2019 (11) TMI 595 - AT - Income Tax

Tribunal upholds full deduction under Section 80IA, excludes harvesting charges from tax deduction.

The Tribunal upheld the CIT(A)'s decision to allow the full deduction claimed under Section 80IA for the assessee. Additionally, it ruled that harvesting ... Deduction u/s. 80IA - HELD THAT:- Deduction u/s.80IA of the Act has to be allowed as per Sec.80IA(1) of the Act, but the deduction so arrived at cannot exceed the gross total income of the Assessee. In the present case, the deduction u/s. 80IA of the Act, considering the business on which deduction u/s.80IA was claimed by the Assessee as the only income of the Assessee, was ₹ 24,36,83,037/-. The gross total income of the Assessee was ₹ 29,75,89,300/- (as per the return of income of the Assessee). Income under the head “Income from Business or profession” was ₹ 20,01,80,662/-. The ceiling of deduction u/s.80IA read with Sec.80AB or 80B(5) or 80A(2) is that it cannot exceed the gross total income, not the income determined under the head “income from Business or profession”. This aspect has not been noticed by the AO or the CIT(A). Conclusions of the CIT(A) that the Assessee should be allowed deduction u/s.80IA at ₹ 24,39,83,037/- as allowing the said deduction would not violate the mandate of law as laid down in the decision of the Hon’ble Supreme Court in the case of Synco Industries Ltd. [2008 (3) TMI 13 - SUPREME COURT] . For the reasons given above, we sustain the order of CIT(A). TDS u/s 194C - harvesting charges paid to labourers by the assessee on behalf of the cane growers - whether it is part and parcel of the cost price of sugarcane and the payment of which cannot be covered within the expression 'work contract' - when as per assessee, the Alland unit cane price was fixed under two different heads? - HELD THAT:- If the contract to supply sugarcane is ex field (cost of harvesting and transportation to be borne by the Sugar manufacturer), then it is the responsibility of the assessee to lift the sugarcane from the field to its factory i.e., the assessee has to bear the harvesting and transportation charges for the sugarcane. There is no such material brought on record to come to the conclusion that the harvesting & transportation charges paid by the assessee is on ex-field basis. In such circumstances, we are of the view that, on the basis of probability, the plea of assessee has to be accepted and it has to be held that the payments made by the assessee towards harvesting and transportation charges have to be regarded as payment made for purchase of sugarcane and consequently the provisions of section 194C of the Act do not get attracted. - Decided in favor of assessee. Issues Involved:1. Deduction under Section 80IA of the Income Tax Act, 1961.2. Applicability of Section 194C regarding harvesting charges and the consequent disallowance under Section 40(a)(ia).Issue-wise Detailed Analysis:1. Deduction under Section 80IA:The revenue contended that the CIT(A) erred in allowing the deduction claimed under Section 80IA by the assessee. The AO argued that the deduction should be restricted to the income under the head 'income from business' after adjusting losses from other business segments. The AO referenced Section 70 and concluded that the deduction should be limited to Rs. 22,09,10,637 instead of the claimed Rs. 24,36,83,037.The assessee argued that under Section 80IA(5), the profits of the eligible business should be computed as if it were the only source of income. The CIT(A) agreed with the assessee, citing the Supreme Court decision in CIT vs. Canara Workshop Pvt Ltd (161 ITR 320) and the Calcutta High Court decision in CIT vs. O. Belliss & Morecom (136 ITR 481). The CIT(A) directed the AO to allow the full deduction of Rs. 24,36,83,037.The Tribunal reviewed the submissions and referenced the Supreme Court decision in Synco Industries Ltd. v. AO, 299 ITR 444, which emphasized that the gross total income should be computed after adjusting losses and unabsorbed depreciation. The Tribunal concluded that the deduction under Section 80IA should not exceed the gross total income, which was Rs. 29,75,89,300. Therefore, the Tribunal upheld the CIT(A)'s decision to allow the deduction as claimed by the assessee.2. Applicability of Section 194C regarding Harvesting Charges:The AO disallowed the deduction of Rs. 2,07,29,975 for harvesting charges in AY 2011-12, claiming the assessee should have deducted tax at source under Section 194C. The CIT(A) found that the harvesting charges were part of the sugarcane purchase cost and not payments to contractors. The CIT(A) relied on ITAT decisions in Shree Mahuva Prasad Sahakari Khand Udyog Mandal Ltd. v. ITO and DCIT v. Dwarkadheesh Sakhar Karkhana Ltd., which held that such payments were not covered under Section 194C.For AY 2012-13, the AO again disallowed Rs. 9,54,22,413 for harvesting charges. The CIT(A) upheld the disallowance, focusing on whether Section 40(a)(ia) applied to paid amounts or only to amounts payable. The Tribunal noted the lack of discussion by the AO and CIT(A) on why these payments fell under Section 194C. The Tribunal reviewed sample bills and concluded that the cane price included harvesting and transportation charges, supporting the assessee's claim that these were part of the purchase cost. Therefore, the Tribunal held that Section 194C did not apply and allowed the assessee's appeal for AY 2012-13 while dismissing the revenue's appeal for AY 2011-12.Conclusion:The Tribunal dismissed the revenue's appeal for AY 2011-12 and the assessee's cross-objection, while allowing the assessee's appeal for AY 2012-13. The Tribunal upheld the CIT(A)'s decision on the deduction under Section 80IA and ruled that harvesting charges were part of the sugarcane purchase cost, not subject to Section 194C.