HYDROAIR TECTONICS (PCD) LTD., NAVI MUMBAI V. ACIT RG 10 (3), MUMBAI

ITA 2886/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3557 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 23-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAYDR
• Assessee Lawyers: VALLABHDAS D PARMAR; S K KEDIAAR
• Section: 153A; 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI H BENCH . . , , BEFORE S/SH. B.R. BASKARAN,ACCOUNTANT MEMBER & RAM LAL NEGI,JUDICIAL MEMBER /.ITA NO.2886/MUM/2013, /ASSESSMENT YEAR-2008-09 HYDROAIR TECTONICS (PCD) LTD. 116, RAHEJA ARCADE PLOT NO.61, SECTOR-11,BELAPUR NAVI MUMBAI-400 020. PAN: AAACH 9686 C VS ACIT-RANGE10(3) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY : S/SHRI VALLABHDAS D. PARMAR AND S.K. KEDIA-AR / REVENUE BY : SHRI CHANDRA VIJAY-DR / DATE OF HEARING : 23.02.2016 / DATE OF PRONOUNCEMENT : 02- 03-2016 ORDER . . / PER B.R. BASKARAN, AM - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 16.01.2013 PASSED BY THE LD. CIT(A)-37, MUMBAI FOR THE AY 2008 -09. 2. AT THE TIME OF HEARING LD. COUNSEL APPEARING FOR TH E ASSESSEE DID NOT PRESS GROUND NOS. 3 AND 4. ACCORDINGLY, THOSE GROUNDS ARE DISMISSED AS NOT PRESSED. THE REMAINING GROUNDS RELATE TO THE FOLLOWING TWO I SSUES:- A) DISALLOWANCE MADE U/S. 14A OF THE ACT AND B) REJECTION OF DEDUCTION CLAIMED U/S. 80IA OF THE ACT . ITA/2886/MUM/2013,AY.08-09-HYDROAIR 2 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ENVIRONMENT ENGINEERING AND ALLIED ACTIVITIES. 3.1 THE FIRST ISSUE RELATES TO DISALLOWANCE MADE U/S. 1 4A OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED A DIV IDEND INCOME OF RS.2,000/- FROM THE SHARES HELD IN VIJAYA BANK LTD AND CLAIMED IT AS EXEMPT. THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S. 14A ON THE REASO NING THAT IT DID NOT INCUR ANY EXPENDITURE TO EARN THE EXEMPT DIVIDEND INCOME OF RS.2,000/-. HOWEVER, THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE A S PER RULE 8D OF THE IT RULES AND ACCORDINGLY DISALLOWED A SUM OF RS.19,20,787/-, WHICH WAS ALSO CONFIRMED BY CIT(A). 3.2 THE LD. COUNSEL INVITED OUR ATTENTION TO THE SCHEDULE O F INVESTMENT GIVEN IN THE ANNUAL REPORT AND SUBMITTED THAT THE ASSESSEE H AS MADE INVESTMENT IN THE FOLLOWING COMPANIES:- I) JANKALYAN SAHAKARI BANK, II) PRIA CETP (INDIA) LTD. AND III) VIJAYA BANK LTD. 3.3 THE LD. COUNSEL SUBMITTED THAT THE DIVIDEND RECEIVE D FROM JANKALYAN SAHAKARI BANK(JSB) IS TAXABLE AND HENCE, THE PROVIS IONS OF SECTION 14A ARE NOT APPLICABLE TO IT. HE HAS FURTHER SUBMITTED THAT PRI A CETP (INDIA) LTD. (PCIL) IS A SUBSIDIARY OF THE ASSESSEE COMPANY AND HENCE, INVES TMENT MADE THEREIN IS A STRATEGIC INVESTMENT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT MADE ANY FRESH INVESTMENT EITHER IN PCIL OR IN VIJAYA BANK L TD.(VBL) DURING THE YEAR UNDER CONSIDERATION, MEANING THEREBY, BOTH THE SHARES HAV E BEEN BROUGHT FORWARD FROM THE EARLIER YEARS. HE FURTHER, SUBMITTED THAT THE DIVIDEND INCOME OF RS.2,000/- HAS BEEN DIRECTLY CREDITED TO THE BANK A CCOUNT OF THE ASSESSEE. ITA/2886/MUM/2013,AY.08-09-HYDROAIR 3 ACCORDINGLY, HE CONTENDED THAT THE PROVISIONS OF SE CTION 14A SHALL NOT BE APPLICABLE TO THE FACTS PREVAILING IN THE INSTANT Y EAR. HE FURTHER SUBMITTED, THAT THE ASSESSING OFFICER, DID NOT COMPLY WITH THE MAND ATORY CONDITION PRESCRIBED U/S. 14A OF THE ACT BEFORE APPLYING THE PROVISIONS OF RULE 8D, I.E., HE DID NOT RECORD HIS DIS-SATISFACTION WITH THE CLAIM MADE BY THE ASSESSEE BY HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. ACCORDINGLY, HE SU BMITTED THAT THE DISALLOWANCE MADE U/S. 14A OF THE ACT DESERVES DELETION. 3.4 ON THE CONTRARY, THE LD. DEPARTMENTAL REPRESENTATIV E (DR) PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE CIT(A) ON THIS ISSUE. 3.5 HAVING HEARD RIVAL SUBMISSIONS, WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE FACTS AVAILABLE ON THIS ISSUE. WE HAVE EARLIER NOTICED THAT THE DIVIDEND RECEIVED/RECEIVABLE FROM PCIL AND VBL ALONE ARE EXEMPT. THESE INVESTMENTS HAVE BEEN MADE IN THE EARLIER YEA RS AND FURTHER THE INVESTMENT MADE IN PCIL WAS A STRATEGIC INVESTMENT. THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.2,000/- ONLY DURING THE YEAR UNDER CONSIDERATION AND THE SAID DIVIDEND INCOME HAS ALSO BEEN DIRECTLY CREDITE D TO THE BANK ACCOUNT OF THE ASSESSEE. CONSIDERING THE SMALLNESS OF THE DIVIDEND INCOME AND ALSO CONSIDERING THE FACT, THAT THE INVESTMENT IN SHARES HAVE BEEN M ADE IN THE EARLIER YEARS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENT IONS OF THE ASSESSEE THAT IT DID NOT INCUR ANY EXPENDITURE IN RELATION TO THE DIVIDE ND INCOME. FURTHER, AS CONTENDED BY LD A.R, THE AO DID NOT REJECT THE CONT ENTIONS OF THE ASSESSEE BY HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. HEN CE, WE FIND NO REASON FOR INVOKING THE PROVISIONS OF RULE 8D OF THE I.T. RULE S IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE S ET ASIDE THE ORDER OF THE ITA/2886/MUM/2013,AY.08-09-HYDROAIR 4 CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFIC ER TO DELETE THE DISALLOWANCE MADE U/S. 14A OF THE ACT. 4. THE NEXT ISSUE RELATES TO REJECTION OF DEDUCTION CLAIMED U/S. 80IA OF THE ACT. 4.1 DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD UNDERTAKEN A PROJECT TO DEVELOP, OPERATE AND MAINTAIN AN INFRAST RUCTURE FACILITY FOR ITS MSW/CETP PROJECTS ON BOOT BASIS. THE ASSESSEE CLAIM ED DEDUCTION U/S. 80IA OF THE ACT IN RESPECT OF TWO UNITS, VIZ., RS.6.22 CROR ES IN RESPECT OF ROHA UNIT AND RS.2.49 CRORES IN RESPECT OF ICHALKARANJI UNIT. TH E ASSESSING OFFICER EXAMINED THE CLAIM OF THE ASSESSEE IN TERMS OF PROVISIONS OF SECTION 80-IA(4) OF THE ACT. THE SAID PROVISIONS READ AS UNDER:- (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, OR (II) OPERATING AND MAINTAINING, OR (III) DEVELOPING, OPE RATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE F OLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CON SORTIUM OF SUCH COMPANIES (OR BY AN AUTHORITY OR A BOAR D OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT) ; (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTR AL GOVERN MENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING, OR (II) OPERATING AND MAINTAINING, OR ( III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY ; ITA/2886/MUM/2013,AY.08-09-HYDROAIR 5 (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRA STRUCTURE FACILITY ON OR AFTER THE 1ST APRIL, 1995: THE AO NOTICED THAT THE ASSESSEE HAS ENTERED INTO A MOU WITH R.I.A.C.E.P.T CO- OPERATIVE SOCIETY ONLY, WHEREAS THE PROVISIONS OF S EC. 80IA(4) REQUIRE THAT AN AGREEMENT SHOULD BE ENTERED WITH THE CENTRAL GOVERN MENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUT ORY BODY. ACCORDINGLY, THE AO REJECTED THE CLAIM FOR DEDUCTION U/S 80IA IN RES PECT OF ROHA UNIT. 4.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E LD CIT(A) CALLED FOR A REMAND REPORT FROM THE AO, SINCE THE ASSESSEE APPEA RS TO HAVE CLAIMED THAT IT ALONG WITH RIA CETP CO-OP SOCIETY LTD HAS ENTERED I NTO A MOU WITH MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) AND FURTH ER IT WAS CLAIMED THAT THE MOU SHOULD BE TREATED AS AN AGREEMENT SPECIFIED IN SEC. 80IA(4)(I)(B). HOWEVER, THE AO REPORTED IN THE MOU THAT MIDC WAS A CTING ONLY AS FACILITATOR AND ACCORDINGLY STOOD BY HIS ORDER. THE LD CIT(A) WAS CONVINCED WITH THE REMAND REPORT AND HE FURTHER OBSERVED THAT:- (A) THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RE CORD TO SHOW THAT IT WAS EFFECTIVELY MAINTAINING THE NEW INFRASTRUCTURE FACILITY. (B) THE ASSESSEE HAS ACTED AS CONTRACTOR AND FURTH ER IT IS NOT SHOWN THAT THE INFRASTRUCTURE FACILITY WAS OPERATED UNDER BOOT BASIS. (C) THE ASSESSEE HAS SUBSEQUENTLY FILED A RETURN O F INCOME U/S 153A OF THE ACT IN PURSUANCE OF SEARCH PROCEEDINGS, WHEREIN THE PROFIT AND LOSS ACCOUNT HAS BEEN REVISED BY THE ASSESSEE. WITH THE ABOVE SAID OBSERVATIONS, THE LD CIT(A) CON FIRMED THE ORDER OF THE AO ON THIS ISSUE. 4.3 WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THE ISSUE UNDER DISPUTE IS ABOUT THE NATURE OF MOU ENTERED BETWEEN THE ASSESSEE ALONG WITH M/S R.I.A CETP CO-OP SOCIETY LT D AND M/S MIDC. ITA/2886/MUM/2013,AY.08-09-HYDROAIR 6 ACCORDING TO THE ASSESSEE THE MOU SATISFIES THE CHA RACTERISTICS OF AN AGREEMENT, WHEREAS ACCORDING TO THE AO, THE SAME CANNOT BE CONSIDERED TO BE AN AGREEMENT. THOUGH MIDC IS ACCEPTED AS A STATUTO RY BODY, THE AO HAS OBSERVED THAT THE MIDC ONLY ACTS AS A FACILITATOR. BESIDES THE ABOVE, THE LD CIT(A) HAS ALSO MADE SOME MORE OBSERVATIONS, AS DIS CUSSED ABOVE. 4.4 IT IS A WELL SETTLED PROPOSITION OF LAW THAT T HE NOMENCLATURE GIVEN TO A DOCUMENT WILL NOT DECIDE ITS CHARACTERISTICS, I.E., THE SUBSTANCE WILL PREVAIL OVER THE FORM. THE MAIN CHARACTERISTICS OF A COMMERCIAL AGREEMENT, INTER ALIA, CONSISTS OF ORDINARILY THE CLAUSES RELATING TO (A) SCOPE OF CONTRACT OR WORK TO BE EXECUTED. (B) CONSIDERATION INVOLVED AND PAYMENT TERMS. (C) CLEAR SPECIFICATION OF SCOPE, RISKS AND RESPONS IBILITIES OF EACH OF THE PARTIES (D) TIME PERIOD FOR COMPLETION OF CONTRACT (E) LIABILITY CLAUSE IN CASE OF FAILURE TO ADHERE TO CONTRACT TERMS. IF THE UNDERSTANDING REACHED BETWEEN THE PARTIES EN COMPASSES THE ABOVE TERMS, IN OUR VIEW, THE SAME WOULD CONSTITUTE AN AGREEMEN T AND THE SAME SHOULD BE CONSIDERED AS AN AGREEMENT MENTIONED IN SEC. 80IA(4 )(I)(B) OF THE ACT. WE NOTICE THAT THE TAX AUTHORITIES HAVE NOT EXAMINED T HE MOU IN THE ABOVE SAID LINES AND ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. 4.5 WE HAVE EARLIER NOTICED THAT BOTH THE AO AS WE LL AS THE LD CIT(A) HAS MADE SOME MORE OBSERVATIONS TO SUPPORT THE REJECTIO N OF THE CLAIM FOR DEDUCTION U/S 80IA OF THE ACT. THE LD A.R SUBMITTED THAT THE ASSESSEE SHALL BE IN A POSITION TO SATISFY THE AO WITH REGARD TO THOSE OBS ERVATIONS ALSO. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ENTIRE MATTERS RELATING TO THE DEDUCTION U/S 80IA ITA/2886/MUM/2013,AY.08-09-HYDROAIR 7 INCLUDING THE VARIOUS ADVERSE FEATURES NOTED DOWN B Y THE AO/CIT(A) REQUIRES FRESH EXAMINATION. 4.6 ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A ) ON THIS ISSUE AND RESTORE ALL THE ISSUES RELATING TO THE DEDUCTION U/S 80IA(4 ) OF THE ACT TO THE FILE OF THE AO FOR FRESH EXAMINATION. THE ASSESSEE IS ALSO DIRECT ED TO FURNISH ALL THE DETAILS THAT MAY BE CALLED FOR BY THE AO IN THIS REGARD. AFTER HEARING THE ASSESSEE, THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH TH E LAW. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON 2 ND MARCH, 2016 2 , 2016 SD/- SD/- ( / RAM LAL NEGI) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 02.03. 2016 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / !' , , . . . 6. GUARD FILE/ # $ ! ! //TRUE COPY// / BY ORDER, DY./ASST. REGISTRAR , /ITAT, MUMBAI.