The ITO, Ward-8(4), Ahmedabad V. Zydus Infrastructure Pvt.Ltd., Ahmedabad

ITA 2236/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8201 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JIGAR M PATEL
• Keywords: Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2236/AHD/2014 (ASSESSMENT YEAR: 2010-11) THE I.T.O. WARD-8(4), AHMEDABAD V/S ZYDUS INFRASTRUCTURE PVT. LTD. ZYDUS TOWER, OPP. ISCON TEMPLE, SATELLITE CROSS ROAD, AHMEDABAD- 15 (APPELLANT) (RESPONDENT) PAN: AAACZ0629H APPELLANT BY : SHRI K. MADHUSUDAN, SR. D. R. RESPONDENT BY : SHRI JIGAR M. PATEL, A.R. ( )/ ORDER DATE OF HEARING : 25 -10-201 7 DATE OF PRONOUNCEMENT : 27-10-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)- XIV, AHMEDABAD DATED 22.05.2014 PERTAINING TO A.Y. 2010-11. ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 2 2. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READS AS U NDER:- 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI V, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE DEPRECIATION @60% INSTEAD OF @25% ALLOWED BY THE AO ON COMPUTER SOFTWARE LICENCE, WHEN LICENCES ARE ELIGIBLE FOR DEPRECIATION @25% AS PER PART-'B' OF NEW APPENDIX-1 OF INCOME-TA X RULES. 2. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)- XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE DEDUCTIONS OF RS.3 ,25,07,625/- U/S.80AB OF THE ACT ON ACCOUNT OF INCOME FROM OPERATION & MAINTENAN CE & RS. 18,250/- ON ACCOUNT OF INCOME FROM SALE OF SCRAP RELATED TO SEZ . 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT THE IMPUGNED ISSUES RAISED BY THE REVENUE HAVE BEEN DECIDED IN F AVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ASSESSEES OWN CASE IN THE I MMEDIATELY PRECEDING ASSESSMENT YEAR I.E. A.Y. 2009-10. THE LD. COUNSEL FURNISHED THE ORDER OF THE TRIBUNAL IN ITA NO. 1464/AHD/2012. THE LD. D.R. STA TED THAT DUE TO THE AMENDMENT IN THE SECTION 80-IAB. THE ISSUE IS NOT C OVERED BY THE PREVIOUS ORDER OF THE TRIBUNAL. IN SUPPORT, THE LD. D.R. FIL ED THE COPY OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PRAKASH NA TH KHANNA 266 ITR 1. 4. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW AND HAVE CAREFULLY PERUSED THE DECISIONS RELIED UPO N BY BOTH SIDES. THE ASSESSEE CARRIES ON THE BUSINESS OF DEVELOPMENT OPE RATION AND MAINTENANCE OF SPECIAL ECONOMIC ZONE (SEZ). THE ASSESSEE CLAIMED D EDUCTION U/S. 80-IAB OF THE ACT. DURING THE COURSE OF THE SCRUTINY ASSESSME NT PROCEEDINGS AND ON EXAMINING THE CLAIM OF DEDUCTION U/S. 80-IAB OF THE ACT, THE A.O. WAS OF THE OPINION THAT THE ASSESSEE IS NOT ELIGIBLE FOR THE C LAIM OF SAID DEDUCTION. THE A.O. WAS OF THE FIRM BELIEF THAT THE SECOND PROVISO TO SECTION 80-IAB OF THE ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 3 ACT IS SPECIFICALLY APPLICABLE IN CASE OF TRANSFERE E DEVELOPER AND IN CASE OF A DEVELOPER OF SEZ. RELYING UPON THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CORE HEALTHCARE LTD. 251 ITR 61. THE A.O. DISMISSED THE CLAIM OF DEDUCTION. THE A.O. FURTHER RESTRICTED THE CLAIM OF DEPRECIATION @ 60% ON COMPUTER SOFTWARE LICENSE TO 25%. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND WAS SUCCESSFUL IN GETTING THE RELIEF. WHILE ALLOWING THE RELIEF TO THE ASSESS EE, THE LD. CIT(A) FOLLOWED THE ORDER OF HIS PREDECESSOR FOR A.Y. 2009-10. THE RELE VANT FINDINGS OF THE LD. CIT(A) READS AS UNDER:- MY PREDECESSOR VIDE ORDER NO.CIT(A)XIV/JT.CIT .R.8/2011-12 DATED 30.04.201 2 IN APPELLANT'S OWN CASE FOR A. Y.2009-1 0 HELD AS UNDER: 'I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT SINCE T HE SOFTWARE INVOLVES RAPID OBSOLESCENCE, THE CLAIM OF REVENUE EXPENDITURE SHOU LD BE ALLOWED. I AM NOT INCLINED TO AGREE WITH THE SUBMISSION OF THE APPELL ANT. THE APPELLANT HAS BOUGHT SOFTWARE LICENSES WHICH ARE VALID FOR LONG TERM AND -THE EXPENDITURE INCURRED THEREON IS, THEREFORE, NOT IN THE NATURE OF REVENUE . THEREFORE, THE PLEA OF THE APPELLANT THAT EXPENDITURE IS IN THE NATURE OF REVE NUE IS DISMISSED. HOWEVER, THE TREATMENT OF THE SOFTWARE BY THE A. O. AS INTANGIBLE ASSET AND ALLOWING INTEREST @ 25% IS NOT JUSTIFIED AS THE COM PUTER SOFTWARE HAS BEEN GROUPED AS ELIGIBLE TO RATE OF DEPRECIATION @ 60% A ND, THEREFORE, A. O. SHOULD' HAVE ALLOWED THE DEPRECIATION @ 60% IN PLACE OF 25% ALLOWED BY HIM. THE APPELLANT HAS ALSO DISPUTED THE FINDING OF THE A. O . THAT THE SOFTWARE WERE USED FOR LESS THAN 180 DAYS. THE A. O. IS DIRECTED TO VE RIFY THE CLAIM FROM THE FACTS AVAILABLE ON RECORD AND ALLOW THE DEPRECIATION ACCORDINGLY AS PER THE PROVISIONS OF THE ACT. THE GROUNDS OF APPEAL ARE AC CORDINGLY PARTLY ALLOWED.' I AM INCLINED WITH APPELLANT AND RATIO OF MY PREDEC ESSOR ORDER. IT IS THEREFORE A.O. IS DIRECTED TO ALLOW RATE OF DEPRECIATION AT 6 0% AFTER VERIFICATION OF PERIOD FOR WHICH SUCH SOFTWARE PUT TO USE. THE APPELLANT G ETS PART RELIEF FROM THE ADDITION OF RS. 10,163/-. THIS GROUND BEING RELATED TO ADOPTION OF RATE OF ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 4 DEPRECIATION, THE SAME IS TREATED AS ALLOWED SINCE RATE OF DEPRECIATION IS DIRECTED TO BE ADOPTED AT 60%. 5.4 GROUND NO. 4 IS AGAINST THE DISALLOWANCE OF D EDUCTION U/S 80IAB IN RESPECT OF RS. 3,25,07,625/- BEING INCOME FROM OPERATION & MAINTENANCE AND RS. 18,250/- BEING INCOME FROM SALE OF SCRAP RELATED TO SEZ. THE APPELLANT RELIED ON THE APPEAL ORDER DT. 30/04/2012 IN THE CASE OF APPE LLANT FOR A.Y. 09-10 ON THIS ISSUE WHERE LD. CIT(A)XIV, AHMEDABAD ON SIMILAR FAC TS & CONTENTION ALLOWED SUCH DEDUCTION. MY PREDECESSOR VIDE ORDER NO.CIT(A)XIV/JT.CIT .R.8/2011-12 DATED. 30.04.201 2 IN APPELLANT'S OWN CASE FOR A. Y.2009-1 0 HELD AS UNDER: 'I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE A. O. HAS DISALLOWED THE CLAIM OF IN COME OF THE APPELLANT BY OPERATION AND MAINTENANCE OF THE SEZ AS THE SECTION 80IAB MENTIONS ONLY THE WORD 'DEVELOPING'. THE APPELLANT HAS SUBMITTED THAT THE CLAIM IS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 80IAB AND SHOULD THE REFORE BE ALLOWED. IN ORDER-TO CLEARLY UNDERSTAND THE CONTROVERSY, VARIOUS PROVISI ONS WHICH ARE RELEVANT ARE QUOTE HEREUNDER: SECTION 80IAB OF THE I. T. ACT. ' (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE, B EING A DEVELOPER, INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS OF DEVELOPING A SPECIAL ECONOMIC ZONE, NOT IFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 UNDER THE SPECIAL ECONOMIC ZONES ACT , 2005, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION OF AN AMOUNT EQUAL TO ONE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIV ED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS' THE WORD 'DEVELOPER HAS FURTHER BEEN DEFINED IN EXPLANATION TO SECTION 80IAB WHICH READS AS UNDER: 'DEVELOPER SHALL HAVE THE MEANING AS ASSIGNED UNDER CLAUSE (G) OF SEC. 2 OF THE SPECIAL ECONOMIC ZONES ACT.' FURTHER, SECTION 2(G) OF THE SEZ ACT HAS DEFINED TH E TERM DEVELOPER AS UNDER: SEC. 2(G) - 'DEVELOPER' MEANS A PERSON WHO, OR A STAT E GOVERNMENT WHICH, HAS BEEN GRANTED A LETTER OF APPROVAL UNDER SUB-SECTION (10) OF SEC. 3 AND INCLUDES AN AUTHORITY AND A CO-DEVELOPER. SECTION 3(10) OF THE SEZ ACT PROVIDES THAT THE CENT RAL GOVERNMENT SHALL ON RECEIPT OF COMMUNICATION BY THE BOARD, GRANT A LETT ER OF APPROVAL ON SUCH 'TERMS ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 5 AND CONDITIONS' AND OBLIGATIONS AND ENTITLEMENTS AS MAY BE APPROVED BY THE BOARD TO THE DEVELOPER, BEING THE PERSON OR THE STA TE GOVERNMENT CONCERNED. A COMBINED READING OF THE PROVISIONS OF SECTION 80I AB OF THE INCOME TAX ACT WITH SECTION 2(G) AND SECTION 3(10) OF THE SPECIAL ECONO MIC ZONE ACT SHOW THAT A PERSON WOULD BE CONSIDERED AS A DEVELOPER IN ACCORD ANCE WITH THE GRANT OF LETTER OF APPROVAL ON THE BASIS OF TERMS AND CONDITIONS AN D OBLIGATION AND ENTITLEMENT AS MAY BE APPROVED BY THE BOARD WHO IS APPROVING TH E SETTING UP OF THE SEZ. THEREFORE, IF THE APPROVAL HAS BEEN GRANTED FOR DEV ELOPING, OPERATING AND MAINTAINING THE SEZ, THE TERM 'DEVELOPER' WOULD INC LUDE OPERATION AND MAINTENANCE ALSO. FURTHER AN EXAMINATION OF THE LETTER OF APPROVAL BE ARING NO. F.2/44/2005-EPZ, DATED 21 ST JUNE, 2006, ISSUED BY THE CENTRAL GOVERNMENT IN FA VOUR OF THE APPELLANT AS THE DEVELOPER SHOW THAT THE VERY FIRST CONDITION UNDER WHICH THE APPROVAL IS GRANTED STATES THAT 'THE DEVELOPER SHALL DEVELOP, OPERATE AND MAINTAIN THE SPECIAL ECONOMIC ZONE IN TERMS OF THE SPECIAL ECONOMIC ZONES ACT, 2005 AND THE RULES MADE THERE UNDER.' THUS, IT IS C LEAR FROM THE LETTER OF APPROVAL THAT DEVELOPMENT, OPERATION AND MAINTENANC E OF THE SPECIAL ECONOMIC ZONE ARE AN INTEGRAL PART OF THE TERMS AND CONDITIO NS AND OBLIGATIONS AND ENTITLEMENTS GRANTED TO THE DEVELOPER. THEREFORE, I N VIEW OF THE PRECEDING DISCUSSION, THE WORD 'DEVELOPER' ALSO INCLUDES THE ACTIVITIES OF OPERATION AND MAINTENANCE OF THE SEZ IN THE CASE OF THE APPELLANT . THE INTERPRETATION BY THE A. O. THAT OPERATION AND MAINTENANCE ARE DIFFERENT TO THAT OF DEVELOPMENT AND LEGISLATURE WERE FULLY AWAR E OF THIS FACT AND, THEREFORE, THE WORDS 'OPERATION AND MAINTENANCE' HAVE NOT BEEN INTENTIONALLY OMITTED IS NOT JUSTIFIED. A HARMONIOUS INTERPRETATION OF THE P ROVISIONS OF VARIOUS ACTS, AS DISCUSSED ABOVE, CLEARLY SHOW THAT IN THE CASE OF T HE APPELLANT, THE DEDUCTION IS AVAILABLE FOR OPERATION AND MAINTENANCE ALSO IN ACC ORDANCE WITH THE TERMS AND APPROVAL. THE OBSERVATIONS OF THE A. O. THAT THE SECOND PROVI SO TO SECTION 80IAB WHERE THE ACT PROVIDES FOR DEDUCTION IN RESPECT OF PROFITS AN D GAINS DERIVED FROM OPERATION AND MAINTENANCE ACTIVITIES IN THE HANDS OF TRANSFER EE DEVELOPERS, IF .ANY DEVELOPER AFTER DEVELOPING A SEZ TRANSFERS THE OPER ATION AND MAINTENANCE OF SUCH SEZ TO ANOTHER DEVELOPER IS ALSO, IN MY OPINIO N, NOT JUSTIFIED. THE ACTIVITY OF DEVELOPMENT, OPERATION AND MAINTENANCE ARE CONTINUO US IN NATURE. ONCE A PERSON TAKES UP THE WORK OF DEVELOPMENT OF A FACILI TY AND STARTS ALLOTTING OR SELLING PLOTS IN THE SEZ, IT IS NOT POSSIBLE THAT A LL THE PLOTS WILL BE SOLD SIMULTANEOUSLY AND FURTHER IT IS ALSO NOT POSSIBLE THAT ALL THE PERSONS WHO HAVE PURCHASED PLOTS WILL START FUNCTIONING AFTER COMPLE TE SELL OUT OF THE SEZ. IT IS ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 6 THEREFORE MOST LIKELY THAT THE ACTIVITY OF DEVELOPM ENT, OPERATION AND MAINTENANCE WILL GO ON SIMULTANEOUSLY. IT IS A DIFF ERENT FACT THAT ONCE ALL THE PLOTS ARE-DEVELOPED AND SOLD, THE OPERATION AND MAINTENAN CE CAN BE TRANSFERRED TO SOME OTHER PARTY AND FOR THIS PURPOSE, THE PROVISO TO SECTION 80IAB HAS BEEN INCORPORATED. IN THE CASE OF THE APPELLANT, THE APP ROVAL GIVEN IS FOR ALL THE ACTIVITIES. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE THAT T HE PROVISIONS OF SECTION 80IA(4) INITIALLY HAD THE WORDS DEVELOPING, MAINTAINING AND OPERATING OR DEVELOPING, MAINTAINING AND OPERATING. HOWEVER, ONCE THE DIFFIC ULTY OR ANOMALY IN IMPLEMENTATION OF THE LANGUAGE WAS OBSERVED, THE PR OVISIONS WERE SUBSEQUENTLY AMENDED FROM 01/04/2001 AND THE WORDS OR WERE INTRO DUCED TO TAKE THE WORK OF DEVELOPMENT OR DEVELOPMENT AND OPERATION OR DEVELOP MENT OPERATION AND MAINTENANCE FOR ENTITLEMENT OF DEDUCTION. IN VIEW OF THE PRECEDING DISCUSSION, I AM OF THE CO NSIDERED OPINION THAT THE APPELLANT IS ENTITLED FOR DEDUCTION U/S. 80IAB FOR THE INCOME EARNED FROM OPERATION AND MAINTENANCE, AS THE ACTIVITIES ARE CO VERED BY THE LETTER OF APPROVAL AND ACCORDINGLY MAKE THE APPELLANT ENTITLED FOR DED UCTION. THE APPELLANT HAS FURTHER CLAIMED DEDUCTION ON MISC ELLANEOUS INCOME OF RS.91,000/- FROM SALE OF SCRAP. IT IS NOTED THAT TH E INCOME HAS BEEN GENERATED FROM SALE OF SCRAP OF IRON AND STEEL WHICH WAS USED FOR INFRASTRUCTURE DEVELOPMENT. THE APPELLANT HAS RELIED ON THE DECISI ON OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. CORE HEALTHCARE LTD. [308 ITR 