TaxTMI 
TaxTMI 
2019 (8) TMI 291
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....sions of S.14A of the Act r.w.r. 8D. The Ld. CIT(A) failed to appreciate the quantum of interest free funds available with the appellant company. The judgment of the Hon'ble jurisdictional Bombay High Court in CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) was squarely applicable to the facts of the case. The disallowance be deleted. 2) On the facts and circumstances of the case and in law and on careful perusal of the order passed by the A.O., it reveals that the prerequisites of such disallowance in S. 14A have been ignored which mandate that the A.O. to record satisfaction that the interest-bearing funds have been used to earn tax-free income. The satisfaction to be recorded must be based upon credible and relevant evidence and onus to prove that interest bearing funds have been used, lie squarely on the shoulders of Revenue. The A.O. failed to discharge the onus that lay upon her. The disallowance made by the A.O. and sustained by Ld. CIT(A) be quashed and set aside. 4. The Revenue in ITA No.1244/PUN/2015 has raised the following grounds of appeal:- 1) On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred while allowing the....
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....ecial Leave Petition was dismissed against the High Court ruling that section 14A of the Act could not be invoked where no exempt income was earned by assessee in the relevant assessment year. 9. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 10. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is whether any disallowance can be made under section 14A of the Act read with Rule 8D of the Rules in the year when no income is earned, which is exempt from tax. We find that the issue now stands covered by latest decision of Hon'ble Supreme Court in CIT Vs. Chettinad Logistics (P.) Ltd. (supra) that in the absence of exempt income, no disallowance is to be made under section 14A of the Act. In view thereof, we find merit in the plea of assessee and we delete the disallowance made under section 14A of the Act read with Rule 8D of the Rules at Rs. 2,47,716/-. The grounds of appeal raised by assessee are thus, allowed. 11. Now, coming to the appeal filed by Revenue, wherein the issue is against eligibility of claim of deduction under section 80I....
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....r for assessment year 2007-08. The assessee pleaded that the said issue could not be re-agitated during 153A proceedings on the ground that assessee was not developer but work contractor. In this regard, reliance was placed on different decisions of Hon'ble Bombay High Court and various Tribunals. The learned Authorized Representative for the assessee then before the Assessing Officer referred to various amendments to section 80IA(4) of the Act with special emphasis on the amended provisions w.e.f. 01.04.2000 by the Finance Act, 1999, under which earlier section 80IA of the Act was substituted with new section 80IA(4) of the Act. Under the amended provisions, the assessee emphasized that it is entitled to claim deduction as it was the developer of project. The Assessing Officer was of the view that the assessee was a contractor as the only income arising in the hands was profit arising out of contracts. Relying on the proviso under the said section, which was introduced on the same day i.e. 01.04.2000, the Assessing Officer pointed out that enterprise had to satisfy three conditions; it should be owned by the company; it would have entered into an agreement with the Government or L....
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....under:- "15.4 The above submission of the assessee has been considered but not accepted because of the following reasons:- (i) The head such as Discount Received account, Commission from sub-contractor, other deduction sub contract, VAT Tax Refund Goa, VAT Tax Refund M.S., other income, other interest, material deduction Sub contract, VAT Rem received, profit on sales of vehicle, liquidated damages, excess provision of FBT are prima facie nothing to do with the business which is entitled for deduction u/s 80IA(4). (ii) Similarly sundry creditors balance write off is also not entitled for any deduction. (iii) Further Work / Labour Insurance are not part of the business for which deduction under sec. 80IA(4) is available. (iv) As regarding Bank interest and other interest are concerned, these have nothing to do with the Business of the assessee thus not entitled for deduction under sec.80IA(4). (v) The income disclosed during search in respect of advance / cash has been discussed separately elsewhere on this order and such undisclosed income is not entitled for deduction under sec.80IA(4). 14. The Assessing Officer vide para 15....
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....see to be entitled to claim the aforesaid 80IA(4) deduction, wherein the assessee had developed the infrastructure facilities as per the agreement with State Government. The CIT(A) allowed all the grounds taken on this issue. 16. The Revenue is in appeal against the order of CIT(A) and has raised the issue that the CIT(A) had erred while allowing the assessee's appeal of eligibility of Miscellaneous receipts at Rs. 2,82,54,726/-, without controverting the facts enumerated by the Assessing Officer in his order and further erred in treating the said receipts as profits and gains derived from eligible business. 17. The learned Departmental Representative for the Revenue pointed out that under the provisions of section 80IA(1) of the Act, it is mentioned that profits and gains derived from such business are to be allowed as deduction. In this regard, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Sterling Foods (1999) 237 ITR 579 (SC) and Pandian Chemicals Ltd. Vs. CIT (2003) 262 ITR 278 (SC). Our attention was drawn to Paper Book 6A and the details in Paper Book 6A and pointed out that all the items were not directly derived from industria....
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....o have been generated out of these deposits. 20. Now, coming to next receipt i.e. commission from sub-contract of Rs. 1,61,021/-, which was not pressed by assessee. Further head was other income of Rs. 4,35,000/-, which was Miscellaneous receipt from Department, for Bodhegaon Maintenance Bill. This was subject to the receipt relatable to business. 21. The next part of Miscellaneous receipt was Sales Tax Refund of Rs. 14,50,489/-. The learned Authorized Representative for the assessee pointed out that VAT payments were part of expenses and in case any part of VAT was refunded, then it was business receipts and was similarly shown in the hands of assessee. 22. Coming to next item i.e. VAT reimbursement on work contract, it was pointed out that as per contract agreement, VAT liability was payable by contractee over and above the contract price. VAT paid by assessee was debited to Profit and Loss Account and same was reimbursed by the Department as per contract agreement, hence no impact on the profits of business. 23. The learned Authorized Representative for the assessee referred to next head i.e. Other deduction from sub-contractors at Rs. 1,20,04,233/-, details of which....
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....ssee has not pressed its claim of 80IA(4) deduction on commission from sub-contractors of Rs. 1,61,021/- and interest income of Rs. 1,17,218/-, hence the same is denied to the assessee. 27. Now, coming to head-wise breakup of Miscellaneous receipts on which 80IA(4) deduction has been claimed by assessee. The first such item is bank interest received of Rs. 78,85,014/-. We have already in the paras above have held that no deduction is to be allowed on bank interest of Rs. 1,17,218/-. With regard to balance interest income earned by assessee, the assessee has furnished the details in this regard along with copy of ledger account at pages 68 to 87 of Paper Book 6A. The explanation of assessee is that the bank deposits were for Tender deposits, security for bank guarantee (performance guarantee, etc.). In other words, bank deposits were for obtaining the Tenders, which was the first step in infrastructure development activity. The said bank deposits were thus, inextricably linked to the business activity carried on by assessee. Consequently, interest earned on bank deposits was business receipt in the hands of assessee and was to be considered as income derived from business infrast....
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.... hence, were eligible for claim of deduction under section 80IA(4) of the Act. 31. Now, coming to next head which is Sales Tax Refund of Rs. 14,50,489/-. Under the scheme of Maharashtra VAT Act, VAT / sales tax is paid by assessee or deducted by the contractee from RA bills and the same is debited to Profit and Loss Account. However, excess amounts, if any, after calculating the net liability is credited to Profit and Loss Account; where sales tax / VAT has direct link to the business activity of infrastructure development, the receipts were eligible business receipts in the hands of assessee and entitled to the claim of 80IA(4) deduction. Accordingly, we hold so. 32. The next item is under the Miscellaneous receipts is VAT reimbursement at Rs. 53,03,571/-. In this regard, the learned Authorized Representative for the assessee explained that as per contract agreement in respect of work of Jalochi and Khadkpurna, VAT liability was payable by the contractee over and above contract price. Such VAT paid was debited to Profit and Loss Account. However, the same was reimbursed by the Department as per contract agreement and as such VAT reimbursement was part of contract price....