2019 (8) TMI 1948 - AT - Income Tax

s.80IA deduction for infrastructure business and related-party service charges dispute; disallowances deleted for lack of rebuttal evidence

The dominant issue was disallowance of deduction under s.80IA by invoking s.80IA(10). The Tribunal held that each assessment year is separate and, ... Disallowance of deduction u/s 80IA - cliam rejected by the AO by applying the provisions of section 80IA(10) by holding that the assessee is not eligible for claiming deduction u/s 80IA - disallowance of deduction u/s 80IA is not justified in view of the fact that every assessment is a different year - HELD THAT:-We find that identical issue has been decided by the co-ordinate bench of the Tribunal in assessee’s own case [2019 (5) TMI 2044 - ITAT MUMBAI] held that as long as the payment is made for the purpose of business, the payment would be allowable as expenses. Whether a particular expense has to be incurred is to be seen from the business point of view and have to be respected by the authorities, regardless of the fact that it may appear to the latter that expenses were incurred unnecessarily. In the case of S.A Builders [2006 (12) TMI 82 - SUPREME COURT] the Hon’ble Apex Court has held that any particular expenditure may not be incurred under any legal obligation, yet it is allowable as business expenditure as it is incurred on the grounds of commercial expediency. The revenue has not brought any materials before us to controvert the findings of ld CIT(A) who has otherwise taken a correct view of the issue and decided the issue in favour of the assessee. Disallowance of managerial supports service charges which were disallowed by the AO on the ground that assessee has failed to prove the benefit arising out of the said services obtained from the related parties - Issue is squarely covered by the decision of the co-ordinate bench of the Tribunal in favour of the assessee in assessee’s own case [2019 (5) TMI 2044 - ITAT MUMBAI]. 1. ISSUES PRESENTED AND CONSIDERED 1) Whether deduction under section 80IA in respect of the eligible undertaking/phase was rightly allowed, and whether invocation of section 80IA(10) to deny such deduction was sustainable on the facts found by the Tribunal. 2) Whether managerial support service charges paid to a related entity were allowable as business expenditure despite the Assessing Officer's objection that the assessee failed to prove specific benefits from the services. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Deduction under section 80IA and rejection by applying section 80IA(10) Legal framework: The Tribunal considered the claim of deduction under section 80IA for the eligible phase/undertaking and the Assessing Officer's reliance on section 80IA(10) to deny the deduction. Interpretation and reasoning: The Court noted that the dispute concerned allowance of section 80IA deduction for an eligible phase. It found that an identical controversy had already been decided by a coordinate bench in the assessee's own case for earlier years, and that the facts for the year under consideration were identical. On that basis, the Tribunal applied the earlier decision as governing the present year. Conclusions: The Tribunal affirmed the appellate authority's deletion of the disallowance and dismissed the Revenue's grounds challenging eligibility and the application of section 80IA(10), following the coordinate bench decision on identical facts. Issue 2: Allowability of managerial support service charges paid to a related party Legal framework: The Tribunal examined the disallowance of managerial support service charges made on the ground that the assessee did not prove services/benefits, and the appellate deletion of that disallowance. Interpretation and reasoning: The Tribunal observed that the same issue had been decided in favour of the assessee by a coordinate bench in the assessee's own case for earlier years. Since the facts were identical, the Tribunal followed that decision. The earlier reasoning, as applied, accepted that managerial support services were obtained under an agreement, bills were raised and payments made, the service provider had substantial staff providing such services, and the Revenue had not brought material to controvert the findings supporting the business purpose of the expenditure. Conclusions: The Tribunal upheld the appellate authority's deletion of the disallowance of managerial support service charges and dismissed the Revenue's challenge, applying the coordinate bench's earlier decision on identical facts.