2023 (10) TMI 909 - AT - Income Tax

Assessee's Deductions Upheld Under Section 80IA(4); Disallowance Under 14A Overturned; Other Issues Remanded for Review

The Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal. It upheld the assessee's eligibility for deductions under section ... Deduction u/s 80IA(4) - HELD THAT:- Landfill-I and Landfill-II as separate and independent undertakings. The Co-ordinate Bench in AY 2008-09 in [2021 (12) TMI 1292 - ITAT SURAT] clarified that Landfill-II is eligible to claim deduction u/s 80IA of the Act from AY 2008-09 being a separate infrastructure facility. It is relevant to note here that the Tribunal orders in AY 2007-08 [2017 (2) TMI 1493 - ITAT AHMEDABAD] and for AY 2008-09 [2021 (12) TMI 1292 - ITAT SURAT] were passed subsequent to the impugned order. Thus, the CIT(A) did not have the benefit of Tribunal orders for AY 2007-08 and AY 2008-09. In the light of decision of Co-ordinate Bench, ground no. 1 and 2 of appeal are allowed. Deduction u/s 80IA of the Act in respect of Incinerator-II - assessee for the purpose of safe storage/management/disposed of toxic waste has also set up incinerator - We find that the CIT(A) in the impugned order has rejected the claim of assessee by merely placing reliance on the order of his predecessor in AY 2011-12. The Co-ordinate Bench [2023 (4) TMI 1258 - ITAT SURAT] has reversed the findings of CIT(A). Taking into consideration the documents furnished by the assessee, we are of the view that the Incinerator Project-II is a separate undertaking eligible for deduction u/s 80IA(4) of the Act starting from AY 2012-13. The assessee succeeds on ground no. 3 of appeal. Disallowance made u/s 14A r.w.r. 8D under normal provision as well as u/s 115JB - It is an admitted position that in the period relevant to the assessment year 2012-13, the assessee has not earned any exempt income. It is no more res-integra that where the assessee has not earned any income exempt from tax, no disallowance u/s 14A of the Act is to be made. Hence, ground no. 4 of appeal is allowed. Disallowance of provision for post closure care expenditure under normal provision and u/s 115JB - In AY 2007-08, the Tribunal in appeal of the assessee [2017 (2) TMI 1493 - ITAT AHMEDABAD] deleted the disallowance placing reliance on earlier order of Tribunal in assessee’s own case. In assessment year 2008-09, [2021 (12) TMI 1292 - ITAT SURAT] followed the decision of Tribunal in assessee’s own case for AY 2007-08. No material has been brought on record by the Revenue to substantiate that there has been any change in the facts in the impugned assessment year. We see no reason to deviate from the consistent view taken by the Tribunal on this issue. Hence, assessee’s claim of provision for post closure expenditure is allowed. Addition in respect of advances received from customers for treatment of waste as income of the assessee - AO added closing balances of the advances as income of the assessee - HELD THAT:- We find that Hon’ble jurisdictional high court's decision in CIT vs. Unique Mercantile Services Pvt. Ltd. [2015 (1) TMI 525 - GUJARAT HIGH COURT] decides a similar question pertaining to membership fee spreading over to a time span of more than one assessment year to be taxable on prorata basis. We adopt the same reasoning herein as well and direct the Assessing Officer to assess the above stated non-refundable receipts by adopting similar proportionate computation formula. This Revenue's ground is accordingly accepted for statistical purposes. MAT computation on addition u/s 14A - A perusal of the impugned order shows that the CIT(A) has deleted disallowance u/s 14A of the Act while computing Book Profit u/s 115JB of the Act. Following the decision of the Special Bench in the case of ACIT vs. Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] Issues Involved:1. Eligibility for deduction under section 80IA(4) for Landfill Projects and Incinerator Projects.2. Disallowance under section 14A as per Rule 8D.3. Disallowance of provision for post-closure care expenditure.4. Treatment of advances received from customers as income.5. Levying of interest under section 234C.Summary:1. Eligibility for deduction under section 80IA(4) for Landfill Projects and Incinerator Projects:The assessee claimed deductions under section 80IA(4) for Landfill Project-I, Landfill Project-II, Incinerator Project-I, and Incinerator Project-II, asserting them to be separate undertakings. The Tribunal had previously held that these projects are distinct and eligible for deductions independently. The CIT(A) had earlier rejected these claims, but the Tribunal reversed this decision, citing that Landfill-II and Incinerator-II are independent undertakings. The Tribunal concluded that both Landfill-II and Incinerator-II commenced operations separately and are entitled to deductions under section 80IA(4).2. Disallowance under section 14A as per Rule 8D:The AO disallowed Rs. 1,89,103/- under section 14A read with Rule 8D, despite the assessee not earning any exempt income during the relevant period. The Tribunal referenced several judicial precedents, including PCIT vs. Red Chillies Entertainment (P.) Ltd., to conclude that no disallowance under section 14A is warranted if no exempt income is earned. Thus, this ground of appeal was allowed.3. Disallowance of provision for post-closure care expenditure:The AO disallowed Rs. 5,94,32,456/- claimed by the assessee for post-closure care expenditure. The Tribunal noted that similar disallowances had been made in previous years but were deleted by the Tribunal. As there was no change in the facts, the Tribunal allowed the assessee's claim for the provision of post-closure care expenditure.4. Treatment of advances received from customers as income:The AO added the closing balances of advances received from customers for waste treatment as income. The Tribunal restored the issue to the AO for fresh consideration, referencing its previous decisions where such advances were treated on a prorated basis. Consequently, this ground was allowed for statistical purposes.5. Levying of interest under section 234C:The assessee contested the levy of interest under section 234C. The Tribunal directed the AO to re-examine the issue and charge interest based on the returned income, in accordance with the law. This ground was allowed for statistical purposes.Conclusion:The appeal of the assessee was partly allowed, and the appeal of the Revenue was dismissed. The Tribunal upheld the assessee's claims regarding the eligibility for deductions under section 80IA(4) and the provision for post-closure care expenditure while restoring certain issues to the AO for reconsideration.