DCIT, New Delhi V. M/s DLF Cyber City Developers Ltd., Gurgaon

ITA 4742/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8388 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILESH KUMAR SENIOR
• Assessee Lawyers: SATYAJEET GOEL CAS
• Keywords: Capital asset; Business income; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4742/DEL./2015 (ASSESSMENT YEAR : 2010-11) DCIT, CIRCLE 1 (1), VS. M/S. DLF CYBER CITY DEVELO PERS LTD., GURGAON. 3 RD FLOOR, SHOPPING MALL, ARJUN MARG, DLF CITY, PHASE 1, GURGAON. (PAN : AACCD3572H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI & SATYAJEET GOEL, CAS REVENUE BY : SHRI SHAILESH KUMAR, SENIOR DR DATE OF HEARING : 06.12.2018 DATE OF ORDER : 02.01.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DCIT, CIRCLE 1 (1), GURGAON (HEREINA FTER REFERRED TO AS THE REVENUE) BY FILING THE PRESEN T APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 05.05.2015 PASSE D BY LD. CIT (APPEALS)-1, GURGAON QUA THE ASSESSMENT YEAR 2010-1 1 ON THE GROUNDS INTER ALIA THAT :- 1. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN TAKING COGNIZANCE OF CLARIFICATIONS DAT ED 18.1.2011 & 20.1.2011 ISSUED BY MINISTRY OF COMMERCE FOR HOLDIN G THAT ITA NO.4742/DEL./2015 2 TRANSFER OF BARE SHELL BUILDINGS BY ASSESSEE TO ITS CO DEVELOPER WAS A AUTHORIZED OPERATION IGNORING THE FACT THAT AS PE R SEC 9(2) ONLY BOARD OF APPROVAL IS EMPOWERED TO GRANT APPROVAL OF SEZ OR AUTHORIZED OPERATIONS IN THE SEZ AND NOT THE MINIST RY OF COMMERCE AND THAT THE ABOVE CLARIFICATIONS/ LETTERS HAVE NO LEGAL SANCTITY AS THESE WERE NOT ISSUED BY THE COMPETENT AUTHORITY OF BOARD OF APPROVAL BUT BY THE UNDER SECRETARY AND J. S, MINISTRY OF COMMERCE RESPECTIVELY, WHO WERE NOT COMPETENT TO ISSUE ANY SUCH CLARIFICATION AS PER PROVISION OF SEC 8(8) OF THE SEZ ACT. 2. WHETHER THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT MINISTRY OF COMMERCE COULD NOT HAVE ISSUED CLARIFIC ATION REGARDING APPROVAL GIVEN BY BOA AND WHETHER SUCH A CLARIFICATION ISSUED BY AN AUTHORITY OTHER THAN BOA HAS ANY LEGAL SANCTITY OR EVIDENTIARY VALUE PARTICULARLY WHEN REL EVANT ACTIVITIES MENTIONED IN THE CLARIFICATION ARE NOT MENTIONED IN THE APPROVAL GIVEN BY BOA TO THE ASSESSEE OR TO ITS CO DEVELOPER , AND SUCH A CLARIFICATION IS ALSO IN CONTRAVENTION OF SPIRIT OF SEZ ACT. 3. WHETHER THE LD. CIT(A) IS JUSTIFIED IN RELYING UPON THE CLARIFICATIONS ISSUED BY THE MINISTRY OF COMMERCE ( SEZ SECTION) WITHOUT VERIFYING THAT THE SAME HAVE BEEN ISSUED BY THE BOARD OF APPROVAL BY FOLLOWING PROPER PROCEDURE AND ALSO WHE THER CBDT WAS CONSULTED BEFORE ISSUE OF SUCH CLARIFICATIONS B ECAUSE IT HAD THE EFFECT OF DILUTING THE DISCLAIMER CLAUSE WHICH WAS ADDED ON BEHEST OF CBDT. 4. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND FAC TS OF THE CASE IN HOLDING THE TRANSFER OF BARE SHELLS BY ASSE SSEE TO CO- DEVELOPER WAS AN AUTHORIZED OPERATION IGNORING THE FACT THAT SUCH TRANSFER WAS NOT AN AUTHORIZED OPERATION AS PE R NOTIFICATION NO SO 1846 E DATED 27 10.2006 5. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND FAC TS OF THE CASE IN HOLDING THE TRANSFER OF BARE SHELLS BY ASSE SSEE TO CO- DEVELOPER WAS AN AUTHORIZED OPERATION IGNORING THE FACT THAT THE BOA HAD ONLY ALLOWED SUCH TRANSFER SUBJECT TO THE C ONDITION THAT TAXABILITY OF SUCH TRANSACTION WOULD BE EXAMINED BY IT AUTHORITIES 6. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THAT EVEN HE CLARIFICATION DATED 20.01.11 ONLY STATES THAT TRANSFER OF BARE SHELLS BY ASSESSEE TO ITS CO-DEVEL OPERS IS ALLOWED ITA NO.4742/DEL./2015 3 AND IT NO WHERE SAYS THAT IT WAS AN AUTHORIZED OPER ATION ELIGIBLE FOR BENEFITS UNDER THE SEZ ACT. 7. WHETHER THE LD CIT(A) HAS ERRED IN LAW AND ON F ACTS OF THE CASE IN HOLDING THAT THE ASSESSEE IS ELIGIBLE F OR CLAIM OF DEDUCTION U/S 80LAS IN RESPECT OF PROFITS DERIVED F ROM TRANSFER OF BUILT UP SPACE (BARE SHELLS BUILDINGS) COMPLETELY I GNORING THAT AS PER PROVISIONS OF PROVISO TO SEC 80IAB (2) ONLY INC OME FROM TRANSFER OF OPERATION AND MAINTENANCE OF SEZ IS ELI GIBLE FOR DEDUCTION AND NOT THE PROFITS DERIVED FROM TRANSFER OF BUILT UP SPACE( BARE SHELLS BUILDINGS) AND SUCH TRANSFER OF BUILT UP SPACE IS A VIOLATION OF PROVISIONS OF RULE 11 (5) OF THE SEZ ACT WHICH EXPRESSLY PROHIBITS SALE OF LAND OR BUILT UP AREA I N AN SEZ. 8. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN TREATING THE ACT OF CONSTRUCTION OF BAR E SHELL/ COLD SHELL/ WARM SHELL BUILDINGS AND TRANSFER THEREOF AS A BUSINESS OF DEVELOPING, OPERATING AND MAINTAINING OF SEZ AND TH EREBY HOLDING THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80I AB. 9. IN DOING SO, THE D. CIT(A) HAS FAILED TO APPREC IATE THE SPIRIT OF PROVISO TO SEC. 80IAB (2) THAT THE MOMENT THE DEVELOPER TRANSFERS THE OPERATION & MAINTENANCE OF SEZ TO THE CO- DEVELOPER, THE DEDUCTION U/S 80IAB WOULD BE AVAILAB LE TO THE CO- DEVELOPER FOR THE REMAINING PERIOD IN 10 CONSECUTIV E YEARS MEANING THEREBY RIGHT OF DEVELOPER TO CLAIM BENEFIT S OF SEZ WOULD CEASE ON TRANSFER OF OPERATION & MAINTENANCE OF SEZ TO CO-DEVELOPER. 10. WHETHER THE LD. CIT(A) HAS ERRED IN LA AND ON FACTS IN HOLDING THAT AO HAS NO JURISDICTION TO CHALLENGE TH E VALIDITY OF APPROVAL GIVEN BY MINISTRY OF COMMERCE IGNORING THE FACT THAT APPROVAL GIVEN BY BOA OR MINISTRY OF COMMERCE WAS N OT ABSOLUTE BUT SUBJECT TO CONDITION THAT THE TREATMEN T OF INCOME ARISING OUT OF TRANSACT ON OF TRANSFER OF BARE SHEL LS BY ASSESSEE TO CO-DEVELOPER WOULD BE DECIDED AS PER RELEVANT PROVI SIONS OF IT ACT. 11. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, WHETHE R THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ACCEPTING THE DEVELOPMENT CONSIDERATION RECEIVED BY THE ASSESSEE AS BEING AT MARKET VALUE. THE LD. CIT(A) HAS ERRED IN SUMMARILY ACCEPTING RENT CAPITALIZATION METHOD FOR DETERMINING DEVELOPM ENT CONSIDERATION OF BARE SHELLS IGNORING THE RELEVANT ITA NO.4742/DEL./2015 4 CONSIDERATIONS/FACTORS SUCH AS OTHER METHODS OF DET ERMINATION OF SALE CONSIDERATION, PREVALENT RATE OF SUCH TYPE OF COMMERCIAL PROPERTIES IN THE AREA ETC. 12. WHETHER THE LD. CIT(A) HAS ERRED IN LAW & ON F ACTS IN HOLDING CAPITALIZATION RATE OF 9% AS REASONABLE IGN ORING THE FACT THAT NORMAL CAPITALIZATION RATE IN THE AREA OF NCR 'S 12% 13. WHETHER THE LD CIT(A) HAS ERRED IN LAW & ON FAC TS IN HOLDING THAT THE BARE SHELL BUILDINGS TRANSFERRED T O CO-DEVELOPER WAS STOCK IN TRADE AS AGAINST CAPITAL ASSET. 14. WHETHER THE LD. CIT(A) HAS ERRED IN LAW & ON F ACTS IN IGNORING THE ALTERNATE OBSERVATION GIVEN BY THE AO IN THE ASSESSMENT ORDER THAT EVEN IF INCOME FROM TRANSFER OF ASSETS IS TO BE CONSIDERED AS DEVELOPMENT INCOME, THE ENTIRE CON SIDERATION CANNOT BE TREATED AS EXEMPT U/S 80IAB, AS IT ACTUAL LY IS RENT FOR A PERIOD OF 49 YEARS AND RENT CORRESPONDING TO THE YE AR UNDER CONSIDERATION IS 1/49 OF THE TOTAL DEVELOPMENT CONS IDERATION. THUS, THE TOTAL DEDUCTION U/S 80IAB IN THE YEAR UND ER CONSIDERATION CAN IN NO CASE EXCEED 1/49 OF THE TOT AL DEVELOPMENT CONSIDERATION. 15. WHETHER THE LD. CIT(A) HAS ERRED IN LAW, ON FAC TS AND IN CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE SIGNA GE INCOME RECEIVED FROM TENANTS IS NOT INCOME FROM OTHER SOUR CES BUT IS IN THE NATURE OF INCOME FROM HOUSE PROPERTY AND ALLOWE D THE STANDARD DEDUCTION U/S 24(A) OF THE IT ACT. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY IS ENGAG ED IN THE BUSINESS OF LEASING AND SALE OF CONSTRUCTED PROPERT Y AS EXPLAINED IN FORM 3CD OF AUDIT REPORT. DURING THE YEAR UNDER AS SESSMENT, ASSESSEE HAS SHOWN DEVELOPMENT INCOME OF RS.110.37 CRORES AND THE COST OF DEVELOPMENT HAS BEEN SHOWN AT RS.17.21 CRORES IN THE PROFIT & LOSS ACCOUNT. ASSESSEE HAS ALSO RECEIVED LEASE RENT OF ITA NO.4742/DEL./2015 5 CONSTRUCTED PROPERTIES AND INCOME FROM LAND LEASE R ENT. ASSESSEE COMPANY CLAIMED DEDUCTION UNDER SECTION 80IAB OF TH E INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) TO THE TUNE OF RS.93.09 CRORES ON THE DEVELOPMENT INCOME EARNED DURING THE YEAR UNDER ASSESSMENT. ASSESSEE CLAIMED THAT DEVELOPMENT INCOME HAS ACCRUE D TO IT ON ACCOUNT OF AGREEMENT ENTERED INTO BETWEEN ASSESSEE COMPANY AND ITS CO-DEVELOPER, M/S. DLF ASSETS PRIVATE LIMITED ( DAPL). THE CLAIM OF THE ASSESSEE IS BASED UPON THE APPROVAL GR ANTED TO THE ASSESSEE BY THE BOARD OF APPROVALS OF SPECIAL ECONO MIC ZONE (SEZ) TO THE CO-DEVELOPER AGREEMENT WITH THE AFORES AID DAPL. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, A O, BY FOLLOWING THE EARLIER ASSESSMENT YEARS 2008-09 & 2009-10, OBS ERVED THAT DEDUCTION U/S 80IAB OF THE ACT IS NOT ADMISSIBLE QU A THE PROFIT DERIVED FROM SEZ PROJECT AT GURGAON AS THE ASSESSEE HAD MERELY SOLD THE BARE SHELL BUILDING TO THE CO-DEVELOPER, M /S. DAPL, WHICH IS NOT AN AUTHORIZED OPERATION UNDER THE SPECIAL EC ONOMIC ZONE ACT, 2005 AND THE SPECIAL ECONOMIC ZONE RULES, 2006 . AO ALSO HELD THAT SIGNAGE INCOME OF RS.3,79,04,198/- WAS AS SESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES RATHER THAN I NCOME FROM HOUSE PROPERTY AND THEREBY MADE A DISALLOWANCE OF 30% OF THE ANNUAL VALUE U/S 24(S) OF THE ACT AND THEREBY ASSES SED THE TOTAL ITA NO.4742/DEL./2015 6 INCOME AT RS.2,84,69,73,320/- AS AGAINST THE RETURN ED INCOME OF RS.190,46,46,860/-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS ALLOWED THE APPEAL. FEELING AG GRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF F ILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 TO 14 5. UNDISPUTEDLY, THE AO HAS DECLINED THE DEDUCTION U/S 80IAB OF THE ACT BY FOLLOWING THE AYS 2008-09 & 2009-10. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE COMPANY IS ENTITLED FO R DEDUCTION U/S 80IAB FOR A PERIOD OF 10 YEARS AND IT IS THE THIRD YEAR OF CLAIMING DEDUCTION. IT IS ALSO NOT IN DISPUTE THAT THE ASSE SSEE HAS CLAIMED DEDUCTION U/S 80IAB ON THE BASIS OF AGREEMENT ENTER ED INTO BETWEEN THE ASSESSEE COMPANY AND ITS CO-DEVELOPER, M/S. DAPL WITH REGARD TO DLF IT PARK, GURGAON DEVELOPED BY M/ S. DAPL. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE COMPANY HA S BASED ITS CLAIM ON THE BASIS OF APPROVAL GRANTED TO THE ASSESSEE BY THE BOARD OF ITA NO.4742/DEL./2015 7 APPROVALS OF SPECIAL ECONOMIC ZONES TO THE CO-DEVEL OPER AGREEMENT WITH AFORESAID M/S. DAPL. 6. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FACT , THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED IN ITS FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 2008-09 I N ITA NOS.5469 & 5366/DEL/2012 WHICH FACT HAS NOT BEEN CONTROVERTED BY THE LD. DR FOR THE REVENUE. 7. AO IN ORDER TO DECLINE THE DEDUCTION U/S 80IAB P ROCEEDED ON THE PREMISE THAT THE CLAIM OF DEDUCTION OF RS.93 ,09,55,202/- IS ACTUALLY A PROFIT ACCRUING TO THE ASSESSEE FROM THE SALE OF ASSET AND NOT INCOME AND THE SALE OF SUCH NATURE IS NOT AUTHO RIZED ACTIVITIES UNDER THE SEZ ACT AND AS SUCH, NOT ELIGIBLE U/S 80I AB. HOWEVER, THIS ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 (SUPRA). 8. THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2008-09 (SUPRA), AFTER DISCUSSING THE RELEVA NT PROVISIONS OF SEZ ACT AS WELL AS RELEVANT PARA OF BOARD OF APPROV ALS ACCORDING APPROVAL, PROCEEDED TO DECIDE THE ISSUE IN FAVOUR O F THE ASSESSEE BY MAKING FOLLOWING OBSERVATIONS :- 38. THUS, IT IS CLEAR FROM THE ABOVE THAT THE PRO VISIONS OF SEZ ACT SHALL HAVE OVER RIDING EFFECT EVEN IF ANYTHING INCONSISTENT IS CONTAINED IN THE INCOME TAX ACT. THE SEZ ACT HAS BE EN ENACTED ITA NO.4742/DEL./2015 8 CONTAINING THE SPECIFIC LEGISLATION TO BE BROUGHT I N OTHER STATUTES. WHEN THE TERMS LIKE SEZ, AUTHORIZED OPERATIONS, DEV ELOPERS ETC HAVE BEEN SPECIFICALLY DEFINED UNDER THE SEZ ACT, I T IS NOT OPEN TO ANY AUTHORITY TO RELOOK AT THE MEANING OF TERMS ALREADY DEFINED UNDER THE SEZ ACT. IN THIS REGARD, WE ALSO FIND SUPPORT FROM THE DECISION OF THE TRIBUNAL IN THE CASE OF AS SESSEE GROUP ITSELF FOR THE A.Y 2007-08, THE RELEVANT PARAGRAPHS THEREOF IS BEING REPRODUCED HEREUNDER :- PAGE 17 PARA 5.3 THE SEZ ACT 2005, AS WELL AS, INC OME TAX ACT, 1961 HAVE PLACED DEVELOPER AND THE CO- DEVELOPER AT THE SAME LEVEL I.E FOR DEVELOPMENT (CR EATING INFRASTRUCTURE FACILITIES), MAINTENANCE AND OPERATI ONS. IT WAS IN THIS CONTEXT THAT SEZ BOA, UNDER THE AEGIS O F MINISTRY OF COMMERCE, APPROVED CONVERSION OF BARE SHELL INTO WARM SHELL BY THE CO-DEVELOPER AS AUTHORIZED OPERATIONS PAGE 21 PARA 5.15 ASSESSEE RECEIVED CLARIFICATION FROM BOA/GOVERNMENT OF INDIA , MINISTRY OF COMMERCE AND INDUSTRY, DEPTT OF COMMERC E (SEZ SECTION), UDYOG BHAWAN, NEW DELHI DATED 18/1/2011 & 20/1/2011 BOA IN EXERCISE OF ITS STATUT ORY POWERS APPROVED BUSINESS MODEL OF THE ASSESSEE CLAR IFIED THAT UNDER RULE 11(9) SALE OF LAND IS NOT PERMISS IBLE IN A SEZ. HOWEVER CO- DEVELOPER CAN TAKE LAND ON LEASE F ROM DEVELOPER FOR DEFINITE PERIOD. FURTHER SEZ BUILDIN GS I.E. BARE SHELL/COLD SHELL CAN BE TRANSFERRED AND HANDED OVER TO THE CO-DEVELOPER ON PAYMENT OF CONSIDERATION TO DEVELOPER, THIS TRANSFER IS PERMISSIBLE AND AUTHORI ZED AS PER SEZ ACT AND RULES. THE CORRESPONDENCE WITH THE SEZ AUTHORITIES ON THIS ISSUE IS PLACED ON THE P.B AT P AGES 122 TO 130 AND ITS CONTENTS ARE REFERRED TO BY THE LD. COUNSEL. THUS AS PER SPECIFIC CLARIFICATIONS BY BOA THE TRAN SFER OF BARE SHELL BUILDING ON LONG TERM LEASE TO APPROVED CO- DEVELOPER ARE AUTHORIZED ACTIVITIES UNDER SEZ ACT & RULES. THUS THESE CLARIFICATIONS ALSO DISPEL THE FI NDINGS OF CIT REVISING THE ASSE4SSMENT ORDER AND SETTING ASID E THE SAME. 263 ORDER AND FINDINGS THEREIN BEING CONTRARY TO LEGAL PROVISIONS IS LIABLE TO BE QUASHED. THE ASSES SMENT ORDER BEING IS CONFORMITY WITH SEZ ACT, RULES AND PROVISIONS OF SECTION 80IAB CAN NEITHER BE TERMED A S ERRONEOUS OR PREJUDICIAL TO THE INTEREST OR REVENUE . PAGE 28 PARA 6.9 LD. COUNSEL CONTENDS THAT LD. CITS PROPOSITION TO TAX IT AS CAPITAL GAINS IS AGAINST T HE BASIC PRINCIPLE OF TAXATION AS LARGE SCALE REAL ESTATE BU SINESS ACTIVITIES CONTINUOUSLY CARRIED ON BY ASSESSEE AND BARE SHELL BUILDINGS DECLARED AS STOCK-IN-TRADE IN ITS B OOKS OF ACCOUNTS, AS PER ITS OBJECTS CLAUSE IN ITS MEMORAND UM AND ARTICLES OF ASSOCIATION CAN BE TAXED ONLY UNDER THE HEAD BUSINESS INCOME. ITA NO.4742/DEL./2015 9 PAGE 35 PARA 6.16 THE LETTER OF APPROVAL IS ISSUED BY THE BOARD BY A STATUTORY PROCESS OF LAW AND ONCE IT HAS BEEN ISSUED BY THE EXCLUSIVE SANCTIONING AUTHORITY, THE CONSEQUENTIAL BENEFITS THAT ARE AVAILABLE TO A DEVE LOPER CANNOT BE DENIED. THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME-TAX EXERCISING THE POWER OF REVISION UNDER THE ACT CANNOT HAVE ANY JURISDICTION TO QUESTION THE VALIDITY OF THE LEGALITY OF THE AUTHOR IZED OPERATIONS WHICH HAVE BEEN APPROVED BY THE REGULATO RY BODY OF THE CENTRAL GOVERNMENT I.E. BOA AND ATTEMPT TO DISPUTE THE SAME IS CONTRARY TO THE STATUTORY PROVI SIONS OF THE SEZ ACT. PARA 6.17 BOA ARE APPOINTED BY THE CENTRAL GOVERNME NT IN VARIOUS FIELDS OF GIVING BENEFITS LIKE SEZ, CUST OMS AND VARIOUS OTHER FISCAL LEGISLATION, THE INCOME TAX AU THORITIES CANNOT SIT OVER THE JUDGMENT OF THE BOA. BY CATENA OF JUDGMENTS THE COURTS HAVE HELD THAT THE APPROVAL ACCORDED BY SUCH REGULATORY BOARDS IN DEVELOPMENT SCHEMES CANNOT BE QUESTIONED BY TAX AUTHORITIES. RE LINE IN THIS BEHALF IS PLACED ON: -APOLLOTYRES VS. CIT (2002) 9 SCC 1(SC) -MALAYALA MANORAMA CO. LTD VS. CIT (2008) 12 SCC 61 2 (SC) -CIT VS. HCL COMMET SYSTEM & SERVICE LTD. 305 ITR 409 (SC) -MARMO CLASSIC VS. COMMISSIONER OF CUSTOMS [2002 (143) ELT 153(TRIB.--MUMBAI] AFFIRMED BY HONBLE SUPREME COURT IN [2003 (152) ELT A85(SC)]; -LOKASH CHEMICAL WORKS VS. M. S. MEHTA 1981 (8) ELT 235; -TITAL MEDICAL SYSTEM PVT. LTD. VS. COLLECTOR 2003 (151) ELT 254 (SC) -CESTAT JUDGMENT IN HICO ENTERPRISES VS. COMMISSIONER 2005-(189)ELT 135 (TRIB. LB) APPROVED BY HONBLE SUPREME COURT IN 2008 (228) ELT161 (SC); -ATUL COMMODITIES PVT. LTD. VS. COMMISSIONER OF CUSTOMS COCHIN 2009 (235) ELT 385 (SC); -M.J. EXPORTS LTD. VS. CEGAT 1992 (60) ELT 161 (SC) ; ITA NO.4742/DEL./2015 10 THE ASSESSEE HAS NOT SOLD ANY LAND BUT ONLY TRANSFE RRED THE BARE SHELL BUILDINGS ON LEASE. THEREFORE, THERE IS NO ERROR AS POINTED OUT BY LD. CIT. PAGE 42 PARA 9 THE CONDITION MENTIONED IN NOTIFICATION DATED 27/10/200 6 GIVING TO ASSESSING OFFICER THE RIGHT TO EXAMINE TH E TAXABILITY OF ISSUE OF 80IAB IN THE SPIRIT OF SEZ P ROVISION STANDS VINDICATED. BESIDES, WE MAY HASTEN TO ADD TH AT APPARENTLY THIS RIDER APPEAR TO BE MADE WHILE APPRO VING THE CODEVELOPER AGREEMENT. THIS IS POSSIBLE APPLICA BLE TO CO-DEVELOPER AND NOT THE ASSESSEE AS THE CONDITION WAS PUT DURING THE COURSE OF APPROVAL OF THE AGREEMENT BETW EEN ASSESSEE AND THE CO-DEVELOPER. PAGE 46 PARA 9.5 APROPOS THE ISSUE OF SALE OF BARE SHELL BUILDINGS BEING AUTHORIZED ACTIVITY, IT IS AMPLY CL EAR THAT THE SEZ ACT AUTHORIZES ACTIVITIES INCLUDE CONSTRUCT ION OF BARE SHELL/COLD SHELL/WARM SHELL BUILDINGS AND TRAN SFER THEREOF, BOA HAS APPROVED IT AND CLARIFIED THE SAME . THERE IS ENOUGH MATERIAL ON THE RECORD TO HOLD THAT THE TRANSFER OF BARE SHELL BUILDINGS TO CO-DEVELOPERS C ONSTITUTE AUTHORIZED ACTIVITY. THUS, WE SEE NO ERROR ON ANY C OUNT AS HELD BY CIT IN THE ORDER OF ASSESSING OFFICER ALLOW ING DEDUCTION U/S 80IAB. 39. WE THUS FIND THAT ASSESSEE IS A DEVELOPER UNDE R THE SEZ ACT AND IS IN THE BUSINESS OF DEVELOPING A SEZ, THE SEZ HAS BEEN NOTIFIED ON THE FIRST DAY OF APRIL 2005 UNDER THE S PECIAL ECONOMIC ZONE ACT 2005 ; AND THE PROFITS HAVE BEEN DERIVED FROM THE BUSINESS OF DEVELOPMENT, OPERATION AND MAI NTENANCE OF SEZ. WE THUS FULLY AGREE WITH THE FINDING OF THE LD . CIT(A) THAT ALL THE CONDITIONS AS REQUIRED TO BE SPECIFIED UNDE R THE SEZ ACT/RULES ARE FULFILLED AND THE ASSESSEE IS APPROVE D DEVELOPER FOR ALL THE INTENT AND PURPOSES OF SECTION 80 IAB I.T O F THE ACT. CONSEQUENT UPON APPROVAL GRANTED BY THE BOA FOR TRA NSFER OF BARE SHELL TO THE CO-DEVELOPER, THE PROFITS ARISING TO THE ASSESSEE FROM SUCH AN AUTHORIZED TRANSACTION ARE ELIGIBLE FO R DEDUCTION U/S 80IAB OF THE ACT. FOR A READY REFERENCE PROVISI ONS LAID DOWN U/S 80IAB (1) OF THE ACT ARE BEING REPRODUCED HEREU NDER:- '80IAB( 1)- WHERE THE GROSS TOTAL INCOME OF AN ASSE SSEE, BEING A DEVELOPER, INCLUDES ANY PROFITS AND GAINS D ERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINES S OF DEVELOPING A SPECIAL ECONOMIC ZONE, NOTIFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 UNDER THE SPECIAL ECONOM IC ZONE ACT, 2 THERE SHALL, IN ACCORDANCE WITH AND SUB JECT TO THE PROVISIONS OF THIS SECT' BE ALLOWED, IN COMPUTI NG THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AMOUNT EQUAL TO ONE HUNDRED PER CENT, OF THE PROFITS AND GAINS D ERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS.' ITA NO.4742/DEL./2015 11 9. FOLLOWING THE DECISION RENDERED BY THE COORDINAT E BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 (SUPRA) AND IN VIEW OF THE FACT THAT THE YEAR UNDER ASSESSMENT IS THIRD YEAR OF CLAIMING DEDUCTION, IT IS PROVED ON FILE THAT ASSES SEE COMPANY IS A DEVELOPER UNDER THE SEZ ACT AND THE SEZ IS DULY NOT IFIED AND ALL THE PROFITS DERIVED BY THE ASSESSEE COMPANY FROM TH E BUSINESS OF DEVELOPMENT OPERATION AND MAINTENANCE OF SEZ. CONS EQUENTLY, ON THE BASIS OF APPROVAL GIVEN BY THE BOARD OF APPROVA LS FOR THE TRANSFER OF BARE SHELL TO THE CO-DEVELOPER AS PER A GREEMENT, THE PROFIT ARISING TO THE ASSESSEE FROM THE AFORESAID A UTHORIZED TRANSACTIONS IS ELIGIBLE FOR DEDUCTION U/S 80IAB OF THE ACT. SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RE TURNED BY LD. CIT (A), HENCE GROUNDS NO.1 TO 14 ARE DETERMINED AGAINS T THE REVENUE. GROUND NO.15 10. AO TREATED THE SIGNAGE INCOME RECEIVED BY THE A SSESSEE COMPANY FROM TENANTS AS INCOME FROM OTHER SOURCES RATHER THAN INCOME FROM HOUSE PROPERTY AND THEREBY MADE DISAL LOWANCE OF DEDUCTION U/S 24(A) OF THE ACT TO THE TUNE OF RS.1, 13,71,259/-. IT IS THE CASE OF THE ASSESSEE THAT SIGNAGE INCOME OF RS. 3,79,04,198/- HAS BEEN RECEIVED FROM TENANTS TO WHOM THE BUILDING S HAVE BEEN ITA NO.4742/DEL./2015 12 GIVEN ON RENT AND NOT TO ANY OUTSIDE PARTIES. THE LESSEE WAS ALLOWED TO PUT SIGNAGE ON THE LOCATION WHERE THEIR OFFICES ARE SITUATED WHICH ARE NOT ADVERTISEMENT HOARDINGS AND THE ASSESSEE COMPANY HAS NOT RECEIVED SIGNAGE INCOME FROM ANY OU TSIDE PARTY OTHER THAN THE TENANTS FOR PUTTING THE SIGNAGE IN T HE COMPANYS BUILDINGS. ASSESSEE COMPANY ALSO RELIED UPON MEMOR ANDUM OF UNDERSTANDING DATED 21.05.2007 ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND ONE OF THE TENANTS, M/S. GLOBAL SPACE P VT. LTD.. THE LD. CIT (A) EXTRACTED THE RELEVANT PORTION OF MOU I N THE IMPUGNED ORDER AND THE SAME IS REPRODUCED FOR READY PERUSAL AS UNDER :- SUBJECT TO ALL LOCAL LAWS APPLICABLE, LESSOR SHALL THROUGH ITS ARCHITECT IDENTIFY THE LOCATIONS AND PR OVIDE SPACE FOR SIGNAGE AT THE ATRIUM/FLOOR OCCUPIED BY T HE LESSEE, AS APPROVED BY THE ARCHITECT AND THE LESSEE WILL THE ALLOWED TO PUT SIGNAGE ON SUCH LOCATION. ALL TAXES INCLUDING SERVICE TAX, DUTIES, RATES, CESSES, COSTS AND CHARGES RELATING TO THE SIGNAGE PAYABLE TO THE CONCERNED AUTHORITIES SHALL BE BORNE AND PAID BY LESSEE. 11. THE LD. CIT (A) ALSO RELIED UPON THE DECISION R ENDERED BY THE DELHI BENCH OF THE TRIBUNAL IN CASE CITED AS MANPREET SINGH VS. ITO (2015) 53 TAXMANN.COM 244 (ITAT DELHI) WHEREIN IT WAS HELD THAT, THE INCOME EARNED BY THE ASSESSEE FOR RENTING OF T ERRACE FOR INSTALLATION OF MOBILE ANTENNA WAS TAXABLE AS INCOME FROM ITA NO.4742/DEL./2015 13 HOUSE PROPERTY AND AS SUCH DEDUCTION U/S 24(A) @ 3 0% OF THE ANNUAL VALUE WAS ALLOWABLE. 12. KEEPING IN VIEW THE AFORESAID FACTS AND CIRCUMS TANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT WHEN IT IS NOT IN DISPUTE THAT THE ASSESSEE COMPANY HAS DERIVED THE SIGNAGE I NCOME FROM THE TENANTS FROM THE SPACE OWNED BY THE ASSESSEE COMPAN Y AND NOT FROM THE OUTSIDERS AS IT ALLOWED TENANTS TO USE THE SPACE AT THE ATRIUM/ DIFFERENT FLOORS FOR PUTTING SIGNAGE, THE S IGNAGE INCOME HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY AND A S SUCH IS ELIGIBLE FOR DEDUCTION U/S 24(A) OF THE ACT @ 30% O F SUCH INCOME. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE FIND INGS RETURNED BY LD. CIT (A) ON THIS ISSUE, THIS GROUND IS DETERMINED AG AINST THE REVENUE. 13. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 2 ND DAY OF JANUARY , 2019 . SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 2 ND DAY OF JANUARY , 2019 TS ITA NO.4742/DEL./2015 14 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-1, GURGAON. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.