TA Infra Projects Limited, Hyderabad V. Income Tax Officer, Ward-2(4), Hyderabad

CO 24/Hyd/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3681 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 17-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R LAXMAN
• Assessee Lawyers: SYED TAUSIF ALI
• Section: 142(1); 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1069/HYD/2017 AND C.O. NO. 24/HYD/2017 ASSESSMENT YEAR: 2014-15 INCOME-TAX OFFICER, WARD 2(4), HYDERABAD. VS. TA INFRA PROJECTS LTD., HYDERABAD. PAN AABCT 4110E (APPELLANT) (RESPONDENT/CROSS OBJECTOR) REVENUE BY : SHRI R. LAXMAN ASSESSEE BY : SHRI SYED TAUSIF ALI DATE OF HEARING 06/03/2018 DATE OF PRONOUNCEMENT 04/04/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 31/03/2017 OF CIT(A) 2, HYDERABAD FOR AY 20 11-12. THE ASSESSEE ALSO FILED C.O. AGAINST THE VERY SAME ORDE R OF THE CIT(A). 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE COMP ANY FILED ITS RETURN OF INCOME FOR THE AY 2014-15 ON 30/11/2014 D ECLARING TOTAL INCOME OF RS. 11,77,280/-. SUBSEQUENTLY, THE CASE W AS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) WERE ISS UED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICES, THE ASSESSEE FURNISHED THE INFORMATION AS REQUIRED. THE AO COMPLETED THE A SSESSMENT BY MAKING THE FOLLOWING DISALLOWANCES: 1. DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IA R S. 2,05,,310/- 2. DISALLOWANCE U/S 40(A)(IA) OF THE ACT RS. 14, 64,53,013/-. 2 ITA NO. 1069 /HYD/2017 & CO NO. 24/HYD/17 TA INFRA PROJECTS LTD. 3. AS REGARDS THE DISALLOWANCE OF CLAIM OF DEDUCTIO N U/S 80IA, THE AO AFTER EXAMINING THE AGREEMENT COPIES FILED BY TH E ASSESSEE IN RESPECT OF SOME OF THE CONTRACTS AND IN REFERENCE T O THE PROVISIONS OF SECTION 80IA, OBSERVED THAT THE ASSESSEE IS ONLY E XECUTING CONTRACTS AWARDED TO IT BASED ON THE DESIGNS SUPPLIED BY THE GOVT. DEPARTMENTS AND, THEREFORE, THE ASSESSEE CANNOT BE HELD TO BE D EVELOPING ANY INFRASTRUCTURAL FACILITY AND IT CAN ONLY SAID TO BE BUILDING AN INFRASTRUCTURAL FACILITY. FURTHER, HE OBSERVED THAT THE AGREEMENTS ENTERED BY THE ASSESSEE WERE FOR BUILDING OR CONSTR UCTING THE WHOLE OR PART OF THE PROJECTS IN WHICH THE ENTIRE INVESTM ENT WAS MADE BY THE GOVT. AND THE ASSESSEE WAS PAID ON RUNNING BILL TO BILL BASIS. HE OPINED THAT THERE WAS NO STIPULATION IN ANY OF THE CONTRACTS THAT THE FACILITY BUILT WILL BE TRANSFERRED OR HANDED OVER B ACK TO THE OWNER/EMPLOYER AND SUCH CONTRACTS ARE NOT ENVISAGED BY THE LEGISLATURE FOR ALLOWING THE BENEFIT OF SECTION 80I A OF THE ACT. HE, THEREFORE, CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITION OF SECTION 80IA(4)(I)(B). ACCORDINGLY , HE DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA OF RS. 2 ,05,310/-. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A). 5. THE CIT(A) FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR AYS 2004-05 TO 2009-10, ALLOWED THE ASSES SEES CLAIM OF DEDUCTION U/S 80IA. 6. AS REGARDS DISALLOWANCE U/S 40(A)(IA) OF THE ACT , THE AO OBSERVED THAT ON PERUSAL OF P&L A/C UNDER THE HEAD OTHER EXPENSES, THE ASSESSEE CLAIMED AN AMOUNT OF RS. 14,64,53,013/ - TOWARDS SUBCONTRACT EXPENSES AND RS. 10,66,000/- TOWARDS LE GAL AND PROFESSIONAL CHARGES ON DIFFERENT DATES. WHEN THE A R OF THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF TAX DEDUCTED ON THE ABOVE MENTIONED EXPENSES, THE AR CATEGORICALLY STATED THA T NO TAX WAS DEDUCTED ON THE SAID PAYMENTS. THE AO REFERRING TO VARIOUS 3 ITA NO. 1069 /HYD/2017 & CO NO. 24/HYD/17 TA INFRA PROJECTS LTD. JUDGMENTS AS WELL AS CBDT CIRCULAR ON SECTION 40(A) (IA), HELD THAT THE ASSESSEE HAVING FAILED TO DEDUCT THE TAX ON SUBCONT RACT EXPENSES U/S 194C AND LEGAL PROFESSIONAL PAYMENTS U/S 194J, HAS APPARENTLY VIOLATED THE PROVISIONS OF SECTION 40(A)(IA). ACCOR DINGLY, HE DISALLOWED THE ENTIRE SUB-CONTRACT EXPENDITURE OF R S. 14,64,53,013/- AND LEGAL PROFESSIONAL PAYMENTS OF RS. 10,66,000/- U/S 40(A)(IA) OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 7. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT AS IT IS EVIDENT FROM THE FACTS THAT THE ASSESSEE HAS ALREADY MADE THE SUBCONTRACT PAYMENTS AND ALSO THE PAYMENTS IN THE NATURE OF LEGAL EXPENSES DURING THE YEAR ITSELF AND NOTHING WAS PAYABLE AS ON 31 ST MARCH AND THIS FACT WAS NOT DISPUTED BY THE AO ALSO. FURTHER, HE OBSERVED THAT THE ISSUE INVOLVED IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE ITAT, SPL. BE NCH, VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRA NSPORT AND JANAPRIYA ENGINEERING SYNDICATE RESPECTIVELY. ACCOR DINGLY, HE DELETED THE DISALLOWANCE MADE BY THE AO U/S 40(A)(I A) OF THE ACT. 8. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHE THER THE CIT(A) IN ALLOWING THE APPEAL OF THE ASSESSEE ON TH E DEDUCTION U/S 80IA(4) TO A WORKS CONTRACTOR DESPITE EXPLANATI ON TO SECTION 80IA PROHIBITING SUCH DEDUCTION RELYING ON THE TRIBUNAL'S DECISION IN THE ASSESSEE'S OWN CASE FOR A.Y. 2004-05 TO 2009-10 ? 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE CIT (A) IS CORRECT IN HOLDING THAT THE EXPENDITURE OF R S. 14,75,19,013/- WHICH IS NOT PAYABLE AS ON 31. 03.20 14, THEREFORE THE PROVISIONS OF SECTION 40(A)(IA) IS NO T APPLICABLE BY FOLLOWING THE DECISION OF THE VIZAG SPECIAL BENCH'S DECISION IN THE CASE OF M/S MERYLIN SHIPPING PRIVATE LIMITED, W HEN THE SAID DECISION WAS SUSPENDED BY THE HON'BLE HIGH COURT OF A.P. ? 4 ITA NO. 1069 /HYD/2017 & CO NO. 24/HYD/17 TA INFRA PROJECTS LTD. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE CIT (A) IS CORRECT IN HOLDING THAT THE EXPENDITURE OF R S. 14,75,19,013/- WHICH IS NOT PAYABLE AS ON 31.03.201 4, THEREFORE, THE PROVISIONS OF SECTION 40 (A)(IA) IS NOT APPLICABLE WHICH IS IN CONTRARY TO THE PRINCIPLE HELD BY HON'B LE SUPREME COURT IN THE CASE OF M/ S PALAM GAS SERVICE? 9. AS REGARDS GROUND NO. 1 RELATING TO DEDUCTION U/ S 80IA(4), THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR AYS 2012-13 AND 2013-14 IN ITA NOS. 14/HYD/16 AND 727/HYD/2017 VIDE ORDER DATED 16/02/2018. THE LD. DR, ON THE OTHER HAND, NE ITHER CONTROVERTED THE SUBMISSION OF THE LD. AR NOR BROUGHT ANY CONTRA RY DECISION IN THIS REGARD. 10. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE COORDINATE BENCH IN ASSESSEES OWN CASE IN EARLIER YEARS (SUPRA) HAS HELD AS UNDER: 4.4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, OBJE CTIONS OF THE DR AND SUBMISSIONS OF THE AR. AS CAN BE SEEN FROM THE ORDER OF CIT(A), HE HAS FOLLOWED THE ORDER OF ITAT IN EARLIER YEARS. AT THE OUT SET, IT IS TO BE AGREED T HAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE ORDERS OF THE ITAT IN EARLIER YEARS IN ASSESSEES OWN CASE WHICH THE LD. CIT(A) HAS FOLLOWED. CONSEQUENTLY, WE DO NOT SEE AN Y REASON TO INTERFERE WITH THE ORDER OF CIT(A), AS THERE SEEMS TO BE NO CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE IN THE YEARS UNDER APPEAL. HOWEVER, AO HAS NOT DIST INGUISHED ON WHAT PERCENTAGE ASSESSEE HAS CLAIMED U/S. 80IA AND WHAT ARE THE CON TRACTS UNDERTAKEN. IN EARLIER YEARS, AS SEEN FROM THE ORDERS OF AYS. 2010-11 AND 2011-12 , AO HAS ISSUED AN ANNEXURE, IDENTIFYING VARIOUS PROJECTS. THE MATTER WAS SENT B ACK TO AO FOR VERIFICATION. THE ORDER OF ITAT IN ITA NOS. 1382 & 1383/HYD/2015 DT. 26-04- 2017 IS AS UNDER: 4. AS CAN BE SEEN FROM THE ABOVE, THE MAJOR ISSUE WHICH REVENUE IS CONTESTING IS WITH REFERENCE TO DEDUCTION UNDER SEC TION 80IA. AT THE OUTSET, BOTH THE PARTIES HAVE AGREED THAT THIS ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE ITAT IN EARLIER YEAR IN ASSESS EES OWN CASE, WHICH THE LD. CIT(A) HAS FOLLOWED. CONSEQUENTLY, WE DO NOT SEE AN Y REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AS THERE ARE NO CHANGE IN F ACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEARS UNDER APPEAL. HOWEVER, WHILE PAS SING THE ORDER THE A.O. HAS STATED THAT CERTAIN CONTRACTS WERE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. THIS WHICH SEEMS TO HAVE BEEN QUANTIFIED IN A N ANNEXURE WAS NOT PLACED ON RECORD. LEARNED COUNSEL FOR THE ASSESSEE HAS STA TED THAT THE CLAIM MADE WAS ONLY WITH REFERENCE TO THE INFRASTRUCTURE PROJE CTS AND NOT ON WORK CONTRACTS WHICH THE ASSESSEE ITSELF HAS SEGREGATED AND CLAIMED. HOWEVER, HE HAS NO OBJECTION IF THIS ASPECT IS VERIFIED BY THE A.O. THEREFORE, WHILE AGREEING WITH THE ORDER OF THE CIT(A) IN GRANTING THE DEDUCT ION UNDER SECTION 80IA, 5 ITA NO. 1069 /HYD/2017 & CO NO. 24/HYD/17 TA INFRA PROJECTS LTD. SUBJECT TO VERIFICATION OF QUANTUM OF INCOME ON THE ELIGIBLE INFRASTRUCTURE PROJECTS, AS PER THE DIRECTIONS OF THE ITAT IN EARL IER YEARS. REVENUE GROUNDS ARE ACCORDINGLY PARTLY ALLOWED. 4.5. IN VIEW OF THAT, SINCE ASSESSEE ASCERTAINS THA T IT HAS CLAIMED ONLY THE DEDUCTION ON INFRASTRUCTURAL PROJECTS UNDERTAKEN BY IT, AO IS DIRECTED TO EXAMINE THIS ASPECT AND ALLOW THE CLAIM AFTER VERIF ICATION AS IN EARLIER YEARS. THE GROUND IS CONSIDERED PARTLY ALLOWED FOR STATIST ICAL PURPOSES. AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDEN TICAL TO THE EARLIER YEARS, WE REMAND THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ISSUE AND ALLOW THE CLAIM AFTER VERI FICATION AS IN EARLIER YEARS. THE GROUND RAISED BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11. AS REGARD GROUND NOS. 2 & 3 REGARDING DISALLOWA NCE U/S 40(A)(IA) OF THE ACT, THE LD. AR OF THE ASSESSEE SU BMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE IT AT IN ASSESSEES OWN CASE FOR AYS 2012-13 AND 2013-14 IN ITA NOS. 14 /HYD/16 AND 727/HYD/2017 VIDE ORDER DATED 16/02/2018. THE LD. D R, ON THE OTHER HAND, NEITHER CONTROVERTED THE SUBMISSION OF THE LD . AR NOR BROUGHT ANY CONTRARY DECISION IN THIS REGARD. 12. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE COORDINATE BENCH IN ASSESSEES OWN CASE IN EARLIER YEARS (SUPRA) HAS HELD AS UNDER: 5.1. AFTER CONSIDERING THE RIVAL CONTENTIONS, AS T HE ISSUE IS NOW DECIDED BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF PALAM GAS SER VICE VS. CIT [394 ITR 300] (SC) IN WHICH IT WAS HELD THAT EVEN THE AMOUNTS PAID DURING THE YEAR ARE ALSO COVERED BY THE PROVISIONS OF SECTION 40(A)(IA), THE SPECIAL BENCH DECISION OF THE ITAT IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD., VS. (SUPRA) IS NO LONGER A VALID ONE. CONSEQUENTLY, THE ORDER OF CIT(A), RELYING ON THE ABOVE, FOR GIVI NG RELIEF IS TO BE SET ASIDE. 6. HOWEVER, ASSESSEE IN THE CROSS-OBJECTION HAS RAI SED THE ISSUE THAT ASSESSEE HAS NOT BEEN TREATED AS ASSESSEE-IN-DEFAULT UNDER THE PROVI SIONS OF SECTION 201(1) OF THE ACT AND FOLLOWING THE DECISION OF THE HON'BLE DELHI HIG H COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD., VS. CIT [CM APPEAL NO. 3774 OF 2015 IN ITA NO. 160 OF 2015] DT. 28-08-2015, THE DISALLOWANCE U/S. 40(A)(IA) COU LD NOT BE MADE, IF ASSESSEE IS NOT TREATED AS ASSESSEEIN-DEFAULT. IT WAS FURTHER SUBMI TTED THAT ASSESSEE IS IN A POSITION TO PRODUCE THE CERTIFICATES THAT THE PAYEE HAS INCLUDE D THE AMOUNT RECEIVED FROM ASSESSEE IN ITS RETURNS AND HAS PAID ENTIRE TAXES O N THE INCOME. SINCE THESE ISSUES ARE 6 ITA NO. 1069 /HYD/2017 & CO NO. 24/HYD/17 TA INFRA PROJECTS LTD. NOT EXAMINED BY THE AO, WE ARE OF THE OPINION THAT THE DISALLOWANCE U/S. 40(A)(IA) IS REQUIRED TO BE RE-CONSIDERED BY THE AO, AFTER GIVIN G DUE OPPORTUNITY TO ASSESSEE. FOR THIS PURPOSE, ORDERS OF AO AND CIT(A) ON THIS ISSUE ARE SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO AS THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO TH E EARLIER YEARS (SUPRA), WE REMIT THE ISSUE BACK TO THE FILE OF THE AO TO DECIDE THE SAME IN LINE WITH THE DIRECTIONS OF THE COORDINATE BENCH IN EARLIER YEARS. 13. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 14. C.O. FILED BY THE ASSESSEE IS MAINLY IN SUPPORT OF THE ORDER OF CIT(A) AND ON THE ISSUE OF 40(A)(IA), WHICH HAS ALR EADY BEEN RESTORED TO THE FILE OF THE AO AND ACCORDINGLY, CO IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. 15. TO SUM-UP, BOTH REVENUE APPEAL AND CO ARE ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 4 TH APRIL, 2018 KV 7 ITA NO. 1069 /HYD/2017 & CO NO. 24/HYD/17 TA INFRA PROJECTS LTD. COPY TO:- 1) ITO, WARD 2(4), ROOM NO. 509, 5 TH FLOOR, SIGNATURE TOWERS, OPP. BOTANICAL GARDEN, KONDAPUR, HYD. 2) M/S TA INFRA PROJECTS LTD., 1-11-251/4/B, 6 TH FLOOR, TIRUMALA HEIGHTS, BEHIND SHOPPERES STOP, BEGUMP ET, HYD 16. 3) CIT(A) 2, HYDERABAD. 4) PR. CIT -2, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE