The Bombay High Court ruled that income tax deduction under Section 80IA(4)(iii) allowable on obtaining Government approval to Industrial Park.
The Assessing Officer (AO), during the course of the assessment proceedings, found that the Assessee, Punit Chettiar alias Punit Balan, had claimed deduction under Section 80IA(4)(iii) of the Income Tax Act, 1961 to the tune of Rs.3,70,52,575/-. During the course of the survey action under Section 133A of the Income Tax Act at the office premises of M/s. Sai Constructions Pvt. Ltd, certain loose papers and documents were impounded.
A copy of the letter from the Under Secretary, Ministry of Commerce and Industry, Government of India, to the Assessee was found which stated that, on the basis of the State Government’s Report, the building in which the Industrial Park was being developed by the Assessee’s proprietary concern, M/s. S Balan, did not belong to an individual but belonged to a partnership firm named M/s. S Balan & Co.
The AO found that, in the Return filed under Section 153A of the Income Tax Act for Assessment Year 2009-10 and Assessment Year 2010-11, the Assessee had claimed deduction under Section 80IA(4)(iii) of the Income Tax Act. The AO sought the explanation of the Assessee and found the explanation to be not acceptable because on the basis of the said letter from the Under Secretary, Ministry of Commerce and Industry, the Assessee was not eligible for the said deduction.
The Assessee, in its reply to the Remand Report, submitted that the observation of the AO that the Assessee had not completed the Industrial Park even up to the date of scrutiny assessment was factually not correct as the Assessee started earning income from the Industrial Park from Financial Year 2006- 07, relevant to Assessment Year 2007-08, but due to losses incurred did not have positive gross total income for Assessment Years 2007- 08 and 2008-09 due to which the said deduction was not claimed. A Division Bench comprising of Justices KR Shriram and Firdosh P Pooniwalla observed that “The objection of the AO that the Industrial Park was being developed by the partnership firm is also not factually correct, in view of the explanation offered by the Assessee and also the letter issued by the Competent Authority. Once the Central Government grants the approval, it is incumbent on the part of the AO to grant the claim of deduction.”
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