Chennai ITAT: Provision in Section 80IA(12) Only Applies In Case of Transfering of Industrial Park Operation

The Chennai ITAT referring to CBDT Circular no. 10/2014, stressed that if an undertaking is transferred to another undertaking excluding the way of amalgamation and demerger and in other cases, the transferee undertaking will be qualified for deduction for the remaining unexpired period under section 80IA(4)(iii) of the Income Tax Act.

The Bench, Manmohan Das (Judicial Member) and Manjunatha. G (Accountant Member) followed that “proviso to section 80IA(12) of the Act applies merely if there is a transfer of operation and maintenance of the industrial park.

In the facts of the appellant case, the whole undertaking that developed the industrial park has been transferred not only the process and maintenance alone. Thus, in our considered view, the reasons provided via the Assessing Officer to allow deduction u/s. 80IA(4) of the Act only to operation and maintenance is not under law.” (Para 12)

According to the case, the taxpayer’s return was chosen for scrutiny, wherein the AO called upon the taxpayer to provide the required proof to explain the deduction claimed under section 80IA(4)(iii). The taxpayer answered that the industrial park made by the company was duly approved by the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry.

Central Board of Direct Taxes notifies about the stated industrial park as per the Industrial Park Scheme, 2002. The taxpayer mentioned that, at the time of the financial year, the company including four other companies made a partnership firm has transferred the industrial park as its capital contribution as a current subject.

The AO ruled that the taxpayer was not authorized for deduction u/s. 80IA(4), as the new undertaking which is taking up operation and maintenance of the industrial park, is not approved under the Industrial Park Scheme, 2002 & Industrial Park Scheme, 2008.

The CIT(A) on appeal, rendered the AO to permit the deduction claimed under section 80IA(4), for the whole income along with the income under the head rent, operations, and maintenance of pit out etc.

The Coram indicated that there is no merit in the reasons that the AO furnished to deny deduction u/s. 80IA(4)(iii), for the simple reason that the industrial park created by the taxpayer company is approved under the Industrial Park Scheme, 2002 and the taxpayer has made the same within the time stipulated under said scheme.

The Bench followed that transfer u/s. 80IA(4)(iii), is qua the undertaking and not qua the taxpayer. Hence, the reasons furnished via the AO to restrict deduction u/s. 80IA(4)(iii), with the successor undertaking not composed in the date specified under Industrial Park Scheme, 2002 & Industrial Park Scheme, 2008 is not valid and devoid of merits.

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The Bench followed that the AO once again losses to comprehend the provisions of section 80IA(4)(iii), in the right perspective as transferred under the section. 80IA(4)(iii) is qua the undertaking and not qua the taxpayer.

Hence on finding that CBDT Circular No. 779, illustrates the case and procedure of claiming deduction under section. 80IA(4)(iii) which was also supported by a press release issued by the Government of India, the ITAT dismissed the Revenue’s appeal.