The Chennai bench of Income Tax Appellate Tribunal ( ITAT ) recently held that Successor companies could claim deduction under Section 80IA(4) of Income Tax Act, 1961 as per the recognition of Industrial Park Scheme, 2006.
The fact of the case is that the assessee M/s. Khivraj Tech Park is a partnership firm filed its return of income for the assessment year 2012-13, declaring Nil total income after claiming deduction under Section 80IA(4)(iii) of the Income Tax Act, 1961. The case was selected for scrutiny.
During the course of assessment proceedings, the Assessing Officer called upon the assessee to furnish necessary evidence to justify deduction claimed under Section 80IA(4)(iii) of the Act. In response, the assessee submitted that the company, M/s. Khivraj Tech Park Pvt Ltd., is engaged in developing, operating and maintenance of the Industrial parks. The industrial park developed by the company was duly approved by the Department of Industrial Policy and Promotion ( DIPP ) under the Ministry of Commerce and Industry .
During the financial year relevant to assessment year 2012-13, the company along with four other companies formed a partnership firm under name and style of ‘M/s. Khivraj Tech Park’ and the company M/s. Khivraj Tech Park Pvt Ltd has transferred the industrial park as its capital contribution as a going concern.
The partnership firm has been subsequently converted into a company under the name and style of ‘M/s. Olympia Tech Park ( Chennai ) Private Limited’ ,the appellant, under Part IX of Companies Act, 1956.
Since, the Industrial park was approved by the Ministry of Commerce, Government of India, under the Industrial Park Scheme, 2002, on transfer to the successor company, the successor company can claim deduction under Section 80IA(4)(iii) of the Income Tax Act, for the remaining period and accordingly, the assessee has claimed deduction under Section 80IA(4)(iii) of the Income Tax Act.
However, without convincing by the submission of the assessee AO denied the deduction claimed by the assessee.
Aggrieved, the appellant ( Successor company ) filed an appeal before the CIT(A), who allowed the deduction claimed by the assessee and held that successor company is eligible to claim deduction for the remaining period and the same has been recognized by the Industrial Park Scheme, 2002. Aggrieved by the CIT(A) order, the revenue is in appeal before the tribunal.
Before the tribunal R. Clement Ramesh Kumar, the Department representative argued that Industrial Park Scheme, 2002 & Industrial Park Scheme, 2008 provides that deduction is eligible only to those undertakings which were notified between the period 01.04.1997 to 31.03.2011
Hence the CIT(A) failed to note that as per Industrial Park Scheme, 2008, which superseded the earlier schemes, makes it very clear that both the transferor and the transferee entities have to be notified under the scheme to become eligible for claiming the deduction.
Accordingly the counsel for revenue submitted that In the present case, the transferor industrial park was notified as per Industrial Park Scheme, 2002, whereas the transferee entity was not notified under any Industrial Park Scheme.
Ajith Chordia, Counsel for Appellant argued that the assessee’s industrial park is approved under Industrial Park Scheme, 2002 and as per said scheme, if the undertaking has transferred the industrial park to another undertaking for operation and maintenance, then the successor undertaking can claim deduction, as if there was no transfer for the purpose of section 80IA(4)(iii) of the Income Tax Act.
It was observed by the tribunal that the industrial park developed by the assessee was approved under the Industrial Park Scheme, 2002. Further the undertaking and the industrial park of the assessee has been duly approved and notified by the CBDT. The said notified undertaking and industrial park was transferred to the appellant partnership firm as capital contribution.
Therefore the tribunal concluded that “In the present case, transferor undertaking is duly notified, whereas the transferee undertaking is not notified in any of the sections. In our considered view, the Assessing Officer has once again failed to understand the provisions of section 80IA(4)(iii) of the Income Tax Act, in right perspective because as we have stated in earlier part of this order transfer under Section 80IA(4)(iii) of the Income Tax Act is qua the undertaking and not qua the assessee. The undertaking owned by the transferor is the same undertaking owned by the transferee”.
After observing the submissions of both parties the two-member bench of Manjunatha. G ( Accountant member ) and Manomohan Das ( Judicial Member )observed that Successor companies could claim deduction under Section 80IA(4) of Income Tax Act, 1961 as per the recognition of Industrial Park Scheme, 2006.
Therefore the bench dismissed the appeal filed by the revenue.
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