AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 73
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....the assessment under section 143(3) has been processed by the Ld. AO after duly considering the material explanations and submissions on record including in context of applicable law. Mere difference of view between the view of the Ld. CIT and the Ld. AO cannot form the basis of action under section 263. Provisions of section 263 do not permit substitution of the Ld. CIT's opinion for the opinion of the Ld. AO, particularly when the view of the Ld. CIT are contrary to the record, to precedents and case laws in appellants favour and contrary to the provisions of the Act. 4. That the appellant is entitled to the deduction under section 80IA(4) as allowed by the Ld. AO in the assessment under section 143(3). Appellant is entitled to its claim inter alia in view of precedents in favour of the appellant. As such too, the Ld. CIT has erred in invoking jurisdiction under section 263 and setting aside the assessment to be made de novo. Moreover, it is settled law that even if two views are reasonably' possible, the view favouring the appellant is to be adopted and further the beneficial provisions of deductions from taxable income to promote investment in and development of infr....
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....en correctly allowed by the Ld. AO. The Ld. CIT has erred in setting aside the assessment. 9. That without prejudice, in the alternative, as the appellant is eligible for deduction under section 80IA(6), even as per the view of the Ld. CIT, then in any case on the facts and law involved, the assessee is entitled to relief and deduction in this matter, be it under 801A(4) OR 80IA(6). Setting aside the assessment to be made de novo is unlawful, uncalled for and would be merely an academic exercise if permitted. 10. That the Grounds of Appeal as herein are without prejudice to each other." 3. Briefly stated, the facts giving rise to this appeal are that the assessee filed its return of income declaring nil income on 30.03.2009 for AY 2009-10 through e-filing acknowledgement. Subsequently, the case was selected for scrutiny through CASS and accordingly notice u/s 143(2) of the Act was issued on 25.8.2010. In response to the said notice, Senior Vice President (Finance) and DGM (Finance) of the assessee company attended the assessment proceedings from time to time and furnished details and replies to the queries raised during the course of the assessment proceedings. Books of ac....
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....ch Ltd., Sector-128, Noida (UP). Sub: Show Cause Notice u/s 263 of the IT Act,1961 in respect of the assessment order for A. Y. 2009-10 to afford the assessee company an opportunity of being heard- A perusal of the assessment order for the Assessment Year (hereafter A. Y.) 2009-10 passed on 30-12-2011 shows that the assessee M/s Jaypee Infratech Ltd., sector-128, Noida (UP) furnished its return of income on 30-09-2009 through e-filing declaring Nil income. The assessment record shows that the case has been picked up for scrutiny (i.e. regular assessment) through CASS (i.e. Computer Assisted Scrutiny Selection). The nature of business of the company is reported by the assessee as development, operation, maintenance of the six-lane access controlled expressway along with road and associated structures & sale/development of lease hold land along the expressway. 2. A Perusal of Form No. 3CD (Rule 6G(2)) filed for this A. Y. certifies that there is no change in the above business of the assessee company. As regards, the method of accounting a/50, there is no change from A. Y. 2008-09 as certified in the said Form. ....
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....eriod to realize the revenue. d) By constructing residential/ commercial building, including all internal and external developments and then selling it either during construction stage itself or after complete construction. This will require further additional investment and additional period to realize the revenue. III. In addition, the assessee company has itself submitted a note on Yamuna Expressway Project which under the heading Land for Development has stated the following: '6.2 There can be many alternative business models in relation to the said Land for Development. Some of such business models could be as under: a) ..... b) ..... c).. .. d) By constructing residential/commercial building, including all internal and external developments and then selling it either during construction stage itself or after complete construction. This will require further additional investment and additional period to realize the revenue.' IV. Most importantly, a concession agreement was entered into between the Taj Expressway Development Authority and Jay Prakash Industries Ltd. on 07-02-2003. In this agreement the word 'Project' (which is assigned to Ja....
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....were examined, a perusal of Form No. 10 CCB (Rule 18BBB) in A. Y. 2009-10 showed that the tax auditors of the assessee company have though reiterated its nature of business being the same as what is mentioned at para 2 & 3 above, but, under the heading 'Eligible Business Under Section BO-IA', they have specified the 'infrastructure Facility' as Road including toll road. The A.D. has failed to notice this contradiction while passing the erroneous assessment order allowing deduction u/s 80-IA not realizing that the assessee has not begun to operate the toll road which is a mandatory condition u/s 80-IA (2) of the IT Act, 1961 for being considered for deduction. Where is the question of allowing any profits as deduction when there are no profits in this year from the operation of the toll road? 5. In the above context, however, if Road including toll road, as mentioned as above by the tax auditors in Form no. 10CCB is to be considered as the 'infrastructure facility' of the assessee company as per clause (a) of the Explanation to sub-section (4) (i), then the assessee company gets out of the ambit of section 80-IA for the simple reason that in order to quali....
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....hich if complied with enables the eligible business to lodge a claim for deduction u/s 80-IA of the IT Act, 1961. The above would abundantly clarify why the 'infrastructure facility' of the assessee is not road including toll road and the A.O. could have considered its claim for deduction only in the light of its averment in several documents including the agreement dated 07-02-2003 entered into between TEA and JPI Ltd.(dealt with at para 2 hereinbefore) in addition to its own accounting policy that it is a highway project including housing or sale/development of lease hold land along the Expressway and all other activities are an integral part of the highway project. 6. After examination of the above facts and issues from the assessment records for AY 2009-10, it is noticed that the AO has stated at para 4 of the assessment order that the assessee is eligible for deduction u/s 80-IA of the IT Act, 1961 after getting a clarification from the assessee (vide order sheet entry dated 23-12-2011) to the effect that assessee's income during the year had come mainly from the sale of land to 4 parties and that, deduction u/s 80-IA was claimed in respect of such income der....
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.... project. 7. By allowing an absolutely incorrect claim of deduction u/s 80-IA in A. Y. 2009-10 in the regular assessment made by the A.O. u/s 143 (3) of the IT Act, 1961 on 30-12-2011 as brought out in the foregoing paragraphs, he has passed an assessment order which is erroneous as the order has completely glossed over the provisions of sub-section (2), (4) and sub-section (6) of the IT Act, 1961, the latter read with Rule 18BBE of the income Tax Rules, 1962. The order thus passed is prejudicial to the interests of the revenue as a wrong deduction u/s 80-IA has been allowed by not following and implementing the aforementioned provisions of law, thereby causing substantial loss of revenue. The assessee is, accordingly, being afforded an opportunity of being heard before the undersigned on 19-03- 2014 at 11:30 AM to enable it to make its written and oral contentions so as to rebut the above by way of personal appearance or through a duly authorized representative. (D. P. Semwal) Commissioner of Income Tax, Noida. " 5. In response to the said notice u/s 263 of the Act (supra) as reproduced hereinabove, the assessee submitted the first reply dated 19.3.2014 and the Join....
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....has again referred to revenue's insistence on the expression 'begins to operate' and has stated that sub-section 80-IA (2) is subservient to 80-IA (4). It is contended that the word land' used in 80-IA (2) has to be read as 'and/or' in the context of section 80-IA (4) or to be read as 'or' so as to avoid unworkable, unreasonable, or absurd interpretation which is not reconcilable with the rest of the statued/section 3D-lA (4). The assessee has also referred to the ruling in 103 ITR 613 (ORI) (FB) wherein it has been held that the word 'and' should be construed as 'or' where the context so requires. The asseessee has cited the ruling in the case of Ishwar Singh Bindra 1968 AIR 1450 where the Hon'ble Supreme Court held that the word 'and' had to be read as 'or'. A perusal of the ruling of Hon'ble Orissa High Court in CIT v. Gangaram Chapolia (103 ITR 0613)(1976) together with the omitted provisions of clause (a) of section 271 (1) would show that the decision to use 'or' in place of 'and' is rendered to enable the A.O., wherever he is satisfied, to impose penalty if the return is not filed within ....
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....rdship may appear to the judicial mind to be." (ii) The assessee has then referred to its letters written to the A.O. dated 23-11-2011, 21-12-2011, 23-12-2011, 28-12-2011, and 29-12-2011 and contended that assessee's claim had been correctly allowed after considering the contents of all these letters. In this context, it would be proper to record that all these letters were duly perused from the assessment record and thereafter only jurisdiction u/s 263 of the LT. Act, 1961 was assumed by issuing a show cause issued on 11-03-2014. References is assessee's contentions in the aforesaid letters have figured in the discussion on preceding pages answering how jurisdiction was assumed. (iii) On page 4 of the aforesaid letter dated 19-03-2014, the assessee has explained that through the aforementioned letters it was clarified to the A.O. that deduction was available u/s 80-IA (4)(i) even to an enterprise only ( developing the 'the' Infrastructure Facility' and as to how section 80-IA (4)(i) would override 80- lA (2). While asserting so, the Ld. Counsel Shri Chopra, CA, explained that a provision should be interpreted in a manner that it subserves the purpose it i....
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....elopment of land parcels and other activities is complementary to the creation of the highway project and the provisions of sub-section (6) subserve the same objective by providing for utilization of the profits from sale of land, etc. only for the highway project. Here also it is not difficult to discern that the assessee on the one hand contends that the provisions of sub-section (6) are not applicable to it and on the other draws support from the observations of the Hon'ble Supreme Court in the aforementioned PIL. It would, therefore, seem that Assessee's contradictory contentions have instead helped conclude that the Hon'ble Supreme Court's observations and the objective of the provisions of sub-section (6) are identical. Therefore, the inescapable and logical conclusion would be that the assessee ought to have complied with the provisions of sub-section (6) of section 80-IA which it has not. The contention of the assessee that the volume of expenditure/investment in the year (Rs. 3,377 crores) was far more than the profits earned during the year from the sale of land is no reason for not complying with the statutory conditions of creating the special reserve to....
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.... was still going on and was yet to be completed. 16. The foregoing discussion would amply bring out that the A.O. passed an erroneous order in as much as he failed to appreciate the facts of the case, did not apply the correct law to the facts and circumstances of the assessee company, did not apply his mind to the assertions made by the assessee and did not even comply with CBOT's circular no. 01/2006 dated 12-01-2006, as a result of which an erroneous order was passed being full of errors which has led to loss of revenue and has the effect of perpetuating losses in subsequent years; the order , therefore, simultaneously being prejudicial to the interests of revenue. The A.O. has not applied his mind to other claims also, for example whether he should have allowed deduction in respect of interest on FDs in the face of the relevant ruling of the Hon'ble Supreme Court and whether depreciation was admissible even while the project was not complete, thereby, further rendering the order erroneous and prejudicial to the interests of revenue. The assessment thus completed as a result of wrong appreciation of facts on the record and non- application of mind is set aside, to be ....
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....sessee spread over 229 pages, gist of case laws relied upon by the appellant assessee, brief written submissions of the assessee, written submissions of ld. CIT-DR and paper book of case laws spread over 22 pages relied by the ld.CIT- DR. 9. For just and proper adjudication of the case, we also find it appropriate to reproduce brief written submissions made by the ld. AR, on behalf of the assessee, which read as under: "In the above matter, the appellant begs to submit herein brief written submissions. These are in addition to oral submissions being made, paper book filed and case law gist filed and relied upon. The appellant is a listed company that has been formed as a single object company for carrying on the business of an infrastructure facility as defined in section 80lA of the Income Tax Act (Act). The profits and gains derived from the said eligible business are entitled to deduction u/s 80lA of the Act be it u/s 80IA( 4) or in the alternative without prejudice u/s 80IA(6). In assessment for assessment year involved i.e. 2009-10 in assessment order dated 30.12.2011 the appellant was correctly allowed deduction u/s 801A. The Learned CIT, Noida (Ld.CIT) has set aside....
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....on of the Ld. AO, particularly when the views of the Ld. CIT are contrary to the record, to precedents and se laws in appellant's favour and contrary to the provisions of the Act. 4. The appellant is entitled to the deduction under section 80IA( 4) as allowed by the Ld. AO in the assessment under section 143(3). Appellant is entitled to its claim inter alia in view of precedents in favour of the appellant. As such too, the Ld. CIT has erred in invoking jurisdiction under section 263 and setting aside the assessment to be made de novo. Moreover, it is settled law that even if two views are reasonably possible, the view favouring the appellant is to be adopted and further the beneficial provisions of deductions from taxable income to promote investment in and development of infrastructure facility are to be interpreted liberally, so as to advance their objectives. Regarding Ground No. 1 - as seen from Page 28, Para 16 of the Ld. CIT order, the assessment has been merely set aside to be made de novo. The Ld. CIT has relied on irrelevant and erroneous material for passing the order under appeal without taking a final decision in this matter. He has also relied on and taken....
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...., it was held that remanding matter for fresh examination was not permissible as Commissioner must reach finding that final finding in assessment order was erroneous and incorrect. We also rely on: * 12 Taxmann.com 118 (Alla.) CIT v. Shiv Prasad * 171 ITR 698 (Alla.) CIT v. Goyal Private Family Specific Trust * 297 ITR 99 (Alla.) CIT v. Mahendra Kumar Bansal * 369 ITR 14 (Del.) Globus Infocom Ltd. v. CIT * 367 ITR 377 (Raj.) CIT v. Deepak Real Estate Developers (I) P. Ltd. Please see gist of case law filed. Regarding Grounds No. (2), (3) and (4) The assessment order is not erroneous and not prejudicial to the interest of revenue within the meaning of section 263. The assessment was after due process, after considering explanations, filings and submissions on record in context of applicable law. The Ld. CIT has himself noted that the Ld. AO has recorded a 17 pages long 'office note' to the assessment order. Mere difference of view between the Ld. CIT and Ld. AO does not permit action u/s 263. Section 263 does not permit substitution of the Ld....
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....ct Details i) The concept of the Project Taj Expressway was an outcome of the Policy decision of the Government of V.P. under the statute called V.P. Industrial Area Development Act, 1976 (V.P. Act No of 1976). ii) The State Government, in exercise of the power as vested under section 3 of the said Act, constituted, just prior to launching the Project, an Implementing Authority, namely, "Taj Expressway Industrial Development Authority" (in Short TEA). iii) The length of the expressway connecting Noida with Agra was about 160 Kms and it was to pass through a virgin area along the Yamuna River. iv) Land Offered: TEA has granted rights for land development of 25 million sq. mtrs of land on 90 years lease along the proposed 100 meters wide Expressway for commercial, amusement, industrial, institutional and residential development to the SPV Company. TEA provided the "land for development" along the Expressway at five or more locations of which one location was in Noida or Greater Noida with an area of 5 million sq. mtrs. The aforesaid land for development was in addition to the land for construction of Expressway and was an intrinsic part of the infrastructure f....
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....n of Inquiry under the chairmanship of Shri Sidheshwar Narayan, Justice (Retired) High Court Patna and Calcutta, which states that "Considering the capital cost, gestation period and the uncertainties involved in the revenue from toll collection, inflation etc, it was necessary to strengthen the economic viability of the Project by some mechanism and, accordingly, it was decided to provide 2500 hectares of Land for Development to the successful Bidder along the Expressway". The Commission further held that: "The Taj Expressway Project being a land mark event in the Industrial development of State of U.P. is of immense public utility and also in the national interest". j) Techno Economic Feasibility Report (TEFR) as submitted by the Assessee to YEA and the fact that the toll fee has a 'Negative' Net Present Value (NPV) of the toll fee during the entire concession period (Refer Halcrow Report August, 2013). There is no obligation under the Concession Agreement to carry out housing on "Land for Development". Section 801A In the instant case the infrastructure facility is the toll road (160 kms long six lane access controlled expressway) and the consider....
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..... Deduction u/s 80IA (1) is to be profits and gains derived from an undertaking or enterprise from any business referred to in sub-section 4 i.e. eligible business. Thus, it is the income from business undertaking which is to be deducted and not only the toll fee. We refer with advantage to the under- mentioned decisions that the income from business would include all income emanating from the same. Please refer gist of case law attached. * 317 ITR 353 (Del.) CIT v. Dharam Pal Prem Chand Ltd. (SLP rejected against Dharam Pal Prem Ch and (SC) in 2010 TIOL-1S-SC-IT) * 300 ITR 6 (Del.) CIT v. Eltek SGS P. Ltd. Income during the year from sale of plots, built up properties, FDRs, bank interest etc. is derived from and forms an intrinsic part of the infrastructure facility project income. Accordingly, any income arising from such land would also be regarded as income derived from the business of development, operation and maintenance of the infrastructure facility i.e. the toll road and it is that income which we have claimed as deduction under section 80IA(4) during the captioned assessment year. The word 'business' is wide enough to cover wi....
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....respectfully and humbly explained at length that our case is covered by section 80IA(4)(i) as read with explanation (a). We have also explained at length as to how we fall under explanation (a) to the said 80IA( 4)(i). We have further explained and submitted that we are an infrastructure facility under the said explanation (a) as a road including toll road and that accordingly we fall in the definition of infrastructure facility as defined in the said explanation. The development rights of land and income therefrom are an integral and intrinsic part of consideration to us in respect of infrastructure facility involved being toll road. The limits of section 80IA(6) apply to infrastructure facilities that fall in the definition of highway project including housing or other activities being an integral part of the highway project as defined in the said explanation (b) and not to infrastructure facility referred in the said explanation (a). The deduction provided u/s 80IA(4)(i) is the relevant deduction for infrastructure facility as in our case. There is no restriction in our case u/s 80IA(6). The limits and requirements of 80IA(6) apply to highway project as defined in the said ex....
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....s an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. In this regard, it is humbly submitted that where there has been a detailed application of mind by the AO during the assessment proceedings, after which a view has been formed by him, the said view cannot be said to be erroneous or prejudicial to the interest of the revenue and be revised by invoking the provisions of section 263. The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83) has held that the provisions of section 263 can be invoked, inter alia, where the order passed is without application of mind. However, in the present case, it is abundantly clear that the deduction has been allowed to us by the AO after proper application of mind. In this regard, attention is also invited to the decision of the Gujarat High Court in the case of CIT vs. Arvind Jewellers (259 ITR 502) wherein it is held that where material was on ITA NO. 3339/Del/2014 record and said material was considered by ITO and a particular view was taken, mere fact that different view could be taken, should not have been basis for an action u/s. ....
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....ficer adopts one of the courses permissible, in law, or where two views are possible and the Assessing Officer has taken one of the possible views, the Commissioner cannot exercise his powers under section 263 to differ with the view of the Assessing Officer, even if there has been a loss of revenue. On each of the issues raised by the Ld. CIT, the AO has made detailed enquiries and after proper application of mind had passed the assessment order. It is further submitted that in the captioned assessment year, the AO has rightly allowed us deduction u/s. 80IA( 4) for the profits derived from sale of land and other income since the same are profits and gains derived from the business of developing, operating or maintaining an infrastructure facility i.e. a road including toll road. It is humbly submitted that as is clear from the activities carried out by us as also the Concession Agreement, the land received for sale and/or development under the Concession Agreement is in fact a part of the compensation received by us for developing, operating and maintaining the toll road. Indeed, without the revenue from said land, the toll road project would not be viable, since the mere colle....
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.... of the legislature which is the interpretation being sought by the appellant for grant of allowance and for removal of any doubts. The Ld. CIT has also not been able to properly rebut or distinguish much binding case law relied by the appellant. Moreover, it is well known decision like in the K.P. Verghese v. ITO 131 ITR 597 (Se) which governs interpretation of statute in India wherein it was held that a statutory provision must be so construed that absurdity and mischief may be avoided so as to achieve obvious intention of the legislature and produce a rational construction. Beneficial Tax Deduction provisions to be interpreted liberally The beneficial tax deduction provisions provided by Section 80IA are to promote investment in and development of infrastructure facility. Accordingly they are to be interpreted liberally so as to advance their objectives. (a) 196 ITR 188 (Se) Bajaj Tempo Ltd. V. CIT Interactive of Statutes-Taxing Statute-Incentive for growth and development- Provision interpreted liberally- Restriction on exemption- To be construed so as to advance objective and not frustrate it. (b) 2371TR 662 (Mad.) CIT v. Salem Textiles Ltd. Interpretation of ta....
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....) that where income falls under anyone head of exemption [said clause (a)], it would be free from tax even if the condition of another head of exemption [said clause (b)] was not satisfied. The assessee has invested over Rs. 11,000 crores in its toll road project. The assessee's investment in the toll road project upto 31.3.2011 aggregates to Rs. 10,159 crores. A certificate was filed in this regard from M/s. R. Nagpal Associates, Chartered Accountant and statutory auditor of the assessee. The overall utilization and investment in the project far exceeds the income of the year and as such even the alternate claim u/s 80IA(6) would be eligible to the appellant. Ground No. 5 "That, inter alia, the appellant is entitled to deduction u/s 80IA(4) on the facts and law involved as a developer of the infrastructure facility, even if it has not commenced operating and maintaining but it is developing the same, in view of direct decisions in its favour including inter alia reported in ACIT v. Bharat Udyog Ltd. 118 ITD 336 which follows the decision of the Hon'ble Apex Court in K. P. Verghese v. ITO 131 ITR 597 (SC) and as held in TRG Industries (P) Ltd. V. DCIT (2013) 35 Taxman....
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....r that an enterprise 'developing' an infrastructure facility is entitled to the said deduction. When 'and' is read as 'or' it would make the provisions of section 80IA(4)(i) and 80IA(2) harmonious, workable and be in accordance with the text, context and object of the provisions. In 103 ITR 613 (ORI) (FB) it has been held that the word 'and' should be construed as 'or' where the context so requires. In the case of Iswhar Singh Bindra 1968 AIR 1450, the Hon'ble Supreme Court held in context of interpretation of statute in that case, that the word 'and' had to be read as 'or'. Copy of the said decision is attached. The Hon'ble Apex Court quoted from Stroud's Judicial Dictionary, 3rd ED to state that sometime 'and' by force of contents, reads as 'or'. They also quoted Maxwell on interpretation of statute, 11th ED that to carry out the intention of the legislature, it is occasionally found necessary to read 'or' or 'and' one for the other. Kindly also see our submissions as contained in Annexures to Ld. CIT order including particularly Annexure- C. Ground No. 6 "That the Ld. CIT....
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....ticorin mentioned by Ld. CIT relates to interest income during pre- commencement of business period. The appellant's business has commenced and business income has been earned and assessed correctly for interest income. In Lok Holdings - 308 IT 356 (BOM)- business income assessed in respect of bank interest for an assessee engaged in construction business. This was for surplus money with bank in course of the business. Tuticorin distinguished as above in this case." 10. Further, we also find it just and proper to reproduce reply and submissions of the ld. DR on behalf of the revenue which read as under:- * Section 80-IA(1) grants deduction in respect of any profits and gains derived by an undertaking from any business referred to in sub-section (4) thereof. * Under sub-section (2), the deduction is admissible for a period of ten consecutive years out of 20 years beginning with the year in which the undertaking develops and begins to operate the infrastructural facility referred in clauses (a), (b) and (c) to Explanation to sub-section (4). * As per sub-section (2A), the admissible deduction is 100% of the profits and gains of eligible business for first five Asse....
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.... Section 119(2)(c) of the Act which mandates only the Board in the event that it finds it desirable or expedient to avoid genuine hardship in any case, to do so subject to the condition that the default (in compliance for which the relaxation is sought) was due to circumstances beyond the control of the assessee and it has complied with such requirement before the completion of the assessment. Further, every such order is to be laid before each House of Parliament. * The assessee has begun to operate the infrastructural facility w.e.f. 09.08.2012 and hence prior to this date it had only profits which are attributable to sale of land, transferred to it in terms of Concessionaire Agreement. Therefore, in respect of profits exclusively from the highway project, the assessee would be eligible for deduction under Section 80-1A only w.e.f Assessment Year 2013-14. * The case of the assessee squarely falls within clause (b) of Explanation to sub-section (4) and therefore, the assessee would be eligible for exemption in respect of profits from housing and other activities wholly under sub-section (6) of section 80lA of the Act. The failure of the AO to examine the claim of the assesse....
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.... Clause (c) specifies one of the conditions of eligibility of deduction and only clarifies that projects which has started operation and maintenance prior to the specified date or after the specified date will be eligible for the deduction. The said clause in no way can or is intended to override the stipulation in sub section (2) which mandates availing of deduction, in cases of eligible projects, only from the beginning of the operation of the facility. In fact the wording of clause (c) of sub section (4) reiterates the condition of sub section (2) in as much as it makes the start of the operation and maintenance of a infrastructure facility, a pre requisite for the grant of deduction. It may be relevant to mention that the deduction u/s 801A to infrastructure facility was for the first time introduced in the statute, sub section (4A) of section 80lA as it stood prior to 114/1999, w.e.f. A.Y. 1996- 97 (i.e.lst April, 1995) and clause (c) brings into the ambit of eligibility projects which has started before this date and also subsequent to this date. The second argument taken is that the deduction u/s 801A(4 )(i) is admissible also to an undertaking which only develops the infras....
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....ty from a developer to another enterprise for operation and maintenance. * As regards the provisions of sub section (6), the assessee has admittedly not created any special reserve. Neither has it maintained separate accounts for housing and other activities nor has it furnished Form 10CCC during either with return of income or during the assessment proceedings. Acceptance of the claim of deduction by the AO without ensuring the fulfillment of the aforesaid statutory prescription applicable to the case of the assessee, or even without seeking a response from the assessee in respect of such failure undoubtedly was an error on the part of the AO and the consequential order granting the deduction squarely falls in the category of an erroneous order, contemplated in section 263 of the Act. * That the filing of Form No. 10CCC, creation of a special reserve and utilisation of such reserve are mandatory conditionalities for availing of deduction U/S 80IA(6) of the Act, being the statutory provision under which the claim of the assessee appropriately falls, has been accepted by the assessee company in as much as in its annual account for the F.Y. 2013-14, note no. 26 states that '....
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....t facto after the conclusion of assessment proceedings and furnishing a certificate of Form 10CCC dated 15.11.2014 is irrelevant for determining the eligibility of the deduction . * A proposal for action under Section 263 of the Act for A.Y. 2010-11 has been submitted by the Assessing Officer and Joint Commissioner of Income Tax concerned vide their letters dated 21.08.2014 and 25.08.2014 to the Commissioner of Income Tax and the show cause notice for the year has been issued on 19.01.2015 . * The order under Section 263 for A.Y. 2009-10 dated 30.03.2014 categorically states that "the inescapable and logical conclusions would be that the assessee ought to have ITA NO. 3339/Del/2014 complied with provisions of sub-section (6) of Section 80- IA which it has not". Further, the CIT has also noted that the assessee had claimed deduction u/s 80lA on interest income from FDs made by deploying its surplus funds and the same has been erroneously accepted by the A.O. In this context, reference is invited to the decision of the ITAT Chandigarh Bench A in the case of Vodafone Essar Ltd., (2013) 153 TTJ (Chd) 451, wherein an identical issue had been over looked by the AO and the CIT had i....
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....T Rules 1962 and CBDT Circular No. 1/2006 dated 12.1.2006. The ld. CIT DR mainly harping on the factual and legal contention that the assessee is in the business of development of a highway project including housing and other activities being an integral part of the highway project and defined in clause (b) of Explanation to section 80IA(4)(i) of the Act. Ld. CIT-DR further contended that the income from sale or sub lease & land is not an income from the business of infrastructure development business, hence, deduction thereon is not allowable u/s 80IA(4) of the Act. 12. Ld. CIT DR drawing our attention to the impugned notice issued to the assessee and the impugned order passed u/s 263 of the Act, revising the assessment order, submitted that the business of infrastructure facility development was not started in the assessment year under consideration and the same actually became operational on 9.4.2012 when the project was ITA NO. 3339/Del/2014 inaugurated and hence the assessee is not entitled for deduction on the income from such activity which is not a part of infrastructure facility development business. Ld. CIT-DR further pointed out that if for the sake of argument it is ....
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.... highway. The ld. AR further contended that the main object of work assigned to the assessee was to develop 6 lane Expressway with controlled access and exit points for fast moving traffic and the users of Expressway has to pay a toll at toll plazas situated at entry or access points and therefore the assessee has to develop a toll road connecting Noida to Agra. The ld. AR, repeating his written submissions, also submitted that, since the assessee was under obligation to pay cost of land acquisition plus Rs. 100/- per hectare per annum lease rent on land for construction and development of Expressway, in addition to bearing cost of construction of Expressway and development of land, therefore, the project could not be viable unless the absolute rights on the land for development are given to the assessee as the only toll revenue was not sufficient even to meet cost of construction and development. 15. The ld. AR pointed out that assessee's business commenced from the date of its incorporation i.e. 5.4.2007 as prior to incorporation, the bid of holding company was accepted and the TEA allowed the successful bidder to create a Special Purpose Vehicle (SPV) company in order to ....
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.... ITA NO. 3339/Del/2014 proceedings u/s 263 of the Act dated 19.3.2014, 25.3.2014 and 27.3.2014, impugned order, rival written submissions and contentions of both the sides (as reproduced hereinabove) placed before us and the ratio of the case laws relied by both the parties and specially, grounds raised by the assessee before us in this appeal are kept in close juxtaposition, side by side, the following prime issues emerge for our consideration for proper adjudication of the present appeal: (i) Whether in view of concession agreement and allied documents, the assessee claim falls u/s 80IA(4)(i) Explanation clause (a) or (b) and whether the assessee is developing a road (including toll road) or highway? (ii) Whether in the background of concession agreement and judgment of the Hon'ble Supreme Court in the case of Nand Kishore Gupta vs State of UP, the AO was correct in treating the subject year as falling in the eligible period u/s 80IA(2) of the Act in the light of the fact that the assessee did commence the development of the infrastructure facility since 5.4.2007 and was actively developing the infrastructure facility during the assessment year under considera....
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....ars beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park (or develops a special economic zone) rendered to in clause (iii) of sub-section (4) or generates power or commences transmission or distribution or power (or undertakes substantial renovation and modernisation of the existing transmission or distribution lines." (3) xxxxxx (4) This section applies to- (i) any enterprise carrying on the business l[of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely: a) it is owned by a company registered in India or by a consortium of such companies 2[ or by an authority or a board ITA NO. 3339/Del/2014 or a corporation or any other body established or constituted under any Central or State Act.] (5) xxxxxxx (6) The amount of deduction in the case of the business of a ship shall be thirty per cent of the profits and gains derived from such ship for a period of ten consecutive assessment y....
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.... Report (DPR), arrangement of finances, design, engineering, construction and operation of six-lane Expressway alongwith service roads and associated structures as per requirement, between Noida and Agra in Uttar Pradesh, India except the construction of Expressway between Noida and Greater Noida, which is already under execution jointly by NOIDA and GNIDA and shall be completed in all respects, operated and maintained jointly by NOIDA and GNIDA at its own cost till the start of the Concession Period. This road would have provision for expansion to 8-lane in future based on traffic volume. 2.2 The scope of Work also includes operation and maintenance of the Expressway, including collection and retention of Fees during the term of the Concession Period. 2.3 The Expressway shall be developed in following 3 phases :- Phase 1 : Expressway stretch between Greater Noida and the proposed Taj International Airport. Phase 2 : Expressway stretch between the proposed Taj International Airport and an intermediate destination between the proposed Taj International Airport and Agra as may be mutually agreed between the Parties. Phase 3: Expressway stretch between the aforesaid int....
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....Noida Expressway shall be treated as interest free loan to the Concessionaire, which shall be repaid by the Concessionaire to TEA in 15 equal yearly instalments starting from 11th year of the Concession Period. 3.5 The Concessionaire shall submit TEFR / DPR within 2 years of signing the Concession Agreement. 3.6 The Concession Period shall commence on COD and shall end on the date of expiry of period of 36 (thirty six) years plus any extensions thereto provided in accordance with the ITA NO. 3339/Del/2014 provisions of this Agreement. However in case COD is not achieved within 7 (seven) years or such extended period as may be approved by TEA, after signing of this Agreement solely on account of Concessionaires default, the Concession Period shall be reduced by the period of delay in achieving the COD. 3.7 Concessionaire shall be entitled to collect and retain the Fee from the users of the Expressway between Noida and Greater Noida during the terms of the Concession Agreement. 3.8 The alignment of the Expressway between Greater Noida and Agra shall be finalised by the Concessionaire in consultation with TEA. CHAPTER - IV LAND 4.1 Land for construction of E....
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.... funds including own funds and copies of communication from the lenders in ITA NO. 3339/Del/2014 case of debt by way of term loan, NCD or any other instrument showing their intention for providing the debt. 4.3 Land for development shall be transferred by TEA to the Concessionaire free from all Encumbrances on following terms & conditions : a. It shall be on lease for a period of 90 (ninety) years from the date of transfer through such lease deeds as may be mutually agreed between the Parties. b. The land to be transferred shall be as per the request and choice of the Concessionaire subject to availability, in such a manner that the Concessionaire is entitled to achieve 150 Floor Area Ratio (FAR) on such land. If due to local byelaws or other statutory provisions, it shall not be possible to achieve 150 FAR, then TEA shall evolve suitable mechanism, as may be mutually agreed between the TEA and the Concessionaire, so as to enable the Concessionaire to achieve 150 FAR. c. The sole premium of the transferred land shall be equivalent to the acquisition cost plus a lease rent of Rs. 100.00 (Rupees one hundred) only per hectare per year. The acquisition cost shall be the act....
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....d i.e. for commercial, amusement, industrial, institutional, residential etc. And also for the area of land to be allocated for different uses. The Concessionaire shall also be free to decide whether the sub'-leased land shall be in the form of plots or constructed properties. No permission of TEA shall be required either for the land use or for transfer of leasehold / sub-leasing / multiple sub-leasing of land. The land use shall however be as per applicable Master Plan and other regulations. 4.5 The rights of the sub-lessees / end-users shall not be affected by termination of this Agreement, or expiry of Concession Period and subsequent renewals shall be granted by TEA without any additional cost to transferees / sub-lessees / end-users, standard terms and conditions notwithstanding. The Concessionaire / sub-lessees / end-users shall follow the statutory laws / byelaws etc. for the land use. 4.6 If the land is not made available by TEA to the Concessionaire at Stages 1, 2 & 3 according to the schedule mentioned in Clause 4.1 and 4.2 above for any reason other than attributable to the Concessionaire, TEA, at its discretion, shall either reimburse to the Concessionaire th....
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....curtailing the traveling time, as also the transport of the goods, would be some factors which speak in favour of the Project being for the public purpose. Much was stated about the 25 million square meters of land being acquired for the five parcels of land. In fact, in our opinion, as has rightly been commented upon by the High Court, the creation of the five zones for industry, residence, amusement etc., would be complimentary to the creation of the Expressway. It cannot be forgotten that the creation of land parcels would give impetus to the industrial development of the State creating more jobs and helping the economy and thereby helping the general public. There can be no doubt that the implementation of the Project would result in coming into existence of five developed parcels/centers in the State for the use of the citizens. There shall, thus, be the planned development of this otherwise industrially backward area. The creation of these five parcels will certainly help the maximum utilization of the Expressway and the existence 3 of an Expressway for the fast moving traffic would help the industrial culture created in the five parcels. Thus, both will be complimentary to e....
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....ment year under appeal. 25. Ld. AR replied that the assessee is entitled to deduction u/s 80IA(4) of the Act on the fact and law involved and relevant to the issue as a developer of the infrastructure facility, even if it has not commenced operating and maintaining but it is developing the same. Placing reliance on the decisions of Hon'ble Supreme Court in the case of K.P. Vergese vs ITO 131 ITR 597 (SC), the order of ITAT Mumbai in the case of ACIT vs Bharat Udyog Ltd. 118 ITD 336 (Mumbai Tribunal) and on the order of ITAT-Amritsar in the case of TRG Industries (P) Ltd. vs DCIT (2013) 35 Taxman.com 253 (Amritsar Tribunal) submitted that this issue is covered in favour of the assessee by the ratio of these judgments and orders. 26. Ld. AR reiterating its argument submitted before the ld. CIT Noida and relying on written submissions dated 19.3.2014, 25.3.2014 and 27.3.2014 (annexed to order of CIT as Annexure A, B & C) placed before the ld. CIT during proceedings u/s 263 of the Act, submitted that there is no requirement u/s 80IA(4) that the deduction would be available only after the assessee has begun the operation of the infrastructure facility. Ld. AR strenuously conte....
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....egation of non-compliance of the CBDT Circular No. 1/2006 (supra) has not been mentioned by the ld. CIT Noida in the notice issued to the assessee u/s 263 of the Act (supra). Secondly, the construction of language and words used by the legislature in sub-section (2) of section 80IA of the Act and used by the CBDT in Circular No. 1/2006 (supra) are similar viz. "develops and begins to operate". The heading given by the legislation to section 80IA of the Act reads as "Deductions in respect of profits and gains from industrial undertaking or enterprise engaged in infrastructure development etc." which, to our humble understanding, express the intention of the legislature that the exemption therein section 80IA of the Act is available for the undertakings or enterprise which are engaged in the business of infrastructure development etc. Meaning thereby infrastructure development is paramount consideration for grant of exemption u/s 80IA of the Act. If the literal meaning is given to the conjunctive word "and" between "develops" and "begins to operate" then the enterprise would be entitled to exemption only when the enterprise develops and begins to operate infrastructure facility on or....
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.... of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible." 31. Ld. AR placing reliance on the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. vs CIT (1992) 196 ITR 188 (SC), the ld. AR submitted that if provision for checking abuse is found to have resulted into nullifying the very purpose of its enactment then the provisions of taxing statutes should be interpreted liberally so as to advance the objective of the provisions and not frustrate it. Ld. AR has further drawn our attention towards decision of Hon'ble Bombay High Court in the case of CIT vs ABG Heavy Industries Ltd. (2010) 322 ITR 323 (Bombay) and submitted that after considering the ratio of the decision of Hon'ble Apex Court in the case of Bajaj Tempo Ltd. (supra) it was also held that an assessee did not have to develop the entire part of eligible business or activity in order to qualify for a deduction u/s 80IA of the Act. 32. Ld. DR contended that the toll was inaugurated on 9.8.2012 (relevant to AY 2013-14). Hence, literal meaning does not allow to grant exemption u/s 80IA of the Act from AY 2009-10. Ld. AR placin....
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.... a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under section 80-IA. Parliament did not legislate a condition impossible of compliance. A port is defined to be an infrastructure facility and the circular of the Board clarified that a structure for loading, unloading, storage, etc., at a port would qualify for deduction under section 80-IA. The condition of a certificate from the Port Authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The assessee developed the facility on a BOLT basis under the contract with JNPT. On the fulfilment of the lease of ten years, there was a vesting in the JNPT free of cost." 34. Therefore, in view of ratio laid down by Hon'ble Apex Court in the case of Bajaj Tempo (supra) and by Hon'ble Bombay High Court in the case of ABG Heavy Industries (supra), we respectfully note that a provision in taxing statute granting incentives for promoting growth and development should be construed liberally and since a provision for promoting economic growth has to be interpr....
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....ch it is enacted and does not frustrate the object behind the statute and its purpose. Accordingly, ld. AR submitted that in order to fulfil the purpose of section 80IA(4)(i) i.e. to make even income from development of infrastructure facility eligible for deduction u/s 80-IA(4)(i) of the Act, clause (c) of the same provision of the Act should be read as "has started or starts developing or operating or maintaining or developing, operating and maintaining the infrastructure facility on or after 1st day of April 1995." 37. Ld. AR strenuously contended that if clause (c) is interpreted in the manner as adopted by the ld. CIT, the it would be interpreted to cover the cases only relating to operation and maintenance of the infrastructure facility, the entire reason and purpose for amending section 80IA(4)(i) to separately allow deduction for development of infrastructure facility would lose its purpose. 38. Having heard arguments of both the sides and after having gone through relevant material placed on record, written submissions, gist of case laws relied by both the parties, we note that the main controversy in this case is mainly that ITA NO. 3339/Del/2014 the assessee is cla....
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....d (JIL) on 19/10/2007. The ld. AR also pointed out that to implement all the objects of the Concession Agreement dated 7/2/2003 between Jaiprakash Industries Ltd. (now Jaiprakash Associates Ltd.) and Taj Expressway Industrial Development Authority (TEA), the assessee company was formed as a Special Purpsoe Vehicle (SVP) on 5.4.2007 and after incorporation of assessee company, the said assignment agreement (supra) was also executed on 19/10/2007. 41. Elaborating objects and project details, the ld. AR submitted that the concept of the Taj Expressway project was an outcome of the Policy decision of the Government of U.P. under the statute called U.P. Industrial Area ITA NO. 3339/Del/2014 Development Act, 1976 (U.P. Act No of 1976) and in exercise of the power as vested under section 3 of the said Act, the Government of UP constituted an Implementing Authority namely, "Taj Expressway Industrial Development Authority" (TEA) just prior to launching the project viz. the expressway connecting Noida with Agra was about 160 Kms of length and it was to pass through the virgin area of UP State along the Yamuna River. 42. Ld. AR further submitted that the TEA has granted rights of land d....
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....give impetus to the industrial development of the state creating more jobs and helping the state economy and thereby helping the general public. Ld. AR has further drawn our attention towards findings of the Inquiry Commission headed by Hon'ble Former High Court Judge, and submitted that Inquiry Commission also held that it was necessary to strengthen economic viability of the project by some mechanism and, therefore, it was decided to provide 2500 hectare of land for development to the successful bidder along with the proposed expressway. Ld. AR also added that the inquiry commission held that the Taj Expressway, being a landmark event in the industrial development of state of UP, is of immense public utility and also in the national interest. Ld. AR specially pointed out that there is no obligation on the assessee company under the concession agreement to carry out housing activities on the land for development which is a narrow area and land for development was given along the proposed the 100 metre expressway, for industrial, commercial, institutional, amusement and residential development to the assessee company. 45. Ld. AR also again took us to the provisions of sectio....
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.... and operating infrastructure facility as defined in the said explanation (a) as "road including toll road". Ld. AR elaborating the financial rights and obligations on the assessee company submitted that the development rights on the land and income therefrom are integral and inseparable part of the consideration to the assessee company in respect of facility involved being toll road the rider created in section 80IA(6) apply to the infrastructure facility entity that fall in the definition of "highway project including housing or other activities being an integral part of the highway project" as defined in clause (b) of explanation to section 80IA(6) of the Act. Ld. AR vehemently contended that the restriction imposed by the legislature u/s 80IA(6) is not applicable to the assessee company and the limits and requirement in the said section apply to "highway project" as defined in clause (b) of explanation to section 80IA(4)(i) of the Act and not to the "road including toll road" as mentioned in clause(a) of Explanation to section 80IA(4)(i) of the Act, including integral and inseparable part of the development rights and income therefrom on the land given to the assessee company f....
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....see. 50. The precise reply and contentions of the revenue is that the assessee's business activities fall under clause (b) of explanation to section 80IA(4)(i) of the Act i.e. "a highway project including housing or other activities being an integral part of the highway project". The ld. CIT DR further contended that since the assessee company has not commenced business operations during the year under consideration and the assessee has begun to operate infrastructure facility w.e.f. 9.8.2012, when the expressway was inaugurated, hence, prior to this date, the assessee had earned only profits which are attributable to sale of land which was transferred to it in the terms of concession agreement, therefore, the assessee would be eligible for deduction u/s 80IA only w.e.f. AY 2013-14. On this issue, it was also contended by the ld. CIT DR that in respect of an assessee claiming to be engaged in building infrastructure facility in the nature of a highway project including housing and other activities being an integral part of the highway project, the profits arising from housing and other activities would be exempt from tax under sub-section (6) of the section 80IA. Further, th....
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.... this case, which read as under:- (A) Highway - a public road that everyone has right to use (Ref. Chamberlain dictionary, First Indian Edition 2001 at page 635) - A public road especially an important road that joins cities or towns together (Ref. Cambridge Dictionary, low price edition 1996 at page 669) (B) Expressway - a major road for fast moving traffic, especially with three lane per carriageway and limited access and exit points (Ref. Chamberlain dictionary, first Indian edition 2001 at page 462 & 892.) - A wide road built for fast moving traffic travelling long distances with a limited number of points at which drivers can enter and leave it. (Ref. Cambridge dictionary, low price edition 1996 at page 485) (C) Toll - a charge payable to use of a bridge or road (Ref. Concise Oxford Dictionary, at page 1507) (D) Toll gate - a barrier across a road where a charge must be paid to proceed further (Ref. Concise Oxford Dictionary, Edition at page 1507). - A gate at the start of a road or a bridge at which you pay an amount of money in order to use the road or bridge.(Cambridge Dictionary, low price edition 1996 at page 1533) (E) Toll Plaza - a row of toll bo....
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....88 ITR 408 (SC) submitted that the object of the contract in question may be inferred from the stipulation and terms and conditions of the contract and as per intention of the parties to the contract, any other meaning or intention can not be given to the contract and the agreement (supra) between the assessee company and TEA is intended to develop, operate and maintain a "toll road", therefore, the AO took a reasonable and plausible view in allowing exemption u/s 80IA(4) of the Act. 56. The relevant operative part of decision of Hon'ble Supreme Court in the case of Ishikawaijima Harima Heavy Industries Ltd. (supra) reads thus:- "In constructing a contract, the terms and conditions thereof are to be read as a whole. A contract must be construed keeping in view the intention of the parties. No doubt, the applicability of the tax laws would depend upon the nature of the contract, but the same should not be construed keeping in view the taxing provisions." 57. On the basis of foregoing discussion, we are of the considered opinion that the business activities of the assessee company fall within the ambit of clause (a) of Explanation to section 80IA(4)(i) of the Act. We declin....
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....r deduction. 61. Ld. AR, reiterating assessee's arguments and submissions before AO vide letter dated 21.12.2011, submitted that the consideration for developing, operating and maintaining the said infrastructure facility is provided, inter alia, by way of right to develop and sub lease the adjoining land allotted to assessee is evident from concession agreement executed between assessee and the TEA and relevant extracts, conditions and clauses clearly demonstrate that the assessee was under obligation of development, operation and maintenance of the Expressway and development of 25 million sq. Metre land along the proposed Expressway for commercial, industrial, institutional, amusement and residential development. It was also explained that as per concession agreement, the assessee company was under obligation to pay cost of acquisition plus lease rent of Rs. 100/- per hectare per annum for the land proposed to be used for construction of Expressway and also for the 25 million square Meter land for development along the proposed expressway at five or more locations. Ld. AR further explained that the assessee was not granted any title over the Expressway and land used for co....
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....acility. Ld. AR further illustrated that in case the assessee had received a sum of money as consideration from the state government, then undisputedly the said sum of money would be income from the business of infrastructure facility and if instead of a sum of money, the assessee has been allotted land for development with related rights and obligations, then obviously the income on sub-lease of the land is just a sum of money in kind on its realisation and is income from the business of said infrastructure facility. Ld. AQR further contended that the said income from sub lease of land has been utilized for developing the infrastructure facility and same was actually utilized during the relevant financial year for infrastructure facility project and the overall cost/capital expenditure was for exceeding from the income derived therefrom and as such there was no taxable income. 64. Ld. CIT DR replied in her written submissions that the clause (b) of Explanation to section 80IA(4)(i) of the Act refers to a "highway project including housing or other activities being an integral part of the highway project" is applicable to the extant case and so sub section (6) states that notwit....
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....of the assessee is squarely covered under sub-section (6) of section 80IA of the Act, even if the argument of the assessee that the claim of the assessee falls under sub-section (4) thereof is accepted, and when the assessee entered into an agreement with the State Government of UP for "developing, operating and maintaining a new infrastructure facility and therefore its business activities squarely falls within clause (b) of Explanation to section 80IA(4)(i) f/w clause (iii) of the Act and since sub-section (2) of section 80IA categorically states that the deduction will be admissible "beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility" no deduction for income generated by activities of such infrastructure facility and/or any allied activity would be eligible for deduction in any year prior to the beginning of operations of the infrastructure facility. Ld. CIT DR also pointed out that as per sub-clause (c) of clause (i) of sub- section (4) of section 80IA of the Act, the deduction would be admissible to the enterprise which "has started or starts operating and maintaining the infrastructure facility on or a....
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....t for developing, operating and maintaining infrastructure facility a distinct category of eligible project specifically covered under sub-clause (iii) of clause (c) of section 80IA(4) of the Act and the assessee has not entered into an agreement only for developing of infrastructure facility as envisaged in sub-clause (i) of clause (c) of sub-section (4) and as per provisions of the Act, the exemption/deduction would be admissible only on the commencement of the operation. 69. Ld. CIT DR also tried to lead us to interpret the relevant provisions of the Act and submitted that the contention of the assessee is not acceptable that the development of infrastructure facility would not be eligible for exemption if the commencement of operation of infrastructure facility is accepted as pre- requisite for exemption as the assessee has not entered into an agreement only for development of infrastructure facility but for development, operation and maintenance of infrastructure facility. Ld. CIT DR also submitted that there can be an instance where an assessee has entered into an agreement with Centre/State Govt./Statutory Authority only for development of infrastructure facility and afte....
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....s from Industrial undertaking or enterprises engaged in infrastructure development etc. " 72. Meaning thereby the provisions of Section 80IA of the Act is related to the deduction in respect of profits and gains from enterprises engaged in infrastructure development etc. We further note that as per language used therein sub-section (1) grants deduction in respect of any profits and gains derived by an undertaking or an enterprise from any business referred to in sub- section (4) thereof, under sub-section (2) the admissible deduction is 100% of the profits and gains of eligible business for ten (10) consecutive assessment years (AY) out of twenty (20) AYs beginning with the AY in which such undertaking or enterprise develops and begins to operate any infrastructure facility referred in clause (iii) of sub-section (4). 73. We may further note that sub-section (4)(i) r/w clause (a) and (b) are related to deduction in respect of the enterprise carrying on business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils the following conditions:- (a) It is owned by a company registered in Indi....
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.... note that the development is a continuous process which starts from the date of commencement of business and beginning of the development activities and comes to an end when development work concludes and thereafter operation and maintenance thereto is started. When the intention of legislation is that the entrepreneurs should be encouraged and promoted towards infrastructure development etc., then it is a positive inference that the legislation intended to grant deduction for the enterprises which only develops or which operates and maintains or which develops, operate and maintain infrastructure facility. Our aforesaid view also finds support from proviso to sub clause (c) to section 80IA (4)(i) of the Act, wherein it is also provided that if developer of an infrastructure facility transfers the same, then the transferee enterprise would also be eligible for deduction as if it were the enterprise to which this clause (c) applies i.e. transferor enterprise, meaning thereby the enterprise which only develops infrastructure facility is eligible for deduction and in case developer transfers the facility for operation or maintenance to another enterprise then the transferee would als....
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....09) and onwards as and when business activities of developing infrastructure has begun, then income derived from business would be certainly eligible for deduction. Ld. AR has also contended that the activity of sub lease or sale of land for development, which was received by the assessee as a major part of consideration of project, is an integral and inseparable part of main business activity of development of infrastructure facility, therefore, income/profits derived during AY 2009-10 from sub-lease of land are the first degree operational profits of the business which is eligible for deduction u/s 80IA(4)(i) read with Explanation (a) thereto. 79. Since we have already held that the assessee company is in the business of development of "road including toll road" infrastructure facility and the enterprises which only develops infrastructure facility are eligible for deduction u/s 80IA(4)(i) of the Act from the date when it begins to operate its business activity of development of infrastructure facility. Ld. CIT DR could not demolish these contentions of the assessee including the contention that the business operations of eligible enterprises visualises the development of infr....
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....d down the Rule that a provision for deduction, exemption, incentives, benefits and relief should be interpreted liberally, reasonably and in favour of the assessee as observed by the Hon'ble Apex Court in the judgement in the case of CIT vs. South Arcot City 176 ITR 117 at page 119 (SC). In the judgment of Hon'ble Supreme Court in the case of CIT vs. Mahindra 144 ITR 225 at page 239 (SC) it was further held that the beneficial taxation provisions should be so construed as to effectuate the object of the legislature and not to defeat it . 83. The Hon'ble Supreme Court in the judgment in the case of Prabhakar P.R. Vs. CIT 284 ITR 549 (SC) held that although the exemption provisions are to be construed strictly as regards the applicability thereof to the case of the assessee but once it is found that the same is applicable, the same are required to be interpreted liberally. As per ratio the judgment of Hon'ble Madras High Court in the case of AGS Tiber vs. CIT 233 ITR 207 (Madras), the interpretation of beneficial taxing statue should be liberal but logical. Subsequently, the Hon'ble Supreme Court in the judgment in the case of Mysore Minerals vs. CIT 239 ITR 7....
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....n theory propounded by John Rawls on the other hand. Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of the tax." 85. In the shadow of above considerate view if we analyse the facts of the present case, then we have to hold that the AO took a reasonable and plausible view that the assessee is eligible for deduction u/s 80IA(4)(i) read with clause (a) of Explanation thereto. Sub-section (2) also clarifies that the deduction shall be at the option of the assessee and the assessee is eligible for deduction on the income earned from sub-lease/sale of land which was provided by the TEA to the assessee with an absolute right to use it, undisputedly the assessee company has started its business of developing the infrastructure facility w.e.f. 5.4.2007 and the same was continuing during relevant period pertaining to relevant assessment year under consideration i.e. AY 2009-10, and if assessee wants to avail its legal option to claim deduction u/s 80IA(4)(i) of the Act, then the assessee cannot be denied for the same by following a hyper technical appr....
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....at where the AO adopts one of the courses permissible in law or where two views are possible and the AO has taken one of the possible views then the commissioner cannot exercise his powers under section 263 of the Act to differ with the view taken by the AO, even if there has been a loss of Revenue. 88. The Ld. AR has further drawn our attention towards assessee's paper book from page 93 to 196 and submitted that the AO has made detailed enquiries and after proper application of mind, has passed assessment order u/s 143(3) of the Act. The Ld. AR further contended that the AO has rightly allowed deduction u/s 80 IA (4) of the Act for the profits derived from the sale of land and other income since the same are profits and gains derived from the business of developing, operating and maintaining of an infrastructure facility i.e. a road including toll road and from the main business activities carried out by the assessee during the period under consideration. The Ld. AR, also pointed out that the land for development which was received by the assessee under concession agreement, was, in fact, an important part of consideration received by the assessee for developing, operating ....
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....laced on the ratio of the decision of the Hon'ble Supreme Court in the case of CIT vs. Max India Ltd. (Supra) wherein it was held that since different views existed on the day when the Commissioner passed the order and the mechanics of that section had become so complicated over the years, the subsequent amendment of section 80 HHC of the Act, even though retrospective, would not be attracted. In this case Hon'ble Apex Court, referring and reiterating the ratio laid down in its earlier order in the case of Malabar Industries Ltd. (supra), has held that where two views are possible and the AO has taken one view in the assessment order with which the commissioner does not agree, then the same cannot be termed as an erroneous order prejudicial to the interest of revenue unless the view taken by the AO is "unsustainable" in law. 90. The Ld. AR, vehemently contended that a plethora of judgments of Hon'ble Supreme Court and Hon'ble various High Courts have firmly laid down the rule that a provision for deduction, exemption or relief should be interpreted liberally and reasonably in favour of the assessee and these provisions should be so construed as to achieve the obj....
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.... submissions (as reproduced hereinabove), contended that the Ld. CIT in his order categorically states that "the inescapable and logical conclusions would be that the assessee ought to have complied with the provisions of sub section (6) of section 80IA which it has not" and the Ld. CIT also noted that the assessee had claimed deduction u/s 80IA of the Act on interest income on FDs made by deploying its surplus funds in the bank and the same has been erroneously accepted by the AO. The Ld. CIT- DR, referring to the decision of ITAT Chandigarh Bench "A" in the case of Vodaphone Essar Ltd. (2013) 153 TTJ (Chd) 451, contended that where, in a given situation, an identical issue had been overlooked by the AO and the CIT had invoked the powers available u/s 263 of the Act, it was held the AO had failed to make proper investigation into the eligibility of the assessee in violation to the claim of deduction u/s 80 IA of the Act on the business profits, interest and other income received during the year, therefore, the order of the AO was held to be erroneous and prejudicial to the interest at the Revenue and the Tribunal upheld the order of the CIT u/s 263 of the Act. 94. The Ld. CIT-D....
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....need to show any reason as its part of administrative control to call for records of any proceeding under the Act, and examine the same. Secondly, the Commissioner can also consider that any order passed under the Act is erroneous in so far as it is prejudicial to the interest of the Revenue and for this purpose, having regard to the stipulation and fabric of language of section 263 of the act it is vivid that the Commissioner may exercise his powers by calling and examining the records in the manner as indicated above and at this stage of consideration of the appearance of intended assessee or his representative is not required and therefore, there is no question or situation for the assessee to appear, object and making any submissions before the commissioner. We also note that at this stage after calling for and examining the records, if the commissioner reaches to a prime facie conclusion that the assessment order is erroneous and in so far it is prejudicial to the interest of the revenue, then the third stage of section 263 of the act comes. 97. In our humble understanding of this provision, aforesaid two stages are purely administrative and the proceeding of the third stag....
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....hich has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, [National Tax Tribunal,] the High Court or the Supreme Court. Explanation.--In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 98. In the light of language stipulations used by the Legislature in section 263 of the Act, at third stage the Commissioner may, after giving an opportunity being heard for the assessee and after making such enquiry, as he deems necessary, pass such order as per facts and circumstances of the case including an order enhancing or modifying the assessment, or cancelling the assessment and directing the AO for fresh assessment. Meaning thereby, that the Commissioner must give an opportunity of being heard on the issues raised by the Commissioner in the notice u/s 263 of the act and it also confers on the Commissioner the powers to issue show cause to the assessee and....
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....ess of the assessee. Hence, we are of the considered opinion that the prepositions of two views is not applicable to the present case and even if view posed by the Ld. CIT is analysed then we note that the Ld. CIT himself has not conclusively decided that the assessees' claim of deduction falls under ambit of clause (b) of explanation to section 80IA (4) (i) of the Act. 102. In the case of CIT vs. Gabriel India Ltd. (supra), the Hon'ble Bombay High Court has held that the power u/s 263 (1) of the Act is in the nature of supervisory jurisdiction and can be exercised only if the circumstances must exist to enable the Commissioner to exercise power of revision subsection (1) of section 263 of the Act viz. (i) the order should be erroneous; and (ii) by virtue of the order being erroneous and prejudicial to the interest of the revenue. Speaking for Hon'ble Bombay High Court, their Lordships held that an order cannot be termed as erroneous unless it is not in accordance with law and if the AO, acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him (Ld. CIT), the order should have ....
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....t it is expected that the AO will make a detailed enquiry to find out correct income of the assessee and not to accept facts placed by the assessee on their face value. The Ld. AR, pointed out this is a case of an assessee who was the owner of a number of properties and the order was held be erroneous and prejudicial to the indirect of the Revenue by holding that the AO could not find out the correct income from the house property and he also failed to investigate the investments made by the assessee in construction of a particular house property. The Ld. AR vehemently contended that the present case is that wherein proper, detailed and adequate enquiry has been made. 106. The Ld. CIT-DR has also pressed the ratio of the judgments as Hon'ble Jurisdictional Allahabad High Court in the case of CIT vs. Bhagwandas (2005) 272 ITR 367 (All.) and submitted that if it is found that there was no discussion in the assessment order regarding the question as to whether the amount of income shown by the assessee which was being claimed to be exempt, had actually been earned by the assessee or not then the commissioner had rightly initiated the assessment proceedings u/s 263 of the Act as....
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....cause the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interest of the revenue. 109. The judgment of Hon'ble Jurisdictional High Court of Allahabad in the case of Jagdish Kumar Gulati, (supra) as relied by the Ld. CIT-DR, is the case of a property owner wherein the assessing officer could not find out the correct income from House property and also failed to investigate investment made by the assessee in construction of a property and the facts and details of the assessee were accepted by the AO on face value, hence, it was held that the order is erroneous and prejudicial to the interest of the Revenue. Further, from the another judgment of Hon'ble High Court of Allahabad, as relied by Ld. CIT-DR, in the case of Bhagwandas (Supra) we note that the order of the commissioner passed u/s 263 of the Act was upheld in a peculiar situation wherein the assessing officer passed an order without any discussion and without application of mind and there was no discussion regarding the question as to whether the amount of inc....
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....rt of Delhi in the case of CIT vs. New Delhi Television Ltd. (supra). 112. At this point, the Ld. AR has also pressed in to service the ratio of the decision of Hon'ble High Court of Delhi in the case of CIT vs. DLF Ltd. (2013) 350 ITR 555 (Delhi) and submitted that it is not mere prejudice to the Revenue or a mere erroneous view which can be revised u/s 263 of the Act but also there should be the element of "unsustainability" in the order of the assessing officer, which empowers the commissioner to issue notice and to proceed to pass an appropriate order. On careful reading of the same we note that Hon'ble High Court has held as under (at page 562) : "In this case, the record reveals that the Assessing Officer had issued notice, and held proceedings on several dates (of hearing) before proceeding to frame the assessment. He added nearly Rs. 2 crores to the income at that time. The Commissioner took the view that the assessment order disclosed an error, in that the deduction under section14 A had not been made. Now, while the statutory direction to the Assessing Officer to calculate, proportionately, the expenditure which an assessee may incur to obtain the dividend i....
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....d explanations, the AO had come to a definite conclusion. Their Lordship further held that in this situation, since the material was there on record and the said material was considered by the AO and a particular view was taken, the mere fact that a different view can be taken should not be the basis for a valid action u/s 263 of the Act and therefore, dismissing the appeal of the revenue the Hon'ble High Court held that the order u/s 263 of the Act was not justified and valid. 114. The Ld. AR also sought support from preposition laid by Hon'ble Jurisdictional High Court of Allahabad in the judgment passed in the case of ITA NO. 3339/Del/2014 CIT vs. Shiv Prasad (2011) 12 Taxmann. Com 118 (All.) and submitted that the proceedings u/s 263 of the act can only be taken in case if the assessment order is found to be erroneous and prejudicial to the interest of the Revenue and if one condition does not exist the revisional powers u/s 263 can not be exercised. The Ld. AR further submitted that as per ratio of the judgment of Hon'ble High Court of Allahabad in the case of CIT vs. Goyal Private Family specific Trust (1988) 171 ITR 698 (All.) in absence of specific findings t....
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....d per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an ....
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....t of Hon'ble Rajasthan High Court in the case of CIT Vs. Deepak Real State Developers (I) P. Ltd. (2014) 367 ITR 377 (Raj.) and submitted that where the Commissioner did neither reject the documents or records to be irrelevant, nor lacking in their probative worth and he simply remanded the matter to the Assessing Officer observing that these ought out to have been laid before the AO and should be examined at the time of assessment then it was held that the order of revision u/s 263 of the Act was not valid. 118. Continuing with arguments on the validity of assumption of jurisdiction u/s 263 of the Act, the Ld. AR also brought to our notice the recent decision of Hon'ble High Court of Delhi in the case of CIT vs. Hotz Industries Ltd. (2014) 49 Taxmann. Com.267 (Delhi) and contended that once inquiries were conducted and a decision was recorded by the AO, it cannot be said that it was a case of "no inquiry" and the commissioner must reach to a finding that the finding recorded by the AO was erroneous, not because no inquiries were conducted, but because final conclusion in the assessment order was wrong and untenable or unsustainable in law. The relevant operative para of....
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....er Ground no. 7 and other grounds raised before us. 120. The ld. AR has drawn our attention to para 15 of the impugned order, as reproduced hereinabove in para 4 of this order and vehemently contended that the CIT Noida has disputed only sole issue pertaining to allowability of assessee's claim under clause (a) of Explanation to section 80IA(4)(i) of the Act and in the notice dated 11.3.2014 issued u/s 263 of the Act (supra) but in the final impugned order passed u/s 263 of the Act dated 30.3.2014, the CIT Noida has also disputed and revised two more issues in para 15 of the impugned order viz. issue of interest earned by the assessee by parking its surplus funds in various fixed deposits accounts in the bank and issue of claim of depreciation on the project which was yet to be completed in addition to the main issue which is not permissible. To support above contention, the ld. AR has placed reliance on the decision of Hon'ble Andhra Pradesh High Court in the case of CIT vs G.K. Kabra (1995) 211 ITR 336 (AP) and deicison of ITAT Delhi in the case of B.S. Sangwan vs ITO (2015) 53 Taxman.com 402 (Delhi- Tribunal) to which one of us (C.M. Garg, JM) was the co-author. ITA N....
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....s claimed on the assets used for the business and interest involved emanates from the business of development of infrastructure facility for the single object company. Ld. AR also submitted that when business income of the assessee was exempted u/s 80IA(4) of the Act, then why assessee would assail wrong claim of depreciation. On careful consideration of above rival submissions of both the parties, at the very outset, we note that the CIT, Noida has issued notice u/s 263 of the Act (supra), only raising and disputing the sole issue, the AO allowed exemption to the assessee under clause (a) of Explanation to Section 80IA(4)(i) of the Act and the assessee was showcaused on this sole allegation only which clearly show that the notice u/s 263 of the Act was not given on the issues of interest but it is apparent from page 27 and 28 in para 15 of the impugned order that the CIT, Noida also revised the assessment order passed u/s 143(3) of the Act on the issue of allowability of exemption on the interest income and allowability of claim of depreciation in the computation of income. We may further observe that the ITAT-Delhi in the order passed in the case of Genesis Color Pvt. Ltd. (su....
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....cation of mind on the part of the AO which has resulted in allowing the deduction u/s 80IA of the Act which was not admissible, if the AO had taken in to account and followed the law under the provision of sub section (2), (4) and (6) of the section 80IA of the Act and clarification under CBDT's circular no. 1/2006 dated 12.1.2006 (supra). Thereafter, the Ld. CIT observed that the order passed by the AO has been rendered erroneous and in so far as it is prejudicial to the interest of the Revenue as the tax which was lawfully eligible on profit from sale of land has not been levied due to such omission of the part of the AO to follow sub sections (2), (4) & (6) of section 80IA of the Act, CBDT Circular (Supra), and Rule 18BBE of the Income Tax Rules, 1962. This allowance of deduction has lead to loss of Revenue, therefore order is also prejudicial to the interest of the Revenue. In subsequent para, the Ld. CIT further note that an order is erroneous deviating from law and the expression prejudicial to the interest of Revenue is of wide import which is not confined to mere loss of tax. 124. In the subsequent paras of the impugned order the Ld. CIT also observed that the AO in ....
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....ht of facts and circumstances of the particular case under revision. We may further point out that when the AO takes a view and the commissioner, without recording any finding, that the view taken and order passed by the AO is not correct and therefore, the same is erroneous ITA NO. 3339/Del/2014 and prejudicial to the Revenue; holds that the assessment order is revisable u/s 263 of the Act, then the order of the Commissioner is not valid and sustainable. We may further note that it would be incorrect to say as broad proposition that an assessment order cannot be erroneous, if the AO has adopted one out of two possible views. In this situation, the order of the AO can be held as erroneous only when the commissioner holds and is able to demonstrate that the view taken by the AO was not plausible and reasonable, being legally unsustainable, untenable and incorrect, but the said finding must be recorded by the commissioner to provide legitimate life to the order of revision u/s 263 of the Act. 127. In the light of aforesaid discussion, if we analyse the facts and circumstances of the present case, we observe that the assessee company is in the business of developing, operating and ....