Dy. Commissioner of Income Tax, Circle-1(1), Hyderabad V. M/s AP Industrial Infrastructure Corporation Limited, Hyderabad

ITA 1807/HYD/2013

• Counselvise Citation: 180722514 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MO HARANA
• Assessee Lawyers: B SATYANARAYANA MURTY
• Keywords: Retrospective amendment; Revised return
• Section: 143(3)

Judgement Text

ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS.1806 & 1807/HYD/2013 (ASSESSMENT YEARS: 2009-10 & 2010-11) DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) HYDERABAD VS. A.P. INDUSTRIAL INFRASTRUCTURE CORPORATION LTD 5-9-58/B 6 TH FLOOR, PARISRAMA BHAVAN, BASHEERBAGH, HYDERABAD PAN: AABCA 9029 K (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI S. MOHARANA, CIT (DR) FOR AS SESSEE : SHRI B. SATYANARAYANA MURTY DATE OF HEARING : 26 .08.2015 DATE OF PRONOUNCEMENT : 04 .0 9 .2015 O R D E R PER SMT.P. MADHAVI DEVI, J.M. BOTH ARE REVENUE APPEALS FOR THE A.Y 2009-10 AND 2 010-11 AGAINST THE ORDER OF THE CIT (A)-II, HYDERABAD, DATED 29.10.2013. ITA NO.1806/HYD/2013 A.Y 2009-10 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, A STATE PUBLIC SECTOR UNDERTAKING, WAS IN THE BUSINES S OF DEVELOPMENT, OPERATION AND MAINTENANCE OF INDUSTRIA L ESTATES IN THE STATE OF ANDHRA PRADESH. ASSESSEE FILED ITS E-R ETURN OF INCOME ON 30.09.2009 ADMITTING A TAXABLE INCOME OF RS.11,2 1,58,380. THE RETURN WAS PROCESSED U/S 143(1) ON 25.03.2011 A ND A REFUND OF RS.58,17,080 WAS ALSO ISSUED. THEREAFTER, ASSESSMENT PROCEEDINGS U/S 143(3) WERE INITIATED AND NOTICE U/ S 143(2) WAS ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 2 OF 9 ISSUED AND SERVED ON THE ASSESSEE ON 3.8.2010. DURI NG THE PENDENCY OF THE SCRUTINY ASSESSMENT PROCEEDINGS, AS SESSEE FILED A REVISED RETURN OF INCOME IN PHYSICAL MODE ON 30.0 5.2011 ADMITTING THE TAXABLE INCOME OF RS.16,36,73,160. AO OBSERVED THAT THE REVISED RETURN WAS FILED BEYOND THE TIME P ERMITTED AND THEREFORE, IS LEGALLY INVALID. HOWEVER, SINCE THE A SSESSEE DISCLOSED HIGHER INCOME AS PER THE REVISED COMPUTATION, HE CO NSIDERED IT FOR THE PURPOSE OF DETERMINATION OF THE TAXABLE INC OME. AO OBSERVED THAT IN THE REVISED RETURN, ASSESSEE HAS C LAIMED DEDUCTION OF RS.53,88,807 U/S 80IAB OF THE ACT TOWA RDS INCOME FROM NOTIFIED SEZ. HE OBSERVED THAT ASSESSEE HAS NO T MADE THE CLAIM U/S 80IAB IN THE ORIGINAL RETURN OF INCOME. H E ALSO OBSERVED THAT THE ASSESSEE HAS FILED FORM 10CCB IN SUPPORT OF CLAIM U/S 80IAB ONLY ON THE LAST DATE OF HEARING. O BSERVING THAT THE ASSESSEE HAS FAILED TO FURNISH THE P&L A/C AND BALANCE SHEET OF THE RESPECTIVE UNITS ELIGIBLE FOR THE CLAIM U/S 80IAB, HE OBSERVED THAT IT IS NOT POSSIBLE TO DETERMINE THE E LIGIBLE PROFIT. THEREFORE, HE DISALLOWED THE DEDUCTION BY RELYING U PON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F GOETZE INDIA LTD (284 ITR 329 (S.C). FURTHER HE ALSO OBSER VED THAT IN THE P&L A/C OF THE ASSESSEE, ASSESSEE HAS DEBITED AN AM OUNT OF RS.5,28,06,794 AS INTEREST PAID TO NTPC AND THAT T HE ASSESSEE HAS NOT MADE DEDUCTION OF TAX AT SOURCE U/S 192A OF THE ACT. AO, THEREFORE, PROPOSED TO DISALLOW THE CLAIM U/S 4 0(A)(IA) OF THE ACT. ASSESSEE, HOWEVER, REPLIED THAT THE ROLE OF TH E ASSESSEE WAS LIMITED TO ACTING AS A MEDIATOR ONLY AND THUS IT WAS A BACK TO BACK ARRANGEMENT AGAINST INTEREST INCOME RE CEIVABLE FROM VIWSCO, WHICH IN TURN WAS PAYABLE TO NTPC. AO HOWEVER, WAS NOT CONVINCED WITH THE ASSESSEES CONTENTION AN D HELD THAT THE ASSESSEE WAS BOUND TO MAKE TDS U/S 192A OF THE ACT. DUE ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 3 OF 9 TO NON DEDUCTION OF TDS ON INTEREST OF RS.5,28,06,7 94 PAID TO NTPC, THE AO DISALLOWED THE SAME U/S 40(A)(IA) OF T HE ACT AND BROUGHT IT TO TAX. HE ALSO MADE OTHER DISALLOWANCES AND CONSEQUENTIAL ADDITIONS TO THE ASSESSEES INCOME AG AINST WHICH ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A), WHO G RANTED PARTIAL RELIEF TO THE ASSESSEE BY DELETING BOTH THE ADDITIO NS DISCUSSED ABOVE AND CONFIRMED THE OTHER ADDITIONS. AGAINST TH E RELIEF GRANTED BY THE CIT (A), THE REVENUE IS IN APPEAL BE FORE US. 3. THE LD DR, WHILE SUPPORTING THE ORDER OF THE AO, SUBMITTED THAT THE CIT (A) HAS GRANTED RELIEF TO THE ASSESSEE U/S 80IAB OF THE ACT, EVEN THOUGH (I) ASSESSEE HAS NOT MADE THE CLAIM IN ITS ORIGINAL RETURN OF INCOME AND (II) THE ASSESSEE HAS NOT FILED FORM NO.10CCB ALONGWITH THE REVISED RETURN OF INCOME IN WHICH THE ASSESSEE HAS MADE THE CLAIM. HE FURTHER SUBMITTED T HAT RULE 18BBB PRESCRIBES THAT THE AUDITED REPORT IS TO BE F ILED ALONGWITH THE RETURN OF INCOME AND THEREFORE, THE CIT (A) OUG HT NOT TO HAVE CONSIDERED FORM NO.10CCB FILED ON THE LAST DATE OF HEARING AND GIVEN RELIEF ON THE BASIS OF SUCH A REPORT. HE ALSO SUBMITTED THAT THE RELIANCE OF THE CIT (A) ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUDHVI BROKERS & SHAREHOLDERS PVT. LTD (ITA NO.3908 OF 2010) DATED 2 1.06.2012 IS ALSO MISPLACED AS ACCORDING TO HIM, THE FACTS THERE IN ARE DISGINGUISHABLE FROM THE FACTS OF THE CASE BEFORE U S. AS REGARDS THE ISSUE OF INTEREST EXPENDITURE DISALLOWED U/S 40 (A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE, THE LD DR S UPPORTED THE ORDERS OF THE AO AND SUBMITTED THAT THE CIT (A) HAS APPLIED THE AMENDED PROVISIONS OF SECTION 40(A)(IA) OF THE ACT TO THE FACTS OF THE CASE, EVEN THOUGH SUCH PROVISION WAS APPLICABLE PROSPECTIVELY AND WAS NOT APPLICABLE TO THE YEAR BE FORE US. HE ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 4 OF 9 SUBMITTED THAT THE CIT (A) OUGHT NOT TO HAVE CONSID ERED THAT NTPC HAS OFFERED THE INTEREST INCOME AND THEREFORE, OUGHT NOT TO HAVE HELD THAT THE DISALLOWANCE U/S 40(A)(IA) IS NO T TO BE MADE IN THE HANDS OF THE ASSESSEE. 4. THE LD COUNSEL FOR THE ASSESSEE, ON THE OTHER HA ND, SUPPORTED THE ORDER OF THE CIT (A) AND SUBMITTED TH AT AS REGARDS DEDUCTION U/S 80IAB IS CONCERNED, IT IS TRUE THAT T HE ASSESSEE DID NOT MAKE ANY CLAIM U/S 80IAB IN ITS ORIGINAL RE TURN OF INCOME, BUT THE ASSESSEE HAD MADE THE CLAIM IN ITS REVISED RETURN FILED ON 30.05.2011. HE SUBMITTED THAT FILIN G OF FORM NO.10CCB ALONGWITH THE RETURN OF INCOME WAS ONLY A TECHNICAL REQUIREMENT AND THE ASSESSEE HAD FILED THE SAME BEF ORE THE AO THOUGH ON THE LAST DATE OF HEARING. HE SUBMITTED TH AT INSPITE OF OBSERVING THAT IT WAS A BELATED RETURN, BY TAKING I NTO ACCOUNT THE TAXABLE INCOME RETURNED IN THE REVISED RETURN OF IN COME, AO HAS ACCEPTED THE SAME AND THEREFORE, IT WAS A VALID RET URN. THEREFORE, ACCORDING TO HIM, THE AO WAS WRONG IN SAYING THAT T HE ASSESSEES CLAIM IS NOT ALLOWABLE BECAUSE IT WAS NOT MADE IN I TS ORIGINAL RETURN OF INCOME. HE SUBMITTED THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. (SUP RA) IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US AS TH E ASSESSEE HAS MADE THE CLAIM BY WAY OF FILING THE REVISED RETURN OF INCOME WHICH HAS BEEN ACTED UPON BY THE AO. 5. ON THE OBJECTIONS OF THE REVENUE THAT THE ASSESS EE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR ELIGIBLE UNITS AND THEREFORE, THE DEDUCTION IS NOT ALLOWABLE, THE LD C OUNSEL FOR THE ASSESSEE SUBMITTED THAT FORM NO.10CCB IS CERTIFIED BY THE CHARTERED ACCOUNTANT, BASED ON THE AUDITED ACCOUNTS AND ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 5 OF 9 THEREFORE, THERE IS SUFFICIENT COMPLIANCE IN ORDER TO MAKE THE CLAIM. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATER IAL ON RECORD, WE FIND THAT THE ASSESSEES CLAIM OF DEDUCT ION U/S 80IAB WAS DISALLOWED ON THE FOLLOWING GROUNDS: I) THAT ASSESSEE HAS NOT MADE THE CLAIM IN ITS ORIG INAL RETURN OF INCOME; II) THAT THE ASSESSEE HAS NOT FILED FORM 10CCB ALON GWITH THE RETURN OF INCOME; AND III) THAT THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS. 7. AS REGARDS THE FIRST OBJECTION, WE FIND THAT IT IS NOT SUSTAINABLE AS THE ASSESSEE HAD FILED A REVISED RET URN OF INCOME IN WHICH THE CLAIM U/S 80IAB WAS MADE. ACCORDING TO THE AO, THE REVISED RETURN WAS BARRED BY LIMITATION, BUT TH E FACT THAT HE HAS ACTED UPON IT BY ACCEPTING THE INCOME RETURNED THEREIN BELIES HIS CONTENTION THAT IT IS NOT A VALID RETURN . HAVING ACCEPTED THE REVISED RETURN IN PART, HE CANNOT IGNO RE THE CLAIM OF THE ASSESSEE U/S 80IAB OF THE ACT. AS REGARDS THE S ECOND OBJECTION THAT FORM 10CCB WAS NOT FILED ALONG WITH THE RETURN OF INCOME, WE FIND THAT RULE 18BBB REQUIRED THAT FORM 10CCB BE FILED ALONG WITH THE RETURN OF INCOME, WE ARE OF TH E OPINION THAT IT WOULD ALSO FULFIL THE REQUIREMENT IF IT IS FILED BE FORE COMPLETION OF THE ASSESSMENT PROCEEDINGS. IN THE CASE BEFORE US, THE THE ASSESSEE HAS FILED FORM NO.10CCB ON THE LAST DATE O F HEARING DUE TO WHICH AO COULD NOT HAVE VERIFIED THE SAME TO APPRECIATE THE CORRECTNESS OF THE CLAIM. AS REGARDS THE THIRD OBJECTION, WE FIND THAT THE CIT (A) HAS RELIED ON SECTION 80IA(10 ) DEALING WITH ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 6 OF 9 SIMILAR PROVISIONS AS SECTION 80IAB TO HOLD THAT T HE AO IN COMPUTING THE PROFIT AND GAINS OF THE ELIGIBLE BUSI NESS FOR THE PURPOSE OF THE DEDUCTIONS U/S 80IA, CAN TAKE THE AM OUNTS OF PROFIT AS MAY BE REASONABLY DEEMED TO HAVE BEEN DER IVED THEREFROM. THUS, IT IS CLEAR THAT EVEN IF THE ASSES SEE IS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNTS FOR ELIGIBLE UNITS, THE AO SHALL COMPUTE THE DEDUCTION ON A REASONABLE BASIS P ROVIDED THE BUSINESS TRANSACTED BETWEEN ELIGIBLE BUSINESS AND A NY OTHER PERSON PRODUCES TO THE ASSESSEE MORE THAN THE ORDIN ARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE B USINESS. IN THE CASE BEFORE US, THE CIT (A) HAS SIMPLY APPLIED THE SAID PROVISION WITHOUT EXAMINING WHETHER THE ASSESSEE SATISFIES TH E CONDITIONS PRESCRIBED THEREUNDER. THEREFORE, THOUGH WE AGREE W ITH THE ORDER OF THE CIT (A) THAT THE ASSESSEES CLAIM U/S 80IAB NEEDS TO BE CONSIDERED, WE FIND THAT THE CIT (A) HAS NOT CONSID ERED THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE U/S 80IAB OF THE ACT. THEREFORE, FOR VERIFICATION AS TO WHETHER THE ASSES SEE SATISFIED THE CONDITIONS U/S 80IA(10) OF THE ACT AND FOR COMPUTAT ION OF DEDUCTION U/S 80IAB OF THE ACT, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE AO. THIS GROUND OF THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. AS REGARDS THE DELETION OF DISALLOWANCE OF THE I NTEREST PAID TO NTPC U/S 40(A)(IA), WE FIND THAT THE ASSESSEE IS A NODAL AGENCY AND THE LOANS ARE ROUTED THROUGH THE ASSESSE E. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY COMPANY LTD ( WIWSCO) HAS TAKEN A LOAN OF RS.350 CRORES IN FINANCIAL YEAR 2004-05 FROM NTPC, VMC AND RINL OF RS.50 CRORES, 60 CRORES AND 2 40 CRORES RESPECTIVELY AND THE INTEREST WAS AGREED TO BE CHAR GED @ 10% ON THE ABOVE LOAN AMOUNT. IT IS ALSO OBSERVED THAT THE INTEREST ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 7 OF 9 RECEIVABLE AND INTEREST PAYABLE ARE BOTH REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THERE IS NO INCOME TO THE ASSESSEE AS IT IS ONLY A CONDUIT TO RECEIVE INTEREST FROM VI WSCO TO MAKE PAYMENT TO THE LENDERS. IT WAS SUBMITTED BY THE LD COUNSEL FOR THE ASSESSEE THAT ALL THE THREE ORGANIZATIONS WHO H AVE LENT MONEY TO VIWSCO ARE GOVT. ORGANIZATIONS AND THEREFO RE, THERE WAS NO REQUIREMENT OF MAKING ANY TDS FROM THE PAYME NTS MADE TO THEM AND THAT SINCE NTPC HAD CEASED TO BE A GOVT . ORGANIZATION AND BECAME A PUBLIC SECTOR UNDERTAKING FROM THE RELEVANT PREVIOUS YEAR, THE ASSESSEE WAS REQUIRED T O DEDUCT TAX AT SOURCE WHILE MAKING THE PAYMENT TO NTPC. HE SUBM ITTED THAT IN ORDER TO AVOID UNNECESSARY COMPLICATIONS, ASSESS EE HAD REQUESTED VIWSCO TO OPERATE DIRECTLY WITH THE LENDE RS AND THAT FOR THE RELEVANT A.Y NTPC HAD ALREADY OFFERED THE I NTEREST RECEIPT IN ITS BOOKS OF ACCOUNTS. WE FIND THAT THE ASSESSEE HAD FURNISHED A CERTIFICATE FROM THE MANAGING DIRECTOR OF NTPC TO THIS EFFECT. WE FIND THAT THE CIT (A) HAS TAKEN NOTE OF AMENDMEN T TO SECTION 201 AND SECTION 40(A)(IA) MADE BY THE FINANCE ACT O F 2012 W.E.F. 1.4.2013 TO THE EFFECT THAT THE SAID PROVISIONS WOU LD NOT APPLY, IF THE PAYEE HAS TAKEN THE AMOUNT IN COMPUTING ITS INC OME AND PAID TAX THEREON. WE FIND THAT THE CIT (A) HAS OBSE RVED THAT THE PROIVISO THAT WAS INSERTED W.E.F. 1.4.2013 ARE TO R EMEDY UNINTENDED CONSEQUENCES AND THEREFORE, THE SAME ARE TREATED AS CLARIFICATORY IN NATURE AND RETROSPECTIVE IN OPERAT ION. THEREFORE, THE CIT (A) HAS GRANTED RELIEF TO THE ASSESSEE. 9. AT THE TIME OF HEARING THE LD COUNSEL FOR THE AS SESSEE FILED BEFORE US COPIES OF THE ORDERS OF THE TRIBUNAL AT A GRA IN THE CASE OF SATISH CHAND AGARWAL VS JCIT, ITA NO. 339/AGRA/2 013 AND RAJEEV KUMAR AGARWAL VS ACIT, ITA NO. 337/AGR/2013 BOTH ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 8 OF 9 DATED 29.05.2013, WHEREIN AFTER DISCUSSING THE ISSU E AT LENGTH, THE TRIBUNAL HAS HELD THAT INSERTION OF PROVISOS AR E TREATED AS DECLARATORY AND CLARIFICATORY IN NATURE AND THEREFO RE, IT HAS RETROSPECTIVE EFFECT FROM 1.4.2005 I.E. FROM THE DA TE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A)(IA) WAS INSERTED B Y THE FINANCE ACT, 2004. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL ON THE LEGAL ISSUE ABOUT THE RETROSPECTIVE EFFECT O F THE AMENDED PROVISIONS OF SECTION 40(A)(IA), WE SEE NO REASON T O INTERFERE WITH THE ORDER OF THE CIT (A). THEREFORE, THE REVENUES APPEAL IS DISMISSED., 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IN I TA NO.1806/HYD/2013 IS DISMISSED. ITA NO.1807/HYD/2013 A.Y 2010-11 11. IN THE REVENUE APPEAL FOR A.Y 2010-11, THERE IS ONLY ONE GROUND OF APPEAL AGAINST THE DELETION OF DISALLOWAN CE OF INTEREST PAYMENT MADE TO NTPC BY THE AO U/S 40(A)(IA) OF THE ACT. FOR THE DETAILED REASONS GIVEN IN OUR ORDER IN REVENUE S APPEAL IN ITA NO.1806/HYD/2013 FOR A.Y 2009-10, THIS GROUND O F THE REVENUE IS ALSO REJECTED. 12. IN THE RESULT, BOTH THE REVENUE APPEALS FOR A.Y S 2009-10 AND 2010-11 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015. S D/ - S D/ - (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 4 TH SEPTEMBER, 2015. VNODAN/SPS ITA NOS 1806 AND 1807 OF 2013 AP INDUSTRIAL INFRAST RUCTURE CORPN LTD HYDERABAD PAGE 9 OF 9 COPY TO: 1. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 2. M/S. A.P. INDUSTRIAL INFRASTRUCTURE CORPORATION LTD , 5-9-58/B 6 TH FLOOR, PARISRAMA BHAVAN, BASHEERBAGH, HYDERABAD 3. CIT (A)-II HYDERABAD 4. CIT-I HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER