2016 (1) TMI 241 - AT - Income Tax

Tribunal grants deduction under section 80IA for infrastructure facilities & agricultural income, dismisses disallowances.

M/s. KNR Constructions Ltd. Versus DCIT, Central Circle-3, Hyderabad.

M/s. KNR Constructions Ltd. Versus DCIT, Central Circle-3, Hyderabad. - TMI Issues Involved:1. Entitlement to claim deduction under section 80IA in returns filed in response to notices issued under section 153A.2. Ownership of infrastructure facility for claiming deduction under section 80IA.3. Exemption on account of agricultural income.4. Alleged inflation of subcontract expenses.Detailed Analysis:1. Entitlement to Claim Deduction under Section 80IA in Returns Filed in Response to Notices Issued under Section 153A:The primary issue is whether the assessee can claim deduction under section 80IA in the returns filed in response to notices under section 153A. The assessee argued that the returns filed under section 153A should be treated as fresh returns, allowing all claims, including those not made in the original returns. The assessee cited various case laws, including the ITAT Mumbai decision in Eversmile Constructions Pvt Ltd., supporting the claim that deductions under section 153A cannot be rejected solely because they were not claimed in the original assessment.The Tribunal noted that the decision of the Hon'ble Rajasthan High Court in Jai Steel (India) vs. ACIT, which the AO relied on, was not applicable as the facts differed. The Tribunal observed that section 153A requires the AO to assess the total income afresh, allowing the assessee to make new claims. The Tribunal followed the decisions in Eversmile Constructions and VN Devodoss, holding that the assessee is entitled to claim deduction under section 80IA in the returns filed in response to section 153A notices for A.Ys. 2006-07 to 2011-12.2. Ownership of Infrastructure Facility for Claiming Deduction under Section 80IA:The AO disallowed the deduction under section 80IA, arguing that the infrastructure facility was not owned by the assessee, a requirement under sub-clause (a) of clause (1) sub-section (4) of section 80IA. The CIT(A) disagreed, stating that the ownership of the infrastructure facility is not a condition; rather, the ownership of the enterprise is required. The Tribunal upheld the CIT(A)'s view, citing the decision of the Hon'ble Bombay High Court in CIT vs. ABG Heavy Industries Ltd., which clarified that the enterprise carrying on the development of infrastructure should be owned by a company, not the infrastructure facility itself.3. Exemption on Account of Agricultural Income:The AO denied the assessee's claim of agricultural income exemption, citing the absence of lease agreements and Pattadar Pass books. The CIT(A) found merit in the assessee's submissions, noting that the ownership of land was evidenced by sale deeds and declarations from farmers. The CIT(A) held that the Pattadar Pass book was irrelevant for proving ownership and that oral agreements for leasing land were common. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere with the acceptance of the agricultural income claim.4. Alleged Inflation of Subcontract Expenses:The AO disallowed a portion of the subcontract expenses, suspecting inflation. The CIT(A) found that the work assigned to subcontractors was completed and payments were made by cheque with TDS deducted. The CIT(A) noted that the AO's method of estimating inflated expenses based on subcontractor liabilities or NHAI Data Book rates was flawed. The Tribunal agreed, stating that the AO's presumption of inflated expenses was not justified and that the assessee had substantiated its claim with evidence. The Tribunal upheld the CIT(A)'s deletion of the disallowance.Conclusion:The Tribunal allowed the assessee's appeals for A.Ys. 2006-07 to 2008-09, holding that the assessee is entitled to claim deduction under section 80IA in returns filed in response to section 153A notices. The Tribunal dismissed the Revenue's appeals for A.Ys. 2009-10 to 2012-13, upholding the CIT(A)'s decisions on the ownership of infrastructure facilities, exemption of agricultural income, and the deletion of disallowances for alleged inflated subcontract expenses.