ITAT Delhi Allows Deduction under Section 80-IA to Finest Promoters Pvt. Ltd. – Quashing of Government Withdrawal Order Restores .

Income Tax Act, 1961 – Section 80-IA – Industrial Park Scheme, 2002 – Withdrawal of approval by Ministry of Commerce and Industry – Quashing by Delhi High Court – Rule of consistency – Deduction allowed in first year cannot be denied subsequently – Penalty u/s 271(1)(c) also deleted.

The Income Tax Appellate Tribunal (ITAT), Delhi “F” Bench, held that once an assessee is granted approval under the Industrial Park Scheme and deduction under Section 80-IA(4)(iii) is allowed in the initial year, the same cannot be denied in subsequent years in absence of any change in facts. The Tribunal relied on the Delhi High Court’s order which had quashed the Central Government’s withdrawal of the approval, restoring the assessee’s entitlement. Consequently, the assessee’s appeal was allowed and the Revenue’s appeals dismissed.

The assessee, M/s. Finest Promoters Pvt. Ltd., had developed, maintained, and operated an industrial park at Gurgaon under approval granted by the Ministry of Commerce and Industry in terms of the Industrial Park Scheme, 2002, and claimed deduction under Section 80-IA(4)(iii) of the Income Tax Act.

The approval was notified vide CBDT Notification No. S.O. 462 dated 09.02.2007. However, the Central Government subsequently withdrew the approval through an order dated 24.01.2014, alleging deviation in construction from the approved plan. Based on this withdrawal, the Assessing Officer disallowed the deduction and levied a penalty under Section 271(1)(c).

The assessee’s appeal before the CIT(A) was dismissed for A.Y. 2010–11, while in subsequent years the CIT(A) allowed deduction following the Delhi High Court’s quashing of the withdrawal. Both the assessee and the Revenue approached the Tribunal.

1. The assessee claimed a deduction of ₹7.15 crore under Section 80-IA for A.Y. 2010–11, which was disallowed by the Assessing Officer on the ground that the Government had withdrawn approval.
2. The CIT(A) upheld the disallowance, leading to the assessee’s appeal before the ITAT.
3. For A.Ys. 2011–12 to 2015–16, the Revenue filed appeals against CIT(A)’s orders allowing the deduction.
4. The Delhi High Court, in W.P.(C) No. 3162/2014 (Order dated 12.07.2018), had quashed the withdrawal of approval, observing that the action was unreasoned and contrary to the Industrial Park Scheme and judicial precedents such as Silverland Developers (Bombay HC).
5. The High Court directed reconsideration but no fresh order was produced by the Revenue, rendering the original approval effective.

1. Once deduction under Section 80-IA is granted in the initial assessment year, it must continue in subsequent years unless there is a material change in facts or law (Radhasoami Satsang v. CIT (1992) 193 ITR 321 SC).
2. The withdrawal of approval having been quashed by the Delhi High Court, the basis of disallowance no longer survives.
3. The Revenue failed to place on record any fresh order from the Government post the High Court’s ruling.
4. Therefore, the assessee remains entitled to claim the deduction under Section 80-IA for all relevant assessment years.
5. As the deduction itself stands allowed, penalty under Section 271(1)(c) imposed for alleged concealment on this disallowance also cannot be sustained.

Assessee’s Appeal (ITA No. 2736/Del/2014 – A.Y. 2010–11):

Allowed. Deduction under Section 80-IA restored.

Revenue’s Appeals (ITA Nos. 7814–7817/Del/2018 & 3662/Del/2019 – A.Ys. 2011–12 to 2015–16):

Dismissed. CIT(A)’s orders allowing deduction upheld.

Revenue’s Appeal (ITA No. 4277/Del/2019 – A.Y. 2010–11):

Dismissed. Penalty under Section 271(1)(c) deleted.

The ITAT reaffirmed that administrative withdrawal of statutory approval cannot override judicial quashing and that consistency must be maintained in allowing deductions where facts remain unchanged. The Tribunal underscored the principle that once an assessee qualifies for a deduction under Section 80-IA in the initial year of eligibility, the same cannot be denied in later years without fresh grounds. The judgment reinforces the legal protection for industrial park developers against arbitrary withdrawal of tax incentives.

Result:

Assessee’s appeal allowed; all Revenue appeals dismissed.