TaxTMI 
TaxTMI 
2022 (5) TMI 773
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....ed of by this common order for the sake of convenience. 2. A perusal of the grounds of appeals, it would indicate that there are certain common grounds, in both the assessee's appeal and the Revenue's appeals which are as follows- i) Common ground raised in all the appeals of the assessee is, denial of claim of deduction under section 80IA(4) of the Income Tax Act, 1961 by treating the assessee-company as a 'Contractor' and not 'Developer' by the Department. However, the Revenue is challenging the action of the ld.CIT(A) in granting deduction under section 80IA(4) of the Act for the Asst.Year 2005-06 and 2006-07. ii) Revenue is also challenging deletion of penalty imposed under section 271(1)(c) of the Act for the Asst.Years 2007-08 to 2010- 11. While, the assessee challenges imposition of penalty under section 271(1)(c) of the Act for the Asst.Year 2010-11. iii) The second main ground in respective appeals is with regard to disallowance of interest income and other income as not eligible for deduction under section 80IA(4) of the Act. iv) Challenge is also made in some of the years that loss of eligible sites are not to be set off against pro....
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....is not a developer, but a 'contractor' since the assessee has merely executed the contract for the various sites awarded by various entities. 5. Brief facts of the case is this that the assessee is a Private Limited Company, engaged in the business of development, operation and maintenance of infrastructure facilities such as development of roads, bridges, water treatment plants, canals, siphon work (irrigation projects), sewage treatment plant etc. by entering into contract with various Government authorities. Original return of income was filed on 1.11.2004 declaring total income at Rs.78,69,170/-. The return was finalized under section 143(3) of the Act on 30.11.2006 determining total income at Rs.1,86,13,536/-. By doing so, the ld.AO has restricted the deduction under section 80IA/80IB of the Act to Rs.79,00,417/- as against Rs.1,86,44,783/- claimed by the assessee, which in turn stood deleted by the Ld.CIT(A). Subsequently, the Ld. Commissioner of Income Tax noticed that assessment framed by the AO under section 143(3) of the Act was erroneous and prejudicial to the interest of the Revenue on ground that the AO, while passing the order, had not verified facts of the case an....
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....rm has wider meaning so as to state that if the activities carried out by the assessee involve development of project, engagement of various agencies, undertaking risk element, raises own finances and invests its own funds in the construction of the project, then the case of the assessee falls within the meaning of expression "developer". A perusal of the tender documents clearly shows that the assessee has to arrange own finances, purchase own plant & machinery and purchase all materials at own cost, deploy of qualified personnel for construction and development of infra projects. The authorities gave only general specifications for the project. However, for the specific drawings & designs recommended by the assessee, the same has to be approved by the competent authority and becomes part of the tender. Further that once the tender is awarded, the assessee has to pay earnest money, security deposits, performance guarantee by placing fixed deposits with banks. The assessee is also liable for liquidated damages/penalty, free maintenance and repair during defect liability period. During the construction of project, the assessee has to make all the arrangements and is liable for procu....
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....ineers Ltd. [2012] 21 taxmann.com 25 (Hyd ITAT) 9. B.T. Patil & Sons Belgaum Construction P.Ltd. [2013] 34 taxmann.com 97 (Pune ITAT)" 10. Radhe Developers Vs.CIT, 341 ITR 403 (Guj) 8. On the other hand, the Ld. DR supported the orders of the Revenue authorities. He has also filed a detailed written submissions dated 27.4.2022, which we will analyse the appropriate stage. 9. We have heard the rival submissions made by the respective parties; we have also perused the relevant materials including the orders passed by the authorities below. It appears from the record that the Ld. AO has denied deduction claimed under section 80IA(4) of the Act by holding that the assessee has acted as work-contract in the project awarded by the statutory bodies. The Ld.CIT(A) while upholding finding of the AO on this issue, also taken into consideration the submissions of the assessee as made before us. 10. It was further noted by the ld.CIT(A) that the similar claim raised by the assessee for the Asst.Year 2003-04 was allowed by his predecessor and granted deduction under section 80IA(4) of the Act. Further that it appears from the impugned order under challenge that in vie....
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....sferring the infrastructure facilities to the Government authority was not modified, i.e. projects under BOT/BOOT were only eligible for deduction U/s. 80IA. The Provision of section 80IA(4) were further implied by Finance Act 2001 w.e.f. A.Y.2002-03. As per the modifications, the enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility were eligible for deduction. Moreover the condition for transferring the infrastructure facilities to Government Authority was done away. Hence infrastructure projects for which agreement for development and/or maintenance/operation have been entered with Government Authorities were also became eligible w.e.f A.Y.2002-03. So the concept of BOT/BOOT was done away. Hence the appellant was eligible for deduction U/s. 80IA for developing various projects w.e.f A.Y.2002-03. Copy of relevant pages of budget speech, explanatory statement and memorandum regarding delegated legislation of 2001-02 is enclosed herewith (ANNEXURE-2). The explanation was introduced to clarify the provisions of Section 80IA so that a person who executes a wo....
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...., during the course of appeal proceedings, the A. has also filed further written submission. The same are reproduced hereunder. Judgment of Mumbai Tribunal in case of M/s. B. T. Patil & Sons Belgaum Construction (P) Ltd Vs. ACIT reported in 126 TTJ 577: Sir the Hon'able Mumbai Tribunal in above referred case has held that the company is not eligible for deduction U/s. 80 IA for A.Y. 2000-01 and A. Y. 2001-02. As discuss in detailed on page no. 30 to 36 of our submission dated 10th July, 2010, up to A. Y. 2001-02 the deduction U/s. 80IA is available to assess ee company who develops infrastructure facility on BOOT/EOT basis only. The projects carried out by the company (B. T. Patil .....) were not on BOOT or BOT basis. Hence, the Mumbai Tribunal has held that the assessee is not eligible for deduction U/s. 80IA. Sir, due to modification in Section 80 IA, w.e.f. A. Y. 2002-03, development of infrastructure facility other than BOOT and BOT were also became eligible for deduction U/s. 80IA. Sir the appellant company has started claiming deduction U/s. 80IA w.e. f. A. Y. 2002-03 and appellate authorities has granted deduction U/s. 80 IA f....
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....ion of Patil Engineering Ltd vs. DCIT 84 TTJ 666 (Mumbai). However as on the date of passing of the said orders, the benefit of the Third Member decision cited at 126 TTJ 577 discussed below was not available. In this decision, the Mumbai Tribunal elaborately discussed the newly inserted Explanation below 80-IA(13) (by the Finance (No.2) Act, 2009 w.e.f. 01-04-2010) and overruled the decision cited at 84 TTJ 666 (supra). In the said case of B.T.Patil& Sons Belgaum Construction (P) Ltd vs. ACIT (TM) - 126 TTJ 577 it is held as under :- " Intention of the legislature is not to provide deduction under s. 80- IA(4) to anyone except the person or authority which is directly engaged in developing, maintaining and operating the infrastructure facility infrastructure facilities in respect of which the assessee is claiming deduction, are being set up by the State Government(s) or local/statutory authorities and the assesses is simply engaged in some construction work, thereby contributing partly in the attainment of the object of developing the infrastructure facility; under such circumstances it does not qualify for deduction within the framework of sub-s.(4)(i) itself; position h....
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....ed by the developer. The developers, in true sense, are the persons who are carrying out the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility whereas the contractors are those persons who merely execute part of these functions on behalf of developer and do not own any risks and responsibilities of the work. In such cases, the contractors may not be eligible for the deduction under section 80-IA of the Act as they are not developing any infrastructure facility but only providing assistance to the actual developer. 15. In view of the above, in order to ascertain whether a civil construction work is assigned on development basis or contract basis only the terms and conditions of the agreement needs to be considered. Only on the basis of the terms and conditions and the scope, ambit and nature of the contract assigned it could be ascertained whether it is a "work contract" or a "development contract". The right and obligations of the assessee in the projects implemented by the assessee on behalf of the Government entities is also required to be examined. Our this approach has also been strengthened by the obs....
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.... and creditors for goods are of Rs.2,10,12,846/- as per the Balance Sheet annexed at page No.15 of the paper book. Apart from that Clause-15, page No.111 clearly specified that various materials and mix are also got to be tested by the assessee at its own cost from time to time at Government approved laboratories. 19. It is also a fact that assessee has to arrange own finance by raising adequate capital, reserves & surplus, secured & unsecured loans, which as per the Balance Sheet is of Rs.28,99,17,693/- raised by the assessee for the year under consideration. The assessee has to use and invest heavily in purchasing own plant & machinery equipments etc. in order to qualify for bid for tender and carry out the development of various projects. In this respect, the gross block of assets to the tune of Rs.2,07,53,968/- is reflected at page No.19 in the Schedule annexed to the paper book. The assessee has to employ own team of experience and qualified Project Manager, Construction Engineers and arrange for skilled, semi-skilled and unskilled workers as stipulated in clause 1.4 of the tender (page No.30). 20. So far as financial aspect is concerned, it appears from the tender docum....
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....pletion and handing over to the Department, shall be paid by the assessee-company. The same term is stipulated at Annexure-V of section B2 of the Tender Notice. One year free maintenance and guarantee period from the certified date of completion of work has been provided. This stipulation contained in clause 17A, page No.51 and 98 of the Tender documents. 22. So far as safety measures are concerned, the terms also stipulated that the assessee has to arrange for labours and also responsible for safety of all the concerned. In this regard the assessee has to take Workmen Compensation Insurance and also liable to pay compensation as per clause 36, page No.57. The assessee is directed to employ only such labourer who shall produce a valid certificate of having been vaccinated against smallpox/ cholera within a period of last three years. For that, the Contractor shall be responsible for and shall pay expenses for providing medical aid to any workmen who may suffer a bodily injury as a result of an accident. 23. As per Clause 37A [page no.58 of Tender document ("TD"for short)]the contractor shall provide all necessary personal safety equipment and first aid apparatus available for....
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.... the TD. 25. The case made out by the assessee in support of claim under section 80IA(4) of the Act is mainly on the basis of TD i.e. contract/agreement between the assessee and the statutory bodies. Further that upon going through the entire documents, we find that in respect of each project, the assessee was issued work-order. The details mentioned therein further support the case of the assessee that the assessee is working as "developer" of infrastructure project awarded by the statutory bodies. We will be dealing with the same at the appropriate level. 26. The Ld. DR submitted written submission dated 27.4.2022 in support of the case made out by the Revenue for rejecting the claim of the assessee under section 80IA(4) of the Act. The said written submissions read as under: "2. The above cases came up for hearing on 20/4/2022. As directed by Hon'ble bench, I am filling the written Submission (Two sets) in the above appeal for kind consideration while adjudicating the case. The same may kindly be taken on record. 3. The assessee is a pvt. Ltd. Company engaged in carrying out various contract work for Govt. and local bodies and claimed deduction u/s. 8....
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.... utilizing his resources either himself or through a contractor. The contractor would be a person who works on the terms and conditions settled with his principle or the person who has awarded him the contract whereas the developer would be the person who is overall owner or protagonist of the work at hand. 6. That the appellant is merely a contractor in this case is abundantly established by several facts which are deeply ingrained in the factual matrix of this case. To begin with Ahmedabad Municipal Corporation (AMC) has taken up Sabarmati River Cleaning Project and invited tender for following works: * Interception and diversion of untreated sewage flowing through storm water drains into river Sabarmati. * Construction of Sewage Treatment Plants * Improvement and refurbishment of sewage pumping stations and sewage treatment plants 7. The assessee had successfully awarded the tender by the AMC and had to execute the work as per term and condition of the tender document. 8. The said document clearly stipulates that the appellant was a successful bidder to the said tender and was being awarded the contract to complete the job on....
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....ct was conceptualized by the AMC with drawings, specifications, materials to be used and contractor / assessee has completed the project under strict monitoring inspections and supervisions of AMC. The argument of the appellant that he is a developer are ill founded in as much as to begin with as discussed above the role of any actual developer was being performed by AMC and not by the appellant. Arguing that the appellant is a developer and not a contract who merely performs civil construction work, it has been argued that since the appellant was responsible for development of the entire Sabarmati River Cleaning Project the appellant has entered the shoes of a 'developer'. The appellant has thus tried to make a distinction between a mere contractor doing civil construction work with a contractor who is interested with a wide and varied gamut of responsibilities. The distinction itself has been found to be flawed. A contractor would be a person who agrees to undertake all the different activities at an agreed rate. In the instant case, the AMC had issued a composite contract to the appellant with the directive of completing Sabarmati River Cleaning Project as per pre decide....
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....(v) Water Treatment Plants (Kutch). (vi) VatamanPipali Road (vii)Vasna Sewerage Treatment Plant (viii) Ambaji Mata Site Development. During the course of hearing, the assessee has submitted details of above mentioned works as under: (i) Mahi Weir Scheme across Mahi River. The contract work for construction of Weir Diaphragm Walls Training Walls of Mahi Weir Scheme across Mahi River, Nr. Village. Sindhrol, Taluka: Vadodara was taken from the Irrigation Project Division No. 6, Vadodara for Rs. 19.76 crores, which was required to be completed within 36 months. The assessee has simply furnished a copy of work order dated 5.3.2004 for starting of work. The assessee has not furnished any further details. The assessee has claimed deduction u/s. 80-IA(4) of Rs.80,19,970/-. The work order to be executed as per approved terms / conditions. The work has to be completed within stipulated time allowed. The assessee has not been allowed to add excess quantity without prior approval of the competent authority (contractee). The work has to be carried out under the strict supervision, instructions and guidelines of Dy. Executive Enginee....
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....urfacing of roads in western AUDA area. The total contract cost was Rs.11,88,35,176/-. The assessee has furnished a copy of work order dated 5.12.2003 and also copy of agreement of joint venture between Vijay M. Mistry Construction Pvt. Ltd. and Rajkamal Builders Infrastructure Pvt. Ltd. dated 28.7.2003 and supplementary agreement dated 25.11.2003. On verification of the work order, it is seen that the contract work included strengthening and re-surfacing of roads in western AUDA area. The work has been carried out on the roads pertaining to AUDA authority. It cannot be considered as new infrastructure project or facilities and, therefore, the assessee's claim of developer in respect of this work is not satisfied. The assessee company has acted simply as a contractor with specific conditions and terms. (v) Water Treatment Plants (Kutch) This work was undertaken from Gujarat Water Supply and Sewerage Board, Gandhinagar by the assessee in joint venture consortium with M/s. Aquafill Polymers Co, Pvt. Ltd., Ahmedabad. The assessee has furnished a copy of work order dated 16.01.2004 for construction of water treatment plants with commissioning and training. The con....
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....h Ahmedabad Municipal Corporation for development of the above project but had obtained the work order for execution of contract as per terms and condition of the Ahmedabad Municipal Corporation. The assessee was allotted the work for execution and completion thereof as well as the remedying of any defects therein. The terms / conditions are specified by AMC. Also working, drawing are to be supplied by the AMC. The contractor covenant with the Commissioner (AMC) to supply, construct, deliver, erect, commission and maintain the works in conformity in all aspects with the provisions of the contract. The assessee company is merely acting as an agency and executing the work awarded to it with specific conditions. Therefore, the assessee's this work does not become eligible for deduction u/s. 80-IA of the Act. (viii) Ambaji Mata Site Development: This work was undertaken by the assessee from Ambaji Mata Trust for which the assessee claims that the Trust is controlled by the Government of Gujarat. The assessee has not furnished any further details of the work. The assessee has claimed deduction of Rs.4,83,746/- u/s. 80IA in respect of new college complex. It has bee....
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....eported in (2020) 119 taxamnn.com 489 (ITAT-Rjt). Relevant paragraph extracted from the judgment passed n the matter of Patel Infrastructure (Supra) is reproduced hereinbelow: "10.17 It is also pertinent to note that the Hon'ble Gujarat High Court in the case of Katira Construction Ltd. Vs. Union Bank of India reported in 31 taxmann.com 250 has decided the issue of the applicability of the explanation attached below section 80-IA (13) whether such explanation was applicable retrospectively in the case on hand. The assessee challenged the vires of Explanation inserted below sub-section (13) of section 80-IA of the Income-tax Act, 1961 by Finance (No. 2) Act of 2009 with retrospective effect from 1-4-2000. By adding the impugned Explanation, the Legislature provided that nothing contained in the section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person and executed by an undertaking or enterprise. The central question is, whether in the present case, the explanation below sub-section (13) to section 80-IA introduced by the Finance Act No.2 of 2009 with effect from 1.4.2000 transgresses th....
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....Explanation to Section 80IB(10) introduced with retrospective effect from 1.4.2001, since several aspects overlap, it would be convenient to discuss the same together. 36. We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution ....
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....ing profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. 30. Paragraph-6 and 7 of the said submissions, speak about the tender awarded to the assessee for development of entire projects by the AMC for construction, commissioning and trial run of 26 MLD Capacity Sewage Treatment Plant including operation and maintenance of 36 months at Vasna, Ahmedabad as a part of Sabarmati River Action Plan under National River Consideration Directorate, Ministry of Environment& forests, Government of India which in fact goes root of the matter in confirming the position of the assessee as a "developer" and not "contractor" as it has fulfilled all the criterion to achieve the status of a 'Developer'. 31. In paragraph-8 points have been raised by the Revenue in regard to submission of weekly project report to the engineers, working to be done as per the approval of engineer, no alteration without approval, work to be kept open for inspection and supervision of engineer. In our considered opinion, these are only administrative terms for monitoring and supervision of the project undertaken by the assessee and not ....
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....eiterated their arguments that the assessee has acted as a 'contractor' since the work was done under the supervision and monitored by Engineers of AMC. It was further stated by the Revenue that possessing of skilled manpower, preparing drawings & designs, providing equipments are not relevant, which only improves the profitability of the assessee. In our considered opinion, only in order to negate the claim of the assessee the issue of the supervision and monitoring by engineers has sought to be raised by Revenue which is found to be irrelevant for consideration of the main issue involved in the matter. The contentions made by the Revenue in the submissions, if read with the terms of TD filed in each case along with audited accounts would demonstrate, that the assessee has fully undertaken work for development of various infrastructure projects as a whole, by owning risk and responsibilities, raising own finance for the project, getting men, material and project equipments, drawing specifications for the approval of competent authorities. Therefore, the work executed by the assessee is not work-contracts simplicitor, rather they are for the development of infrastructure facility w....
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....commissioning of sewage treatment plant at Atladara, from Vadodara Municipal Corporation. 2010-11 14. Survey planning, designing & construction of new high level bridge, Bhavnagar from R&B Division, Bhavnagar. 15. Construction of Four Lane Flyover Bridge at CTM cross roads, Ahmedabad from AMC. 16. Construction flyover bridge at Delhi Gate, Surat from SMC. 17. Construction of flyover bridge at Thakkar-Bapunagar junction, Ahmedabad from AMC. 2011-12 18. Construction of bridge & road, Akota, Vadodara from VMC. 19. Operating & Maintenance of Mechanical, Electrical, Civil & Instrumentation equipments of sewage treatment plant at Gajarawadi, Vadodara for five years from VMC. 35. In view of the above detailed paper books containing the above tender documents comprising agreement clauses (relevant clauses have already dealt with by us hereinabove) and the contents whereof would definitely suggest that the assessee has been entrusted with the work of development infrastructure facilities, and therefore being a 'developer', the assessee would be entitled for deduction under section 80IA(4) of the Act. Relevant to mention that perusal of all tender documents mention....
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.... Watamanpipri& paving of shoulders. This was a new bridge constructed in connection with the overall strengthening of the Highway project. 7. Vasna Sewerage Treatment Plant Work order dated 13.2.2002. According to the department, work is dated 13.22002, hence prior to 1.4.2002 the assessee must build, operate and transfer. The DR's view is not correct in law in view of the amendment made by Finance Act, 2001 to 80IA(4) by which the deduction is available to any enterprise carring on the bsiness of i) developing, or ii) operating and maintaining or iii) developing, operating and maintaining any infrastructure facility. Therefore, deduction is available to either of the three businesses as the conditions are mutually exclusive and not cumulative in nature. For this proposition, the decision of the Hon'ble High Court of Bombay in the case of CIT Vs. ABG Heavy Industries Ld. (2010) 189 Taxman 54 (bom). In other words, this project undertaken by the assessee viz. construction, commissioning and trial run of 126 MLD capacity sewage treatment plant including operation and maintenance for 36 months at Vasna, Ahmedabad. 8. Ambaji Mata Site Development Page No.91 of PB ....
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.... up before the Hon'ble ITAT, Amritsar Bench in the case of M/s. TRG Industries P. Ltd. in ITA Nos. 433 etc./Asr/2009. The Tribunal after relying various case laws has laid down the following parameters when to treat an assessee as a developer or contractor. (i) The assessee does not have to develop the entire infrastructure facility to qualify for deduction u/s.80-IA(4) and if only a part of the infrastructure facility is developed, the assessee would be eligible for deduction. (ii) The three requirements of section 80-IA(4) viz. development, operation and maintenance are not cumulative. Thus, an enterprise which only develops facility would also be entitled to the benefit of section 80-IA(4). (iii) Merely because the assessee is referred to as a contractor in the agreement, it would not debar it from claiming deduction. (iv) Direct agreement between the transferee-assessee and the specified authority is not a mandatory requirement u/s.80-IA(4) of the I.T. Act. Needless to mention that the assessee qualified all the criterion fixed by the Amritsar Bench 40. We have already dealt with relevant clauses of the tender documents stipulating ....
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....ed on this point that the jurisdictional High Court in the said matter already decided the issue against the assessee. Fact remains that the jurisdictional High Court in that particular matter dealt with the constitutional validity of the insertion of explanation as mentioned hereinabove and decided the same in favour of the revenue to this effect that such explanation brought with retrospective effect from 01.04.2000 by the Finance Act No. 2 of 2009 was very well within the competence of Parliament. As such there was no issue whether the assessee is acting as a developer or contractor was raised before the Hon'ble Jurisdictional High Court neither the said has been decided in the said judgement. 43. In the light of the above discussion and perusal of various clauses of Tender documents and case laws relied upon by both the parties, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution ....
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....ction 80IA/80IB of the Act. The AO was of view that interest income could not be considered as income derived from industrial undertaking and therefore interest receipt were not eligible for the deduction, as sought for. He further opined that since the assessee has claimed deduction under section 80IA(4) of the Act of Rs.1,95,62,210/- on several projects, this amount included interest income also. In response to the show cause notice, it was explained by the assessee that the assessee has made different fixed deposits with different bank as security deposits with the Government Authorities in respect of the project contract, and for giving bank guarantees. For getting bank guarantee the assessee has to keep certain amount fixed deposits as margin money. These fixed deposits were made out of borrowed funds for giving security deposits to the Government. Therefore, claim of deduction under section 80IA was fully allowable. However, the AO did not accept this explanation of the assessee. He was of the view that since the assessee has huge surplus funds, the same was parked with the bank and earned interest income, which was not part of the income earned from any industrial activities....
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....ect nexus with its business, was to be considered as income 'derived from' business. Thus, deduction under section 80I of the Act was allowed on such income. Yet in another decision by jurisdictional High Court in the case of CIT Vs. Shah Alloys Ltd. (supra) has held that interest received on margin money placed for business purpose cannot be treated as income from other sources and is, therefore, eligible for deduction under section 80IA of the Act. Further, various higher judicial authorities have held that profits of the business of the undertaking include other incidental incomes derived from the business of the undertaking. This being the position of law, we have no hesitation in accepting the claim of the assessee that the income earned from the deposits is business income is eligible for deduction under section 80IA of the Act. Accordingly, this common ground raised in the appeals under consideration is allowed in favour of the assessee and against the Revenue. 49. As aforesaid, since the above issue is also identical to the assessee's appeals for Asst.Year 2004-05, 2005-06, 2007-08to 2010-11 and 2012-13to 2016-17, in the absence of any changed circumstances, our finding ....
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....ishing inaccurate particulars of income." 53. However, the case of the assessee is this that the deduction was to be calculated on standalone unit basis. In fact as per section 80 IA(5) the quantum of deduction is to be computed as if the eligible business is the only source of income and therefore, the deduction is to be computed unit wise without considering or set off of loss of other eligible units. On this aspect the Ld. AR relied upon the judgement passed by the jurisdictional High Court in the case of PCIT versus Nirma Ltd, passed in ITA No. 360 of 2016. 54. We have carefully considered the said judgement passed by the Hon'ble jurisdictional High Court. While dealing with this particular aspect of the matter the Hon'ble Court was pleased to observed as follows: "5. In the case of Commissioner of Income tax(Central) Madras vs. Canara Workshops P.Ltd. Reported in 161 ITR 320, in the context of deductions provided under section 80E of the Act, the Supreme Court held that the merit earned by one industry not to be lost or diminished for loss by some other industry when assessee was carrying on two priority industries. It was held that loss in one industry is not t....
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.... clause appearing in section 80-I(6) of the Act is applicable only to the quantum of deduction, whereas the gross total income under section 80B(5) which is also referred to in section 80-I(1) of the Act is required to be computed in the manner provided under the Act which pre- supposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. The apex court further held that under section 80-I(6) of the Act for the purposes of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-section (6) of the Act contemplates that only the profits shall be taken into account as if it was the only source of income. Therefore, from the decision of the apex court, two principles of law emerge one for the purposes of computation of gross total income the losses of other units are to be taken into account but for the purposes of calculating the deduction of industrial undertaking, the loss sustained in another unit cannot be taken into account and only the profit shall be taken into account as if it was the only source of income of that unit. In ....
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....ferring the judgment in the case of Canara Workshop (supra). "The Hon'ble Supreme Court has further held that the object of section 80E was properly served only by confining the application of the provisions of that section to the profits and gains of a "single industry". In the present case, under section 80I(6), profit of Badi unit are required to be treated as if that was the only source of income. That the losses from the Daman unit are required to be ignored. Therefore, while calculating quantum of deduction, profit of the Badi unit alone are required to be taken. To that there is no difficulty. However, after calculating the deduction on the basis that the profits from the Baddi unit was the only source of income, one has to give effect to the computed deduction in order to arrive at the total income of the company and while giving effect, one has to consider the provisions of section 80IA and 80IB of the Act. In other words, while considering the gross total income of the assessee, deduction under section 80IA and 80IB of the Act are required to be allowed after adjusting loss worked out in other units." 9. We therefore, do not find any error i....
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....Hence, the instant appeal before the Tribunal. 61. Upon perusal of the profit & loss account for the year under consideration appearing at page 29 of the paper book filed before us, where balance sheet of the assessee company has been annexed it appears that the assessee company is having total reserves and surplus fund to the tune of Rs.19,97,60,729/-. 62. However, we are of the view that Revenue has not established any nexus between the interest bearing funds and free advances so allegedly made by the assessee nor it has been proved that the assessee has diverted the funds for non-business purpose so as to deny interest expenditure. The impugned disallowance is merely on some assumption that it is diversion of interest bearing funds without any basis or justification. The Hon'ble Apex Court in the case of CIT v. Reliance Industries Ltd., 410 ITR 466 held that where interest free funds available with the assessee were sufficient to meet its investment and it could be presumed that the investments were made from the interest free funds available with assessee, therefore, there is no reason to deny the claim of the assessee. Hence, we delete the impugned disallowance of intere....
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.... year 2010-11 the assessee has advanced an amount of Rs.25,00,000/- to M/s Ruturaj traders for purchase of goods. However, the goods were not supplied and assessee could recover only Rs.8,50,000/-and the balance amount remaining outstanding of Rs.16,50,000/- is written off under Section 28 of the Act. During the Assessment Year 2011- 12 the assessee advanced a staff loan of Rs.1,85,490/-to one Jayash B Patel who was the site supervisor. However, as he left the job the amount could not be recovered and was written off as business loss under Section 28 of the Act. 68. On this aspect apart from considering the judgment passed by the Hon'ble Jurisdictional High Court we have carefully considered the records produced before us by the assessee. Upon consideration of the same the loss is found to be incurred during the course of conducting business by the assessee and therefore, the same can be allowed as business/trading loss under section 28 of the Act. With this observation we allow this ground of appeal raised by the assessee in both the appeals with the direction upon the Ld. AO to grant relief accordingly. 69. Deduction under section 80 GGB of the Act has been denied by the re....
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.... preferred by the assessee. 73. Now we take penalty appeals filed by the assessee and the Revenue against imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961. i) ITA No. 1966/A/2012 for AY 2007-08 ii) ITA No. 2765 /A/2015 for AY 2008-09 iii) ITA No. 199/A/2016 for AY 2009-10 iv) ITA No. 2706/A/2016 for AY 2010-11 74. In all the above appeals preferred by the Revenue penalty was levied under Section 271(1)(c) of the Act in respect of disallowance of claim of deduction under Section 80IA (4) of the Act which was in turn deleted by the Ld. CIT(A). Hence, the instant appeal before us. 75. We have heard the rival submissions made by the respective parties; we have also perused the relevant materials available on record. 76. Since we have already decided the quantum appeals preferred by the assessee granting relief of the claim of deduction under 80IA(4) of the Act, the penalty arising out of the said quantum proceeding automatically become infructuous. 77. However, we would like to note that the Ld. CITA has deleted the penalty on the ground that the assesses's claim is a bona fide one, all the particulars were ful....