AI Drafter 
TaxTMI 
TaxTMI 
2020 (12) TMI 1156
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....justified in not upholding disallowance of Rs. 81,348/- under section 14A of the Income Tax Act on the ground that disallowance cannot be made where there is no exempt income without appreciating the fact that applicability of section 14A or Rule 8D does not depend on earning of income as held by Supreme Court in the case of CIT vs. Rajender Prasad Moody (1978), 115 ITR 519. 4. The Ld. CIT(A) has erred in following the decisions of Hon'ble High Courts whose facts were distinguishable from the taxpayers, ignoring the principal of apportionment regardless of exempt income laid down by Hon'ble Supreme Court decision in CIT vs. Walfort Share and stock Brokers P Ltd: 326 ITR 1 (SC) and upheld by the Hon'ble Supreme Court in 91 Taxmann.com 154(SC). 5. The Ld. CIT(A) has erred in ignoring the legislative intent expressed in CBDT's Circular No. 5/2014 dated 11.02.2014, which explicitly states that expenses relatable to earning of exempt income have to be considered for disallowance irrespective of the fact whether any such income has been earned during the F.Y. or not as confirmed by Apex Court in Maxopp Investment Ltd. Vs. CIT, 91 Taxman.com 154(SC). ....
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....143(3) of the Act. 11. The Ld. CIT(A) has erred in not deciding the issue at hand on merits rather than only relying upon the order for A.Y. 2011-12 wherein facts are different from the present case. 12. The Ld. CIT(A) has erred in by allowing deduction u/s 80IA as the case of the assessee with identical facts for A.Y. 2014-15 wherein assessment framed u/s 143(3) of the Act and the addition made on account of disallowance of deduction u/s 80IA of the Act has been confirmed by the Ld. CIT(A)-4, Ludhiana vide appeal order dated 01.09.2018 in appeal no. 75/ROT(10658)CHD/IT/CIT(A)-4/LDH/2016-17. 13. The Ld. CIT(A) has erred in by allowing deduction u/s 801A of the Act whereas as per the contract letters and bid documents pertaining to each project undertaken by the assessee during the year under consideration it is apparent that the assessee company was bound by the exact specification, design & directions given by the Government concerned. Thus the nature of work carried out by the assessee was actually in the nature of work contract. 14. The appellant craves to leave to add or amend any grounds of appeal before the appeal is heard or disposed off. ....
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....ut also to operate and maintain the facilities for specific number of years i.e. firstly, the development of project which would take 1 to 3 years and then to operate and maintain projects for one to five years. So far as the 'Thural Project' is concerned, the question as to whether the project developed by the assessee was an Infrastructure development project / contract awarded by the Government, came into consideration before this Tribunal in the appeal of the assessee for assessment year 2011-12 and the Tribunal after considering the facts and circumstances of the case held that the 'Thural Project' was developed by the assessee as per the composite contract awarded by the Government and would be eligible for deduction u/s 80IA(4) of the Income-tax Act. Then in the next year relevant to AY 2012-13, the assessee was awarded three more contracts of similar nature. The Ld. PCIT citing similar reasons as were given in her order for AY 2011-12, exercised her jurisdiction u/s 263 of the Act and held that the Assessing Officer had not properly examined the issue as to whether the contracts entered into by the assessee in respect of the three new projects were Infrastructure Developmen....
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....al of the assessee for assessment year 2011-12 and even in the appeal for assessment year 2012-13, since, the 'Thural Project' in those years was in its developmental stage, hence, the Tribunal considering the nature of the contract held that it was an Infrastructure development project. Since the Ld. PCIT has not brought any differentiating or distinguishing fact about the development activity carried in the 'Thural Project' as compared to the other eight projects undertaken by the assessee, hence, under the circumstances, the findings arrived at by the Tribunal in respect of 'Thural Project' are squarely applicable to the other projects also. It is also pertinent to mention here that the nature of the other three projects which were started in the year 2012-13 has also came for consideration in the appeal of the assessee against the order passed u/s 263 of the PCIT and it has been specifically held that the Ld. PCIT had failed to point out any difference between the 'Thural Project' and the other three projects carried out by the assessee in the said year. However, again vide impugned order, the Ld. PCIT though, fully aware of the earlier findings of the Tribunal, yet, p....
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.... the revenue. Before us Ld. counsel for the assessee made arguments challenging the jurisdiction of the Pr.CIT to invoke revisionary powers on this aspect as also on the merits of the claim of deduction under section 80IA(4). Challenging the assumption of jurisdiction of the learned Pr. CIT, the Ld. counsel of the assessee stated that this issue had been examined during assessment proceedings and the Assessing Officer, after due application of mind, had allowed the assessee's claim of deduction under section 80IA(4). The Ld. counsel for the assessee stated that review of the order was only on account of change of opinion and could not be exercised under section 263 of the Act. In support of its contention that the issue had been examined by the AO during assessment proceedings the Ld. counsel for the assessee drew our attention to the following: a) The return of income for the impugned year accompanied by Audit Report under section 80 IA in form No. 10 CCB on the basis of which deduction under section 80 IA was claimed by the assessee placed at paper book page No. 1 to 26 b) The questionnaire received from the Assessing Officer and the relevant queries ra....
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....out to us by the Ld. counsel for the assessee is as follows: "5. The assessee company was awarded contract by Himachal Pardesh Government, Irrigation and Public Health Department, Division Thural as under; "providing Rehabilitation and Source Level Agumentation of various schemes in Changer area in Tenhil Jaisinghpur, Palampw, Khwidian and Dera in District Kangra (HP) Sub Head:- Construction of Civil Work i.e. Percolation Well, Pump House, Dtaff Quarters, Laboratory Building, Inspection Hut Storage Tanks, Compound Walls, retaining/breast -walls, Wire Crate Works, roads, street truss bridge, providing, lowering, laying and jointing of pipe lines including supply and fixing of required valves and specials, construction of anchor blocks/thrust blocks and supporting pillars etc for rising main, gravity main and supply of lab equipments, inspection vehicle and maintenance van etc. supply and installation of pumping machinery including accessories and electromechanical equipments required for stepping down of 11KVA power supply and post completion operation and maintenance of the whole scheme for 60 months including automation." The composite project a....
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....nd also carried forwarded the same WDV of the firm as on the last date of 13.04.2013. 4.1 The assessee company is a partner in the firm Kaveri Infrastructure Private Ltd. JV Unipro Techno Infrastructure in which it is holding 95% share. Copy of the partnership deed is placed on record. The asessee has earned a profit of Rs. 52,35,708/- as partner on account of 95% share of profit from the firm and claimed exempt u/s 10(2A) of the IT Act, 1961. Farther, the assessee company was awarded contract by Himachal Pardesh Government, Irrigation and Public Health Department, Division Thural. The composite project awarded to the assessee in providing lift water supply scheme from Executive Engineer, Irrigation & Public Health, Division Thural, Distt. Kangra (HP) on account of providing rehabilitation and source level augmentation of various schemes in changer area in Tehsil Jaisinghpur, Palampur, Khundian and Dehra in Distt. Kangra HP complete construction of the project of the project including operation & Maintenance of the whole scheme. 4.2 The activity undertaken by the company for IPH Thural qualifies exemption u/s 80!A of the IT. Act 1961, and the income is 100% exempt....
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....he Act, the assessee was awarded a certificate for assessment years 2010-11 to 2013-14 placed at PB-126 to 134 after considering all the necessary and relevant documents proving that the assessee was eligible to claim deduction under the same. Ld. counsel for the assessee pointed out the fact that the assessee had been awarded a certificate for deduction of tax at lower rate on account of its eligibility to claim deduction under section 80IA of the Act proved that the view taken by the Assessing Officer on the basis of documents before it was correct. Ld. counsel for the assessee further drew our attention to the fact that a similar contract in the case of M/s Kaveri Infrastructure Private Limited/Unipro Techno Infrastructure was held as infrastructural contract for the assessment year 2008-09 to A.Y 2011-12 by another Assessing Officer. Ld.Counsel for the assessee drew our attention to the relevant order sheet entry in the case of M/s Kaveri Infrastructure Private Limited, JV Unipro Techno Infrastructure placed at PB-70 and 71, which reads as under : 04.08.2015 The reply to the notices issued under Section 133(6) of the Act by respondent no. 2 to the Irrigation D....
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....rse of regular assessment proceedings and the Assessing Officer having allowed the claim which was consistent with the view taken by the CIT (TDS) while granting certificate of lower deduction of tax, the Assessing Officer in the preceding and succeeding years, as also with the view taken by the Assessing Officer in the case of another assessee undertaking identical work, it cannot be said that any error had crept in the order of the Assessing Officer causing prejudice to the revenue and therefore the action of the learned Pr. CIT in assuming jurisdiction under section 263 for reviewing the order of the Assessing Officer on this count was bad in law and needed to be quashed. 12. Ld.DR, on the other hand, we find, relied upon the order of the learned Pr. CIT and stated that the aspect of application of Explanation to sub-section (13) of section 80IA, to the contract awarded to the assessee was not examined by the Assessing Officer which being crucial to the claim of deduction under section 80IA, an error had crept into the order of the Assessing Officer and since apparently the project undertaken by the assessee was covered under the definition of "works contract" the asses....
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....rent Tehsils of District Kangra. The assessee, we find, had also stated that the complete construction of the project alongwith operation and maintenance of the whole scheme was to be undertaken by it. Complete detail of the construction work to be undertaken was also given and it was reiterated that the post-completion operation and maintenance of the whole scheme for 16 months including automation was the responsibility of the assessee under the scheme. The assessee had clarified that it was a composite project awarded to it and thus was covered under section 80IA of the Act. Thus, the assessee had clarified that it was not merely works contract awarded to it but a project awarded to it was on a turnkey basis which included post-completion operation and maintenance of the same also for a specified period. Copy of the contract was also placed before the Assessing Officer. The assessee had also clarified that the impugned deduction under section 80IA was first claimed by it in assessment year 2010-11 and the year under reference was the second year for claiming the said deduction. 18. It is amply clear from the above that necessary enquiries regarding the assessee....
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....tivity qualified for the said claim. We find that the view taken by the Assessing Officer is a plausible view since as demonstrated before us, the assessee had been granted a certificate of lower deduction of tax for assessment years 2010-11 to 2013-14 after considering the eligibility of the claim of the assessee to deduction under section 80IA of the Act. The assessee has also demonstrated before us that in the preceding and succeeding assessment years, identical claim on account of very same project had been allowed to it by the Assessing Officer and also that for identical project another Assessing Officer had granted deduction under section 80IA of the Act to a sister concern of the assessee M/s Kaveri Infrastructures Pvt. Ltd. in collateral proceedings before the DCIT, for the assessment years 2008-09 to 2011-12, that too after exercising powers under section 133(6) and receiving clarification from the Executive Engineer, IPH, on perusal of which the Assessing Officer found that the contract was on Built Operate Transfer (BOT) basis and not in the nature of works contract and that the project was on turnkey basis in which the assessee was involved in operation and management ....
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....on the Ld. Counsel relied upon the decision of the Punjab and Haryana High Court in the case of CIT versus Micro Instrument Company in ITA. No. 958/2008 dated 2.9.2016 more specifically at para 12 of its order had stated as follows: "12. However, while undertaking this exercise, the Assessing Officer is not entitled to reopen an issue that had been decided in respect of a previous assessment year. In other words, an Assessing Officer is not entitled to question the validity of the grant of a deduction under Section 80-IB in a previous assessment year on any ground. The Assessing Officer would not be entitled to say that a particular condition was not fulfilled in an earlier assessment year if the assessee had been granted the deduction in that year. The Assessing Officer, therefore, cannot deny a deduction in the assessment year in question before him on the ground that the assessee had failed to fulfill a condition precedent to the grant of a deduction in another assessment year. That would amount to an Assessing Officer reopening an assessment in respect of another assessment year without following the provisions of the Act." 23. Ld.DR, on the other, hand relyin....
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....nothing on record except the suspicion of the Department that the assessing officer has not carried out adequate enquiries. We have gone through the record and seen that the issues have been enquired into replies have been placed on record nothing has been brought by the Department to show that the view taken by the assessing officer was incorrect on facts. The requisite agreements alongwith site plan Schedule etc. attached thereto were all available before the AO and before the Pr. CIT alongwith photographs etc. No effort to distinguish the Contract entered into with Himachal Pradesh Govt. in respect of Thural Project with the subsequent contracts entered into by the assessee with Himachal Pradesh Government in respect of Dehra Project or with the Uttrakhand Govt. in respect of Pauri and Rudraprayag Projects have been referred to in his order by the Pr. CIT or in his arguments by the ld. CIT-DR. Mere argument that the three Projects were different without any supporting fact cannot be given a judicial approval. Suspicion may be said to be sufficient for the purposes of issuance of Show Cause Notice but thereafter, the suspicion has to be backed by hard facts. 4.19 On givi....
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....isional powers under section 263 of the Act. The provision though permits the Commissioner to initiate an enquiry as he may deem necessary does not authorise a roving probe into the facts with the disposition to pick out errors to sustain the eventual interference. This assumes great significance in the context of the statutory frame work of the Act outlining the jurisdictional contours of different authorities to adjudicate the issues as legislatively stipulated. The Commissioner in exercise of his revisional powers cannot arrogate to himself a status to surrogate the other authorities and supplant their roles under the Act. 18. The jurisdiction exercisable under section 263 of the Act being supervisory in nature, permitting suo motu review of any assessment already made, the statutorily enjoined sanctions circumscribing the same have to be rigorously construed. The legislative intendment of conditioning the plenitude of the power conferred is manifest in the two preconditions lodged in the section. To sustain the delicate balance between this supervisory and other remedial jurisdictions, as designed by the lawmakers, a constricted connotation and purport of the enabling ....
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....e set aside as opportunity to the assessee is any way granted by the Rule of Law. 5.2 Before parting, we may also refer to the decision of the Allahabad High Court in the case of CIT Vs Goyal Private Family Specific Trust (1988) 171 ITR 698, 701-702 (All). A perusal of the said decision would show that the Court has held in unambiguous terms that merely because the orders of the Assessing Officer are brief and cryptic, the said fact by itself cannot be a ground for branding the assessment orders as erroneous and prejudicial to the interests of the Revenue. The Court was careful to observe that writing a detailed order no doubt may be a legal requirement, but the order not fulfilling this requirement, cannot be said to be erroneous and prejudicial to the interests of the Revenue. The Court in unambiguous terms has fastened the responsibility for exercising the Revisionary Power on the Commissioner to necessarily point out as to what error was committed by the Assessing Officer in having reached the conclusion which was sought to be set aside. The said effort was found to be missing in the facts of the said case as in the facts of the present case also. In the facts of the p....
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....hether day to day control on the project and its manner of development is of the Government authorities or of the contractor. The Coordinate Lucknow Bench of the Tribunal in the case of 'M/s Vijay Infrastructure Limited, Lucknow vs ACIT', ITA No. 254/LKO/2015 & Others, order dated 30.10.2015 observed that if the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not and that the agreement is not for a specific work, it is for development of facility as a whole, the material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility, the losses suffered in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development and if the assessee has to undertake maintenance of said infrastructure for a particular period and during the said period, if any damages are occurred, it shall be the respon....
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....e for deduction u/s 80IA(4) of the Act being Infrastructure Facility Development Project, nor the Ld. PCIT could point out from the clauses of the agreement that they would not fall within the definition of infrastructure development project as provided u/s 80IA(4) of the Act. In our view, the Ld. PCIT has exercised her jurisdiction u/s 263 of the Act totaling bye- passing and in contradiction of the findings given by the Tribunal in the own cases of the assessee for earlier assessment years i.e. 2011-12 and 2012-13 vide orders dated 6.2.2017 & 1.12.2017(supra). Further, it is found that all the material was put before the Assessing Officer including the copies of the contracts. The Assessing Officer has duly taken note of the nature of contract entered into by the assessee and held that the same were infrastructure facilities development contracts and eligible for deduction u/s 80IA of the Act. Hence, it cannot be said that the order passed by the Assessing Officer was erroneous or prejudicial to the interest of Revenue on this issue." 5. The Ld. DR has not pointed out any distinguishing fact for the assessment year under consideration. 6. Moreover, the deduction....