2022 (1) TMI 1050 - AT - Income Tax

Tribunal Upholds CIT(A) Decision on Expenditure & Section 80IA(4) Deductions

The Tribunal upheld the CIT(A)'s decision to restrict the disallowance of expenditure related to the Dummugudem Project to 12.5%, emphasizing judicial ... Disallowance of the expenditure pertaining to assessees’ Dummugudam project involving varying sums on account of the fact that the same had been incurred on cash basis only - It’s case therefore, is that the CIT (A) has erred in law and on facts in restricting the same to the extent of 12.5% - HELD THAT:- Revenue is fair enough in not pinpointing any distinction on facts or law in all these assessment years as the project concerned is “Dummagudum” only. We thus adopt judicial consistency to affirm the CIT (A)’s findings deleting the impugned disallowance. Revenue fails in its identical former substantive grievance in all these appeals therefore. Deduction u/s 80IA(4) - Disallowance of deduction claimed by the appellant u/s 80IA(4), on the ground that the profits under reference were pertaining to the projects executed by the assessee-company as a constituent of the JV on which the assessee is not eligible for deduction u/s.80IA(4) - HELD THAT:- Assessee has filed a letter before the hon'ble President of the tribunal seeking to constitute a Special Bench u/s 255(3) of the Act and therefore, we ought not to proceed further with the instant appeal till a final decision is taken therein. We note from a perusal of section 255(3) of the Act that there is no such pre-condition of keeping the issue in abeyance so as to await the foregoing representation. We accordingly adopt judicial consistency qua the instant letter as well as in absence of any distinction on the relevant facts involved and restore the impugned section 80IA disallowance in all these three assessment years in Revenue’s favour. Issues Involved:1. Disallowance of expenditure related to Dummugudem Project.2. Deduction under Section 80IA(4) of the Income Tax Act.Detailed Analysis:1. Disallowance of Expenditure Related to Dummugudem Project:The Revenue's appeals challenged the CIT(A)'s decision to restrict the disallowance of cash-based expenditure on the Dummugudem Project to 12.5%. The Tribunal referred to its previous decision for AYs 2008-09 to 2013-14, where similar disallowances were restricted to 12.5%. The CIT(A) had observed that the appellant withdrew substantial cash amounts for project expenses, which were not fully supported by detailed documentation. The AO treated these as unexplained expenses due to lack of proper vouchers and non-compliance with TDS provisions. However, the CIT(A) found that the appellant had partly substantiated the expenses, noting that a significant portion was paid to a subcontractor, which had been accounted for and taxed. Consequently, the Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 12.5%, emphasizing judicial consistency and the absence of any new distinguishing facts in the current assessment years.2. Deduction Under Section 80IA(4) of the Income Tax Act:The Revenue's appeals also contested the CIT(A)'s decision to allow deductions under Section 80IA(4) for various infrastructure projects. The AO had disallowed these deductions, arguing that the projects were executed by a joint venture (JV) and not directly by the assessee, and thus did not meet the conditions of Section 80IA(4). The CIT(A), however, allowed the deductions, noting that the assessee executed the projects as a constituent of the JV and bore significant risks and responsibilities, including financing and development activities.The Tribunal referred to its previous decisions, including the case of M/s. Transstroy India Limited, where it was held that contractors involved in developing infrastructure facilities could qualify for Section 80IA(4) deductions. The Tribunal also noted that the AO's disallowance was based on the fact that the Revenue had not accepted the ITAT's decision in Transstroy India Limited and had appealed to the High Court. However, the Tribunal emphasized the binding nature of ITAT decisions unless overturned by a higher court.Further, the Tribunal cited multiple precedents, including decisions from the ITAT, Hyderabad, and the Allahabad High Court, which supported the allowance of Section 80IA(4) deductions for contractors involved in infrastructure development. The Tribunal concluded that the CIT(A) was correct in allowing the deductions, as the assessee met the conditions stipulated in Section 80IA(4) and the projects were executed by the assessee as a constituent of the JV.Conclusion:The Tribunal dismissed the Revenue's appeals regarding the disallowance of expenditure related to the Dummugudem Project, upholding the CIT(A)'s decision to restrict the disallowance to 12.5%. It also upheld the CIT(A)'s decision to allow Section 80IA(4) deductions for the infrastructure projects, emphasizing judicial consistency and the binding nature of ITAT decisions. The Tribunal's decision was based on detailed examination of facts, judicial precedents, and the specific conditions of Section 80IA(4).