TaxTMI 
TaxTMI 
2018 (2) TMI 250
X X X X Extracts X X X X
X X X X Extracts X X X X
....rporation of the value of Rs. 15,55,200/- for the purpose of display of hoardings. The said sum was claimed as an expenditure and deduction while computing the income from business. The AO noticed that in A.Y.2009-10 purchase from M/s. B.M.Sales Corporation was held by the AO in the order of assessment for A.Y.2009-10 to be not genuine. This was based on the reply received from M/s. B.M.Sales Corporation in response to a notice by the AO u/s 133(6) of the Act that it had never supplied any material whatsoever to the assessee. Following the findings in the order of assessment for A.Y.2009-10, the AO disallowed the claim of the assessee for deduction of a sum of Rs. 15,55,200/-. 4. On appeal by the assessee the CIT(A) deleted the addition made by the AO as in the order of the CIT(A) against the order of the AO for A.Y.2009-10, it was held that purchase from M/s. B.M.Sales Corporation were genuine. The CIT(A) found that except placing reliance on the order of assessment for A.Y.2009-10 the AO had made the disallowance of expenditure on purchase of Rs. 15,55,200/- in the present A.Y.2010-11 and that no new facts or findings were brought on record by the AO to disallow the claim for de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppeal by the assessee the CIT(A) deleted the addition made by the AO. The CIT(A) held that the AO has not brought any material on record to show that the claim made by the assessee that only a sum of Rs. 8,66,839/- was incurred to earn the exempt income was incorrect. Hence the addition made by the AO was deleted by CIT(A). 10. Aggrieved by the order of CIT(A) the revenue has raised ground no.2 before the Tribunal. 11. On a perusal of the order of AO it is clear that the AO has not brought any material on record to show that the claim made by the assessee regarding disallowance u/s 14A of the Act was incorrect. It is mandatory on the part of the AO to first reject on an objective basis the claim of the assessee with regard to expenses incurred to earn exempt income before resorting to his own basis of expenses to be disallowed u/s 14A of the Act. Without doing so the AO is not entitled to apply the provision of Rule 8D to make disallowance of expenses u/s 14A of the Act. The following decisions relied upon by CIT(A) in coming to the aforesaid conclusion support the conclusion of CIT(A). 1. Advance Construction Co.Pvt. Ltd, Mumbai vs ACIT (2008-TIOL-281-ITATMUM): 2. ACIT vs E....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... advertisement hoardings can be regarded as permanent or temporary structure was ever decided. The AO therefore disallowed the depreciation claimed at 100% hoardings. According to the AO hoardings have to be regarded as plant and machinery on which allowable depreciation as per Rules was only 15%. The AO accordingly disallowed the difference between the depreciation claimed by the assessee and that allowed by the AO. 15. On appeal by the assessee, the CIT(A) allowed depreciation at 100% on hoardings. In doing so the CIT(A) followed the decisions rendered by the Tribunal referred to in the earlier paragraphs of this order. The CIT(A) directed the AO to allow the claim of the assessee for depreciation at 100% on hoardings. 16. Aggrieved by the order of the CIT(A), the revenue has raised Gr.No.3 before the Tribunal. The ld. DR, submitted that under part-A in Appendix-I of the Rules, under the head ' Tangible assets' entry (4) depreciation at 100% on "Purely temporary erections such as wooden structure is allowed. According to him the hoardings in question cannot be regarded as purely temporary erection. 17. We have given a very careful consideration to the rival submissions. We are....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 21. The Provisions of Sec.80-IA(4)(i) reads thus: "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years.] (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops a special economic zone referred to in clause (iii) of sub-section (4) or generates power or commences tra....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway, inland port or navigational channel in the sea;" 22. The details of various agreements with Municipalities/Corporations between the assessee were as follows :- Sl. No. Agreement entered into with Date of the Agreement / letter Infrastructure Facility 1. Bangalore Mahanagar Palike 20 November 2004 for a period of 5 Year Foot over bridge 2. Bangalore Mahanagar Palike 21 July 2007 for a period of 25 years (High court consent and extension to agreement dated 20 November 2004) Foot over bridge 3. Corporation of Madurai 06 October 2008 for a period of 6 Years Road Median 4. Mysore City Corporation 31 March 2004 for a period of 3 years commencing from 01 August 2004 Street Lighting 5. Mysore City Corporation 18 June 2007 for a period of 3 years (extension letter to agreement dated 31 March 2004) Street Lighting 6. Mysore City Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....panels The Assessee did carry on the business of developing, operating and maintaining the infrastructure facility continuously and systematically by the application of its labour and skill with a view to earning advertisement income. Since the Central Local Authority/other statutory body, did not have the funds to compensate the Assessee for costs it incurred for developing infrastructure facility, the Assessee was given license to collect advertisement revenue by display of advertisement panels. The advertisement revenue collected by the Assessee retained the character of income derived from the business of the assessee from developing and maintaining "lnfrastructure facility" and does not change as income from 'advertisement business". The immediate source of advertisement income is the infrastructure facility business and the effective source of the genealogy of the source of the advertisement income is the infrastructure facility business. There was a direct nexus between the advertisement revenue and infrastructure facility business of the assessee. According to the CIT(A) from the terms of the agreements between the Assessee and the various municipal authorities, it was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the Hon'ble Tribunal's decision in appellant's own case stated above and following the decision of my predecessor in the A Ys.2008-09 & 2009-10 on the same set of facts. I decide these grounds of appeal in favour of the appellant and direct the AO to allow the claim of the appellant accordingly. Hence these grounds of appeal are allowed." 26. Aggrieved by the order of the CIT(A) the revenue has raised ground no.4 before the Tribunal. 27. The ld. DR submitted before us that the CIT(A) has not seen that the assessee was in the business of advertisement and not development of infrastructure facility. His further submission was that he has also not examined that the quantification of the amount of eligibility of deduction u/s 80IA of the Act. According to him a part of the advertisement cannot be considered as derived from development of infrastructure facility. According to him the CIT(A) has co-terminus power with that of the AO and he ought to have examined the quantum of deduction that should be allowed u/s 80IA of the Act. He prayed that the matter should be remanded to the CIT(A) on the above aspects. 28. The ld. Counsel for the assessee, on the other hand, point....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by the industrial undertaking or business itself. " 29. We have given a very careful consideration. We find that identical issue has been considered and decided in assessee's own case in the decision cited by the ld. Counsel for the assessee. For the sake of ready reference we may refer to the order of the Tribunal in assessee's own case in ITA Nos. 1388 to 1390/Kol/2012 for A.Y.2004-05, 2006-07 to 2009-10 dated 10.03.2015 wherein this aspect has been considered and the tribunal as follows :- "8. We have carefully considered the submissions and perused the records. We find that the issue on merits as to whether the assessee is entitled to deduction u/s 80IA of the Act for construction of foot over bridge as well as bus shelter is covered in favour of assessee by the decision of the Tribunal and the Hon'ble Calcutta High Court as referred in the submissions of the ld. Counsel of the assessee. The Tribunal in assessee's own case as well as in the case of DCIT vs Selvel Advertising Pvt. Ltd. (supra) has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....41, rule 2, of the Code of Civil Procedure also it is clear that the appellant shall not except by leave of the court, urge or be heard in support of any ground of objection not set forth in the memorandum of appeal." On the basis of the above ratio the Hon'ble High Court had held that admittedly the ground of status was not taken by the Department in terms of section 253(2) of the Act. No leave was obtained to urge the ground in regard to the status as regards the liability to tax. The Tribunal erred in law in setting aside the findings given by the Appellate Assistant Commissioner that the assessee was a separate entity and the assessment made in the case of the assessee should be treated as substantive. 8.3. Thus from the above we hold that the issue which was not the basis of disallowance by the AO and the same was not the subject matter of consideration by the ld. CIT(A) and the same was also not the subject matter of the ground of appeal taken before ITAT the issue now being raised by the ld. DR need not be adjudicated by us. Hence on the issue as to whether foot over bridges and bus shelters qualify for deduction of section 80IA of the Act we hold that the ld. CIT(A) i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t was the payment in question was not a payment under contract for putting up a hoarding and therefore the assessee ought to have deducted tax at source on the aforesaid payment u/s 194I of the Act at 10% and it was not in the nature of payment made to a contractor for carrying out any work u/s 194-C on which TDS was required to be made at 2%. 35. The AO referred to CBDT Circular No.715 dated 08.08.1995 wherein the scope of an advertising contract has been explained by CBDT as follows :- " .. Question 1 : What would be the scope of an advertising contract for the purpose of section 194C of the Act? Answer: The term 'advertising' has not been defined in the Act. During the course of the consideration of the Finance Bill, 1995, the Finance Minister clarified on the Floor of the House that the amended provisions of tax deduction at source would apply when a client makes payment to an advertising agency and not when advertising agency makes payment to the media, which includes both print and electronic media. The deduction is required to be made at the rate of 1 per cent. It was further clarified that when an advertising agency makes payments to their models, artists, phot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Act and not u/s 194I of the Act and paid the sum deducted within the prescribed time. The provisions of section 40(a)(ia) of the Act has two limbs, one is where, inter alia, assessee has to deduct tax and the second where after deducting tax, inter alia, the assessee has to pay into Government Account. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is it shortfall in deduction. With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, "on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139". It was argued that Section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. It there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provision, the assessee can be declared to be an assessee in default u/s 201 of the Act and no disallowance can be made by invo....