2018 (1) TMI 1103 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Deduction Entitlement

The Asst. Commissioner of Income Tax, Circle-1, Kolhapur Versus Mahalaxmi Infraprojects Ltd.

The Asst. Commissioner of Income Tax, Circle-1, Kolhapur Versus Mahalaxmi Infraprojects Ltd. - [2018] 63 ITR (Trib) 671 Issues Involved:1. Claim of deduction under section 80IA(4) of the Income Tax Act on additional income offered on account of purchases.2. Applicability of the ratio laid down by the Mumbai High Court in the case of CIT Vs. ABG Heavy Industries Ltd.3. Interpretation of the enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] as cumulative.4. Disallowance of purchases deemed to be non-genuine.Detailed Analysis:Issue 1: Claim of Deduction under Section 80IA(4) on Additional IncomeThe primary issue in the appeals was whether the assessee was entitled to claim deduction under section 80IA(4) of the Income Tax Act on additional income offered due to non-genuine purchases. The Tribunal noted that the assessee had consistently claimed this deduction in previous years, and the Tribunal had allowed it. The CIT(A) had also allowed the deduction, stating that the additional income retained the nature of business income and was eligible for deduction under section 80IA(4). The Tribunal upheld this view, referencing its earlier decisions and the Bombay High Court's ruling in the case of Sheth Developers.Issue 2: Applicability of CIT Vs. ABG Heavy Industries Ltd.The Revenue argued that the CIT(A) erred in applying the ratio of CIT Vs. ABG Heavy Industries Ltd. to the assessee's case. The Tribunal found that the CIT(A) had correctly applied the ratio, noting that the assessee's activities qualified as infrastructural development, thus making it eligible for the deduction under section 80IA(4).Issue 3: Interpretation of Business ActivitiesThe Revenue contended that the CIT(A) erred in interpreting the enterprise's business activities as cumulative. The Tribunal dismissed this argument, confirming that the assessee's activities fell within the scope of section 80IA(4) as infrastructural development projects. This interpretation had been consistently upheld in previous years' assessments and by the Tribunal.Issue 4: Disallowance of Non-Genuine PurchasesThe CIT(A) had deleted the additions made by the Assessing Officer regarding non-genuine purchases from M/s. Manvir Metal Pvt. Ltd., stating that there was no clear evidence proving these purchases were bogus. The Tribunal upheld this deletion, noting that the Revenue did not appeal against this part of the CIT(A)'s decision. The Tribunal emphasized that any addition on this account should have been preceded by a proper show cause notice to the assessee.Conclusion:The Tribunal dismissed all the appeals filed by the Revenue, upholding the CIT(A)'s decisions across all issues. The Tribunal confirmed the assessee's eligibility for deduction under section 80IA(4) on additional income and found no merit in the Revenue's grounds of appeal. The Tribunal's decision was consistent with its earlier rulings and the legal precedents set by the Bombay High Court.