VITP Private Limited, Hyd, Hyderabad V. DCIT, Circle-3(3), Hyderabad, Hyderabad

ITA 729/HYD/2015

• Counselvise Citation: 72922514 RSA 2015
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: RAGHUNATHAN S
• Keywords: Opportunity of being heard; Difference of opinion; Competent authority; Assessment record; Change of opinion
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 729/HYD/2015 ASSESSMENT YEAR: 2009-10 VITP PVT. LTD., HYDERABAD PAN AACCV 2672 G VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAGHUNATHAN S REVENUE BY : SHRI KONDA RAMESH DATE OF HEARING : 31-08-2015 DATE OF PRONOUNCEMENT : 04-09-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER DATED 27/03/2015 PASSED U/S 263 OF THE IT ACT BY LD. CIT 5, HYDERABAD FOR THE AY 2009-10. 2. ASSESSEE HAS RAISED A NUMBER OF GROUNDS CHALLENG ING THE ORDER PASSED U/S 263 BOTH ON THE ISSUE OF JURISDICTION AS WELL AS ON MERITS. 3. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIAN COMPAN Y IS ENGAGED IN THE BUSINESS OF PROVIDING INFRASTRUCTURE FACILITIES , WHICH INTER-ALIA, INCLUDES DEVELOPING, OPERATING AND MAINTENANCE OF I NDUSTRIAL PARK. FOR THE AY UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 17/09/09 DECLARING TOTAL INCOME OF RS. 14,48,61,750 AFTER CLAIMING DEDUCTION U/S 80IA(4)(III) OF THE ACT FOR AN AMOUNT OF RS. 33,36,38,229. ASSESSEES CASE WAS SELECTED FOR SCRU TINY AND AO AFTER VERIFYING THE BOOKS OF ACCOUNT AS WELL AS OTHER DET AILS AND MAKING 2 ITA NO. 729 /HYD/2015 VITP PVT. LTD. NECESSARY ENQUIRY COMPLETED ASSESSMENT U/S 143(3) O F THE ACT VIDE ORDER DATED 28/03/13. WHILE COMPLETING ASSESSMENT, AO MADE A NUMBER OF ADDITIONS/DISALLOWANCES, AS A RESULT OF W HICH GROSS INCOME WAS DETERMINED AT RS. 46,17,01,813 AFTER ALLOWING D EDUCTION UNDER CHAPTER-VA, TAXABLE INCOME WAS DETERMINED AT RS. 20 ,54,38,350. SUBSEQUENTLY, ASSESSMENT RECORDS OF ASSESSEE RELATI NG TO AY UNDER CONSIDERATION CAME UP TO BE EXAMINED BY LD. CIT IN EXERCISE OF POWER CONFERRED U/S 263 OF THE ACT. WHILE EXAMINING THE R ECORDS OF ASSESSEE, LD. CIT NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA(4)(III) FOR FOUR UNITS IN INDUSTRIAL PARK OUT OF TOTAL FIVE UNITS. HE FOUND THAT OUT OF FOUR UNITS, ASSESSEE HAS CLAIMED DEDUCTION FOR RS. 5,77,76,303 IN RESPECT OF UNIT NAMED CAPELLA AND IN COURSE OF ASSESSMENT PROCEEDING, AO ACCEPTING ASSESSEES SUBM ISSION THAT IT HAS COMPLIED TO THE CONDITIONS PRESCRIBED BY DEPART MENT OF INDUSTRIAL POLICY AND PROMOTION (DIPP), GOVT. OF INDIA HAS AL LOWED ASSESSEES CLAIM OF DEDUCTION U/S 80IA(4)(III). HE OBSERVED, W HILE DOING SO AO DID NOT VERIFY WHETHER ASSESSEE HAS VIOLATED CONDIT IONS LAID DOWN IN THE NOTIFICATION NO. 244/07 DATED 28/09/07 ISSUED B Y CBDT. THUS, LD. CIT WAS OF THE OPINION THAT BECAUSE OF FAILURE ON T HE PART OF AO TO VERIFY THE FACT WHETHER ASSESSEE HAS COMPLIED TO TH E CONDITIONS OF SECTION 80IA(4)(III), WHILE ALLOWING DEDUCTION, ASS ESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. ACCORDINGLY, HE ISSUED A NOTICE TO ASSESSEE ON 14/0 3/15 REQUIRING HIM TO SHOW CAUSE AS TO WHY ASSESSMENT ORDER SHALL NOT BE REVISED/SET ASIDE. 3.1 IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, ASS ESSEE WHILE OBJECTING TO THE PROPOSED REVISION OF THE ASSESSMEN T ORDER, SUBMITTED A DETAILED REPLY STATING THEREIN THAT ASSESSEE HAS NOT VIOLATED ANY OF THE CONDITIONS WHILE CLAIMING DEDUCTION U/S 80IA(4) (III). ASSESSEE ALSO SUBMITTED, IT HAS OBTAINED NECESSARY APPROVAL FROM DIPP AND CBDT AS REQUIRED UNDER RULE 18C OF INCOME-TAX RULES. IT WAS SUBMITTED BY ASSESSEE THAT AS FAR AS INDUSTRIAL PARK NAMED CAPEL LA IS CONCERNED, 3 ITA NO. 729 /HYD/2015 VITP PVT. LTD. ASSESSEE HAS APPLIED FOR APPROVAL OF DIPP UNDER NON -AUTOMATIC ROUTE AND THE CENTRAL GOVT. THROUGH DIPP HAS APPROVED IND USTRIAL PARK CAPELLA THROUGH NOTIFICATION DATED 10/04/07. IT WAS SUBMITTED THAT IN CONSEQUENCE TO THE NOTIFICATION OF DIPP, CBDT HAS A LSO NOTIFIED INDUSTRIAL PARK CAPELLA FOR AVAILING DEDUCTION U/S 80IA(4)(III) VIDE NOTIFICATION DATED 28/07/07. IT WAS SUBMITTED BY AS SESSEE THAT THE CONDITION IMPOSED IN THE NOTIFICATION ISSUED BY CB DT TO THE EFFECT THAT NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF T HE ALLOCABLE INDUSTRIAL AREA OF AN INDUSTRIAL PARK IS NOT APPLIC ABLE TO NON-AUTOMATIC ROUTE. IT WAS FURTHER SUBMITTED BY ASSESSEE THAT SI NCE ALL THESE ISSUES WERE ENQUIRED IN DETAIL BY AO AND HE COMPLETED THE ASSESSMENT ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 80IA(4)( III) AFTER PROPER ENQUIRY, ASSESSMENT ORDER CANNOT BE CONSIDERED TO B E ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. FOR THE PR OPOSITION THAT CONDITION IMPOSED IN CBDT NOTIFICATION TO THE EXTEN T THAT NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF ALLOCABLE INDUST RIAL AREA OF AN INDUSTRIAL PARK IS NOT APPLICABLE TO APPROVAL GRANT ED UNDER NON- AUTOMATIC ROUTE, ASSESSEE RELIED UPON A NUMBER OF D ECISIONS INCLUDING THE DECISION OF ITAT, HYDERABAD BENCH IN CASE OF L&T INFOCITY LTD. VS. CIT. 3.2 LD. CIT, HOWEVER, DID NOT FIND MERIT IN THE SUB MISSIONS OF ASSESSEE. REFERRING TO THE NOTIFICATION ISSUED BY C BDT VIDE NOTIFICATION NO. 244/07 DATED 28/09/09 AND MORE SPE CIFICALLY PARA NO. 4 OF THE SAID NOTIFICATION, LD. CIT