2022 (11) TMI 1446 - AT - Income Tax

Infrastructure project developer qualifies for Section 80IA deduction when working with government undertakings

BSC C&C JV Versus Assessing Officer, National e-Assessment Centre, Delhi.

BSC C&C JV Versus Assessing Officer, National e-Assessment Centre, Delhi. - TMI Issues Involved:1. Computation of Gross Total Income.2. Disallowance of Deduction under Section 80IA(4)(i).3. Transfer Pricing Adjustments.4. Disallowance on Account of Late Deposit of EPF Contribution.5. Disallowance on Account of Retention Money Released.Issue-wise Analysis:1. Computation of Gross Total Income:The assessee contested the computation of Gross Total Income without considering the Revised Return of Income filed on 31.03.2018. The original return declared an income of Rs. 145.64 crores, while the revised return declared NIL income after claiming deductions under Section 80IA. The Tribunal noted that the Assessing Officer (AO) had initially considered the revised return in the draft assessment order but reverted to the original return in the final assessment order. The Tribunal directed the AO to compute the income based on the revised return. Ground No. 2 was allowed for statistical purposes.2. Disallowance of Deduction under Section 80IA(4)(i):The AO disallowed the deduction claimed under Section 80IA(4)(i) on the grounds that the contractees were not recognized entities under the said section and that the assessee was merely a contractor, not a developer. The Tribunal examined the agreements and found that entities like DFCCIL, IRCON, and PGCIL, which awarded contracts to the assessee, were public sector undertakings under various ministries. The Tribunal held that these entities qualify under Section 80IA(4)(i) and that the assessee acted as a developer, not just a contractor. The Tribunal allowed the deduction under Section 80IA(4)(i) for the projects executed by the assessee. Ground Nos. 3 and 3.1 were allowed.3. Transfer Pricing Adjustments:a. Interest Receivable on Advance to AE:The AO/TPO made a TP adjustment of Rs. 1,01,87,884/- for interest receivable on an advance given to BSC C&C JV Nepal Pvt. Ltd. The assessee argued that the amount was not an advance but a transfer of LCs issued by JV partners due to the closure of business activities in Nepal. The Tribunal noted that the TPO did not analyze the pattern of receivables over time or the impact on working capital, as required by the Delhi High Court in PCIT Vs. Kusum Healthcare Pvt. Ltd. The Tribunal remanded the issue back to the AO/TPO for fresh adjudication. This ground was allowed for statistical purposes.b. Interest Paid to Mr. B. Krishnaiah:The AO/TPO made a TP adjustment of Rs. 37,71,124/- for interest paid to Mr. B. Krishnaiah, benchmarking the interest rate at 12.51%. The assessee contended that the interest rate of 24% was justified due to the inability to secure bank loans for working capital. The Tribunal found that the TPO did not bring in any comparables for benchmarking and did not examine the CUP submitted by the assessee. The Tribunal remanded the issue back to the AO/TPO for fresh adjudication. This ground was allowed for statistical purposes.4. Disallowance on Account of Late Deposit of EPF Contribution:The AO disallowed Rs. 3,55,46,576/- for the late deposit of EPF contributions. The Tribunal upheld the disallowance, citing the Supreme Court's decision in Checkmate Services Pvt. Ltd. Vs. CIT. This ground was dismissed.5. Disallowance on Account of Retention Money Released:The AO disallowed Rs. 2,33,25,511/- on account of retention money released by the employer, which the assessee claimed was already disallowed in the revised return. The Tribunal directed the AO to verify the claim and ensure no double disallowance. This ground was allowed for statistical purposes.Conclusion:The appeal was partly allowed, with directions for fresh adjudication on certain issues and upholding of specific disallowances.