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2023 (1) TMI 470
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....iled by the Assessee and three cross-appeals filed by the Revenue, pertaining to different assessment years, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), [in short "the ld. CIT(A)"], which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the "Act"]. 2. Since the issues involved in all these appeals are common and identical, therefore these six appeals of assessees and three cross-appeals of Revenue have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 3. Although, these appeals filed by the Assessees and Revenue, contain multiple grounds of appeals. However, at the time of hearing, we have carefully perused all the grounds raised by the Assessee as well as Revenue. We find that most of the grounds raised by the Assessee as well as Revenue are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of assessee and the Revenue as well. With this background, we....
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....A No.1910/Ahd/15, A.Y. 2010-11, Rs.33,65,220/- (iii) Land utilization charges/expenses (a)ITA No.1393/Ahd/10, A.Y. 2007-08, Rs.4,16,669/- (b) ITA No.1048/Ahd/12, A.Y. 2009-10, Rs.5,40,310/- (c) ITA No.1910/Ahd/15, A.Y. 2010-11, Rs.4,55,383/- (4) Learned CIT(A) has erred in law and on facts in confirming income computed by assessing officer under section 115JB of the Act, by making adjustments to the book profit: (a) ITA No.1393/Ahd/10, A.Y.2007-08 (b) ITA No.1048/Ahd/12, A.Y.2009-10 (5) Learned CIT(A) has erred in disallowing employees contribution towards ESIC of Rs.3,46,338/- ignoring the fact that same was paid before due date of filing of return on income. This ground is raised by the assessee in ITA No.2605/Ahd/2016 for assessment year 2012-13. (6) Initiation of levy of interest u/s 234B and 234C of the Act is not justified (a) ITA No.1393/Ahd/2010 for A.Y.2007-08 (b) ITA No.1048/Ahd/2012 for A.Y.2009-10 (7) Initiation of penalty u/s 271(1) (c) of the Act is not justified (a) ITA No.1393/Ahd/10, A.Y.2007-08 (b) ITA No.1048/Ahd/12, A.Y. 2009-10 ....
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....ue are that in assessee`s case under consideration, the assessment u/s 143(3) of the Act was completed on 26.12.2008, determining the total income at Rs.3,10,033/-. Subsequently on perusal of the case records, it was noticed that assessee-company has claimed deduction of Rs.2,58,47,697/- u/s 80IA(4) of the Act, which includes income of Rs.1,18,364/- derived from the Alang unit of the assessee-company, the work contract of which was awarded by some other person and executed by the assessee-company and the same was allowed by the Assessing Officer while finalizing the assessment u/s 143(3) of the Act, on 26.12.2006. Further, it was noticed that assessee-company has not fulfilled the conditions laid down for claiming deduction u/s 80IA of the Act and therefore the assessee was not eligible for deduction u/s 80IA(4) of the Act, in respect of profit derived from Alang unit of the assessee-company. Since the deduction of Rs.1,18,364/- claimed by the assessee was wrongly allowed by the Assessing Officer while finalising the assessment u/s 143(3) of the Act, there was an underassessment of income to the extent of Rs.1,18,364/-. Therefore, the case was reopened u/s 147 of the Act by issuing....
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.... that there is no infirmity in the reasons so recorded by the assessing officer. The Hon'ble Supreme Court in the case of Phul Chand Bajrang Lal and another vs. ITO 203 ITR 456, was considering the question of reassessment beyond the period of four years in the case of an assessee firm; and had held that in case of acquiring fresh information specific in nature and reliable, relating to the concluded assessment, which went to falsify the statement made by the assessee at the time of original assessment and, therefore, he would be permitted under the law to draw fresh inference from such facts and material. The Court also went to an extent of saying that there are two distinct and different situations where the transaction itself on the basis of subsequent information is found to be bogus transaction and in such event, mere disclosure of the transaction cannot be said to be true and full disclosure and the Income-tax Officer would have jurisdiction to reopen the concluded assessment. The Apex Court in the case of Phul Ghand Bajrang Lal (supra), observed as following: "...one has to look to the purpose and intent of the provisions. One of the purposes of Section 147 appe....
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....,74,450/- (i) ITA No.2605/Ahd/16, A.Y. 2012-13, NMC Unit Rs.1,62,84,844 /- 14. The contention raised by the assessee in the concise ground No.2 is that these above units are engaged in operating and maintaining solid waste management system and thus qualifying as infrastructure facility. That is, these units are engaged in developing infrastructure facility, hence eligible for deduction under section 80IA(4) of the Act and Ld. CIT(A) wrongly applied the amendment made in section 80IA(4) by Finance Act, 2009. 15. In order to adjudicate the issue relating to deduction under section 80IA(4) in respect of the above units, we take lead case of Alang Unit-assessment year 2010-11. The facts narrated by the assessing officer in respect of Alang Unit for assessment year 2010-11, are as follows: The assessee has claimed deduction u/s 80IA(4) of the I.T. Act of Rs,30,66,609/-. The assessee company has works contract of which was awarded by some other person and executed by the assessee company. Since the assessee company is not the owner of the project, deduction u/s 80IA(4) will not be allowable to the assesseecompany in respect of Alang Unit in view of the amended provision o....
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....slature was to lay down the condition regarding owning of the infrastructure facility by the undertaking than it would not have categories operating and maintaining of facility as separate category. It is pertinent to note that the intention of the legislature is very clear and therefore it categories separate category of operating and maintaining which can only be of the facility owned by others. It may be noted that operating and marinating of facility owned by the undertaking itself is otherwise covered under developing, operating and maintaining. It is therefore clear beyond doubt that undertaking which is engaged in the business of operating and maintaining infrastructure facility should be owned by Company and not that infrastructure facility should be owned by the undertaking. In view of above it is submitted that profits and gains derived by Alang unit is eligible for deduction u/s 80IA and we request your good self to please allow the same. It is submitted that even the amended explanation inserted vide, Finance Act (No,2) 2009 w.e.f. from 01-04-2000 which is reproduced hereunder does not come in way for claiming deduction under section 80IA in respect of Alang un....
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..... The Explanation of any section has to subserve the main provisions of the statute and it cannot be read to curtail it or override it. In the facts of the present case, the impugned explanation added with respect to section 80-IA(4) of the Act is a substantive amendment substantially curtailing the right of an assessee to claim the deduction under section 80-IA(4) of the Act, which was otherwise available to it. This retrospective amendment is thus unduly oppressive and confiscatory. It is also contended that the relief granted under the main provisions of the Act cannot be taken away by way of amendment with retrospective effect by substituting the Explanation. It is submitted that the explanation cannot override the main provisions. It is submitted that the newly inserted Explanation to section 80-IA(4) of the Act with retrospective effect from 01/01/2000 is ultra vires the Constitution of India, suffers from lack of legislative competence, violates fundamental rights of the Petitioner and also suffers from the vice of arbitrariness, unreasonableness, discrimination and it is a colourable exercise of legislative powers and therefore the same is in gross violation of Art....
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....eration & maintenance of Alang Facility" and not eligible for deduction u/s 80IA(4) of the Act. 7.3 The facts and arguments of the assessee remain the same, there is facts and law following the "rule of consistency", the issue is decided against the assessee following the decisions rendered by my predecessors in A.Y 2006-07, 2007-08 & 2009-10. Accordingly, the ground of appeal is hereby dismissed. 19. We also reproduce, the CIT(A)`s findings in respect of SMC unit, which is as under: "8. The AO has observed in Para 6 of the assessment order that the assessee has claimed deduction of Rs.27,40,226/- on profits derived by it from activity of developing of Municipal Solid Waste (MSW) site under a work order obtained through tender from Surat Mahanagar Seva Sadan (SMSS). The AO was of the view that since the assessee was not owner of the facility but only obtained a "works contract", it was not eligible for deduction as per amended, provision of 80IA w.e.f. 01.04.2000. As per the details filed by the assessee, an agreement was executed between GEPIL (assessee) and A.K, Patel & Co. (Const.) Pvt. Ltd. and SMSS on 23.04.2009 for approved of Rs.20,51,20,768/- towards co....
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....09-10 is followed. In view of this ground of appeal is dismissed." 20. We also reproduce, the CIT(A)`s findings in respect of NMC unit, which is as under: "Discussion and appellate decision: 9.4 After considering the submission and facts of the case, it is noticed that this issue has similar shades & contour as were relating to VMC & SMC. On the basis of same reasoning and following the precedent in its own case in A.Y 2009-10 when ld. CIT(A)-I, Surat has upheld the disallowance made by AO, I am of the considered view that following the rule of consistency & Hon'ble jurisdictional High Court decision (in SCA 11286/2009), the issue is covered against the assessee. Hence, the disallowance of Rs.1,40,21,149/- made by AO is hereby sustained. This ground of appeal is dismissed." 21. Aggrieved by the order of ld CIT(A), the assessee is in appeal before us. 22. The ld Counsel for the assessee, argues that assessee company claimed deduction of Rs. 30,66,609/- being profits derived from Alang Unit. The claim of deduction u/s 80IA(4) was supported by Form No. 10 CCB which was filed alongwith the return of income. The agreement with the Gujarat Maritime Board wa....
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....t and NMC unit, that these units were bogus and created by the assessee to defraud the revenue. None of these units fulfils the basic conditions for claiming deductions under section 80IA(4) of the Act. The ld DR, by taking an example of SMC unit, pointed out that assessee has claimed deduction of Rs.27,40,226/- on profits derived by it from activity of developing of Municipal Solid Waste (MSW) site under a work order obtained through tender from Surat Mahanagar Seva Sadan (SMSS). Since, the assessee was not owner of the facility but only obtained a "works contract", it was not eligible for deduction under section 80IA(4) of the Act. The ld DR cited identical examples for other units and states that assessee is not eligible to claim deduction under section 80IA(4) in respect of Alang unit, VMC unit, SMC unit and NMC unit. 24. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. In respect of Alang unit, we note that assessee entered into MoU with Gu....
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....under section 80IA(4) of the Act and therefore, we agree with the findings of the assessing officer. 26. On identical facts, our view is also fortified by the judgment of the Hon`ble Supreme Court in the case of M/S. DILIP KUMAR AND COMPANY & ORS, in CIVIL APPEAL NO. 3327 OF 2007, dated 30.07.2018, wherein it was held as follows: "52.To sum up, we answer the reference holding as under (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled." 27. Under the facts and circumstances as well as the legal position in the matter, as explained above, we do not find any merit in assessee`s appeal, as the assessee is not eligible to ....
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....ure thereof, schedule "L" of the notes on account, annexed to the audited accounts vide note no. (II)-(C) & (D) in which the accounting principle followed by the assessee is mentioned. The assessee-company is engaged in developing, operating and maintaining hazardous solid waste management and treatment and disposal. The waste is dumped into secured landfill which are the final grave, yard of solid waste. The major components of secured landfill are: a) Bottom Liner systems b) Side Liner systems c) Top Liner systems d) Leachel Collection systems and e) Ground Water Monitoring systems. The items at a), b), d) and e) have been completed at first stage and the expenses on the same have already been incurred. Top Liner system is made alter the waste is filled and compacted in the cell. The company has arrived at service charges as per tonne considering the cost estimated to be incurred on the Top Liner systems. As the cost of Top Liner system has already been built up into the revenue a view has been taken that based on the matching principle and mercantile system of accounting provision for the cost to be incurred on Top Liner system is required to be made in books to give true and fa....
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....r escapes the pit nor water from outside enters the pit. There are set legal norms/requirements for the design and operation of Secured Landfill Facility (SLF). The bottom liner system, side liner system, top liner or top cover system, leachate collection system are important and integral component of SLF. These are developed in phases for environmentally safe operation and maintenance. The landfill with Bottorn liner, side liner is developed first, the same shall be then utilized for disposal of wastes and then once completely filled, and the same shall be closed with top cover and subsequently maintained, The span of this operation depending on [he size of SLF ceil / pit and depending upon the waste receipt quantity. The copy of CPCB guidelines and CCA issued by GPCB to GEPIL, clearly indicating the legal obligations and responsibility of GEPIL of providing top cover as a part of ICHWTSDF operations is annexed as annexure-1.The "Landfill waste disposal charges" towards the waste treatment and disposal is paid, when the waste is sent by member unit to ICHWTSDF. This charge includes cost towards the landfill bottom and side liner construction cost, top cover construction cost, land....
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....l utilization charges. It may please be appreciated that it is established law under Income Tax. This method is being consistently followed in the industry carrying on the business of Hazardous Wastes Treatment, Storage and Disposed Facility. The problem of the tax treatment where an assessee has yet to carry out some obligation at the end of the year has been examined by the three judge Bench of Supreme Court in the case of Calcutta Co. Ltd. vs. CIT (1957) 37 ITR 1 (SC) which has laid down certain fundamental principles for deduction of accrued liability to be discharged at a future date. Hon'ble Apex Court while deciding the appeal in favour of the assessee held that "The expressions "Profits and Gains' should be understood in its commercial sense and there can be no computation of profits and gains until the expenditure which is necessary for the purpose of earning the receipts is deductible there from, whether the expenditure is actually incurred or the liability in respect thereof has accrued even though it may have to be discharged at some future date. Without prejudice to above, we have to further submit that the provision for expenses for top cover attributable to t....
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....when the goods/services/utility pertaining to such expenditure is in fact received by the businessman and for which either the payment is actually made or an enforceable liability towards the supplier is created for such goods/services/utility. Merely because in future as per statutory requirement assessee will have to incur this expense does not mean that the expenditure has actually been incurred. (ii) It is undisputed fact that during the year under assessment the assessee company has neither received any goods/services/utility in respect of this expenditure nor made any payment for that nor any enforceable liability has been created in favour of a supplier of such goods/services/utility. Hence no expenditure is in fact incurred. The deduction is claimed only in respect of contingent expenditure which may be or may not be incurred in future. It is a well-established law that such type of contingent liability expenditure is not an allowable expenditure from the total income. (iii) In this regard support is found in the Apex Court's decision in the case of New India Mining Corporation Ltd. The above views have been affirmed by the Hon'ble Supreme Court in the case la....
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....lowed. Further, it is also found that the assessee has shown provision for post monitoring Expenses of Rs.1 ,92,46, 474/- in its balance sheet and out of which expenses claimed during the year aggregates to Rs.33,65,220/- for post monitoring which is also not actually incurred but it is simply a provision for a future expense. Hence, this expenditure is also disallowed for the reasons mentioned herein above. Hence total disallowance on this account is of Rs.88,61,746/- (Rs.54,96,526 + Rs.33,65,220/-. The assessee has deliberately claimed this wrong expenditure which is not at all allowable as per the well-established law. 34. About Land Utilization expenses, the assessing officer noted that on verification of the Profit & Loss account, that the assesses has debited a sum of Rs.5,60,870/- on account of land utilization. In fact, no such expenditure is incurred by the assessee but it is sort of depreciation on land. Under Income-tax law, no depreciation is allowable on land. The assessee has claimed this item as on expenditure but it is a depreciation in disguise. When asked to justify this expenditure, the assessee has made submission which is reproduced as below: "As re....
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....bmission, which is reproduced below: "Assessee made the provisions for top liner expenses of Rs.54,96,526/-, post monitoring expenses of Rs. 33,65,220/- and land utilization expenses of Rs. 5,60,870/-. Assessee made the provision following the mercantile method of accounting which envisages matching principle. When the receipt is considered as income, the corresponding expenses should be considered as revenue expenditure. Assessing officer reproduced accounting principle adopted by the assessee at para no. 10.2 of the assessment order. Assessee filed the detailed submission vide letter dated 27.02.2013 justifying the allowability of provisions for top cover expenses and post monitoring expenses. The assessing officer disallowed the expenses on the ground that no such expenses have been incurred by the assessee considering the fact that assessee didn't receive any service for the expenditure during the year under consideration relying on the decision of Supreme Court in case of New India Mining Corporation Pvt. Ltd. v/s. CIT (2000) 243 ITR 640. The ld. CIT(A) confirmed the addition on the basis of the order of CIT(A) of the earlier year. It is to be noted that the ....
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....d by the assessing officer. We note that after using the land for Solid Waste Management, as per assessee this land will be of no use and, therefore, a certain percentage of the cost of land is charged to Profit and loss account as land utilization expenses. However, this is nothing but just depreciation. What is debited is part of cost of land which is a capital expenditure and, therefore, cannot be allowed as deduction. 40. Hence, we confirm the following findings of ld CIT(A), which is reproduced below: "10.1 The ld. AO stated in para 10.3 of the assessment order that the assessee has claimed deduction for '"provision for Top cover" at Rs.54,96,526/-. The assessee furnished its explanation which was not found acceptable, therefore for the reason given in para 10.4 (1) to (iv) of the assessment order and after relying on the decision of Apex Court in the case of New India Mining Corp. Pvt. Ltd. vs. CIT (2000) 234 ITR 640 (SC) disallowed the expenditure being in the nature of provision and not actually incurred. The made disallowance of Rs.88,611,746/- (54,96,526 + 33,65,220) and added to the total income. 10.2 The AO noticed that as has debited Rs.5,60,870//-....
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.... (b) ITA No.1048/Ahd/12, A.Y.2009-10" 44. We have heard both the parties. Learned Counsel for the assessee submits that assessing officer must make adjustment in the book profit only as per the provisions of section 115JB of the Act, for that ld Counsel relied on the judgment of Hon`ble Supreme Court in the case of Apollo Tyres Limited Vs. CIT 255 ITR 273(SC). On the other hand, learned DR for the Revenue reiterated the stand taken by the assessing officer. We note that while making adjustment in the book profit, the assessing officer must adhere with the provisions of section 115JB of the Act, therefore, we direct the assessing officer to make adjustment in the book profit as per the provisions of section 115JB of the Act. For statistical purposes the ground raised by the assessee is allowed. 45. In the result, the concise and summarized ground No.4 of appeals of Assessee, is allowed for statistical purposes. 46. The concise and summarized ground No.5 of appeals of Assessee, is reproduced below: (5) Learned CIT(A) has erred in disallowing employees contribution towards ESIC of Rs.3,46,338/- ignoring the fact that same was paid before due date of filing o....
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....re concerned with and enact different conditions, that the tax adjudicator has to enforce, and the assessee has to comply with, to secure a valid deduction. 32. The scheme of the provisions relating to deductions, such as Sections 32- 37, on the other hand, deal primarily with business, commercial or professional expenditure, under various heads (including depreciation). Each of these deductions, has its contours, depending upon the expressions used, and the conditions that are to be met. It is therefore necessary to bear in mind that specific enumeration of deductions, dependent upon fulfilment of particular conditions, would qualify as allowable deductions: failure by the assessee to comply with those conditions, would render the claim vulnerable to rejection. In this scheme the deduction made by employers to approved provident fund schemes, is the subject matter of Section 36 (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Section 36(1)(va) was specifically inserted by the Finance Act, 1987, w.e.f. 01-04-1988. Through the same amendment, by Section 3(b), Section 2(24) - which defines vari....
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....ifferent clauses of Section 36 (1). All these establish that Parliament, while introducing Section 36(1)(va) along with Section 2(24)(x), was aware of the distinction between the two types of contributions. There was a statutory classification, under the IT Act, between the two. 35. It is instructive in this context to note that the Finance Act, 1987, introduced to Section 2(24), the definition clause (x), with effect from 1 April 1988; it also brought in Section 36(1)(va). The memorandum explaining these provisions, in the Finance Bill, 1987, presented to the Parliament, is extracted below: "Measures of penalising employers mis-utilising contributions to the provident fund or any funds set up under the provisions of the Employees State Insurance Act, 1948, or any other fund for the welfare of employees - 12.1. The existing provisions provide for a deduction in respect of any payment by way of contribution to the provident fund or a superannuation fund or any other fund for welfare of employees in the year in which the liabilities are actually discharged (Section 43B). The effect of the amendment brought about by the Finance act, is that no deduction will be allow....
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....n 43B, in Allied Motors. The court held, after setting out extracts of the Budget speech of the Finance Minister, for 1983-84, that: "Section 43B was, therefore, clearly aimed at curbing the activities of those tax-payers, who did not discharge their statutory liability of payment of excise duty, employer's contribution to provident fund, etc., for long periods of time but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year. It was to stop this mischief that Section 43B was inserted." 39. Original Section 43B(b) enabled the assessee/employer to claim deduction towards contribution as an employer, "by way of contribution to any provident fund". The second proviso was substituted by Finance Act, 1989 with effect from 01.04.1989 and read as under: "...Provided further that no deduction shall in respect of any sum referred to in clause (b) be allowed unless such sum has actually been 22 paid in cash or to by issue of a cheque or draft or by any other mode on or before the due date as defined in the explanation below Clause (va) of sub-section (1) of Section 36....
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....n to any provident fund or superannuation fund or any other fund for the welfare of the employees shall be allowed in computing the income of the year in which such sum is actually paid. In case the same is paid before the 23 due date of filing the return of income for the previous year, the allowance will be made in the year in which the liability was incurred. These amendments will take effect from 1st April, 2004 and will accordingly apply in relation to the assessment year 2004-05 and subsequent years." 41. The Notes on Clauses inter alia, reads as follows: "It is also proposed to amend the first proviso to the said section so as to omit the references of clause (a), clause (c), clause (d), clause (e) and clause (f) which is consequential in nature. It is also proposed to omit the second proviso to the said section. These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-2005 and subsequent years." 42. The rationale for introduction of Section 43B was explained by this court in M.M. Aqua Technologies Ltd. vs. Commissioner of Income Tax, Delhi: 16 "19. The object of Section 43B, as originally e....
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....ce, Section 43-B was inserted with effect from 1-4-1984, by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under Section 43-B, it became mandatory for the assessee(s) to account for the aforestated items not on mercantile basis but on cash basis. This situation continued between 1-4-1984 and 1-4-1988, when Parliament amended Section 43-B and inserted the first proviso to Section 43-B. 11. By this first proviso, it was, inter alia, laid down, in the context of any sum payable by the assessee(s) by way of tax, duty, cess or fee, that if an assessee(s) pays such tax, duty, cess or fee even after the closing of the accounting year but before the date of filing of the return of income under Section 139(1) of the Act, the assessee(s) would be entitled to deduction under Section 43-B on actual payment basis and such deduction would be admissible for the accounting year. This proviso, however, did not apply to the contribution made by the assessee(s) to the labour welfare funds. To this effect, the first proviso stood introduced with effect from 1-4-1988. *** 15. By the Finance Act, 2003, the amendment made in th....
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.... sought to be amended by bringing about a uniformity in tax, duty, cess and fee on the one hand vis-à-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003 is retrospective in operation. Moreover, the judgment in Allied Motors (P) Ltd. [(1997) 3 SCC 472 : (1997) 224 ITR 677] was delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that the Finance Act, 2003 will operate retrospectively with effect from 1-4-1988 (when the first proviso stood inserted). 23. Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that the Finance Act, 2003, to the above extent, operated prospectively. Take an example, in the present case, the respondents have deposited the contributions with RPFC after 31st March (end of accounting year) but before filing of the returns under the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on t....
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....the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Section 43B of the Act. In our view, therefore, Finance 27 Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1st April, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003". 46. A discussion on the Principles of interpretat....
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....cter against any other provision of general application. It declares that within the sphere allotted to it by the Parliament, it shall not be controlled or overridden by any other provision unless specifically provided for. Out of the allowable deductions, the legislature consciously earmarked certain deductions from time to time and included them in the ambit of Section 43B so as to subject such deductions to conditionality of actual payment. Such conditionality may have the inevitable effect of being different from the theme of mercantile system of accounting on accrual of liability basis qua the specific head of deduction covered therein and not to other heads. But that is a matter for the legislature and its wisdom in doing so. 22. The existence of Section 43B traces back to 1983 when the legislature conceptualised the idea of such a provision in the 1961 Act. Initially, the provision included deductions in respect of sum payable by Assessee by way of tax or duty or any sum payable by the employer by way of contribution to any provident fund or superannuation fund. It is noteworthy that the legislature explained the inclusion of these deductions by citing certain pract....
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....e construed strictly, and that there is no room for equitable considerations. 49. That deductions are to be granted only when the conditions which govern them are strictly complied with. This has been laid down in State of Jharkhand v Ambay Cements 21 as follows: "23.... In our view, the provisions of exemption clause should be strictly construed and if the condition under which the exemption was granted stood changed on account of any subsequent event the exemption would not operate. 24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the industrial policy and the exemption notifications. 25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule. 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe co....
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....er decision, a Bench of five Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute: '(i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing 22 Commissioner of Income Tax v. Ace Multi Axes Systems Ltd., 2018 (2) SCC 158 23 Commissioner. of Customs v. Dilip Kumar & Co, 2018 (9) SCC 1. 31 unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly.'" 51. The analysis of the various judgments cite....
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.... is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of "income" amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time - by way of contribution of the employees' share to their credit with the relevant fund isto be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers' contribution (Section 36(1)(iv)) and employees' contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out-goings forming part of the assessees' liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, ....
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.... case of employees' contributions-which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such 34 interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, h....
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.... hearing, hence we dismiss above grounds of appeal, as not pressed. 58. Concise and summarised grounds of appeal of Revenue, in case of Gujarat Enviro Protection and Infrastructure Ltd (PAN No.AABCG3746K), assessment year-wise, is reproduced below for ready reference: (1) On the facts and circumstances of the case and in law, the ld CIT(A) has erred in deleting the addition made on account of disallowance of claim under section 80IA(4) of the Income Tax Act, in respect of the following units: (i)ITA No.1236/A/12, A.Y. 2009-10, Gabheni Unit, Rs.15,35,59,562/- (ii) ITA No.2250/A/15, A.Y. 2010-11, Gabheni Unit, Rs.19,32,33,992/- (iii) ITA No.2521/A/16, A.Y. 2012-13, Gabheni Unit, Rs. 1,42,35,127/- (iv) ITA No.2521/A/16, A.Y. 2012-13, Co-Processing Unit, Rs. 1,25,70,515/- (v) ITA No.2521/A/16, A.Y. 2012-13, Palsana Unit, Rs. 6,50,77,043/- 59. Brief facts qua the issue of allowability of 80IA deduction claimed by assessee on account of income earned from the Gabheni Unit, Surat, is as follows: The assessee has claimed deduction u/s 80IA of the Act on the income earned from the Gabheni Unit for Rs.19,32,33,992/-. The Gabheni Uni....
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....ble to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. -[Explanation. - For the purposes of this clause, "infrastructure facility" means - (a) a road including toll road, a 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];) 60. The assessing officer, from the above contents of the section 801A(4) observed that any assessee who wants to claim the deduction has to fulfil the three conditions. The first condition is the infrastructure facility should be owned by the assessee and the Gabheni unit of the assessee qualifies this condition as it was formed by the investment made by the assessee himself. Third, condition is the infrastructural facility should have started operating & maintaining before 1995. The assessee Gabhen....
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....conditions of MoU (Annexure-II), under heading work delivery, it is specifically mentioned that ICHWMF shall design and construct facility > Vide clause 3.11 of conditions of MoU ( Annexure-II), it is reiterated that the ICHWFM shall design and construct the project > Vide clause 5.1 of the conditions of MOU (Annexure-II) under the heading operations, ICHWMF (i.e Company's Ghabeni Unit) has to operate and maintain facility > Under the heading life of TSDF(ICHWMF) in annexure-II of MoU, it is agreed amongst parties that " The ICHWMF" has the right and obligation to conduct and operate the project for the period commencing on the commencement date 30.06.2001 and ending nearly on the day 30 years after the practical completion date" > It is pertinent to mention that MOU entered into by the company with MOEF and G1DC is exhaustive agreement for developing, operating and maintaining integrated common hazardous waste management facility (ICHWMF), containing therein detail terms and conditions and on basis of which financial assistance of Rs.2.00 cr is granted vide this MoU > It is clear from the above that the Gabheni Unit 01 company have ....
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....stance. E. MoEF after careful examination of the project proposal and need for financial assistance has agreed to contribute to an extent of Rs. 200 lakh (Rupees Two hundred lakh only ) for Phase-11 of the project comprising of (i) Construction of secured landfill cell-2 and 3, (ii)Procurement of collection/transportation/monitoring equipment. F. The MoEF shall make the payments to GIDC and GIDC shall disburse its payments to ICHWMF (GEPIL) in accordance with the provisions set forth in this MoU and those stated in the Sanction Order." 63. Ongoing through the contents of the above agreement, the assessing officer observed that ICHWMF (Integrated common hazardous waste management facility) has approached the MOEF directly as well as through GPCB for financial assistance for establishment of further provisions in the facility under Phase-II. It is also mentioned on the first page of the MOU that MOEF after careful examination of the project proposal and the need for financial assistance has agreed to contribute to an extent of Rs.200 lakh for Phase-II of the project comprising of: (i) Construction of secured land fill cell-2 and 3. ....
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.... 5. Assessee has stored certain hazardous waste beyond 90 days in the site. 6.Assessee has kept the drums of solid wastes on the PDF dumping site (cell) which is not supposed to be stored at this place. 65. Earlier while scrutinizing the similar issue in the immediately preceding year i.e. A.Y. 2009-10, the then AO noticed that the activities of GEPIL were not upto the mark or requirement specially in treating, the hazardous waste and GEPIL has failed to fulfil the status of solid waste treatment plant eligible for deduction u/s 80IA and the conditions as laid down under section 80IA are not fulfilled by GEPIL. The newspaper reports published at the time were also taken into consideration and were made part of the order of the A.Y. 2009-10 and are also forming of this order as per Annexure which is annexed at the end of order. The then AO was of the view- point that these observations of the GPCB are clearly indicating that assesses was violating the environmental norms and not treating the waste properly as required by the Law. The section 80IA deduction is for the infrastructure facility which fulfils the norms of solid waste treatment plant. When infrastructural fa....
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....ntamination of drum The activity of De-contamination of Drum is carried out regularly. GPCB during their 8 visit in last 12 months have witnessed the activity of decontamination of Drum. Recently at the instruction of RO, GPCB, Surat more than 400 decontaminated drums have bene donated to Forest Department for tree plantation. 4 ou are not operating ETP regularly • ETP plant is being operated regularly. • ETP is 60 KLPD capacity and is a batch process. Our batch process is carried out as penalty Scheduled hours. It might be a case that during your visit the batch process was not taken up which led you to draw the conclusion that ETP is not operated regularly. • ETP has been modified as penalty instructions and in consultation with GPCB. • Our operational records are duly audited by Environment Auditors and reports are also submitted to GPCB. • GPCB during their 8 visit in last 12 months have witnessed that ETP was operating during above visits. 5 You have stored certain hazardous waste beyond 90 days in the site. • Only 50 drums containing residue from Co-processing facility are....
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....OU entered into by the Assessee with MOEF and GIDC is an exhaustive agreement whereby Assessee have to develop, operate and maintain Integrated Common Hazardous Waste Management Facility (ICHWMF). This MOU also prescribes detailed terms and conditions and on basis of which financial assistance of Rs.2.00 crores was granted. The AO has erred in treating it just a subsidy agreement, which was wrong. The ld CIT(A) also held that assessee has committed some minor irregularities and the same should not be considered for disallowance of deduction under section 80IA(4) of the Act. 68. Learned Counsel for the assessee submits written submission before the Bench, which is reproduced below: "Disallowances of deduction claimed u/s. 80IA(4) of Rs.19,32,33,992/- in respect of profit and gains from Gabheni Unit. Facts: In the return of income, assessee claimed the deduction u/s. 80IA(4) of Rs. 21,30,61,976/- which includes income of Rs. 19,32,33,992/- derived from the Gabheni Unit. The claim of deduction u/s 80IA(4) was supported by Form No. 10 CCB which was filed alongwith the return of income. The company has entered into an agreement with MoEF and Gujarat Industr....
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.... Pollution control board (in brief GPCB) are clearly indicating that assesses was violating the environmental norms and not treating the waste properly as required by the Law. The assessee`s activities were came into limelight recently due to allegation and agitation of the local habitants that without treating the hazardous waste received from the industry assessee through underground pipe line discharging waste in to outside the premises. Due to this untreated hazardous waste effects on health of animals and habitants placed in and around the facility. In this scenario Gujarat Pollution control board has taken up enquiry and came with findings and asked the facility to stop its activities and take up corrective steps to make it fit for treatment of hazardous waste. Therefore, assesse is not entitled to claim deduction u/s 80IA(4) of the Act. 70. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel, we find that assessee has not fulfilled the conditions for claiming deduction under section 80IA(4) of the Act. It is no doubt true that in all cases in which a receipt is sought to be taxed as ....
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....cer. 72. The Assessing Officer also noted that assessee`s activities were came into limelight recently due to allegation and agitation of the local habitants that without treating the hazardous waste received from the industry, the assessee through underground pipe line discharging waste in to outside the premises. Due to this untreated hazardous waste effects on health of animals and habitants placed in and around the facility. In this scenario Gujarat Pollution control board has taken up enquiry and came with findings and asked the facility to stop its activities and take up corrective steps to make it fit for treatment of hazardous waste. The findings of the GPCB during their inspection are as follows: (1) Assessee has provided underground pipelines for discharge of wastes, from hazardous waste storage yards in your premises, leading to GIDC effluent pipeline near Unn khadi, outside your premises. (2) Assessee has failed to operate the co-processing plant as per the legal requirements as result of which hazardous waste in excess quantity is accumulated beyond prescribed time limits under the rules. (3) Assessee was not carrying decontamination of dr....
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....ble to income-tax proceedings. Meaning thereby, acceptance of claim of the assessee, in past by the department has no bearing in this assessment year. We note that assessee has failed to comply status of solid waste treatment plant in the year under consideration and that is why the assessing officer has denied the deduction under section 80IA(4) of the Act. In view of above discussion, the decision of Assessing Officer should be upheld. 75. We note that assessee has not followed procedure for establishing Solid Waste Management System and ld CIT(A) allowed the deduction based on deemed agreement Concept. At this juncture, it is appropriate to quote the important para of the order of ld CIT(A), which reads as follows: "6.1.......As discussed, in the above cited case, deduction was not granted to the assessee because assessee had not entered into an agreement with the State/Central Govt. but for the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the there is no formal GPCB has issued an State Govt. Similar is the situation here, as per AO agreement with Central/State Govt., however the authorization....
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....(2004) 10 SCC 201]", for brevity). In the later decision, a Bench of five Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute: '(i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly.'" From the above judgment, it is abundantly clear that a taxing statute cannot be interpreted on any presumption or assumption. Hence deduction under sectio....
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....ese facts, we confirm the findings of the assessing officer, and allow the following appeals of Revenue: (i) ITA No.1236/A/12, A.Y. 2009-10, Gabheni Unit, Rs.15,35,59,562/- (ii) ITA No.2250/A/15, A.Y. 2010-11, Gabheni Unit, Rs.19,32,33,992/- (iii) ITA No.2521/A/16, A.Y. 2012-13, Gabheni Unit, Rs. 1,42,35,127/- 81. Now we shall take ITA No.2521/AHD/2016, A.Y. 2012-13, Co-Processing Unit, Rs. 1,25,70,515/-, appeal of the Revenue: 82. Brief facts qua the issue are that assessee has claimed deduction under section 80IA of the Act on the income earned from the Co-processing unit, for Rs.1,25,70,515/-. The Co-processing unit, Surat involved in the business of developing operating and maintaining solid waste management system. In the solid waste management system, assessee was claiming that he was dealing with Hazardous waste generated from the local industries at Surat. In the form 10CCB report, the assessee has mentioned that local/state authorities from whom approval taken was mentioned as Gujarat Pollution Control Board (GPCB). The assessing officer noted that assessee company has works contract of which was awarded by some other person and executed by....
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....proval to this unit, therefore ld CIT(A) has correctly allowed deduction under section 80IA(4) of the Act. 86. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 87. We have heard both the parties. We note that as per the amended provision of Explanation to Section 80IA of the I.T. Act, deduction u/s 80IA(4) of the I.T. Act shall not be allowable to an assessee engaged in the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility, the nature of a work contract awarded by any person [including the Central, or State Government] and executed by the undertaking or enterprise referred to Section (1) of Section 80IA. The assessee is executing only a works contract, therefore not eligible for deduction under section 80IA of the Act. Moreover, the assessee has not entered into an agreement with the Central Government or a State Government for developing, maintaining and operating a new infrastructure facility. The legal precedents, which we have cited in case o....
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....ructure facility. Therefore, as per the amended provision of Explanation to Section 80IA inserted by the Finance Act (No.2) 2009 with retrospective effect from 01.04.2000, the deduction under section 80IB(4) claimed by the assessee from the profits and gains of Palsana Unit of the assessee company is not allowable and hence the same was disallowed. 90. On appeal, ld CIT(A) deleted the disallowance of deduction under section 80IA(4) of the Act. Aggrieved, the Revenue is in appeal before us. 91. Learned DR for the Revenue, has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 92. The ld Counsel for the assessee, submitted before us written submission, which is reproduced below: "In the return of income, assessee claimed the deduction u/s 80IA(4) of Rs.11,39,41,979/- which includes income of Rs. 6,50,77,043/- derived from the Palsana Unit. The claim of deduction u/s. 80IA(4) was supported by Form No. 10 CCB which was filed alongwith the return of income. Assessee company applied for the authorization from GPCB and in turn GPCB agreed to grant authorization ....