TaxTMI 
TaxTMI 
2023 (2) TMI 1390
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....of brevity and convenience, we have clubbed all of them together for the purpose of the adjudication. First, we take up ITA 939/AHD/2011, an appeal by the Revenue pertaining to the AY 2008-09 2. The Revenue has raised the following grounds of appeal: 1. The Ld.CIT(A)-XIV, Ahmedabad erred in law and on facts in deleting to disallowance of Rs. 33,63,180/- made by the Assessing Officer u/s. 14A of the Act. 2. The Ld.CIT(A), Ahmedabad erred in law and on facts in deleting to disallowance of Rs. 47,96,578/- made by the Assessing Officer u/s. 35D. 3. The Ld.CIT(A)-XIV, Ahmedabad erred in law and on facts in deleting to disallowance of Rs. 8,22,39,101/- made by the Assessing Officer out of excess claim of deduction u/s. 80iA(4) of the Act. 4. The Ld.CIT(A)-XIV, Ahmedabad erred in law and on facts in directing to re-compute the eligible deduction u/s. 80IA(4) after allocating the net interest among the different units and allow such deduction. 5. The Ld.CIT(A)-XIV, Ahmedabad erred in law and on facts in deleting the interest u/s. 234B of the Act. 6. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-....
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....f computing the total income under this Chapter no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part-of the total income under this Act:] [Provided Chat nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.] 2. The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form pan of the total income under this Act. 3. The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in rela....
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....ied with the correctness of the claim of expenditure made by the assessee or the claim made by the assessee that no expenditure has been incurred. in the absence of any satisfaction recorded by the AO in the assessment order for applying provision of section 14A(2), the disallowance made under Rule 8D (2)(iii) is not justified. Taking in to consideration the totality of the facts and circumstances of the case and the (written submission filed by the appellant in the course of assessment proceedings and also during the appellate proceedings and also the case laws cited, I hold that the AO is not justified in disallowing an amount of Rs. 37,63,180/-. Accordingly, the disallowance of Rs. 37,63,180/- is deleted. 6. The Ld. DR before us contended that the assessee has earned exempted income and therefore the disallowance needs to be made by the assessee of the expenses incurred in connection with such exempted income. However, the assessee has not made any disallowance of the expense against the exempted income. Thus, the AO has rightly made the disallowance under the provisions of section 14A read with rule 8D of Income Tax Rules. 7. On the contrary, the Ld. AR before us....
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....cer had worked out the disallowance of expenditure under section 14A of the Act read with Rule 8D to Rs. 1,02,82,049/-. The Tribunal, while restricting the disallowance to Rs. 55,604/-, relied on the decision of Delhi High Court in case of Joint Investments (P.) Ltd. v. CIT reported in 372 ITR 694 holding that disallowance of expenditure in terms of section 14A read with Rule 8D cannot exceed the exempt income itself. Our High Court has also adopted the similar view in case of Commissioner of Income Tax v. Corrtech Energy Pvt Ltd. reported in 372 ITR 97. 8.2 In view of the above, and after considering the facts in totality we hold that the disallowance has to be made as per the provisions of law and in the manner as discussed above against the exempted income in the given facts and circumstances. Hence, the ground of appeal of the Revenue is allowed. 9. The issue raised by the Revenue in ground No. 2 is that the Ld. CIT(A) erred in delete the addition made by AO of Rs. 47,96,578/- on account of preliminary expenses u/s 35D of the Act. 10. During the assessment proceeding, the AO was found that the assessee has claimed deduction of Rs. 47,96,578/- on account of preliminary ....
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.... before us. 17. At the outset, we note that the issue discussed above has been squarely covered by the judgment of Hon'ble Gujarat High Court in the case of CIT Vs Metrocom Industries Ltd. reported in 389 ITR 181 where it was held as under: "We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The appellant is a banking company. It filed its revised return of income for the AY 201011 on March 30, 2012 declaring total income at Rs. 7,90,10,18,157/-. As mentioned earlier, the question involved in this appeal is whether QIB can be regarded as "public" and whether the offer made to them can be regarded as "offer made to public" for the purpose of section 35D of the Act. In Deccan Chronicle Holdings Ltd. (supra), the Tribunal has held as under: "6. With respect to ground No. 4 for the assessment year 2008-09, we find that the Assessing Officer has not disallowed for the assessment years 2006-07 and 2007-08. However, the Assessing Officer has disallowed the expenditure on the issue of qualified institutional buyers for the assessment year 2008-09 which has been allo....
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....gument of the appellant-company that the facts of its case are distinguishable from those in the case of Brooke Bond, for the detailed reasons submitted by it, and therefore its claim cannot be denied by relying on that decision. It was further claimed that though the entire expenditure was allowable in one year under section 37, the same was treated as deferred revenue expenditure and claimed over five years, starting from the assessment year 200708. The concept of deferred revenue expenditure is now legally recognised by various judicial authorities and in fact, this was upheld even in the case of the appellant by my predecessor, while deciding the appeal for assessment year 2006-07. In view of the above facts, I hold that the expenditure of Rs. 2,07,00,112 claimed for assessment year 2008-09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is in order, the disallowance on this account is deleted." 7. We find that during the year 2007-08, the company incurred debenture expenses of Rs. 2.07 crores and QIB issue expenditure of Rs. 8.28 crores, both totalling to Rs. 10.35 crores. The expenditure referred to abov....
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....are defined in clause 40A of the SEBI Listing Agreement. Further, the listing agreement takes us to Securities Contracts (Regulation) Rules, 1957 (in short "SCRR"). Also Rule 19(2)(b) and Rule 19A of the SCRR provide that companies are required to maintain minimum public shareholding of 25% in case of first time listing and in case of continuous listing agreement respectively. In this context, we may refer to section 2(d) of SCRR defining the term "public". It (public) is defined to mean any person other than the promoter, promoter group, subsidiaries and associates of the company. Thus any person other than these four qualify to be considered as public. As can be seen from the list of QIBs to whom shares are issued, the shares are not issued to any of the aforesaid category. Thus QIBs, not being promoters, promoter group, subsidiaries and associates of the company would qualify as "public". As specified in clause 40A(ii) of the listing agreement, public shareholding can be increased by any of the modes specified therein to comply with Rule 19(2) and 19A of SCRR. One such note is the issue of IIP in accordance with Chapter VIIIA of the SEBI-ICDR. Chapter VIIIA has been inc....
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....anded over the projects to such authority after development. The assessee also submitted that it has maintained separate books of accounts for the undertaking carrying out the work of infrastructure development which have been duly audited by the independent chartered accountant. 19.1 The assessee further submitted that as per the amended provision of section 80IA(4) of the Act, an enterprise which is engaged in carrying out only the work of development is eligible for deduction. The word developer has not been defined under this Act. However, several judicial authority has defined the developer as the one who makes the things happen by mobilizing plan, technical expertise, fund, manpower, supervision and control etc. It also mobilized and synthesized people, plan, technical expertise, supervision and by employing all these resources create new infrastructure facility being two lane road and irrigation project being canal which was not available to the community as a whole for its use. 19.2 It was also submitted that if an enterprise is only carrying out the work of development of infrastructure facility, will obviously receive payment from the Government/local authority/stat....
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.... the above submitted that it is eligible for claiming deduction under section 80IA(4) of the Act on 100% of profit computed in accordance with the provision of Income Tax Act by treating the such entity/ industrial undertaking as the only business of the assessee. 20. However, the AO was dissatisfied with submission of the assessee on the reasoning that the provision of explanation below to section 80IA(13) of the Act as amended by Finance (No-2) Act 2009 is applicable to the assessee and disallowed the claim of the deduction under section 80IA(4) by observing as under: The judgments relied upon by the assessee are not applicable to the facts and law for the current year. The position in law has changed with the amendment introduced to the explanation below section 80IA(13) by the Finance (No 2) Act, 2009, which is reproduced here in above. In view of the amended provisions, the assessee's entire claim is liable to be disallowed. There is no dispute over the fact that the assessee company had entered into the agreement with the Central and the State Government. The various projects of construction of Higways and roads etc. executed by the assessee, which the assessee cl....
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.... the preceding assessment years would be made. Similarly income by way of interest would also not be eligible for deduction u/s 80IA(4). If at all the assessee, as a result of any appellate order in future is held to be entitled to deduction u/s 80!A(4), then for the purpose of computation of such deduction, the income by way of interest is to be excluded. After excluding the gross interest income, the amount of eligible deduction u/s. 80IA(4) is worked out at Rs. 7,89,41,856/- keeping in view the provisions of section 80IA(4) r.w.s 80IA(5), r.w.s 80AB as well as 80B(5). Thus the deduction if at all the assessee is held to be entitled to as a result of any future appellate order is limited to Rs. 7,89,41,856/- as against the claim of Rs. 8,22,39,101/- as made in the return of income. 21. Aggrieved, assessee carried the issue before the learned CIT(A). The assessee before the learned CIT(A) reiterated its submission made during the assessment proceeding. 22. However, the assessee in respect of interest income excluded by AO from the amount of deduction claimed under section 80-IA(4) of the Act submitted before the Ld. CIT(A) that interest income is related to business of the a....
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....nt of infrastructure facilities. This fact has been duly accepted by the Income Tax department in the scrutiny assessment made for and from A.Y. 2002-03 to 2007-08. In all these Assessment Years, the appellants claim for deduction u/s 801 A(4) of the Act had been allowed by the department year after year, after making some minor adjustments. The appellant had vividly brought out that even the amended explanation below subsection (13) of section 801A has no applicability to the present case. Further the relevant paras of the Rajkot ITAT judgment in the case of M/S TARMAT BEL (JV.) KCL, RAJKOT V/S ITO in 1TA No. llll/ RJT/2010 are as under: The Explanation does not in any way create an artificial fiction about the nature of business of the undertaking but ii only states that no deduction shall be admissible in the case where an assessee carries on business in the nature of a works contract. This clearly means that if the nature of business is not just a works contract but something more, the assessee cannot be hit by'the rigours of the Explanation, As far as the assessee and its facts on record of Revenue are concerned, the nature of business carried on by it, a....
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....e held as a factor against the assessee becoming a developer. According to the A.R.. all these aspect put together clearly show that the assessee was not merely a works contractor but-was also a developer. Merely because the assessee has acted under -a Govt. contract, it cannot be denied deduction nor can it be held that it has acted only as a works contractor. This is more so because one of the fundamental pre-conditions of Sec. SO-IA(4) is that the infrastructure facility must have been developed or developed, operated and maintained by-entering into a contract with the Govt. Therefore, contract with the Govt. is a sine qua nan for becoming eligible for the deduction. 'Therefore, contracting by itself cannot make the assesses a works contractor. In our country, all lands and infrastructure other than those privately owned, belong to the State and hence one can develop infrastructure facility only under a government mandate which is given in the form of a contract. Once there is a contract for a new facility, there are bound to be obligations under the contract which include obligations of, inter alia, observing the specifications of the infrastructure facility. Hence....
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....se of the appellant it is an undisputed fact that it is an undertaking \ engaged in development of infrastructure facilities on its own. It is not a subcontractor. The ratio of the said judgment is squarely applicable to the appellant's case. It is significant to mention here that in the case cited supra, the ITAT had considered the judgment of the ITAT Mumbai bench in the case of B.T. PATIL & SONS Belgaum Construction Pvt Ltd V/S ACIT reported in 126 TT) 577. The ITAT observed that facts in the case of B.T Patil & sons are quite different. In that case, the assessee was employed as a- subcontractor to carry out civil work and that a portion of the contract was assigned to that assessee who carried out the assigned work in the capacity of a subcontractor. In the case of the present assessee, the facts are totally different. The appellant itself is the developer. It is not a subcontractor. Therefore, the ratio of the judgment in the case of B.T. PATIL & SONS Belgaum Construction PvtLtd is not applicable to the present case. But the ratio of the judgment of the ITAT in the case of M/S TARMAT BEL [JV.) KCL, RAJKOT V/S ITO in ITA No. llll/ R|T/2010 cited supra is ....
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....ed in 207 CTR 689, wherein it was held that only the-net interest i.e. gross interest received minus the expenditure incurred on payment of interest only is to be reduced from the profits of the business. ! also find that Hon'ble Orissa High Court in the case ofTata Sponge & Iron Co. 292 ITR 175 has taken similar view that interest income has to be netted up with the interest expenses. Considering the facts regarding the nexus of interest bearing funds being used for making Fixed Deposits, 1 hold that the A.Q. is not justified in allocating interest on the basis of gross figure amongst various units. I, therefore, direct the A.Q. to allocate only net interest amongst various units of the appellant and recalculate the claim of appellant u/s. 80IA(4) r.w.s. (5) and allow accordingly." Following the appellate order in the appellant's case for A.Y.2007-08 cited as above, this ground is accordingly decided in favour of the assessee and the AO is directed to recompute the eligible deduction u/s 8QIA(4] after allocating the net interest among the different units and allow such deduction. 24. Being aggrieved by the finding of the learned CIT(A) both the Revenue and the ....
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....urther submitted that the assessee has made investments which are in the nature of earnest money, performance guarantee and mobilization advance but the same were concepts are also applicable in case of the works contract. Thus, based on the investment made by the assessee as discussed above cannot be concluded that the assessee is a developer. 25.3 In all the contract undertaken by the assessee, there was no investment risk, rather the element of profit embedded in the projects was very much apparent. As such the assessee has not undertaken any entrepreneurial risk. The liability of the assessee was limited to the extent of the forfeiture of earnest money deposit and performance guarantee which in any way is also attached with the very nature of works contract. Furthermore, the assessee was not significantly involved in the planning and designing of the project. 26. On the contrary, the learned AR before us filed a paper book running from pages 1 to 202, supplementary paper of 1 to 259 pages along with the copies of the agreement/tender documents which are available on record. It was contended by the learned AR that the assessee was the project in charge for the entire infra....
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....duction to the industrial undertaking. The purpose of providing such deduction was for the modernization and expansion of industrial undertaking. 27.2 However, the provision of this section was amended by Finance Act 1995 for the reason that the legislature realized that the modernization of industrial undertaking requires development of infrastructure facilities. This fact can be verified from the memorandum explaining the amendment in the section as reproduced below: Industrial moderanisation requires a massive expansion of, and qualitative improvement in, infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports, ports and rapid urban rail transport systems. Additional resources are needed to fulfil the requirements of the country within a reasonable time frame. In many countries the BOT (build-operate-transfer) or the BOOT (build-own-operate-transfer) concepts have been utilised for developing new infrastructure. Applying commercial principles in the operation of infrastructure facilities can provide both managerial and financial efficiency. In view of this, it is proposed to allow a five year tax holiday for an....
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....cable with retrospective effect i.e. 1-4-2000. This explanation restricts the benefit of deduction under section 80-IA(4) of the Act to a person who executes a project which is in the nature of works contract. At this juncture, it is pertinent to refer the provisions of the Explanation attached below section 80IA(13) of the Act as reproduced below: "For the removal of doubts, it is hereby declared that nothing contained in this 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 (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1). " 27.7 The explanation reproduced above denies the benefit of deduction under section 80-IA(4) of the Act to a person who executes a project which is in the nature of works contract. 28. Coming to the facts of the case on hand, we note that the only thrust of the revenue for denying the benefit to the assessee under the provisions of section 80IA(4) of the Act was revolving around the explanation as discussed above brought under the statute. However, the revenue in the earlier assessm....
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....structure facility. (d) The assessee has to utilize its expertise, experience including its technical knowhow in the development of the project. (e) That a developer has to undertake financial responsibility. A developer is therefore expected to arrange finances either by private placement or from financial institutions for the proper development of the project at its own risk. Thus, the developer is the one who undertakes entrepreneurial and investment risk besides the business risk. (f) That a developer is required to bring the qualitative materials. The Government does not provide any material to the assessee. (g) That a developer is required to bring plant and machineries to be utilized in the project. (h) Any loss caused to the public or the Government in the process of developing the project, it would be the responsibility of the developer. The Government shall not take any responsibility for any such kind of loss except where it is responsible. (i) That a developer stands as guarantor for the project developed by it and in the event of any defect in the project, he shall provide the remedy for the same. (j) That ....
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....s and conditions of the agreement. 28.6 In the backdrop of the above stated discussion, we proceed to analyze the facts of the present case to find out whether the assessee is acting as a developer or works contractor. The assessee in the year under consideration has undertaken certain projects. The assessee with respect to some of the projects claimed deduction under 80IA of the Act. The details of all the projects whether eligible for deduction or not under section 80IA(4) of the Act along with the amount of deduction under section 80IA(4) of the Act stand as under: S. No. NAME OF THE PROJECT AMOUNT ELIGIBLE 80IA U/S 1 Mihan 2929974/- 2 Malvan 56466399/- 3 Sujlam Suflam 300384/- 4 Chirayadungri 1664250/- 5 Jabalpur- MPRDCL 17120983/- 6 Anantpur 3400154/- 7 KBC 356957/- 8 to 29 Other Projects NIL Total 82239101/- 28.7 On sample basis, we analyze the relevant clauses of the tender documents placed in the supplementary paper book in respect of the project namely Multimodal International Hub Airport at Nagpur (Mihan) Project Complex which are detailed as under: (A) Instruction to Bid....
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.... viii) As per Clause No. 8.7 on page No. 45, the contractor shall pay the liquidated damages in case of completion of project after the date of intended completion of project. ix) As per Clause No. 11.1 on page No. 47, the contractor shall inspect the project in every 3 months during the 1st year after completion of the work and carry minimum 2 inspections per year for the remaining years of defect liability period. (C) Special conditions of the Contract i) Special Conditions specified in the tender are that Contractor shall make his own arrangement for cement, however the quality of cement should be approved by the engineer. ii) Contractor shall arrange Electric power supply, and water supply required for the construction and the labors. However, the employer will issue necessary certificate, letter of recommendation etc. to the contractor for obtaining the power supply, water supply etc. But the employer shall not be responsible for any delay in obtaining the power/water connections. Non availability of electric power and water supply will not be considered as delay in progress. iii) Contractor shall also provide the traffic s....
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....Ltd, Chennai is already completed. As per the recommendations of consultants and approved by the GoM, the area adjacent to, / Airport is to be developed as SEZ containing various economic "activities which ' will back up the airport project and contribute to the development of Vidarbha region of Maharashtra and the central part of the country. The Master Plan of;' MIHAN project has identified different specialty sectors in the SEZ area as well/ as proposed road and rail terminal and the residential area outside but adjoining SEZ. The master plan also defines the broad road network of different hierarchy (2/3/4/6 Lane) in the project area. Site Location & Metrological Data a) Approximate location with nearest station and airport Approx location: In village Kalkuhi, Telhara, Dahegaon & Khapri (Rly.) Nearest Railway Station: Khapri (Rly) Approx distance from Khapri Railway station : 1.0 KMS Nearest Airport: Dr. Ambedkar International Airport, Nagpur b) Terrain Almost plain terrain, MSL varying from approx. 292 to 309. The average MSL being 300 c) Range of relative humidity Max: 100% Min: ....
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....nvoices for the cutting of the trees and earthwork which can be verified from the bills placed on pages 198 to 215 of the tender documents. 29.1 It is also important to note that the MADC of Maharashtra Government was coming up for the establishment of the Airport at Nagpur with international standards. The area adjacent to the airport was to be developed as SEZ which will provide the backup to the airport project. Similarly, it was also the part of the project to develop the roads, rail terminals and the residential area outside but with adjoining SEZ. As such, the construction of the road being the infrastructure facility was part of the masterplan of MIHAN project. Admittedly, the success of the impugned project (MIHAN) was possible after having the necessary infrastructure facilities. Thus, the purpose for which the provisions of section 80IA (4) were brought under the statute were getting achieved in the given facts and circumstances. Thus, the fact that the assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the tender document as discussed above has clearly demonstrated ....
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....he assessee had invested his own fund, it would be assumed that the assessee was acting as a developer and not as a contractor. Relevant extract of the above decision is reproduced as under : There are letters exchanged, written by the assessee and various Government departments, which indicate that the assessee was awarded the job, wherein the assessee had placed the bank guarantee, against the tendered cost, which proved beyond doubt that the assessee, itself was doing the development of infrastructure facility, on behalf of the Government, besides placing its own funds at risk and peril." 29.5 Further, we draw support by placing our reliance on the Judgment of Hon'ble ITAT Kolkata in case of Asstt. CIT v. Simplex Infrastucture Ltd Ltd. I.T.A. No. 01/Kol/2020 vide order dated 10/03/2021 wherein it was held s under: "It is noted that in a development contract, responsibility is fully assigned to the developer for execution and completion of work. It is evident that the assessee, vide the agreements, has clearly demonstrated the various risks undertaken by it. In all the agreements, relevant portions of which are reproduced supra, the assessee has undertaken hu....
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....e is no dispute over the fact that the assessee company had entered into the agreement with the Central and State government. The various projects of construction of Highways and roads etc. executed by the assessee, which the assessee claims to be development of infrastructure facility is in reality pursuant to the contract entered into between the assessee company and the central or State Government. 29.9 Likewise, the learned CIT(A) in his order has made the observation as detailed below: In view of the facts and circumstances of the case as mentioned above and keeping in view the principle of consistency and also the fact that the appellant being a developer of infrastructure facilities in its own right and the business of the appellant in respect of which deduction u/s. 80IA(4) had been claimed is not in the nature of a work. 29.10 The above observation made by the learned CIT(A) has nowhere been challenged by the revenue in the ground of appeal which have been reproduced above. 29.11 The co-joint reading of the above facts reveals that there was no issue with respect to the fact whether the assessee has not taken the project of infrastructure facility, rather....
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....e provisions of the Act. For this purpose, the rules as applicable to the interpretation of the statute should be applied. One of the rule of interpretation is to analyze the provision in the light of the object for which it was brought under the statute. In holding so we rely on the judgement of Hon'ble High Supreme Court in the case of New India Assurance Company Ltd vs Nusli Neville Wadia And Another in civil appeal no 5879 of 2007 vide order dated 31-12-2007 wherein it was held as under: "With a view to read the provisions of the Act in a proper and effective manner, we are of the opinion that literal interpretation, if given, may give rise to an anomaly or absurdity which must be avoided. So as to enable a superior court to interpret a statute in a reasonable manner, the court must place itself in the chair of a reasonable legislator/ author. So done, the rules of purposive construction have to be resorted to which would require the construction of the Act in such a manner so as to see that the object of the Act fulfilled; which in turn would lead the beneficiary under the statutory scheme to fulfill its constitutional obligations as held by the court inter alia in As....
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.... Normally, therefore, an explanation would not expand the scope of the main provision and the purpose of the explanation would be to fill a gap left in the statute, to suppress a mischief, to clear a doubt or as is often said to make explicit what was implicit. Further, the object of an explanation to a statutory provision is - (a) To explain the meaning and intendment of the Act itself, (b) Where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to sub-serve, (c) To provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) An Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the ....
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....r Assessee's and also for other years in the case of the same assessee. The appellant would like to state that since A.Y. 2003-04 onwards till A.Y. 2007-08, consistently claim u/s. 80IA(4) of the Act was allowed by Predecessor A.O's the Rang CIT's reviewed the allowability thereof, the AG Auditors and the Honorable CIT(A)'s all the independent not disputed the allowability of claim of the appellant and upheld the claim u/s. 80IA(4) of the Act. In view of the above undisputed facts, the allowability of the claim u/s. 80IA(4) of the Act had already been decided and upheld by the higher authorities in the preceding years together. Hence, the Ld.AO. can only be legally allowed to verify the quantum of the claim, not the eligibility at all. 30.6 The above submission of the assessee has nowhere been controverted/doubted by the Revenue. Thus, it can be presumed that the assessee was acting as a developer in the earlier years in respect of identical projects. Accordingly, we are of the view that the principles of consistency should be adopted in the given facts of the case. The Hon'ble Supreme Court in the case of Radhasoami satsung Vs CIT reported in 193 ITR 321 where....
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.... body; and (iii) The start of operation and maintenance of the infrastructure facility on or after 14-1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1-4-1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object and intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirety would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1-4-1995. In the present case, the assessee clearly fulfilled this condition" 30.9 In view of the above discussion, we are inclined to hold that the assessee who is only engaged in the activity of development of infrastructure facility....
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....of Parliament. As such there was no issue raised whether the assessee is acting as a developer or contractor before the Hon'ble Jurisdictional High Court neither, the said issue has been decided in the said judgement. 32. At the time of hearing, both the learned DR and the AR before us has submitted that projects in respect of which the deduction was claimed by the assessee were of identical nature. Therefore, we have analyzed one contract/agreement with the government on sample basis. However, the reasons given in the contract before us shall also be applied in all the contracts which was subject to the deduction under section 80-IA(4) of the Act. In view of the above, the grounds of appeal of the Revenue with respect to the admissibility of the claim of the assessee under section 80-IA (4) of the Act are hereby dismissed. 33. Now coming to the issue whether interest income is to be excluded on gross basis or net basis while the computing the deduction u/s 80IA(4) of the Act. The assessee while computing the deduction u/s 80IA (4) of the Act has considered the interest income from the eligible business as detailed below: During the assessment year under consider....
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.... or any other establishment of the assessee situate outside India". 9. Explanation (baa) extracted above states that "profits of the business" means the profits of the business as computed under the head "Profits and Gains of Business or Profession" as reduced by the receipts of the nature mentioned in clauses (1) and (2) of the Explanation (baa). Thus, profits of the business of an assessee will have to be first computed under the head "Profits and Gains of Business or Profession" in accordance with provisions of Section 28 to 44D of the Act. In the computation of such profits of business, all receipts of income which are chargeable as profits and gains of business under Section 28 of the Act will have to be included. Similarly, in computation of such profits of business, different expenses which are allowable under Sections 30 to 44D have to be allowed as expenses. After including such receipts of income and after deducting such expenses, the total of the net receipts are profits of the business of the assessee computed under the head "Profits and Gains of Business or Profession" from which deductions are to made under clauses (1) and (2) of Explanation (baa). ....
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....ture and so construed the words "such income by way of dividends" in sub-section (1) of Section 80M must be referable not only to the category of income included in the gross total income but also to the quantum of the income so included. Similarly, Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in Explanation (baa), the words "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and Gains of Business or Profession" referred to in the first part of the Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head "Profits and Gains of Business or Profession", ninety per cent of such quantum of the receipt cannot be deducted under Explanation (baa) to Section 80HHC. 12. If we now apply Explanation (baa) as interpreted by us in this....
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....t case, the assessee owned a factory in which he processed cashew nuts grown in his farm and he exported the cashew nuts as an exporter. At the same time, the assessee processed cashew nuts which were supplied to him by exporters on job work basis and he collected processing charges for the same. He, however, did not include such processing charges collected on job work basis in his total turnover for the purpose of computing the deduction under Section 80HHC (3) of the Act and as a result this turnover of collection charges was left out in the computation of profits and gains of business of the assessee and as a result ninety per cent of the profits of the assessee arising out of the receipt of processing charges was not deducted under clauses (1) of the Explanation (baa) to Section 80HHC. This Court held that the processing charges was included in the gross total income from cashew business and hence in terms of Explanation (baa), ninety per cent of the gross total income arising from processing charges had to be deducted under Explanation (baa) to arrive at the profits of the business. In this case, this Court held that the processing charges received by the assessee were part o....
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....uction of Rs. 72,76,405/-under Section 80HHC of the Act. In the assessment order, the Assessing Officer held that ninety per cent of the gross interest has to be excluded from the profits of the business of the assessee under Explanation (baa) to Section 80HHC of the Act and deducted ninety per cent of the gross interest of Rs. 50,26,284/- from the profits of the business of the assessee. The assessee preferred an appeal contending that only ninety per cent of the net interest should have been deducted from the profits of the business of the assessee under Explanation (baa) to Section 80HHC, but the Commissioner of Income Tax (Appeals) rejected this contention of the assessee. Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal (for short 'the Tribunal') and the Tribunal allowed the appeal of the assessee and held that the assessee was entitled to deduct the expenses from the interest received and only ninety per cent of the net amount of interest could be excluded under Explanation (baa) to Section 80HHC and remitted the matter to the Assessing Officer to examine whether there is factually an excess between the interest paid and interest receiv....
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....t passed in case of Rajkamal Builders Infrastructure P. Ltd. vs. DCIT in ITA Nos. 118/Ahd/2019 & Ors. While granting relief to the assessee, the Co-ordinate bench has been pleased to observe as follows: "46. Before us, the counsel for the assessee reiterated submissions as were made before the lower authorities. The counsel further submitted that the interest income is earned only on fixed deposits for obtaining bank guarantee and security deposit to be placed mandatorily as per the tender when work was awarded. Hence, such interest income is business income and eligible for deduction under section 80IA(4) of the Act. In support of his contentions, the counsel relied upon the following decisions: i) AVM Cine Products Vs. DCIT, (2021) 123 taxamnn.com 41 (Mad); ii) CIT Vs. Alloys Ltd. (2017) 84 taxmann.com 256 (Guj) iii) Empire Pumps P. Ltd. Vs. ACIT, (2015) 54 taxmann.com 317 (Guj) 47. For countering the above submissions of the assessee, the DR supported orders of the Revenue authorities, which was based on the decision of Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. 48. We have considered submissions of both ....
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....6,733/- for the deduction made under Section 80IA of the Act. This ground of appeal will apply mutatis mutandis in the appeal preferred by the assessee for A.Ys. 2008-09 & 2009-10. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.- 2007-08 to 2013-14 & 2016-17. 37.2 In view of the above and respectfully following the ratio laid down by the Hon'ble Courts, we hold that only net interest income should be excluded while the computing the eligible income u/s 80IA(4) of the Act. Hence, the ground of appeal of the Revenue is hereby dismissed. 38. The AO during the assessment proceedings allocated common expenses of the head office to the eligible unit while computing the eligible profit u/s 80IA (4) of the act which was also confirmed by the CIT(A) by placing reliance on his predecessor order for the AY 2006-07. 39. Now aggrieved assessee preferred CO before us on the grounds raised as under: 2. That, on facts and in law, the learned CIT(A) has grievously erred in confirming the action of learned AO in re-computing deduction u/s. 80IA(4) of the Act by allocating expenditure of head office etc to different eligible units. 40. There is no d....
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....7 of this order. For detail discussion, please refer the aforementioned paragraph of the order. Hence the ground of appeal raised by the Revenue is hereby rejected 43. The other issued raised by the Revenue in ground Nos. 5 to 7 either general or consequential or premature to decide hence the same are dismissed being infructuous. 44. In the result, appeal of the Revenue is partly allowed Now coming to the CO of the assessee 100/AHD/2011, AY 2008-09 45. The assessee has raised the following objection in CO 100/AHD/2011 1. That on facts and in law, the learned Commissioner of Income-tax, (Appeals) has grievously erred in rejecting the alternate plea for allowance of entire expenditure of Rs. 2,39,82,891/- as business expenditure instead of allowance of amortized expenditure u/s. 35D of the Act. 2. That, on facts and in law, the learned CIT(A) has grievously erred in confirming the action of learned AO in re-computing deduction u/s. 80IA(4) of the Act by allocating expenditure of head office etc to different eligible units. 3. The appellant craves leave to add, alter, amend any of the grounds of appeal at or before the date of hearing. 46. The....
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....ds of appeal at the time of or before the hearing of the appeal. 53. The 1st issue raised by the assessee in grounds of appeal is that the Ld. CIT(A) is erred in confirming 25% disallowance of alleged bogus purchase. 54. Based on the information received from the Maharashtra Sales Tax Department, it was alleged that the assessee has claimed the bogus purchases amounting to Rs. 2,10,30,907/- from the certain parties during the AY 2009-10, 2010-11 and 2011-12 as detailed below: Name of the Party PAN F.Y. Amount(Rs.) DHRUV SALES CORPORATION AHYPD6115E 2009-10 20,58,436 DHRUV SALES CORPORATION AHYPD6115E 2010-11 36,76,537 KRISH CORPORATION AWAPS3678L 2010-11 44,62,457 N B ENTERPRISES AAYPL7154J 2008-09 2,10,354 NAMAN ENTERPRISES AQEPK5024G 2009-10 94,461 NAVDEEP TRADING CORPN. AAAPV4487A 2009-10 2,76,848 NAVDEEP TRADING CORPN. AAAPV44B7A 2010-11 90,06,950 SHUBHLAXMI SALES CORP. AAVPS1333B 2009-10 12,44,864' TOTAL 2,10,30,907 54.1 These parties in their statements before the Sale Tax Department admitted that they are engaged in providing only accommodation entri....
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....the present case the work was also completed by the assessee and final payment also has been released. 56.1 Further, in this situation where the work has been completed and the party which is supposed to have done work is found to be bogus, If the purchase amount is fully disallowed, then the there is a contradiction in assumption that receipt amount is treated as income and purchase disallowed. Therefore, it means that the turnover of the assessee is treated as income. Nevertheless, the ld. CIT-A confirmed the order of the AO in part by observing as under: 8.9 This situation has been analyzed by the Gujarat High Court in the case of N.K. Proteins Ltd. vs. DCIT reported in [2004] 4 SOT 479 (AHD.) and also in the case of Sanjay Oilcake Industries vs. CIT reported in [2009] 316 ITR 274 (MAD.) wherein after examining the situation the Gujarat High Court has held that in such situation making a disallowance of 25% only of purchases is justified. 8.10 The disallowance of the entire purchases was made by the same Assessing Officer i.e. DCIT, Central Circle-l(l), Ahmedabad in the case of Jagdamba Ginning Factory A.Y.2008-09 on account of bogus purchases made. The said....
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....being 12.5% of the bogus purchases. In holding so, we draw support and guidance from the judgment of Hon'ble ITAT Mumbai in the case of Ratangiri Stainless(p) Ltd. Vs. ITO reported in 80 taxmann.com 265 wherein it was held as under: "In our considered view and based on facts and circumstances of the case as discussed by us in details above, end of justice will be met in this case if GP ratio of 12.5% on alleged bogus purchases is added to income of the assessee against which credit for the declared GP ratio on the alleged bogus purchases will be granted by the AO after verification by the AO because of failure of the assessee to come forward to discharge primary onus cast upon him as detailed above for which assessee is to be blamed and in the midst of afore-stated un-rebutted allegation against the assessee and non discharge of primary onus, the declared lower GP ratio of 5.45% in the instant previous year under appeal cannot be accepted. Thus, in nut-shell we are inclined to adopt GP ratio of 12.5% on alleged bogus purchases in the instant case which in our considered view is fair, reasonable and rational keeping in view factual matrix of the case, while the assessee sha....
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....al: 1) The Ld.CIT (A) has erred in law and on facts in deleting addition of Rs. l 7,08,93,901/- u/s 801A(4) of the Act, as in view of Explanation below sub-section (13) of section 801A introduced by Finance Act, 2009 with retrospective effect from 01.04.2000 the assessee was not eligible for deduction u/s 80IA(4) of the Act. 2) The Ld.CIT (A) has erred in law and on facts in deleting addition of Rs. 27,55,956/- out of total addition of Rs. 36,74,609/- made on account of Bogus Purchases from four parties. 3) The Ld.CIT (A) has erred in law and on facts in deleting addition of Rs. 25,93,620/- made u/s 14A of the I.T.Act read with Rule 8D of the I.T.Rules. 4) The Ld.CIT (A) has erred in law and on facts in deleting addition of Rs. 47,96,578/- made u/s 35D of the I.T.Act. 5) On the facts and in the circumstances of the case and in law, the CIT{A) ought to have upheld the order of the A.O.. 6) It is, therefore, prayed that the order of the CIT (A) be set aside and that of the A.O. be restored to the above extent. 65. The issue raised by the Revenue vide ground No. 1 is that the learned CIT(A) erred in deleting the disallowance of ....
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....11 an appeal by the Assessee for the AY 2011-12 74. The assessee has raised the following grounds of appeal: 1. The Learned CIT(A) erred in law and on the facts of the case in confirming 25% of the disallowance made by the AO for alleged bogus purchases without appreciating the factual aspect and ignoring all the possible manifested evidences submitted before the AO as well as CIT(A). It is therefore prayed that addition/ disallowance confirmed by the CIT(A) may please be deleted. 2. The Id. C1T(A) has erred in law and on facts in confirming the action of Id. AO in charging interest u/s 234B/C/D of the Act. 3. The Id. CIT(A) has erred in law and on facts in confirming the action of Id. AO in initiating penalty proceedings u/s 271(l)(c) of the Act. 4. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 74.1 The only issue raised by the assessee in grounds of appeal is that the Ld. CIT(A) is erred in confirming the 25% disallowance of alleged bogus purchase. 74.2 At the outset, we note that the identical issue has be....
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.... out of total addition of Rs. 1,71,45,944/- made by AO on account of bogus purchases. 80. At the outset, we note that the identical issue has been raised by the assessee in ground No. 1 of its appeal in IT(SS) No. 363/Ahd/2011 for AY 2009-10 where we have decided the issue vide paragraphs Nos. 59 of this order. For detailed discussion, please refer the aforementioned paragraph of this order. Hence, the ground of appeal of the Revenue is hereby dismissed. 81. The issue raised by the Revenue in ground No. 3 is that the Ld. CIT(A) erred in deleting the addition of Rs. 2,10,49,015/-made by AO on account of ESOP expenses. 82. During the year under consideration, the assessee has issued 25,00,000 equity shares at a price of Rs. 50/- per share to the eligible employee of the company as per the ESOP scheme. 82.1 During the year under consideration, the company has vested the option of 25,00,000 shares out of which 58,000 options have not been exercised. Accordingly, the assessee company booked the expenses on ESOP amounting to Rs. 2,10,49,015/- which is the difference between the market price of shares on the date of grant of option and price at which the options are vested to ....
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....rofit and loss account of the company. In view of the above, the profit or loss generated due to granting of options under Employees Stock Option Scheme to eligible employees only alters the capital structure of the company and hence is either a capital profit or capital loss. Thus, it would not affect the profit or loss account of the company. 10.3 However, the Special Bench of the ITAT Bangalore in the case of Eicon Ltd. vs. DCIT reported in [2013] 35 taxman.com 335 (Bangalore - Trib.) (SB) has held that loss arising out of the difference between market price of the share on the date of grant of such option and the price such option was vested to the employees under Employees Stock Option Scheme is allowable u/s. 37(l)of the IT Act, 1961. No other contrary decision of any High Court is available. In view of the judicial discipline, the decision of the Special Bench of the ITAT has to be followed by appellate authorities. In view of the above, the amount of Rs. 2,10,49,010/- being the loss on account of the difference between market price of the share on the date of grant of such option and the price such option was vested to the employees under Employees Stock Option Sch....
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....facts in allowing the deduction u/s. 80IA(4) of the Act to the extent of Rs. 3,79,46,675/-without appreciating the fact that the company has not fulfilled the conditions mentioned in section 80IA(4) of the Act and hence not eligible to get deduction u/s. 80IA(4) of the Act." 2. "The Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs. 47,96,578/- on account of disallowance u/s. 35D of the Act without appreciating the fact that the said expenditure actually pertains to qualified institutional placements (QIP) which is not eligible for deduction u/s. 35D of the Act." 3. "The Ld. CIT(A) has erred in law and/or on facts in deleting th addition made of Rs. 4,02,46,403/- on account of premium of ESC while here is no specific section under which ESOP expenditure allowable under I T Act." 4. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O." 5. It is, therefore, prayed that the order of the CIT (A) be set aside and that of the A.O. be restored to the above extent. 91. The issue raised by the Revenue vide ground No. 1 is that the learned CIT(A) erred in deleting th....