Bombay High Court
Pvt. Ltd. vs & Ors on 16 November, 2011
Bench: Dr. D.Y. Chandrachud, A.A. Sayed
Dmt 1 wp744-11
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGNAL CIVIL JURISDICTION
WRIT PETITION NO. 744 OF 2011
M/s. Silver Land Developers
Pvt. Ltd., & Ors.
ig .. Petitioners.
versus
The Empowered Committee
& Ors. .. Respondents.
.....
Mr. Aspi Chinoy, Sr. Adv. with Mr. Vinay Sonpal and
Mr. B.R. Vishwakarma for the Petitioners.
Mr. B.M. Chatterjee with Mr. Rajinder Kumar and Ms.
Anamika Malhotra for R. Nos. 1 & 2.
Mr. Suresh Kumar for Respondent Nos. 3 & 4.
......
CORAM : DR.D.Y.CHANDRACHUD &
A. A. SAYED, JJ.
16 November 2011.
Dmt 2 wp744-11
ORAL JUDGMENT : (PER DR. D. Y. CHANDRACHUD, J.)
An order has been passed by the Empowered
Committee on 21 February 2011 holding that the Petitioners are
not entitled to the benefit of the Industrial Park Scheme 2002.
The Scheme has been notified by the Central Government in
exercise of powers conferred by clause (iii) of Sub-section (4) of
Section 80-IA of the Income Tax Act, 1961. The Petitioners in
these proceedings under Article 226 of the Constitution question
the legality of the order of the Empowered Committee.
2. Sub-section (1) of Section 80-IA provides that where
the gross total income of an assessee includes profits and gains
derived by an undertaking or an enterprise from a business
referred to in sub-section (4), the assessee would be allowed, in
accordance with the provisions, in computing the total income,
a deduction of an amount equal to hundred per cent of the
profits and gains derived from such business for ten
consecutive assessment years. Under sub-section (2) the
Dmt 3 wp744-11
assessee has an option to claim the deduction for any ten
consecutive assessment years out of fifteen years beginning
from the year in which the undertaking or the enterprise
develops an industrial park. Sub-section (4) of Section 80-IA
contains a description of the undertakings or enterprises to
which the provision applies. Clause (iii) of sub-section (4) as
it stood during the material period to which the controversy
relates was to the following effect :
"(iii) any undertaking which develops, develops and
operates or maintains and operates an industrial
park notified by the Central Government in
accordance with the scheme framed and notified by
that Government for the period beginning on the 1st
day of April, 1997 and ending on the 31st day of
March, 2006."
3. Under Section 80-IA (4) (iii) the Central Government
was empowered to notify a scheme. The Central Government
Dmt 4 wp744-11
has notified schemes from time to time. The Scheme to which
the present dispute relates is notified on 1 April 2002 and is
called the Industrial Park Scheme, 2002. Para 3 of the Scheme
provides for the period of operation and is to the following
effect :
"3. Period of operation of the scheme - This
scheme shall be applicable for any undertaking
which develops, develops and operates or maintains
and operates an Industrial Park for the period
beginning on the 1st day of April, 1997 and ending
on the 31st day of March, 2006. In a case, where
an undertaking develops an Industrial Park on or
after the 1st day of April, 1999 and transfers the
operation and maintenance of such Industrial Park
to another undertaking (transferee undertaking), the
benefits shall be allowed to such transferee
undertaking for the remaining period in the ten
consecutive assessment years in a manner as if the
Dmt 5 wp744-11
operation and maintenance were not so transferred
to the transferee undertaking.
Para 4 defines the objectives of an industrial park which
includes, inter alia, in sub-para (b) "an industrial park for
development of infrastructural facilities or built-up space with
comon facilities in any area allotted or earmarked for the
purposes of industrial use". The Scheme provides two modes
for the grant of approval; (i) automatic approval and (ii) non-
automatic approval. The case of the Petitioners is admittedly
governed by the non-automatic approval route. In such cases
para 7 of the Scheme stipulated that all applications which
were not eligible for automatic approval shall require the
approval of the Empowered Committee constituted by the
Central Government. The Empowered Committee was required
to consider each application on a case to case basis subject to
its complying with the statutory requirements as prescribed by
the Ministry of Finance under the Income Tax Act, 1961 and
other statutory rules/obligations. Para 9 of the Scheme lays
Dmt 6 wp744-11
down certain general conditions and is to the following effect :
"9. General conditions.-(1) In case the
commencing of the Industrial Model Town or
Industrial Park or Growth Centre gets delayed by
more than 1 year from the date indicated in the
application, fresh approval may have to be obtained
to get the benefits under the Act. This condition
also applies to the existing approvals under the
Industrial Park Scheme, which envisages
commissioning of the Parks, latest by March 31,
2002.
(2) The tax benefits under the Act can be availed
only after the number of units indicated in the
application, are located in the industrial park."
4. The Petitioners initially applied to the Government
of Maharashtra on 14 June 2005 for the registration of their
Dmt 7 wp744-11
project at Jogeshwari (West) Mumbai as a private Information
Technology Park under a resolution of the State Government.
The State Government issued a letter of intent on 8 July 2005.
On 27 September 2005 the Directorate of Industries of the
State Government drew the attention of the Petitioners to the
Industrial Park Scheme of 2002 notified by the Union
Government under Section 80-IA(4)(iii). On 27 December 2005
the Petitioners submitted an application to the Union Ministry
of Commerce and Industry for approval of their Information
Technology Park under the Scheme. The proposed area of
the Park was stated to be 8261-56 sq.mt. and it was proposed
that the total number of industrial units would be eight. The
expected date of commencement of the Industrial Park was
stated to be 15 March 2006. The proforma provided by the
Union Government clarified that the expected / actual date of
commencement would denote the date when all the
infrastructural facilities for the proposed number of industrial
units have been provided.
Dmt 8 wp744-11
5. The Union Government in the Ministry of
Commerce and Industry conveyed the approval of the
Government to the proposal of the Petitioners for setting up of
an industrial park in terms of the Industrial Park Scheme, 2002
on 24 July 2006. According to the approval, the expected date
of commencement was to be 15 March 2006. Para 3 stipulates
that the Industrial Park should be in operation during the
period for which the benefits under Section 80-IA (4)(iii) are to
be availed of. Para 5 (ii) of the letter which was in terms
of para 9 of the Scheme then contains the following stipulation
:
(ii) In case the commencement of the 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-IA of the
Income Tax Act, 1961.
Dmt 9 wp744-11
6. On 26 October 2006 the Petitioners addressed a
communication to the Union Ministry of Commerce and
Industry stating that the project would require a likely period
of two months for completion. The Petitioners stated that in
view of the then existing circumstances they would be able to
accommodate three units in the I.T. Park and consequently
sought a change in the number of units allowed from eight to
three. The proposed area of the I.T. Park was maintained at
8261.56 sq. mt. and similarly there was no change in the
proposed allocable area. The expected date of completion
was set back from 15 March 2006 to 31 March 2006.
7. On 8 March 2007, the Petitioners submitted an
application for the grant of an occupation certificate. The
Municipal Corporation of Greater Mumbai issued an occupation
certificate on 2 June 2007. On 17 April 2007 the Union
Ministry of Commerce and Industry sought a status report
from the State Directorate of Industries on a number of issues
Dmt 10 wp744-11
including the status of the development of the project and the
date of commencement. In a response dated 29 May 2007
a status report was forwarded. The State Directorate of
Industries clarified to the Empowered Committee that the
Municipal Corporation of Greater Mumbai had found that the
Architects had submitted a building completion certificate on 8
March 2007 after completion of the work at site. The view of
the State Government on the actual completion of the work
was as follows :-
" The Municipal Corporation of Greater
Mumbai concludes that the Building under
reference was completed on 08/03/2007 and
thereafter, issued OC on 02/06/2007 on the basis
of application filed by the applicant on 08/03/2007
considering completion of Building on 08/03/2007.
In this case, as per the confirmation report
given by Brihanmumbai Mahanager Palika (now
Dmt 11 wp744-11
MCGM) Applicant / Developers have completed
building work on 08/03/2007, and thereby complied
with norms of Industrial Park Scheme, 2002. Hence,
it is recommended to consider the request of
applicant under the said scheme."
8. On 10 July 2007 an intimation was addressed to the
Petitioners by the Union Ministry of Commerce and Industry in
the following terms :
"The date of commencement of your park is
15-03-2006. With one year grace period the park
should start functioning before 14-03-2007.
However, the State Government report indicated
that construction work is at final stage of
Completion & Occupation Certificate is awaited.
2. You are requested to furnish the following
details to this Department at the earliest for further
Dmt 12 wp744-11
processing your case :
a. Whether the park has become function? If so,
b. How many units have been located in your
park as on 14-03-2007?
(emphasis supplied)
The communication, significantly refers to the fact that the I.T.
Park, as stated in the application, should have been completed
by 15 March 2006 and notes that a one year grace period
would entail that the park should have started functioning
before 14 March 2007. Queries were accordingly addressed to
the Petitioners to clarify as to when the park had actually
become functional. In a reply dated 25 July 2007, the
Petitioners stated that as on 14 March 2007 three units were
located in I.T. Park, namely, (1) M/s. Tata Consultancy Services
Ltd., (2) M/s. Polaris Software Lab Ltd. and (3) M/s. Bharti
Airtel Ltd.
Dmt 13 wp744-11
9. On 3 August 2007, the Union Government sought a
No Objection Certificate from the land owner to the effect that
only the Petitioners shall claim benefit under Section 80 IA.
The NOC was furnished on 14 August 2007. On 21 September
2007 the Petitioners addressed a communication to the Union
Government stating that subsequently an additional unit,
namely, of M/s. Citigroup Global Services Ltd. had been located
in the I.T. Park and permission was sought. On 12 November
2007 the Petitioners stated that they had anticipated that they
will be allotted three industrial units. However, they were in a
position to accommodate five units for which an amendment in
the approval was sought.
10. On 25 August 2008, the Union Government in the
Ministry of Commerce and Industry rejected the application of
the Petitioners on the ground that since the expected date of
commencement of the Industrial Park is after 31 March 2006,
the application was not covered by the Industrial Park Scheme
of 2002. The Petitioners were accordingly advised to apply to
Dmt 14 wp744-11
the appropriate authority under the subsequent Scheme of
2008. On 6 January 2009, an order was passed by the Union
Government in the Ministry of Commerce and Industry
reiterating that since the expected/actual date of
commencement of the Industrial Park was 15 February 2007 as
reflected in the application dated 19 November 2008, the
application was not covered by the Scheme of 2002. The view
taken was that the Industrial Park Scheme, 2002 was applicable
only to Industrial Parks set up between 1 April 1992 and 31
March 2006.
11. The initial order dated 6 January 2009 was set
aside by a Division Bench of this Court on 16 June 2009 on
the ground that an opportunity of being heard was not granted
to the Petitioners and the matter was referred back to the
Empowered Committee for a fresh decision. Upon remand, a
hearing took place before the Empowered Committee on 7
September 2009 during the course of which the Committee
noted that "the most crucial element here is the date of
Dmt 15 wp744-11
completion of the building." The Empowered Committee
noted the submissions of the Petitioners that the date of the
completion of the building should be reckoned from the date
of the application, for the grant of an occupation certificate
and not from the date of the issuance thereof. Accordingly, it
was decided that the matter should be referred to the State
Government to take a report from the Municipal Corporation
about (i) The date of the application for issuance of a
completion certificate; (ii) The date of the completion of the
building as per law. Following this reference, on 20 November
2009, a report was submitted by the State Government
clarifying that according to the Municipal Corporation the
building under reference was completed on 8 March 2007 and
that an occupation certificate was issue on 2 June 2007 on the
basis of the application considering the completion of the
building as on 8 March 2007. The Directorate of Industries of
the State Government recommended in the report that since
the Petitioners had completed the work of the building on 8
March 2007, they should be regarded as having complied with
Dmt 16 wp744-11
the norms of the Industrial Park Scheme, 2002.
12. Upon receipt of the report of the State Government,
a further hearing took place before the Empowered Committee
on 21 December 2009. During the course of the hearing, a
representative of the Central Board of Direct Taxes contended
that an industrial park which commences operation after 31
March 2006 and before 31 March 2009 shall be governed by
the Scheme of 2008. Hence, according to the CBDT, since the
Petitioners had commenced operation of the industrial park
after 31 March 2006 and even after allowing the grace period
of upto one year that should not extend later than 31 March
2006. The Empowered Committee took the view that the issue
of the grace period should be resolved first before the CBDT,
the Department of Revenue and the Department of Industrial
Policy and Promotion and a fresh meeting of the Committee
should be convened thereafter.
13. On 7 July 2010 the Empowered Committee came to
Dmt 17 wp744-11
the conclusion that the Petitioners should not be granted the
benefit of the Industrial Park Scheme, 2002. In taking this view
the Committee noted that it had obtained the views of the
Revenue Department and the Department of Legal Affairs.
According to the clarification issued by CBDT on 2 June 2008
para 9 (1) of the Scheme only provided a condition of re-
notification of the Industrial Park in case there was a delay in
completion of the park by more than one year. According to
the the Empowered Committee, this only meant that if there
was a delay of less than one year, there was no need of re-
notification but that would not extend the operation of the
Scheme beyond 31 March 2006. The Committee took the view
that when the Scheme of 2002 was notified on 1 April 2002,
Section 80-IA (4) (iii) only applied to undertakings which were
to commence operation by 31 March 2006. Hence, it was held
that Para 9(1) of the Scheme should not be interpreted in a
manner which would extend the scope of exemption beyond
what was intended in the main statute. In sum and
substance the view of the the Empowered Committee was that
Dmt 18 wp744-11
since the Petitioners had not commenced the industrial park by
31 March 2006, they were not entitled to the benefit of the
Scheme.
14. This second order of the the Empowered
Committee was set aside by a Division Bench of this Court on
18 October 2010 in a Writ Petition under Article 266 of the
Constitution on the ground that the Committee had relied
upon material which was not disclosed to the Petitioners.
Following the second order of remand, the Empowered
Committee convened fresh hearings and thereafter rejected the
application of the Petitioners for the benefit of the Scheme of
2002 by an order dated 21 February 2011.
15. The impugned order dated 21 February 2011 of the
the Empowered Committee takes note of the legal opinion of
the Department of Legal Affairs and of the view of the
Revenue Department according to which any industrial park
which commences after 31 March 2006 is not eligible to be
Dmt 19 wp744-11
considered under the Industrial Park Scheme, 2002 and that the
one year grace period cannot extend beyond 31 March 2006.
The claim of the Petitioners has been consequently rejected on
the ground that since the industrial park was not completed on
or before 31 March 2006, they were not eligible for approval
under the Scheme of 2002.
16.
The learned Senior Counsel appearing on behalf of
the Petitioners urged the following submissions in assailing the
order of the the Empowered Committee :
(i) Section 80-IA (4) (iii) does not mandate that
development of an industrial park should be
completed by 31 March 2006. Several schemes
have in fact been notified by the Central
Government from time to time and the intent to
give the benefit of a deduction for developing
infrastructural facilities continues to exist until date;
Dmt 20 wp744-11
(ii) Under Section 80-IA (4) (iii) a benefit is available to
(i) either an assessee who is a developer; or (ii) an
assessee who develops and operates an industrial
park; or (iii) an assessee who maintains and
operates an industrial park in accordance with the
Scheme notified by the Central Government. Para
9(1) of the Scheme does contemplate a situation
where the commencement of the industrial park is
delayed by more than one year from the date
indicated in the application in which case a fresh
approval has to be obtained to get the benefit
under the Act. This condition has been also
applied to existing approvals under the Industrial
Park Scheme which had envisaged the
commissioning of the park, latest by 31 March 2002.
Clause 5 (2) of the letter of approval that was
granted to the Petitioners was inserted specifically
with reference to the expected date of completion
of 15 March 2006 and was in terms of Para 9 of
Dmt 21 wp744-11
the 2002 Scheme;
(iii) The subsequent scheme which has been framed by
the Central Government in 2008 has liberalised the
provisions even further by merely requiring that
the undertaking shall begin to develop an industrial
park;
(iv) In the present case the entire project was
completed by 8 March 2007. The Empowered
Committee in the course of its hearing also noted
that the crucial date was 14 March 2007.
(v) In the circumstances, the view which has been
taken on Para 9 (1) of the Scheme by the the
Empowered Committee is unduly technical and
would defeat the public purpose underlied Section
80-IA (4). An infrastructural project requires
investment of considerable amount of time, effort
Dmt 22 wp744-11
and money and if the interpretation which has
been placed by the the Empowered Committee
were to be adopted, the benefit of the provision
would be denied to several projects where
approvals were granted within a period of one year
prior to 31 March 2006 when the Scheme was to
expire. In the present case itself, approval was
granted to the project on 24 July 2006. As a
matter of fact, queries under the Right to
Information Act have revealed that approvals have
been granted to at least fifty projects as late as
April 2007. This would suggest that it has been
the consistent stand of the the Empowered
Committee that the completion of the project on or
before 31 March 2006 has not been regarded as an
inviolable condition for availment of benefits.
17. On the other hand, learned Counsel appearing on
behalf of the Revenue submitted that :
Dmt 23 wp744-11
(i) Para 3 of the Scheme of 2002 postulates that the
development of the facility has to be completed by
31 March 2006;
(ii) The Scheme cannot override the provisions of
Section 80-IA (4) (iii);
(iii) Para 9 of the Scheme would apply only to those
cases where there is a delay in the commencement
of the project of the industrial park but when the
commencement does not fall back beyond 31 March
2006;
(iv) In the present case occupation certificate was
granted only on 2 June 2007 and even if a grace
period of one year were to be granted, that would
also expire on 15 March 2007 being the date on
which a period of one year would expire from the
Dmt 24 wp744-11
expected date of completion; and
(v) The number of units for which approval is sought
constitutes an essential requirement. The
Petitioners sought to reduce the number of units
for which approval was taken from eight to three
and thereafter to five.
18. The rival submissions now fall for determination.
The object and purpose of Section 80-IA is to grant a
deduction, while computing the total income of the assessee of
an amount equal to hundred per cent of the profits and gains
derived from an eligible business for ten consecutive
assessment years out of fifteen years beginning from the year
in which inter alia the assessee develops an industrial park or
facility. The eligible businesses to which the provisions are
attracted are specified in sub-section (4) of Section 80-IA. The
object and purpose of Section 80-IA was to provide an impetus
to the growth of infrastructure in the country. Clause (iii) of
Dmt 25 wp744-11
sub-section (4) of Section 80-IA makes eligible an undertaking
which (i) develops; or (ii) develops and operates; or (iii)
maintains and operates an industrial park notified by the
Central Government in accordance with the Scheme framed for
the period beginning on 1 April 1997 and ending on 31 March
2006. An undertaking is eligible if it has either developed; or
developed and operated; or operated and maintained an
industrial park in accordance with the Scheme. The first
aspect of the matter which needs emphasis is that clause (iii)
of Section 80-IA (4) requires that the Scheme has to be notified
for the period between 1st April 1997 and 31 March 2006. The
statutory provision does not contain a specific requirement to
the effect that the industrial park had to be developed on or
before 31 March 2006. The requirement is that the industrial
park has to be developed in accordance with the Scheme
framed by the Central Government for the period between 1
April 1997 and 31 March 2006. The Scheme which was framed
by the Central Government stipulated the requirement for the
grant of approval in those cases which did not fall in the
Dmt 26 wp744-11
automatic approval route. Para 3 of the Scheme lays down
the period of operation of the Scheme. Under Para 3 the
Scheme is to be applicable to any undertaking which develops,
develops and operates or maintains and operates an Industrial
Park for the period beginning on 1 April 1997 and ending on 31
March 2006. Therefore, undoubtedly it was as a result of Para
3 that a requirement to the effect that the undertaking should
develop an industrial park for the period commencing on 1
April 1997 and ending on 31 March 2006 came to be
introduced. The Scheme, however, stipulated in Para 9 (1) that
in case the commencement of the industrial park is delayed by
more than one year from the date indicated in the application,
a fresh approval would have to be obtained to get the benefit
of the Act. The last sentence of Para 9 (1) then clarified that
this condition would also apply to the existing approvals under
the Industrial Park Scheme which envisaged the commissioning
of the park, latest by March 31, 2002. Para 9 (1) took notice of
the fact that approvals were granted under the previous
Scheme which envisaged the commissioning of parks by 31
Dmt 27 wp744-11
March 2002. The new Scheme was notified on 1 April 2002.
If 31 March 2002 was to be treated as an absolute cut-off then
it is unlikely that the last sentence of Para 9(1) would provide
that the condition which was spelt out in the said Para would
also apply to existing approvals. Consequently Para 9 of the
Scheme did contemplate situations where the commencement
of an industrial park was delayed by more than one year from
the date indicated in the application. The Scheme provides
that in such cases, a fresh approval would have to be obtained
in order to obtain the benefits under the Act.
19. The course of proceedings before the Empowered
Committee reveals that the application filed by the Petitioners
for the grant of approval was allowed on 24 July 2006 noting
that the expected date of completion was 15 March 2006. The
letter of approval is significant because clause 5(2) of the letter
stipulates that in case the commencement of the park is
delayed by more than one year from the date as indicated in
Para 1 (11) - 15 March 2006 - a fresh approval would be
Dmt 28 wp744-11
required under the Industrial Park Scheme, 2002 for availing of
benefits under Section 80-IA (4) (iii). Obviously therefore, when
the the Empowered Committee granted its approval on 24 July
2006 it did so conscious of the circumstance that the expected
date of completion was 31 March 2006. The Empowered
Committee took note of the possibility that the commencement
of the industrial park may be delayed by more than one year
from this date. The letter thereafter proceeded to stipulate
that in such an event a fresh approval was required. This is
an important circumstance, which has a bearing on the manner
in which the provisions of the Scheme were construed by the
Empowered Committee. At least when it granted its approval
on 27 July 2006 the Empowered Committee did not treat the
requirement that the industrial park should commence on 15
March 2006 as inviolable. In this regard it would be necessary
to also take notice of the fact that the notified date of
commencement, as referred to in the format provided by the
Union Government, was defined as denoted as the date from
which industrial facility proposed for the units having been
Dmt 29 wp744-11
provided.
20. The next important circumstance which would have
a bearing on the issue before the Court is the manner in
which the Union Government in the Ministry of Commerce and
Industry construed the Scheme during the course of the
proceedings. On 10 July 2007 the Union Government in its
communication to the Petitioners noted that the date of
commencement of the park (as recorded in the application) was
15 March 2006. The Government noted that with a one year
grace period the park should start functioning before 14 March
2007. The Petitioners were, therefore, called upon to disclose
as to whether the park had become functional and if not how
many units had been located as on 14 March 2007. On
remand a hearing took place before the Empowered Committee
on 7 September 2009. During the course of hearing the
Committee observed that the most crucial element was whether
the completion of the building had taken place before or after
14 March 2007. The Empowered Committee was persuaded to
Dmt 30 wp744-11
change its view on the basis of the position which was adopted
by the CBDT which was also minuted during the course of a
hearing which took place on 21 December 2009. The
Committee was of the view that the issue of the grace period
should be first resolved between the CBDT, the Department of
Revenue and the Department of Industrial Policy and
Promotion and a fresh meeting of the Empowered Committee
should be convened. The affidavit in reply that is filed in
these proceedings contains an extract of a legal opinion which
was received from the Department of Legal Affairs. The
opinion of the Department of Legal Affairs, as set out in the
reply, was to the following effect:
"Para 9(1) of Industrial Park Scheme, 2002, only
provides a condition of re-notification of the
industrial park, in case of delay of completion of
industrial park by more than one year from the
date indicated in the application. It only means
that if there is a delay of one year or less, there is
Dmt 31 wp744-11
no need for re-notification. But it does not in any
case extend the operation of the scheme beyond
31st March, 2006. The intention of para 9 (1) is also
very clear. When Industrial Park Scheme, 2002 was
notified on 1.4.2002, the main section 80-IA[4(iii)]
only applied to undertakings which were to
commence operation by 31 st March, 2006. Thus,
para 9(1) of the scheme cannot be interpreted in a
manner which would extend the scope of
exemption beyond what was intended in the main
statute. Hence, if an industrial park has not
commenced operation by 31st March, 2006, it shall
not be governed by the provision of the Industrial
Park Scheme, 2002". (emphasis supplied).
The view which finds acceptance by the Department of Legal
Affairs postulates that when the Industrial Park Scheme of 2002
was notified on 1 April 2002, Section 80-IA(4)(iii) only applied
to undertakings which were to commence operations by 31
Dmt 32 wp744-11
March 2006. This conclusion is not a correct reading of
Section 80-IA(4)(iii). What Section 80-IA(4)(iii) postulated was
that the section would apply to any undertaking which
develops, develops and operates or maintains and operates an
industrial park notified by the Central Government in
accordance with a Scheme framed for the period beginning on
1 April 1997 and ending with 31 March 2006. The provision
does not contain a condition to the effect that the industrial
park must commence operation by 31 March 2006. As a
matter of fact, the provision applies to an undertaking which
either develops, or develops and operates or maintains and
operates an industrial park. Based on the opinion which was
formed by the Department of Legal Affairs, the Empowered
Committee accepted the contention of the Department that
Para 9 (1) cannot be interpreted in a manner which would
extend the scope of exemption beyond what was enacted in
the main statute. Now, undoubtedly, as a matter of first
principle, a scheme which constitutes a piece of subordinate
legislation, cannot override the provisions of the parent
Dmt 33 wp744-11
enactment. That is, however, not the case here. The statute
contemplated that a scheme would be notified for the period
between 1 April 1997 and 31 March 2006. The Scheme
contemplates that the industrial park should be developed,
developed and operated or be maintained and operated for the
period beginning on 1 April 1997 and ending on 31 March
2006. This stipulation in Para 3 of the Scheme must however
be read harmoniously with Para 9 which contemplates a
situation where the commencement of any industrial park is
delayed by more than one year from the date indicated in the
application in which event a fresh approval has to be granted.
This condition was also made applicable to existing approvals
under the Scheme which had envisaged the commissioning of
the park March by 31, 2002, prior to the enforcement of the
Scheme on 1 April 2002.
21. We find merit in the contention of the Petitioners
that if the position which has been adopted by the Empowered
Committee were to be accepted, that would result in virtually
Dmt 34 wp744-11
defeating the salutary public purpose which underlies Section
80-IA (4) (iii). Notice would have to be taken of the fact
that infrastructural projects require a considerable amount of
investment and a time lag is involved in the completion of the
project. The view of the Empowered Committee is that Para 9
of the Scheme would apply to a delay in a project beyond one
year but that the delayed date of completion should not in
any event fall beyond 31 March 2006. If this were to be
accepted as the correct interpretation, that will denude the
benefit of Section 80-IA to project where approvals were
granted a few months before 31 March 2006 and the
completion date spills over beyond that date. There is no
indication either in the statute or in the scheme that
Parliament or its delegate intended to deprive the assessee of
the benefit of Section 80IA(4)(iii). Para 9 of the Scheme would
would in fact indicate an intent not to deprive the benefit of
Section 80IA (4) (iii) save and except that if the commencement
of the project is delayed beyond one year a fresh approval
would have to be obtained to get the benefits under the Act.
Dmt 35 wp744-11
The Court cannot also ignore the fact that the intent of the
legislature and its executive is not to discontinue the benefits
available in law. The Union Government has further liberalised
the scheme in 2008 by requiring that the undertaking shall
begin to develop the industrial park by a stipulated date. In
this case, approvals had been granted on 24 July 2006 which
was several months after 31 March 2006 when the Scheme of
2002 was to expire.
22. During the course of the hearing, learned Counsel
appearing on behalf of the Revenue relied on the fact that
though the Petitioners had initially stated in their application
that they would have eight units in the industrial park, this
figure was sought to be reduced to three. Learned Counsel
submitted that Para 9(2) of the Scheme speaks that the tax
benefits under the Act can be availed of only after the number
of units indicated in the application are located in the
industrial park. In response to this, the attention of the Court
was drawn by the learned Counsel for the Petitioners to the
Dmt 36 wp744-11
fact that the Petitioners had in their original application stated
that there would be eight units; that the proposed area of the
industrial park would be 8261-56 sq. mt.; and that the
proposed allocable area of would be 6529.42 sq. mt. By their
further application dated 26 October 2006 the Petitioners
sought to alter the number of units from eight to three.
However, there was no change proposed either in the area as
declared earlier or in the allocable area. Learned Counsel
submitted that the Petitioners fulfilled in substance the object
and substance underlying the Scheme and the Department was
notified on 25 July 2007 that three units located in the park as
on 14 March 2007 were occupied by Tata Consultancy Services
Ltd., Polaris Software Lab. Ltd., and Bharti Airtel Ltd.
Subsequently, the Petitioners notified the Department that an
additional unit had been occupied by Citigroup Global Services
Ltd.
23. The application filed by the Petitioners for a
modification of the number of approved units was not allowed
Dmt 37 wp744-11
purely on the ground that the development of the industrial
park was completed beyond 31 March 2006. For the reasons
already indicated by us in the earlier part of this judgment, we
have come to the conclusion that the Respondents were not
justified in rejecting the application purely on the ground that
the development of the park was not complete by 31 March
2006. In holding thus, the Empowered Committee disabled
itself from exercising the power and jurisdiction which it had
under Para 9(1) of the Scheme.
24. The attention of the Court has also been drawn to
the fact that in fifty cases, approvals have been granted under
the Scheme of 2002 beyond 31 March 2006 and as a matter of
fact as late as in April 2007. Learned Counsel on behalf of the
Revenue has submitted that the Department would seek to
revoke those permissions which have been granted in other
cases. Be that as it may, for the reasons indicated earlier we
have come to the conclusion that the basis on which the
Empowered Committee has rejected the application filed by the
Dmt 38 wp744-11
Petitioners is contrary to law and would have to be set aside.
25. We, accordingly, dispose of this Petition by quashing
and setting aside the impugned order of the Empowered
Committee dated 21 February 2011. We direct in consequence
that the Empowered Committee shall consider the application
filed by the Petitioners including for the reduction of units
without holding the Petitioners to be disentitled on the ground
that has been found to be erroneous in the judgment of this
Court. The Committee, it is clarified, would be at liberty to
consider the application in accordance with the provisions of
law.
26. Rule is made absolute in the aforesaid terms.
There shall be no order as to costs.
(Dr. D.Y. Chandrachud, J.)
(A. A. Sayed, J.)
Dmt 39 wp744-11
