2023 (1) TMI 605 - AT - Income Tax

Tribunal grants developer status, allows deductions, and quashes penalty.

Vijay M. Mistry Cons. P. Ltd. Versus Asst. Commissioner of Income Tax Circle–8, Joint Commissioner of Income Tax, Dy. Commissioner of Income Tax (OSD), Dy. Commissioner of Income Tax Circle–4 (1) (2), Ahmedabad And Dy. Commissioner of Income Tax Circle–4 (1) (2), Ahmedabad Versus Vijay M. Mistry Cons. P. Ltd.

Vijay M. Mistry Cons. P. Ltd. Versus Asst. Commissioner of Income Tax Circle–8, Joint Commissioner of Income Tax, Dy. Commissioner of Income Tax (OSD), ... Issues Involved:1. Denial of claim of deduction under Section 80IA of the Act by treating the assessee as a 'work contractor' and not 'developer' by the Revenue.2. Additional ground for A.Ys. 2007-08, 2008-09 & 2009-10 regarding rejection of deduction under Section 80IA(iv) of the Act.3. Claim of deduction in respect of repairs expenses for A.Y. 2009-10.4. Rejection of claim under Section 36(1)(va) i.e., Employees' PF & Welfare Fund for A.Y. 2006-07.5. Quashing of penalty under Section 271(1)(c) of the Act for A.Y. 2012-13.Issue-wise Detailed Analysis:1. Denial of claim of deduction under Section 80IA of the Act by treating the assessee as a 'work contractor' and not 'developer' by the Revenue:The assessee, a Private Limited Company, engaged in the business of constructing infrastructure projects like bridges, flyovers, etc., claimed deduction under Section 80IA(4) of the Act. The Revenue denied this claim, treating the assessee as a 'work contractor' rather than a 'developer'. The Tribunal examined the nature of the contracts and the role of the assessee. It found that the assessee was involved in the development of infrastructure projects, taking on financial risks, arranging finances, and handling the entire project from design to completion. The Tribunal relied on various judicial precedents, including the Radhe Developers case, to conclude that the assessee fulfilled the conditions of being a 'developer' and was entitled to the deduction under Section 80IA(4).2. Additional ground for A.Ys. 2007-08, 2008-09 & 2009-10 regarding rejection of deduction under Section 80IA(iv) of the Act:The assessee raised an additional ground regarding the denial of deduction for other income of Rs.42,62,716/- under Section 80IA(iv). The Tribunal admitted this ground, noting that the issue was germane to the assessee's business and the facts were already on record. The Tribunal found that the other income had a direct nexus with the business activities and was eligible for deduction under Section 80IA(4).3. Claim of deduction in respect of repairs expenses for A.Y. 2009-10:The assessee did not press this ground during the hearing. Therefore, the Tribunal dismissed this ground as not pressed.4. Rejection of claim under Section 36(1)(va) i.e., Employees' PF & Welfare Fund for A.Y. 2006-07:The assessee did not press this ground during the hearing. Therefore, the Tribunal dismissed this ground as not pressed.5. Quashing of penalty under Section 271(1)(c) of the Act for A.Y. 2012-13:The Revenue challenged the CIT(A)'s order quashing the penalty under Section 271(1)(c). The Tribunal upheld the CIT(A)'s decision, noting that the assessee's claim was bona fide, and all particulars were fully disclosed. The Tribunal referred to the Supreme Court's decision in Reliance Petro Products Pvt. Ltd., which held that merely because a claim was not accepted by the Revenue, it would not attract penalty under Section 271(1)(c). The Tribunal found that the penalty was not sustainable as the assessee's claim was bona fide and allowed the appeal in favor of the assessee.Conclusion:The Tribunal allowed the assessee's appeals regarding the deduction under Section 80IA(4), finding that the assessee was a 'developer' and not merely a 'contractor'. It also allowed the additional ground for other income and quashed the penalty under Section 271(1)(c). The grounds related to repair expenses and Employees' PF & Welfare Fund were dismissed as not pressed. The Revenue's appeal was dismissed, and the assessee's appeals were allowed.