OBSERVED, THE C ONDITION IMPOSED THEREIN STIPULATES THAT NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AREA OF THE INDUSTRIAL PAR K, WHEREAS, ONE OF THE UNIT VIZ.; CA COMPUTER ASSOCIATION INDIA PVT. L TD. OCCUPIES MORE THAN 50% OF THE INDUSTRIAL SPACE, HENCE, ASSESSEE H AS VIOLATED THE CONDITIONS IMPOSED IN THE CBDT NOTIFICATION. LD. CI T OBSERVED, THOUGH, ASSESSEE HAS VIOLATED THE AFORESAID CONDITI ON AS PER THE NOTIFICATION ISSUED BY CBDT, BUT, AO WITHOUT VERIFY ING THIS ASPECT HAS COMPLETED THE ASSESSMENT ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 4 ITA NO. 729 /HYD/2015 VITP PVT. LTD. 80IA(4)(III). HE HELD THAT DECISION TAKEN BY AO WIT HOUT REQUISITE VERIFICATION OR ENQUIRES CANNOT CONSTITUTE FORMATIO N OF AN OPINION. HE OBSERVED THAT CHANGE OF OPINION IS POSSIBLE ONLY WH EN THERE EXISTS A VALID OPINION. AS FAR AS THE DECISION OF ITAT IN CA SE OF L&T INFOCITY IS CONCERNED, LD. CIT OBSERVED, SINCE THE DECISION WAS NOT PART OF RECORD AT THE TIME OF FINALIZATION OF ASSESSMENT, T HE SAME CANNOT BE TAKEN INTO CONSIDERATION. WITH THE AFORESAID OBSERV ATIONS, LD. CIT SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO RE-D O ASSESSMENT DE- NOVO. BEING AGGRIEVED ASSESSEE IS BEFORE US. 4. LD. AR MADE DETAILED SUBMISSIONS BOTH ORALLY AS WELL AS THROUGH WRITING. PRIMARY CONTENTION OF LD. AR IS, A SSESSEE HAS APPLIED FOR APPROVAL OF CAPELLA INDUSTRIAL PARK THROUGH NON -AUTOMATIC ROUTE AS PER THE INDUSTRIAL PARK SCHEME, 2002. HE SUBMITTED, THE CONDITION IN PARA 4 OF THE CBDT NOTIFICATION, WHICH STIPULATES T HAT NO SINGLE UNIT SHOULD OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUST RIAL AREA IS APPLICABLE ONLY IN CASE OF APPROVAL GRANTED UNDER A UTOMATIC ROUTE. LD. AR SUBMITTED, AS PER RULE 18C OF IT RULES THE COMPE TENT AUTHORITY FOR GRANTING APPROVAL IS CENTRAL GOVT. THROUGH DIPP . AS PER SUB-RULE (2), CBDT DOES NOT HAVE AUTHORITY TO PRESCRIBE ANY CONDITIONS FOR APPROVAL OF INDUSTRIAL PARK, BUT, ONLY AFTER APPROV AL IS GRANTED BY DIPP, CBDT IS REQUIRED TO ISSUE A NOTIFICATION IN T ERMS WITH SUB-RULE (4) OF RULE 18C NOTIFYING ASSESSEE FOR AVAILING DE DUCTION U/S 80IA(4)(III). IT WAS SUBMITTED BY LD. AR, DIPP WHIL E GRANTING APPROVAL HAS NOT PUT ANY CONDITION THAT NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AREA. THAT BEING TH E CASE, CONDITION IMPOSED BY CBDT IN ITS NOTIFICATION IS NOT VALID. I N THIS CONTEXT, LD. AR RELIED UPON THE DECISION OF ITAT, HYDERABAD BENCH I N CASE OF MEENAKSHI INFRASTRUCTURE PVT. LTD. VS. CIT, ITA NO. 313 /H/10. LD. AR SUBMITTED, ONCE THE CENTRAL GOVT. APPROVES THE PROJ ECT UNDER THE INDUSTRIAL PARK SCHEME, THE CONDITIONS U/S 80IA(4)( III) ARE SATISFIED AND THE NOTIFICATION FROM CBDT IS ONLY A PROCEDURAL FORMALITY. IN THIS CONTEXT, HE RELIED UPON THE FOLLOWING DECISIONS: 5 ITA NO. 729 /HYD/2015 VITP PVT. LTD. 1. CREATIVE INFOCITY LTD. VS. UNDER SECRETARY [201 2] 19 TAXMANN.COM 270 (GUJ.) 2. CIT VS. M/S ACKRUTI CITY LTD., ITA 71 OF 2012 ( BOM.) 3. ACIT VS. M/S ANNAPURNA BUILDERS, HYD. ITA NO. 1177/HYD/2011. 4.1 FOR THE PROPOSITION THAT UNDER NON-AUTOMATIC RO UTE, THE CONDITION THAT NO SINGLE UNIT SHALL OCCUPY MORE TH AN 50% OF THE ALLOCABLE INDUSTRIAL AREA IS NOT APPLICABLE, LD. AR RELIED UPON THE DECISION OF ITAT, HYDERABAD BENCH IN CASE OF L&T IN FOCITY LTD. VS. CIT, ITA NO. 1515/HYD/11 AND OTHERS, DATED 22/01/20 15. 4.2 CHALLENGING THE ASSUMPTION OF JURISDICTION U/ S 263 OF THE ACT BY LD. CIT, LD. AR SUBMITTED, AO IN COURSE OF ASSES SMENT PROCEEDING HAS CONDUCTED EXTENSIVE ENQUIRY WITH REGARD TO ASSE SSEES CLAIM OF DEDUCTION U/S 80IA(4)(III) OF THE ACT IN RESPECT OF CAPELLA INDUSTRIAL PARK. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE NOTICE ISSUED BY AO ON 26/07/11 DURING THE ASSESSMENT PROCEEDING. REFER RING TO THE SAID NOTICE, LD. AR SUBMITTED, AO SPECIFICALLY ENQUIRED INTO THE CONDITION IMPOSED IN PARA 4 OF THE CBDT NOTIFICATION. IT WAS SUBMITTED, IN RESPONSE TO THE QUERY RAISED BY AO, ASSESSEE SUBMIT TED A REPLY BEFORE HIM ON 18/10/11 EXPLAINING IN DETAIL WHY THE CONDITION IMPOSED IN PARA 4 OF CBDT NOTIFICATION WILL NOT APPLY TO AS SESSEE. LD. AR SUBMITTED, WHEN AO AFTER CONDUCTING NECESSARY ENQUI RY AND APPLYING RELEVANT STATUTORY PROVISION HAS TAKEN A VIEW, WHIC H IS A POSSIBLE VIEW WHILE GRANTING DEDUCTION U/S 80IA(4)(III) TO ASSESS EE, THE ORDER PASSED CANNOT BE CONSIDERED TO BE ERRONEOUS AND PRE JUDICIAL TO THE INTERESTS OF REVENUE. LD. AR SUBMITTED, THE FACT TH AT THE VIEW TAKEN BY AO IS ONE OF THE POSSIBLE VIEW IS ALSO PROVED FROM THE FACT THAT ITAT HYDERABAD BENCH IN CASE OF L&T INFOCITY VS. CIT (SU PRA) HELD THAT CONDITION IMPOSED IN PARA 4 OF CBDT NOTIFICATION WO ULD NOT APPLY TO APPROVAL GRANTED UNDER NON-AUTOMATIC ROUTE. THUS, I T WAS SUBMITTED BY LD. AR WHEN AO HAS TAKEN A POSSIBLE VIEW AFTER P ROPER ENQUIRY AND APPLICATION OF MIND, LD. CIT CANNOT HOLD SUCH VIEW TO BE ERRONEOUS 6 ITA NO. 729 /HYD/2015 VITP PVT. LTD. AND PREJUDICIAL TO THE INTERESTS OF REVENUE ONLY BE CAUSE IT IS NOT TO HIS LIKING, THUS, HE WANTS TO SUBSTITUTE HIS VIEW. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: 1. BHARTI AIRTEL LTD. VS. CIT, ITA NO. 3120/DEL/20 14 2. SATYAM VENTURES ENGG SERVICES PVT. LTD. VS. DCI T, ITA NO. 492/H/08. 3. DR. WILLIAM BRITTO VS. CIT, KARNATALA (CENTRAL) , [2015] 56 TAXMANN.CO. 170 (PANAJI TRIB.) 4. HAPPY FORGINGS LTD. VS. JCIT, [2015] 58 TAXMANN .COM 65 (CHANDIGARH TRIB.) 5. CIT VS. LEISURE WEAR EXPORTS LTD. [2012] 341 IT R 166/202, TAXMAN 130 (DEL.) 6. DIT VS. JYOTI FOUNDATION [ 2013], 357 ITR 388/2 19 4.3 LD. AR SUBMITTED, ONLY BECAUSE AO HAS NOT DISCU SSED IN DETAIL ALL THESE FACTS IN ASSESSMENT ORDER WILL NOT LEAD T O A CONCLUSION THAT HE HAS NOT MADE ENQUIRY ON THE ISSUE. LD. AR ALSO C HALLENGED THE IMPUGNED ORDER OF LD. CIT ON VARIOUS OTHER ISSUES S UCH AS (I) LD. CIT CANNOT SET ASIDE THE ENTIRE ASSESSMENT ORDER, BUT, HAS TO CONFINE THE ISSUE ON WHICH HE CONSIDERS THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, (II) A SSESSMENT ORDER PASSED IS VOID-AB-INITIO AS AO HAS PASSED FINAL ASS ESSMENT ORDER U/S 143(3) OF THE ACT IN STEAD OF A DRAFT ASSESSMENT O RDER U/S 144C. SINCE, THE ISSUE IS UNDER CHALLENGE BEFORE LD. CIT( A), REVISIONAL AUTHORITY CANNOT EXERCISE JURISDICTION U/S 263. 5. LD. DR, ON THE OTHER HAND, RELIED UPON THE REASO NING OF LD. CIT. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF RE VENUE AUTHORITIES. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS CITE D BY LD. AR. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAS DEVELOP ED INDUSTRIAL PARK, WHICH IS AN ELIGIBLE BUSINESS ACTIVITY U/S 80IA(4)( III), HENCE, ASSESSEE IS ENTITLED TO AVAIL DEDUCTION IN RESPECT OF THE PR OFIT DERIVED FROM SUCH 7 ITA NO. 729 /HYD/2015 VITP PVT. LTD. ELIGIBLE BUSINESS. THERE IS ALSO NO DISPUTE TO THE FACT THAT INDUSTRIAL PARK DEVELOPED BY ASSESSEE IS IN TERMS WITH INDUSTR IAL PARKS SCHEME, 2002 OF THE CENTRAL GOVT. AS PER THE SCHEME FORMULA TED BY CENTRAL GOVT. IN THE MINISTRY OF COMMERCE AND INDUSTRY, APP ROVAL FOR INDUSTRIAL PARK CAN BE OBTAINED FROM THE MINISTRY OF COMMERCE AND INDUSTRY, GOVT. OF INDIA THROUGH DIPP EITHER UNDER AUTOMATIC ROUTE OR NON- AUTOMATIC ROUTE. AS FAR AS THE PRESENT ASSESSEE IS CONCERNED, THERE IS NO DISPUTE TO THE FACT THAT IT HAS SOUGHT APPROVAL FOR CAPELLA INDUSTRIAL PARK UNDER NON-AUTOMATIC ROUTE. THE CONDITIONS IMPO SED FOR AUTOMATIC ROUTE AND NON-AUTOMATIC ROUTE ARE DIFFERE NT. AS FAR AS AUTOMATIC ROUTE IS CONCERNED, CONDITIONS IMPOSED AR E AS UNDER: '5. AUTOMATIC APPROVAL (1) AN UNDERTAKING SHALL MAKE AN APPLICATION IN THE FORM-IPS-1 ALONG WITH AN AFFIDAVIT CERTIFYI NG THE DETAILS GIVEN IN SUCH APPLICATION FOR OBTAINING APPROVAL F OR 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 PR OMOTION IN THE MINISTRY OF COMMERCE & INDUSTRY, UDYHOG BHAWAN, NE W DELHI- 110011. (3) THE SECRETARIAT FOR INDUSTRIAL ASSISTANCE REF ERRED TO IN SUB- PARAGRAPH (2) SHALL, UPON RECEIPT OF APPLICATION, GIVE ACKNOWLEDGEMENT FOR RECEIPT OF SUCH APPLICATIONS ALONG WITH, REGI STRATION NUMBER ALLOTTED BY SUCH SECRETARIAT. (4) EVERY APPLICATION UNDER SUB-PARAGRAPH (1) SHAL L BE ACCOMPANIED BY A FEE OF SIX THOUSAND RUPEES PAYABLE BY A DEMAN D DRAFT DRAWN IN FAVOUR OF PAY AND ACCOUNTS OFFICER, DEPARTMENT OF INDUSTRIAL DEVELOPMENT PAYABLE AT STATE BANK OF INDIA, NIRMAN BHAWAN BRANCH, NEW DELHI-110011. (5) ALL APPLICATIONS MADE UNDER SUB-PARAGRAPH (1) AND ELIGIBLE FOR AUTOMATIC APPROVAL IN ACCORDANCE WITH PARAGRAPH 6 SHALL BE DISPOSED OF WITHIN FIFTEEN DAYS OF MAKING SUCH APPLICATION AND THE DECISION FOR SUCH APPROVAL SHALL BE COMMUNICATED TO THE APPLICA NT IMMEDIATELY ON DISPOSAL OF SUCH APPLICATION. 8 ITA NO. 729 /HYD/2015 VITP PVT. LTD. 6. CRITERIA FOR AUTOMATIC APPROVAL AN UNDERTAKIN G WHICH SEEKS APPROVAL UNDER PARAGRAPH 5, SHALL FULFIL THE FOLLO WING CONDITIONS, NAMELY:- (A) THE MINIMUM AREA REQUIRED TO BE DEVELOPED FOR AN IN DUSTRIAL MODEL TOWN SHALL BE 1000 ACRES: PROVIDED THAT MINIMUM AREA FOR SPECIFIED INDUSTRIAL PARK REFERRED TO IN CLAUSE (B) AND (C) OF PARAGRAPH 4 MAY VARY DEPEN DING 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 O F INDUSTRIAL UNITS AS FOLLOWS:- TYPE OF INDUSTRIAL PARK MINIMUM NUMBER OF UNITS TO BE PROVIDED IN THE INDUSTRIAL MODEL TOWN/INDUSTRIAL PARK/GROWTH CENTRE (1) (2) (I) INDUSTRIAL MODEL TOWN REFERRED TO IN CLAUSE (A) OF PARAGRAPH 4. 50 UNITS; (II) INDUSTRIAL PARK REFERRED TO IN CLAUSE (B) OF PARAGRAPH 4. 30 UNITS; (III) GROWTH CENTRE REFERRED TO IN CLAUSE (C) OF PARAGRAPH 4. 30 UNITS; (C) THE MINIMUM PERCENTAGE OF THE AREA TO BE ALLOCATED FOR INDUSTRIAL USE SHALL NOT BE LESS THAN SIXTY SIX PERCENT OF THE TOT AL ALLOCABLE AREA. EXPLANATION: FOR THE PURPOSE OF THIS CLAUSE, THE IN DUSTRIAL USE SHALL INCLUDE ANY ACTIVITY DEFINED IN THE NATIONAL INDUST RIAL CLASSIFICATION 1987 CODE ISSUED BY CENTRAL STATISTICAL ORGANISATIO N, DEPARTMENT OF STATISTICS, MINISTRY OF PLANNING AND PROGRAMME IMPL EMENTATION, 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 9 ITA NO. 729 /HYD/2015 VITP PVT. LTD. (D) THE PERCENTAGE OF LAND TO BE EARMARKED FOR COMMERCI AL USE SHALL NOT BE MORE THAN TEN PER CENT OF THE ALLOCABLE AREA; (E) IN CASE OF AN INDUSTRIAL MODEL TOWN, INDUSTRIAL PAR K AND GROWTH CENTRE, THE MINIMUM INVESTMENT ON INFRASTRUCTURE DE VELOPMENT SHALL NOT BE LESS THAN 50% OF THE TOTAL PROJECT COST. IN THE CASE OF AN INDUSTRIAL PARK AND GROWTH CENTRE WHICH PROVIDES BU ILT UP SPACE FOR INDUSTRIAL USE, THE MINIMUM EXPENDITURE ON