TaxTMI 
TaxTMI 
2014 (10) TMI 961
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....ing Officer to delete the disallowance of Rs. 3,59,81,384/- out of the total disallowance of Rs. 3,62,84,404/- in the computation of deduction u/s.80IA(4) without appreciating that, as the assessee had disclosed abnormally high profit in respect of the Godawari Lift Irrigation Scheme, the Assessing Officer had correctly invoked the provisions of sub sec. (8) of sec.80IA of the Income Tax Act, 1961 in order to arrive at the deduction eligible u/s.80IA on the profit of the said project. 4. The learned Commissioner of Income-tax(Appeals) grossly erred in deleting the disallowance of Rs. 82,87,446/- made by the Assessing Officer out of the deduction claimed u/s.80IA in respect of profit earned from the project Guthpa Lift Irrigation Scheme developed by the Govt. of Andhra Pradesh, instead of confirming the said disallowance. 5. The learned Commissioner of Income-tax(Appeals) grossly erred in directing the Assessing Officer to delete the disallowance of Rs. 82,87,446/- out of the total disallowance of Rs. 86,42,971/- in the computation of deduction u/s.80IA(4) without appreciating that, as the assessee had disclosed abnormally high profit in respect of the Guthpa....
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....n its books of account relating to the Godavari project has been disregarded by the Assessing Officer on mere conjectures and surmises. No doubt, the profit ratio in case of the Godavari project is higher in comparison to other projects undertaken by the assessee in different assessment years. So however, such a difference can only be a basis to further verify the factual aspects, but the difference in profit-ratio by itself, cannot be a ground to disbelieve the same. The Assessing Officer has not brought out any cogent material or evidence to say that the profits declared by the assessee, based on the audited books of account suffer from any infirmity. Therefore, action of the CIT(A) deleting the disallowance of Rs. 6,63,61,181/- out of deduction u/s 80IA of the Act is hereby affirmed. 41. In so far as the action of the CIT(A) in scaling down the deduction u/s 80IA of the Act to the extent of Rs. 18,70,849/- on account of allocation of interest expenditure is concerned, we find that the same is quite justified. The assessee has not assailed the factual appreciation of matter undertaken by the CIT(A) with respect to the variation in allo....
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....arranty amounting to Rs. 1,76,13,328/-, the Assessing Officer allowed deduction of an amount of Rs. 1,67,03,218/- on the ground that the same was actually utilized for the product warranties. Since the CIT(A) directed that the entire Provision for warranty amounting to Rs. 1,76,13,328/- is an allowable expenditure, he directed that amount of Rs. 1,67,03,218/- allowed by the Assessing Officer be reversed. In this manner, the net relief allowed to the assessee on this ground was Rs. 9,10,110/-, which is subject-matter of appeal preferred by the Revenue. 46. At the time of hearing, it was a common point between the parties that the Provision for warranty cannot be considered as a contingent liability following the judgement of the Hon'ble Supreme Court in the case of Rotork Control India P. Ltd. (supra). The CIT(A), in our view, has correctly decided the issue in the light of the judgement of the Hon'ble Supreme Court, which we hereby affirm. Thus, on this aspect, the appeal of the Revenue is dismissed." 4.1 Nothing contrary has been brought to our knowledge on behalf of the Revenue. Facts being similar, so following the same reasoning, we hol....
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.... and payment of Fringe Benefit Tax. The "Appellant" craves, leave to add, alter, amend or modify any of the "Grounds of Appeal" stated above. 7. The first issue is with regard to disallowance of Rs. 31,73,97,655/- u/s.80IA of the Act in respect of infrastructure facility developed for M/s. Sardar Sarovar Narmada Nigam Limited (SSNNL) (SPV developed by the Government of Gujarat). In this regard, the learned Authorized Representative has pointed out that this issue has been decided by ITAT, Pune in favour of the assessee in assessee's own case in ITA Nos.657/PN/2010 and 671/PN/2010 vide order dated 17.09.2014 for A.Y. 2006-07, wherein the Tribunal has decided the similar issue by observing as under: "26. Having regard to the scope of work executed by the assessee, it is difficult to comprehended that assessee was merely acting as a contractor. In common parlance, a contractor is understood as a person who carries out the assigned work as per the directions given by the contractee. In the present case, the assessee has used own-developed technology and its own resources to conceptualize, design, erect, commission, test and operate the 'Saurashtra....
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....on scheme is concerned, the benefits of section 80IA has been allowed to the assessee and the assessee has not been treated as a 'contractor'. It has been pointed out that on account of the aforesaid, the stand of the Revenue in relation to the project executed for SSNNL is self-contradictory. 28. Before us, the aforesaid assertions of the assessee have not been assailed by the learned Departmental Representative. Be that as it may, in our view, having regard to the aforesaid discussion, assessee cannot be treated as a contractor for the work assigned by SSNNL and it is to be understood as a 'developer' within the meaning of section 80IA(4) of the Act. 29. Another objection taken by the Revenue is that assessee only constructed/developed the infrastructure facility but did not operate the same. This aspect of the controversy has been clearly answered by the Hon'ble Bombay High Court in the case of ABG Heavy Industries Ltd. (supra). Even an enterprise which is engaged only in development of an infrastructure facility has also been held to be eligible for section 80IA benefits. Therefore, the said objection of the Revenue is not justifi....
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....r, so following the same reasoning, we hold that the assessee is eligible for claim of deduction u/s.80IA amounting to Rs. 31,73,97,655/- in respect of the profits derived from the development of infrastructure facility for SSNNL. Accordingly, the order of CIT(A) is set aside and the Assessing Officer is directed to allow the deduction in question. 8. The next issue is with regard to disallowance u/s.40(a)(ia) of the Act amounting to Rs. 80,00,000/-. The Assessing Officer has disallowed the said amount on the ground that the assessee has not deducted tax at source on payment of commission to the Non-executive Directors, which was confirmed by the CIT(A). The learned Authorized Representative has pointed out that this issue is covered in favour of the assessee by the order of ITAT, Pune Bench in the case of Bharat Forge Ltd. Vs. Addl.CIT in ITA Nos.1326, 1327, 1357 & 1358/PN/2010 vide order dated 31.01.2013 for A.Ys. 2007-08 & 2008-09, wherein the Tribunal has held as under: "As per the explanation to provisions of section 194J professional service means services rendered by a person in the course of carrying on legal, medical, engineering or architectu....
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....it & loss account of the relevant year. Therefore, the decision of the Special Bench, ITAT Calcutta in the case of Sutlej Cotton Mills Ltd. Vs. ACIT reported in 45 ITD 22 is not applicable to the facts of the present case. In that case, the profit on sale of investments was directly taken to capital reserve in the Balance sheet and not shown as income in the profit & loss account and in that context, the special bench held that the A.O. is bound to compute the MAT only on the basis of book profits shown in the P&L a/c and adjustment made by the Assessing officer to the book profits is not correct. 8.3.1 The exemption claimed u/s.54EC in respect of capital gains on sale of investments cannot be reduced from the book profit as contemplated u/s. 115JB as there is no provision under 115JB for making such adjustment to the book profit. The deduction under sec. 54EC are not covered under clause (i), to (viii) of the Explanation to sec. 115JB and therefore, the deduction claimed u/s. 54EC is not a permissible adjustment u/s. 115JB. This issue is squarely covered in favour of the revenue by the decision of the Kerala High Court in the case of N.J. Jose & Co. Vs. ACIT r....
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....n the profit and loss account prepared under Chapter VI of the Companies Act, it cannot be excluded unless so provided under Explanation to section 115J(1A). In the absence of any provision for exclusion of capital gains in the computation of book profit under the above provision, the assessee was not entitled to the exclusion claimed. In other words, section 54E has no application in the computation of book profit under section 115J. Therefore, the order of the Tribunal was justified. The appeal was, accordingly, to be dismissed. " [Para 3]. 8.3.2 In this regard, reference can also be made to the decision of the Hon'ble Bombay High Court in the case reported in 262 ITR 330 wherein the Hon'ble Bombay High Court, relying on the decision of Apex Court in the case of Appolo Tyres Ltd. reported in 255 ITR 273 held as under :- " In Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 it has been held by the Apex Court that while computing the income under section 115J, the Assessing Officer has only power to examine whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with that Act. It has....
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....ceptional or non-recurring nature show clearly that capital gains should be included for the purposes of computing book profits. Capital gains would certainly be one of the various items whose information is required to be given to the shareholders under the said clause 3(xii)(b). So also, the disclosure is required to be made in respect of investment in the capital of a partnership firm if the company is a partner on the date of the balance sheet. Similarly, profits or losses on such investments are also required to be disclosed. (Clause 3(xii)(a) of Part II of Schedule-VI of the Companies Act.)" 8.3.4 In view of the above legal position, it is not correct to exclude the profit on sale of investments shown in the profit and loss a/c from the book profits for the purpose of computation of MAT u/s. 115JB. Sections 54E, 54EC etc., have no application in the computation of book profit under section 115JB. Accordingly, the addition made by the Assessing Officer to the book profit as defined under the Explanation to sec. 115JB is upheld. Ground No. 7 of appeal fails." 9.2 As discussed above, since the facts and circumstances of this ground is similar to the one a....
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....loyee for medical treatment in an unapproved hospital and it does not exceed Rs. 15,000 during the year, such sum does not fall within the meaning of 'salary' as defined in clause (1) of section 17 of the Income-tax Act and not liable to income-tax in the hands of the employee. There is no change in this position. Since such sum is not taxable in the hands of the employee, the same is liable to FBT. 9.2.1 In view of the clarification issued by the Board, it is clear that any sum paid by the employer for expenditure actually incurred by the employee for medical treatment and which does not exceed Rs. 15,000/- during the year, is taxable as Fringe Benefit in the hands of the employer. The Hon'ble Supreme Court had an occasion to consider the binding nature of circular issued by the CBDT on the taxability of various Fringe Benefits in a recent case reported in 301 ITR 289 and observed as under:- " CBDT has the requisite jurisdiction to interpret the provisions of Income-tax Act. The interpretation of CBDT being in the realm of executive construction, should ordinarily be held to be binding, save and except where it violates any provisions of law or ....