SDE Engineers Pvt.Ltd., Hyd, Hyderabad V. DCIT, Circle-3(1), Hyderabad, Hyderabad

ITA 204/Hyd/2016

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4622 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 28-11-2023
• Assessment Year: 2006-2007
• Appeal Filed On: 21-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income; Competent authority; Rule 8D; Set aside
• Section: 143(3); 14A; 205; 80IA; 13

Judgement Text

ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 1 of 21 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A ‘ Bench, Hyderabad Before Shri R.K. Panda, Vice-President AND Shri Laliet Kumar, Judicial Member ITA No Assessee Revenue A.Y 204/Hyd/2016 SDE Engineers Pvt. Ltd Hyderabad PAN:AACCS8121R Dy. CIT, Circle 3(1) Hyderabad 2006-07 205/Hyd/2016 -do- -do- 2011-12 842/Hyd/2017 -do- Income Tax Officer Ward 3(1) Hyderabad 2012-13 Assessee by : Shri S. Rama Rao, Advocate Revenue by: Shri Shakeer Ahmed, DR Date of hearing: 29/11/2023 Date of pronouncement: 19/12/2023 ORDER Per Bench. ITA 204 & 205/Hyd/2016 filed by the assessee are directed against the separate orders dated 15.12.2015 of the learned CIT (A)-3, Hyderabad, relating to A.Y.2006-07 & 2011-12 respectively. ITA 842/Hyd/2017 filed by the assessee is directed against the order dated 6.2.2017 of the learned CIT (A)-3, Hyderabad, relating to A.Y 2012-13. Since identical issues have been raised by the assessee in all these appeals, therefore, for the sake of convenience, these were heard together and are being disposed of in this common order. ITA 204/Hyd/2016 – A.Y 2006-07 2. First, we take up ITA No.204/Hyd/2016 for the A.Y 2006-07. This is the second round of litigation before the Tribunal. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 2 of 21 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of builders and contractors. It filed its return of income on 22.11.2006 declaring income of Rs.52,65,894/- after claiming deduction of Rs.99,85,307/- u/s 80IA of the I.T. Act. The Assessing Officer completed the assessment u/s 143(3) on 31-12-2008 disallowing the claim of deduction u/s 80IA(4) of the Act at Rs.99,85,307/- by recording the following reasons: “i. The claim of assessee that the Industrial Park was made operational on 15.10.2004 by a lease agreement dated 21-9-2004 with M/s. Satyam Computer Services Ltd (SSCL] is not based on facts. ii. Assessee has not kept 42 units operational even till 13- 01-06 and made a request for reducing the number to 3 units. iii. Assessee has sold 199345 sq.ft in the year 2004-05 and 40319 sq.ft in the year 2005-06 without being authorized to sell or eliminate property sans fulfilling the basic conditions. 4. In appeal, the learned CIT (A) allowed the claim of deduction u/s 80IA(4) by observing as under: “i. though the number of units was fixed at 42, the same was reduced by Department of Industrial Policy and Promotion [ DIPP] based on the request of assessee ii. assessee company has built the industrial Park on a 'plug and play' mode and made it operational as well as sold some of the properties as an IT Park iii. by virtue of lease with M/s. Satyam, assessee will be entitled for claiming incentive u/s.80IA[4] and as developer for the property developed and sold in a 'plug n play' mode. iv. the property retained by assessee company will be eligible for claiming incentive under 'maintenance' phrase of the section”. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 3 of 21 5. Subsequently, the Tribunal in appeal filed by the Revenue restored the issue to the file of the Assessing Officer by observing as under: “5. As seen from the above order of the Tribunal, in our opinion, the assessee is entitled for deduction u/s 80IA (4) of the Act if it develops the Industrial Park. Being so, the assessee has to show that it has actually developed the Industrial Park during the relevant assessment year under consideration for claiming deduction u/s 80IA (4) of the Act by bringing on record contemporaneous documents like Electricity connection, water connection, connected documents like copies of approval, fire safety certificate from the competent authority along with complying the conditions laid down by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India vide their letter No.15/24/04-IP & ID dated 22-9- 2004.We find from the materials on record that excepting the lease agreement with M/s Satyam Computers, no other document has been furnished to establish the fact that the Industrial Park has been developed during the relevant assessment year. Accordingly, we remit the matter back to the file of the Assessing Officer for fresh consideration and to decide this issue in accordance with law after affording an opportunity of being heard to the assessee. 6. In the result, the appeal filed by the department is treated as allowed for statistical purposes.” 6. Subsequently, the Assessing Officer issued notice to the assessee company asking the assessee to furnish the following details: 1. Evidence regarding the actual development of the Industrial Park during the relevant year viz., Electricity connection, Water connection, copies of approval, fire safety certificate from the competent authority. 2. Evidence regarding complying the conditions laid down by the department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India vide their letter Do.15/24/04- IP&ID dated 22-09-2004. 7. The assessee in response to the same filed the following details: 1. Copy of Development Agreement cum General Power of Attorney dated 29-12-2003 entered with the landlord. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 4 of 21 2. Note on electricity connection enclosing ledger account of electricity connection charges for the period 01-06-04 to 30-06-04, 01-04-04 to 31-03-05, Electricity Bill dated 16-06-2004 in the name of M. Madhuri Kiran. In the note submitted assessee has stated as under: "All municipal approvals have been obtained in the name of land lord for completion of the facility. The power connection was also obtained in the name of the Landlord and continues to be in the same name. Bill in the name of land lord evidences that the power connection is for Software Technology Park. The address mentioned in the bill is the same as the location of Software Technology Park which proves that the power connection is for Software Technology Park only." 3. Ledger account of 'Water charges' for the period 01- 04-04 to 31-03 05 along with bills/delivery challans of water supply. 4. Copies of letters of Director General of Fire Services, AP, Hyderabad. i. Rc.No.11290/B1/2003 dated 12-03-2004 ii. Rc.No.11290/E4/2003 dated 02-04-2008 iii. Rc.No.11290/E4/LC-2/2003 dated 23-12-2011 iv. Rc.No.11290/E4/LC-2/2003 dated 09-05-2013 5. Copies of letter of Department of Information Technology letter no.1[31/2004-ITP dated 22-12-2004, Department of Industrial Policy & Promotion letters no.15/24/04-IP&ID dated 22-09-2004, no.15/13/ 2006-ID dated 10-04-2007, CBDT's Notification dated 1511-2006. 8. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and held that the information furnished by the assessee is not sufficient to conclude that it has actually developed the industrial park during the relevant year for the following reasons: ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 5 of 21 ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 6 of 21 9. He therefore, rejected the claim of deduction/s 80IA(4) made by the assessee for the impugned A.Y holding that the assessee has not complied with the conditions laid down by the Department of Industrial Policy and Promotion, Ministry of Commerce, Govt. of India vide their letter No.15/24/04-IP & ID dated 22.09.2004. The industrial park was not operational during the relevant year for the A.Y 2006-07 and the assessee is not eligible for deduction u/s 80IA(4). 10. In appeal, the learned CIT(A) upheld the action of the Assessing Officer by observing as under: “10.5 Having considered the totality of facts, the appellant is not entitled to 80IA(4)(ii) deduction for the following reasons: (a) The appellant grossly violated the conditions prescribed in DIPP approval dated 22-09-2004, approval dated 10-04- 2007 and CBDT Notification dated 15-11-2006. (b) There is only one unit running at Industrial Park. As per the Industrial Park Scheme, 2002, which is the original scheme for granting concession and exemption, the minimum number of units to be located in Industrial Park. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 7 of 21 the lowest number is 30, it is not understood as to how the DIPP brought this down to 5 units. Even these 5 units are not located in this Industrial Park. (c) It is a condition prescribed by the CBDT in its approval dated 15-11-2006 that no single unit in the Park should occupy more than 50% of the area. In the instant case, the entire area is occupied by M/s Satyam Computers and as on the date of passing this appeal order, the entire building is occupied by M/s Capital IQ Information Systems (P) Limited. (d) As the operation and maintenance was transferred to M/s Satyam Computers, the appellant along with M/s Satyam Computers should have jointly intimated DIPP, Delhi, regarding such transfer of operation and maintenance. There is nothing on record to evidence that this condition was complied with. (e) As per the agreement of lease between the appellant and M/s Satyam Computers Services Limited, what was proposed to be leased out was a single building of ground plus 9 floors which was yet to be constructed. Like any other building, this building was also provided with electricity, drainage, lifts etc. The single building occupied by a single unit/tenant does not become an Industrial Park which is entitled to 80IA (4)(ii) deduction. As per the Industrial Park Scheme, 2002, there should be at least minimum 30 units to be called as Industrial Park. Though the appellant obtained permission reducing the number of units from 42 to 5, even those 5 units did not occupy the premises and did not carry out any business. (f) The CBDT, vide Notification dated 15-1i-2006 gave approval to the appellant for availing benefit u/s 80IA(4) (i) prescribing the number of units at 42. In view of the above discussion, I hold that the appellant is not eligible for deduction u/s 80IA (4)(iii). 11. In the result, the appeal is dismissed”. 11. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds: “1. The order of the learned CIT(A) is erroneous both on facts and in law. 2. The learned CIT (A) erred in confirming the action of the Assessing Officer in rejecting the claim for deduction u/s 80IA(4)(iii) of the I.T. Act of Rs.99,85,307/-. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 8 of 21 3. Any other ground that may be urged at the time of hearing”. 12. The learned Counsel for the assessee at the time of hearing filed the following written submission stating that the assessee has fulfilled all the conditions mentioned by the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion vide letter dated 22.9.2004. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 9 of 21 ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 10 of 21 ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 11 of 21 ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 12 of 21 ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 13 of 21 13. He accordingly submitted that the order of the Assessing Officer as well as the learned CIT (A) is not in accordance with law and facts. Therefore, the claim of deduction u/s 80IA(4) which was wrongly rejected by the Assessing Officer and sustained by the learned CIT (A) be set aside and the grounds raised by the assessee be allowed. 14. The learned DR, on the other hand, heavily relied on the order of the Assessing Officer and the learned CIT (A). He submitted that the Assessing Officer has given justifiable reasons as to how and why the assessee is not entitled to the claim of deduction u/s 80IA(4). He therefore, submitted that since the learned Counsel for the assessee has made certain arguments as ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 14 of 21 per the written submission which has not been verified by either of the lower authorities, therefore, he has no objection if the matter is restored to the file of the Assessing Officer with a direction to verify all the details and pass appropriate order. 15. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. The only dispute in the impugned appeal is regarding the claim of deduction u/s 80IA(4) of the Act. We find the Tribunal in the order dated 31.01.2013 had restored the issue to the file of the Assessing Officer with a direction to the assessee to produce the details substantiating that it has actually developed the industrial park during the relevant A.Y under consideration for claiming deduction u/s 80IA(4) of the Act by bringing on record contemporaneous documents like electricity connection, water connection, copies of the approval of fire safety certificate from the competent authority along with complying the conditions laid down by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India. We find before the Assessing Officer the assessee filed certain documents which according to the Assessing Officer are not sufficient enough to conclude that the assessee company has complied with the conditions laid down by the Industrial Policy and Promotion, Ministry of Commerce, Govt. of India and that the assessee failed to prove that the Industrial Park was operational during the relevant A.Y. We find the learned CIT (A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the learned Counsel for the assessee that as ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 15 of 21 against the proposed number of industrial units mentioned at 42, the same was reduced to 5 units. However, the assessee has constructed 20 independent units i.e. 10 units in north block and 10 units in south blocks. Thus, the assessee has constructed more than the required number of units. It is also his submission that during the immediately preceding A.Y, the assessee has effected sales amounting to Rs.7,35,37,424/- and during the year under consideration, the sale effected amounted to Rs.42,00,71,669/-. According to the learned Counsel for the assessee M/s. Satyam Computers (P) Ltd was in possession of all the units by taking on lease from the assessee and other owners. It is also his submission that the Industrial Park was kept ready in all aspects and was operational during the year under consideration. It is also his submission that the occupancy certificate has been issued by the Municipal Corporation, Seri Lingampally on 29.11.2005 which also shows that the assessee kept ready all the Units for occupation. 16. Since according to the learned Counsel for the assessee all the 20 units have been occupied by Satyam Computers (P) Ltd which are owned by the assessee as well as 10 other persons, therefore, we find force in the argument of the learned Counsel for the assessee that it cannot simply be considered as a single unit. As per the submission of the learned Counsel for the assessee property tax was paid by different persons for different units. Further, in absence of any water connection given by the Hyderabad Metro Water Supply & Sewerage Board, the assessee has supplied water through tankers for which the learned Counsel for the assessee has filed details of the water supply bills, copies of which are placed at Page 211 to 221 of the Paper Book. Since all the details were not properly gone ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 16 of 21 through by either of the lower authorities, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one last opportunity to the assessee to produce all the relevant details and decide the issue as per the fact and law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. ITA 205/Hyd/2016 – A.Y 2011-12 17. The grounds raised by the assessee are as under: “1. The order of the learned CIT (A) is erroneous both on facts and in law. 2. The learned CIT (A) erred in confirming the action of the Assessing Officer in rejecting the claim for deduction u/s 80IA of Rs.14,60,715/-. 3. The learned CIT (A) erred in confirming the action of the Assessing Officer in disallowing expenditure of Rs.61,17,749/- by applying the provisions of section 14A of the I.T. Act. 4. The learned CIT (A) ought to have accepted the explanation submitted and deleted the additions made by the Assessing Officer. 5. Any other ground that may be urged at the time of hearing”. 18. Grounds 1, 4 & 5 being general in nature are dismissed. 19. Ground of appeal No. 2 relates to the denial of claim of deduction u/s 80IA amounting to Rs.14,60,715/-. 19.1 After hearing both the sides, we find the above ground is identical to the ground of appeal in ITA No.204/Hyd/2016. We have already decided the issue and the matter has been restored ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 17 of 21 to the file of the Assessing Officer for fresh adjudication with certain directions. Accordingly, this ground is restored to the file of the Assessing Officer for fresh adjudication in the light of the directions given in ITA No.204/Hyd/2016. 20. Ground 3 relates to the disallowance of Rs. 61,17,749/- under the provisions of section 14A of the Act. 21. Facts of the case, in brief, are that the Assessing Officer during the course of assessement proceedings noted that the assessee has made investment in equity shares of M/s. Meenakshi Power Ltd and M/s. Meenakshi Ventures and Holdings India Pvt. Ltd, income derived from which is exempt from tax. According to the Assessing Officer, the investment at 31.3.2010 and 31.3.2021 were reported by the assessee at Rs.4,67,00,000/- and Rs.8,27,00,000/- respectively. The interest paid during the year is Rs.2,15,32,472/-. He therefore, asked the assessee to explain as to why the provisions of section 14A should not be applied. It was explained by the assessee that the total investment made as on 31.3.2011 were 8,27,00,000/- out of which an amount of Rs.3,60,00,000/- was invested during the relevant financial year. The total shareholders fund for the previous year 2010-11 is Rs.8.92 crores which is more than the total investment made and that the assessee has not diverted any interest bearing funds for investment the income of which is exempt and therefore, provisions of section 14A are not applicable. It was further submitted that unsecured loans of Rs.2.51 crores was applied for the purpose of reduction of credits and have not been diverted to investments. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 18 of 21 21.1 However, the Assessing Officer was not satisfied with the arguments advanced by the assessee invoking the provisions of section 14A r.w. rule 8D he disallowed an amount of Rs.61,17,749/-. 22. In appeal, the learned CIT (A) sustained the addition made by the Assessing Officer. 23. Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal. 24. The learned Counsel for the assessee referring to the decision of the Hon'ble Supreme Court in the case of South Indian Bank Ltd v. CIT (2021) 438 ITR 1 submitted that the Hon'ble Supreme Court in the said decision has held that where interest free own funds available with the assessee-banks exceeded their investments in tax-free securities, investments would be presumed to be made out of assessee’s own funds and proportionate disallowance was not warranted u/s 14A on the ground that separate accounts were not maintained by the assessee for investments and other expenditure incurred for earning tax-free income. 25. Referring to the decision of the Coordinate Bench of the Tribunal in the case of NCC Infra vs. ACIT in ITA No.144/Hyd/2022 and the decision of the Mumbai Bench of the Tribunal in the case of Mukand Engineers Ltd vs. ACIT in ITA No.1246/Mum/2023 dated 17.8.2023 he submitted that in ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 19 of 21 absence of any exempt income, no addition can be made. He submitted that in the instant case also there is no finding that the assessee has earned any exempt income. Therefore, in absence of any exempt income, no addition can be made u/s 14A r.w. rule 8D. 26. The learned DR, on the other hand, submitted that the plea of the assessee that it has not received any dividend income was never raised before either of the lower authorities. Therefore, he has no objection if the matter is restored to the file of the Assessing Officer for fresh adjudication of the issue in the light of the decision of the Coordinate Benches cited (Supra). 27. We have heard the rival arguments and perused the material available on record. We find the Assessing Officer applying the provisions of section 14A r.w.rule 8D made addition of Rs.61,17,749/- on the ground that the total investment made by the assessee as at the end of the year 31.3.2011 is Rs.8,27,00,000/- out of which an amount of Rs. Rs.3,60,00,000/- was invested during the relevant financial year and the assessee has paid interest amounting to Rs. 2,15,32,472/-. We find the learned CIT(A) upheld the action of the Assessing Officer. It is the submission of the learned Counsel for the assessee that since the assessee has not received any dividend income during the year, therefore, no addition can be made u/s 14A r.w. rule 8D in the light of various decisions of the Coordinate Benches of the Tribunal. We find the order of the Assessing Officer and the CIT (A) is silent on the issue as to what is the dividend income received by the assessee during the relevant A.Y. The Coordinate Bench of the Tribunal in the case of NCC Infrastructure Holdings Ltd vs. ACIT (Supra) relying on various decisions has held that no disallowance u/s 14A of the Act can be made if the assessee has ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 20 of 21 not earned any exempt income during the year under consideration. Since these facts are not coming out from the order of either of the lower authorities as no such plea was taken before them, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate that it has not received any dividend income during the relevant year from the investments made. The Assessing Officer shall decide the issue afresh as per fact and law after giving due opportunity of being heard to the assessee. The ground raised by the assessee is accordingly allowed for statistical purposes. ITA 842/Hyd/2017 – A.Y 2012-13 28. The grounds raised by the assessee are as under: “1. The order of the learned CIT (A) is erroneous to the extent it is prejudicial to the appellant. 2. The learned CIT (A) erred in confirming the action of the Assessing Officer in rejecting the claim for deduction u/s 80IA(4)(iii) of the I.T. Act of Rs.17,56,454/-. 3. Any other ground that may be urged at the time of hearing”. 29. After hearing both the sides, we find the above ground (Ground No.2) is identical to the grounds raised by the assessee in ITA No.204/Hyd/2016 for the A.Y 2006-07. We have already decided the issue and the ground raised by the assessee has been allowed for statistical purposes. Following similar reasonings, this ground raised by the assessee is also allowed for statistical purposes. ITA Nos 204 205 and 842 SDE Engineers Pvt Ltd Page 21 of 21 30. In the result, all the three appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the Open Court on 19 th December, 2023. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (R.K. PANDA) VICE-PRESIDENT Hyderabad, dated 19 th December, 2023. Vinodan/sps Copy to: S.No Addresses 1 M/s. SDE Engineers (P) Ltd, Plot No.119, Meenakshi, Road No.10, Jubilee Hills, Hyderabad 500033 2 Dy.CIT, Circle 3(1) Hyderabad and Income Tax Officer Ward 3(1) Hyderabad 3 Pr. CIT – 3, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order