INFRASTR UCTURE DEVELOPMENT INCLUDING COST OF CONSTRUCTION OF INDUS TRIAL SPACE, SHALL NOT BE LESS THAN 60% OF THE TOTAL PROJECT COST; (F) NO SINGLE UNIT REFERRED TO IN COLUMN (2) OF THE TAB LE GIVEN IN THE SUB- PARAGRAPH (B) OF PARAGRAPH 6 SHALL OCCUPY MORE THAN FIFTY PER CENT OF THE ALLOCABLE INDUSTRIAL AREA OF AN INDUSTRIAL MODE L TOWN OR INDUSTRIAL PARK OR GROWTH CENTRE; (G) EVERY UNDERTAKING BEING AN INDUSTRIAL PARK SHALL OB TAIN APPROVAL FOR FOREIGN DIRECT INVESTMENT OR NON RESIDENT INDIAN IN VESTMENT FROM THE FOREIGN INVESTMENT PROMOTION BOARD OR RESERVE BANK OF INDIA, OR ANY AUTHORITY SPECIFIED UNDER ANY LAW FOR THE TIME BEIN G IN FORCE, AS THE CASE MAY BE. 6.1 THE CONDITIONS FOR APPROVAL UNDER NON-AUTOMATIC ROUTE ARE AS UNDER: 7. NON AUTOMATIC APPROVAL: (1) ALL APPLICATIONS NO T ELIGIBLE FOR AUTOMATIC APPROVAL UNDER PARAGRAPH 6 SHALL REQUIRE THE APPROVAL OF EMPOWERED COMMITTEE, CONSTITUTE BY THE CENTRAL GOVERNMENT AND ALL SUCH APPLICATIONS SHALL BE PLA CED BEFORE THE EMPOWERED COMMITTEE WITHIN FIFTEEN DAYS OF RECEIP T OF APPLICATIONS. (2) THE EMPOWERED COMMITTEE SHALL CONSIST OF THE F OLLOWING, NAMELY:- (A) SECRETARY, DEPARTMENT OF INDUSTRIAL POLICY AND PROM OTION, GOVERNMENT OF INDIA CHAIRMAN (B) CHAIRMAN, CENTRAL BOARD OF DIRECT TAXES, MEMBER GOVERNMENT OF INDIA, OR HIS REPRESENTATIVE (C) SECRETARY, DEPARTMENT OF URBAN DEVELOPMENT, GOVERNMENT OF INDIA, OR HIS REPRESENTATIVE MEMBER (D) A REPRESENTATIVE OF THE STATE GOVERNMENT TO WHICH THE PROJECT RELATES MEMBER 10 ITA NO. 729 /HYD/2015 VITP PVT. LTD. (E) JOINT SECRETARY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, GOVERNMENT OF INDIA MEMBER SECR ETARY PROVIDED THAT THE EMPOWERED COMMITTEE MAY CO-OPT OT HER SECRETARIES TO THE GOVERNMENT OF INDIA AND OFFICIAL S OF FINANCIAL INSTITUTIONS, BANKS AND PROFESSIONAL EXPERTS FROM I NDUSTRY AND COMMERCE AS CO-OPTED MEMBERS OF THE COMMITTEE AND S UCH CO- OPTED MEMBERS, HOWEVER, SHALL NOT HAVE ANY VOTING R IGHT. (3) THE EMPOWERED COMMITTEE SHALL CONSIDER EACH AP PLICATION ON A CASE TO CASE BASIS, SUBJECT TO ITS COMPLYING WITH THE STATUTORY REQUIREMENTS AS PRESCRIBED BY THE MINISTRY OF FINA NCE UNDER THE INCOME TAX, 1961, AND OTHER APPLICABLE STATUTORY RULES/OBLIGATIONS. THE COMMITTEE WILL CONSIDER E ACH CASE ON ITS MERIT AND GRANT APPROVAL SUBJECT TO SUCH OTHE R CONDITIONS AS MAY BE DEEMED FIT BY IT. HOWEVER, IN ALL CASE S OF REJECTION OF PROPOSALS, THE APPLICANTS SHALL BE AFFORDED AN OPPORTUNITY OF BEING HEARD BY THE COMMITTEE AND THE ORDERS SHALL BE PASSED AND COMMUNICATED WITHIN TWELVE WEEKS. THE COMMITTEE MAY ALSO PERIODICALLY REVIEW IMPLEMENTATION OF THE APPROVE D PROPOSALS. (4) THE EMPOWERED COMMITTEE WILL HOLD MEETINS WHEN EVER NECESSARY. ALL INDUSTRIAL MODEL TOWN/INDUSTRIAL P ARK/GROWTH CENTRE PROPOSAL RECEIVED SHALL BE PLACED BEFORE TH E COMMITTEE WITHIN 15 DAYS OF RECEIPT. THE COMMITTEE, AS FAR AS POSSIBLE, WOULD ENSURE THAT THE GOVERNMENT DECISION ON EACH PROPOSAL IS COMMUNICATED TO THE APPLICANT WITHIN SIX WEEKS . THE COMMITTEE WILL ADOPT ITS OWN MODE AND WORKING PRO CEDURE, KEEPING IN VIEW THE REQUIREMENT OF EACH PROPOSAL. 6.2 THUS, A COMPARATIVE ANALYSIS OF THE AUTOMATIC A PPROVAL ROUTE AND NON-AUTOMATIC APPROVAL ROUTE, WOULD CLEARLY SUG GEST THAT CONDITIONS IMPOSED THEREIN ARE DIFFERENT. CLAUSE (F ) OF AUTOMATIC APPROVAL ROUTE STIPULATES THAT NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AREA OF AN INDUSTRI AL PARK. WHEREAS, SUCH CONDITION IS ABSENT IN NON-AUTOMATIC APPROVAL ROUTE. THUS, ON A PLAIN READING OF THE SCHEME AND CONDITIONS OF APPR OVAL UNDER BOTH AUTOMATIC AND NON-AUTOMATIC ROUTE, IT IS VERY MUCH CLEAR THAT CONDITION STIPULATING THAT NO SINGLE UNIT CAN OCCUP Y MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AREA IS NOT APPLICABLE TO AN INDUSTRIAL PARK APPROVED UNDER NON-AUTOMATIC ROUTE. AT THIS STAGE, IT WOULD BE 11 ITA NO. 729 /HYD/2015 VITP PVT. LTD. RELEVANT TO NOTE THAT RULE 18C OF THE IT RULES, PRE SCRIBES THE CONDITIONS FOR GRANTING BENEFIT U/S 80IA(4)(III). A S PER SUB-RULE (2) OF RULE 18C, THE UNDERTAKING SHALL HAVE TO BE DULY APP ROVED BY THE MINISTRY OF COMMERCE AND INDUSTRY IN THE CENTRAL GO VT. UNDER SCHEME FOR INDUSTRIAL PARK. IT IS SEEN FROM THE RECORD THA T THE MINISTRY OF COMMERCE AND INDUSTRY VIDE NOTIFICATION DATED 10/04 /07, HAS GRANTED APPROVAL TO CAPELLA INDUSTRIAL PARK UNDER INDUSTRIA L PARK SCHEME, 2002 FOR AVAILING BENEFIT U/S 80IA(4)(III). ON A CA REFUL READING OF APPROVAL GRANTED AS AFORESAID, A COPY OF WHICH IS A T PAGE 230 OF ASSESSEES PAPER BOOK, IT IS SEEN THAT MINISTRY OF COMMERCE AND INDUSTRY OF GOVT. OF INDIA HAS NOT PUT ANY CONDITIO N STIPULATING THAT NO SINGLE UNIT SHALL OCCUPY MORE THAN 50% OF ALLOCABLE INDUSTRIAL AREA. HOWEVER, SUCH CONDITION HAS BEEN PUT IN PARA 4 OF T HE NOTIFICATION ISSUED BY CBDT PURSUANT TO THE APPROVAL GRANTED BY DIPP. ON READING OF SUB-RULE (4) OF RULE 18C OF IT RULES, IT IS SEEN THAT ON APPROVAL BY THE CENTRAL GOVT., CBDT IS ONLY REQUIRE D TO NOTIFY THE INDUSTRIAL PARK FOR BENEFIT U/S 80IA(4)(III). THERE FORE, IN OUR VIEW, WHEN THE CENTRAL GOVT. IN THE MINISTRY OF COMMERCE AND I NDUSTRY IS THE COMPETENT AUTHORITY TO GRANT APPROVAL TO AN INDUSTR IAL PARK U/S 80IA(4)(III) AND SUCH AUTHORITY HAVING NOT IMPOSED ANY CONDITION, STIPULATING THAT NO SINGLE UNIT SHALL OCCUPY MORE T HAN 50% OF THE ALLOCABLE INDUSTRIAL AREA, CBDT BEING MERELY A NOTI FYING AUTHORITY CANNOT IMPOSE ANY FRESH CONDITION. THE HONBLE GUJA RAT HIGH COURT IN CASE OF CREATIVE INFOCITY LTD. VS. UNDER SECRETARY (SUPRA) WHILE INTERPRETING RULE 18C OF THE IT RULES, HELD AS UNDE R: ONCE APPROVAL IS GIVEN BY THE COMMERCE MINISTRY TO THE PETITIONER IN TERMS OF SUB-RULE [2] OF RULE L8C, T HE BOARD IS DUTY BOUND TO NOTIFY THE INDUSTRIAL PARKS FOR BENEFITS UNDER SECTION 80-IA WITHOUT ANY FURTHER INVESTIGATION AS TO WHET HER THE PETITIONER HAS COMPLIED WITH THE TERMS AND CONDITI ONS ENVISAGED IN THE SCHEME. SINCE THE POWER OF GRANT OF APPROVA L HAS BEEN CONFERRED UPON THE COMMERCE MINISTRY, IN THE ABSEN CE OF ANY EXPRESS PROVISION IN THE RULES, IT SHOULD BE PRESU MED THAT THE AUTHORITY, WHICH HAS GIVEN APPROVAL, HAS THE POWER OF REVOCATION AND EXAMINATION OF COMPLIANCE OF THE CO NDITIONS UPON WHICH THE APPROVAL HAS BEEN ACCORDED. THEREFO RE, IT IS 12 ITA NO. 729 /HYD/2015 VITP PVT. LTD. THE DUTY OF THE COMMERCE MINISTRY TO DECIDE WHETHE R AN INDUSTRIAL UNDERTAKING IS COMPLYING WITH THE CONDI TIONS ENVISAGED IN THE SCHEME AND IF THE UNDERTAKING FAI LS TO COMPLY WITH THOSE CONDITIONS, IT IS THE COMMERCE MINISTRY ALONE, WHICH HAS THE RIGHT TO WITHDRAW THE BENEFIT GRANTED UNDE R SUB-RULE [2J OF RULE 18C OF THE RULES. AS SOON AS TLTE APPROVAL UNDER SUB- RULE [2] OF RULE 18C IS GIVEN, IT IS OBLIGATORY ON THE PART OF THE CENTRAL BOARD OF DIRECT TAXES TO NOTIFY INDUSTRIAL PARKS IN TERMS OF SUB-RULE [4] OF RULE 18C.' 6.3 THE HONBLE BOMBAY HIGH COURT IN CASE OF M/S AC KRUTI CITY LTD. (SUPRA) HAS ALSO EXPRESSED SIMILAR VIEW AS UNDER: 3.THE CIT(A) AS WELL AS THE TRIBUNAL HAVE HELD THAT THE MINISTRY OF COMMERCE AND INDUSTRY HAD FINALLY BY L ETTER DATED 31 ST DECEMBER, 2004 APPROVED THE INDUSTRIAL PARK AND A COPY OF THE SAME WAS FORWARDED TO THE CBDT. IN TERMS OF RU LE 18C(4) OF THE RULES, ONCE THE INDUSRRIAL PARK IS APPROVED BY THE MINISTRY OF COMMERICE AND INDUSTRY, THE CBDT HAS T O SUOMOTTO ISSUE THE NOTIFICATION. THE TRIBUNAL, ON EXAMINAT ION OF ALL FACTS CONCLUDED THAT ALL THE REQUISITE CONDITIONS FOR CLAIMING BENEFIT UNDER SECTION 80IA(4)(III) OF THE ACT HAS BEEN COMPLIED WITH BY THE RESPONDENT ASSESSEE DURING T HE ASSESSMENT YEAR IN QUESTION. FURTHER, THERE IS NO REASON TO HOLD THE BENEFIT UNDER SECTION 80IA(4)(III) OF THE ACT IS AVAILABLE ONLY PROSPECTIVELY FROM THE DATE OF THE ISSUE OF N OTIFICATION BY THE CBDT. IN THESE CIRCUMSTANCES, AS THE DECISION OF THE TRIBUNAL IS BASED ON FINDING OF FACT AND MERE DELA Y ON THE PART OF THE CENTRAL BOARD OF DIRECT TAXES IN ISSUING TH E NOTIFICATION WOULD NOT WARRANT THE RESPONDENT - ASSESSEE BEING DENIED THE BENEFIT OF SECTION 80IA(4)(III). ' 6.4 THE OTHER DECISIONS OF ITAT REFERRED TO BY LD. AR ALSO EXPRESS SIMILAR VIEW. IN FACT, ITAT, HYDERABAD BENCH WHILE CONSIDERING IDENTICAL ISSUE IN CASE OF L&T INFOCITY LTD. (SUPRA ) AFTER ANALYZING THE SCHEME FOR APPROVAL BOTH UNDER AUTOMATIC AND NON-AU TOMATIC ROUTE, HELD THAT CONDITION IMPOSED IN PARA 4 OF CBDT NOTI FICATION IS NOT APPLICABLE TO APPROVAL GRANTED UNDER NON-AUTOMATIC ROUTE. FOR BETTER CLARITY WE REPRODUCE HEREIN THE OBSERVATIONS MADE B Y THE COORDINATE BENCH IN THIS REGARD: THUS, AS CAN BE SEEN, THE CONDITIONS AS SPECIFIED U NDER AUTOMATIC APPROVAL SCHEME ARE NOT SPECIFIED UNDER NON-AUTOMATIC SCHEME AND ASSESSEE HAVING APPLIED SEPARATELY AND EMPOWERED COMMITTEE HAVING EXAMINED 13 ITA NO. 729 /HYD/2015 VITP PVT. LTD. THE PROPOSAL CASE BY CASE HAS GRANTED THE SANCTI ON VIDE LETTER DT.11-04- 2007 IN WHICH 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 INDUSTRIAL PARK , IN TERMS OF THE INDUSTRIAL PARK SCHEME, 2002, NOTIFIED BY THIS DEP ARTMENT IN EXERCISE OF POWER UNDER SECTION 80 IA, SUB SECTION 4(III) OF T HE INCOME TAX ACT, 1961, SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS: I) NAME OF THE INDUSTRIAL UNDERTAKING M/S. L&T INFOCITY LTD., HYDERABAD II) ADDRESS OF THE PROPOSED LOCATION OF THE INDUSTRIAL PARK MADHAPUR VILLAGE, SERILINGAMPALLI MUNICIPALITY, DISTRICT RANGA REDDY, AP - 500 033. III) PROPOSED ARAS OF THE INDUSTRIAL PARK 9.16 ACRE S IV) PROPOSED ACTIVITIES SECTION DIVISION GROUP CLASS A 8 89 892 - DATA PROCESSING, SOFTWARE DEVELOPMENT AND COMPUTER CONSULTANCY B 8 89 893 - BUSINESS AND MANAGEMENT CONSULTANCY ACTIVITIES C 8 89 894 - ARCHITECTURAL AND ENGINEERING AND OTHER TECHNICAL CONSULTANCY ACTIVITIES. V) PERCENTAGE OF ALLOCABLE AREA EARMARKED FOR INDUSTRIAL USE 100% VI) PERCENTAGE OF ALLOCABLE AREA EARMARKED FOR COMMERCIAL USE NIL VII) PROPOSED NUMBER 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/- 14 ITA NO. 729 /HYD/2015 VITP PVT. LTD. X) INVESTMENT ON INFRASTRUCTURE DEVELOPMENT INCLUDING INVESTMENT ON BUILT UP SPACE FOR INDUSTRIAL USE RS.1,60,79,28,658/- XI) EXPECTED DATE OF COMMENCEMENT OF THE INDUSTRIAL PARK 31-03-2006 NOT ONLY THAT, THE CBDT HAS ALSO NOTIFIED VIDE NOT IFICATION DT.28 TH SEPTEMBER, 2007, EXTRACTING THE SAME TABLE, WHICH WAS 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) DATED T HE 1 ST APRIL, 2002, SHALL OCCUPY MORE THAN FIFTY PERCENT OF THE ALLOCABLE INDUSTRIAL AREA OF AN INDUSTRIAL PARK. FOR THIS PURPOSE A UN IT MEANS ANY SEPARATE AND DISTINCT ENTY FOR THE PURPOSE OF ONE 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 AUTOMAT IC APPROVAL SCHEME, BUT UNDER NON-AUTOMATIC APPROVAL SCHEME. IN VIEW OF THIS, SINCE THERE IS ALREADY APPROVAL FROM THE RELEVANT AUTHORITIES AND ALSO FROM THE CBDT, WE DIRECT THE ASSESSING OFFICER TO GRANT THE DEDUCTION U/S.80IA SUBJECT TO VERIFICATION OF COMPUTATION. ASSESSEE' S GROUND ON THIS ISSUE IS ALLOWED. 6.5 THUS, CONSIDERING THE FACTS OF ASSESSEES CASE IN THE LIGHT OF JUDICIAL PRECEDENTS REFERRED TO ABOVE, THE ONLY RAT IONAL CONCLUSION WOULD BE, CAPELLA INDUSTRIAL PARK DEVELOPED BY ASS ESSEE HAVING BEEN APPROVED BY MINISTRY OF COMMERCE AND INDUSTRY, GOVT. OF INDIA UNDER NON-AUTOMATIC ROUTE, THE CONDITION IMPOSED UN DER PARA 4 OF CBDT NOTIFICATION STIPULATING THAT NO SINGLE UNIT S HOULD HAVE MORE THAN 50% OF THE ALLOCABLE INDUSTRIAL AREA IS NOT AP PLICABLE TO PRESENT ASSESSEE. MOREOVER, AS HELD BY HONBLE GUJARAT HIGH COURT (SUPRA), COMMERCE MINISTRY BEING THE COMPETENT AUTHORITY FOR GRANTING APPROVAL, THEY ONLY HAVE THE POWER TO VERIFY WHETHE R CONDITIONS OF THE SCHEME HAVE BEEN VIOLATED AND IF IT IS FOUND SO, ON LY THEY CAN 15 ITA NO. 729 /HYD/2015 VITP PVT. LTD. WITHDRAW THE BENEFIT. THEREFORE, FOR AFORESAID REAS ONS, ASSESSEES CLAIM OF DEDUCTION U/S 80IA(4)(III) CANNOT BE REJEC TED. 6.6 ON MERIT HAVING HELD THAT ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IA(4)(III) IN RESPECT OF CAPELLA IN DUSTRIAL PARK, NOW WE WILL PROCEED TO EXAMINE WHETHER ASSUMPTION OF JURIS DICTION U/S 263 BY LD. CIT WHILE HOLDING ASSESSMENT ORDER TO BE ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE IS VALID. A S COULD BE SEEN FROM THE SHOW CAUSE NOTICE ISSUED U/S 263 AS WELL AS THE IMPUGNED ORDER PASSED U/S 263, THE ONLY ISSUE ON WHICH LD. CIT HAS CONSIDERED ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE IS, AO HAS FAILED TO ENQUIRE OR VERIFY WHET HER ASSESSEE HAS COMPLIED TO THE CONDITION IMPOSED UNDER PARA 4 OF C BDT NOTIFICATION WHILE ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 80 IA(4)(III) IN RESPECT OF CAPELLA INDUSTRIAL PARK. AS COULD BE SEE N FROM THE MATERIAL ON RECORD, AO IN COURSE OF ASSESSMENT PROCEEDING HA S SPECIFICALLY ENQUIRED INTO ASSESSEES CLAIM OF DEDUCTION U/S 80I A(4)(III). LETTER DATED 26/07/11 ISSUED BY AO CLEARLY BEARS TESTIMONY TO THIS FACT. FURTHER, IN REPLY TO THE SAID QUERY RAISED BY AO, ASSESSEE IN ITS REPLY SUBMITTED BEFORE AO, HAS STATED AS UNDER: THE INDUSTRIAL PARK SCHEME, 2002 (R POLICV') DARED I APRIL 2002 ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTRY, UNDER WHICH THE CAPELLA IP HAS BEEN APPROVED, IS ATTACHED AS ENCLOSURE LB. THE POLICY PRESCRIBES THE FOLLOWI NG TWO METHODS IN ORDER TO BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA (4)(III) OF THE ACT: AUTOMATIC ROUTE - THE CONDITIONS TO BE FULFILLED ARE PRESCRIBED IN PARAGRAPH 5 AND 6 OF THE POLICY. NON-AUTOMATIC ROUTE / APPROVAL ROUTE - THE CONDI TIONS TO BE FULFILLED ARE PRESCRIBED IN PARAGRAPH 7 OF THE POLICY. WE SUBMIT THAT SUB-PARAGRAPH M OF PARAGRAPH 6 PRES CRIBES THAT NO SINGLE UNIT SEEKING APPROVAL UNDER THE AUTOMATIC ROUTE SHOULD ALLOT MO RE THAN 50% OF THE TOTAL ALLOCABLE INDUSTRIAL AREA TO A SINGLE OCCUPANT. HOWEVER, THE SAID CONDITION DOES NOT FIND ANY MENTION IN PARAGRAPH 7 OF THE POLICY WHICH IS APPL ICABLE TO INDUSTRIAL PARKS SEEKING APPROVAL UNDER NON-AUTOMATIC ROUTE. THE COMPANY HAS MADE APPLICATION FOR APPROVAL OF T HE CAPELLA IP UNDER LIOLL-AUTOMATIC ROUTE IN FORMIPS-L DATED 12 OCTOBER 2006. ACCORDIN GLY, THE ABOVE MENTIONED CONDITION IS NOT APPLICABLE TO THE CAPELLA IF. COP Y OF THE APPLICATION SEEKING APPROVAL 16 ITA NO. 729 /HYD/2015 VITP PVT. LTD. IS ATTACHED HEREWITH AND MARKED AS ENCLOSURE 1 C. THE SALIENT FEATURES AS MENTIONED IN THE APPLICATION ARE AS UNDER: PROPOSED NUMBER OF INDUSTRIAL UNITS 4 4 TOTAL INVESTMENT PROPOSED RS. 28,69,00,000 PROPOSED INVESTMENT ON BUILT UP SPACE FOR INDUSTRIA L USE RS.24,33,00,000 I ALLOCABLE AREA MARKED FOR INDUSTRIAL USE 90% ALLOCABLE AREA MARKED FOR COMMERCIAL USE 10% SUBSEQUENT TO THE APPLICATION, AFTER THOROUGH VERI FICATION, THE COMPANY HAS BEEN GRANTED APPROVAL FOR SETTING UP CAPELLA IP BY DIPP VIDE LETTER NO. 15/112/2006-10 DATED 10 APRIL 2007 SUBJECT TO COMPLYING WITH TERM S AND CONDITIONS AS MENTIONED THEREIN. COPY OF THE LETTER OF APPROVAL IS ATTACHE D HEREWITH AND MARKED AS ENCLOSURE ID. THE DIPP HAS GRANTED THE SAID APPROVAL BASED 0 11 THE SAME PARAMETERS AS REQUESTED BY THE COMPANY IN THE APPLICATION, AS ME NTIONED ABOVE. THE COMPANY WOULD LIKE TO DRAW YOUR ATTENTION TO THE FOLLOWING RELEVANT POINTS AS MENTIONED IN THE SAID DIPP APPROVAL- '4. THE CONDITIONS MENTIONED IN PARA J ABOVE ARE A S PER THE PROPOSAL MADE BY THE UNDERTAKING AND ARE WITHIN THE PROVISIONS OJ THE I NDUSTRIAL PARK SCHEME, 2002. NOTIFIED BY THIS DEPARTMENT VIDE S.O. NO. 35/FE) DATED 1. 4.2002. THE CONDITIONS MENTIONED IN THIS LETTER AND THOSE INCLUDED IN TH E INDUSTRIAL PARK SCHEME.2002, SHOULD BE ADHERED TO DURING THE PERIOD WHEN BENEF ITS UNDER THIS SCHEME ARE TO BE AVAILED. 5. FOLLOWING CONDITIONS IN PARA 9 OJ THE INDUSTRIA L PARK SCHEME, 2002, MAY PARTICULARLY BE NOTED FOR SUITABLE COMPLIANCE: (I) THE INCOME TAX BENEFITS UNDER SUB SECTION 4(I II) OJ SECTION 80IA OF THE INCOME TAX ACT. 1961 'WILL BE AVAILABLE ONLY AFT ER THE PROPOSED NUMBER OF INDUSTRIAL UNITS MENTIONED IN PARA 1 (VI) OF TH IS APPROVAL LETTER, ARE LOCATED IN THE INDUSTRIAL PARK. THE BENEFIT WILL BE AVAIL ABLE ONLY AFTER NOTIFICATION OF THE INDUSTRIAL PARK BY CENTRAL BOARD OF DIRECT TAXES. ' FURTHER, THE COMPANY WOULD LIKE TO SUBMIT THAT IN THE SAID APPROVAL, THE DIPP DID NOT PRESCRIBE ANY CONDITION RESTRICTING THE COMPANY FR OM ALLOTTING MORE THAN FIFTY PERCENT OF THE ALLOCABLE INDUSTRIAL AREA TO ANY SINGLE OCCUPANT/TENANT. SUBSEQUENT TO THE APPROVAL GRANTED BY THE DIPP, TH E CBDT HAS NOTIFIED THE CAPELLA IP IN EXERCISE OF THE POWER CONFERRED BY SECTION 80IA (4)(III) OF THE ACT VIDE NOTIFICATION NO. 244/2007 DATED 28 SEPTEMBER 2007 AS ELIGIBLE T O CLAIM DEDUCTION UNDER THE ACT. COPY OF THE CBDT NOTIFICATION IS ATTACHED HEREWITH AND MARKED AS ENCLOSURE 1 E. THE COMPANY WOULD LIKE TO DRAW YOUR ATTENTION TO THE F OLLOWING RELEVANT POINTS AS PER THE SAID CBDT NOTIFICATION- 17 ITA NO. 729 /HYD/2015 VITP PVT. LTD. 'AND WHEREAS THE CENTRAL GOVERNMENT HAS APPROVED T HE SAID INDUSTRIAL PARK VIDE MINISTRY OF COMMERCE AND INDUSTRY LETTER NO. 15/1 12/2006-1 D DATED 10-4-2007 SUBJECT TO THE TERMS AND CONDITIONS MENTIONED IN THE ANNEXURE TO THIS NOTIFICATION; HOWEVER, WHILE REPRODUCING THE SAID TERMS AND COND ITIONS AS PROVIDED BY THE DIPP, THE CBDT HAD ERRONEOUSLY REFERRED TO ONE OF THE CO NDITION WHICH IS APPLICABLE FOR INDUSTRIAL PARKS SEEKING APPROVAL UNDER AUTOMATIC ROUTE, WHICH READS AS UNDER- 'NO SINGLE UNIT REFERRED TO IN COLUMN (2) OF TABLE GIVEN IN SUB-PARAGRAPH (B) OF PARAGRAPH 6 OF S. 0. 354() DATED THE R APRIL, 20 02. SHALL OCCUPY MORE THAN FIFTY PERCENT OF THE ALLOCABLE INDUSTRIAL AREA OF AN IN DUSTRIAL PARK. FOR THIS PURPOSE A UNIT MEANS ANY SEPARATE AND DISTINCT ENTITY FOR THE PU RPOSE OF ONE AND MORE STATE AND CENTRAL TAX LAWS. ' THE ABOVE CONDITION DOCS NOT FORM PART OF THE TERM S AND CONDITIONS AS STIPULATED BY THE DIPP AND WAS ERRONEOUSLY INCLUDED BY THE CBDT. THE SAME IS APPARENT FROM THE READING OF THE CBDT NOTIFICATION WHICH STATES THAT THE TERMS AND CONDITIONS AS APPROVED BY DIPP IS BEING REPRODUCED IN THE ANNEXU RE TO THE CBDT NOTIFICATION. FURTHER, IT MAY BE NOTED THAT THE CONDITIONS AS ME NTIONED BY THE CBDT AS REPRODUCED ABOVE REFERS TO PARAGRAPH 6(B) OF THE SCHEME WHICH IS APPLICABLE FOR APPROVAL UNDER THE AUTOMATIC ROUTE AS ALREADY MENTIONED EARLIER. THE PREROGATIVE TO APPROVE AND STIPULATE ANY CONDI TIONS WHILE APPROVING ANY INDUSTRIAL PARK WAS ALWAYS WITH THE DIPP. THE CBDT WAS ONLY A UTHORIZED TO NOTIFY THE PARK AS PER THE APPROVAL GRANTED BY THE DLPP. IT DID NOT HAVE ANY POWER TO PUT ADDITIONAL CONDITIONS WHILE NOTIFYING THE INDUSTRIAL PARK. TO ELABORATE FURTHER, THE COMPANY WOULD LIKE TO BR ING ATTENTION TO THE CONDITIONS AS REQUIRED TO BE FULFILLED BY INDUSTRIAL PARKS SEEKI NG APPROVAL UNDER NON-AUTOMATIC ROUTE AS GIVEN UNDER PARAGRAPH 7 OF THE SCHEME. THE RELE VANT EXTRACTS OF SUB-PARAGRAPH (1) & (3) OF PARA 7 READ AS UNDER: '(F) ALL APPLICATIONS NOT ELIGIBLE FOR AUTOMATIC A PPROVAL UNDER PARAGRAPH 6 SHALL REQUIRE THE APPROVAL OF THE EMPOWERED COMMITTEE, CONSTITU TED BY THE CENTRAL GOVERNMENT (2) ..... (3) THE EMPOWERED COMMITTEE SHALL CONSIDER EACH AP PLICATION ON A CASE TO CASE BASIS, SUBJECT TO ITS COMPLYING WITH THE STATUTORY REQUIR EMENTS AS PRESCRIBED BY THE MINISTRY OF FINANCE UNDER THE INCOME TAX ACT, 1961, AND OT HER APPLICABLE STATUTORY RULES/OBLIGATIONS. THE COMMITTEE WILL CONSIDER EA CH CASE ON ITS MERIT AND GRANT APPROVAL SUBJECT TO SUCH OTHER CONDITIONS AS MAY BE DEEMED FIT BY IT.. ... ' THUS, IT COULD BE INFERRED FROM SUB-PARAGRAPH (1) READ WITH SUB-PARAGRAPH (3) THAT THE EMPOWERED COMMITTEE OF THE DIPP DULY CONSIDERS THE APPLICATION MADE BY THE COMPANY, FROM THE PERSPECTIVE OF 80LA OF THE ACT, FOR GRANTING APPROVAL UNDER THE NON-AUTOMATIC ROUTE. THE SAME IS ALSO EVIDENT FROM LETTER OF APPROVAL PROVIDED BY THE DIPP (REFER ENCLOSURE LD). THE RELEVANT EXTRACTS O F THE SAID APPROVAL ARE AS UNDER: 18 ITA NO. 729 /HYD/2015 VITP PVT. LTD. 'I AM DIRECTED TO REFER TO YOUR APPLICATION DATED 12 OCTOBER 2006 AND LETTER DATED 29 SEPTEMBER 2006. THIS IS TO CONVEY THE APPROVAL OF THE GOVERNMENT OF INDIA TO YOUR PROPOSAL FOR CLAIMING INCOME TAX BENEFIT OF YOUR INDUSTRIAL PARK. SCHEME, 2002, NOTIFIED BY THIS DEPARTMENT IN EXERCISE OF POWERS UNDER SECTION 80-LA, SUB SECTION 4 (III) OF THE INCOME TAX ACT, I961, SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS .... ' IN THIS REGARD, THE COMPANY WOULD LIKE TO SUBMIT M AT THE POWER CONFERRED TO THE CBDT UNDER SECTION 80IA( 4) OF THE ACT READ WITH R ULE 18C OF THE INCOME TAX RULES, 1962 IS ONLY TO NOTIFY THE INDUSTRIAL PARKS WHICH ARE APPROVED BY THE DIPP. THE PROVISIONS OF SECTION 80IA(4)(III) READ WITH R ULE 18C DOES NOT AUTHORIZE CBDT TO PUT ANY ADDITIONAL CONDITION FOR CLAIMING DEDUCTIO N UNDER THE SAID SECTION. THUS IN THE PRESENT CASE CBDT HAS ERRONEOUSLY INCLUDED THE CON DITION APPLICABLE TO AUTOMATIC ROUTE. HYPOTHETICALLY, IF IT IS CONSIDERED THAT TH E CBDT INTENDED TO PRESCRIBE THE SAID CONDITION THEN THE VERY PURPOSE OF GETTING THE APP ROVAL UNDER NON-AUTOMATIC ROUTE WOULD GET DEFEATED. AS DISCUSSED ABOVE, THE RIGHT TO APPROVE AND PUT A NY CONDITIONS WHILE GRANTING APPROVAL FOR SETTING UP ANY INDUSTRIAL PARK WAS AL WAYS WITH THE DIP? THE CBDT WAS ONLY AUTHORIZED TO NOTIFY THE PARK AS PER THE APPR OVAL PROVIDED BY THE DIPP. IT DID NOT HAVE ANY POWER TO PUT ADDITIONAL CONDITIONS WHILE NOTIFYING THE INDUSTRIAL PARK. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISION: CIT VS. ELGI EQUIPMENTS LTD. (2000) 242 ITR 460 (MAD) THE HON'BLE MADRAS HIGH COURT IN THE SAID CASE HEL D THAT CONDITIONS LAID DOWN BY CBDT VIDE ITS NOTIFICATION 8.0. NO. 3433 DATED 21 OCTOBER 1965, ARE NOT WITHIN THE SCOPE OF POWER CONFERRED ON CBDT BY SECTION 36(1 ) (IV) OF THE ACT. THE SAID NOTIFICATION LIMITS THE AMOUNT OF DEDUCTION TO 80% OF THE CONTRIBUTION (THEREBY DENYING 20% OF THE AMOUNT PAID) WITHOUT A RULE HAV ING BEEN MADE TO THAT EFFECT. IT WAS FURTHER HELD THAT IT IS NOT PERMISSIBLE FOR CB DT TO WHITTLE DOWN THE RULE AND ALTER THE LIMITS OF CONTRIBUTIONS WHETHER ANNUAL OR INIT IAL, THAT WOULD QUALIFY AS DEDUCTION UNDER SECTION 36(1)(IV) OF THE ACT. BASED ON THE ABOVE FACTS AND JUDICIAL PRECEDENT, W E SUBMIT THAT THE CBDT HAS ERRONEOUSLY INCLUDED AN ADDITIONAL CONDITION (OF N OT ALLOTTING MORE THAN FIFTY PERCENT OF THE ALLOCABLE INDUSTRIAL AREA TO A SINGLE OCCUP ANT) WHILE NOTIFYING THE CAPELLA IP WHICH WAS APPROVED UNDER NON-AUTOMATIC ROUTE. EVEN OTHERWISE, IF IT IS CONSIDERED THAT THE CBDT INTENDED TO INCLUDE THE ADDITIONAL C ONDITION, THEN WE WOULD LIKE TO SUBMIT THAT THE CBDT HAS SURPASSED ITS JURISDICTIO N AND HENCE IT IS VOID-AB-INITIO. IN VIEW OF ABOVE, THE COMPANY HAS COMPLIED WITH AL L THE CONDITIONS LAID BY THE DIPP AND THE ADDITIONAL CONDITION PRESCRIBED BY CBDT, F ORMING PART OF AUTOMATIC ROUTE, BEING ERRONEOUS, IS ELIGIBLE FOR CLAIMING DEDUCTIO N UNDER SECTION 80IA OF THE ACT. 6.7 THUS, FROM THE AFORESAID FACTS, IT IS VERY MUCH EVIDENT THAT NOT ONLY AO ENQUIRED INTO THE ISSUE OF CLAIM OF DEDUCTI ON U/S 80IA(4)(III) IN RESPECT OF CAPELLA INDUSTRIAL PARK WITH REFERENC E TO THE CONDITION IMPOSED IN PARA 4 OF CBDT NOTIFICATION, BUT, ASSESS EE ALSO SUBMITTED A DETAILED REPLY EXPLAINING WHY SUCH CONDITION WILL NOT APPLY TO 19 ITA NO. 729 /HYD/2015 VITP PVT. LTD. ASSESSEE. THUS, AO AFTER CONDUCTING NECESSARY ENQUI RY AND APPLYING HIS MIND TO THE ISSUE HAVING TAKEN A DECISION ALLOW ING ASSESSEES CLAIM OF DEDUCTION U/S 80IA(4)(III) IN RESPECT OF C APELLA INDUSTRIAL PARK, THE DECISION SO TAKEN, CANNOT BE CONSIDERED T O BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN FAC T, THOUGH, LD. CIT ACCEPTS THE FACT THAT AO DID MAKE ENQUIRY WITH REGA RD TO ASSESSEES CLAIM OF DEDUCTION U/S 80IA(4)(III) AND ASSESSEE AL SO EXPLAINED ITS STAND BEFORE AO, BUT, HE NEVERTHELESS CONTRADICTS H IMSELF BY OBSERVING THAT AO DID NOT CONDUCT PROPER ENQUIRY AN D VERIFY WHETHER ASSESSEE HAS COMPLIED TO THE CONDITION IMPOSED IN P ARA 4 OF CBDTS NOTIFICATION. IN OUR VIEW, SUCH CONCLUSION DRAWN BY LD. CIT IS NOT ONLY CONTRARY TO THE MATERIAL ON RECORD, BUT, ALSO DOES NOT STAND THE TEST OF LEGAL SCRUTINY. ONCE AO HAS CONDUCTED ENQUIRY ON A PARTICULAR ISSUE AND HAS TAKEN A DECISION AFTER PROPER APPLICA TION OF MIND AND IF SUCH VIEW TAKEN BY AO IS ONE OF THE POSSIBLE VIEW, THEN, EVEN IF IT IS NOT DISCUSSED ELABORATELY IN THE ASSESSMENT ORDER, IT CANNOT BE SAID ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIA L TO THE INTERESTS OF REVENUE. THE PRINCIPLE OF LAW LAID DOWN IN VARIO US JUDICIAL PRECEDENTS IN THIS CONTEXT BEING TOO WELL-KNOWN, TH ERE IS NO NEED FOR US TO DELIBERATE ON THEM HERE. 6.8 MOREOVER, AS COULD BE SEEN, THE COORDINATE BENC H IN CASE OF L&T INFOCITY (SUPRA) AFTER GOING THROUGH THE CONDIT IONS IMPOSED UNDER AUTOMATIC AND NON-AUTOMATIC ROUTE HELD THAT THE RE STRICTION IMPOSED UNDER THE AUTOMATIC APPROVAL ROUTE STIPULATING THAT NO SINGLE UNIT SHALL EXCEED 50% OF THE ALLOCABLE INDUSTRIAL AREA IS NOT APPLICABLE TO APPROVAL GRANTED UNDER NON-AUTOMATIC ROUTE. THEREFO RE, THE VIEW TAKEN BY AO WHILE ACCEPTING ASSESSEES CLAIM BEING IN CONSONANCE WITH THE VIEW EXPRESSED BY THE COORDINATE BENCH, AS AFORESAID, CERTAINLY CAN BE CONSIDERED TO BE A POSSIBLE VIEW. THAT BEING THE CASE, LD. CIT HAS NO AUTHORITY TO INVOKE HIS POWER U/S 263 OF THE ACT ONLY BECAUSE HE DOES NOT AGREE WITH THE VIEW EXPRES SED BY AO AND WANTS TO SUBSTITUTE HIS VIEW. FOR THE AFORESAID REA SON, ASSUMPTION OF 20 ITA NO. 729 /HYD/2015 VITP PVT. LTD. JURISDICTION U/S 263 BY LD. CIT FOR REVISING THE AS SESSMENT ORDER, IN OUR VIEW, IS NOT VALID. THUS, ASSESSEE DESERVES TO SUCCEED BOTH ON MERITS AS WELL AS ON JURISDICTIONAL ISSUE. IN VIEW OF THE ABOVE, WE QUASH THE IMPUGNED ORDER OF LD. CIT AND RESTORE THE ORDER PASSED BY AO. IN VIEW OF OUR DECISION HEREINBEFORE, WE DO NO T THINK IT NECESSARY TO DEAL WITH OTHER ISSUES RAISED BY ASSE SSEE. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 4 TH SEPTEMBER, 2015 KV COPY TO:- 1) VITP PVT. LTD., PLOT NO. 17, SOFTWARE UNITS LAYO UT, HI-TECH CITY, MADHAPUR, HYDERABAD 500 081, TELENGANA, INDIA . 2) DCIT, CIRCLE 3(3), INCOME TAX TOWERS, HYD. 3) CIT-5, HYDERABAD 4) ADDL. CIT, RANGE 17, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.