By TIOL News Service
NEW DELHI, AUG 16, 2018: THE ISSUE AT HAND IS - whether approval granted as 'industrial park' u/s 80IA can be withdrawn for mere reduction in constructed area, when in fact there is no minimum requirement of industrial park provided in the I-T Act. NO is the verdict.
Besides, the High Court also held that such approval cannot be revoked when in fact the constructed upon area was known to the DIPP all along & there was no suppression of facts on part of the builder.
Facts of the case
The assessee company, engaged in construction business, had been granted approval by the DIPP under the Industrial Park Scheme 2002 & u/s 80IA of the Income Tax. It applied for such approval under the scheme. It constructed a particular building so as to be eligible under the scheme. The assessee notified the Director of Industries about the same and also provided specific details of the total area, common areas and constructed area. Upon examination of all details, the Joint Director as well as the Director of Industries. Thereupon the Central Govt granted such approval, notifying the building as an industrial park u/s 80IA. Subsequently, the office of the DIPP kept pointing out various issues in the built up area. Following exchange of communications between the assessee and the DIPP, it was noted that the original approval as industrial park had been given based on the assessee's undertaking that the Park would be constructed upon a certain area. However, it was pointed out that the actual construction area had been reduced. Hence the approval was revoked.
In writ, the High Court held that,
++ the detailed letter with the IPS-1 form furnished to the DIPP on 23.02.2006 in this case, discloses that out of the total of 24299.75 sq. mtrs proposed to be area, the land area was 4818.30 square meters; the earmarked commercial area was 1948 square meters and the contemplated industrial allocable area was 17533.45 square meters. Such being the circumstances, when the final approval was communicated, the area apparent from the letter dated 21.07.2006 (No. 1927) issued by the Senior Town Planner (containing floor wise details) disclosed that the building was constructed and approved for 14715.55 square meters. This was communicated to the Director of Industries on 04.08.2006. This area finds repeated mention in all the inter se communications of the state department of industries; it was also part of the record when the case was recommended for approval to the Central Government on 23.08.2006. In these circumstances, the assessee's explanation that the repeated communications of the DIPP kept mentioning the larger – original application area of 24299.75 sq. mtrs. which impelled it to seek amendment of the notification, is reasonable. Para 8 of the 2002 scheme, under which the notification was initially issued and which was later revoked, clearly states, by the proviso that the "before withdrawal, the undertaking being industrial park shall be given an opportunity of being heard". In the present case, there does not appear to have been any prior opportunity; even the written submissions given to the committee was not considered or adverted to. The material facts, such as the approval given by the town planning authorities, the repeated inter se correspondence between the Haryana Director of Industries (based on whose recommendation the approval and notification were issued in 2007) and the explanation given by the assessee were completely ignored. The DIPP just went by a bare comparison of the area in the Original Application (24299.75 sq. mtrs.) and the final built up area (14715.55 square meters). The assessee's explanation as regards the built up area being the larger super area (for which the leases were entered into) and the actual carpet area being 8094 square meters were ignored altogether. In these circumstances, the order and notification suffer from non application of mind;
++ it is clear therefore, that in the absence of any stipulation as to the minimum requirement of industrial park under the scheme as well as under the Income Tax Act, the unreasoned order of DIPP (ignoring the record and overlooking the material explanation of the assessee with respect to the area constructed, the super area in fact leased and that there was no suppression of facts anytime) withdrawing the earlier notification cannot survive. As regards the other ground, i.e. non-construction beyond the scheme, the court notices that the approval was in fact issued after the date mentioned by the DIPP. Following the reasoning in Silverland of the Bombay High Court, that reason cannot survive.
(See 2018-TIOL-1618-HC-DEL-IT)
