2022 (6) TMI 790 - AT - Income Tax

ITAT upholds firm's deduction eligibility under Section 80IA(4) as consortium, rejects Revenue's appeal.

The ITAT dismissed the Revenue's appeals for both assessment years, affirming the firm's eligibility for deduction under Section 80IA(4) as a consortium ... Deduction u/s.80IA(4) - AO denied the benefit only on one ground that assessee is a partnership firm where as sec 80IA(4) (i)(a) specifies that it is applicable only for a company or consortium of company - HELD THAT:- It is a fact that assessee is a firm in which three companies are partners. As relying own case [2018 (2) TMI 2073 - ITAT PUNE] it is an undisputed fact that the assessee is a partnership firm consisting of 3 companies namely Rohan Builders (India) Pvt. Ltd, Rajdeep Buildcon Pvt., Ltd and Rajdeep Road Developers Pvt., Ltd with a profit sharing ratio of 50:40:10 respectively. It is also a fact that in the case of assessee apart from the aforesaid 3 partners, there are no other non-corporate entities, who are partners. It is also a fact that the partnership firm came into existence on 11.04.2001 and the same partners continued in the year under consideration without any change in the constitution. It is a fact that according to provisions of Sec 80IA(4)(i)(a), the section applies to an enterprise which is a company registered in India or a consortium of companies or by an authority ir a board or a corporation or any other body established or constituted inder any Central or State Act. It is also a fact that the word 'consortium” used in the provision has not been defined in the Income Tax Act. As per the Merriam Webster dictionary, the word “consortium” means fan agreement, combination, or group (as of companies) formed to undertake an enterprise beyond the resources of any one member”. As per the Collins English Dictionary, a “Consortium” is a group of people or firms who have agreed to cooperate with each other”. In ORG INFORMATICS LTD. VERSUS M.P. STATE ELECTRONICS DEV. CORP. [2011 (4) TMI 1536 - MADHYA PRADESH HIGH COURT] observed that a consortium is akin to a partnership where each partner is liable for action of other partners. In the present case it is not the case of the Revenue that in the partnership firm, there are other non corporates, who are partners or the firm is not for the purpose of business. It is seen that the assessee has been granted the benefit of deduction u/s 80IA(4) in earlier years and in 2 assessment years i.e., A.Y. 2006-07 and A.Y. 2010-11, the benefit of Sec.80IA(4) was denied to the assessee by the AO for a different reason and not for the reason that the assessee was a firm and not a consortium of companies. The claim of deduction was subsequently allowed by the Coordinate Bench of Tribunal [2013 (4) TMI 758 - ITAT PUNE] for A.Y. 2006-07 [2017 (3) TMI 1896 - ITAT PUNE] for A.Y. 2010-11. Thus, the claim of deduction u/s 80IA(4) of the Act has been allowed to the assessee in past from A.Y. 2004-05 onwards. Further, Revenue has not brought on record any new facts in the year under consideration due to which the claim of deduction u/s 80IA(4) could be denied to the assessee. Reopening of assessment u/s 147 - HELD THAT:- We have heard both the parties and perused the record. It is observed from the Original Assessment Order passed/s 143(3) on 18/3/2013 that assessee is a firm. The names of the partners of the firm are mentioned in para 4. Thus at the time of original assessment order, the AO was aware of the fact that the assessee is a Firm having three partners. In spite of that the AO has not denied the deduction u/s 80IA(4) on the ground that assessee is a firm. During the original assessment , the AO has allowed assessee’s claim of deduction u/s 80IA(4) for the project Terna Bridge, and denied deduction u/s 80IA(4) for other two projects holding that those two projects are not new infrastructural facility. It means AO after considering the fact have concluded that the assessee, though firm was eligible for deduction for Terna Bridge Project. In this fact , we are of the opinion that the reopening is based on change of opinion. On perusal of the reason recorded , it is observed that the AO has not brought any new material on record for reopening. In the assessment order passed u/s 147, in para 4, it is clearly mentioned that there was Audit Objection.Therefore, we are of the opinion that the reopening is not valid. Depreciation treating the right of toll collection as intangible asset - AO has amortized the opening WDV over the remaining concession period following the CBDT Circular No.9/2014 - HELD THAT:- As relying on own case [2018 (2) TMI 2073 - ITAT PUNE] we hold that assessee’s claim of depreciation shall be allowed. Thus, the Ground No.2 of Revenue is dismissed. Issues Involved:1. Deduction under Section 80IA(4) of the Income Tax Act for a partnership firm.2. Validity of reopening of assessment under Section 148.3. Depreciation claim on intangible assets.Issue-wise Detailed Analysis:1. Deduction under Section 80IA(4) of the Income Tax Act for a partnership firm:The primary issue was whether a partnership firm qualifies for deduction under Section 80IA(4) of the Income Tax Act. The Revenue contended that Section 80IA(4) does not provide deductions to firms, only to companies or consortiums of companies. The CIT(A) allowed the deduction, referencing a prior ITAT ruling in the assessee's favor for AY 2012-13, where it was determined that the firm, consisting of three corporate partners, qualifies as a 'consortium' under the Act. The ITAT reaffirmed this interpretation, emphasizing that the firm had been consistently granted the deduction in previous years, and no new facts justified a different outcome for the current assessment years (2010-11 and 2014-15). Consequently, the Revenue's appeals were dismissed.2. Validity of reopening of assessment under Section 148:The assessee challenged the reopening of the assessment under Section 148, arguing it was based on a mere change of opinion and an audit objection. The ITAT observed that during the original assessment under Section 143(3), the AO was aware of the firm's structure and still allowed the deduction for one project. The reopening did not introduce any new material facts but was prompted by an audit objection, which constitutes a change of opinion. Hence, the ITAT deemed the reopening invalid and allowed the assessee's cross-objection appeal.3. Depreciation claim on intangible assets:For AY 2014-15, the AO denied the assessee's claim of depreciation on the right to collect toll, treating it as an intangible asset, based on CBDT Circular No.9/2014. The CIT(A) allowed the claim, following a prior ITAT ruling in the assessee's favor, which held that the right to collect toll is a capital expenditure eligible for depreciation under Section 32(1)(ii). The ITAT upheld this view, referencing consistent judicial precedents, including the Bombay High Court's decision in North Karnataka Expressway Ltd. Thus, the Revenue's appeal on this ground was dismissed.Conclusion:The ITAT dismissed the Revenue's appeals for both assessment years and allowed the assessee's cross-objection appeal, affirming the firm's eligibility for deduction under Section 80IA(4) and the invalidity of the assessment reopening. The assessee's claim for depreciation on intangible assets was also upheld. The order was pronounced in the open court on 13th June 2022.