Page 166 - DCOM301_INCOME_TAX_LAWS_I

Unit 6: Deductions: For Special Conditions

Notes

Case Study Coimbatore Hitech Infrastructure (P.) Ltd. vs

Additional Commissioner of Income-tax, Range-I,

Coimbatore

he assessee is a company engaged in the business of developing Special Economic
Zone (SEZ) at Keeranatham Village, Coimbatore. The assessee company has set up
Ta sector specific SEZ for Information Technology and Information Technology
Enabled Services. A SEZ is set up, approved and governed under the provisions of The
Special Economic Zones Act (SEZ Act), 2005 and The Special Economic Zones Rules (SEZ
Rules), 2006 made there under. The administration of the scheme is vested with the SEZ
authority functioning under the Rules promulgated in 2009.
The assessee company has satisfied the conditions to be complied with for obtaining
approval from the competent authority notified under the SEZ Act. The Department of
Commerce in the Ministry of Commerce and Industry, Government of India has granted
the approval to the assessee company for setting up the sector specific SEZ through their
proceedings dated 20.8.2006. The SEZ set up by the assessee company has been notified by
the concerned authority in Official Gazette as required under the SEZ Act, 2005. In short,
the assessee company is fully approved to develop SEZ under the SEZ Act, 2005.
In view of the approval granted by the competent authority, the assessee company carried
out its activities to set up the SEZ. As per the SEZ Act, 2005, the assessee is in the status of
a Developer, who shall develop, operate and maintain the SEZ in terms of the SEZ Act,
2005 and the Rules made there under. A Developer for the purpose of the SEZ Act, 2005
also includes a Co-Developer. After having developed SEZ as per the conditions laid
down in the approval granted by the competent authority, the assessee has let out the
developed lands to three parties in the previous year relevant to the assessment year
under appeal. The three parties are M/s. Robert Bosch India Ltd., M/s. Cognizant
Technology Solutions India (P) Ltd. and M/s. KGISL IT Parks (P) Ltd. The assessee has
leased out 21.88 acres, 23.68 acres and 11.74 acres respectively.
As the assessee company is an approved and notified SEZ, it claimed deduction in respect
of its income, being profits and gains arising from development of SEZ as provided under
sec.80-IAB. The deduction provided under sec.80-IAB is 100% of the profits and gains by an
undertaking or entrepreneur engaged in the development of SEZ. Accordingly, the assessee
filed a ‘NIL’ return of income.
The Assessing Officer, in the course of assessment proceedings examined the case in detail.
He found that the assessee has developed a SEZ as provided under the SEZ Act, 2005 in the
specific sector of Information Technology and Information Technology Enabled Services.
He examined the conditions laid down in the approval given by the competent authority.
One of the conditions is that the assessee shall develop a minimum area of one lakhs
square meters. The Assessing Officer found that the assessee has not completed that
minimum built up area by the end of the previous year relevant to the assessment year
under appeal. The Assessing Officer accordingly, pointed out a case of breach of one
condition stipulated in the approval granted to the assessee as a SEZ. The assessing authority
has observed in page 10 of his order that “It is apparent from the details filed that this
condition has not been fulfilled by the assessee in order to qualify for the deduction”.
Contd...

LOVELY PROFESSIONAL UNIVERSITY 161