TaxTMI 
TaxTMI 
TaxTMI 
2012 (4) TMI 563
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....acts and in the circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in ignoring the material evidences in the form of agreement executed by the assessee with the Local Authorities. (3) On the facts and in the circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in deleting disallowance of ₹ 56,98,144/- made by the A.O. u/s.80IB of the Act. (4) On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. (5) It is, therefore, prayed that the order of the CIT(A) may be setaside and that of Assessing Officer may be restored to the above extent. 3. Facts in brief in respect of the issue raised as emerged from the corresponding assessment order passed u/s.143(3) dated 17.12.2007 were that the assessee-company is stated to be in the business of solid waste management. For the year under consideration, the assessee has claimed a deduction u/s.80-IA of ₹ 56,98,146/-. A show cause was issued and in compliance the assessee has informed the facts as under, only relevant portion reproduced. "3. REGARDING DEDUCTION U/S.80IA "3.1. Biomedical Waste Plant - Surat a.....
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....pur (Rajasthan) for setting up centralized biomedical waste treatment facility on a land provided by the local body on lease agreement for 30 years. As per Clause II of the said agreement, the incineration plant i.e. bio medical waste treatment plant was to be set up by EEEPL at its own cost at the said site. Clause No.III makes it very clear that the lease agreement is meant only for providing land by local body and in such type of infrastructure development contracts on big scale, the land facility is provided by the Government body or Local Authority. However, as per the said agreement, plant is to be set up by EEEPL at its own cost and the operation and maintenance of the said plant is to be performed by EEEPL. Accordingly, EEEPL had set up the plant at its own cost. Thus the terms of the agreement clearly indicates that the ownership of plant lies with EEEPL. b. It is humbly submitted that the cost of plant of BMW Udaipur branch is reflected in the books of accounts of EEEPL which clearly suggests that the infrastructure facility is owned by the company and it has entered into an agreement with the Local Authority and therefore, the provisions of Section 80IA(4)(i) are fully ....
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....different agencies. Thus, the sub-contractors of the assessee also carry out the same work for which the assessee claims deduction available to the owner of the infrastructure. If the assessee was eligible to claim deduction then the sub-contractors were also eligible to claim the deduction. However, it is not the intention of the law to allow the deduction to the contractor or subcontractor. k. The explanation to the section 80IA which was inserted by the finance Act, 2007 w.r.e.f 01.04.2000, is very clear that the deduction is not to be allowed to the person who executes a works contract entered into with the undertaking or enterprise, as the case may be. It can be seen from the above discussion that the assessee is a contractor and working for various authorities and executing contracts for them. In view of the above, I am satisfied that the assessee is not eligible to claim deduction u/s.80-IA of the Act. Accordingly, the assessee's claim of deduction u/s.80IA of the Act is disallowed. Penalty proceedings u/s.271(1)(c) are being initiated separately for failure to disclose the true particulars of income / for furnishing inaccurate particulars of Income or concealed the partic....
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.... "Developer" but merely as a "Contractor". The next plank of argument is that the TDS certificates issued by the Government Authority have also clearly stated the assessee as a "Contractor Bill". Therefore, the payments have been made to a "Contractor" and not to a "Developer". His next plank of argument is that the assessee has not owned the infrastructure because as per one of the terms of the agreement after the expiry of the lease of thirty (30) years the assessee has to vacate the premises. He has argued that being a "Contractor" the assessee had no right over the property and the property in fact has been owned by the Municipal Council. Ld.DR has also drawn our attention on clause(5) of the Agreement that the operation and maintenance shall be observed and under supervision of Municipal Council of Udaipur. The assessee has offered a rate of construction and constructed the property on turn-key basis. On account of these reasons, the assessee was not entitled for the claim of deduction u/s.80IA(4). 6. From the side of the respondent-assessee, ld.AR Mr.S.N.Soparkar appeared and supported the order of CIT(A). He has drawn our attention on the annual accounts of the assessee to ....
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....it was not so in the agreement dated 14/11/2002 executed with Surat Municipal Corporation. Be that as it was, merely mentioning the assessee as "Contractor" the exact nature of the execution of the work do not alter. Rather, this controversy has been resolved by Respected Co-ordinate Bench in the case of Patel Engineering Ltd. 94 ITD 411(Mum.)cited-supra. We are convinced with the argument of the ld.AR that a contractor can also be a developer. In this context, our attention has been drawn on a latest decision of Hon'ble Gujarat High Court pronounced in the case of CIT vs. Radhe Developers (2012)341 ITR 403 (Guj.), wherein the issue was in respect of claim of deduction u/s.80IB(10) of IT Act and the assessee happened to be "developer-cum-building contractor". The Hon'ble Court has held that the said developer had to make the construction and to engage labour on contract, therefore the term "developer" has to be understood in common parlance as well as in legal sense. The Hon'ble Court has taken the help of Websters- encyclopedia and other dictionaries and thereupon opined that the term "developer" carries a much wider connotation. As far as the agreement with Surat Municipal Corpor....
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....3. We have also examined the other agreement dated 14/11/2002 which in its nomenclature says "Agreement for treatment of Bio Medial waste on BOOT (Build, Own, Operator, Transfer) basis between Surat Municipal Corporation and En-Vision Enviro Engineers Pvt.Ltd." For the removal and disposal of refuse, rubbish and garbage of various hospitals, clinics, nursing homes in Surat, it was required by the Municipal Corporation to handle and manage the same, hence, invited Boot Tender. The assessee has offered and on a token rent of Re.1/- per square meter per annum, the said agreement was entered into for seven years. The assessee is to make the construction on the land as per the approved plans. The assessee has to install necessary equipment and machinery. One of the clauses is very clear that "En-Vision shall bear all the expenses for putting up the said plan". The assessee is entitled to charge for treatment of waste per kg. as fixed by Municipal Corporation from time to time. One of the clauses, thus is clear that the rate shall be as per the quotations agreed upon. On termination of agreement, the project is to be taken over. At this juncture, ld.AR has also mentioned the change in th....
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....fter 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 80IA. 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 aa 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. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April, 1995. The assessee was entitled to the special deduction under section 80-IA." 9. Under the totality of the facts and circumstances of the case and after due consideration of the legal provisions in the light of the case law cited, we hereby hold that the assessee is entitled for the claim of deduction u/s.80IA(4) of IT Act. In the result, we hereby confirm the findings of ld.CIT(A) and dismiss the grounds of th....
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....as under:- "b) The law is very clear in this regard and hence the initial year of the assessee for carry forward of the loss etc. is taken as AY 2003-2004. In view of the same the working will be as follows - AY 2003-2004 Net Income of the BMW Project -Rs.9,414 Less - Depreciation as per IT Act Rs.34,89,998 -Rs.34,99,412 AY 2004-05 Net Income of the BMW Project Rs.9,26,204 Carried forward loss of the last AY -Rs.34,99,414 Carry forward for the next AY -Rs.25,73,208 AY 2005-06 Net Income of the BMW Project Rs.56,98,146 Carried forward loss of the last AY -Rs.25,73,208 Rs.31,24,938 Claim u/s.80IA of the Act for the AY 2005-2006 Rs.56,98,146 Less Allowable Deduction Rs.31,24,938 Excess Deduction claimed Rs.25,73,208 In view of the above, the deduction u/s.80IA is claimed in excess to the tune of ₹ 25,73,208/- and the same is disallowed. Penalty proceedings u/s.271(1)(c) are being initiated separately for failure to disclose the true particulars of income for furnishing inaccurate particulars of Income or concealed the particulars of his income. (Addition of ₹ 25,73,208)" 11. When the matter carried before the first appellate authority, ld.CIT(A)....
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....er as per law, needless to say after providing adequate opportunities of hearing to both the parties. Resultantly, this ground of the assessee may be treated as allowed but for statistical purposes. 13. Rest of the grounds pertaining to interest u/s.234B and penalty u/s.271(1)(c) are either consequential or pre-mature in nature, hence need no adjudication. 14. In the result, Assessee's appeal for AY 2005-06 may be treated as allowed but for statistical purposes. 15. For A.Y. 2004-05, the assessee has raised the following Cross Objection. 1. The learned CIT(A) has erred in law and on facts in justifying re-opening proceedings undertaken by AO u/s.147/148 of the fact by dismissing the objection raised by the Appellant challenging validity of reassessment proceedings. Ld. CIT(A) failed to appreciate the fact that AO in original scrutiny assessment granted deduction claimed u/s.80IA (4) of the act after detailed verification of documentary evidence submitted by the Appellant. This action of CIT(A) upholding reassessment proceedings based on change of opinion on the part of AO to be correct is bad, illegal and against the principle of natural justice that deserves to be quashed. 15....
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....der this Act has been computed.] 15.3. At the first round of assessment, there was no discussion at all in respect of the eligibility of the deduction u/s.80IA(4) as is evident from the said initial order passed u/s.143(3) dated 09/11/2006 through which the total income was assessed at ₹ 41,82,870/-. Therefore, reasons were recorded for reopening of the assessment on 29/03/2010, wherein it was mentioned that the assessee was not eligible to claim the deduction u/s.80IA(4) which was wrongly allowed, hence the income has escaped assessment. Under these circumstances, we are of the view that the proviso to section 147 was applicable because prima-facie income chargeable to tax has escaped assessment. We have also noticed that in respect of the said claim, the assessee has not disclosed fully all material facts. The Explanation-2 annexed to section 147 thus prescribes, relevant portion reproduced above, that in respect of an assessment where income has been under assessed or an excessive relief has been granted, then for the purpose of this section it can be deemed that the income chargeable to tax has escaped assessment. 15.4. From the side of the assessee, few case laws; name....
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....vided for determining the expenditure related to the exempted income. Applying the said formula, the AO has worked out the disallowance of expenditure at ₹ 2,84,215/-. When the matter was carried before the first appellate authority, the disallowance was confirmed, although it was mentioned that Rule 8D was not applicable for the Asst.Year under consideration being inserted with effect from 24/03/2008. 17. However, on hearing the submissions of both the sides, we are of the view that as suggested by both the sides, this issue requires readjudication as per the decision of Hon'ble Bombay High Court pronounced in the case of Godrej & Boyce Mfg. Co.Ltd. Mumbai vs. Dy.CIT in Income tax Appeal No.626 of 2010 and Writ Petition No.758 of 2010 order dated 12/08/2010 [now reported as 328 ITR 81(Bom)]. In this judgement at the end, the Hon'ble Court has recapitulated the conclusion and pronounced that a finding is required whether the investment in shares is made out of own funds or out of borrowed funds. A nexus is required to be established between the investments and the borrowings. In section 14A of the Act expenditure incurred in relation to exempted income is to be disal....
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....e facts of the present case, because of the material change introduced by Section 14A by way of statutory disallowance in certain cases. There, the decisions of the Tribunal in the earlier years would have no relevance in considering disallowance in assessment year 2002- 2003 in the light of Section 14A of the Act. 73. For the reasons which we have indicated, we have come to the conclusion that under Section 14A(1) it is for the Assessing Officer to determine as to whether the assessee had incurred any expenditure in relation to the earning of income which does not form part of the total income under the Act and if so to quantify the extent of the disallowance. The Assessing Officer would have to arrive at his determination after furnishing an opportunity to the assessee to produce its accounts and to place on the record all relevant material in support of the circumstances which are considered to be relevant and germane. For this purpose and in light of our observations made earlier in this section of the judgment, we deem it appropriate and proper to remand the proceedings back to the Assessing Officer for a fresh determination. Conclusion : 74. Our conclusions in this jud....