263]. CONSIDERING THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT, I AM OF THE OPINION THAT SALE OF SCRAP OF IRON AND STEEL WHICH IS GENERATED FROM THE ACTIVITY OF CONSTRUCTION OF THE INFRASTRUCTURE FACILITY SHOULD BE TREATED AS DERIVE D FROM THE ACTIVITY AND, THEREFORE, THE APPELLANT IS ENTITLED FOR DEDUCTION ON THE SAME. THE CLAIM OF DEDUCTION ON PROFESSIONAL INCOME ON AC COUNT OF RECEIPT OF PLAN APPROVAL FEE COLLECTED BY THE APPELLANT ALSO HAS A DIRECT NEXUS WITH THE ACTIVITY OF THE APPELLANT BUSINESS. THEREFORE, THE APPELLANT IS ALSO ENTITLED FOR THE DEDUCTION ON THAT INCOME. THE CLAIM REGARDING PRIOR PERIOD INCOME OF RS.23,09 ,372/- HAS BEEN DISALLOWED BY THE A. O. ON THE GROUND THAT THE INCOME PERTAINE D TO EARLIER YEAR AND ONLY THE INCOME OF CURRENT YEAR CAN BE CONSIDERED FOR DEDUCT ION. THE APPELLANT HAS SUBMITTED THAT IT HAD STARTED RECOVERING THE RAW WA TER CHARGES FROM THE CURRENT FINANCIAL YEAR, AND THE CHARGES FOR EARLIER YEARS W ERE ALSO COLLECTED. THEREFORE, THE SAME SHOULD BE ALLOWED AS THE APPELLANT WAS ALL OWED DEDUCTION IN EARLIER YEARS ALSO. IT IS NOTED THAT THE APPELLANT HAS COMM ENCED THE BILLING PROCESS FOR THE WATER SERVICES FROM THE PRESENT YEAR. THE RAW WATER CHARGES HAVE BEEN ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 7 BILLED AND COLLECTED IN THE CURRENT' ASSESSMENT YEA R ITSELF AND, THEREFORE, THE INCOME HAS CRYSTALLIZED AND HAS BECOME DUE IN THE C URRENT ASSESSMENT YEAR ITSELF. THEREFORE, THE APPELLANT HAS CORRECTLY SHOWN THE INCOME IN THE CURRENT ASSESSMENT YEAR AND THE SAME SHOULD BE TREATED AS I NCOME OF THE CURRENT YEAR. THE RELIANCE IS PLACED ON THE JUDGMENT OF HON'BLE H IGH COURT O'F GUJ'ARAT IN THE CASE OF SAURASHTRA CEMENT AND CHEMICALS INDUSTRIES LIMITED [80 TAXMAN 61]. THE CLAIM OF DEDUCTION IS, THEREFORE, ALLOWABLE AND A. O. IS DIRECTED ACCORDINGLY.' THE A.O. IN THE IMPUGNED ASSESSMENT ORDER CONSIDERE D THE TOTAL CLAIM OF APPELLANT OF DEDUCTION U/S 80IAB FOR RS. 5,65,36,41 5/-. AT PARA 6.3 OF THE IMPUGNED ORDER, THE RENTAL INCOME OF RS. 3,45,000/- COMPRISED IN TOTAL CLAIM WAS ALLOWED BY A.O.. FURTHER, MISC. INCOME OF RS. 77,00 0/- WHICH WAS COMPRISED OF RS. 59,138/- AS INTEREST FROM M/S UGVCL AND RS. 18, 250/- AS SCRAPE VIDE PARA 6.14 OF IMPUNGED ORDER, A.O. DID NOT CONSIDERED RS. 59,138/- BEING SAME WERE OFFERED BY APPELLANT AS INCOME FROM OTHER SOURCES, WHILE, RS. 18,250/- WAS DISALLOWED. IT IS THEREFORE OUT OF RS. 5,65,36,415/ - CLAIM, THE A.O. DISALLOWED CLAIM OF RS. 3,25,07,625/-BEING INCOME FROM OPERATI ON & MAINTENANCE OF SEZ AND RS. 18,250/- BEING RECEIPT FROM SCRAPE SALE REL ATED TO SEZ. I AM INCLINED WITH APPELLANT THAT ON SIMILAR ISSUE AND SIMILAR FACTS, MY PREDECESSOR VIDE ORDER DT. 30/04/2012 CONSIDERED THE SIMILAR CONTENTION OF A.O . ON THESE ISSUE AND AFTER CONSIDERING THE APPELLANT'S CONTENTION AND LEGAL PR OPOSITION ALLOWED THE CLAIM OF APPELLANT U/S 80IAB FOR THESE TWO RECEIPTS. RESPECT FULLY FOLLOWING THE SAME, THE A.O. IS DIRECTED TO ALLOW THE CLAIM OF APPELLANT FO R DEDUCTION U/S 80IAB OF THE ACT OF RS. 3,25,07,625/- AND RS. 18.250/- AND DELETE TH E ADDITION SO MADE. THE APPELLANT GETS RELIEF ACCORDINGLY. THIS GROUND IS T REATED AS ALLOWED. 