACT, THE AO DISA LLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 40(A)(IA) ON THE PREMISE THAT SPECIAL BENCH DECISION OF ITAT, VIZAG IN THE CASE O F MERLYN SHIPPING & TRANSPORT CANNOT BE APPLICABLE TO ASSESSEE AS THE DEPARTMENTS CASE AGAINST THE SAID DECISION IS STILL PENDING BEF ORE THE HONBLE AP HIGH COURT. 13. ON APPEAL BEFORE THE CIT(A), THE CIT(A) FOLLOWI NG THE SPECIAL BENCH DECISION OF ITAT VIZAG IN THE CASE OF MERLYN SHIPPING & TRANSPORT DIRECTED THE AO TO DELETE THE DISALLOWANC E OF RS. 1,01,11,201/- ON THE GROUND THAT THE SAID AMOUNT HA S ALREADY BEEN PAID DURING THE PY. 14. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. AS PER THE SPECIAL BENCH DECISION, SECTI ON 40(A)(IA) IS APPLICABLE ONLY TO THE EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALLOW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE PY, WITHOUT DEDUC TING THE TAX AT SOURCE. SINCE THE ASSESSEE HAS ALREADY PAID THE AM OUNT DURING THE PY AND NO AMOUNT IS THERE TO BE PAYABLE AS ON 31 ST MARCH, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUND RAISED B Y THE REVENUE ON THIS ISSUE. 7 ITA NO. 1746/H/16 JANAPRIYA PROPERTIES PVT. LTD. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 7 TH APRIL, 2017. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN ) VICE PRESIDENT A CCOUNTANT MEMBER HYDERABAD, DATED: 7 TH APRIL, 2017. KV COPY TO:- 1) DCIT, CIRCLE 2(1), 5 TH FLOOR, ROOM NO. 514, SIGNATURE TOWERS, KONDAPUR, HYDERABAD. 2) M/S JANAPRIYA PROPERTIES PVT. LTD., 8-2-120/86, PLOT NO. 11 & 12, KEERTI & PRIDE TOWERS, ROAD NO. 2, BANJARA HILL S, HYDERABAD 34. 3) CIT(A) - 2, HYDERABAD 4 PR. CIT - 2, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE