IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF NOVEMBER, 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.11284/2014 (T – RES) BETWEEN:
M/s SOFTZONE TECH PARK LTD., # 3, "SALARPURIA WINDSOR", 4TH FLOOR, ULSOOR ROAD, BANGALORE-560042 (REP BY ITS VICE PRESIDENT (PLANNING & PROCUREMENT) Mr. P.K MISHRA, AGED ABOUT 49 YEARS S/O LATE NARAYAN MISHRA) ... PETITIONER [BY SRI CHYTHANYA K.K., ADV.] AND:
1 . THE CENTRAL BOARD OF DIRECT TAXES REP BY THE UNDER SECRETARY- (ITA-I) DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, ROOM NO.245-A, NORTH BLOCK, NEW DELHI-110001 2 . UNION OF INDIA REP BY THE UNDER SECRETARY THE DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION MINISTRY OF COMMERCE AND INDUSTRY, ROOM NO.482, UDYOG BHAVAN, NEW DELHI-110011 …RESPONDENTS [BY SRI K.V.ARAVIND, ADV. A/W SRI DILIP M., ADV. FOR R-1; SRI SHOWRI H.R. CGC FOR R-2.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO DIRECT BY AN APPROPRIATE WRIT OF MANDAMUS, OR OTHERWISE TO THE R-1 TO NOTIFY THE INDUSTRIAL PARK OF THE PETITIONER UNDER RULE 18C OF THE INCOME TAX RULES, 1962.
THIS PETITION COMING ON FOR HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R Though several reliefs are sought in the writ petition, the petitioner has confined the writ petition only to relief No(A ) which reads thus:
“A. To direct by an appropriate writ of mandamus or otherwise to the 1st respondent to notify the Industrial Park of the petitioner under Rule 18C of the Income Tax Rules, 1962.”
2. The petitioner is a Company, registered under the Companies Act, 1956. The company is carrying on its business in Bangalore under the name and style “M/s.Softzone Tech Park Limited” and is engaged in development of Industrial Park for providing facilities to IT/ITES sector and operation and maintenance of said Industrial Park.
3. It is submitted that the ‘Industrial Park Scheme, 2002’ was notified by the Central Government of India in Gazette of India dated 1.4.2002 vide Notification No.354(E)of 2002. The predecessor firm of the petitioner filed “Form IPS-1” before the 2nd respondent for the approval of Industrial Park under the ‘Industrial Park Scheme, 2002’ on 11.2.2006. The 2nd petitioner granted approval for the Industrial Park to the predecessors firm of the petitioner under the Scheme 2002 with certain conditions which was communicated to the petitioner through letter dated 25.7.2006. The terms and conditions stipulated in the said approval order was indeed accepted by the petitioner’s predecessor and a request was made before the respondent No.1 to issue Notification under Rule 18C(4) of the Income Tax Rules, 1962 (‘Rules for short’).
Subsequent to change in the Constitution of the erstwhile partnership firm to company, the petitioner requested the respondent No.1 to issue Notification under Rule 18C(4) of the Rules. The 1st respondent has issued the Official Memorandum dated 1.3.2012 addressed to the 2nd respondent, marking a copy to the petitioner, directing to withdraw the approval granted by the 2nd respondent to the Industrial Park of the petitioner under the Scheme 2002. The petitioner has made requests before the respondent No.1 to withdraw the Office Memorandum dated 1.3.2012 as well as before the 2nd respondent not to consider the Office Memorandum issued by the 1st respondent.
4. It is the grievance of the petitioner that the request of the petitioner to issue Notification under Rule 18C(4) has not yielded any positive results. On the contrary, the Office Memorandum dated 1.3.2012 issued by the respondent No.1 directing the respondent No.2 to withdraw the approval without providing an opportunity of hearing to the petitioner is in flagrant violation of the principles of natural justice and lacks jurisdiction.
5. Learned counsel Sri. Chythanya appearing for the petitioner submitted that IPS Scheme 2002 does not empower the respondent No.1 to adjudicate upon the approval granted by the 2nd respondent under the said Scheme. Rule 18C(2) of the Rules during the relevant period contemplates that the undertaking shall be duly approved by the Ministry of Industry and Commerce in the Central Government under the Scheme for Industrial Park or special economic zones notified by that Ministry. It was argued that the date of commencement of the Industrial Park was 15.3.2007, well within the period of one year stipulated under the Scheme 2002 and clause 5(ii) of the order of approval. Learned counsel contended that the architect had issued the Provisional Completion Certificate of the Industrial Park on 26.12.2006. The predecessors firm of the petitioner had entered into lease agreement with the lessees viz., N.I.Systems (India) Pvt. Limited on 25.10.2006, Career Net Technologies Pvt. Limited on 25.10.2006 and M/s Timken Engineering & Research India Pvt. Limited on 1.12.2006. The predecessors firm of the petitioner had filed an application before the BDA for issue of occupation certificate on 29.12.2006. However, the BDA has issued occupation certificate of the Industrial Park on 23.6.2007. The petitioner is regularly filing the quarterly statements before the respondent No.2. The action of the respondent No.1 directing the respondent No.2 to withdraw the approval is without jurisdiction. Hence, seeks for a direction to the respondent No.1 to issue the Notification under Rule 18-C of the Rules.
6. Learned counsel Sri. K.V.Aravind appearing for the revenue submitted that the Official Memorandum dated 1.3.2012 is only recommendatory. The petitioner has not complied with the condition of commencement of the Industrial Park within a period of one year from the date as indicated in the approval letter i.e. 28.3.2006 for availing benefits under sub- section 4(iii) of Section 80-IA of the Income Tax Act, 1961 (‘Act’ for short). Learned counsel submitted that the petitioner has admitted the date of commencement of the Industrial Park as 15.3.2007. Further, the Occupancy Certificate for the commercial building was issued by the BDA on 23.6.2007. In such circumstances, the petitioner not having complied with the conditions of approval in terms of the Scheme 2002 is not entitled for grant of any notification under Rule 18-C of the Rules. Learned counsel made an endeavour to refer to the IPS Scheme 2008 to contend that “date of commencement” means the date of obtaining the Completion Certificate or Occupation Certificate, as the case may be, from the relevant local Authority certifying thereby that all the required development activities for the project have been completed. The Occupancy Certificate being issued by the competent Authority on 23.6.2007, the request of the petitioner has to be negated.
7. I have carefully considered the rival arguments advanced by the learned counsel for the parties and perused the material on record.
8. In terms of the approval of the Government of India for setting up of an Industrial Park, in terms of the ‘Industrial Park Scheme, 2002’ notified by the department in exercise of powers under Section 80 IA sub-Section 4(iii) of the Act, expected date of commencement of Industrial Park was 28.3.2006. Clause 5 (ii) of the conditions stipulated therein, reads thus:
“(ii) in case the commencement of industrial park is delayed by more than one year from the date as indicated in para 1(xi) of this approval letter, fresh approval shall be required under the Industrial Park Scheme, 2002, for availing benefits under Sub-Section 4(iii) of Section 80 1A of the Income Tax Act, 1961.”
Para 1(xi) specifies the expected date of commencement of the Industrial Park as 28.03.2006.
9. Annexure-H dated 29.12.2006 addressed by the predecessors of the petitioner to the BDA for issuance of Occupation Certificate indicates that the construction work of the building was completed and the same was enclosed with the copy of the completion certificate issued by the architects, M/s.Venkataramana Associates. The quarterly returns submitted before the respondent No.2 discloses the date of commencement of the industrial park as 15.3.2007, well within one year from the expected date of commencement of the Industrial Park mentioned in the approval order. In the absence of any definition of date of commencement in the Scheme 2002, the definition clause of Scheme 2008 cannot be borrowed/adopted to deny the benefit of Scheme 2002. The arguments of the learned counsel for the revenue that issue of Occupation Certificate by the competent Authority is the relevant date for the date of commencement cannot be countenanced, there being no such reference made in the Scheme 2002. In the year 2002 the petitioner would not have visualized the Scheme of 2008 coming with specific definition clause.
10. At this juncture it would be beneficial to refer to the order of the Hon’ble High Court of Gujarat in the case of Commissioner of Income Tax Vs. Tarnetar Corporation reported in (2014)362 ITR 174 wherein, in para.6, it is observed thus:
“6. In the present case, therefore, the fact that the assessee had completed the construction well before 31st march, 2008 is not in doubt. It is, of course, true that formally BU permission was not granted by the Municipal Authority by such date. It is equally true that explanation to clause(a) to section 80-IB(10) links the completion of the construction to the BU permission being granted by the local authority. However, not every condition of the statute can be seen as mandatory. If substantial compliance thereof is established on record, in a given case, the court may take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available.”
11. In the case of Commissioner of Income Tax, Chennai Vs. Ceebros Hotels (P) Limited reported in (2018)409 ITR 423, the Hon’ble Madras High Court has held thus:
“ The facts noted by the Tribunal clearly show that the application filed by the assessee for such a classification was made on 19.4.2010 i.e in the assessment year 2010-11. Thereafter, it appears that there are certain procedure to be followed and an inspection requires to be conducted by an Approving Committee constituted for such purpose. The manner, in which, the inspection was conducted and the time frame taken by the Competent Authority are all beyond the control of the assessee. Thus, a holistic interpretation of the provisions has to be made and if the same is done, the attendant circumstances as to how the assessee was treated by the Department assume importance.”
12. In the case of The Principal Commissioner of Income Tax, Patiala Vs. M/s Ambey Developer Private Limited in 2018-TIOL-207, the Hon’ble High Court of Punjab and Haryana has observed thus:
“In the present case, therefore, it is an admitted fact that the appellant applied for the completion certificate alongwith architect’s certificate in the prescribed form, copy of approved map etc. on 29.3.2010 i.e. within stipulated period of five years as enumerated in Section 80IB(10)of the Act. It is also observed during the course of assessment proceedings that the assessee has sold flats and same were occupied by some of the owners NOC was also obtained from various departments. The Assessing Officer in his report has submitted that the explanation of the assessee is plausible with respect to procedural delay at the end of Municipal authorities. Further, the appellant has submitted that the completion certificate issued clearly refers to the request letter of appellant dated 29.3.2010, and that the completion certificate was issued with reference to the appellant’s application dated 29.3.2010. There is no mention of any defect or discrepancy in the project on record. The appellant has also referred to the possession certificate issued to the flat owners upto 31.3.2010, the registered sale deeds, no objection certificate from Fire Safety Officer, Punjab State Electricity Board etc. Permanent Electricity connection has been given by Punjab State Electricity Board in the names of the respective buyers before 31.3.2010. Further the approving authority i.e. Municipal Corporation, Patiala has also accepted that the approval was granted on the basis of application filed by the appellant on 29.3.2010 and the delay in issuing completion certificate is because of the various stages involved in the process. The delay in issuance of completion certificate is beyond the control of the appellant and is not attributable to him. Thus from the submission of the Assessing Officer, the appellant and from the letter of the municipal authorities, it is amply clear that the project was completed before the due date as envisaged under section 80IB(10) of the Act and the completion certificate was also awarded on the basis of certificate dated 29.3.2010. Under the facts of the case, I am of the opinion that the ratio of various decisions discussed above is squarely applicable to the facts of the present case. Therefore, looking into submission made and the facts of the case and respectfully following the decisions as discussed above, the deduction claimed under Section 80IB(10) is allowed and the addition made by the Assessing Officer is hereby deleted.”
13. It is not in dispute that the petitioner had applied for the Occupancy Certificate along with Architect’s Certificate before the BDA on 29.12.2006 well within the stipulated period of one year as enumerated in condition No.5 (ii) of the approval under the Scheme 2002 and the said occupancy certificate was issued on 23.6.2007. The delay caused by the Authority in issuing the Occupancy Certificate would not obliterate the rights of the petitioner to avail the benefit under Section 80 1A(4) of the Act vitiating the very purpose of the approval granted by the respondent No.2. If the compliance is made on the part of the petitioner, the same cannot be frustrated on technicalities or minor deviations by applying the IPS scheme 2008 which was not in force during the relevant period. The arguments of the learned counsel for the revenue on these grounds requires to be negated.
14. The action of the respondent No.1 instructing respondent No.2 vide Official Memorandum dated 1.3.2012 to withdraw the approval suffers from the vice of arbitrariness and lacks jurisdiction. In terms of scheme 2002, the respondent No.1 is empowered to issue the notification under 18-C of the Rules in compliance with the approval order of the respondent No.2 not to adjudicate upon it. The language employed in the Official Memorandum impugned would not indicate that the instructions therein were only recommendatory. Even if the same to be construed as recommendatory, no such recommendation has been accepted by the respondent No.2.
15. In the circumstances, Respondent No.1 is directed to notify the petitioner’s Industrial Park under Rule 18-C of the Income Tax Rules, 1962 in terms of the Industrial Park Scheme, 2002 in an expedite manner, in any event, not later than three months from the date of receipt of certified copy of the order.
Writ petition stands disposed of in terms of the above.
Sd/- JUDGE Dvr: