Dy. Commissioner of Income Tax , Circle-8(1), Hyderabad V. Avinash Hitech City, Hyderabad

ITA 918/Hyd/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4466 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 12-03-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 10-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K GOPALA KRISHNADR
• Assessee Lawyers: RAMESH BABU KILARU
• Keywords: Business income; Capital Gains
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ITA NO.918/HYD/2018 ASSESSMENT YEAR: 2014-15 DCIT CIRCLE 8(1) HYDERABAD. VS. AVINASH HITECH CITY, HYDERABAD. PAN- AABAA1623R (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K. GOPALA KRISHNA,DR ASSESSEE BY : SHRI RAMESH BABU KILARU, AR DATE OF HEARING : 12-03-2019 DATE OF PRONOUNCEMENT : 15-03-2019 ORDER PER D.S. SUNDER SINGH, A.M: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-8, HYDERABAD DATED 31.01.2018 FOR THE A.Y 2014-14. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY (AOP) FORMED BY A THE OWNERS OF LAND, WHO HAVE GIVEN THEIR RESPECTIVE LAND FOR DEVELOPMENT OF AN IT-SEZ, TO PHOENIX ADVANCE BUSINESS HUB. IN RETURN FOR THE CONTRIBUTION OF LAND, THE DEVELOPER I.E M/S. L&T PHOENIX INFRAPARKS (P) LTD., DEVELOPER WAS TO DELIVER THEIR SHARE OF CONSTRUCTED SPACE IN THE FORM OF COLD SHELL. THE SAME WAS NOT SUITABLE FOR LETTING OUT AND WAS REQUIRED TO BE 2 ITA NO. 918/HYD/2018 AVINASH HITECH CITY, HYD. CONVERTED INTO WARM SHELL BY ADDING INFRA FACILITIES LIKE GENERATORS, AIR CONDITIONERS ETC. THE ASSESSEE WAS GRANTED A CO-DEVELOPER STATUS BY THE MINISTRY OF COMMERCE FOR THE PURPOSE OF DEVELOPING INFRASTRUCTURE FACILITIES IN THE ABOVE MENTIONED SEZ AND ASSESSEE INVESTED HUGE AMOUNT OF RS. 20 CRORES FOR THIS PURPOSE AND WAS HOLDING RESPONSIBILITY FOR MAINTAINING THE SAME. ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME CLAIMING 100% DEDUCTION U/S 80IAB OF THE ACT BY OFFERING THE RENTALS AS BUSINESS INCOME. THE ASSESSMENT WAS COMPLETED BY THE A.O U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF RS. 8,55,89,120/- BY TREATING THE SAME AS INCOME FROM HOUSE PROPERTY AND BY REJECTING THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IAB OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE A.O, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE PLACING RELIANCE ON CIRCULAR NO. 16/2017 OF CBDT DATED 25.04.2017 AND THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y 2013-14 IN ITA NO. 726/HYD/2017 DATED 29.12.2017. 4. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y 2013-14. THE HONBLE ITAT IN ITS ORDER (CITED SUPRA) HELD AS UNDER: 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE WAS FORMED IN THE YEAR 2007 AND THE MAIN OBJECT OF THE ASSESSEE SOCIETY IS TO MANAGE, MAINTAIN, OPERATE, LEASE AND RECEIVE RENTALS FOR THE CONSTRUCTED SPACES THAT WOULD BE DELIVERED TO THE MEMBERS OF THE SOCIETY IN H1B BUILDING OF THE HITECH 3 ITA NO. 918/HYD/2018 AVINASH HITECH CITY, HYD. CITY-2 BY THE L&T PHOENIX INFO PARKS (P) LTD. IN THE MEMORANDUM OF SOCIETY , IT IS ALSO MENTIONED THAT THE SOCIETY IS FORMED WITH THE MAIN OBJECT OF APPLYING AND OBTAINING THE CO-DEVELOPER STATUS UNDER THE SPECIAL ECONOMIC ZONES ACT, 2005 ON BEHALF OF THE MEMBERS AND THEIR REPRESENTATIVE TO COMPLY WITH ITS RULES ON BEHALF OF THE MEMBERS AND FOR THE PURPOSE OF TAKING CARE OF COMMON MAINTENANCE AND UPKEEP OF THE CONSTRUCTED SPACES, ESTABLISH AND PROVIDE FOR THE COMMON FACILITIES, EQUIPMENT AND AMENITIES AND TO PROVIDE ALL OTHER INCIDENTAL AND NECESSARY COMMON SERVICES TO ITS MEMBERS, AND TO PERFORM SUCH OTHER DUTIES AND TO COMPLY WITH ALL OTHER STATUTORY REGULATIONS ON BEHALF OF ITS MEMBERS 8. WE HAVE GONE THROUGH THE LETTER OF THE GOVT. OF INDIA, MINISTRY OF COMMERCE & INDUSTRY, DATED 31.12.2008 CONFERRING THE CO-DEVELOPER STATUS TO THE ASSESSEE IN THE IT/ITES SEZ AT PAPER BOOK (PAGE NOS.7 & 8) FILED BY THE ASSESSEE. WE FIND THAT THE STATUS IS GIVEN TO THE ASSESSEE FOR DEVELOPING INFRASTRUCTURE FACILITIES IN THE SEZ AT GACCHHIBOWLI, RANGA REDDY DISTRICT AND THAT THE ASSESSEE SHALL OBTAIN REQUIRED APPROVAL FROM VARIOUS STATUTORY AUTHORITIES UNDER THE RELEVANT STATUTES AND REGULATIONS OF THE GOVT. OF INDIA AND THE STATE GOVT. AND LOCAL BODIES AND THAT THE CO- DEVELOPER SHALL CONFORM TO THE ENVIRONMENTAL REQUIREMENTS, LOCAL LAWS, RULES & REGULATIONS OR BYE-LAWS IN REGARD TO AREA PLANNING, SEWERAGE DISPOSAL, POLLUTION CONTROL, LABOUR LAWS AND THAT IT SHALL RAISE REQUIRED FUND FOR THE FACILITIES BEING CREATED AND ALSO THAT THE APPROVAL IS VALID FOR A PERIOD OF THREE YEARS WITHIN WHICH TIME, THE CO-DEVELOPER SHALL CREATE THE APPROVED FACILITIES AND THE PROGRESS OF IMPLEMENTATION WILL BE SUBMITTED TO THE GOVT. OF INDIA EVERY SIX MONTHS. IT IS ALSO MANDATED THAT THE OPERATION, MAINTENANCE OF THE FACILITY WILL BE MADE AS PER THE STANDARDS SPECIFIED IN THE PROPOSAL AND TO THE SATISFACTION OF THE USERS AND THAT IT SHALL MAINTAIN ADEQUATE MANPOWER TO PROVIDE THE FACILITIES. IT IS ALSO MANDATED THAT THE CODEVELOPER SHALL OBTAIN THE APPROVAL OF BOARD FOR SPECIFIC ACTIVITIES PROPOSED TO BE UNDERTAKEN FOR DEVELOPMENT, OPERATION AND MAINTENANCE OF SEZ AND BASED ON THE ACTIVITIES APPROVED BY THE BOARD, THE CO-DEVELOPER SHALL BE ENTITLED FOR DUTY FREE IMPORT OR DOMESTIC PROCUREMENT AND FOR THE APPROVED ACTIVITIES AFTER THE SEZ HAS BEEN NOTIFED. IT IS ALSO MADE CLEAR THAT THE APPROVAL GIVEN BY THE BOARD FOR CO-DEVELOPER FOR PARTICULAR TERMS & CONDITIONS OF THE AGREEMENT WILL NOT HAVE ANY BEARING ON THE TREATMENT OF THE INCOME BY WAY OF LEASE RENTALS/DOWN PAYMENT/PREMIUM ETC., FOR THE PURPOSE OF ASSESSMENT UNDER THE PREVALENT INCOME TAX ACT AND RULES AND THAT THE AO WILL HAVE THE RIGHT TO EXAMINE THE TAXABILITY OF THESE AMOUNTS UNDER THE I.T. ACT. THUS, IT IS SEEN THAT THE ASSESSEE IS TO ADHERE TO THE VARIOUS TERMS AND CONDITIONS ON BEING CONFERRED WITH THE STATUS OF CO-DEVELOPER, UNDER THE SUPERVISION OF THE GOVT. OF INDIA. THE CIT (A) HAS OBSERVED THAT M/S. L&T INFOPARK HAS HANDED OVER A COLD SHELL TO THE ASSESSEE WHILE THE ASSESSEE HAS CONVERTED IT INTO A WARM SHELL BY PROVIDING THE NECESSARY FACILITIES 4 ITA NO. 918/HYD/2018 AVINASH HITECH CITY, HYD. AND THAT THE ASSESSEE IS OPERATING AND MAINTAINING ALL THE FACILITIES ON 24/7 BASIS BY EMPLOYING REGULAR/TECHNICAL AND COMPETENT STAFF. THUS, IT IS CLEAR THAT THE ASSESSEE IS NOT ONLY PROVIDED PART OF THE INFRASTRUCTURE BUT IS ALSO OPERATING AND MAINTAINING THE INFRASTRUCTURE. THE RELIANCE OF THE LEARNED DR ON THE WORDS UNDERTAKING OR AN ENTERPRISE USED IN SECTION 80IAB, TO MEAN THAT THE AOP IS NOT AN UNDERTAKING IS ALSO NOT ACCEPTABLE. AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80IAB IS ONLY TO MEAN THAT IT IS NOT AN INDIVIDUAL. THE ASSESSEE IS A REGISTERED SOCIETY. WE FIND THAT SIMILAR ISSUE HAD ARISEN BEFORE THE COORDINATE BENCH OF THE TRIBUNAL AT DELHI IN THE CASE OF DLF INFOCITY DEVELOPERS (CHENNAI) LTD VS. ACIT, REPORTED IN (2013) 37 TAXMANN.COM 311 WHEREIN THE TRIBUNAL HAS AT PARAS 36 TO 41 HELD AS UNDER: 36. THUS, AS DISCUSSED ABOVE, THE ADMITTED AND UNDISPUTED FACT REMAIN THAT THE ASSESSEE HAS BEEN DULY APPROVED BY THE BOA AS A DEVELOPER, THE LAND OWNED BY THE ASSESSEE AT CHENNAI WAS NOTIFIED BY THE GOVT. OF INDIA FOR ESTABLISHMENT OF SEZ, THE AUTHORIZED OPERATIONS TO BE UNDER TAKEN IN THE SAID SEZ WERE APPROVED BY BOA, THE CODEVELOPER AGREEMENT DATED 20/3/2008 EXECUTED WITH THE CO- DEVELOPER CONTEMPLATING TRANSFER OF 'BARE SHELLS' TO THE CO-DEVELOPER HAS BEEN DULY APPROVED BY THE BOP; THE DAPL HAS BEEN APPROVED AS A CODEVELOPER, THE TRANSFER OF BARE SHELL TO THE CO-DEVELOPER HAS BEEN APPROVED AS AN AUTHORIZED OPERATION BY THE BOP AND THE DISCLAIMER CONTAINED IN CLAUSE 3(XVII) OF THE APPROVAL LETTER DATED 1/6/2009 APPLIES ONLY TO THE LEASE OF LAND AS CLARIFIED BY THE MINISTRY OF COMMERCE IN THE CLARIFICATION DATED 18/1/2011 AND NOT TO THE TRANSFER OF BARE SHELLS. NOTING THESE MATERIAL FACTS WE ARE OF THE VIEW THAT THE LD. CTI(A) HAS RIGHTLY AGREED WITH THE PLEA OF THE ASSESSEE THAT THE TAX DISCLAIMER CONDITION MENTIONED IN THE CO-DEVELOPER APPROVAL IS PRIMARILY TO BE IN BY THE BOA IN THE APPROVALS GRANTED TO PUT A CURB ON THE WRONG PRACTICE OF LEASING THE LAND FOR LONG PERIODS AND RECEIVING ONE TIME PAYMENT IN THE FORM OF LEASE RENTALS/DOWN PAYMENTS/PREMIUM ETC WHICH TANTAMOUNT TO SALE OF LAND IN THE GUISE OF LONG TERM LEASE. THE ASSESSEE HAS OBTAINED REQUISITE APPROVALS FROM THE BOA IN MOST TRANSPARENT MANNER BY DISCLOSING NOT ONLY DEVELOPMENT CONSIDERATION BUT ALSO THE BASIS FOR DETERMINING THE SAME. THE ENTIRE CONTROVERSY AS TO WHETHER TRANSFER OF BARE SHELL BUILDINGS TO THE CO-DEVELOPER WAS AN AUTHORIZED OPERATION HAS BEEN SET AT REST BY FURTHER CLARIFICATIONS DATED 18/1/2011 AND 20/1/2011 ISSUED BY THE MINISTRY OF COMMERCE. THE BOA, BEING THE STATUTORY AUTHORITY UNDER THE SEZ ACT, HAS GRANTED VARIOUS APPROVALS BY A STATUTORY PROCESS OF LAW AFTER DULY CONSIDERING AND EXAMINING ALL THE FACTS AND DOCUMENTS ON RECORD IN ACCORDANCE WITH RELEVANT PROVISIONS OF SEZ ACT AND SEZ RULES. THUS, THE CONSEQUENTIAL BENEFITS THAT IS AVAILABLE TO A DEVELOPER UNDER THE INCOME TAX ACT CANNOT BE DENIED. THE AO DOES NOT HAVE ANY JURISDICTION TO QUESTION THE VALIDITY OR THE LEGALITY OF AUTHORIZED OPERATIONS WHICH HAVE BEEN APPROVED BY THE BOA/CENTRAL GOVERNMENT. SECTION 27 5 ITA NO. 918/HYD/2018 AVINASH HITECH CITY, HYD. OF SEZ ACT PROVIDES FOR MODIFICATION OF INCOME TAX ACT TO THE EXTENT OF SECOND SCHEDULE OF SEZ ACT WHICH READS AS UNDER:- '27. THE PROVISIONS OF THE INCOME TAX ACT, 1961, AS IN FORCE FOR THE TIME BEING, SHALL APPLY TO, OR IN RELATION TO, THE DEVELOPER OR ENTREPRENEUR FOR CARRYING ON THE AUTHORIZED OPERATIONS IN A SPECIAL ECONOMIC ZONE OR UNIT SUBJECT TO THE MODIFICATIONS SPECIFIED IN THE SECOND SCHEDULE.' 37. THE SECOND SCHEDULE OF SEZ ACT CONTENDS BARE TEXT OF CERTAIN PROVISION INCLUDING SECTION 80IAB TO BE INCORPORATED IN THE INCOME TAX ACT PRESENT TO THE SECTION 80IAB (HAVING THE SAME IN AS MENTIONED IN SEZ ACT) HAS BEEN BROADLY INCORPORATED INTO THE INCOME TAX ACT. SECTION 51 OF SEZ ACT HAVING AN OVER RIDING EFFECT OVER ANY OTHER LAW, READS AS UNDER:- '51.( 1) THE PROVISIONS OF THIS ACT SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE OR IN ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT.' 38. THUS, IT IS CLEAR FROM THE ABOVE THAT THE PROVISIONS OF SEZ ACT SHALL HAVE OVER RIDING EFFECT EVEN IF ANYTHING INCONSISTENT IS CONTAINED IN THE INCOME TAX ACT. THE SEZ ACT HAS BEEN ENACTED CONTAINING THE SPECIFIC LEGISLATION TO BE BROUGHT IN OTHER STATUTES. WHEN THE TERMS LIKE SEZ, AUTHORIZED OPERATIONS, DEVELOPERS ETC HAVE BEEN SPECIFICALLY DEFINED UNDER THE SEZ ACT, IT 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 ITA NO 726 OF 2017 AVINASH HITECH CITY 2 SOCIETY HYDERABAD. PAGE 8 OF 11 CASE OF ASSESSEE 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, INCOME TAX ACT, 1961 HAVE PLACED 'DEVELOPER' AND THE 'CO-DEVELOPER AT THE SAME LEVEL I.E FOR DEVELOPMENT (CREATING INFRASTRUCTURE FACILITIES), MAINTENANCE AND OPERATIONS. IT WAS IN THIS CONTEXT THAT SEZ BOA, UNDER THE AEGIS OF 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 COMMERCE (SEZ SECTION), UDYOG BHAWAN, NEW DELHI DATED 18/1/2011 & 20/1/2011 BOA IN EXERCISE OF ITS STATUTORY POWERS APPROVED BUSINESS MODEL OF THE ASSESSEE CLARIFIED THAT UNDER RULE 11(9) 'SALE OF LAND' IS NOT PERMISSIBLE IN A SEZ. HOWEVER CODEVELOPER CAN TAKE LAND ON LEASE FROM DEVELOPER FOR DEFINITE PERIOD. FURTHER SEZ BUILDINGS 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 AUTHORIZED AS PER SEZ ACT AND RULES. THE CORRESPONDENCE WITH THE SEZ AUTHORITIES ON THIS ISSUE IS PLACED ON THE P.B AT PAGES 122 TO 130 AND ITS 6 ITA NO. 918/HYD/2018 AVINASH HITECH CITY, HYD. CONTENTS ARE REFERRED TO BY THE LD. COUNSEL. THUS AS PER SPECIFIC CLARIFICATIONS BY BOA THE TRANSFER OF BARE SHELL BUILDING ON LONG TERM LEASE TO APPROVED CODEVELOPER ARE AUTHORIZED ACTIVITIES UNDER SEZ ACT & RULES. THUS THESE CLARIFICATIONS ALSO DISPEL THE FINDINGS OF CIT REVISING THE ASSE4SSMENT ORDER AND SETTING ASIDE THE SAME. 263 ORDER AND FINDINGS THEREIN BEING CONTRARY TO LEGAL PROVISIONS IS LIABLE TO BE QUASHED. THE ASSESSMENT ORDER BEING IS CONFORMITY WITH SEZ ACT, RULES AND PROVISIONS OF SECTION 80IABCAN NEITHER BE TERMED AS 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 THE BASIC PRINCIPLE OF TAXATION AS LARGE SCALE REAL ESTATE BUSINESS ACTIVITIES CONTINUOUSLY CARRIED ON BY ASSESSEE AND BARE SHELL BUILDINGS DECLARED AS STOCK-IN-TRADE IN ITS BOOKS OF ACCOUNTS, AS PER ITS OBJECTS CLAUSE IN ITS MEMORANDUM AND ARTICLES OF ASSOCIATION CAN BE TAXED ONLY UNDER THE HEAD BUSINESS INCOME. 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 DEVELOPER 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 AUTHORIZED OPERATIONS WHICH HAVE BEEN APPROVED BY THE REGULATORY BODY OF THE CENTRAL GOVERNMENT I.E. BOA AND ATTEMPT TO DISPUTE THE SAME IS CONTRARY TO THE STATUTORY PROVISIONS OF THE SEZ ACT. PARA 6.17 BOA ARE APPOINTED BY THE CENTRAL GOVERNMENT IN VARIOUS FIELDS OF GIVING BENEFITS LIKE SEZ, CUSTOMS AND VARIOUS OTHER FISCAL LEGISLATION, THE INCOME- TAX AUTHORITIES 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. RELINE IN THIS BEHALF IS PLACED ON: -APOLLOTYRES VS. CIT (2002) 9 SCC 1(SC) MALAYALA MANORAMA CO. LTD VS. CIT (2008) 12 SCC 612 (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 HON'BLE 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 HON'BLE SUPREME COURT IN 2008 (228) ELT 161 (SC); - 7 ITA NO. 918/HYD/2018 AVINASH HITECH CITY, HYD. 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); PAGE 42 PARA 9 THE CONDITION MENTIONED IN NOTIFICATION DATED 27/10/2006 GIVING TO ASSESSING OFFICER THE RIGHT TO EXAMINE THE TAXABILITY OF ISSUE OF 80IAB IN THE SPIRIT OF SEZ PROVISION STANDS VINDICATED. BESIDES, WE MAY HASTEN TO ADD THAT APPARENTLY THIS RIDER APPEAR TO BE MADE WHILE APPROVING THE CO- DEVELOPER AGREEMENT. THIS IS POSSIBLE APPLICABLE TO CO-DEVELOPER AND NOT THE ASSESSEE AS THE CONDITION WAS PUT DURING THE COURSE OF APPROVAL OF THE AGREEMENT BETWEEN 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 CLEAR THAT THE SEZ ACT AUTHORIZES ACTIVITIES INCLUDE CONSTRUCTION OF BARE SHELL/COLD SHELL/WARM SHELL ITA NO 726 OF 2017 AVINASH HITECH CITY 2 SOCIETY HYDERABAD. PAGE 10 OF 11 BUILDINGS AND TRANSFER 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 CONSTITUTE AUTHORIZED ACTIVITY. THUS, WE SEE NO ERROR ON ANY COUNT AS HELD BY CIT IN THE ORDER OF ASSESSING OFFICER ALLOWING DEDUCTION U/S 80IAB.' 39. WE THUS FIND THAT ASSESSEE IS A DEVELOPER UNDER THE SEZ ACT 39. WE THUS FIND THAT ASSESSEE IS A DEVELOPER UNDER 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 SPECIAL ECONOMIC ZONE ACT 2005 ; AND THE PROFITS HAVE BEEN DERIVED FROM THE BUSINESS OF DEVELOPMENT, OPERATION AND MAINTENANCE OF SEZ. WE THUS FULLY AGREE WITH THE FINDING OF THE LD. CIT(A) THAT ALL THE CONDITIONS AS REQUIRED TO BE SPECIFIED UNDER THE SEZ ACT/RULES ARE FULFILLED AND THE ASSESSEE IS APPROVED DEVELOPER FOR ALL THE INTENT AND PURPOSES OF SECTION 80 IAB I.T OF THE ACT. CONSEQUENT UPON APPROVAL GRANTED BY THE BOA FOR TRANSFER OF BARE SHELL TO THE CO-DEVELOPER, THE PROFITS ARISING TO THE ASSESSEE FORMS SUCH AN AUTHORIZED TRANSACTION ARE ELIGIBLE FOR DEDUCTION U/S 80IAB OF THE ACT. FOR A READY REFERENCE PROVISIONS LAID DOWN U/S 80IAB (1) OF THE ACT ARE BEING REPRODUCED HEREUNDER:- '80IAB( 1)- WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE, BEING A DEVELOPER, INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING 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 ZONE ACT, 2 THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECT' BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AMOUNT EQUAL TO ONE HUNDRED PER CENT, OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS.' 40. THUS, WE FIND THAT THE ISSUES DISCUSSED HEREINABOVE IN THE PRECEDING PARAGRAPHS WILL COVER THE ISSUE RAISED IN ADDITIONAL GROUND OF THE APPEAL PREFERRED BY THE REVENUE AND THE ISSUES RAISED IN GROUND NOS 6, 7, 8, 9, 10 & 14 OF THE REVENUE'S APPEAL. IN RESULT ALL THESE GROUNDS OF THE APPEAL OF THE REVENUE ARE REJECTED. 41. CONSEQUENTLY, APPEAL PREFERRED BY THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 8 ITA NO. 918/HYD/2018 AVINASH HITECH CITY, HYD. 9. WE FIND THAT THE ORDER OF THE CIT (A) IS IN CONSONANCE WITH THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL. HENCE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) AND THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 4.1 SINCE, THE ISSUE IN THIS APPEAL IS IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE, WE HOLD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION/S 80IAB AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD CIT(A) AND UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2019 SD/- SD/- (V. DURGA RAO) (D.S. SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 15 TH MARCH , 2019. KRK 1 M/S AVINASH HITECH CITY 2 SOCIETY, SY. NO 34P, 35P & 38P, HIB PHOENIX INFOCITY SEZ, BEHIND CYBER GAEWAY, GACHIBOWLI, HYDERABAD. 2 THE DCIT, CIRCLE-8(1), HYDERABAD. 3 CIT(A)-8, HYDERABAD. 4 THE PR. CIT (2), HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE