Gujarat Urban Development Corporation Ltd., Gandhinagar V. The ACIT.,Gandhinagar Circle, Gandhinagar

ITA 2670/AHD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73143 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Retrospective amendment; Question of law

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S) ITA NO(S) ASSESSMENT YEAR(S) APPELLANT RESPONDENT 1. 2670/AHD/2013 2009-10 GUJARAT URBAN DEVELOPMENT CORPORATION LTD. 2 ND FLOOR, A WING, GUJARAT STATE CIVIL SUPPLIES CORPN. BLDG SECTOR 10A, GANDHINAGAR PAN: AABCG 1330 R ASST.CIT GANDHI NAGAR CIRCLE GANDHI NAGAR 2. 2671/AHD/2013 2010-11 ASSESSEE REVENUE 3. 1116/AHD/2011 2007-08 REVENUE ASSESSEE 4. 787/AHD/2012 2008-09 ASSESSEE REVENUE ASSESSEE BY : SHRI S.N. SOPARKAR, ADV. WI TH MS.URVASHI SHODHAN, AR REVENUE BY : SHRI SUBHASH BAINS, CIT-DR WITH SHRI R.K.DHANESTA, SR.D.R. ' % & $' / / / / DATE OF HEARING : 06/03/2014 )*+ & $' / DATE OF PRONOUNCEMENT : 19/03/2014 , / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : OUT OF THESE FOUR APPEALS; THREE APPEALS BY THE A SSESSEE, I.E. ITA NOS.2670 & 2671/AHD/2013 AND 787/AHD/2012 FOR ASST. YEARS 2009-10, 2010-11 AND 2008-09 RESPECTIVELY ARE DIRECTED AGAIN ST THE ORDERS OF THE ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 2 - LD.CIT(A)-GANDHINAGAR DATED 23/09/2013, 24/09/2013 AND18/01/2012 RESPECTIVELY AND ONE APPEAL BY THE REVENUE, I.E. I TA NO.1116/AHD/2011 FOR A.Y.2007-08 IS DIRECTED AGAINST THE ORDER OF TH E LD.CIT(A) DATED 17/01/2011 FOR AY 2007-08. SINCE COMMON ISSUES A RE INVOLVED, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP REVENUES APPEAL IN ITA NO.111 6/AHD/2011 FOR AY 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.17,38,364/- MADE ON ACCOUNT OF D ISALLOWANCE OF ADMINISTRATIVE AND OTHER EXPENSES AND RS.1,97,288/- , MADE ON ACCOUNT OF DEPRECIATION. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST INCOME OF RS.5,35,77,935/-. 3. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.3,00,000/- MADE ON ACCOUNT OF DI SALLOWANCE OF EXPENSES CLAIMED AS EXPENDITURE ON ACCOUNT OF CONTR IBUTION TO GUJARAT VIBRANT SUMMIT 2007. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.C IT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO TH E ABOVE EXTENT. 2.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 26/11/2009, THEREBY THE ASSESSING OFFICER(AO) MADE ADDITION OF RS.17,38,364/- ON ACCOUNT OF DISALLOWANCE OF ADMINI STRATIVE AND OTHER EXPENSES, RS.1,97,288/- MADE ON ACCOUNT OF DEPRECIA TION AND THE AO ALSO MADE ADDITION OF RS.5,35,77,935/- ON ACCOUNT O F INTEREST RECEIVED ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 3 - FROM THE FIXED DEPOSIT RECEIPTS. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION QUA ADMINISTRATI VE EXPENSES AND DISALLOWANCE OF DEPRECIATION FOLLOWING THE TRIBUNAL S ORDER IN ASSESSEES OWN CASE FOR AYS 2002-03, 2003-04, & 2005-06 IN IT A NOS.1205/AHD/2006 DATED 29/04/2009, 2113/AHD/2006 D ATED 29/04/2009 AND 2218/AHD/2008 DATED 13/08/2008 RESPECTIVELY. T HE LD.CIT(A) ALSO DELETED THE ADDITION MADE IN RESPECT OF ACCRUAL OF INTEREST ON FIXED DEPOSITS. 3. APROPOS TO GROUND NO.1, LD.CIT-DR RELIED ON THE DECISION OF LD.CIT(A). 3.1. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT URBAN DEVELOPMENT CO.LTD. I N TAX APPEAL NO.14 OF 2010, DATED 13/06/2011. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS DISALLOWED THE EXPENDITURE AS CLAIMED BY THE ASSESSEE ON THE BASIS THAT THE DECISION OF THE HON BLE ITAT B BENCH AHMEDABAD RENDERED IN ASSESSEES OWN CASE IN ITA NO .1205/AHD/2006, FOR AY 2002-03, DATED 29/04/2009 THE DECISION HAS N OT BEEN ACCEPTED BY THE DEPARTMENT AND THE APPEAL HAS BEEN FILED BY THE REVENUE BEFORE THE HONBLE HIGH COURT. NOW, IT IS POINTED OUT BY THE LD.COUNSEL FOR THE ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 4 - ASSESSEE THAT THE HONBLE GUJARAT HIGH COURT HAS DI SMISSED THE TAX APPEAL NO.14 OF 2010 FILED BY THE REVENUE. WE FIND THAT THE ASSESSEE HAS PLACED ON RECORD THE DECISION OF THE HONBLE GU JARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. GUJARAT URBAN DEVEL OPMENT CO.LTD., I.E. THE ASSESSEE, IN TAX APPEAL NO.14 OF 2010. THEREFO RE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE D.CIT(A), THE SAM E IS HEREBY UPHELD. THUS, GROUND NO.1 OF REVENUES APPEAL IS DISMISSED . 5. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.5,35,77,935/-MADE ON ACCOUNT OF INTEREST ON FDRS . 5.1. THE LD.CIT-DR/SR.DR SUBMITTED THAT THE LD.CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE PLACED RELI ANCE ON THE JUDGEMENT OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE O F U.P.BHUMI SUDHAR NIGAM VS. CIT REPORTED AT (2006) 280 ITR 197 (ALL.) AND ON THE JUDGEMENT OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. INDO GULF FERTILIZER & CHEMICAL CORPN.LTD. REPO RTED AT (2006) 280 ITR 621 (ALL.). 5.2. ON THE CONTRARY, THE LD.SR.COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE AO HAS WRONGLY APPLIED THE JUDGEMENT OF HONBLE SUP REME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LT D. VS. CIT REPORTED AT (1997) 227 ITR 172 (SC). HE SUBMITTED THAT THE ASS ESSEE IS ONLY A NODAL AGENCY SUPERVISING THE WORK ASSIGNED BY THE DIFFERE NT AGENCIES AND THE ADVANCES GIVEN AS PER THE AGREEMENT WERE PLACED IN FIXED DEPOSITS. THE INTEREST SO ACCRUED WAS NOT OFFERED FOR TAX SINCE S UCH INTEREST WAS CREDITED TO THE RESPECTIVE ACCOUNTS OF THE AGENCIES AND UTILIZED FOR THE ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 5 - PURPOSE OF PROJECTS. HE SUBMITTED THAT UNDER THE I DENTICAL FACTS, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAR INFRACON PVT.LTD. HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE. HE F URTHER PLACED RELIANCE ON THE JUDGEMENT OF HONBLE KARNATAKA HIGH COURT RE NDERED IN THE CASE OF CIT VS. KARNATAKA URBAN INFRASTRUCTURE DEVELOPME NT & FINANCE CORPN. REPORTED AT (2006) 284 ITR 582 (KAR.). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE-LAWS RELIED UPON BY THE PARTIES . WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING ON FACT THAT THE ASSE SSEE IS 100% GOVERNMENT OWNED COMPANY APPOINTED AS A NODAL AGENC Y FOR IMPLEMENTATION OF VARIOUS INFRASTRUCTURE DEVELOPMEN T PROJECTS ALL ACROSS GUJARAT. HE HAS FURTHER GIVEN A FINDING ON FACT TH AT THE OBSERVATION OF THE ASSESSING OFFICER IN PARA-13.3 PARTICULARLY ON PAGE -6 OF THE ASSESSMENT ORDER THAT THE INTEREST IS NOT CREDITED TO THE RESP ECTIVE GRANT ACCOUNTS IS FACTUALLY INCORRECT, AS A PERUSAL OF THE BALANCE-SH EET AND THE RESPECTIVE LEDGER ACCOUNTS OF THE GRANT/PROJECT CLEARLY SHOW T HAT I FACT THE INTEREST IS CREDITED TO THE RESPECTIVE ACCOUNT. THE HONBLE JU RISDICTIONAL HIGH COURT IN TAX APPEAL NO.828 OF 2013 FORMULATED FOLLO WING SUBSTANTIAL QUESTION OF LAW FOR DETERMINATION:- WHETHER IN LAW AND ON FACTS, THE ITAT WAS RIGHT IN NOT TREATING THE INTEREST OF RS.1,25,44,938/- ACCRUED TO FIXED D EPOSITS AS INCOME OF THE ASSESSEE? 6.1. THE HONBLE HIGH COURT DISMISSED THE APPEAL AF FIRMING THE VIEW OF THE HONBLE TRIBUNAL AND HELD THAT NO ERROR HAS BEEN COMMITTED BY THE ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 6 - TRIBUNAL IN DELETING THE ADDITION OF RS.1,25,44,938 /- MADE BY THE AO TREATING IT AS THE INCOME OF THE ASSESSEE. THE FAC TS BEFORE THE HONBLE HIGH COURT IN THE CASE OF CIT VS. SAR INFRACON PVT. LTD.(SUPRA) WERE THAT THE AO MADE ADDITION IN RESPECT OF THE INTEREST EAR ED BY THE ASSESSEE ON A SUM OF RS.16.70 CRORES, WHICH WAS RECEIVED BY IT BY WAY OF GRANT FROM THE CENTRAL GOVERNMENT AND CONTRIBUTION/GRANT RECEI VED FROM GUJARAT HIRA BOURSE WHICH SUM WAS INVESTED IN THE FIXED DEP OSITS AND THE INTEREST EARNED ON THE SAID FIXED DEPOSIT CAN BE SA ID TO BE INCOME AS THE ASSESSEE ITSELF CLAIMED REFUND OF TDS DEDUCTED ON T HE INTEREST EARNED ON THE AFORESAID FIXED DEPOSIT. THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) AFFIRMED THE VIEW OF T HE AO. THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE HONBLE TRI BUNAL. THE HONBLE TRIBUNAL ON CONSIDERING THE LETTER OF THE CENTRAL G OVERNMENT WHILE SANCTIONING THE GRANT IN FAVOUR OF THE ASSESSEE, MO RE PARTICULARLY THE CONDITION THAT, THE INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WOULD FORM PART OF THE CENTRAL GRANT LIMIT OF RS.50 CRORES AND CONSIDERING THE DECISION(S) OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT MUNICIPAL FINANCE BOARD VS. DY.CIT REPOR TED AT (1996) 221 ITR 317 AS WELL AS IN THE CASE OF GUJARAT POWER COR PORATION LTD. VS. ITO REPORTED AT (2013) 354 ITR 201(GUJ.), THE TRIBUNAL HAS ALLOWED THE APPEAL BY DELETING THE ADDITION OF RS.1,25,44,938/- MADE BY THE AO. THE HONBLE JURISDICTIONAL HIGH COURT AFFIRMED THE VIEW TAKEN BY THE TRIBUNAL. 6.2. SINCE THE FACTS ARE IDENTICAL IN THIS CASE ALS O, THE ASSESSEE HAS CREDITED THE INTEREST ACCRUED TO THE RESPECT GRANT ACCOUNTS, THEREFORE WE ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 7 - DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CI T(A), THE SAME IS HEREBY UPHELD. THUS, THIS GROUND OF REVENUES APPEAL IS D ISMISSED. 7. GROUND NO.3 IS AGAINST THE DISALLOWANCE OF THE E XPENSES CLAIMED AS EXPENDITURE ON ACCOUNT OF CONTRIBUTION TO GUJARA T VIBRANT SUMMIT- 2007. THE LD.CIT-DR SUPPORTED THE ORDER OF THE AO A ND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). 7.1. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS DISALLOWED THE EXPENSES WHI LE OBSERVING THAT THE ASSESSEE HAS NOT COMMENCED ITS BUSINESS AND THE EXPENSES CLAIMED IN THE P&L ACCOUNT HAVE ALREADY BEEN DISALLOWED. ON T HE CONTRARY, THE LD.CIT(A) HAS GIVEN A FINDING ON FACT THAT THE BUSI NESS OF THE ASSESSEE HAS ALREADY BEEN COMMENCED. IT IS OBSERVED BY THE LD.C IT(A) THAT THE AMOUNT PAID BY THE ASSESSEE-COMPANY WAY BY WAY OF P ARTICIPATION FEES TO GUJARAT VIBRANT SUMMIT TO ENCOURAGE DEVELOPMENT ACTIVITIES IN THE STATE. THE ASSESSEE HAD ALSO PARTICIPATED IN THE S AME BY PUTTING UP A STALL SINCE THE MAIN OBJECT OF THE ASSESSEE-COMPANY IS AL SO TO CARRY OUT ACTIVITIES FOR INFRASTRUCTURE DEVELOPMENT PROJECTS IN THE STATE OF GUJARAT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD.CIT(A), THE SAME IS HEREBY UPHELD. THUS, THIS GROUND OF THE RE VENUES APPEAL IS REJECTED. 8. GROUND NOS.4 & 5 ARE GENERAL IN NATURE REQUIRE N O INDEPENDENT ADJUDICATION. ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 8 - 9. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.1 116/AHD/2011 FOR AY 2007-08 IS DISMISSED. 10. NOW, WE TAKE UP ASSESSEES APPEAL IN ITA NO.787 /AHD/2012 FOR AY 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING ACTION OF AO IN DISALLOWING DEDUCTION CLAIMED BY THE APPELLAN T U/S.80IA(4) OF THE ACT. BOTH THE LOWER AUTHORITIES ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT, A DEVELOP ER AWARDS CONTRACTS TO THE LOCAL BODIES FOR GETTING THE DEVEL OPMENT WORK DONE AS PER PLANS IN THE COURSE OF ITS INFRASTRUCTU RAL DEVELOPMENT ACTIVITIES, HENCE THERE IS NO QUESTION OF ANY WORK CONTRACT BEING GRANTED TO THE APPELLANT AS ENVISAGE D BY EXPLANATION BELOW SECTION 80IA(13) OF THE ACT. THE ORDER OF LD.CIT(A) BEING ERRONEOUS DENYING DEDUCTION CLAIMED BY THE APPELLANT DESERVES TO BE QUASHED. 2. LDE.CIT(A) ERRED IN LAW AND ON FACTS IN FURTHER HOL DING THAT THERE WAS NO RISK UNDERTAKEN BY THE APPELLANT WHILE EXECUTING THE PROJECTS SINCE IT WAS ENTITLED TO ONLY FIXED PE RCENTAGE OF PROJECT COST. THIS OBSERVATION OF LD.CIT(A) WITHOU T APPRAISING HIMSELF OF THE FACTS OF THE CASE IS COMPLETELY IRRE LEVANT AND UNCALLED FOR AS IT TRAVERSED BEYOND ASSESSMENT ORDE R THAT OUGHT TO BE REVERSED AND THE APPELLANT BE GRANTED DEDUCTI ON AS CLAIMED U/S.80IA(4) OF THE ACT. 3. D.CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN RELYI NG UPON TWO DECISIONS OF THE HONBLE ITAT THAT ARE ON COMPLETEL Y DIFFERENT ISSUE HAVING NO BEARING TO THE FACTS OF THE APPELLA NT CORPORATION. LD.CIT(A) OUGHT TO HAVE APPRECIATED T HE CONTROVERSY IN PROPER PERSPECTIVE TAKING RELEVANT F ACTS IN CONSIDERATION THAT THE APPELLANT BEING A DEVELOPER WAS ENTITLED TO DEDUCTION CLAIMED UNDER THE PROVISIONS OF THE AC T. 4. LEVY OF INTEREST U/S.234B & 234C OF THE ACT IS NOT JUSTIFIED. ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 9 - 5. INITIATION OF PENALTY U/S.271(1)(C) OF THE ACT IS N OT JUSTIFIED. 10.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE ACT WAS FRAMED VIDE ORDER DATED 10/12/2010, THEREBY THE AO DISALLOWED THE CLAIM OF THE ASSESSEE MADE U/S.80IA(4) OF THE ACT. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REJECTED THE APPEAL. 11. GROUND NOS.1, 2 & 3 ARE INTER-CONNECTED AND, TH EREFORE, THE SAME ARE DECIDED TOGETHER. 11.1. THE LD.SR.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A DEVELOPER AND, THEREFORE, HE IS ENTITLED FOR DEDUCT ION U/S.80-IA(4) OF THE ACT. 11.2. ON THE CONTRARY, LD.CIT-DR/SR.DR SUBMITTED TH AT THE ORDER OF THE LD.CIT(A) IS JUSTIFIED. HE DREW OUR ATTENTION TOWA RDS THE DECISION OF THE LD.CIT(A) AS CONTAINED IN PARA-5.1 OF HIS ORDER. AFTER SOME ARGUMENT, LD.SR.COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE ISSUE IS DECIDED AGAINST THE ASSESSEE BY THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF KATIRA CONSTRUCTION VS. UNION OF INDIA REPORTED AT (2013) 352 ITR 513 (GUJ.). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 10 - WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING ON F ACT, WHICH READS AS UNDER:- 5.1. I HAVE CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS, THE ASSESSMENT ORDER, THE AMENDMENT IN THE LAW AND THE DECISIONS OF THE COURTS. THE FOLLOWING PERTINENT OBSERVATIONS A RE MADE AFTER CONSIDERING THESE:- THERE IS NO DOUBT THAT THE APPELLANT WORKS AS A NOD AL AGENCY FOR IMPLEMENTATION OF VARIOUS WORKS UNDERTAKEN/DECIDED BY THE GOVERNMENT. THE APPELLANT BEARS NO RISK WHATSOEVER OF THE COST OR SUCCESS OF THE PROJECTS. THE APPELLANT GETS A FIXED PERCENTAGE OF THE MONEY SPENT ON THE PROJECT. SUPPOSEDLY, ON A PROJECT ORIGINALLY E STIMATED AT RS.100 CRORE, THE ACTUAL COST OVER RUNS TO ANY AMOU NT MAY BE EVEN RS.500 CRORE; THE ASSESSEE LOOSES NOTHING. IN FACT ITS OWN ALLOCATION INCREASES AND IT GAINS. SIMILAR LY, IT DOESNT GET ANY BENEFIT WHEN IT SAVES COST OR IS MO RE EFFICIENT. IN FACT, THE GRANTS FOR THE PROJECTS IS NOT ITS REV ENUE INCOME AT ALL. IN FACT, IN VARIOUS DECISIONS THE GRANTS W HICH ARE UTILIZED FOR SPECIFIED PROJECTS HAVE BEEN HELD TO B E NOT INCOME BUT DIVERSION OF FUNDS AT SOURCE. THE DECIS IONS INCLUDE THAT OF HONBLE ITAT, AHMEDABAD BENCH IN TH E CASE OF GUJARAT SAFAI KAMDAR VIKAS NIGAM VS. ACIT, GANDHINAGAR CIRCLE, GANDHINAGAR (ITA NO.3232/AHD/20 08, ORDER DATED 17/04/2009, AND GUJARAT STATE DISASTER MANAGEMENT AUTHORITY VS. ACIT, GANDHINAGAR CIRCLE, GANDHINAGAR, ITA NO.949/AHD/2009, ORDER DATED 05/06/2006. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE APP ELLANT IS DOING THE WORK OF A CONCERN ENGAGED IN WORK WHICH I S IN THE NATURE OF A WORKS CONTACT AWARDED BY ANY PERSON (IN CLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY IT . HERE IT IS TO BE NOTED THAT AS PER THE AMENDED EXPLANATION BEL OW SECTION 80IA(13) WITH RETROSPECTIVE EFFECT FROM 1.4.2000; T HE WORK ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 11 - SHOULD NOT BE OF THE NATURE (EMPHASIS SUPPLIED) OF CONTRACT AND NOT ONLY CONTRACT. HERE THE PROJECT COSTS AND SOUR CE THEREOF NOT BEING REVENUE OF THE APPELLANT, IT BEING NOT AF FECTED BY THE ACTUAL COST AND EFFICIENCY OF WORK, THE ASSETS CREA TED AND THE SOURCE NOT BEING OF THE APPELLANT AT ANY STAGE AND IT BEING ENTITLED TO A FIXED REMUNERATION FOR ITS PROFESSION AL SERVICES; IT CLEARLY IS FALLING IN THE EXCLUDED CATEGORY AS PER THE AMENDED EXPLANATION BELOW SECTION 80IA(13); AND THEREFORE, NOT ELIGIBLE FOR DEDUCTION. THE DECISION OF THE HONBLE MUMBAI HIGH COURT IN TH E CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD. 322 ITR 323 IS NO T ON THE ISSUE OF WHETHER THE ACTIVITY OF THE CONCERN IS OF THE NATURE OF A WORKS CONTACT. THE DECISION OF HONORABLE SUPREME C OURT IN THE CASE OF GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION 227 ITR 414 IS ALSO NOT APPLICABLE AS IN THAT CASE THE QUES TION WAS NOT WHETHER THE APPELLANT WAS DOING THE ACTIVITIES IN I TS OWN RIGHT OR AS A NODAL AGENCY AS IN THE PRESENT CASE. SIMIL ARLY, THE FACTS AND QUESTION ARE DISTINGUISHABLE IN OTHER CASES CIT ED BY THE APPELLANT. THE APPELLANT IS HELD NOT ELIGIBLE FOR DEDUCTION CLAIMED U/S.80IA(4) AND THE DECISION OF THE AO IS U PHELD. THE FIRST TWO GROUNDS OF APPEAL ARE THEREFORE, DISMISSE D. 12.1. WE FIND ONE OF THE OBJECTIONS OF THE LD.CIT( A) WAS THAT THE ASSESSEE DOES NOT BEAR ANY RISK AND CONSEQUENCES AR ISING FROM THE PROJECT. IN VIEW OF THE RATIO LAID DOWN BY THE JUR ISDICTIONAL HIGH COURT RENDERED IN THE CASE OF KATIRA CONSTRUCTION LTD. UN ION OF INDIA(SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD .CIT(A), THEREFORE GROUND NOS.1 TO 3 OF THE ASSESSEES APPEAL ARE REJE CTED. 13. GROUND NOS.4 IS AGAINST LEVY OF INTEREST U/S.23 4B & 234C OF THE ACT. CHARGING OF INTEREST IS BEING CONSEQUENTIAL , THEREFORE THE GROUND OF THE ASSESSEE IS REJECTED. ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 12 - 14. GROUND NO.5 IS AGAINST INITIATION OF PENALTY U/ S.271(1)(C) OF THE ACT. THIS GROUND IS BEING PRE-MATURE AND, HENCE, T HE SAME IS REJECTED AS SUCH. 13. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.787/ AHD/2012 IS DISMISSED. 14. FINALLY, WE TAKE UP ASSESSEES APPEAL IN ITA NO S.2670 & 2671/AHD/2013 FOR AYS 2009-10 & 2010-11. THE ASSES SEE HAS FOLLOWING GROUNDS IN ITS APPEALS: (A) ITA NO.2670/AHD/2013 1. LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG ACTION OF AO DENYING DEDUCTION CLAIMED U/S.80IA(4) OF THE ACT. BOTH THE LOWER AUTHORITIES ERRED IN HOLDING APPELLANT AS A BUFFER AGENCY AWARDING CONTRACTS TO LOCAL BODIES ON BEHALF OF THE GOVERNME NT OF GUJARAT AND NOT CARRYING OUT WORK ANY INFRASTRUCTURE DEVELO PMENT ACTIVITIES ITSELF. THE ORDER OF LD.CIT(A) FURTHER DENYING DEDUCTION CLAIMED U/S80IA(4) OF THE ACT TO THE APPELLATE SIMP LY FOLLOWING APPELLANT ORDER OF A.Y. 2008/09 BEING ERRONEOUS DES ERVES TO BE SET ASIDE BY GRANTING DEDUCTION AS CLAIMED. IT BE SO H ELD NOW. 2. LD.CIT(A) GRAVELY ERRED IN LAW AND ON FACTS IN HOLDING THAT NO RISK WAS UNDERTAKEN BY THE APPELLANT WHILE EXECUTIN G THE PROJECTS AS IT WAS ENTITLED TO ONLY FIXED PERCENTAGE OF PROJ ECT COST. THIS OBSERVATION OF LD.CIT(A) WITHOUT APPRAISING HIMSELF OF THE FACTS OF THE CASE IS COMPLETELY IRRELEVANT AND UNCALLED FOR SINCE IT TRAVERSED BEYOND ASSESSMENT ORDER THAT DESERVES TO BE REVERSE D AND DEDUCTION AS CLAIMED U/S.80IA(4) OF THE ACT BE GRAN TED. 3. LD.CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN NOT TAKING COGNIZANCE OF THE TWO DECISIONS RELIED UPON BY THE APPELLANT ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 13 - DIRECTLY APPLICABLE TO THE FACTS OF THE CASE BUT RE FERRED TO DECISIONS HAVING NO BEARING TO THE FACTS. LD.CIT(A) FAILED T O APPRECIATE CONTROVERSY IN PROPER PERSPECTIVE TAKING RELEVANT F ACTS INTO CONSIDERATION TO HOLD THE APPELLANT AS DEVELOPER EN TITLED TO CLAIM DEDUCTION U/S.80IA(4) OF THE ACT INSTEAD OF DENYING DEDUCTION BY CHOOSING TO FOLLOW APPELLATE ORDER OF EARLIER YEAR. IT BE SO HELD NOW. 4. LEVY OF INTEREST U/S.234B & 234C OF THE ACT IS NOT JUSTIFIED. 5. WITHDRAWAL OF INTEREST U/S.244A OF THE ACT IS N OT JUSTIFIED. 6. INITIATION OF PENALTY U/S.271(1)(C) OF THE ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEA L AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. (B) ITA NO.2671/AHD/2013 1. LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG ACTION OF AO DENYING DEDUCTION CLAIMED U/S.80IA(4) OF THE ACT. BOTH THE LOWER AUTHORITIES ERRED IN HOLDING APPELLANT AS A BUFFER AGENCY GRANTING WORK CONTRACT OF LOCAL BODIES ON BEHALF OF THE GOV ERNMENT OF GUJARAT AND NOT AS A DEVELOPER OF INFRASTRUCTURE FA CILITY. THE ORDER OF LD.CIT(A) DENYING DEDUCTION CLAIMED U/S80 IA(4) OF THE ACT TO THE APPELLANT SIMPLY FOLLOWING APPELLATE ORD ER OF A.Y. 2008/09 BEING ERRONEOUS DESERVES TO BE QUASHED. I T BE SO HELD NOW. 2. LD.CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT NO RISK WAS UNDERTAKEN BY THE APPELLANT WHILE EXECUTING THE PRO JECTS AS IT WAS ENTITLED TO ONLY FIXED PERCENTAGE OF PROJECT COST. THIS OBSERVATION OF LD.CIT(A) WITHOUT APPRAISING HIMSELF OF THE FACT S OF THE CASE IS COMPLETELY IRRELEVANT AND UNCALLED FOR SINCE IT TRA VERSED BEYOND ASSESSMENT ORDER THAT DESERVES TO BE REVERSED AND D EDUCTION AS CLAIMED U/S.80IA(4) OF THE ACT BE GRANTED. 3. LD.CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN NOT TAKING COGNIZANCE OF THE TWO DECISIONS RELIED UPON BY THE APPELLANT ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 14 - DIRECTLY APPLICABLE TO THE FACTS OF THE CASE BUT RE FERRED TO DECISIONS HAVING NO BEARING TO THE FACTS. LD.CIT(A) FAILED T O APPRECIATE CONTROVERSY IN PROPER PERSPECTIVE TAKING RELEVANT F ACTS INTO CONSIDERATION TO HOLD THE APPELLANT AS DEVELOPER EN TITLED TO CLAIM DEDUCTION U/S.80IA(4) OF THE ACT INSTEAD OF DENYING DEDUCTION BY CHOOSING TO FOLLOW APPELLATE ORDER OF EARLIER YEAR. IT BE SO HELD NOW. 4. LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMIN G ACTION OF AO IN TREATING INTEREST RECEIVABLE ON UNUTILIZED GR ANTS AS TAXABLE IN THE HANDS OF THE APPELLANT. LD.CIT(A) FAILED TO APPRECIATE THAT ANY INCOME EARNED OR GENERATED ON THE DEPOSITS MADE FROM GRANT RECEIVED TOWARDS INFRASTRUCTURE DEVELOPMENT WAS AN INTEGRAL PART OF THE GRANT EARMARKED FOR THE PROJECT. D.CIT(A) F ACTUALLY ERRED IN HOLDING THAT INTEREST EARNED WAS BROUGHT AS INCO ME IN P&L ACCOUNT WHEREAS THE APPELLANT DIRECTLY CREDITED IT TO GRANT RECEIVABLE ACCOUNT. THIS OBSERVATION OF LD.CIT(A) DESERVES TO BE QUASHED. 5. BOTH THE LOWER AUTHORITIES ERRED IN TREATING IN TEREST EARNED ON DEPOSITS AS INCOME FROM OTHER SOURCES AND FURTHER E RRED IN NOT FOLLOWING APPELLATE ADJUDICATION IN A.Y. 2007/08 IN FAVOUR OF THE APPELLANT. THE ORDER OF LD.CIT(A) OUGHT TO BE SET ASIDE AND ADDITION OF INTEREST INCOME OUGHT TO BE DELETED. I T BE SO HELD NOW. 6. LEVY OF INTEREST U/S.234B & 234C OF THE ACT IS NOT JUSTIFIED. 7. INITIATION OF PENALTY U/S.271(1)(C) OF THE ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEA L AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. 14.1. SO FAR AS THE ASSESSEES APPEAL IN ITA NO.26 70/AHD/2013 FOR AY 2009-10 IS CONCERNED, GROUND NOS.1 TO 3 ARE WITH R EGARD TO DENIAL OF DEDUCTION CLAIMED U/S.80IA(4) OF THE ACT. SINCE WE HAVE DECIDED THIS ISSUE IN REVENUES FAVOUR IN ASSESSEES OWN CASE, I .E. ITA ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 15 - NO.787/AHD/2012 FOR AY 2008-09(SUPRA), THEREFORE TA KING A CONSISTENT VIEW, THESE GROUNDS OF ASSESSEES APPEAL ARE REJECT ED. 14.2. GROUND NOS.4,5 & 6 ARE BEING PRE-MATURE AND, HENCE, THE SAME ARE REJECTED AS SUCH. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A Y 2009-10 IS DISMISSED. 16. SO FAR AS THE ASSESSEES APPEAL IN ITA NO.267 1/AHD/2013 FOR AY 2010-11 IS CONCERNED, GROUND NOS.1 TO 3 ARE WITH R EGARD TO DENIAL OF DEDUCTION CLAIMED U/S.80IA(4) OF THE ACT. SINCE WE HAVE DECIDED THIS ISSUE IN REVENUES FAVOUR IN ASSESSEES OWN CASE, I .E. ITA NO.787/AHD/2012 FOR AY 2008-09(SUPRA), THEREFORE TA KING A CONSISTENT VIEW, THESE GROUNDS OF ASSESSEES APPEAL ARE REJECT ED. 16.1. GROUND NOS.4 & 5 ARE IN RESPECT OF THE INTERE ST ACCRUED ON FDRS. SINCE A SIMILAR ISSUE WAS RAISED IN REVENUES APPEA L FOR AY 2007-08 (ITA NO.1116/AHD/2011-SUPRA), WHEREIN WE HAVE DECIDED TH IS ISSUE IN FAVOUR OF ASSESSEE FOLLOWING THE JURISDICTIONAL HIGH COURT RE NDERED IN THE CASE OF GUJARAT MUNICIPAL FINANCE BOARD VS. DY.CIT REPORTED AT (1996) 221 ITR 317 AS WELL AS IN THE CASE OF GUJARAT POWER CORPORA TION LTD. VS. ITO REPORTED AT (2013) 354 ITR 201(GUJ.). THEREFORE, T AKING A CONSISTENT VIEW, THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE A ND THE AO IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF INTEREST ACC RUED ON FDRS. THUS, THESE GROUNDS OF ASSESSEES APPEAL ARE ALLOWED. 16.2. WITH REGARD TO GROUND NO.6 AGAINST LEVY OF IN TEREST U/S.234B & 234C OF THE ACT IS CONSEQUENTIAL. ITA NOS.2670,2671/AHD/13(BY ASSESSEE) , 1116/AHD/11(BY REVENUE) AND 787/AHD/12(BY ASSESSEE) GUJARAT URBAN DEVELOPMENT CORPN.LTD. VS.ACIT/DCIT AYS 2009-10,2010-11, 2007-08 & 2008-09 RESPECTIVELY - 16 - 16.3. GROUND NO.7 IS INITIATION OF PENALTY IS BEIN G PRE-MATURE AND, THEREFORE, THE SAME NEEDS NO ADJUDICATION. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NOA.2671/AHD/2013 FOR AY 2010-11 IS PARTLY ALLOWED. 18. WE SUMMARIZE THE RESULT AS UNDER:- 1. REVENUES APPEAL, I.E. ITA NO.1116/AHD/2011 FOR AY 2007-08 IS DISMISSED. 2. ASSESSEES APPEAL, I.E. ITA NO.787/AHD/2012 FOR AY 2008-09 IS DISMISSED. 3. ASSESSEES APPEAL, I.E. ITA NO.2670/AHD/2013 FOR AY 2009-10 IS DISMISSED. 4. ASSESSEES APPEAL, I.E. ITA NO.2671/AHD/2013 FOR AY 2010-11 IS PARTLY ALLOWED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 19/ 03 /2014 /'.., .../ T.C. NAIR, SR. PS , & 0$1 21+$ , & 0$1 21+$ , & 0$1 21+$ , & 0$1 21+$/ COPY OF THE ORDER FORWARDED TO : 1. 34 / THE APPELLANT 2. 0534 / THE RESPONDENT. 3. !! $ '6 / CONCERNED CIT 4. '6() / THE CIT(A)-GANDHINAGAR 5. 1 #7 0$ , , / DR, ITAT, AHMEDABAD 6. 789 :% / GUARD FILE. ,' ,' ,' ,' / BY ORDER, 51$ 0$ //TRUE COPY// ; ;; ;/ // / !< !< !< !< ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD