Real estate developers across the country are planning to challenge the government’s move to dilute portions of a scheme launched in 2002 that granted 100% tax exemption for 10 years to those who built industrial parks.

Firms in Chennai, Pune, Mumbai and other cities are planning to move the court in their respective cities saying that the government has changed rules midstream well after they have signed deals with prospective clients.

Even though the cases were duly processed and report from the various state governments were received, the fully processed applications have been returned to the applicants after a lapse of 33 months with a request to the applicant to file fresh applications to CBDT, Ministry of Finance.

The Department of Industrial Policy and Promotion is well aware that not even a single application returned will qualify for IT exemption under newly announced Industrial Park Policy 2008, developers across the country contend. The amended scheme, the ambit of ‘industrial activity’ has been expanded to include research and development on natural sciences and engineering, development of computer software and ITeS.

The CBDT had notified the original scheme on January 8, 2008. It had excluded IT from the ambit of the scheme. These sectors have been added after the intervention of the PMO at the behest of DIPP. It is same for the minimum floor area which had been enhanced earlier.

Many of these builders/developers had applied under the Industrial Park Scheme (IPS) of 2002 which granted tax exemption under Section 80 IA of the Income Tax Act. The scheme had stipulated that each industrial park should have three tenants and comprise an area of 15,000 sq m.

But the new policy announced and notified in 2008, the rules have been changed to include 30 tenants and a minimum area of 50,000 sq m.

“Now it is very difficult for them to create infrastructure facilities for an additional 27 units. It is also very difficult to have 27 multi-national tenants in the IT parks and also the applicant companies have already entered into MOUs with MNCs to lease the premises at lower rental values keeping in view the Income Tax Exemption U/s 80 IA,” Manoj Bang, consultant with the Hyderabad-based Aditya Group of Consultants, told ET.

Some builders ET spoke to said it is impossible to arrive at these kind of tenant numbers in a single park. They also objected to the clause that a single tenant occupancy must not to exceed 25%.

Bangalore-based Silverline Industries, another developer, has already filed a petition with the Mumbai high court against the government’s move.

Applications filed under the IPS 2008, would be considered favourably provided the parks had been operating in April 1, 2006 to March 31, 2009 time frame, they added.

The commerce ministry has formally rejected 327 of the 433 applications for reasons that are not clear. A senior commerce ministry official declined to comment on the issue.

“While developers are getting affected, we have been told by authorities that due to elections, no policy decision would be taken. However, the government has been receptive and we have received a positive sign that gives the assurance that our needs would be addressed,” Confederation of Real Estate Developers’ Associations of India (Credai), president Santosh Rungta, on an optimistic note.

Despite the view that developers may wait for elections to end to “re-present” their case to the power corridors, Credai VP Prakash Challa says many of the developers in Chennai have decided to individually file their writs as the association did not have a locus standi to take up this matter.

Later this week, a batch of petitioners, in their individual capacity, are planning to file cases. Some of the names of them include — Khivraj, Acropolis, ECCI Tech Park, Appaswamy and SSPDL.

News Published Under: Real Estate India, Mumbai, Pune, Chennai |

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