TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 73
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....sed 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 infrastructure facility are to be interpreted liberally, ....
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....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 accounts along with relevant bills and vouchers were also produced an....
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....28, 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. In schedule "K" regarding 'Significant Accounting Policies' in A. Y. 2008- 09 u....
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....nd 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 Jay Prakash Industries Ltd.) is defined to mean preparation of TEFR and DPRJ design, engineering, financing, procurement, co....
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....ave 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 qualify for deduction u/s 80-IA (2), it has to have profits derived from the operation of the road including the toll road which is not....
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....tly 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 derived from the sale of land. The A.O. has then passed an erroneous order in as much as he failed to understand that there are no provisions u/s....
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.... 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 Joint Managing Director and officers of the assessee company along with Assessee's Representative (the AR) made detailed submissions, on the statutory a....
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....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 time 'or' not filed in the manner required under the various provisions. Here in this case if 'and' is not read as 'or' the assessee....
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....8-12-2011, 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 is enacted for and not in a manner that frustrates it. The A.O. has not examined assessee's claim of deduction u/s 80-IA in terms of section 80-IA (2) whereunder t....
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.... 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 channelize the profits therefrom for utilization for the highway project. The sub-section, as stated earlier, carves out an umbilical relationship between the profits ea....
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....te 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 made de-novo. The A.D. is, accordingly, directed to make the regular assessment afresh after affording an opportunity of being heard to the assessee." 6. Finally, the ld. CIT No....
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....ust 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 the assessment order to be made de novo after opportunity by Ld. AO to the appellant vide his order dated 30.03.2014 u/s 263 of the Act. Similar deduction u/s 80lA has been allowed to the appellant vide assessment order dated 12.03.2013 in assessment ye....
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.... 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 an erroneous interpretation of non applicable circular 01/2006 dated 12.1.2006 relating to Effluent Treatment and Conveyance System and not applicable to a toll road or highway project which is the case of the appellant. The said circular, in any case, is not binding o....
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....; 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. CIT's opinion for the opinion of the Ld. AO particularly when two views are reasonably possible and when there are precedents and case laws in appellant's favour. If two views are possible and the Ld. AO has taken one view with which the Ld. CIT does not agree, it cannot be treated as an....
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....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 facility project. v) Consideration for Infrastructure Facility: Concessionaire OIL shall be entitled to collect and retain the Fee and toll from the users of the Expressway for concession period of 36 years and amounts from rights to further lease out the developed/undeveloped land (at five or more locations with an area of 5 mil....
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....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 consideration for developing, operating and maintaining the said infrastructure facility, is by way of toll fee and through the right to develop and sub-lease the land along the toll road. During the period covered by the relevant assessment, the assessee has been rapidly developing the said toll Toad. Section 80 IA: Objective The provisions as contained under sec....
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.... 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 within its scope the profits from all activities that are integral part of the business of toll road development. It is humbly submitted that since sub-lease of the plots of land is made pursuant to the authority granted under the Concession Agreement, there can be no doubt that the sub-lease income is income derived from the 'business' of toll road development. Where income falls under any....
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....structure 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 explanation (b) and not to road including toll road including intrinsic land as consideration for that infrastructure facility project as defined in said explanation (a). Accordingly, the requirements of 80IA(6) are not applicable to us. However, kindly note that in the alternative without prejudice to our contention that we are eligible under 80IA(4) as read with explanation (a), we have made an alternate claim u/....
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....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. 263. Attention is also invited to another decision of the Delhi High Court in CIT vs. Honda Siel Power Products Ltd. (194 TAXMAN 175). In that case, the Assessing Officer had allowed deduction under sections 80HHC and 80-lB. The Commissioner, while exercising his powers under section 263, held that the assessment orders passed by the Assessing Officer were erroneous and prejudicial to the interests of the revenue inasmuch as ....
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....essment 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 collection of the toll from such road, would not even meet the cost of construction of the toll road. The detailed submission in this regard has been made in the subsequent part of this letter and also borne out by submissions made during assessment proceedings. Accordingly, it is submitted that, even on merits, the profits derived by us from sale of land is a profit derived from our business of developing, operating and maintaining the toll....
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....ued 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 taxing statutes-Liberal construction of beneficial provisions. The provisions of section 33 of the Act have to be construed purposefully and beneficially to achieve the object behind section 33 of the Act and it cannot be construed in a restricted or mechanical manner. The provision should be construed with common sense so that unnecessary difficulties are not created against the assessee in claiming development rebate. (c) 342 ITR 366 (Kar.) ClT v. J.....
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....uditor 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 Taxmann.com 253 (Amritsar- Tribunal)". This issue is covered by binding judgments in appellant's favour. The appellant also respectfully relies on submissions in Annexure- Band C to Ld. CIT order. Please see gist of case law attached on this ground on which we rely. Moreover, it is humbly submitted that there is no requirement at under section 80IA( 4) that the deduction would be available only after the assessee has begun the operation of the infrastructure facility. If that ....
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....e 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 has erroneously relied on non applicable CBDT Circular No. 1/2006 dated 12.1.2006 which relates to effluent treatment and conveyance system and not to a toll road or highway project, which is the case of the appellant. In any case, the said circular is not binding on the appellant. The Ld. CIT has relied on irrelevant and erroneous material and basis for passing the order under appeal and as such too his order deserves to be quashed". The said circular relates to effluent treatment and conveyanc....
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....st 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 Assessment Years, "commencing at any time during the period as specified in sub-section (2)" i.e., from the year in which "the undertaking or enterprise develops and begins to operate any infrastructural facility" and thereafter, 30% of profits and gains for the further period of five years. * As per clause (c) of sub section( 4), the start of the operation and maintenance of a infrastructure project is an essential pre requisite for the eligibility for deduction. * The clause (a) of the Explanation to sub-section ....
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....ility 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 assessee with reference to the applicable provisions of the Act i.e. clause (b) of the Explanation to sub section (4) read with subsection (6) of section 801A indisputably was an error on the part of the AO and resultantly, the assessment order became erroneous. * Without prejudice to the contention that the claim of the assessee is squarely covered under sub-section (6) of section 80lA of the Act, even if the argument of the assessee that its case falls under sub section (4) thereof is accepted, it is undeniable that the assessee has....
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....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 infrastructure facility but does not operate it. Therefore the admissibility cannot be reckoned with reference to the commencement of operation. This argument is un-acceptable for the reason that the undeniably, case of the assessee is one in which it has entered into an agreement for developing, operating and maintaining the infrastructure facility a distinct category of eligible project specifically covered under sub clause (iii) of clause ( c) of sub section 4. Assessee has not entered into an agreement only for developing of an infras....
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....t 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 ' Accordingly, in compliance of the provisions contained therein, a 'Special Reserve' aggregating Rs. 2800,69,052 (F.Y.2008-09 Rs. 255,36,26,035; F.Y. 2009-10 Rs. 362,48,77,424; F.Y. 2010-11 Rs. 1168,12,74,807 & F.Y. 2011-12 Rs. 1014,71,29,786) has been created during the year for the respective years. Since the said sum has been utilised by the Company for development of the infrastructure facility (the Yamuna Expressway) during the respective years an aggregate amount of Rs. 2800,69,08,052 ... has been transferred from 'Spec....
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....ted 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 invoked the powers available u/s 263 of the Act. It was held that the AO had failed to make proper investigation into the eligibility of the assessee in relation to the claim of deduction u/s 80IA of the Act both on the business profits, interest income and other income received during the year. The order passed by the AO was an erroneous order and in the facts and circumstances of the case it was validly exercised. Moreover, the assessee has claimed depreciation amounting to Rs. 22.67 crores and had been granted by the Assessing Officer even whil....
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....IA(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 accepted that the income of the assessee is entitled for deduction, then again the same cannot be allowed for the assessee was the assessee has not complied with the mandatory provisions of sub-section (6) of section 80IA of the Act and Rule 18BBE of IT Rules, prescribes the manner in which the profits of housing and other activities are to be computed for the purpose of sub-section (6) which mandates maintenance of separate books of accounts for the activities of housing and other activities and submission of a certificate specifying the amount credit....
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....or 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 implement the project successfully, hence, when the business of development of infrastructure facility was started during the financial year under consideration, then the income earned from sale/sub lease of land for development is an income of first degree business operations and hence, the same is eligible for deduction u/s 80IA(4) of the Act. The ld. AR also contended that since the asessee has developed toll road and opted to avail deduction u/s 80IA(4) of the Act for AY 2009-10, therefore, the assessee also complied with the provisions of Rule 18BBB of ....
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.... 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 consideration? (iii) Whether the AO took a plausible reasonable and sustainable view by allowing the assessee claimed deduction under clause (a) of Explanation to Section 80IA(4)(i) of the Act? (iv) Whether the assessment order questioned and alleged by the ld. CIT, is unsustainable and not in accordance with law and has been passed without application of mind, in the peculiar facts and circumstances of the case, specially in the light of the provisions of section 80IA(4) r/w its sub-sections (2) & (6) and other relevant provisions of the Act and the Income Tax Rules, 1....
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....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 years including the initial assessment year provided that the ship - (i) is owned by an Indian company and is wholly used for the purposes of the business carried on by it ; (ii) was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and (iii) is brought into use by the Indian company at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995." 20. First of all, we may point out that the nucleus of the activities and business of the assessee is the concessio....
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....ration 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 intermediate destination and Agra. CHAPTER - III GRANT OF CONCESSION 3.1 Subject to and on the terms and conditions set forth in this Agreement, TEA hereby undertakes to cause Goup to grant to the Concessionaire and the Concessionaire hereby accepts the Concession for a period of thirty six years commencing from the COD including the exclusive right, license and authority during the subsistence of this Agreement to implement the Project. 3.2 Subject to and on the terms and conditions set forth in this Agreement, the Concession hereby granted shall oblige the Concessionaire to undertake the following in accordance with the provisions of th....
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.... 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 Expressway shall be provided by TEA to the Concessionaire, generally in a width of 100 meters along the alignment of the Expressway with additional land width, where required, for developing other facilities like Toll Plazas etc., on following terms & conditions. a. The land for construction of Expressway shall be released as per following 3 stages: Stage - 1 - Land for Phase 1 of Expressway within 6 (six) months of finalisation of Alignment of the Expressway Stage - 2 - Land for Phase 2 of Expressway within 12 (twelve) months of finalisation of Alignment of the Expressway Stage - 3 - Land for Phase 3 of Expressway within 18 (eighteen) months of finalisation of alignment ....
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....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 actual compensation paid to the land owners without any additional charge and shall be payable by the Concessionaire as per applicable rules. The rent shall be payable annually for 90 (Ninety) years from the date of transfer of land. d. The Concessionaire shall be entitled to further sub- lease developed / undeveloped land to sub-lessees / end-users in its sole discretion without any further consent or approval or payment of any charges / fee etc. To TEA or any other relevant authority. e. After sub-lease of part of the land by the Concessionaire, the same can be transferred / assigned without requiring any consent or approval of or payment of any additional charges, transfer fee, premiums etc. To TEA or to any other....
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....sees / 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 the additional cost and loss of revenue occasioned to the Concessionaire on account of the said delay or the Concessionaire shall be compensated by suitably extending the Concession Period." 21. In view of above agreement, the assessee was under obligation to do "work" as mentioned in para 2.1 of chapter II and in turn, concession was granted by the TEA to the assessee as mentioned in chapter III, the land for construction of Expressway and land for development was provided to the assessee and the same was released by the TEA, as per terms of 4.1 and 4.2, respectively, of Chapter IV of the agreement. As per above provisions and terms of the agreement, the TEA has to provide land for expressway and land for development to the assesse....
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.... 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 each other and can be viewed as parts of an integral scheme. Therefore, it cannot be said that it is not a public purpose. .................. (last part of para 30) We have already considered this question that in the present case, there is nothing to indicate that the acquisition is for the Company i.e. for Jaiprakash Industries Ltd. It is only, therefore, that we are at pains to point out that the Government was only using the Company for implementing its policy." (last part of para 34) 23. Hence, in view of above observations of Hon'ble Apex Court in para 30, we may safely infer that the land for development of the Expressway and development of five land parcels for industrial, commercial, amusement and residential purposes was....
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....iterating 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 contended that it is a well accepted proposition that the taxing statutes and provisions conferring benefit for the assessee should be given an interpretation which enables the assessee to secure benefit and it should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit and deduction intended to be given by the legislature to the assessee. Ld. AR also contended that if the meaning adopted by the Revenue and the ld. CIT is accepted, that deduction u/s 80IA(4)(i) of the Act would be available only after assessee has begun the operation of the infrastructure facility then the deduction u/s 80IA(4) would be available only after completion of project which is obviously spread over severa....
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....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 after 1.4.1995, as required by condition (c) of section 80IA(4)(i) of the Act. 29. Under said interpretation as given by the Revenue authorities, the enterprise would be entitled for exemption u/s 80IA(4) of the Act only after completion of the project even if development takes more than one year to start operations and then only the income derived from operating and maintaining of infrastructure facility would be eligible for exemption and enterprises engaged in development activities would never be entitled for exemption. Obviously, this cannot be an intention of legislature and CBDT circular (supra) while framing the provision of section 80IA of the Act and issuing Circular No. 1/2006 (supra) respectively. 30. At this juncture, we respectfully take ....
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....on'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 placing rejoinder submitted that the ITA NO. 3339/Del/2014 assessee started its operation from 5.4.2007. Hence income earned from the activities which are inextricably linked with the main object and scope of work, commencement of business operation are eligible for exemption u/s 80IA of the Act. Firstly, we note that Hon'ble Apex Court laid a basic principle for interpretation of beneficial taxation statutes in the case of Bajaj Tempo Ltd. (supra) which reads as follows:- "A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision ....
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....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 interpreted liberally, the restriction on it also has to be construed so as to advance the objective of the provision and not to frustrate it or to defeat its purpose. We further respectfully note the ratio of the decision of Hon'ble Bombay High Court in the case of ABG Heavy Industries (supra) wherein it was categorically held that the assessee did not have to develop the entire port ITA NO. 3339/Del/2014 or project in order to qualify for exemption u/s 80IA of the Act and that should not be an intention and expectation of legislature to legislate a condition impossible of compliance. 35. Turning to the facts and circumstances of the present case, we note the ld. AR has contended that at the instance of the AO, the assessee submitted various replies to the queries of the AO inc....
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....ending 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 claiming that as per objects of the company, concession agreement and main activities of the company, the company developed a toll road between Noida and Agra and his claim for deduction falls on four corners within the ambit of clause (a) of Explanation to section 80IA(4)(i) of the Act. Per contra, the main contention of the ld. CIT, Noida is that the assessee developed "a highway project" which was inaugurated on 9.8.2012 by Hon'ble Chief Minister, Government of UP which falls under clause (b) of Explanation to section 80IA(4)(i) of the Act and said period is related to financial year 2012- 13 pertained to AY 2013-14 and since the project of the assessee had not started its operation in the period related to AY 2009-10, therefore, the AO wrongly allowed the claim of the assessee. ....
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....he 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 development ofn25 million sq. mtrs land provided to the assessee on lease for the period of 90 years, along the proposed 100 meters wide Expressway for commercial, amusement, industrial, institutional and residential development. Ld. AR pointed out that the 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 integral and inseparable part of the infrastructure facility project. Ld. AR also contended that the land for expressway and land for development was made available by the TEA for the assessee company at the consideration of cost of acquisition plus Rs. 100 per hect....
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....ligation 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 section 80-IA of the Act and submitted that the deduction u/s 80IA(1) is to be given on profits and gains derived from an undertaking or enterprise from any business referred to in sub- section 4 i.e. eligible business and the word "business" is wide enough to cover within its scope all activities that are "integral part" of the business of toll road development. Ld. AR also submitted that it was the income from business undertaking which is to be deducted and not only the income or revenue from toll fee. Placing reliance on the decision of Hon'ble Delhi High Court in Dharam Pal Prem Chand Ltd. 317 ITR 353 (Del.) and another decision in the case of CIT v. Eltek SGS P. Ltd. 300 ITR 6 (Del.) submitted that the term "income from business" would include all income emanating from the same. 46. Ld. AR tur....
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....its 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 for development as major part of consideration for the infrastructure facility project. 48. Ld. AR also submitted that the assessee company is eligible for exemption under clause (a) of Explanation 80IA(4)(i) of the Act, the assessee company, without prejudice to the aforesaid contentions, have also made an alternative claim u/s 80IA(6) of the Act, that if it is concluded that the assessee company is not eligible for exemption under clause (a) of explanation, then the assessee company may be considered eligible under clause (b) of explanation to section 80IA(4) of the Act. Ld. AR further pointed out assessee's Paper Book page no. 79 and tax audit reports and submitted that the business of the assessee company is that the assessee company is engaged in development, operation and maintenance of six l....
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....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, the manner in which the profits of housing and other activities are to be computed for the purpose of sub-section (6) are specified in rule 18BBE of the IT Rules, 1962 which mandates the maintenance of separate books of accounts for the activities of housing and other activities and also requires the submission of a certificate specifying the amount so credited to the reserve account and the amount utilized during the relevant previous year for highway project and it was also required that such certificate is to be furnished in Form 10CCC which should be submitted along with return of income. 51. Ld. AR also placed a rejoinder to the above submissions of the ld. CIT DR that the concession agreement was executed for development of expressway and development of road. Ld. AR has further drawn our attention towar....
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.... 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 booths on a toll road (Ref. Concise Oxford Dictionary edition at page 1507) (F) It is pertinent to note that "Toll plaza" has also been defined at page 9 of the concession agreement as structures and barriers erected on the Expressway. For the purpose of regulating the entry/exit of vehicles in accordance with the provisions of this Agreement." The word "Tolling contract" has been also defined at page 9 of the agreement as the contract, if any, entered into by the concessionaire i.e. assessee with tolling contractor for operation of "Toll Plazas", including collection of fees for and on half of the concessionaire." 53. In view of above referred definitions, in our humble understanding, a "highway" is a public road that everyone has right to use; an "Expressway" is major road for fast moving traffic with three lane per carriage ....
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....ws 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 decline to agree with the ld. CIT-DR that the assessee is engaged in the development of infrastructure facility of a "highway including housing or other activities being an integral part of the highway project". 58. Although the ld. AR has also placed an alternative claim u/s 80IA(6) but in view of our observations and findings, as set out above, the alternative said claim of the assessee and objections of ld. CIT DR about non-compliance of requirement of sub-section (6) of section 80IA of the Act becomes academic and infructuous and we refrain ourselves to deliberate further on the alternate claim of the assessee as well as legal objections of ld. CIT DR. 59. Now reaching to next issue that whether the assessee company is eligible for exemption u/s 80IA(4)(i) of the Act for its income from sale/sub-lease of land for assessment year under cons....
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....us 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 construction of Expressway except right to collect toll/fees as prescribed by Govt. of UP from time to time only during concession period of 36 years and assessee was granted land for development with right to further sub-lease developed or undeveloped land to sub lessees or land users. 62. Ld. DR has further drawn our attention towards Chapter IV of concession agreement clauses 4.3(d), 4.4 and 4.5 and submitted that the object of the infrastructure scheme can be seen from the global tender notice inviting offers to show that the infrastructure facility as envisaged was road including toll road along with development of infrastructure for commercial, industrial, amusement, residential and institutional development. Further, the land was to be offered on acquisition cost on lease for 90 years by the TEA and the development of the said land and works....
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....here 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 notwithstanding anything contained in sub-section (4) of section 80IA of the Act, where housing and other activities are integral part of the highway project and the profits of which are computed on such basis and manner in which the profits of housing and other activities are to be computed for the purpose of sub- section (6), are specified in Rule 10BBE. The said Rule mandates maintenance of separate books of accounts for the activities of housing and other allied activities and further submission of an auditors' certificate in Form 10CCC is required certifying that the amount of income was credited to reserve account and the said amount was utilized during the relevant previous year for the highway project. Ld. CIT DR strenuously contended that when it is apparent from the concession agreement and other relevant facts that in respect of an assessee cla....
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....ar 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 after 1st day of April, 1995" and therefore, the deduction to the assessee which has entered into an agreement for developing, operating and maintaining an infrastructure facility, under provisions of section 80IA(4) of the Act would be admissible only from the year in which the operation of facility begins. 67. Ld. CIT DR pressing its written submissions, further argued that in response to query raised by the AO, the assessee advanced twin arguments, firstly, referring to the words and language of clause (c) of sub section (4) "it has started or starts operating and maintaining the infrastructure facility" the assessee submitted that the expression "starts" covers future events and the assessee deliberately omitted to refer the last part of clause (c) i.e. after 1st April 1995". Ld. CIT-DR has drawn our attention towards page 4 of her written submissions a....
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....ly 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 after completion of development, the developer assessee transfers such facility to another entity and in consideration thereof, receives consideration and earns profits, then transferor is entitled to deduction arising to it i.e. transferor entity and for this situation, the statute of the Act provides that in such cases also, the deduction would be available to the developer and therefore a provision has been provided to clause (c) of sub-section 4 of section 80IA of the Act. 70. Ld. AR placing rejoinder to the above legal contentions of the revenue, submitted that the language used in clause (c) is "has started" or "starts". The expression "has started" indicates the events which have already occurred whereas the expression "starts" indicates the events which would occur and since the assessee is in the business of developing, operating and maintaining "road....
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..../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 India or by consortium of such companies; (b) It has entered into an agreement with Central Government or a State Government or a local authority or any Statutory Body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. (c) It has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. As per proviso to sub-clause (c) above in case of transfer of infrastructure facility or after 1.4.1999 by an enterprise which developed such infrastructure facility or transferor enterprise to another enterprise i.e. transferee enterprise shall apply to the transferee enterprise as if it were the enterprise to which this clause (c) applies and the deduction form profits and gains would be available to such transferee enterprise for the remaining or unexpired period.....
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.... 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 also be eligible to deduction for the remaining or unexpired period as per sub section (2) or other relevant provisions of the Act. Hence, in view of above discussion, we may point out that the legislation has categorically adopted the date of 1st day of April 1995 for mandatory starting or commencement date of infrastructure facility development and the enterprises which started developing or starts operating and maintaining infrastructure facility on or after 1str day of April, 1995 are held to be eligible for deduction u/s 80IA(4)(i) of the Act. 77. We may further observe that the elaborate meaning of collective and cumulative reading of sub section (2) and (4)(i) mandates three pre-conditions in clause (i) of sub-section (4) viz. (a), (b) and (c) and it is required for the enterprise which claim deduction that all three conditions should be fulfilled simultaneously. If the intention....
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....)(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 infrastructure facility. When development activities come to an end or completed and such activity begins to facilitate the intended users, the act of operation and maintenance starts only after creation of entire or part development of infrastructure facility as per requirement. Further, the development work may spread over years which falls under several assessment period/years and if the beneficiary is expected to complete the project or completion of project is considered to be a pre-condition for deduction, then the eligible developing enterprise will have to wait till completion of the entire project during whole development period, which may have spread over several years, for want of this impractical condition. In this situation, the eligible enterprise would become eligible only in the last year of development wherein development work ends and infrastructure facility begins to operate,....
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....o 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 775 (SC) also held that the beneficial provision should be assigned such meaning as it would enable the assessee to secure benefit intended to be given by the legislature to the assessee. 84. We are sincerely conscious about our limits that we cannot amend, alter or modify the statutory provision in any manner and also it would not be ITA NO. 3339/Del/2014 reasonable or permissible for the court to rewrite the section or substitute the words of its own for the actual words used by the Legislature in the name of giving effect to the reposed or supposed underlying object of the statue as observed by Hon'ble Supreme Court in the case of CIT vs. Budhiraja vs. 204 ITR 412(SC). AT the same time, we respectfully take guidance from the recent judgment of the full bench of Hon'ble Supreme Court in the case of CIT vs. Vatika Township Ltd. 3 (supra) wherein, speaking for the constitution bench of Apex....
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....ng 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 approach which is contrary to letter and spirit of the beneficial taxation legislation. Accordingly, issue no. (i), (ii) and (iii), as set out by us, are decided in favour of the assessee. Validity of the Action u/s 263 of the Act. 86. On the question (iv) & (v) and (vi) as set out above by us, regarding examination of validity of issuance of notice, assumption of jurisdiction and passing of impugned order u/s 263 of the Act, the Ld. AR placing reliance on the decision of Hon'ble Supreme Court in the case of Malabar Industries Co. Ltd. Vs. CIT (supra) submitted that as per 263 of the Act it is clear that the pre requisite to exercise of jurisdiction by the Commissioner is that the order of the AO, in question, is erroneous in so far as it is prejudicial to the interest of the Revenue and the commissioner has to be satisfied with twin conditions, namely, (i) the order sought to be revised is erroneous; and ....
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.... 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 and maintaining the toll road and without earning the revenue from said land, the toll road project would not be viable because only collection of the toll from such road would not even meet the cost of construction of toll road. The Ld. AR strenuously contended that aforesaid facts were submitted before the AO replying to the queries of the AO during assessment proceeding through vide replies dated 23.11.2011, 21.12.2011, 23.12.2011, 28.12.2011 & 29.12.2011 and the AO adjudicated his queries after considering the explanation, replies and documents by way of passing a note sheet entry consisting of 18 pages. Hence, the AO had made a detailed inquiry about the claim of deduction u/s 80 IA (4) of the Act before allowing the same to the assessee. Further, stressing upon the above facts, the Ld. AR, also contended that in the light of above exercise and detailed enquiry conducted by the AO prior to allowing the deductio....
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....eme 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 object of the beneficiary taxation legislation and not to frustrate the same. Reliance was placed on the decision of Hon'ble Supreme Court in the cases of CIT vs. South Arcot Society 176 ITR (SC) and CIT Vs. Mahindra 144 ITR 225 at page 239 (SC). 91. The Ld. AR has also drawn our attention towards recent decisions/ judgment of Hon'ble Delhi High Court in the case of CIT vs. DLF Ltd. (2013) 350 ITR 555 (Delhi), decision of Hon'ble Andhra Pradesh High Court in the case of Spectra shares and Scrips Pvt. Ltd. (2013) 354 ITR 35(AP) and decision of Hon'ble Calcutta High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (cal.) and submitted that there should be an essential element of "unsustainability" in the order of the AO, and not mere prejudicial to the interest of the Revenue or a mere erroneous view, which can be revised u/s 263 of the Act. 92. The Ld. AR, also forwarded a preposi....
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....he 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-DR also pointed out that the Assessee had claimed depreciation amounting to Rs. 22.97 crores and had been granted by the AO even while the highway project had not been completed, therefore Ld. CIT rightly held that the assessment order was patently erroneous and prejudicial to the interest of the Revenue. The Ld. CIT DR parted with the argument on this issue with a final submission that the Ld. CIT was quite judicious and correct in holding that the AO passed an erroneous order inasmuch 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 the CBDT circular no. 1/2006 dated 12.1.2006 and thus, due to these reasons, order passed by the AO u/s 143(3) of the Act was erroneous and also has the effect of perpetuating losses in the subsequent years, therefore, the ....
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....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 stage is quasi-judicial and the same requires the commissioner to discharge his duties as per letter and spirit of the section 263 of the Act, which reads as under :- (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed [on or before or after the 1st day of June, 1988] by the Assessing Officer shall....
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....eby, 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 to make such enquiry, as required under the factum and allegations against the assessee and reply and objections thereto submitted by the assessee, as the Commissioner deems necessary. The fourth stage u/s 263 of the Act provides that in the order the Commissioner is empowered to enhance or modify the assessment and if situation requires he is also empowered to pass an order cancelling the assessment to direct the AO for framing of afresh assessment. 99. In the light of above stages emerged from the language used in section 263 of the Act and the proposition & ratio of the decisions relied by both the parties, we proceed to examine the validity of assumption of jurisdiction. 100. On careful consideration of aforesaid rival contentions of both the sides, at the very outset, we find it appropriate to go through the paper book filed by the assessee wherein the AO has raised several queries by way of note sheet entries and letter dated 16.12.2011, 21.12.20....
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....ot 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 been written more elaborately. Their Lordships further went on to hold that there must be some prima facie material on record to show that the tax which was lawfully eligible has not been imposed. 103. In the present case, the AO has raised a number of queries regarding the claim of the assessee u/s 80IA (4) of the Act which were replied by the assessee through detailed submissions supported by relevant documents and other evidence coupled with several legal propositions and decisions. It is also pertinent to note that the AO has passed a detailed order / note sheet entry (enclosed here with this order as Annexure - A for sake of clarity and brevity) while dealing and adjudication the issue of allowability of the claim of the assessee for deduction u/s 80 IA (4) of the Act. We may respectfully take note of the decision of Hon'ble Bombay High Court in the case of Gabriel India Ltd. (supra) and hold that the order of the AO cannot be held as erroneous merely b....
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....ount 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 the exemption has been granted by the AO without any discussion and without application of mind. The Ld. AR, pointed out that the facts of the present case are not similar to the case of Bhagwan Das (Supra) as there are detailed queries of the AO and detailed replied by the assessee followed by detailed note sheet entry adjudication hence, present case is not case wherein as enquiry has been made or the claim of the assessee is allowed without any discussions and without application of mind. 107. The Ld. CIT-DR also pointed out that the Ld. CIT has rightly followed judgment of ITAT Chandigarh in the case of Vodaphone Essar Ltd. vs. CIT (supra), as no enquiry or investigation was made by the AO while considering the admissibility of claim of deduction vs. 80IA of the Act in the hand of assessee and in the present case also the AO, while adjudicating the claim of deduction vs. 80IA (4) of the assessee, has not made any inquiry or investigation and an identical issue had ....
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....d 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 income shown by the assessee which was claimed being exempt had actually been earned by him or not. It is also pertinent to note that the order of ITAT, Amritsar in the case of Vodaphone (Supra) is also a case of "no enquiry" wherein the AO finalized the assessment without placing any document on record as to when the business of the assessee had commenced, and no enquiry or investigation was made by the AO while considering the eligibility of the claim of deduction u/s 80IA of the Act in the hands of the assessee. 110. In view of ratios laid down by the judgments, as relied by the Ld. CIT- DR and having gone through the facts of these cases, at the outset, we sincerely note that judgments are the light houses in the path of adjudication of taxation appeals but we respectfully observe that the benefit of the ratio of the same is not available to the Revenue as the present case is neither a case of "no enquiry" nor is a case where the AO, failed to make necessary enquiry and the ....
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....tion 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 income, for purposes of disallowance, cannot be lost sight of, equally, such a requirement has to be viewed in the context and circumstances of each given case. In the present case, it was repeatedly emphasized that the assessee's dividend income was confined to what it received from investment made in a sister concern, and that only one dividend warrant was received. These facts, in the opinion of this court, were material, and had been given weightage by the Tribunal in its impugned order. There is no dispute that the investment to the sister concern, was not questioned; even the Commissioner has not sought to undermine this aspect. Equally, there is no material to say that apart from that single dividend warrant, any other dividend income was received. Furthermore, there is nothing on record to say that the assessee had to expend effort, or specially allocate resources to keep track of its investments, especially dividend yielding ones. In these circumstances, it can be said tha....
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....d 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 that the assessment order was erroneous the cancellation of assessment was not justified. 115. The Ld. AR further, placing reliance on the decision of Hon'ble Jurisdictional High Court of Allahabad in the case of CIT vs. Mahendra Kumar Bansal (2008) 297 ITR 99 (All.) vehemently contended that merely because the Assessing Officer had not written a lengthy order, without bringing on record, specific instances it would not establish that the assessment order passed u/s 143(3)/148 of the Act is erroneous and prejudicial to the interest of the Revenue. In this case, their Lordship further held that even though, in the assessment order, there was no mention that the detailed enquiry had been made nor any evidence had been discussed, yet the returned income was accepted even then the order was not erroneous and could not be revised u/s 263 of the Act. 116. On behalf of the assessee, it was also contended that the Commissioner, instead of commenting upon or giving a final finding, simply observe....
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.... 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 investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of exami....
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....eous, 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 this order is reads as follows : "Commissioner in the order under Section 263 did not go into the said question on merits, but observed that the "Assessing Officer it appears" ad not caused any inquiries or investigation, but accepted the contention of the assessee. Commissioner observed, "therefore, meaningful inquiry should be conducted". This does ITA NO. 3339/Del/2014 not meet the requirement that the decision of the Assessing Officer should be erroneous. Once inquiries were conducted and a decision was reached by the Assessing Officer, it cannot be said that it was a case of no inquiry. In such cases, the Commissioner must reach a finding that the finding of the Assessing Officer was erroneous, not because no inquiries were conducted, but because the final finding was wrong and untenable." 119. At this juncture, we further find it appropriate to address rival legal contentions of both the sides on the issue of revision of assessment order on other two issues viz. allowbility of deduction on the inc....
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....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 NO. 3339/Del/2014 121. Ld. DR replied that the AO did not examine and verify the issue of allowability of interest earned by the assessee from parking of surplus funds in the fixed deposit accounts in the banks and allowed the same. Ld. DR further contended that the AO has not applied the law u/s 80IA of the Act as only income derived from any business referred to in sub section (4) is eligible for deduction under that section and no other income. The ld. DR also contended that the AO ignored the settled law rendered in the case of Tuticorin Alkalis vs CIT (supra). The ld. DR also submitted that the AO wrongly allowed claim of depreciation in computation of income without examining the fact whether the same was admissible even while the project was still going on and yet to be completed. 122. The ld. AR, placing rejoinder to the above submissions of the revenue, replied that it is not open and allowable to the CIT Noida to issue notice on one and only one reason and revising the assessment u/s 263 of the Act on....
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....bility 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. (supra) had also considered the ratio of the decisions of Hon'ble High Court of Delhi in the cases of CIT vs Ashish Rajpal (2010) 320 ITR 674 Delhi and decision in the case of CIT vs Contimeters Electricals P. Ltd. (2009) 317 ITR 249 (Delhi) wherein dismissing the appeal of the Revenue, it was held that the issue which had not been part of notice u/s 263 of the Act could not form basis for revision of the assessment order u/s 263 of the Act. In the light of decision of Hon'ble High Court of Andhra Pradesh in the case of G.,K. Kabra (supra), the case of B.S. Sangwan (supra) and Genesis Colour Pvt. Ltd. vs CIT (supra), we are inclined to hold that it is not open and permissible for the CIT to revise the original assessment order on the ground(s) which has not been mentioned in the notice u/s 263 of the Act and on which assessee was not showcaused in the said notice. In the present case, the CIT, Noida has revised the assessment on the issues of allowability of exemption on interest income and allowability of claim ....
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.... 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 this case omitted to apply and invoke all the discussed provisions of the Act and corresponding Rules and this grievous error has set a bad trend for similar assessments causing prejudice to the whole of revenue administration. These allegation have also been repeated into the subsequent paras. But we are unable to see any discussions or deliberations on the submission of the assessee before Ld. CIT, himself or before the AO during assessment proceedings. 125. We may further note that the Ld. CIT has not conclusively decided that the claim of the assessee does not fall under clause (a) of Explanation to section 80IA (4) (i) of the Act and same falls under clause (b) of same provision. There is no further logical findings by the Ld. CIT to this effect that since the claim of the assessee falls under clause (b) Explanation to section 80IA (4) (i) and hence, the provisions of sub section 6 to section 80IA (4) (i) is applicable to the case of the assessee which was not complied. The Ld. CIT, without giving any findings, has ....
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....cussion, 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 maintaining infrastructure facility project since its incorporation w.e.f. 5.4.2007. We also observe that the development of the toll road with controlled access and exit points and right to collect toll from the users clearly put the Expressway within the ambit of road which is a toll road. We further hold that the development of the Expressway between Noida and Agra and development of Five land parcels adjacent to Expressway are inseparable and integral part of one project and the assessee is entitled and eligible for deduction u/s 80IA (4) of the Act on the income earned and derived from the business of development of Infrastructure facility during ITA NO. 3339/Del/2014 AY 2009-10 after commencement of its business w.e.f. 5.4.2007 at the option of the assessee which cannot be denied by wrongly putting the case of the assessee in clause (b) of Explanation to section 80IA(4)(i) of the Act. 128. In view of our aforesaid observations and conclusion, on the facts of the case, we are inclined to hold that the view taken by the AO....