6. THE ORDER OF THE FIRST APPELLATE AUTHORITY FOR A.Y. 20090-10 WAS CONFIRMED BY THE TRIBUNAL IN ITA NO. 1464/AHD/2012. THE RELEVANT FINDINGS OF THE CO- ORDINATE BENCH READS AS UNDER:- 23. NOW COMING TO THE MAIN ISSUE ABOUT THE ALLOWABI LITY OF DEDUCTION U/S 80-IAB FOR THE INCOME EARNED FROM OPERATION AND MAINTENANC E, WE FIND THAT PROVISIONS OF SECTION 80-IAB IS SELF-EXPLANATORY WHICH READS A S UNDER: '[DEDUCTIONS IN RESPECT OF PROFITS AND GAINS BY AN UNDERTAKING OR ENTERPRISE ENGAGED IN DEVELOPMENT OF SPECIAL ECONOMIC ZONE. ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 8 80-IAB. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE, BE ING A DEVELOPERM, INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERT AKING OR AN ENTERPRISE FROM ANY BUSINESS OF DEVELOPING A SPECIAL ECONOMIC ZONE, NOTIFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 UNDER THE SPECIAL ECONOMIC ZONES ACT, 2005, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION OF AN AMOUNT EQUAL TO ONE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIV ED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMEN T YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH A SPECIAL ECONOMIC ZONE HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT : PROVIDED THAT WHERE IN COMPUTING THE TOTAL INCOME OF ANY UND ERTAKING, BEING A DEVELOPER FOR ANY ASSESSMENT YEAR, ITS PROFITS AND GAINS HAD NOT BEEN INCLUDED BY APPLICATION OF THE PROVISIONS OF SUB-SECTION (13) O F SECTION 80-IA, THE UNDERTAKING BEING THE DEVELOPER SHALL BE ENTITLED TO DEDUCTION REFERRED TO IN THIS SECTION ONLY FOR THE UNEXPIRED PERIOD OF TEN CONSECUTIVE ASSESSM ENT YEARS AND THEREAFTER IT SHALL BE ELIGIBLE FOR DEDUCTION FROM INCOME AS PROV IDED IN SUB-SECTION (1) OR SUB- SECTION (2), AS THE CASE MAY BE : PROVIDED FURTHER THAT IN A CASE WHERE AN UNDERTAKING, BEING A DEVELO PER WHO DEVELOPS A SPECIAL ECONOMIC ZONE ON OR AFTER THE 1S T DAY OF APRIL, 2005 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH SPE CIAL ECONOMIC ZONE TO ANOTHER DEVELOPER (HEREAFTER IN THIS SECTION REFERR ED TO AS THE TRANSFEREE DEVELOPER), THE DEDUCTION UNDER SUB-SECTION (1) SHA LL BE ALLOWED TO SUCH TRANSFEREE DEVELOPER FOR THE REMAINING PERIOD IN TH E TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRANSFEREE DEVELOPER. (3) THE PROVISIONS OF SUB-SECTION (5) AND SUB-SECTI ONS (7) TO (12) OF SECTION 80-IA SHALL APPLY TO THE SPECIAL ECONOMIC ZONES FOR THE P URPOSE OF ALLOWING DEDUCTIONS UNDER SUB-SECTION (1). EXPLANATION.FOR THE PURPOSES OF THIS SECTION, 'DEVE LOPER' AND 'SPECIAL ECONOMIC ZONE' SHALL HAVE THE SAME MEANINGS RESPECTI VELY AS ASSIGNED TO THEM IN CLAUSES (G) AND (ZA) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005.]' ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 9 24. FROM GOING THROUGH THE PROVISO (2) OF SECTION 8 0-IAB OF THE ACT AS REFERRED ABOVE, WHICH SAYS THAT IF THE WORK OF OPERATION AND MAINTENANCE OF SEZ IS TRANSFERRED FROM ONE DEVELOPER TO ANOTHER THEN THE DEDUCTION ALLOWABLE IN SUB- SEC. (1) OF SEC. 80-IAB WILL BE ALLOWED TO TRANSFER EE DEVELOPER FOR THE REMAINING PERIOD OF THE REMAINING OF CONSECUTIVE 10 YEARS. TH IS PROVISO GIVES A VERY CLEAR PICTURE THAT WHEN THE TRANSFEREE IS ELIGIBLE FOR DE DUCTION U/S 80-IAB FOR THE INCOME FROM OPERATION AND MAINTENANCE OF SEZ THEN C ERTAINLY TRANSFEROR I.E. DEVELOPER IS ELIGIBLE FOR DEDUCTION U/S 80-IAB FROM OPERATION AND MAINTENANCE. 25. FURTHER FROM GOING THROUGH THE LETTER ISSUED BY GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRIES DATED 21ST JUNE, 2006 TO T HE ASSESSEE FOR SETTING UP OF A SECTOR SPECIFIC SPECIAL ECONOMIC ZONE FOR PHARMAC EUTICALS AT AHMEDABAD, WE FIND THAT IN CLAUSE (II) UNDER THE MAIN CLAUSE (III ) REFERRING TO GENERAL CONDITION IT READS THAT OPERATION AND MAINTENANCE OF THE FACILIT IES WILL BE MET AS PER THE STANDARD IN THE SPECIFIC MANNER AND PROPOSITION OF THE USER. 26. IN VIEW OF OUR ABOVE DISCUSSION AS WELL AS OBSE RVATION MADE BY ID. CIT(A), WE ARE OF THE VIEW THAT ASSESSEE BEING A DEVELOPER OF SEZ IS ELIGIBLE FOR DEDUCTION U/S 80-IAB FOR INCOME EARNED FROM OPERATION AND MAINTEN ANCE OF SEZ. IN THE RESULT GROUND NO. 3 (A) OF REVENUE IS DISMISSED. 7. INSOFAR AS THE CLAIM OF DEPRECIATION IS CONCERNED, THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH IS AS UNDER:- 15. IT IS ALMOST A SETTLED ISSUE THAT SOFTWARE APPL ICATION WHICH ARE HAVING VALIDITY FOR LONG TERM PERIOD ARE BASICALLY SYSTEM SOFTWARE ON WHICH COMPUTER HARDWARE RUNS AND IT IS IMPOSSIBLE TO USE COMPUTER WITHOUT H AVING SUCH SOFTWARE INSTALLED ON IT AND, THEREFORE, SUCH LICENSED SOFTWARE ARE SU BJECT TO DEPRECIATION @ 60% AND ID. CIT(A) HAS DONE SO. WE FIND NO REASON TO IN TERFERE WITH THE ORDER OF ID. CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUE IS DIS MISSED . 8. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH, WE DECLINE TO INTERFERE. APPEAL OF THE REVENUE IS ACCORDINGLY DIS MISSED. ITA NO. 2236 /AHD/2014 . A.Y. 2010-11 10 9. BEFORE PARTING, THE RELIANCE WAS PLACED ON THE JUDG MENT OF THE HONBLE SUPREME COURT IN THE CASE OF PRAKASH NATH KHANNA (S UPRA) BY THE LD. D.R. IS MISPLACED AS IN THE CASE IN HAND, THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80- IAB OF THE ACT WHEREIN THE LANGUAGE IS UNAMBIGUOUS AND REQUIRES NO INTERPRETATION THEN WHAT IS COMING OUT FROM THE REL EVANT PROVISIONS. FURTHER, THE CO-ORDINATE BENCH HAS CONSIDERED ALL THE ISSUE RAISED BY THE REVENUE AND HAS DECIDED IN FAVOUR OF THE ASSESSEE. ORDER PRONOUNCED IN OPEN COURT ON 27 - 10- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 27 /10/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD