TaxTMI 
TaxTMI 
2025 (4) TMI 1922
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 31,64,147/- as an eligible receipt entitled to benefit of deduction u/s 80IA(4) of the Act. 2. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) had relied upon certain judgment of Hon'ble Supreme Court which are wholly inapplicable to the issue involve; and whereas the present issue is otherwise covered in favour of assessee by another judgment of Hon'ble Supreme Court and other Courts. 3. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred on the fact & law while not dealing with the issue relating to additions u/s 143(3), could be made only against the returned income not against the income computed u/s 143(1) where such glaring mistakes of adjustment u/s 143(1) are brought in the knowledge of Ld. AO. 4. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in failing to appreciate that the impugned order of assessment is itself bad in law, being barred by limitation and therefore liable to be set-aside and quashed. 5. BECAUSE, on the facts and in the cir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and therefore the impugned order deserves to be set-aside being bad in law." I.T.A. No. 357/Lkw/2020 "1. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in deciding the issue of interest income to the extent of Rs. 30,89,939/- as an eligible receipt entitled to benefit of deduction U/s 80IA(4) of the Act. 2. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) as also the Assessing Officer miss- directed itself and had relied upon certain judgment of Hon'ble Supreme Court which are wholly inapplicable to the issue involve; and whereas the present issue is otherwise covered in favour of assessee by another judgment of Hon'ble Supreme Court and other Courts. 3. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in failing to appreciate that the impugned order of assessment is itself bad in law, being barred by limitation and therefore liable to be set-aside and quashed. 4. BECAUSE, on the facts and in the circumstances of the case, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d on facts as the assessee invested a substantial amount of Rs. 187 Cr. in group companies/sister concerns which entail disallowances to be computed as per the provision of 14A of the I.T. Act read with Rule 8D of the I.T. Rules, 1962 as in the recent ruling by the Hon'ble Apex Court in Maxopp Investment Ltd. vs. CIT, New Delhi, (2018) 402 ITR 640 (SC), the same position as discussed above has been upheld." I.T.A. No. 623/Lkw/2024 "1. Whether the learned CIT(A) has erred in law and on facts of the case by allowing deductions u/s 80IA treating the assessee (a work contractor) as a developer. 2. Whether the learned CIT(A) has erred in law and on facts of the case by treating bogus purchases as genuine ones after admitting additional evidences in violation of Rule 46A." C.O.No.01/Lkw/2025 "1. Because the learned CIT(A) has erred on facts & law not deleting the issue relating to issuance of notice u/s 148 by Assessing Officer not accordance with law and facts. 2. Because the learned CIT(A) has erred in sustaining the addition of Rs. 31,64,146/- out of deduction claimed of Rs. 6,27,83,808/- u/s 80IA of the Act, disallowed by Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a [2017] 391 ITR 218 (P&H) (pg-26 & 27, para-6.7 & 6.8) Appeal filed by Revenue - ITA 453/LKW/20 dated 23.12.2020 GOA-2 APCO INFRATECH PVT LTD PAN: AADCA5639H AY 2017-18 CIT(A)-1 Order dt. 03.09.2020 SI. No. Issue involved Ld. CIT(A) Before Hon'ble ITAT 1 Disallowances of deduction claimed u/s 80IA(4) of the Act amounting Rs. 30,80,939/- being interest earned on FDR kept for release security/retention money. Dismissed relying on judgment of Conventional Fasteners vs. CIT, Dehradoon (2018) 94 taxman.com 80 (pg-8, para-4.4) Appeal filed by Assessee - ITA 357/LKW/2020 3 Disallowances of Rs. 1,71,63,491/- u/s 14A of the IT Act. Deleted the addition in absence of any exempt income and relied on Principal Commissioner of Income-tax v. GVK Project and Technical Services Ltd. [2019] 106 taxmann.com 181 (SC), Cheminvest Ltd. v. CIT [2015] 61 taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi), Dy. Commissioner Of Income Tax v. M/S U.P Power Corp. Ltd., Lucknow, ITA No.152/LKW/2017, dated 4th October, 2019, CIT Vs M/S Shivam Motors (P) Ltd. [2015] 55 taxmann.com 262 (Allahabad). [2018] 99 taxmann.com 286 (SC) has also affirm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....peal deduction u/s 80IA(4) to the extent of Rs. 59619661/- against total deduction claimed Rs. 62783808/- and remaining deduction of Rs. 3164146/- is sustained considering the earlier order of CIT(A) dt. 19/12/2023. [Para 8.16 Page 102] Appeal filed by Revenue - ITA 623/LKW/2024 2 Disallowances of Rs. 90352576/- on account of bogus purchases. Deleted the addition in absence of any adverse evidence on record and relying on citation of PCIT vs. Tejua Rohit Kumar Kapadia 94 taxmann.com 324 (Gujrat). [Para 9.9 & 9.10 Page 109 & 110] Appeal filed by Revenue - ITA 623/LKW/2024 3 Excess disallowances of deduction made u/s 80IA(4) of the Act amounting Rs. 31,64,147/- in Rs. 62783806/- already made in original assessment order u/s 143(3) and sustained by CIT(A) Order dt. 19/12/2023 and disputed before Hon'ble ITAT (ITA- 17/LKW/2020). CIT(A) has provided relief and restricted the disallowances to the extent of Rs. 59619661/- remaining deduction of Rs. 3164146/- is sustained considering the earlier order of CIT(A) dt. 19/12/2023. [Para 8.16 Page 102] Appeal filed by Assessee - ITA 17/LKW/2024 & CO1/LKW/2025 07.01.2025 along with other legal grounds. (A.2) In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ead office expense. 6.5 The claim was examined with reference to the documents/information filed and the audited accounts of the eligible units. 6.5.1 It was observed that the assessee had allocated 'other income' of Rs. 5.48 crores of H.O. to the individual units on the basis of respective turnover. It was submitted that the said income accrued to the assessee on the FDRs made by it towards bank guarantee for different projects and also towards LCs opened against suppliers bills. It was submitted the FDRs made in connection with opening LCs for suppliers are normally for short term, normally for 90 days, and the FDs keep rolling over for different LCs. The assessee was, therefore, asked to submit specific details of Bank Guarantee with accrued interest on FD allocable to the eligible units. In response, the assessee made the following submissions: Impact on profit under section 80IA by direct allocation of Interest Income from FDR kept as Margin Money of BGs. That in the earlier submission, Indirect income of HO was reduced by HO common expense and thereafter net expense is allocated to the eligible business units for computing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....45) 4 JEEVNATHPUR 3159205 3560606 (401,401) 5 KACHWA 4034671 4722044 (687,373) Total 12606771 17925917 (5,319,146) As a result of computing the depreciation as per Income Tax Act, 1961, the eligible profits of the eligible unit were thus reduced by an amount of Rs. 53,19,146/- a The assessee was also required to specify the nature of other income' credited to the P&L account of the eligible units and also to justify the claim u/s 80IA(4) w.r.t. such other income with necessary evidences that the same was derived from the business of eligible units The response was filed, vide letter dated 28.12.2018 as under: "1d) That while computing deduction u/s 80IA of eligible project Jeevnathpur assessee has incorporated Rs. 14,31,685 as accrued interest on retention money kept in the form of FDR with the contractee for release of its funds. Since assessee had borrowed funds therefore money kept in FDRs cause interest liability and interest earned on such FDRs are near to interest incurred on borrowings therefore net effect on profitability almost nullifies, Hence no adverse may be drawn." The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pt as margin with the banks to provide performance bank guarantee and advance bank guarantee by the appellant as per the terms of the Contract. The AO has not disputed this fact as evident from the assessment order. The AO has merely submitted that despite the above fact the interest income on the above FDRs kept as margin is not eligible for deduction in view of the fact that this income is not derived from the business of eligible units. The above submission of the appellant along with the case laws have been considered. The above issue has been settled by the Hon'ble Apex Court in case of Conventional Fastners v. Commissioner of Income-tax, Dehradun, [2018] 94 taxmann.com 80 (SC) by dismissing the SLP arising out against the decision of the Hon'ble Uttarakhand High Court given in case of Conventional Fastners vs.Commissioner of Income-tax, Dehradun, [2017] 88 taxmann.com 163 (Uttarakhand). The facts of the appellant's case are identical to the facts in the above case. There also interest was earned on FDRs kept as security for providing Performance Bank Guarantee. The Hon'ble High Court held that the interest earned on the FDRs kept as security ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cause the interest expenses booked in HO account have already been allocated to all the units and thus have already been deducted to arrive at the eligible profits of the eligible unit. Based on the legal framework and judicial precedents, it is evident that interest earned on surplus funds or FDRs does not qualify for deductions under Section 80IA. The phrase "derived from" necessitates a direct nexus between the income and the business activity, which is absent in the case of interest income. Therefore, the claim for deduction under Section 80IA on account of interest earned should be disallowed. In view of the above discussion and judicial precedents clearly establish that for income to qualify for deductions under Section 80IA, it must be directly derived from the eligible business activity. Interest earned on surplus funds or FDRs does not meet this criterion. The interest income is incidental and not a direct result of the core business operations of infrastructure development. Ground of Appeal Point No. 3 .......... on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in law in failing t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard." The A.O. in his assessment order dated 31.12.2018 vide para 2 clearly mentioned that "The case was selected through CASS (Computer Assisted Scrutiny selection) under Complete Scrutiny. Notice u/s 143(2) dated 21/07/2017 was issued which was duly served to the assessee through ITBA portal. On change of incumbent a notice u/s 142(1) dated 14/10/2018 alongwith questionnaire was issued to the assessee, In response, the assessee company filed its submission through online portal for the e-assessment. The reply of the assessee was examined with respect to documents submitted and information available on record. Books of account were required to be produced." It is evident from the above findings that the incumbent A.O. provided an opportunity of being heard before making the assessment order. The assessee did not raise point of barring of limitation or issuance of notice u/s 143(2) at any time of assessment proceeding but complied with the notices issued by the A.O. Further, the assessee did not r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppeal on merit. Thus, the submission made by the appellant before the Hon'ble ITAT that no opportunity of hearing was given during the appellate proceedings before the Ld. CIT(A)-1, Lucknow, is not correct." Considering the above submission of the CIT(A), it is evident that Ld. CIT(A) provided adequate opportunities of hearing to the assessee, hence, the claim of the assessee that CIT(A) has passed the order without providing the assessee with a due and proper opportunity of hearing is not true and may kindly be dismissed. Disallowance expenditure of Rs. 2,56,56,447/- of under Section 14A Section 14A of the Income Tax Act, 1961, mandates that no deduction shall be allowed for any expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act, i.e., exempt income. Specifically, Section 14A(1) states: "For the purposes of determining the total income of the assessee under this Act, no deduction shall be allowed in respect of any expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act." The legislative intent behind this....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Ltd. v. DCIT (2010) 328 ITR 81 (Bom): The Bombay High Court held that the disallowance of expenses under Section 14A applies even if the exempt income is not received in the year in which the expenditure is incurred. The Court observed that the expenses should be attributed to the investment made in exempt income, and the AO should apply Rule 8D where the expenditure is not directly identifiable. CIT v. YD Ventures Ltd. (2021) 437 ITR 81 (Delhi): The Delhi High Court affirmed that the interest on borrowed funds, when invested in funds generating exempt dividend income, is disallowable under Section 14A. The Court upheld the principle that any expenditure incurred to earn exempt income must be disallowed, irrespective of whether the exempt income is received in the relevant year or not. From the above judicial pronouncements, it is clear that interest on borrowed fund invested to earn exempt dividend income is to be disallowed u/s 14A irrespective of exempt income received in relevant previous year or and AO should apply Rule 8D where expenditure is not directly identifiable. The fact is that dividend income from investment in SPVs is not taxabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the clarificatory amendment as brought out by the Finance Act, 2022 will be applicable to the issue in the instant appeal for the earlier years as well case in view of the legal position as discussed below: Legal Position regarding Clarificatory Amendment The wordings of the captioned Explanation clearly assert that the clarification will apply to earlier Assessment years also as the newly added Explanation 2 below Section 14A clearly uses the word that "For the removal of doubts, it is hereby clarified the notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has to accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income" From the above, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal as well. Here, the refer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word declared' as well as the word 'enacted'. But the use of the words it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective, In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the Corm. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended The language shall be deemed always to have meant or 'shall be deemed never to have included" is declaratory, and is in plain term....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee's computation of disallowance after examining its accounts and examining assessee's explanation and then rejected same as per statutory formula in rule 8D - Whether on facts, impugned disallowance of expenditure made by Assessing Officer was justified - Held, yes [Paras 10 and 11] [In favour of revenue], which were indeterminate and, thus, it had relied on its self- devised method for estimating expenditure pertaining to exempt income - It was further noted that Assessing Officer had duly recorded his Principal Commissioner of Income-tax V. Delhi International Airport (P.) Ltd [2022] 143 taxmann.com 209 (SC) Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to exempt income not includible in total income (General) - Assessment years 2013-14, 2012-13 and 2011-12- High Court by impugned order held that where assessee did not have exempt income, no disallowance could be made under section 14A read with rule 8D - Whether notice was to be issued in SLP filed by revenue against said impugned order - Held, yes [Para 2] [In favour of revenue] During the course of Assessment proceeding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ectly applied the provisions of Rule 8D to compute the disallowance in a fair and reasonable manner. - Applicability of Rule 8D: - Where the interest expenditure cannot be directly attributed to the exempt income, Rule 8D of the Income Tax Rules, 1962, provides the methodology for calculating the disallowance under Section 14A. Rule 8D is applicable when the Assessing Officer is unable to directly identify the expenditure related to exempt income. - Rule 8D(2)(i): Disallows the interest on borrowed funds that is attributable to the investment in assets generating exempt income. -Rule 8D(2)(ii): Disallows a portion of administrative expenses incurred in relation to managing the investments. -Rule 8D(2)(iii): Disallows a portion of other expenses incurred in relation to exempt income. The submission of the assessee that no dividend income was earned from the SPVs is irrelevant in view of the above judicial pronouncements and CBDT circular nol. 05/2014 clarifying the applicability of the disallowance under section 14A. The assessee has argued that the interest expense incurred on the borrowed funds should not be disallowed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is presumed to be a complete statement of income and expenses for the year, and any claim of expenditure after the filing would contravene this principle. In CIT v. S. S. P. L. Ltd. (2014) 360 ITR 11 (SC), the Supreme Court held that "a belated claim for deduction, not made in the original return, cannot be allowed merely by filing a revised return after the time limit has passed." This reaffirms the idea that the original return filed should reflect all claims for deductions. No Provision for Post-Filing Claims of Expenditure Under the provisions of the Income Tax Act, there is no automatic right to claim an expenditure that was not originally claimed in the ITR. The Income Tax Act, 1961, particularly Section 139 (filing of returns) and Section 139(5) (revised return), provides the framework for rectifying mistakes in returns, but only within the specified time limit (typically within one year from the end of the relevant assessment year). In CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC), the Supreme Court upheld the principle that once a return has been filed and accepted, any changes or claims can only be made within th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riginal return cannot be considered in the absence of exceptional circumstances. The Court emphasized that the income-tax return should be final, subject to valid amendments or rectifications under the law, not as a vehicle for new claims. Taxpayer Cannot Benefit from Own Failure to File Correctly Allowing expenditure claims that were not made in the original ITR would effectively give the taxpayer a second chance to correct what was an omission or failure to file correctly. This would violate the principle that taxpayers cannot benefit from their own failure to comply with filing requirements or deadlines. In CIT v. K.R. Choksey Shares and Securities Ltd. (2011) 339 ITR 493 (Bom), the Bombay High Court held that claims for deductions or expenses must be made within the scope of the return filed, and a failure to claim such expenses initially could not be rectified in subsequent proceedings unless they were allowed by specific provisions in the Income Tax Act. It is humble submitted that allowing an expenditure that was not claimed in the original ITR would go against the principles of tax compliance, accuracy, finality, and certainty that underp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....virus. It was accordingly requested to condone the delay. At the time of hearing, the learned Departmental Representative for Revenue did not press the limitation issue, and agreed to the appeal being decided on merits. Accordingly, we do not treat the appeal of the assessee as barred by limitation. The appeal is treated as having been filed in time, and is being decided on merits. (C.1) In the aforesaid appeals i.e. I.T.A. No. 356/Lkw/2020 and I.T.A. No. 357/Lkw/2020 filed by the assessee, the issue in dispute is regarding assessee's claim of deduction u/s 80IA(4) of the Act in respect of interest earned on FDR which were kept for release of security/retention money. In the assessment orders, the Assessing Officer held that the aforesaid income has not been derived from the eligible business of the assessee and he declined the claim of the assessee for deduction u/s 80IA of the Act in respect of the aforesaid amount. At the time of hearing, the learned Departmental Representative relied on the assessment order. However, the learned Authorized Representative for the assessee submitted that the issue is covered in assessee's favour by order of Hon'ble Supreme Court in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m the eligible business. The claim of the Assessee, as accepted by the Appellate Authority, is that there is no restriction on taking into account income from any other source while allowing the deduction computed under Section 80IA, subject to the aggregate of all deductions under Chapter VI-A not exceeding the 'gross total income'. He relied upon judgments of this Court in CIT (Central), Madras v. Canara Workshops (P) Ltd., Kodialball, Mangalore 5 and Synco Industries (supra) to argue that sub-section (5) of Section 80IA of the Act does not restrict permissible deduction under sub-section (1) to be allowed against 'business income' only. The learned Senior Counsel for the Assessee relied upon the judgment of the Bombay High Court in Commissioner of Income-tax v. Tridoss Laboratories Ltd. 6 to argue that the Appeal should not be allowed. 9. The controversy in this case pertains to the deduction under Section 80IA of the Act being allowed to the extent of `business income' only. The claim of the Assessee that deduction under Section 80IA should be allowed to the 5 (1986) 3 SCC 538 6 [2010] 328 ITR 448 (Bombay) extent of 'gross total income' was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under: "80IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc .- (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing 11 | P a g e the total income of the assessee, a deduction of an amount equal to hundred per cent. of the profits and gains derived from such business for ten consecutive assessment years. * * * * (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of subsection (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nue is that sub-section (5) of Section 80IA refers to computation of quantum of deduction being limited from 'eligible business' by taking it as the only source of income. It is contended that the language of sub-section (5) makes it clear that deduction contemplated in sub-section (1) is only with respect to the income from 'eligible business' which indicates that there is a cap in sub-section (1) that the deduction cannot exceed the 'business income'. On the other hand, it is the case of the Assessee that sub-section (5) pertains only to determination of the quantum of deduction under sub-section (1) by treating the 'eligible business' as the only source of income. It was submitted by Mr. Vohra, learned Senior Counsel, that the final computation of deduction under Section 80IA for the assessment year 2002-03 as accepted by the Assessing Officer, was arrived at by taking into account the profits from the 'eligible business' as the 'only source of income'. He submitted that, however, sub-section (5) is a step antecedent to the treatment to be given to the deduction under subsection (1) and is not concerned with the extent to which the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with the treatment to be given to such deductions in order to arrive at the total income of the assessee. The Assessee also relied on the judgment of this Court in Canara Workshops (P) Ltd., Kodialball, Mangalore (supra) to emphasize the purpose of sub-section (5) of Section 80IA. In this case, the question that arose for consideration before this Court related to computation of the profits for the purpose of deduction under Section 80-E, as it then existed, after setting off the loss incurred by the assessee in the manufacture of alloy steels. Section 80-E of the Act, as it then existed, permitted deductions in respect of profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule. It was argued on behalf of the Revenue that the profits from the automobile ancillaries industry of the assessee must be reduced by the loss suffered by the assessee in the manufacture of alloy steels. This Court was not in agreement with the submissions made by the Revenue. It was held that the profits and gain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Revenue, first issue in dispute is assessee's claim for deduction u/s 80IA of the Act amounting to Rs. 2,21,72,493/-. The Assessing Officer disallowed this claim of the assessee on the ground that depreciation of Rs. 2,21,72,493/- was not allocated which resulted in excess claim of depreciation of Head Office. In the impugned appellate order, the learned CIT(A) directed the Assessing Officer to verify the assessee's submissions in this regard and to allow deduction u/s 80IA of the Act if the assessee's claim is found to be legally and factually correct. We find no infirmity in this direction given by learned CIT(A). Therefore, the ground taken by Revenue on this issue is dismissed. (D.1) The second issue in this appeal is regarding the disallowance made by the Assessing Officer under section 14A of the Act, amounting to Rs. 2,56,56,447/-. The Assessing Officer disallowed the aforesaid amount holding that this amount represented interest expenses in relation to making investments, income from which would not be includable in the assessee's hand. In the impugned appellate order, the learned CIT(A) deleted the aforesaid addition after considering the assessee's ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made in above said SPVs assessee was having sufficient own fund for such investments and there is no direct nexus between borrowing and investment in these SPVs. Further, in relevant year assessee has not earned any exempt income from above said SPVs on account of investments and income from these investments will be offered to tax when such income will accrue or arise to assessee and due tax will be paid as per enforceable provision of law.' It was further submitted as under :- 'That as regard to invoking of provision of section 14A it is relevant to mention that during the year all the investments were made at the end of the year i.e. 31.03.2016 on such date assessee was having share capital and free reserves aggregating Rs. 290.42 crores and in the relevant year assessee earned profit after tax amounting Rs. 61.96 crore and profit after tax but before depreciation was Rs. 85.17 crores. Therefore, assessee was having sufficient own fund for making such investment. The investment routed through cash credit account was only because of turnover credited in such account which is part of business receipts in which profit element is embedded; assessee has not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h money towards execution of the contract. Hence, to argue that the investment would also yield taxable income would be incorrect.' Consequently, the Ld. Assessing Officer while making assessment contended that the investments in SPVs have been made out of CC account and made disallowance of Rs. 2,56,56,447 on the basis of formula provided in Rule 8D as mentioned supra. The Ld. Assessing Officer while making such assessment has clearly not considered the peculiar facts of the case and the submissions/documents placed on record by the assessee. Therefore, it is being reiterated here that during the year the investments amounting to Rs. 67.02 crores were made at the end of the year i.e. 31.03.2016 and on such date assessee was having share capital and free reserves aggregating Rs. 290.42 crores and in the relevant year assessee earned profit after tax amounting Rs. 61.96 crore and profit after tax but before depreciation was Rs. 85.17 crores. Further, it is relevant to mention that CC limits obtained by the assessee was for the working capital purpose of the business and utilized accordingly. The assessee was under contractual obligation with bank to ro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt to mention that as per section 14A(2) of the Act, Assessing Officer is duty bound to record his/her dissatisfaction on correctness of claim of assessee before invoking the provision of section 14A. As it is evident from language of section 14A as well as of rule 8D, recording of the dissatisfaction of Assessing officer as regard to correctness of claim of expenditure made by assessee on that no expenditure has been incurred in relation to income which does not form part of total income under the Act is condition precedent before invoking provision of section 14A. Where no expenditure is incurred against the exempt income, however assessee is not bound to explain the reason of same. In the relevant year Assessing Officer was satisfied as regard to correctness as well as completeness of books of accounts of assessee company and completed the assessment u/s 143(3) of the Income Tax Act, 1961. Thus in this situation question of dissatisfaction for invoking section 14A does not arise. Further, it is evident from the order passed by the Assessing Officer that he has simply observed that section 14A of the Act, 1961 was applicable and assessee's contention that no expendit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of expenditure in relation to income not includible in total income in the manner indicated in the Rule 8D as above. Further, Apex Court has also affirmed the decision of Pr. Commissioner of Income Tax, Patiala vs. State Bank of Patiala [2017] 391 ITR 218 (P&H) and held that disallowances u/s 14A cannot exceed exempt income. * CIT vs U.P. Electronics Corpn. Ltd [2017] 397 ITR 113 (Allahabad) - It was held that for making disallowance under section 14A, rule 8D(1)(b) will come into picture only when Assessing Officer recorded his non- satisfaction with regard to claim of assessee that no expenditure has been incurred or with regard to correctness of claim of expenditure by assessee. * PCIT vs Keshav Power Ltd [2020] 268 Taxman 331 (SC) - It was held that Rule 8D is not mandatory and would come into play only when the Assessing Officer comes to the conclusion and records his satisfaction that he was not satisfied with the correctness of the disallowance made by the assessee, having regard to the accounts placed before him. This is a necessary and mandatory precondition for the Assessing Officer to invoke and apply Rule 8D of the Rules. Thus, Rule 8D cannot be app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x free income, the corresponding expenditure could not be worked out for disallowance. The view of the CIT(A) & Tribunal does not give rise to any substantial question of law. 6.7 Hon'ble Apex Court in case of [2018] 99 taxmann.com 286 (SC) has also affirmed the decision of the Hon'ble Punjab and Haryana High Court given in case of Pr. Commissioner of Income Tax, Patiala vs. State Bank of Patiala [2017] 391 ITR 218 (P&H) wherein it was held that disallowances u/s 14A cannot exceed exempt income. 6.8 In view of the above binding judgdements of the Hon'ble Apex Court, Hon'ble High Courts, especially the jurisdictional High Court, and the Hon'ble ITATs, especially the jurisdictional ITAT, it is held that no disallowance u/s 14A can be made in absence of any exempt income. (D.1.1) There is no dispute on the fact that the assessee's exempt income, not included in taxable income of the assessee, during the year was nil. It was held by Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT [2015] 61 taxmann.com 118 (Delhi) that disallowance u/s 14A of the Act is not attracted when exempt income during the year is nil. In this case,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assets" and "trading assets" and the investment in Max India Limited is under the head "trading assets" with the investments in the investment companies shown under the head of "capital assets". 8. The AO appears to have proportionately disallowed, for the purposes of Section 14A of the Act, the interest attributable to the long term investment (other than trade) for the purposes of earning exempted income. Since the unsecured loan borrowed for the purpose was Rs. 6,88,70,000 the disallowance of the amount under Section 14 A of the Act was calculated thus: "1,21,03,367 x 6,88,70,000 / 8,51,65,000" = Rs. 97,87,570 (D.1.1.1) Further the assessee's claim that no disallowance u/s 14A of the Act is attracted is also supported by orders of Hon'ble Supreme Court cases of South Indian Bank Limited vs. CIT [2021] 130 taxmann.com 178 / 283 Taxman 178 (SC) and CIT vs. UTI Bank Limited [2022] 142 taxmann.com 136 / 289 Taxman 238 (SC). The assessee's contention is further supported by order of Hon'ble Gujarat High Court in the case of Pr. CIT vs. Sintex Industries Ltd. [2017] 82 taxmann.com 171 (Guj). SLP filed by Revenue against the order of Hon'ble Guj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esaid explanation to section 14A of the Act in so far as assessment year 2016-17 is concerned. Further, in respectful consideration of precedents mentioned in foregoing paragraphs (D.1.1) and (D.1.1.1) of this order; it is held that no disallowance is attracted u/s 14A of IT Act in assessment year 2016-17. In view of the foregoing, we decline to interfere with the order of learned CIT(A) on this issue. (D.3) The third issue in dispute is regarding assessee's claim for deduction u/s 80IA of Income Tax Act, in respect of interest earned on FDR kept for release of security/retention money. Identical issue has already been decided in foregoing paragraph No. (C.1.1) of this order for assessment year 2016-17. No material facts or circumstances or provisions of law or decided precedents have been brought for our consideration by either side to distinguish the disputed issue in assessment year 2017-18 from assessment year 2016-17. Following the same reasoning, therefore, the issue is decided in favour of the assessee. (E) I.T.A. No. 17/Lkw/2024 In the aforesaid appeal i.e. I.T.A. No. 17/Lkw/2024 filed by the assessee, the issue in dispute vide ground No. 1 & 2, is regarding as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M/s Vishambhar Enterprises Pvt. Ltd as bogus citing its weak financial strength and that during examination M/s Vishambhar Enterprises Pvt. Ltd could only produce few bills which are from stone crusher such as Ekta Stone Crusher, Royal Stone Crusher. 9.4.1 The appellant has submitted that it has made total purchases worth Rs 9,93,52,098/- for its business projects namely Meerut Bulandshaher and UP Border to Dasna (DMEII) from M/s Vishambhar Enterprises Pvt. Ltd against which payment were made through banking channel. In support of its contention, the appellant has furnished the copy of confirmation for issuance of letters of credit in favour of M/s Vishwambhar Enterprises Ltd issued by Panjab National Bank for the payments towards the purchases made alongwith copy of bank statement maintained with Oriental Bank of Commerce showing the corresponding payments made through letters of credit. The details of payments made through letters of credit to M/s Vishwambhar Enterprises Ltd are as under :- LC Date LC NO. LC Amount LC payment Date Payment Including usance Interest 28.07.2017 0687950007117 44,84,978/- 01.02.2018 45,66,095/- 17.08.2017 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s tax paid (VAT & GST) alongwith the name of projects. On perusal of the purchase summary, it is noted that during the year under consideration, the appellant has made total purchases worth Rs. 9,93,52,098.30 from M/s Vishwambhar Enterprises Ltd which includes GST & VAT of Rs. 47,31,056/-. 9.6.1 The appellant has furnished the copy of VAT return and GST returns of M/s Vishwambhar Enterprises Pvt Ltd for the year under consideration. On perusal of VAT return, it is noted that total sales made by M/s Vishwambhar Enterprises Pvt Ltd upto 30.06.2017 were at Rs. 3, 57,75,420/- on which VAT of Rs. 17,88,771/- has been paid. On perusal of GST return of M/s Vishwambhar Enterprises Pvt Ltd w.e.f July, 2017 to March, 2018, month wise total sales made and GST paid during the period by M/s Vishwambhar Enterprises Pvt Ltd has been noted as under :- Month Taxable Value IGST CGST SGST Invoice Value Jul-17 46220222.53 1155506 1155506 48531234.33 Aug-17 64183299.86 1604584 1604584 67392468.32 Sep-17 67442512.39 1686063 1686063 70814638.03 Oct-17 59826533.33 1495663 1495663 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f aforementioned discussion, there is no dispute that the purchases made from M/s Vishwambhar Enterpirses Ltd are duly supported by bills and the payments during the year have been made through banking channel. There is no evidence to draw the conclusion that the entire purchase consideration which the appellant had paid to M/s Vishwambhar Enterpirses Ltd had come back to the assessee in cash. The entire purchases made by the appellant from M/s Vishwambhar Enterpirses Ltd have been accounted for by the appellant. In this regard reliance is placed in the case of Principal Commissioner of Income Tax, Surat-I v. Tejua Rohitkumar Kapadia, in [2018] 94taxmann.com324 (Gujarat) wherein the Hon'ble HIGH COURT OF GUJARAT vide order dated SEPTEMBER 18, 2017 has held as under :- "Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessing Officer had disallowed some expenditure treating purchases as bogus and made additions - Purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque - Further, seller also confirmed transaction and there was no evidence to show that amount was recycled back to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is decided in favour of the assessee. (F.2.1) Appeal of Revenue vide I.T.A. No. 623/Lkw/2024 and Cross Objection of the assessee vide C.O.No.01/Lkw/2025 are treated as disposed of in accordance with aforesaid directions contained in earlier part of this order. For statistical purposes; the appeal vide I.T.A. No. 623/Lkw/2024 and Cross Objection vide C.O.No.01/Lkw/2024; both are treated as dismissed. (G) As we have decided the issues on merits, the technical grounds and other remaining grounds taken in these appeals and in the Cross Objection have become merely academic in nature; and need not be decided. Hence, we decline to express any opinion on the same. (H) In the result, appeals vide I.T.A. No. 454/Lkw/2020, I.T.A. No. 453/Lkw/2020 and I.T.A. No. 623/Lkw/2024 are treated as dismissed; appeal vide I.T.A. No. 17/Lkw/2024 is treated as partly allowed; appeal vide I.T.A. No. 356/Lkw/2020 and I.T.A. No. 357/Lkw/2020 are treated as allowed; and Cross Objection vide C.O. No.01/Lkw/2025 is treated as dismissed; for statistical purposes. (Order pronounced in the open court on 02/04/2025). ============= Document 1 M/S APCO INFRATECH PVT. LTD., LUCKNOT A.Y. 2016-17 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Income 2. Copy of notice u/s 143(2) dated 21-07-2017 3. Copy of reply dated 24-09-2018 against notice u/s 143(2) dated 21-07-2017 4. Copy of notice u/s 142(1) dated 14-10-2018 5. Copy of reply dated 14-11-2018 and 23-11-2018 card 6. Copy of notice u/s 142(1) dated 30-11-2018 7. Copy of reply dated 10-12-2018 against notice u/s 142(1) dated 30-11-2018 8. Copy of Submissions filed before CIT(Appeals) B कà¥à¤°à¤® सं० 20245 दिनांक 5/8/24 * ITA NO. 357/LKW./2020 ITA NO. 454/LKW./2020 A.Y. 2017-18 PAPER BOOK IN APCO INFRATECH PVT. LTD., LUCKNOW INDEX S.L. No. PARTICULARS PAGE NO. 1. Copy of Return of Income 1-103 2. Copy of notice u/s 143(2) dated 28-09-2018 104-107 3. Copy of reply dated 09-09-2019 against notice u/s 143(2) dated 28-09-2018 108-145 4. Copy of notice u/s 142(1) dated 27-09-2019 146-150 5. Copy of reply against notice u/s 142(1) dated 27-09- 2019 151-441 6. Copy of notice u/s 142(1) dated 16-12-2019 442-443 7. Copy of reply dated 19-12-2019 and 23-12-2019 against notice u/s 142(1) dated 16-12-2019 444-449 8. Copy of notice u/s 250 dated 27-8-2020 450-451 9. Copy of Submissions fil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as a developer and treating it to be a work contractor has noted that UPPCL is giving 75% of the project cost in advance which is not correct as in the agreement only 75% of the cost of the material or 75% rate of the item in the BOQ of the detailed estimate which ever is lower was required to be paid in advance by UPPCL. As per agreement, the appellant was responsible for providing personnel, goods, consumables and services whether temporary or permanent in nature. In view of these facts, I am of the considered opinion that the appellant had performed functions of a developer. ii. New Rapti Project : The said project was construction of Rapti Mai .. Canal including all earth work and PUCCA work from 0.450 to 6.600 Km in Dist. Srawasti & Bahraich (U.P.) entered with Irrigation Department, UP. The contract value of the project was 144.21 crores and the construction period of the project was 30 months from the date of contract which was extended from time to time. The appellant has deposited 10% of contract value towards security deposits amounting to Rs. 14.42 crore which could have been forfeited in case of any breach of contract. On perusal of the agreement, it is noted that in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m 35/51 SOT 203 (URO) the Hon'ble Hyderabad Tribunal wherein similar issue of deduction u/s. 80-IA was involved. In the said case, the assessee was allotted various infrastructural projects by different authorities like HUDA, ICICI Park, etc., whereby the assessee would complete the work and hand over to the Govt. The profits from these projects were subjected to deduction under section 80-IA. However, the same was disallowed by the Assessing Officer. In an appeal before the Tribunal; after a detailed discussion on the provisions of section 80-IA and the amendments introduced by the Finance Act, 2009, the Tribunal came to conclusion that the assessees's contractor was a developer for the purpose of . section 80-IA. 8.12Reliance is placed on the decision of the Hon'ble Hyderabad Tribunal in the case of Sushee Hi Tech Constructions (P.) Ltd. v. Dy. CIT [2013] 33 taxmann.com 236/58 SOT 111 (URO) wherein it has been held that where contracts involve development, operating, maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contracts so as to deny deduction under section 80-IA(4) to assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment years as well as subsequent two assessment years - Whether therefore, in absence of any distinguished feature in nature of contract, Rule of consistency had to be applied and deduction under section 80-IA was to be allowed in relevant assessment year also - Held, yes [Para 5] [In favour of assessee]" 8.15 in view of the above discussion, it is evident that even after the amendment by the Finance Act, 2007 and the Finance Act, 2009, the CERTIFICA Document 7 courts have taken a view that the contractors performing the work in the nature of a developer-cum-contractor and assuming risks and responsibilities shall be eligible for deduction under section 80-IA in respect of the eligible infrastructural facilities. In the instant case, the agreements entered into by the appellant with Govt./Statutory bodies has been analysed and tendered documents containing the terms and conditions of the project were taken into consideration and it was noted that security deposits were paid by the appellant. There was a penalty for delay and procurement of the material, the employment of personnel for execution of workwere the responsibility of the appellant. It is also worthwhile to me....