TaxTMI 
TaxTMI 
2022 (1) TMI 1276
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....and PMGSY Patna project wherein roads have been developed in Bihar. The assessee earned total profit of Rs.36,14,02,300/- and claimed the same as deduction u/s 80IA of the Income Tax Act, 1961. 3. Aggrieved with the confirmation of disallowance of deduction by the ld. CIT(A) who held that the assessee is not engaged in the business of infrastructure facilities and the assessee in fact a contractor, the appeal has been filed before the Tribunal. 3.1 At the outset, we find that this issue has been adjudicated in favour of the assessee and the deduction has been held to be allowable vide the orders of the Co-ordinate of the ITAT for the A.Ys. 2000-01, 2001-02, 2003-04, 2005-06. For the sake of ready reference, the relevant portion of the order of the ITAT in the combined order in ITA No. 977/DEL/2010 for A.Y 2004-05 and ITA No. 2220/DEL/2011 for A.Y 2005-06 dated 30.01.2020 is reproduced below: "36. Ground No. 2 relates to the deletion of disallowance of deduction u/s 80IA of the Act amounting to Rs. 26.71 crores made by the Assessing Officer. 37. The claim of deduction came up for adjudication for the first time in Assessment Year 2000-01 and the co-ordinate b....
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....relied upon that appellant was developing infrastructure facility and claimed deduction u/s 80IA in respect of income derived from the development of infrastructure facilities. Explanation inserted below section 80IA(13) does not prevent developers in claiming deduction u/s 80IA(4). Similarly showing the receipts as work receipts in the books of accounts of the appellant alone cannot determine the character of the appellant which in our opinion was that of development. The argument of revenue that infrastructure facility should be owned by the appellant is also misplaced in view of ITO vs. Cable 24 Constructions 354 ITR 13 (Guj.) and various decisions relied upon by the Ld. Counsel for the appellant. We also note that the Ld. CIT (DR) tried to raise issues which were not even the case of the assessing officer and this in our considered opinion is clearly impressible. Case laws relied by the revenue are clearly misplaced on facts and are clearly distinguishable. Special bench decision in the case of B. T. Patil (Mum.) 126 TTJ 577 was recalled later on as it did not consider the binding decision of Hon'ble Bombay High Court in the case of ABG 322 ITR 323 (Bom). According to the asses....
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....Officer was of the opinion that certain portion of the administrative expenses should go towards earning of exempt income and, accordingly, attributed the administrative expenses towards earning of dividend income in proportion to tax free income to total receipts and computed the disallowance of Rs. 28.04 lakhs. 14. The assessee carried the matter before the ld. CIT(A) but without any success. 15. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 16. Per contra, the ld. DR strongly supported the findings of the Assessing Officer. 17. We have given thoughtful consideration to the orders of the authorities below. At the very outset, we have to state that Rule 8D of the Rules has been held to be applicable from Assessment Year 2008- 09. Therefore, for the year under consideration, there is no formula to compute the disallowance. However, at the same time, we are of the view that reasonable expenditure should be disallowed for earning exempt income. Though the Assessing Officer has attributed the administrative expenses on the ratio of the tax free income to total receipts and computed the disa....
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....rofit from foreign entities. 11. The ld. CIT(A) enhanced this amount to the tune of the total amounts earned from the foreign projects. 12. The ld. CIT(A) while enhancing held that the assessee is a resident of India and due to the state of residency the India has inherent right to tax global income of an assessee as per provisions of section 5 of the IT Act. Sub-clause-(c) of Clause(1) to section 5 provides that total income of any previous year of a person who is a resident includes all income from whatever source derived which accrues or arises to him outside India during such year. As per provisions of the Act the appellant is a resident assessee of India and because of this income from all sources derived by the appellant within India or outside India has to be included in its total income for taxation purposes in India. Due to state of residency, India has inherent right to tax the global income of the appellant as per provisions of section- 5. As per India's existing DTAA's, India has adopted credit method whereby the global income of a resident tax payer is considered which includes income accruing or arising outside India as well, even though on such income a more be....
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....usive right in case there exist a permanent establishment. The phrase used 'may be taxed'. Therefore, the combined reading of the sentences of Article 7 of relevant DTAA means that the state of source has non-exclusive right to tax business income attributable to permanent establishment. In view of this, such income may be taxed as per the domestic laws. This nonexclusive right of state of source does not extinguish the inherent right of state of residency to tax global income of its residents. In the circumstances, where the state of the residents of the taxpayer has given up its inherent right to tax the global income, in such situation, the phrase used in Article 7 of the DTAA is 'shall be taxable only'. Since in all the DTAA applicable in the case of appellant the phrase used is 'may be taxed', therefore, inherent right of taxation of global business income in India is not lost. The fiscal domicile of the appellant had to be decided in view of the provisions of Treaty. Appellant's contention that its foreign income is taxable income in foreign countries and it cannot be taxed in India is an untenable contention. It is a fallacious view taken by th....
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....ct and credit for taxes paid in the host countries i.e. Malaysia of Malaysian Ringgets of 2,783,105.90 after converting the same in Indian Rupees as on 31.03.2006 should be allowed. Accordingly, the income to the extent of Rs.12,26,84,796/-has been enhanced. 13. The ld. CIT(A) has also held that this amount is required to be taxed both under normal provisions and MAT provisions. This issue has been adjudicated by the Tribunal in ITA No.2596/Del/2004 for the A.Y. 2000-01 and also in ITA No.1825/Del/2005 dated 31.10.2019 and allowed in favour of the assessee. The relevant part of the order of the Tribunal is as under: "22.2 The Assessing Officer held that adjustment can be made only as provided in Explanation to section 115J as decided by the Hon'ble Supreme Court in the case of Apollo tyres Vs CIT (2002) 255 ITR 273 (SC). According to him, exclusion of DTAA is not provided in that explanation. The Ld. CIT(A) confirmed the action of the Assessing Officer. 22.3 Before us the Ld. Counsel of the assessee submitted that issue in dispute is covered in the favour of the assessee by the decision of the Tribunal in the case of the assessee for assessment year 200001, whe....
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....rovision is an allowable expenditure. 16. It was submitted that the provision for maintenance expenditure is provided to cover the company's expenditure to liability towards defect rectification and/or maintenance incurred by the company after completion of the contract. Such provision is made taking into account contractual provisions, operating turnover for the year, type of project, period of maintenance, contractual obligations of the subcontractors and other relevant factors, if any. As per the agreement with the client, the company is liable to maintain the works executed by it even after the projects are completed and handed over to the clients, for a period of 12 or 24 months from the date of completion. During this period, all the defects are to be rectified free of cost even though the Company has already handed over completed project to the client. The total project cost i.e. contract receipts, have already been received from the client in respect of the said projects before handing over the same to the client and no separate consideration is receivable. During the year an amount of Rs.2,27,42,328/- has been provided for non-DTAA project and Rs.7,18,000/- for DTAA....
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....n assessee's appeal in ITA 2401/Del/2013. ITA No. 27/Del/2013: A.Y. 2007-08 (Assessee): Prior period Expenses: 21. The Assessing Officer disallowed Rs.43,52,514/- under the head "prior period expenses". Out of which, the ld. CIT(A) held that expenses amounting to Rs.14,21,524/- were crystallized during the year and confirmed the balance amount of Rs.29,30,972/-. Since, the decision of the ld. CIT(A) is based on factual verification for the year in question, we hereby decline to interfere with the decision of the ld. CIT(A). Income through PE & 115 JB: 22. This issue has been adjudicated above in ITA No.2401/Del/2013 A.Y. 2006-07, hence the same ratio applies. The appeal of the assessee on this ground is allowed. ITA No. 528/Del/2013: A.Y. 2007-08 (Dept.): Disallowance of Deduction u/s 80IA: Prior period Expenses: 23. These issues is akin to the grounds adjudicated above in ITA No.2401/Del/2013 A.Y. 2006-07, hence the same ratio applies. The appeal of the revenue on these grounds is dismissed. Technical Know-how: 24. This issue has been adjudicated in ITA No. 2443/Del/2013: A.Y. 2008-09, hence the same ratio applies. The appeal of the revenue on this....
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....paid any interest during the year. Further, the appellant pleaded that under Rule 8D(2)(iii), average of 'net current assets' may be taken in place of average of 'total assets.' 28. The ld. CIT(A) held, "that there is no doubt that the appellate company is a cash-rich company and the Ld. AO had himself admitted in the assessment order that the appellant company had own funds comprising share capital and reserves aggregating to Rs.9,48,931 million against which the current assets and investment stood at Rs.3,910 million and 2455 million respectively. There is no doubt that the appellant company-had adequate cash balance available for making the investment in tax free bonds. I find that the Ld. AO was not satisfied with the explanation of the appellant as to why no disallowance was made in respect of expenses relatable to tax exempt interest income, on the grounds that expenses like salary, employee welfare, postage, telecom, conveyance etc. are common expenses which may have nexus with earning of dividend income. I also observe that the Ld. CIT(A)-XIII, while deciding the appeal for 2005-06, had estimated disallowance of salary in respect of certain offic....
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....)(ii). On the 2nd issue, the appellant's contention that for making such disallowance ought to have taken average of 'net current investment' and not the 'total assets', is not supported by the provisions of Rule 8D which call for taking average of total assets as per the books of the assessee as on the first day and the last day of the Previous Year. The AO is accordingly, directed to recompute the disallowance. 29. With the change in the legal proposition in the A.Y. 200809 onwards, we decline to interfere with the order of the ld. CIT(A). ITA No. 2443/Del/2013: A.Y. 2008-09 (Dept.): Provision of maintenance: 30. This issue is akin to the grounds adjudicated above in ITA No.2442/Del/2013 A.Y. 2006-07, hence the same ratio applies. The appeal of the assessee on this ground is allowed. Technical Know-how: 31. This amount of Rs.6,85,98,280/- which was treated as capital expenditure in nature by the revenue pertain to charges paid for services of survey and identifying villages as per PNGS, which requires preparing of DPR consultancy services for soil survey and other detailed activities required for the project. It was also informed ....
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....se of the assessee for the assessment year 2008-09 in ITA No. 2402/Del/2013 and the same ratio applies. With the change in the legal proposition in the A.Y. 2008-09 onwards, we decline to interfere with the order of the ld. CIT(A). ITA No. 2649/Del/2013: A.Y. 2010-11 (Dept.): Provision for Maintenance: 40. This issue has been adjudicated in ITA No. 2442/Del/2013: A.Y. 2006-07, hence the same ratio applies. The appeal of the revenue on this ground is dismissed. ITA No. 2563/Del/2014 : A.Y. 2011-12 (Assessee): Disallowance of deduction u/s 80IA: Income through PE & u/s 115JB: 41. These issues are akin to the grounds adjudicated above in ITA No.2401/Del/2013 for the A.Y. 2006-07, hence the same ratio applies. The appeal of the assessee on this ground is allowed. Disallowance u/s 14A: 42. During the year, the assessee earned tax free interest amount of Rs.1,36,47,143/-. This issue has been dealt in the case of the assessee for the assessment year 2008-09 in ITA No. 2402/Del/2013 and the same ratio applies. With the change in the legal proposition in the A.Y. 2008-09 onwards, we decline to interfere with the order of the ld. CIT(A). ITA No. 2650/Del/2014: A....