TA Infra Projects Ltd., Hyd, Hyderabad V. DCIT, Circle-2(3), Hyd, Hyderabad

ITA 1284/HYD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2557 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SYED TAUSIF ALI
• Keywords: Business income; Business expenditure; Commercial expediency

Judgement Text

1 ITA.NO.1382, 1383/H/2015, C.OS.4&5/H/2016 & ITA.NO. 1284/H/2015 M/S. TA INFRA PROJECTS LTD., HYDERABAD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1382 & 1383/HYD/2015 ASSESSMENT YEARS 2010-2011 & 2011-2012 THE ACIT, CIRCLE-2(2) HYDERABAD. VS. M/S. TA INFRA PROJECTS LTD., HYDERABAD 500 016. PAN AABCT4110E (APPELLANT) (RESPONDENT) CROSS OBJECTION NOS.04 & 05/HYD/2016 ARISING OUT OF ITA.NO.1382 & 1383/HYD/2015 ASSESSMENT YEARS 2010-2011 & 2011-2012 M/S. TA INFRA PROJECTS LTD., HYDERABAD 500 016. PAN AABCT4110E VS. THE ACIT, CIRCLE-2(2) HYDERABAD. (CROSS-OBJECTOR) (RESPONDENT) ITA.NO.1284/HYD/2015 ASSESSMENT YEAR 2011-2012 M/S. TA INFRA PROJECTS LTD., HYDERABAD 500 016. PAN AABCT4110E VS. THE DCIT, CIRCLE-2(3) HYDERABAD. (CROSS-OBJECTOR) (RESPONDENT) FOR REVENUE : SHRI S. SRINIVASU FOR ASSESSEE : SHRI SYED TAUSIF ALI DATE OF HEARING : 18.04.2017 DATE OF PRONOUNCEMENT : 26.04.2017 2 ITA.NO.1382, 1383/H/2015, C.OS.4&5/H/2016 & ITA.NO. 1284/H/2015 M/S. TA INFRA PROJECTS LTD., HYDERABAD. ORDER PER BENCH : THE MAIN APPEALS ARE BY REVENUE AGAINST THE ORDER O F CIT(A)-2, HYDERABAD DATED 11 TH SEPTEMBER, 2015 AND CROSS-OBJECTIONS/ APPEAL BY THE ASSESSEE. SINCE ISSUES ARE COMMON, THES E APPEALS ARE HEARD TOGETHER AND ARE DECIDED BY THIS COMMON ORDER. W E HAVE HEARD THE LD. D.R. AND LEARNED COUNSEL AND PERUSED THE DOCU MENTS PLACED ON RECORD. 2. BRIEFLY STATED, ASSESSEE-COMPANY IS ENGAGED IN MA NUFACTURE OF PIPES FOR WATER-SUPPLY AND SEWERAGE SCHEMES AND ALSO UNDERTAKES TURNKEY CONTRACTS IN INFRASTRUCTURE SECTOR. IT FILED RETU RN OF INCOME FOR THE A.Y. 2010-2011 DECLARING TOTAL INCOME OF RS.3,31,0 8,017 AFTER CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT. THE A .O. HAS DISALLOWED THE CLAIM OF 80IA ON THE REASON THAT ASSESSE E HAS NOT DEVELOPED ANY INFRASTRUCTURE PROJECT AND ONLY UNDERTAKE N WORK CONTRACTS. IN AN APPEAL, THE LD. CIT(A), FOLLOWING TH E ITAT ORDER IN EARLIER YEAR ALLOWED ASSESSEES CONTENTIONS. HENCE, R EVENUE IS AGGRIEVED AND PREFERRED APPEAL RAISING A GROUND ON DEDUCTION A LLOWED UNDER SECTION 80IA(4). ASSESSEE FILED CROSS-OBJECTION IN SU PPORT OF CIT(A) ORDER. 2.1. FOR A.Y. 2011-2012, ASSESSEE FILED RETURN OF I NCOME DECLARING TOTAL INCOME OF RS.2,94,38,293. IN THE ASSE SSMENT MADE UNDER SECTION 143(3), A.O. TAKING A STAND AS IN EARLI ER YEAR, DISALLOWED CLAIM OF DEDUCTION UNDER SECTION 80IA TO THE EXTENT OF R S.74,13,126. IN ADDITION TO THAT A.O. ALSO DISALLOWED AN AMOUNT OF RS.1, 03,00,100 BEING BUSINESS EXPENSES MADE WITHOUT DEDUCTION OF TAX, THERE FORE, DISALLOWABLE UNDER SECTION 40(A)(IA) OF THE ACT. THERE ARE OTHER DISALLOWANCES ALSO WHICH LD. CIT(A) HAS GIVEN RELIE F TO THE ASSESSEE AND 3 ITA.NO.1382, 1383/H/2015, C.OS.4&5/H/2016 & ITA.NO. 1284/H/2015 M/S. TA INFRA PROJECTS LTD., HYDERABAD. REVENUE IS NOT IN APPEAL. LD. CIT(A) ALLOWED THE DEDU CTION UNDER SECTION 80IA(4) WHILE CONFIRMING THE DISALLOWANCE U/S 40(A)(IA). LD CIT(A) HOWEVER HELD THAT THE DISALLOWED AMOUNT WOULD BE PROFIT OF THE ELIGIBLE UNITS FOR DEDUCTION U/S 80IA. 3. REVENUE IS IN APPEAL ON THE ALLOWANCE OF DEDUCTI ON U/S 80IA AND DECISION OF LD. CIT(A) IN ALLOWING PROPORTIONATE DEDUCTION ON THE AMOUNT DISALLOWED U/S 40(A)(IA). ASSESSEE IS AGGRIEV ED ON THE CONFIRMATION OF DISALLOWANCE UNDER SECTION 40(A)(IA) BY THE CIT(A) AND RAISED THE GROUNDS ACCORDINGLY. THE CROSS-OBJECTION I S IN SUPPORT OF CLAIM WITH REFERENCE TO SECTION 80IA, WHICH LD. CIT(A ) FOLLOWING THE ITAT ORDER HAS GIVEN RELIEF TO THE ASSESSEE. 4. AS CAN BE SEEN FROM THE ABOVE, THE MAJOR ISSUE W HICH REVENUE IS CONTESTING IS WITH REFERENCE TO DEDUCTION UN DER SECTION 80IA. AT THE OUTSET, BOTH THE PARTIES HAVE AGREED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE ITAT IN E ARLIER YEAR IN ASSESSEES OWN CASE, WHICH THE LD. CIT(A) HAS FOLLOW ED. CONSEQUENTLY, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AS THERE ARE NO CHANGE IN FACTS AND CIRCUMSTANCES OF THE C ASE FOR THE YEARS UNDER APPEAL. HOWEVER, WHILE PASSING 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 AN ANNEX URE WAS NOT PLACED ON RECORD. LEARNED COUNSEL FOR THE ASSESSEE H AS STATED THAT THE CLAIM MADE WAS ONLY WITH REFERENCE TO THE INFRASTRUCTUR E PROJECTS AND NOT ON WORK CONTRACTS WHICH THE ASSESSEE ITSELF HAS SEG REGATED AND CLAIMED. HOWEVER, HE HAS NO OBJECTION IF THIS ASPECT I S VERIFIED BY THE A.O. THEREFORE, WHILE AGREEING WITH THE ORDER OF THE CIT(A) IN GRANTING THE DEDUCTION UNDER SECTION 80IA, SUBJECT TO VERIFICATION OF QUANTUM OF INCOME ON THE ELIGIBLE INFRASTRUCTURE PROJECTS, AS PER THE DIRECTIONS OF 4 ITA.NO.1382, 1383/H/2015, C.OS.4&5/H/2016 & ITA.NO. 1284/H/2015 M/S. TA INFRA PROJECTS LTD., HYDERABAD. THE ITAT IN EARLIER YEARS. REVENUE GROUNDS ARE ACCOR DINGLY PARTLY ALLOWED. 5. SINCE THE ISSUE IN A.Y. 2011-2012 IS ALSO SIMILA R, CIT(A) ORDERS ARE CONFIRMED, SUBJECT TO VERIFICATION OF THE E LIGIBLE AMOUNT AS DIRECTED ABOVE. ACCORDINGLY, REVENUE GROUNDS ARE CO NSIDERED AS PARTLY ALLOWED. 6. COMING TO THE ISSUE OF DISALLOWANCE OF RS.1,03, 000 MADE BY THE A.O. UNDER SECTION 40(A)(IA) IN AY 2011-12, IT WAS THE CONTENTION OF THE ASSESSEE THAT THESE AMOUNTS WERE COMPENSATIONS PAID IN RESPECT OF DEMOLITION OF STRUCTURES, TREES AND CROPS WHICH WERE READY FOR HARVESTING, WHILE LAYING THE INFRASTRUCTURE PIPELINES AS PART OF THE PROJECT. THE PROVISIONS OF TDS ARE NOT APPLICABLE FO R A SUCH PAYMENTS MADE FOR COMPENSATION AND EXPENDITURE IS INCURRED TOWA RDS COMMERCIAL EXPEDIENCY. LD. CIT(A) WHILE NOT AGREEING WITH THE CONTENTION OF THE ASSESSEE ON THE DISALLOWANCE, HOWEVER ACCEPTED THE ALTERNATE CONTENTION THAT THE AMOUNT DISALLOWED IN THE BU SINESS COMPUTATION WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80IA, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE BOM BAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY VS. CIT 330 ITR 175 A ND THE DECISION OF THE HYDERABAD BENCH OF ITAT IN THE CASE OF M/S. KOYA AND COMPANY CONSTRUCTION P. LTD., HYDERABAD VS. DCIT, CIRCLE-2(1), HYDERABAD (ITA.NOS.221/HYD/2009 DATED 22.03.2012). AS NOTED ABO VE, ASSESSEE IS CONTESTING DISALLOWANCE UNDER SECTION 40(A)(IA) WHE REAS REVENUE IS CONTESTING THE DIRECTION OF THE CIT IN ALLOWING PROPORTIO NATE DEDUCTION UNDER SECTION 80IA. AS FAR AS THE ASSESSEES GROUND I S CONCERNED THE DISALLOWANCE UNDER SECTION 40(A)(IA) IS NOT WARRANTED BY VIRTUE OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF M/S. MER LYIN SHIPPING & TRANSPORTS VS. ADDL. CIT, RANGE-1, VISAKHAPATNAM 136 ITD 23 (VISAKHAPATNAM) (SB) AS THERE ARE NO OUTSTANDING PAYMEN TS AT THE END 5 ITA.NO.1382, 1383/H/2015, C.OS.4&5/H/2016 & ITA.NO. 1284/H/2015 M/S. TA INFRA PROJECTS LTD., HYDERABAD. OF THE YEAR AND THE ENTIRE AMOUNT HAS BEEN PAID DURING THE YEAR WHICH WAS CLAIMED. THEREFORE, WITHOUT GOING TO THE MERITS OF TH E ISSUE WHETHER THE AMOUNTS ARE COVERED BY THE PROVISIONS OF TDS OR N OT, RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE C ASE OF M/S. MERLYIN SHIPPING & TRANSPORTS (SUPRA) AND THE DIRECTIONS OF TH E A.P. HIGH COURT, WE HEREBY ALLOW ASSESSEES CONTENTIONS THAT DISALLOWANC E UNDER SECTION 40(A)(IA) IS NOT WARRANTED. CONSEQUENTLY, THE REVENUE GROUND IS NOT MAINTAINABLE. HOWEVER, REVENUE GROUND IS ALSO NOT MAI NTAINABLE ON THE SIMPLE REASON THAT LD. CIT(A) FOLLOWED THE PRINCIPLE S LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THIS CASE THAT WHATEVER I S DISALLOWED WHILE COMPUTING THE BUSINESS INCOME, THE SAME WOULD B E ELIGIBLE FOR DEDUCTION. SUBSEQUENTLY, THE BOARD HAS ALSO ACCEPTED TH E ABOVE PRINCIPLE AND ISSUED INSTRUCTIONS IN NOVEMBER, 2016 D IRECTING THE A.O. TO CONSIDER THE AMOUNTS DISALLOWED AS PROFIT / BUSINESS INCOME TO BE ELIGIBLE FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER VARIOUS PROVISIONS. IN VIEW OF THIS, GROUNDS OF REVENUE ON TH IS ISSUE ARE NOT MAINTAINABLE. 7. THE CROSS-OBJECTIONS ARE IN RESPECT OF THE ORDER O F THE CIT(A) UNDER SECTION 80IA. SINCE THE ORDER OF THE CIT(A) IS U PHELD THE CROSS- OBJECTIONS BECOME ACADEMIC IN NATURE. 8. IN THE RESULT, REVENUES APPEALS ARE PARTLY ALLOWE D AND APPEAL AND CROSS-OBJECTIONS OF THE ASSESSEE ARE ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2017. SD/- SD/- (SMT. P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 26 TH APRIL, 2017. VBP/- 6 ITA.NO.1382, 1383/H/2015, C.OS.4&5/H/2016 & ITA.NO. 1284/H/2015 M/S. TA INFRA PROJECTS LTD., HYDERABAD. COPY TO 1. THE ACIT, CIRCLE-2(2), 8 TH FLOOR, B BLOCK, ROOM NO.824, I.T. TOWERS, A.C. GUARDS, HYDERABAD 500 004. 2. M/S. TA INFRA PROJECTS LTD., 6 TH FLOOR, TIRUMALA HEIGHTS, BEHIND SHOPPERS STOP, BEGUMPET, HYDERABAD 500 016. 3. CIT(A)-2, HYDERABAD. 4. PR. CIT-2, HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE.