DCIT 9(2), MUMBAI V. K.P. POWER P. TD, MUMBAI

ITA 4518/MUM/2011

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3969 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2002-2003
• Appeal Filed On: 06-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI SHRI GIRISH DAVE
• Keywords: Business income; Opportunity of being heard; Additional evidence; Corroborative evidences; Revised return; Capital expenditure
• Section: 143(3); 142(1); 115JB; 194C; 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO S . 4518 / MUM/201 1, 547/MUM/2012 & 1306/MUM/2012 ( / ASSESSMENT YEAR S : 2002 - 03 , 2006 - 07 & 2007 - 08 ) DCIT, RANG E (9)(2) AAYAKAR BHAVAN, R. NO. 218, 2ND FLOOR, M.K. ROAD, MUMBAI - 400020 . / VS. M/S. K.P. POWER PVT. LTD. 229 - 230, 2 ND FLOOR, ARUN CHAMBERS TARDEO, MUMBAI - 400034 . / I .T.A. NO S . 173 / MUM/ 201 2 & 1385 / MUM/ 2012 ( / A SSESSMENT YEAR S : 2006 - 07 & 2007 - 08 ) M/S. K.P. POWER PVT. LTD. 229/230, 2 ND FLOOR, ARUN CHAMBERS TARDEO, MUMBAI - 400034 . / VS. ADDITIONAL CIT RANGE 9(2) AAYAKAR BHAVAN, 2 ND FLOOR, MAHARISHI KARVE ROAD, MUMBAI - 400020. ./ ./ PAN/GI R NO. : AABCK 9495 M ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 07 .0 9 .201 8 / DATE OF PRONOUNCEMENT : 31. 10. 2018 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE AS WELL AS THE ASSESSEE HAVE FILED THE ABOVE MENTIONED APPEALS AGAINST THE DIFFERENT ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 20 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y S . 2002 - 03, 2006 - 07 & 2007 - 08 . REVENUE BY: SHRI S. K. BEPARI ASSESSEE BY : SHRI GIRISH DAVE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 2 ITA. NO .1306 / M/201 2 : - 2 . THE REVENUE HAS FILED THE PRESENT A PPEAL AGAINST THE ORDER DATED 30 . 1 2 .201 1 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 20 , MUMBAI [ HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2007 - 0 8 . 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND THE LD. CIT(A) WAS CORRECT TO ALLOW THE RELIEF ON ACCOUNT OF EXP ENSES INCURRED UNDER VARIOUS HEADS EVEN THOUGH THE ASSESSES HAS FAILED TO FURNISH DOCUMENTARY EVIDENCE IN RESPECT OF THESE EXPENSES? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND THE LD. CIT(A) WAS CORRECT IN ALLOWING DEDUCTION U/S 80 - LA EVEN THOUGH ASSESSEE HAS NOT FULFILLED THE PRESCRIBED CONDITIONS LAID DOWN AS PER SECTION 80 - IA(4) OF THE IT ACT, 1961? 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. T HE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD GROUND WHICH MAY BE NECESSARY. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 15.11.2007 DECLARING TOTAL INCOME TO THE TUNE OF RS.16,82,200/ - . THE RETU RN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREFORE, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) & 142(1) OF THE I.T. ACT, 1961 WERE ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, DISALLOWING THE CERTAIN CLAIM AND ALSO DISALLOWING THE CLAIM U/S 80 - IA(4) OF THE ACT, THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.10,62,27,710/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF THE PROVISION ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 3 U/S 80 - IB(4) OF TH E ACT. F EELING AGGRIEVED, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO. 1 : - 5 . UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE ALLOWANCE OF THE EXPENSES INCURRED UNDER VARIOUS HEAD ON THE GROUND OF THAT THE ASSESSEE FAILED TO FURNISH THE DO CUMENTARY EVIDENCE IN SUPPORT OF CLAIM. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 6.1 THE AO HAS DISALLOWED THE ABOVE EXPENDITURE INCURRED UNDER VARIOUS HEADS AS UNDER: I. FOUNDATION WORK - RS.1,05,000/ - II. MISCELLANEOUS EXPENSES - R.S10,93,607/ - III. ROAD DEVELOPMENT EXPENSES RS.20,55,286/ - IV. SITE DEVELOPMENT EXPENSES RS.3,55,203/ - V. ELECTRICAL WORK INTERNAL RS. 3,27,000/ - 6.2. THE APPELLANT CHALLENGED THE ABOVE ADDITION AS THE SAME WAS M ADE WITHOUT GIVING SUFFICIENT OPPORTUNITY OF BEING HEARD AND TO EXPLAIN THE DETAILS BEING DISALLOWING IT. 6.3 THIS DISALLOWANCE HAS BEEN MENTIONED AT PAGE 6 TO 8 OF ASSESSMENT OF WHERE AFTER GIVING BIFURCATION OF AMOUNTS UNDER DIFFERENT HEADS AS ABOVE , THE ASSESSING OFFICER OF THE VIEW THAT THE ASSESSEE WAS REQUIRED TO FILE THE PURPOSE OF EACH OF THESE PAYMENTS ALONG WITH DOCUMENTARY EVIDENCES HE WAS ALSO THE VIEW THAT THE APPELLANT WAS REQUIRED TO GIVE FULL DETAILS OF THE EXPENSES AL - WITH JUSTIF ICATION AND SINCE IT HAS FAILED TO DO SO AT THE TIME OF ASSESSMENT THE SAME HAD TO BE DISALLOWED. 64 THE APPELLANT DURING THE APPELLATE PROCEEDINGS HAS STATED THAT IT HAD POSSESSION ALL THE MATERIAL EVIDENCES WHICH WAS NEVER CALLER' UPON BY THE ASSESSI NG OFFICER AND THEREFORE, FILED ADDITIONAL EVIDENCES WHICH WERE FORWARDED TO ASSESSING OFFICER. THE DETAILS WERE SUBMITTED AS FOLLOWS. - I. FOUNDATION WORK - 1,05,000/ - : THIS AMOUNT WAS PAID TO SHRI P.K NAGRAGAN SITE MANAGEMENT EXPENSES FOR BRAHMANVEL AREA . ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 4 II. MISCELLANEOUS EXPENSES 10,93,607 - : THESE EXPENSES ARE IN THE NATURE PAYMENT TO LOCAL POPULATION FOR USE OF LAND FOR LAYING OF TRANSMISSION, I DEVELOPMENT AND OTHER EXPENSES AT MIDC. MCEB, A DETAILED STATEMENT OF EXPENSES WAS SUBMITTED DURING ASSESS MENT PROCEEDINGS (A COPY OF WHICH ATTACHED FOR PERUSAL) AND IT WAS ADDED THAT RELEVANT SUPPORTING CAN BE AVAILABLE AT THE TIME OF REMAND PROCEEDINGS. III. ROAD DEVELOPMENT EXPANSES RS. 20,55,286/ - : IT WAS SUBMITTED THAT IN COURSE OF ASSESSMENT PR OCEEDINGS A DE TAILED STATEMENT NAMES OF PAYEE PURPOSE FOR WHICH THESE PAYMENTS WERE MADE WAS SUBMITTED. ALL THESE PAYMENT? SUPPORTED WITH BILLS AND VOUCHERS WHICH CAN BE PRODUCED DURING REMAND PROCEEDING. SITE. DEVELOPMENT EXPENSES RS.3,55,203/ - : A DETAIL ED STATEMENT OF EXPENSE INCURRED TOWARDS SITE DEVELOPMENT AL BRAHMANVEL WAS SUBMITTED DURING ASSESSEE PROCEEDINGS (A COPY OF WHICH WAS ATTACHED FOR PERUSAL). IT WAS ADDED THAT PERUSAL STATEMENT REVEAL THAT MAJORITY OF THESE EXPENSES WERE INCURRED AT THE BR AHMANVEL BY M/S NEG M1CGN WHO HAVE RECOVERED FROM THE ASSESSES COM; THE APPELLANT ALSO OFFERED TO PRODUCE D EBIT NOTES RAISED BY M/S. MEG M CON VERIFICATION . V ELECTRICAL WORK INTERNAL RS.3,27,000/ - : THESE EXPENSES WERE INCURRED FOR MAINTAINING THE ELECTRI CAL POLES SUPPORTING WITH NETWORK OF TRANSMISSION LINES LAID BY THE ASSESSES THEY COMPRISE OF EXPENSES VARYING BETWEEN RS.2,500/ - TO RS.60,000/ - PAID TO VARIOUS PERSONS AND A COPY OF DETAILS/LIST OF PAYMENTS WERE SUBMITTED DURING THE COURSE OF APPELLATE PR OCEEDINGS WERE ALSO ATTACHED THE ASSESSES ALSO ADDED THAT IT WAS IN A POSITION TO PRODUCE SUPPORTING FOR THESE EXPENSES AT REMAND PROCEEDINGS, IF REQUIRED. 6.5. AS MENTIONED EARLIER, ALL PAPERS AN D EVIDENCES WERE FORWARDED TO THE ASSESSING OFFICER. THE ASS ESSING OFFICER IN REMAND PROCEEDINGS HAS HELD THAT THE APPELLANT HAD FURNISHED SELF - SERVING DETAILS OF VARIOUS EXPENSES NOT BACKED BY SUPPORTING EVIDENCES AND IN SOME CASES EVEN THE ADDRESSES OF THE PARTIES HAVE NOT BEEN MENTIONED. 6.6. IN RESPONSE TO THIS , THE APPELLANT SUBMITTED THAT IT ATTENDED THE REMAND PROCEEDINGS TO JUSTIFY THE DETAILS FORWARDED BY THE CIT(A) AND SUPPORTING EVIDENCES WERE NOT ASKED OR CALLED BY THE ASSESSING OFFICER IN CASE HE WANTED FURTHER DOCUMENTS TO VERIFY THE CLAIM HE WOULD HAV E 'AILED FOR THE SAME INSTEAD OF REJECTING IT ON ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 5 FLIMSY GROUNDS. IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT WHEN COMPLETE DETAILS OF EXPENSES CLAIMED WAS FILED AND HE CALLED FOR FURTHER DETAILS OR SUPPORTING DOCUMENTS WHICH ASSESSEE COULD NOT PRODUC E. ONLY IN THE CASE OF FAILURE OF THE APPELLANT TO SUBSTANTIATE THE CLAIM, THE ASSESSING OFFICER WOULD HAVE BEEN JUSTIFIED IN HOLDING THAT THE APPELLANT HAS FAILED TO SUBSTANTIATE ITS DISALLOWANCE. SINCE NEITHER ANY EVIDENCE WAS CALLED IN ADDITION TO WHAT WAS PRODUCED BEFORE THE CIT(A) IT WAS NOT FAIR ON THE ASSESSING O FFICER'S PART TO REJECT THE EXPENDITURES WHICH HAS BEEN SUBJECT TO TAX AUDIT WITHOUT ANY ADVERSE INFERENCE. THEREFORE, THE APPELLANT SOUGHT DELETION OF THE SAME. 6.7. I HAVE PERUSED THE AS SESSMENT ORDE R, REMAND REPORT AS WELL AS COUNTER COMMENTS ON REMAND REPORT OF THE APPELLANT. SINCE THE DISALLOWANCES WERE MADE WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD OR BY CARRYING OUT ADEQUATE ENQUIRIES MATTER WAS REMANDED TO THE ASSESSING OFFICE R TO CONDUCT ENQUIRY U/S 250(4) ON THEM. 6.8 THE APPELLANT IN ADDITION TO WHAT IT HAD PROVIDED DURING ASSESSMENT PROCEEDINGS HAD OFFERED TO PRODUCE WHATEVER FURTHER EVIDENCES REQUIRED TO SUBSTANTIATE ITS CLAIM WHICH WAS NOT CALLED BY THE ASSESSING OFFICER THUS, IN SPITE OF HAVING THE MANDATE GIVEN BY THE C1T (A) VIDE HIS LETTER DATED 18.11. 2010 TO EXAMINE THE RECORDS AND CONDUCT FURTHER ENQUIRY, THE ASSESSING OFFICER SUBMITTED A REMAND REPORT WHICH IS NO DIFFERENT FROM THE POSITION AS IT EXISTED AT THE ASSES SMENT STAGE. THE ADDITIONS AND DISALLOWANCES WERE MADE AT ASSESSMENT STAGE IN SUMMARY MANNER WITHOUT CONFRONTING THE APPELLANT. AT REMAND STAGE TOO, THE POSITION REMAND UNCHANGED. 6.9. ON THE OTHER HAND, THE APPELLANT HAD FURNISHED DETAILS OF EXPENDITURE I NCURRED WHICH PRIMA - FACIE DISCHARGES ITS ONUS. HOWEVER, IT IS OBSERVED THAT SOME AMOUNTS HAVE BEEN DEBITED UNDER THE HEAD MISCELLANEOUS EXPENSES WITHOUT FURTHER DETAILS EXCEPT THE NAME OF THE PERSON TO WHOM PAYMENT IS MADE. THIS IS NOT CONTRADICTED BY THE AR OF THE APPELLANT AND, THEREFORE, EVEN IF THE SAME IS VOUCHED IT CANNOT BE SAID THAT THEY ARE AMENABLE TO CROSS - VERIFICATION. IN THESE CIRCUMSTANCES IT WOULD BE FAIR AND REASONABLE TO DISALLOW 15% OF RS.39,36,096/ - AMOUNTING TO RS.5,90,414/ - WHICH WILL T AKE CARE OF THOSE DISALLOWANCES WHICH MAY NOT BE FULLY SUBSTANTIATED. ACCORDINGLY, DISALLOWANCE TO THE EXTENT OF RS.5,90,414/ - IS CONFIRMED AND THE APPELLANT GETS RELIEF OF RS.33,45,682/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 6 8. ON APPRAISAL OF THE A BOVE MENTIONED FINDING, WE NOTICED THAT AT THE TIME OF APPELLATE PROCEEDING , T HE ASSESSEE HAS SUBMITTED THE NECESSARY EVIDENCE IN SUPPORT OF HIS CLAIM. HOWEVER, SOME OF THE EVIDENCE S WERE NOT AMENABLE FOR CROSS VERIFICATION . A FTER GOING THROUGH THE EVIDENC E ADDUCED BY LD. REPRESENTATIVE OF THE ASSESSEE , T HE CIT(A) DISALLOWED THE CLAIM TO THE EXTENT OF 15% OF RS.39,36,096/ - WHICH NOWHERE SEEMS UNJUSTIFIABLE. SINCE THE MATTER OF CONTROVERSY HAS DULY BEEN ADJUDICATED BY THE CIT(A) BY GOING THROUGH THE RELEVANT EVIDENCE ON RECORD AND ALSO DISALLOWING THE CLAIM TO THE EXTENT OF 15% WHICH WAS RELATED TO THE NON - PRODUCTION OF EVIDENCE, THEREFORE, W E ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE T O BE INTERFERE D WITH AT THIS APPELLATE STAGE. ACCORDINGLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO S . 2 TO 4 : - 5 . ALL THESE ISSUES ARE IN CONNECTION WITH THE ALLOWANCE OF CLAIM OF THE ASSESSEE IN VIEW OF THE PROVISION U/ S 80 - IA(4) OF THE I.T. ACT, 1961. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE LD. CIT HAS WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE WHEREAS THE AO HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE IN VIEW OF THE PROVISION U/S 80 - IB(4) OF THE ACT , THEREFORE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE HENCE, IS LIABLE TO BE SET ASIDE AND THE ORDER OF THE AO IS LIABLE TO BE RESTORED IN THE INTEREST OF JUSTICE. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECO RD: - ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 7 8. GROUND OF APPEAL NO 5 RELATES TO CLAIM OF DEDUCTION U/S 80IA (4)(IV)(B) OF THE IT ACT. 1961, THIS GROUND OF APPEAL RELATES TO DIS ALLOWANCE OF APPELLANT'S CLAIM OF DEDUCTION FOR LAYING OF NEW TRANSMISSION LINES AMOUNTING TO RS.3,41,50,391/ - U/S.80 IA(4)(IV)(B) OF THE IT ACT, 1961. IT WAS HIGHLIGHTED THAT THE APPELLANT HAD EARN ED , A NET INCOME OF ABOVE AMOUNT OF LAYING OF NETW ORK OF NEW TRANSMISSION LINES FOR TRANSMISSION AND DISTRIBUTION OF POWER WHICH IS ELIGIBLE FOR DEDUCTION UNDER THE ABOVE PROVI SIONS OF CHAPTER VIA. IT WAS CONTENDED THA T THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE APPELLANT COMPANY WAS IN THE BUSINESS OF LAYING OF NETWORK OF NEW TRANSMISSION LINES FOR TRANSMISSION AND DISTRIBUTION OF POWER AND CARRIED OUT THAT ABOVE WORK AND, THEREFORE, WAS AN INFRASTRUCTURE DEVELOPER ELIGIBLE FOR DEDUCTION IT IS OBSERVED THAT THE ASSESSING OFFICER HAD DISALLOWED THIS DEDUCTION ON THE GROUND THAT THE APPELLANT IS A CONTRACTOR OR A LIASIONING AGENT WHO IS NOT ELIGIBLE FOR DEDUCTION ACCORDIN G TO THE ASSESSING OFFICER ONLY DEVELOPER OF INFRASTRUCTURE IS ELIGIBLE FC DEDUCTION IN DOING SO, THE ASSESSING OFFICER HAS RELIED ON THE DECISION OF MUMBAI BENCH DECISION IN B.T PATIL & SONS VS ACIT. AS AGAINST THIS, THE APPELLANT DREW ATTENTION TO THE DE CISION OF HON'BLE BOMBAY HIGH COURT IN CIT VS ABG HEAV Y INDUSTRIES LTD, 37 DTR (BORN) 233 PRONOUNCE D ON 15.02.2010, FOLLOWED BY PUNE BENCH IN LAXMI CIVIL ENGG PVT. LTD VIDE ITS ORDER DATED 08,06.2011. IN THE LIGHT DECISION OF JURISDICTIONAL HIGH COURT, IT WAS CONTENDED THAT THE DECISION OF BT. PATIL & SONS RELIED BY THE ASSESSING OFFICER WAS NOT A GOOD LAW AS IT STANDS IMPLIEDLY OVERRULED. THE APPELLANT ALSO DREW ATTENTION TO THE CIT(A)'S ORDER FOR A.Y.2002 - 03 DATED 30.03.2011 WHERE AFTER EXAMINING THE PROV ISIONS OF SECTION U/S80IA(4)(IV)(B) HAS GIVEN A CLEAR CUT FINDING THAT THE APPELLANTS CASE FALLS IN SUB - CLAUSE (B) OF 80IA(4)(IV) OF THE GIVEN A CLEAR CUT FINDING THAT THE APPELLANT'S CASE FALLS IN SUB - CLAUSE (B) C (A) (4)(IV) OF THE L.T ACT. 1961 AND SO THE APPELL ANT WAS ENTITLED FOR DEDUCTION PROFITS DERIVED FROM NETWORK OF NEW LINES FOR TRANSMISSION AND DISTRIBUTION OF POWER. 8.1. DURING THE COURSE OF APPELLATE PROCEEDINGS ATTENTION OF THE APPELLANT WA S DRAWN TO THE 'WITHOUT PREJUDICE' FINDINGS OF THE A SSES SING OFFICER AT PAGES 21 TO 25 THE ASSESSMENT ORDER, WHEREBY THE ASSESSING OFFICER HAS HELD THAT THE APPELLANT HA CREDITED AN AMOUNT OF 78,67,421/ - BEING DEVELOPMENT CHARGES, LEASE RENT RS.48.73.600/ - AS INCOME FROM OPERATI ONS AND CLAIMED DEDUCTION U/ S,80 LA(4)(IV)(B) ON THESE AMOUNTS ALSO THOUGH THEY WERE NOT ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 8 DIRECTLY DERIVED FROM THE PROFITS & GAINS OF ELIGIBLE BUSINESS OF THE APPELLANT. THE ASSESSING OF FICER WAS ALSO OF THE VIEW INTEREST OF RS.1,98,781/ - AN D DIVIDEND ON MUTUAL FUNDS OF RS. 6,78,183 / - SHOWN AS OTHER INCOME HAS ALSO BEEN INCLUDED WHICH IS NOT PROPER 8.1.1. THE APPELLANT CLARIFIED THAT IT HAS CLAIMED DEDUCTION U/S.80IA(4)(IV)(B) OUT OF TRANSMISSION CHARGES INCOME OF RS 5,65,17,629/ - AND AFTER REDUCING THE EXPENDITURE INCURRED TO THE COST OF LAYING THE NEW TRANSMISSION LINES, THE SAME WAS CLAIMED AT RS3.41,50,391/ - . THE APPELLANT HAS NEITHER CREDITED DEVELOPMENT CHARGES OF RS.78,67 , 421/ - AND LEASE RENT OF RS,48,73,600/ - NOR OTHER INCOMES LIKE INTEREST/DIVIDEND WHILE CLAIMING THE ABOVE DEDU CTION. 8 1 2. IN THIS CONNECTION, IT DREW ATTENTION TO THE FORM NO.10CCB FILED WHERE THE TOTAL SALES OF UNDERTAKING HAS BEEN TAKEN AT RS.6,92,58,650/ - WHICH INCLUDES THE DEVELOPMENT CHARGES AND LEASE RENT BUT WHILE COMPUTING THE PROFIT DERIVED FROM NETWORK OF TRANSMISSION LINES, THEY HAVE BEEN EXCLUDED AND ONLY TRANSMISSION CHARGES INCOME OF RS.5,65,17,629/ - FOR LAYING NETWORK FOR TRANSMISSION OF POWER WAS TAKEN IN COMPUTING THE NET INCOME AT RS.3,41,50,391/ - AFTER SETTING OFF THE EXPENDITURE UNDER SECTION 80IA(4)(IV)(B) OF THE I T. ACT, 1961. THUS, IT WAS STATED THAT THE ASSESSING OFFICER'S 'WITHOUT PREJUDICE FINDINGS' WAS NOT IN ACCORDANCE WITH THE FACTS AND MATERIAL ON RECORD AS NONE OF THE OTHER INCOMES EVEN IF SHOWN UNDER THE HEAD OPERATIONS IN PROFIT & LOSS ACCOUNT, HAS BEEN INCLUDED WHILE CLAIMING DEDUCTION U/S.80LA(4)(IV)(B). 8 2. I HAVE PERUSED THE ASSESSMENT ORDER, REMAND REPORT AND WRITTEN SUBMISSIONS OF THE APPELLANT THIS IS A RECURRING ISSUE WHICH HAS BEEN SUBJECT MATTER OF APPEAL FOR A.Y 2002 - 03 AS WELL AS FOR A.Y 2006 - 07. BY ORDER DATED 30.03.2011, THE APPELLANT'S CLAIM OF DEDUCTION UNDER THIS SECTION WAS ALLOWED FOR A.Y.2002 - 03. THIS ISSUE WAS ALSO EXAMINED AT LENGTH BE ME WHILE DECIDING THE APPEAL FOR A.Y 2006 - 07 AT PAGES 9 TO 17 OF THE APPELL ATE ORDER AND THE APPELLANT'S CLAIM FOR DEDUCTION WAS ALLOWED IN THE LIGHT OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD (CITED SUPRA) SINCE THE FACTS AND CIRCUMSTANCES AND THE NATURE OF WORK FORMED BY THE APP ELLANT REMAINED THE SAME, IT IS HELD THAT THE APPELLANT IS ENTITLED DEDUCTION U/S.80IA(4)(IV)(B) OF THE I.T ACT, 1961 AS IT FULFILLS ALL THE CONDITIONS. THIS IF GROUND OF APPEAL IS ALLOWED IN APPELLANT'S FAVOR. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 9 8 2.1. WITHOUT PREJUDICE TO THE ABOVE FINDIN G, IT IS OBSERVED THAT THE APPELLANT HAS CLAIMED DEDUCTION OF RS.3,41,50,391/ - UNDER THE ABOVE SECTION THI S AMOUNT FORMS PART OF RS.3,46,8 0,000/ - WHICH HAS BEEN HELD TO BE THE RECEIPT FOR IMM EDIATELY PRECEDING A.Y.2006 - 07 TO SAY THAT THE APPELLANT'S CLAIM OF OFFERING THE ABOVE AMOUNT IN THE CURRENT YEAR UNDER THE HEAD 'TRANSMISSION CHARGES' AND CLAIMING CORRESPONDING DEDUCTION BY WAY OF EARNING A NET INCOME OF RS. 3,41.50,391 - FOR LAYING OF NETWORK OF TRANSMISSION LINES FOR DISTRIBUTION OF POWER HAS BEEN NE GATED BY TAXATION AUTHORITIES. IT HAS BEEN THERE CONSISTENT STAND THAT ABOVE SUM OF RS.3,46,80,000/ - BELONGS TO IMMEDIATELY PRECEDING YEAR. 8.2.2 AT THE APPELLATE STAGE, THE APPELLANT'S CONTENTION WAS REJECTED AND THE ACTION OF THE ASSESSING OFFICER WAS UPHELD. IN VIEW OF THE ABOVE, THE APPELLANT IS NOT ENTITLED FOR DEDUCTION U/S.80IA(4)(IV)(B) IN THE CURRENT YEAR AS A DVANCE RECEIPT OF RS.3,46,80,000 / - HAS BEEN TAXED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. 8.2 3. AS PER FORM NO.10CCB COMPUTATION FOR CLAIMING DEDUCTION U/A 80IA(4)(IV)(B), THE APPELLANT HAD SHOWN INCOME FROM TRANSMISSION LI NES LAYING AT RS. 5,65,17,629/ - WHICH INCLUDES THE SUM OF RS.3,46,80,000/ - . ONCE THIS IS EXCLUDED THE INCOME UNDER THIS ELIGIBLE BUSINESS COMES DOWN TO RS.2,18,37, 629/ - WHEREAS THE COST OF EXPENDITURE OF LAYING OF TRANSMISSION LINES AS PER COMPUTATION IN FORM NO. L0CCB COMES TO RS.2,23,67,238 / - . THUS, THERE IS A LOSS FROM THIS ELIGIBLE BUSINESS AMOUNTING TO RS.5,29,609/ - . TO SUM UP, THOUGH THE APPELLANT IS ENTITLED TO CLAIM OF DEDUCTION U/S.801A(4)(IV}(B) BUT SINCE THE SUM OF RS.3,46,80,000/ - HAS BEEN TAKEN AS RECEIPT FOR THE A.Y.2006 - 07 AND HENCE LOSS HAS OCCURRED FOR THE CURRENT YEAR IN THIS ELIGIBLE BUSINESS AND SO NO DEDUCTION CAN BE CLAIMED. THIS GROUND OF APPEA L IS DECIDED ACCORDINGLY. 6. AFTER DUE CONSIDERATION OF THE ARGUMENT ADVANCED BY THE LD. REPRESENT ATIVE OF THE PARTIES AND PERUSING THE RECORD, W E NOTICED THAT THE CLAIM OF THE APPELLANT OF DEDUCTION FOR LAYING OF NEW TRANSMISSION LINES AMOUNTING TO RS.3 ,41,50,391/ - WAS DECLINED BY AO IN VIEW OF THE PROVISION U/S 80 - IA(4)(IV)(B) OF THE ACT. THE CIT(A) IN HIS ORDER DATED 30.03.2011 FOR THE A.Y. 2002 - 03 HAS ALLOWED THE CLAIM . AT THE TIME OF ARGUMENT, THE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 10 LD. REPRESENTATIVE OF THE ASSESSEE HAS ALSO PLACED RE LIANCE UPON THE DECISION OF THE COCHIN BENCH TITLED AS KINFRA EXPORTS PROMOTION INDUSTRIAL PARKS LTD. V. DY. CIT (20 13) 36 TAXMANN.COM 48 (COCHIN) IN WHICH IT WAS SPECIFICALLY HELD THAT THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION U/S 80 - IA OF THE ACT IN R ESPECT OF PROFIT DERIVED FROM TRANSMISSION OR DISTRIBUTION OF POWER THROUG H NETWORK OF NEW TRANSMISSION OR DISTRIBUTION OF LINES . THE CIT(A) HAS ALSO PLACED RELIANCE UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY I NDUSTRIES LTD, 37 DTR (BOM) 233, W HERE IN THE SIMILAR SITUATION THE CLAIM OF THE ASSESSEE WAS ALLOWED U/S 80IA OF THE ACT. TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ITA. NO. 4518/M/2011 9 . THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 30. 03 .2011 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 20 , MUMBAI [HEREINAFTE R REFE RRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2002 - 0 3 . 10 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO R S.10,00,000/ - OUT OF R S.36 ,00,000/ - ON ACCOUNT OF MANAGEMENT CHARGES PAID TO ITS SISTER CONCERN M/S. KING PRAWNS LTD. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 11 2. ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION CLAIMED U/S80 - IA OF THE I.T. ACT, 1961 . 3. THE A PPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY . 11 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2002 DECLARING TOTAL INCOME TO THE TUNE OF RS.16,66,750/ - . THEREAFTER, T HE ASSESSEE FILED A REVISED RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS.16,31,150/ - U/S 115JB OF THE ACT AND INCOME AT RS.NIL UNDER THE NORMAL PROVISION. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 28.02.2003. THE CASE OF THE ASSESSEE W AS TAKEN UP FOR SCRUTINY. IT WAS OBSERVED THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S 80 - IA OF THE ACT @ 100% OF THE PROFITS DERIVED FROM THE BUSINESS RESULTING IN NIL. THE ASSESSEE FAILED TO FURNISH THE FORM NO.10CCB AS LAID DOWN IN RULE 18BBB OF THE ACT RESULTING IN THE ESCAPEMENT OF INCOME TO THE TUNE OF RS.16,31,150/ - , THEREFORE, THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 13.03.2008 AND SERVED UPON THE ASSESSEE. NOTICE U/S 142(1) OF THE ACT WAS ALSO ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY PAID THE SUM OF RS.36,00,000/ - TO ITS SISTER CONCERN M/S. KING PRAWNS LTD. THE BUSINESS OF THE ASSESSEE COMPANY WAS QUITE DIFFERENT FROM THE BUSINESS OF M/S.KING PRAWNS LTD. WHICH WAS ENGAGED IN TRADING AND MANUFACTURE OF PRAWNS, FISH AND SALT O NLY WHEREAS THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF GENERATION OF POWER . BOTH THE ORGANIZATION WAS DIFFERENT AND THE QUESTION OF RENDER ING ANY SERVICE TO THE ASSESSEE CO. BY M/S. KING PRAWN LTD. WAS DOUBTFUL. THEREFORE, THE MANAGEMENT CHARGES O F RS.36,00,000/ - WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 12 THE CLAIM OF THE ASSES SEE U/S 80 - IA OF THE ACT WAS DISALLOWED AND THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 3,70,42,855/ - AND INCOME TO THE TUNE OF RS.3,34,07,25 2/ - UNDER THE PROVISION OF BOOK PROFIT U/S 1 1 5JB OF THE ACT. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO. 1: - 12 . UNDER THIS ISSUE THE REVENUE HAS CHALLENGED RESTRICTING THE DISALLOWANCE OF RS.10,00,000/ - OUT OF 36,00,000/ - ON ACCOUNT OF MANAGEMENT CHARGES PAID TO M/S. KING PRAWNS LTD . THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE BUSINESS OF THE SISTER CONCERN I.E. KING PRAWNS LTD W AS QUITE DIFFERENT, THEREFORE, NO MANAGEMENT CHARGES OF ANY KIND WAS PAYABLE TO M/S. KING PRAWNS LTD , HENCE, THE AO HAS RIGHTLY DISALLOWED THE CLAIM BUT THE CIT(A) HAS WRONGLY RESTRICTED THE CLAIM TO THE EXTENT OF RS. 10,00,000/ - , THEREFORE, THE FINDING OF THE CIT(A) IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS REFUTED THE SAID CONTENTION AND ARGUED THAT THE FINDING OF THE CIT(A) IS BASED UPON THE DECISION OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2003 - 04 IN ITA. NO.4807/M/2007 , THEREFORE, THE FINDING OF THE CIT(A) IS QUITE CORRECT WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 5. I FIND MERIT IN THE CONTENTION OF THE APPELLANT. THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS MADE FOR THE FIRST ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 13 TIME U/S 147 OF THE ACT. PRIOR TO THAT THE AO HAD COMPLETED ASSESSMENT FOR THE A.Y.2003 - 04 U/S 143(3) ON 16.12.2005. THE ISSUE OF DE DUCTION ON ACCOUNT OF MANAGEMENT CHARGES WAS EXAMINED BY THE AO IN THAT YEAR AND THE DEDUCTION WAS DISALLOWED FOR THE SAME REASONS AS IN THE CASE OF THE CURRENT YEAR. FURTHER, THE AO ALSO CONSIDERED THE APPLICABILITY OF 40A(2)(B) OF THE ACT TO THE PAYMENT IN VIEW OF COMMON MANAGEMENT OF THE APPELLANT COMPANY AND KING PRAWNS. MY PREDECESSOR VIDE ORDER DT.05.0 4.2007 IN APPEAL NO. CIT(A) - IX/A CIT - 9(2)/IT - 269/2006 - 07 HELD THAT THE APPELLANT HAD UTILIZED SERVICES OF KING PRAWNS FOR DEVELOPING THE INFRASTRUCTURAL FACILITY FOR ITS WIND FARM ACTIVITIES. SHE OBSERVED THAT KING PRAWNS HAD ALSO ENTERED INTO AN AGREEMENT WITH GERMAN PARTLY FOR TECHNICAL CONSULTATION FOR THE SIMILAR PROJECT TO BE SET UP AT PALGHAR AND, THEREFORE, IT WAS ENGAGED IN DEVELOPMENT OF SUCH PROJ ECT. HOWEVER, SHE OBSERVED , THAT THE APPELLANT WAS UNDER THE DIRECT CONTROL AND SUPERVISION OF COMMON MANAGEMENT AND THEREFORE, THE HUMAN PROBABILITY OF DIVERSION OF PROFIT COULD NOT BE REJECTED. SHE ALSO OBSERVED THAT THE APPELLANT HAD NOT BROUGHT ON RECO RD ANY MATERIAL TO SHOW AS TO HOW THE AMOUNT IN QUESTION WAS REASONABLE FOR THE TYPE OF SERVICES RENDERED BY M/S. KING PRAWNS LTD. SHE THEREFORE, AGREED, WITH THE A O THAT THE PROVISIONS OF SECTION 40A(2)(B) WOULD BE APPLICABLE AND CONSIDERING THE FACT THAT OUT OF THE IMPUGNED SUM, KING PRAWNS HAD SPEND ONLY RS.12,00,000/ - TOWARDS THE PROJECT THE CIT(A) CONSIDERED THE IMPUGNED EXPENDITURE EXCESSIVE TO THE EXTENT OF RS.10,00,000/ - AND ORDERED DEDUCTION ONLY OF THE BALANCE SUM OF RS.20,00,000/ - . ON DEPARTMENT S APPEAL THE ITAT MUMBAI BENCH - H, VIDE ORDER DT.24.09.2010 IN ITA. N. 4807/M/2007 CONCURRED WITH THE AFORESAID FINDINGS OF THE CIT(A) AND UPHELD THE DISALLOWANCE RESTRICTED TO RS.10,00,000/ - . 5.2. IT IS THUS SEEN THAT THERE HAS BEEN CONCURRENT FINDING BY B OTH THE CIT(A) AND THE ITAT IN SIMILAR FACTS AND CIRCUMSTANCES IN THE IMMEDIATELY SUCCEEDING YEAR TO THE EFFECT UP THE WIND FARM PROJECT AT BRAHAMANWEL, SAKRI, DIST. DHULE AND DID RENDER SUCH SERVICES TO THE APPELLANT. IN THESE CIRCUMSTANCES I HAVE NO HESI TATION IN FOLLOWING THE AFORESAID APPELLATE ORDERS AND HOLD THAT APPELLANT IS ELIGIBLE TO CLAIM SIMILAR DEDUCTION IN THE CURRENT YEAR ALSO. HOWEVER, FOR THE REASONS STATED IN THE APPELLATE ORDER OF MY PREDECESSOR, I RESTRICTED THE DISALLOWANCE TO RS.10,00, 000/ - . THE APPELLANT GETS RELIEF OF RS,26,00,000/ - . ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 14 13 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE DECISION IN THE CASE OF ASSESSEES OWN CASE FOR THE A.Y. 2003 - 04 IN I TA. NO. 4807/M/2007. THE RELEVANT PARA OF THE SAID DECISION IS HEREBY REPRODUCED BELOW: - 10. THE AO HAS DISALLOWED THE AMOUNT PAID TO KING PRAWNS LTD., WITHOUT FULLY EXAMINING THE FACTS OF THE CASE. AT PARA 2.4 PAGES 3 AND 4, THE FIRST APPELLATE AUTHORIT Y HELD AS FOLLOWS : 2.4 I HAVE GONE THROUGH THE CONTENTION OF THE APPELLANT AS WELL AS THAT OF THE AO.FROM THE FACTS AS STATED HEREIN BEFORE IT IS SEEN THAT THE APPELLANT COMPANY HAS UTILIZED THE SERVICES OF THE SAID M/S KING PRAWNS LIMITED FOR DEVELOPING THE INFRASTRUCTURE FACILITIES FOR ITS WIND FARM ACTIVITIES. IT IS NOT DISPUTED BY THE AO THAT THE SAID M/S KING PRAWN HAD NEVER RENDERED ANY SERVICES TO THE APPELLANT COMPANY. THE ONLY OBJECTION ACCORDING TO HIM WAS THAT THE SAID M/S KING PRAWN BEING THE COMPANY CARRYING ON THE BUSINESS OF TRADING AND MANUFACTURE OF PRAWNS, FISH AND SALT IT HAD NO EXPERIENCE IN GENERATION OF POWER. THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT SAID KING PRAWNS HAD NEVER RENDERED SUCH SERVICES. MAY IT BE TRU E THAT APART FROM THE SERVICES OF THE SAID KING PRAWNS SOME OTHER SERVICES MIGHT HAVE BEEN REQUIRED, NEVERTHELESS IT IS NOT A CASE OF THE AO THAT THE SERVICES ACTUALLY RENDERED WERE ONLY MAKE BELIEF. IT MAY ALSO BE TRUE THAT THE SAID KING PRAWNS WAS INCURR ING LOSSES BUT THAT ITSELF WOULD NOT BE THE GROUND FOR DISALLOWANCE OF SUCH EXPENSES IN THE HANDS OF THE APPELLANT COMPANY. FURTHER AO HAS NOT DISPUTED THE FACT THAT THE PRINCIPAL SANCTION WAS GIVEN TO THE SAID KING PRAWNS FOR SETTING UP OF SUCH PROJECT WH ICH ALSO INDICATE THAT THE SAID KING PRAWN WAS HAVING THE REQUISITE CAPABILITIES TO SET UP SUCH PROJECT AND THEREFORE THE AO SHOULD HAVE TAKEN NOTE OF SUCH FACTS WHICH CLEARLY DEPICT THE CAPABILITIES OF THE SAID KING PRAWNS. FURTHER IT IS ALSO TRUE THAT TH E SAID KING PRAWN HAD ALSO ENTERED 6 INTO AN AGREEMENT WITH GERMAN PARTY FOR TECHNICAL CONSULTATION FOR THE SIMILAR PROJECT TO BE SET UP AT PALGHAR AND THEREFORE IT IS NOT IN DISPUTE THAT FOR ALL PRACTICAL PURPOSE THE SAID M/S KING PRAWNS WAS ENGAGED IN SU CH PROJECT AND IT IS ONLY TO FACILITATE THE EASY WORKING THE PROJECT HAS BEEN TRANSFERRED TO THE APPELLANT COMPANY AND THEREFORE CONSIDERING THESE FACTS I AM NOT INCLINED TO ACCEPT THE AOS ACTION IN THIS REGARD IN DISALLOWING THE ENTIRE AMOUNT AS EXPENSES . HOWEVER IT IS ALSO TRUE THAT THE APPELLANT COMPANY IS UNDER THE DIRECT CONTROL AND SUPERVISION OF COMMON MANAGEMENT AND ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 15 THEREFORE THE HUMAN PROBABILITY OF DIVERSION OF PROFIT COULD NOT BE REJECTED. FURTHER THE APPELLANT HAS NOT BROUGHT ON RECORD ANY MATE RIAL TO SHOW AS TO HOW THE AMOUNT IN QUESTION WAS REASONABLE FOR THE TYPE OF SERVICES RENDERED BY THE SAID KING PRAWNS. IT IS ALSO TRUE THAT AS AGAINST RS.30,00,000/ - OF PAYMENT, THE SAID KING PRAWN HAD SPENT ONLY 12 LAKHS WHICH APPEARS TO BE EXCESSIVE LOO KING TO THE TYPE OF SERVICES RENDERED. THEREFORE , I AM IN AGREEMENT WITH THE AO THAT IN THE INSTANT CASE PROVISIONS OF SECTION 40A(2)(B) WOULD BE APPLICABLE AND HENCE CONSIDERING THE OVERALL FACTS OF THE CASE I AM OF THE VIEW THAT DISALLOWANCE IF RESTRICTE D TO 10,00,000/ - WOULD MEET BOTH THE ENDS OF JUSTICE. AND ACCORDINGLY THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE AT RS.10 LAKHS AS AGAINST ENTIRE SUM OF RS.30 LAKHS. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 11. WE AGREE WITH THESE FINDINGS. THE AO HAS MADE DISALLOWANCE U/S 40A(2)(B) AND THE CIT(APPEALS) HAS RESTRICTED THE DISALLOWANCE TO RS.10 LAKHS. THERE IS NO ADDITIONAL EVIDENCE IN THIS CASE BEFORE THE FIRST APPELLATE AUTHORITY. THE FINDING OF THE AO THAT M/S KING PRAWNS LTD. IS NOT IN THE BUSINESS OF POWER GENERATION, IS NOT FACTUALLY INCORRECT. IN FACT M/S KING PRAWNS LTD. ON 16TH OCT., 2000, ENTERED INTO MOU WITH GERMAN FIRM TO SET UP A WIND FARM ON ITS SITE AT PALGHAR DIST. THANE AND THIS WIND FARM HAS TO BE SET UP THROUGH A SUBSIDIARY COMPANY OF KINGS PRAWNS LTD. I.E. M/S K.P. POWER PVT. LTD. THE MOU COULD NOT MATERIALIZE. M/S KING PRAWNS LTD. HAD ENTERED INTO AGREEMENT WITH GERMAN PARTY FOR TECHNICAL CONSULTATION FOR A SIMILAR PROJECT. IT IS ALSO TRUE THAT M/S KING PRAWNS LTD. HAS SPENT ABOUT RS .12 LAKHS IN RESPECT OF ITS AGREEMENT WITH THE ASSESSEE. 7 UNDER THESE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE CIT(APPEALS) WHEREIN THE DISALLOWANCE IS RESTRICTED TO RS.10 LAKHS . 14 . SINCE THE MATTER OF CONTROVERSY HAS ALREADY BEEN ADJUDICATED BY THE HO NBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2003 - 04 IN ITA. NO. 4807/M/2007 AND THE HONBLE CIT HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF THE SAID DECISION , HENCE , WE ARE OF THE VIEW CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUS LY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO. 2: - ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 16 15 . ISSUE NO. 2 IS IN CONNECTION WITH THE ALLOWANCE OF CLAIM U/S 80 - IA OF THE ACT BY CIT (A) . THE ASSESSEE HA S CONSTRUCTED THE WIND MILL FARM AND LAYING OF NETWORK OF TRANSMISSION LINES FOR TRANSMISSION OF ELECTRICITY GENERATED BY EACH OF THE WIND MILL ( WIND OPERATED ENERGY GENERATED OR WEG) SET UP IN THE FARM FROM THEIR RESPECTIVE WEG TO THE SUB STATION OF MSEB FOR ONWARD TRANSMISSION AND DISTRIBUTION THROUGH STATE OF MAHARASHTRA. I N RESPECT OF THE SAID ACTIVITY , T HE ASSESSEE CLAIM ED THE DEDUCTION, HOWEVER, THE ASSESSEE DID NOT ANNEXED AUDIT REPORT IN FORM NO.10CCB WHICH WAS MANDATORY FOR FILING THE RETURN OF IN COME. THE ASSESSEE WAS GENERATING THE ELECTRICITY TH ROUGH WIND MILL AND TRANSMITTING AND DISTRIBUTING. T HE CLAIM OF THE ASSESSEE WAS DECLINED AS THE ASSESSEE ASSIGNED THE WORK OF TRANSMISSION TO THE OTHER COMPANY. THE CLAIM OF T HE ASSESSEE WAS ALLOWED BY THE CIT(A) AND THE RELEVANT FINDING HAS BEEN GIVEN IN PARA NO. 21 TO 29 WHICH ARE HEREBY REPRODUCED BELOW: - 21. I HAD ASKED THE AO TO EXAMINE THE EVIDENCES FURNISHED BY THE APPELLANT IN SUPPORT OF LAYING DOWN THE TRANSMISSION L INES. HE HAS SIMPLY IGNORED THEM AND STILL ALLEGES THAT THE APPELLANT FAILED TO PROVIDE ANY EVIDENCE HE HAS NOT MADE ANY OTHER ENQUIRY. AS PER THE APPELLANT, ITS CASE IS COVERED BY SUB - CLAUSE (B) OF CLAU SE (IV) OF SUB - SECTION [4) OF 80 IA, I E, TRANSMISSION OR DISTRIBUTION OF POWER BY LAYING NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES IT HAS RELIED IN THIS REGARD ON THE LETTER DT.L9 - 10 - 2001 OF THE MSEB REGARDING SANCTION FOR EVACUATION OF POWER BY ERECTING SINGLE BAY TRANSMISSION LINE CONNECTING WINDMI LL WITH THE MSEB AND THE LETTER OF M UMBAI VIDE REF NO 34878 DT 16 - 09 - 2001. THE AO DID NOT CALL FOR THIS COMMUNICATION EITHER IN COURSE OF THE ASSESSMENT PROCEEDINGS OR THE REMAND PROCEEDINGS. THE APPELLANT HAS ALSO NOT LAID THIS BEFORE ME BY WAY OF ADDITIO NAL H ENCE. I, THEREFORE, DIRECTED THE APPE LLANT VIDE LETTER DT 1803 - 2011 TO FURNISH THE COPY FOR ADJUDICATING ON ITS CLAIM. I FURTHER DIRECTED TO FURNISH ANY COMMUNICATION ISSUED, EB EVIDENCING COMMISSIONING OF WIND MILL PROJECT AT ITS SITE AT BRAHAMANWEL, DHULE. TH E APPELLANT HAD ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 17 EARLIER SUBMITTED THAT II CONNECTED THE INSTALLED BY TWEI AT THE BY IT LO SEVEN PARTIES WHO PAID THE ADVANCE CASE RENT OF THEREFORE, DIRECTED IT TO FURNISH SUCH COMMUNICATION FROM THE MSEB WING COMMISSIONING OF WTGS INSTALLED AT T HE SITES SUBLEASED TO THESE PARTIES. 'THESE REQUISITION; WERE MADE IN TERMS OF SECTION 250(4) OF I.T. ACT READ WITH RULE 46A(4). THE APPELLANT HAS RESPONDED VIDE LETTER DT 25 - 03 - 2011 FURNISHING THE FOLLOWING I) A COPY OI LETTER NO 34878 DT 18 - 09 - 2001 ISSUE D BY THE CHI EF ENGINEER (COMMERCIAL) MUMBAI ADDRESSED TO THE APPELLA NT GIVING NOC U/S 44 OF THE ELECTRICITY (SUPPLY) ACT.1948 THIS IS THE LETTER REFERRED TO IN LETTER DT 19 - 10 - 2001 OF THE CHIEF ENGINEER (NSKZ), NASHIK MENTIONED ABOVE . II ) A COPY OF LETTER DT.06 - 05 - 2002 OF THE SUPERINTENDING ENGINEER. O & M CIRCLE. MSEBP DHULE TO THE MANAGER (WIND), MEDA, PUNE GIVING THE LIST OF PARTIES 7 PARTIES WHO HAD GOT WIND MILL ERECTED AT THEIR SITES. THE LIST GIVES THE CAPACITY OF THE WTGS AND THEIR DATE OF COMMISSION ING. IT IS NOTED HERE THAT ME LETTER CONTAINS THE NAME OF THE SAME PARTIES LISTED EARLIER TO WHOM THE APPELLANT HAD SUB - LEASED LAND AND COLLECTED TOTAL LEASE RENT OF RS.1 ,19,62,000. 21.2 IT IS SEEN THAT THE APPELLANT WAS ISSUED NO. OBJECTION CERTIFICATE (N OC) U/S 44 OF ELECTRICITY SUPPLY ACT 1948 BY MAHARASHTRA STATE ELECTRICITY BOARD (MSEB) TO INSTALL 30 MW WIND FARM COMPLEX (10X600 KW + 1X750 KW) CAPACITY EACH AT BRAMANWEL DISTRICT DHULE MAHARASHTRA. THE SAID NOC ISSUED VIDE LETTER NO. 34878 DT. 18.9.200 1 OF THE CHIEF ENGINEER (COMMERCIAL) MSEB BANDRA , MUMBAI. IT IS SEEN FROM THE LETTER THAT M/S. GESALLCHAFT ZUR NUTZUNG ERNEURERBARER ENERERGIEN URS MBH (GNEE) HAD BEEN ISSUED LETTER OF INTENT (LOI) BY GOVERNMENT OF MAHARASHTRA (GOM) FOR DEVELOPMENT OF WIN D OPERATED ELECTRIC GENERATOR (WEGS) IN MAHARASHTRA STATE AND THE GOM HAD ALSO EXECUTED AN AGREEMENT FOR THE SAME WITH GNEE ON 29.01.1999. IT IS MENTIONED THAT THE APPELLANT SIGNED MOU WITH GNEE ON 29.1.1999. IT IS MENTIONED THAT APPELLANT SIGNED MOU WITH GNEE ON 16.10.2000 FOR SETTING UP WEG PROJECT AT CHATALE, TAL - PALGHAR DIST: THANE IN THE 200 ACRE OF LAND TO BE PROVIDED BY THE APPELLANT. THE APPELLANT VIDE LETTER DT. 28.8.2001 APPLIED FOR 30 MW PROJECT AT VED, TAL - PALGHAR DIST - THANE AND REQUESTED TO ISSUE NOC. FURTHER VIDE LETTER DT. 4.9.2001 THE APPELLANT INTIMATED THAT IT WILL NOT PURSUE NOC FOR 70 MW UNDER THE ABOVE LOI. IT IS ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 18 FURTHER MENTIONED THAT THE APPELLANT VIDE AFORESAID LETTER DT 4.9.2001 AND ANOTHER DT. 6.9.2001 REQUESTED TO ISSUE THE NOC FOR TOTAL 30MW (10X600 KW + 1X750 KW) FOR SITE AT BRAMANWEL TALUK - SAKRI DIST: DHULE. IT IS STATED THAT IN VIW OF THE AFORESAID, THE MSEB CONVEYED CONSENT U/S 44 OF ELECTRICITY SUPPLY ACT 1948 FOR INSTALLATIONOF TOTAL 30MW (10X600 KW + 1X750 KW) WEGS WITH THE MSEB GRID AT BRAMANWEL TAL - SAKRI, DIST - DHLE. BEFORE COMMISSIONING CONCERNED ELECTRICAL INSPECTOR AND OTHER STATUTORY AUTHORITIES, IF ANY ETC. THE TEMPORARY EVACUATION ARRANGEMENT IF NOT FINALIZED, WAS TO BE FINALIZED BY THE APPELLANT IN CONSULTATION WITH SE DHULE. THE COST OF TEMPORARY EVACUATION ARRANGEMENT WAS TO CONSTRUCT THE SUB TRANSMISSION LINES FROM PROJECT SWITCHYARD TO MSEB EHV SUB - STATION/HV TAP POINT AND INSTALL THE ALLIED EQUIPMENT AT ITS COST AS PER MSEB SPECIFICATION IN CONSULTATION WITH SE DHULE. THE APPELLANT WAS TO EXECUTE THE TOTAL WORK OF EHV (HV FOR EVACUATION OF POWER & CONNECTIONS OF WEGS TO MSEB GRID AS PER MSEB SPECIFICATION BY PAYING SUPERVISION CHARGES AS ADVISED BY SE O&M CIRCLE, MSEB DHULE. IT WAS STIPULATED THAT MSEB IN NO WAY WOULD BE RESPONSIBLE IF THE SAID WEGS WERE NOT CONNECTED TO MSEB GRID BEFORE EXPIRY OF VALIDITY OF THIS NOC. THE NOC WAS VALID FOR A PERIOD OF ONE YEAR FROM THE DATE OF ISSUE OF THE NOC (I.E. UP TO 17.9.2002) BEFORE WHICH WEGS SHOULD BE COMMISSIONED & CONNECTED TO MSEB GRID. THE POWR WAS TO BE SOLD TO MSEB TILL THIRD PARTY WAS IDENTIFIED. 21.3 CLUASE 18 OF THE TERMS AND CONDITIONS OF THE NOC CLARIFIES THAT THE NOC IS ISSUED SUBJECT TO AVAILABILITY OF INFRASTRUCTURE OF EVACUATION/WHEELING OF POWER. IT I S MENTIONED THAT THE OPERATION OF WINDMILL WILL DEPEND ON AVAILABILITY OF INFRASTRUCTURE OF EVACUATION/WHEELING OF POWER AND ACCORDINGLY, OPERATION WILL BE REGULATED BY SE DHULE. SUBSEQUENTLY, THE CHIEF ENGINEER NASIK MSEB WROTE TO THE CHIEF ENGINEER (TR - P I) VIDE HIS LETTER ON 9794 DT. 19.10.2001 WITH REFERENCE TO THE NOC ISSUED TO THE APPELLANT SEEKING SANCTION FOR ESTIMATE FOR ERECTION OF 33 KV D/C LINE (SUSPENSION TYPE) FROM SAKRI SUB - STATION TO BRAMANWEL WIND FARM CONSISTING OF 37 KM OF 33KV D/C LINE WI TH 2 NUMBERS OF 33 KV BAYS AT SAKRI SUB - STATION. AS PER THE LETTER, THE TOTAL ESTIMATE CAME TO RS.5.09 CRORES WITH 15% SUPERVISION CHARGES AT RS.76.35 LAKHS. THE LETTER MENTIONS THAT AS PER THE NOC WITH THE LINE AND BAY WORK WAS TO BE CARRIED OUT BY THE A PPELLANT UNDER SUPERVISION OF SUPERINTENDING ENGINEERS (O&M) DHULE BY MAKING PAYMENT OF 15% SUPERVISION CHARGES. THE LETTER FURTHER MENTONS THAT APPELLANT ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 19 HAD REQUESTED VIDE APPLICATION DT. 15.10.2001 TO ALLOW IT TO CONSTRUCT ONLY SINGLE CIRCUIT AND WITH O NLY ONE BAY. THE CHIEF ENGINEER, THEREFORE, SOUGHT APPROVAL AND SANCTION SO THAT NECESSARY DEMAND OF SUPERVISION CHARGES COULD BE MADE. 21.4 SUBSEQUENTLY, THE APPELLANT ENTERED INTO THE COOPERATION AGREEMENT WITH TWEI ON 5 - 11 - 2001 WHICH IS SHOWN TO BE ENGA GED IN THE BUSINESS OF ASSEMBLING, SALE, COM MISSIONING AND MAINTENANCE OF WIN D TURBINE AND TURN - KEY WIND POWER PLANS T HE AGREEMENT REFERS TO THE NOC FOR 30MW IS SUED BY GOVT . OF MAHARASHTRA TO THE APPELLANT WHEREBY IT WAS ALLOWED RIGHT TO INSTALL AND DEVELO P ON TURN - KEY BASIS WIND FARM (PROJECT) INCLUDING OVERHEAD LINES FROM THE PROJECT SITE IN BRAMANWEL LO THE MSEB DESIGNATED POINT OF INTERCONNECTION THE AGREEMENT ALSO MENTIONS THA T FOR (HIS PURPOSE THE APPLICANT HAD ALREADY BEEN GRANTED LAND BY MIDC AT SUR VEY NO 176 ADMEASURING 750 ACRES AT BRAMANWEL. AS P ER THE SCOPE OF WORK, TWEI WAS T O A) SUPPLY, INSTALL AND COMMISSION WIND TURBINE GENERATORS (WTG) IN ACCORDANCE WITH THE CONTRACT ENTERED INTO BETWEEN TWEL AND THE FINAL CUSTOMERS. B) PROVIDE ALL TECHNICAL ASSISTANCE AND DOCUMENTATION REQUIRE LOT OBTAINING NQC FROM THE RELEVANT ELECTRICITY BOARD AND C) PROVIDE SUCH OTHER MAINTENANCE AND OPERATING FACILITIES AS MAY BE REQUIRED FOR THE OPERATION AND MAINTENANCE OF THE COMMISSION WTG. THE SCOPE OF WORK FOR THE APPELLANT INCLUDES A) PROCURING SUITABLE LAND FOR THE PROJECT, B) TO CARRY OUT CIVIL WORKS INCLUDING ACCESS ROADS TO THE PROJECT SITE AND INTERNALLY M THE WIND FARM, AND C) TO CARRY OUT THE COMPLETE ELECTRICITY WORK AND THE OVER HEAD LINE FROM IN WIND FAR M TO THE IGNITED POINT OF INTERCONNECTION WITH THE MSEB GRID. CLAUSE 3 THE AGREEMENT, TERMS OF THE AGREEMENT WAS T O COMMENCE ON 5 - 11 - 2001TO CLAUSE 14(F) TERMINATE ON THE DALE OF INSTALLATION OF 30MW WIND FARM AT THE SITE OR 31 - 12 - 2001 WHICHEVER WAS EARLIE R. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 20 21.5 AS PER TRANSMISSION LINE PLAN APPROVED BY ELECTRICAL INSPECTOR NASIK, A TOTAL OF 13 OF DIFFERENT CAPACITIES WERE TO BE INSTALLED AND ERECTED TO THE MSEB GRID AS SEEN FROM THE DT.06 - 05 - 2002 OF THE SE, O&M CIRCLE, DHULE ERECTION OF WINDMILLS OF DIFFE RENT CAPACITIES WAS COMPLETED AT THE SITES SUB - LEASED TO SEVEN DIFFERENT PARTIES NAMED EARLIER. OUT OF THEM WINDMILLS AT THE SITES OF FOUR PARTIES WERE COMMISSIONED ON 30 - 03 - 2002 REGARDING THREE OTHERS. THE LETTER OF THE SE. DHULE MENTIONS THAT WIND MILLS HAD BEEN AND WERE READY FOR CONNECTION TO SEB GRID ON 31 - 03 - 2002 BUT COULD BE CONNECTED ON LY ON 14 - 04 - 2002 AS PER THE NO C THE TRANSMISSION LINES CONNECTING T HESE WIND MILLS W ERE T O BE LAID BY THE APPELLANT HAS BEEN MENTIONED EARLIER THAT THE CE, IMSEB NASI K SOUGHT SANCTION VIDE LETTER DT. 19 - 10 - 2001 FOR ESTIMATE OF RS509 CRORES FOR EREC TION OF 37 KRNTS 33 KV D/C LINE SUSPENSION TYPE) FROM SAKRI SUB - STATION TO BRAMANWEL WIND FARM FOR EVACUATING POWER FROM THE WIND FARM COMPLEX. THE WINDMILLS OF THE EVEN PART IES WERE COMMISSIONED BY PROVIDING CONNECTION TO MSE8 GRID THEY COULD NOT HAVE BEEN CONNECTED TO THE MSEB GRID WITHOUT LAYING THE NETWORK OF TRANSMISSION LINES FROM THESE WINDMILLS TO THE MSEB GRID. 21 6 SUB - SECTION (4) OF SECTION 80 IA AS RELEVANT HERE I S EXTRACTED BELOW ' (4) THIS SECTION APPLIES TO {A ) ART UNDERTAKING WHICH, ( B) STARTS TRANSMISSION BY LAYING NETWORK OF NEW TRANSMISSION 01 DISTRIBUTION BEGINNING ON FLIC 1ST DAY OT APR IT. 1999 AND ENDING ON THE DEDUCTION UNDER THIS SECTION TO AN UNDE RTAKING TINDER SUB - CLAUSE (B) SHALL HO ALLOWED ONLY IN ROTATION TO THE POINTS FRONT FAYING OF SUCH NETWORK OF NEW FINES FOR TRANSMISSION OR DISTRIBUTION, (C) UNDERTAKES SUBSTANTIAL RENOVATION AND THE EXISTING NETWORK O! TRANSMISSIO N OR DISTRIBUTION FINES A T ANY TIME DURING THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL 2004 AND ENDING ON THE 31 ST DAY OF MARCH, 2011. EXPLANATION FOR THE PURPOSES OF THIS SUB - CLAUSE, PLANT AND MACHINERY IN THE NETWORK O! T RANSMISSION OR DISTRIBUTION LINE S B Y ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 21 AT SEAS! FIFTY PET CENT OF THE BOOK VALUE OF SUCH PLANT AND MACHI NERY AS ON THE 1ST DAY OF APRIL, 2004. SUB - CL AUSES (A), (B) AND (C) OF S 80 IA(4)(IV} PROVIDE FOR DEDUCTION IN THE CASES OF THREE OF UNDERTAKES VI Z TNE ONE WHICH IS ENGAGED M GENERATION OR GENERATION AND OF POWE R SECOND, WHICH START TRANSMISSION OR DISTRIBUTION LINES, AND THE THIRD, UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIZATION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LINES ALL THESE THREE CLAUSES DEAL WITH THE THREE DIFFERENT CATEGORIES O' THE UNDERTAKING THESE THREE TYPES OF UNDERTAKINGS REFERRED TO THE SAID SUB CLAUSE (A) (B) AND (C) ARE DIFFERENT AND INDEPENDENT OF EACH OTHER THUS WHILE DEALING WITH V , IF ONE D UTY - 'CLAUSE, INFERENCE NEED NOT AND CANNOT BE DRAWN FROM THE OTHER SUB - CLA USE CBDT CIRCULAR WO 779 DT 14 - 09 - 1999 I S ON THE EXPLANATORY NOTES ON PROVISIONS RELATING TO DIRECT TAXES INTRODUCED BY FINANCE ACT. 1999 CLAUSE 393 EXTRACTED BELOW EXPLAINS THE NEWLY INTRODUCED PROVISIONS U/S 80IA(4)(IV)(B) '39 3 TAX BENEFITS FOR GENERATI ON OF POWER OR GENERATION DISTRIBUTION OF POWER TO BE EXTENDED TO ANY UNDERTAKING LAYING NEW TRANSMISSION AND DISTRIBUTION LINES FOR TRANSMISSION ACTIVATES 39. 3 1 UNDER T HE PROVISIONS OF SECTION A FIVE YEAR TAX HOLIDAY AND B DEDUCTION OF 25% (30% IN THE CA SE OF COMPANIES) OF SUBSEQUENT FIVE YEARS IS ALLOWED, TO AN UNDERTAKING ENGAGED IN THE BUSINESS OF GENERATION, OR GENERATION AND DISTRIBUTION OF POWER, PROVIDED IT COMMENCES GENERATION OF POWERS BETWEEN 1.4.93 AND 31.3 2003. 39 3 2 TO URGENT TRANSMISSION A ND OF POWER IN THE COUNTRY, SIMILAR BENEFITS ARE ALSO EXTENDED TO UNDERTAKINGS SETTING TIP NEW TRANSMISSION OR DISTRIBUTION LINES ON OR AFTER 1.4.1999 ON PROFITS DERIVED THERE FROM, AS NOR AVAILABLE FOR GENERATION OR GENERATION AND DISTRIBUTION OF POWER. T HE PROF/IS THEREOF STEAL BE ELIGIBLE FOR DEDUCTION IF THE UNDERTAKING SETS TIP NETWORK OF NEW TRANSMISSION OR DISTRIBUTION ON OR AFTER 1 4 1999 HUT BEFORE 31 3 2003 UNDER PROVISIONS OF SECTION 30 IA OF THE 1 T ACT THE SHALL BE CONFINED TO THE PROFITS DERIV ED FROM TRANSMISSION O : DISTRIBUTION OF POWER THE NEW NETWORK 39 3 2 THIS AMENDMENT WILL COME INTO FORCE WITH EFFECT FROM 1ST APRIL. 2000 AND WILL ACCORDINGLY, APPLY RELATION TO ASSESSMENT YAM 2000 - 01 SUBSEQUENT YEARS [SECTION 50}' ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 22 21 . 8 THE AO HAS TRIE D TO POINT OUT THE INTENTION OF THE LEGISLATURE BY REFERRING TO THE EXPLANATION BELOW SUB - SECTION 13 OF SECTION 80 - IA TO INFER THAT INTENTION IS T O PROVIDE BENEFIT LO THE GENERATOR! OF ELECTRICITY ONLY AND NOT FOR EXECUTING A WORKS CONTRACT SINCE THE NATUR E OF WORK PERFORMED BY THE APPELLANT IS ONLY A CIVIL OR WORKS CONTRACT ON PERUSAL OF THESE PROVISIONS. I AGREE WITH THE PL EA OF THE APPELLANT THAT ITS CASE FALLS IN SUB - CLAUSE [B) AND THE LEGISLATIVE INTENT INFERRED BY THE AO WITH REFERENCE TO THE SAID EXP LANATION IS SUPERFLUOUS. JUST LIKE THERE IS GENERATIO N OR GENERATION AND DISTRIBUTION OF POWER THERE IS TRANSMISSION OR DISTRIBUTION OF POWER BY LAYING A NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES TOO THEREFORE, THERE IS NO BASIS WHATSOEVER FOR DRAW ING DISTINCTION BETWEEN THE TWO OR A ROOM FOR ANY CONFUSION BETWEEN THE TWO PROPOSITIONS. 21 9 I THEREFORE, HOLD THAT THE APPELLANT IS ENTITLED TO DEDUCTION OF PROFI T DERIVED FROM LAYING OF NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION OF POWER THE APPENDANT IS SEEN TO HAVE COMMISSIONED WINDMILLS AL LOCATIONS OF FOUR OUT OF SEVEN WINDMILL OWNERS IN THE CURRENT YEAR IT IS. THEREFORE, ENTITLED THIS YEAR T O DEDUC TION OF PROFITS DERIVED FROM LAYING OF TRANSMISSION LINES CONNECTING T HESE (OUR WINDMILLS O NLY THE S E NO DISPUTE ON THE QUANTUM OF PROFIT OF RS 12, 6 4, 750 SHOWED IN THE AUDIT REPORT IN FORM NO 10CCB. I , T HEREFORE, DIRECT THE AO TO D EDUCTION OF THE SAI D SUM U/S 80 - IA(4)(IV)[B} . 16 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT AFTE R THE EXAMINATION OF RELEVANT DOCUMENT , THE CIT(A) WAS OF THE VIEW THAT THE TRANSMISSION LINE CONNECTING TO THE WIND MILLS WAS TO BE LAID BY THE APPELLANT (CONTRACTOR) WHICH WAS THE PART AND PARCEL OF THE BUSINESS , THEREFORE, THE ASSESSEE WAS ENTITLED FOR DEDUCTION OF PROFIT DERIVED FROM LAYING OF TRANSMISSION LINE CONNECTING 4 WIND MILLS OUT OF 7 WIND MILLS WHICH WERE WORKING U/S 80IA(B) OF THE ACT. AT THE TIME OF ARGUMENT, THE LD. R EPRESENTATIVE OF THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE DECISION OF HONBLE ITAT TITLED AS KINFRA EXPORTS PROMOTION INDUSTRIAL PARKS LTD. V. DY. CIT (2013) 36 TAXMANN.COM 48 (COCHIN) TRIBUNAL IN ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 23 WHICH THE CLAIM U/S 80 - IA OF THE ACT WAS ALLOWED BY THE CIT(A) IN THE SIMILAR CIRCUMSTANC ES. THE RELEVANT FINDING IS HEREBY RE PRODUCED BELOW: - 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE CONTROVERSY IN THE FIRST ISSUE SURROUNDS AROUND THE PROVISIONS OF SEC. 80IA(4)(IV) OF THE ACT. HENCE, IT IS NECESSARY TO REFER TO THE SAID PROVISION AND FOR THE SAKE OF C ONVENIENCE, WE EXTRACT THE RELEVANT PORTIONS OF THE SAME BELOW: - '80IA (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PERCENT OF THE PRO FITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. ..... (4) THIS SECTION APPLIES TO --- (I) .... (II) ..... (III) ...... (IV) AN UNDERTAKING WHICH, - (A) IS SET UP IN ANY PART OF INDIA FOR THE GENERATION OR GENERATION AND DISTR IBUTION OF POWER IF IT BEGINS TO GENERATE POWER AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1993 AND ENDING ON THE 31ST DAY OF MARCH, 2009 (AMENDED LATER AS 2011) (B) STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A NETWORK OF NEW TRANS MISSION OR DISTRIBUTION LINES AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1999 AND ENDING ON THE 31ST DAY OF MARCH, 2009 (AMENDED LATER AS 2011) PROVIDED THAT THE DEDUCTION UNDER THIS SECTION TO AN UNDERTAKING UNDER SUB - CLAUSE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 24 (B) SHAL L BE ALLOWED ONLY IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION; (C) UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LINES AT ANY TIM E DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 2004 AND ENDING ON THE 31ST DAY OF MARCH 2011. EXPLANATION _ FOR THE PURPOSES OF THIS SUB - CLAUSE, 'SUBSTANTIAL RENOVATION AND MODERNISATION' MEANS AN INCREASE IN THE PLANT AND MACHINERY IN THE NETWORK OF TRANSMISSION OR DISTRIBUTION LINES BY AT LEAST FIFTY PER CENT OF THE BOOK VALUE OF SUCH PLANT AND MACHINERY AS ON THE 1ST DAY OF APRIL, 2004'. 5. THE CASE OF THE ASSESSEE IS THAT IT IS COVERED BY CLAUSE (B) OF SEC. 80IA(4)(IV), SINCE IT IS TRANSMITTING OR DISTRIBUTING ELECTRICITY BY LAYING A NET WORK OF NEW TRANSMISSION OR DISTRIBUTION LINES. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THAT THE ASSESSEE HAS LAID THE NET WORK OF TRANSMISSION OR DISTRIBUTION LINES DURING THE TIME PERIOD SPECIFIED IN T HE ABOVE SAID SECTION. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE HAS TO CUMULATIVELY COMPLY WITH CLAUSES (A) TO (C) OF SEC. 80IA(4)(IV) IN ORDER TO BECOME ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. SINCE THE ASSESSEE IS NOT GENERATING POWER AS SPECIFIED IN CLAUSE (A), THE HAS TAKEN THAT VIEW THAT THE ASSESSEE BECOMES INELIGIBLE TO CLAIM DEDUCTION U/S 80IA OF THE ACT, SINCE THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO COMPLY WITH CLAUSE (A). ACCORDINGLY, THE ASSESSING OFFICER REJECTED THE C LAIM MADE BY THE ASSESSEE. THE LD CIT(A), HOWEVER, HELD THAT THE CLAUSES (A) TO (C) OF SEC. 80IA(4)(IV) ARE MUTUALLY EXCLUSIVE AND ACCORDINGLY HE DID NOT AGREE WITH THE VIEW ENTERTAINED BY THE ASSESSING OFFICER. HOWEVER, THE LD CIT(A), BY PLACING RELIANCE TO THE PROVISO UNDER CLAUSE (B) OF SEC. 80IA(4)(IV) OF THE ACT, HELD THAT THE DEDUCTION U/S 80IA HAS TO BE RESTRICTED TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES OF TRANSMISSION OR DISTRIBUTION. ACCORDINGLY, THE LD CIT(A) HELD THAT THE MERE DISTRIBUTION OF POWER DOES NOT MAKE THE ASSESSEE TO BE ELIGIBLE TO CLAIM DEDUCTION U/S 80IA OF THE ACT WITHIN THE MEANING OF SEC. 80IA(4)(IV) OF THE ACT. SINCE THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA IN RESPECT OF PROFIT DERIVED FROM SALE OF ELECT RICITY PURCHASED FROM KERALA STATE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 25 ELECTRICITY BOARD, THE LD CIT(A) ALSO REJECTED THE CLAIM OF THE ASSESSEE. 6. BEFORE US, THE LD D.R SUPPORTED THE VIEW TAKEN BY THE AO AND ACCORDINGLY CONTENDED THAT THE ASSESSEE CAN CLAIM DEDUCTION U/S 80IA ONLY IF IT COM PLIES WITH ALL THE THREE CLAUSES, VIZ., CLAUSES (A), (B) AND (C) OF SEC. 80IA(4)(IV) OF THE ACT. NOW THE QUESTION THAT ARISE FOR OUR CONSIDERATION IS WHETHER THE THREE CLAUSES ENUMERATED IN SUB SECTION 4(IV) OF SECTION 80 - LA ARE MUTUALLY EXCLUSIVE. IN THIS REGARD, IT IS WORTH REFERRING TO THE BUDGET SPEECH RENDERED BY THE THEN FINANCE MINISTER IN PARLIAMENT ON 27.02.1999, (236 ITR (ST.) 25), WHICH READS AS UNDER: - 'THE FINANCIAL CONDITION OF MOST OF STATE ELECTRICITY BOARDS IS EXTREMELY PRECARIOUS. MANY OF THE STATE ELECTRICITY BOARDS WISH TO REMEDY THE SITUATION BY UNBUNDLING GENERATION, TRANSMISSION AND DISTRIBUTION ACTIVITIES TO SEPARATE COMPANIES. I PROPOSE TO TREAT THE ACTIVITIES OF TRANSMISSION AND DISTRIBUTION OF POWER, SET UP AFTER 1.4.1999, AS ELIGI BLE ACTIVITIES FOR FISCAL INCENTIVES AVAILABLE TO INFRASTRUCTURE UNITS. I AM SANGUINE THAT THIS PROPOSAL WILL FACILITATE THE RESTRUCTURING AND REHABILITATION OF THE STATE ELECTRICITY BOARDS.' THUS IT IS SEEN THAT THE LEGISLATIVE INTENTION WAS TO AFFORD THE TAX BENEFIT TO ALL UNDERTAKINGS WHICH WERE ENGAGED IN ANY OF THE THREE ACTIVITIES. WE ALSO NOTICE THAT THE CLAUSES (A) AND (B) OF SUB. SEC. 4(IV) TO SEC. 80IA WAS INTRODUCED WITH EFFECT FROM 1.4.2000 AND CLAUSE (C) WAS INTRODUCED ONLY WITH EFFECT FROM 1.4 .2005, I.E., THEY WERE NOT INTRODUCED IN ONE GO. ACCORDINGLY, IN OUR VIEW, THE THREE CLAUSES, REFERRED ABOVE ARE MUTUALLY EXCLUSIVE TO EACH OTHER. OUR VIEW FINDS SUPPORT FROM THE DECISION OF THE JAIPUR BENCH OF THE HON'BLE ITAT IN THE CASE OF DCIT VS. MAHA RAJA SHREE UMAID MILLS LTD., REPORTED IN (2009) 29 SOT 278, WHEREIN THE HAS OBSERVED AS UNDER: - 'THESE THREE TYPES OF UNDERTAKINGS REFERRED TO IN THE SAID SUB - CLAUSES (A), (B) AND (C) ARE DIFFERENT AND INDEPENDENT OF EACH OTHER. THUS WHILE DEALING WITH ONE SUB - CLAUSE, INFERENCE NEED NOT AND CANNOT BE DRAWN FROM THE OTHER SUB - CLAUSE.' ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 26 ACCORDINGLY, WE UPHOLD THE VIEW TAKEN BY LD CIT(A) THAT CLAUSES (A), (B) AND (C) OF SEC. 80IA(4)(IV) ARE MUTUALLY EXCLUSIVE. 7. THE NEXT ISSUE RELATES TO THE INTERPRETATION OF CLAUSE (B) OF SEC. 80IA(4)(IV) OF THE ACT. THE LD CIT(A) HAS TAKEN THE VIEW THAT THE SAID CLAUSE PROVIDES EXEMPTION ONLY TO THE PROFIT DERIVED FROM LAYING A NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES. SINCE THE ASSESSEE WAS DERIVING INCOME FROM SAL E OF ELECTRICITY, THE LD CIT(A) HAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA IN RESPECT OF PROFIT DERIVED FROM DISTRIBUTION OF POWER. FOR ARRIVING SUCH A CONCLUSION, THE LD CIT(A) HAS PLACED RELIANCE ON THE PROVISO TO CLAUSE (B) OF SEC . 80IA(4)(IV) OF THE ACT. 8. AT THE COST OF REPETITION, WE EXTRACT BELOW CLAUSE (B) AND THE PROVISO THERE UNDER TO SEC. 80IA(4)(IV) OF THE ACT. (IV) AN UNDERTAKING WHICH, ---- (A) .......; (B) STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A NETWORK OF NEW T RANSMISSION OR DISTRIBUTION LINES AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1999 AND ENDING ON THE 31ST DAY OF MARCH, 2009 (AMENDED LATER AS 2011) PROVIDED THAT THE DEDUCTION UNDER THIS SECTION TO AN UNDERTAKING UNDER SUB - CLAUSE (B) SHALL BE ALLOWED ONLY IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION; A PLAIN READING OF CLAUSE (B) SUGGESTS THAT AN UNDERTAKING WHICH STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES DURING THE TIME PERIOD SPECIFIED ABOVE SHALL BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. HOWEVER, THE CONFUSION STARTS ON READING OF THE PROVISO. A PLAIN READING OF THE PROVISO SUGGESTS THAT THE DEDUCTION SHALL BE ALLOWED IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION. 9. FOR AN UNDERTAKING, WHICH HAS STARTED THE ACTIVITY OF DISTRIBUTION OF POWER, THE EXPENDITURE INCURRED ON LAYING A NETWORK OF NEW TRANSM ISSION OR DISTRIBUTION LINES WOULD BE A CAPITAL EXPENDITURE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 27 AND HENCE THE QUESTION OF MAKING ANY PROFIT THERE FROM SHALL NOT ARISE. HENCE, IN ORDER TO UNDERSTAND THE LEGISLATIVE INTENTION AND ALSO THE VIEW OF THE REVENUE, WE MAY REFER TO THE CIRCULAR ISSUE D BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT). THE LD COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO CIRCULAR NO.779 DATED 14.9.1999 ISSUED BY THE CBDT, WHICH IS REPORTED IN (1999)(240 ITR (ST.) 3). PARAGRAPH 39.3.2 OF THE SAID CIRCULAR EXPLAINS THE AME NDMENT BROUGHT IN BY FINANCE ACT , 1999 BY INSERTING SEC. 80IA OF THE ACT. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT PORTIONS OF THE CIRCULAR, REFERRED ABOVE. '39.3.2 TO AUGMENT TRANSMISS ION AND DISTRIBUTION OF POWER IN THE COUNTRY, SIMILAR BENEFITS ARE ALSO EXTENDED TO UNDERTAKINGS SETTING UP NEW TRANSMISSION OR DISTRIBUTION LINES ON OR AFTER 1 - 4 - 1999 ON PROFITS DERIVED THERE FROM, AS ARE AVAILABLE FOR GENERATION OR GENERATION AND DISTRIB UTION OF POWER. THE PROFITS THEREOF SHALL BE ELIGIBLE FOR DEDUCTION IF THE UNDERTAKING SETS UP NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES ON OR AFTER 1 - 4 - 1999 BUT BEFORE 31 - 3 - 2003 UNDER THE RESTRUCTURED PROVISIONS OF SECTION 80 - IA OF THE INCOME - TAX ACT. THE DEDUCTION SHALL BE CONFINED TO THE PROFITS DERIVED FROM TRANSMISSION OR DISTRIBUTION OF POWER THROUGH THE NEW NETWORK'. AS PER THE CIRCULAR, THE INTENTION OF THE PROVISO IS TO RESTRICT THE DEDUC TION U/S 80IA ONLY IN RESPECT OF PROFIT DERIVED FROM TRANSMISSION OR DISTRIBUTION OF POWER THROUGH THE NEW NETWORK OF TRANSMISSION OR DISTRIBUTION LINES. 10. WE SHALL ALSO TRY TO UNDERSTAND THE MEANING OF THE PROVISO TO CLAUSE (B), EXTRACTED ABOVE. SUB - SEC . (1) OF SEC. 80IA PROVIDES THAT THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING REFERRED TO SUB - SECTION (4) ARE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. CLAUSE (IV) OF SUB - SECTION (4) OF SEC. 80IA INCLUDES AN UNDERTAKING WHICH STARTS TRANSMISSION OR DI STRIBUTION BY LAYING A NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES AT ANY TIME DURING THE TIME PERIOD SPECIFIED IN THAT CLAUSE. HENCE PROFITS AND GAINS DERIVED BY SUCH KIND OF UNDERTAKING ARE ELIGIBLE FOR DEDUCTION UNDER SUB - SEC. (1) OF SEC. 80IA OF THE ACT UPON SATISFYING THE MAIN CONDITION THAT THE TRANSMISSION OR DISTRIBUTION WAS CARRIED OUT BY LAYING A NETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES. THE PROVISO, HOWEVER, STATES THAT THE DEDUCTION SHALL BE ALLOWED ONLY IN RELATION ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 28 TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION. THE PROVISO APPEARS TO THROTTLE DOWN THE BENEFIT GIVEN BY THE MAIN ENACTMENT. 11. AT THIS STAGE, WE FEEL IT PERTINENT TO DISCUSS ABOUT THE IMPLICATIONS OF A 'PROVISO' INSER TED TO AN ENACTMENT. IT IS A WELL ESTABLISHED RULE OF CONSTRUCTION THAT A 'PROVISO' CANNOT ENABLE SOMETHING TO BE DONE WHICH IS NOT TO BE FOUND IN THE ENACTING CLAUSE ITSELF, ON THE GROUND THAT OTHERWISE THE PROVISO WOULD BE MEANINGLESS AND SENSELESS (WEST DERBY UNION VS. METROPOLITAN LIFE ASSURANCE SOCIETY 1897 AC 647). IT CANNOT BE USED AS A LEVER TO FORCE PLAIN WORDS IN THE ENACTMENT TO WHICH IT IS APPENDED, AWAY FROM THEIR NATURAL MEANING (IRC VS. JOHAN DAW STAURT LTD 91950)9 31 TC 274 (HL)). WHERE THE LANGUAGE OF THE MAIN ENACTMENT IS CLEAR, A PROVISO CAN HAVE NO REPERCUSSION ON ITS INTERPRETATION SO AS TO EXCLUDE FROM IT BY IMPLICATION WHAT CLEARLY FALLS WITHIN IT TERMS. (M.S.M. RAILWAY VS. BEZWADA MUNICIPALITY AIR 1944 PC 71; CIT VS. MURLIDHAR MATHURA WALLA MAHAJAN ASSOCIATION 91948)(16 ITR 146 (BOM)). 12. IN THE PRECEDING PARAGRAPHS, WE HAVE EXTRACTED RELEVANT PORTIONS FROM THE SPEECH OF THE FINANCE MINISTER AND ALSO RELEVANT PORTIONS FROM THE CIRCULAR ISSUED BY CBDT EXPLAINING THE PROVISIONS OF CLAUSE (B) OF SEC. 80IA(4)(IV) OF THE ACT. ON CONSIDERATION OF THE SAME AND ALSO THE LEGAL EFFECT OF THE PROVISO DISCUSSED ABOVE, IN OUR VIEW, THE HARMONIOUS CONSTRUCTION OF CLAUSE (B) AND THE PROVISO THERE UNDER, WOULD BE THAT THE DEDUCTION U/S 80IA OF THE ACT SHALL BE ALLOWED IN RESPECT OF THE PROFITS DERIVED FROM TRANSMISSION OR DISTRIBUTION OF POWER THROUGH THE NEW NETWORK. HAD THE INTENTION OF THE PARLIAMENT WAS TO GIVE DEDUCTION ONLY TO THE UNDERTAKING WHICH UNDERTAKES THE WORK OF LAYING NETWORK OF NEW TRAN SMISSION OR DISTRIBUTION LINES AND NOT TO THE UNDERTAKING WHICH TRANSMITS OR DISTRIBUTES THE POWER, THEN CLAUSE (B) WOULD HAVE BEEN WORDED ACCORDINGLY AND THERE WOULD HAVE BEEN NO NECESSITY TO INSERT A PROVISO FOR THE SAID PURPOSE. 13. IN VIEW OF THE FOREG OING DISCUSSIONS, WE ARE NOT ABLE TO AGREE WITH THE VIEW ENTERTAINED BY THE LD CIT(A) WITH REGARD TO THE PROVISO TO CLAUSE (B) OF SEC. 80IA(4)(IV) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUC TION U/S 80IA(4)(IV)(B) OF THE ACT IN RESPECT OF THE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 29 PROFITS DERIVED FROM DISTRIBUTION OF POWER THOUGH THE NEW NETWORK. 17 . ON SEEING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH IS QUITE SIMILAR TO THE DECISION OF THE HONBLE ITAT IN THE CASE OF KINFRA EXPORTS PROMOTION (SUPRA) , W E ARE OF THE V I EW THAT THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASS ESSEE IN VIEW OF THE PROVISION U/S 80 - IA OF THE ACT, THEREFORE, THE FINDING OF THE CIT(A) IS QUITE CORRECT WHICH IS NOT LIABLE TO BE INTERFERE WIT H AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED. ITA NO. 547/M/2012: - 18 . THE FACTS OF THE PRESENT CASE IS QUITE SIMI LAR TO THE FACTS OF THE CASE AS DISCUSSED IN ITA. NO.4518/M/2011, THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. THE MATTER OF CONTROVERSY IS ALSO THE SAME IN WHICH THE REVENUE HAS CHALLENGED THE ALLOWANCE OF THE CLAIM U/S 80 - IA(4) OF THE ACT. THE FINDING IN THE ABOVE MENTIONED IN ITA. NO.4518/M/2011 IS QUITE APPLICABLE AS MUTATIS AND MUTANDIS. ACCORDINGLY, WE AFFIRM ED THE FINDING OF THE CIT(A) AND DISMISSED THE APPEAL OF THE REVENUE. ITA NO. 173 /M/2012: - 19 . THE FACTS OF THE PRESENT CASE IS QUITE SIMILAR TO THE FACTS OF THE CASE AS DISCUSSED IN ITA. NO.4518/M/2011, THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 30 20 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1 - AS REGARDS ADDITION OF RS. 3,46,80,000/ - : 1.1 THE ID. CIA (A) - 20 ERRED IN LAW AND ON F ADS IN TREATING THE AMOUNT OF RS. 3,46,80,000/ - RECEIVED BY THE APPELLANT COMPANY AS 'ADVANCE AGAINST TRANSMISSION CHARGES' AS INCOME OF THE FINANCIAL YEAR 2005 - 06. 1.2 THE ID, CIT (A) - 20 ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ADDITION OF RS. 3,46,80, 000,' - RECEIVED AS 'ADVANCE AGAINST TRANSMISSION CHARGES' TREATING THE SAME AS ACCRUED DURING THE FINANCIAL YEAR 2005 - 06. 1.3 THE LD C I T (A) - 20 ERRED IN LAW AND ON FACTS IN IGNORING THE FACT THAT 'THE TRANSMISSION CHARGES ACCRUED TO THE APPE LLANT COMPANY ONLY ON SUCCESSFUL CONNECTIVITY OF THE WIND TURBINES INSTALLED BY THE WTG SUPPLIER. 1.4 THE ID. CH (A) - 20 ERRED IN LAW AND ON FACTS IN COMING TO CONCLUSION THAT JUST BECAUSE TAX AT SOURCE IS DEDUCTED BY THE PAYER FROM THE 'ADVANCE AGAIN ST TRANSMISSION CHARGES', SUCH RECEIPT BECAME INCOME OF THE YEAR OF THE APPELLANT COMPANY IN WHICH IT IS RECEIVED. 1.5 THE ID. CI F (A) - 20 ERRED IN LAW AND ON PACTS FAILED TO APPRECIATE THAT AS AN ACCOUNTING PRACTICE THE ENTRY FOR THE ADVANCE TRANS MISSION CHARGES WAS REVERSED ON 2ND APRIL 2006 I.E. IN THE BEGINNING OF THE FOLLOWING YEAR I.E. 2006 - 07 LIKE ANY OTHER ACCOUNTING PROVISIONS WHICH DID NOT HAVE ANY BEARING ON ACTUAL WORKING. 2, AS REGARDS ADDITION OF RS. 2,83,29,387/ - : 2.1 THE LD. C1T (A) - 20 ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 2,83,29,387/ - BEING THE AMOUNT RECEIVED BY THE APPELLANT COMPANY ON BACK TO BACK PAYMENT BASIS FROM M/S, NEG MICON (INDIA) PRIVATE LIMITED. 2.2 THE ID. CIT (A) - 20 ERRED IN LAW AND ON FACTS IN TREATING THE AMOUNT OF RS, 2,83,29,387/ - RECEIVED AS BACK, TO BACK PAYMENT AS BUSI NESS RECEIPTS AND ACCORDINGLY AS THE INCOME OF THE APPELLANT COMPANY FOR ASSESSMENT YEAR 2006 - 07. ISSUE NO. 1: - ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 31 21 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLEN GED THE TREATING OF AMOUNT OF RS.3,46,80,000/ - RECEIVED BY THE APPELLANT COMPANY AS ADVANCE AGAINST TRANSMISSION CHARGES AS INCOME OF THE F.Y. 2005 - 06. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS RECEIVED THE AMOUNT OF RS.3,46,80,000/ - AS ADV ANCE AGAINST TRANSMISSION CHARGES FROM M/S. NEG MICON (INDIA) P. LTD. T HE WORK COULD NOT BE COMPLETED B EFORE THE 31.03.2006. THE SAID AMOUNT HAS BEEN TREATED AS LIABILITY IN THE BALANCE - SHEET AS ON 31.03.2006 WHICH HAS BEEN OFFERED AS ITS RECEI PT IN THE F. Y 2006 - 07, THEREFORE, IN THE SAID CIRCUMSTANCES, THE ADVANCES IS NOT LIABLE TO BE TREATED AS INCOME IN THE F.Y. 2005 - 06 WHICH HAS BEEN WRONGLY CONFIRMED BY THE CIT(A) IN F.Y. 2005 - 06. NO DOUBT, IN THE FINANCIAL STATEMENT OF F.Y. 2005 - 06, THE ASSESSEE HAS T REATED THE RECEIPT OF THE AMOUNT OF RS.3,46,80,000/ - AS ADVANCE AGAINST TRANSMISSION CHARGES FROM M/S. NEG MICON (INDIA) P. LTD . THE RECEIPT HAS BEEN TREATED AS INCOME IN THE NEXT F.Y. 2006 - 07. IT O N ACCOUNT OF ACCOUNTING PRINCIPAL CONSIDERED BY THE ASSESS EE IN ITS BOOKS OF ACCOUNT, THE SITUATION NOWHERE SEEMS VIOLATED THE PRINCIPAL OF ACCOUNTANCY, THEREFORE, IN THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE HAS RIGHTLY OFFERED THE SAID RECEIPT AS INCOME IN THE F.Y. 2006 - 0 7 THE PERIOD IN WHICH THE WORK HAS BEEN COMPLETED. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO. 2: - 22 . ISSUE NO. 2 IS IN CONNECTION WITH CONFIRMATION OF THE ADDITION OF RS.2,83 ,29,387/ - . THE FACTS RELATING TO THIS ISSUE IS DISCUSSED AS UNDER BY CIT(A) . : - ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 32 DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS SUBMITTED AS UNDER: - IN REGARD TO GROUND NO. 2 WHICH RELATES TO AN ADDITION OF RS.2,83,29,387/ - THE ASSESSING OFFICER IN PAR A NO. 7 AT PAGE NO. 4 OF THE ASSESSMENT ORDER HAS OBSERVED THAT ON PERUSAL OF THE TDS CLAIMED BY ASSESSEE, IT WAS NOTICED THAT MIS. NEG MICON P. LTD. HAD DEDUCTED TAX AT SOURCE ON SUM OF RS.2,83,29,387/ - PAID TO THE ASSESSEE. THE ASSESSEE HAD NOT SHOWN SAI D SUM AS BUSINESS RECEIPTS. ACCORDINGLY, DURING THE COURSE OF ASSESSMENT PROCEEDING VIDE NOTICED U/S 142(1) ISSUED, THE ASSESSEE WAS ASKED TO EXPLAIN AND STATE AS TO WHY THE SAID SUM SHOULD NOT BE TREATED AS BUSINESS RECEIPTS FOR THE YEAR UNDER CONSIDERATI ON RELEVANT TO A.Y. 2006 - 07. IN RESPONSE TO THE QUERY RAISED ASSESSEE COMPANY GAVE REPLY VIDE LETTERS DATED 25.11.10 AND 3.12.2010 RELEVANT EXTRACTS OF WHICH ARE REPRODUCED BELOW. AS FAR AS SUM OF RS.2,83,29,387/ - NOT HAVING BEEN TREATED AS INCOME FOR A.Y. 2006 - 07 IS CONCERNED OUR SUBMISSIONS ARE AS UNDER: - THAT IN T HE COURSE OF CARRYING ON BUSINESS WE H AD BEEN CARRYING OUT CERTAIN WORKS OF DEVELOPMENT BY APPOINTING CONTRACTING AND AT THE SAME TIME MIS. NEG MICON HAD ALSO TO CARRY ON SOME CIVIL AND ELECTRI CAL WORKS SINCE THEY HAD SOLD THE TURBINES ON TUM KEY BASIS SUCH AS LAYING OF FOUNDATIONS AS WELL INTERNAL CIVIL AND ELECTRICAL CONSTRUCTIONS. IT WAS FOR THE SAKE OF CONVENIENCE THAT WE AS WELL AS MIS. NEG MICON HAD AVAILED THE SERVICES OF SAME CONTRACTORS . IT MAY FURTHER BE STATED THAT MIS. NEG MICON HAD THRUST FURTHER RESPONSIBILITY UPON US TO THE EFFECT THAT WE WILL BE SUPERVISING THE WORK AND ENSURE THAT WORK IS CARRIED ON IN A SATISFACTORY MANNER AND UP TO THE MARK BY THESE CONTRACTORS EVEN IN THE RESP ECT OF WORK OF THE MIS. NEG MICON. SINCE THESE BILLS WERE JUST ROUTED THROUGH THEY WERE NEITHER ACCOUNTED AS EXPENSES NOR AS INCOME IN OUR BOOKS. WE MAY CLARIFY THAT WHATEVER BILL WE WERE RECEIVING FOR MIS. NEG MICON WORKS FROM THE CONTRACTORS. SINCE THE C ONTRACTORS ARE ISSUING BILLS IN OUR NAME, WE IN TUM HAD BEEN ISSUING BILLS TO MIS. NEG MICON FOR THE SAME AMOUNT. IN THE YEAR UNDER CONSIDERATION WE HAVE RECEIVED TOTAL LABOUR BILLS OF RS.2,83,29,387/ - FROM 2 CONTRACTORS FOR THE WORKS OF MIS. NEG MICON AND IN TUM HAD ISSUED BILLS OF SIMILAR AMOUNT IN THE NAME ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 33 OF MIS. NEG MICON AS THE AMOUNT WAS ONLY TO BE ROUTED THROUGH US BY MIS. NEG MICON AS THE AMOUNT WAS ONLY TO BE ROUTED THROUGH US BY MIS. NEG MICON AND AS THE PERSONS TO WHOM PAYMENTS WERE MADE BY US W ERE NOT OUR CONTRACTORS IN RESPECT OF THESE BILLS NO TAX WAS DEDUCTIBLE AT SOURCE. WE FURTHER SUBMIT THAT SINCE NO PART OF THIS AMOUNT HAD EFFECTIVELY COME TO US THE QUESTION OF SAID AMOUNT FORMING A PART OF OUR INCOME ALSO DOES NOT ARISE. IT MAY BE PLACED ON RECORD THAT THIS ADDITIONAL RESPONSIBILITY OF SUPERVISING THE WORK AND MAKING PAYMENT ON BEHALF OF MIS. NEG MICON WAS TAKEN OVER BY US TOTALLY OUT OF BUSINESS EXPEDIENCY BECAUSE BY THAT WE WERE ABLE TO HAVE CONTROL OVER THE QUALITY AS WELL COMPLETION O F WORK WITHIN REASONABLE PERIOD SINCE THE VERY EARNING OF INCME BY AS STARTS ONLY ON COMMISSIONING OF THE POWR GENERATION AND ITS TRANSMISSION TO MESB THOUGH ULTIMATELY EVEN IN THIS PROCESS WE HAVE EARNED A GENERATION AND ITS TRANSMISSION TO MESB THOUGH UL TIMATELY EVEN IN THIS PROCESS WE HAVE EARNED A SUM OF RS.73.22,4131 WHICH SUM WAS RETAINED BY US OUT OF THE AMOUNT PAYABLE TO THE CONTRACTORS ON BEHALF OF MIS. NEG MICON AS A SORT OF SECURITY AND SINCE BY THE END OF THE YEAR THE GENERATION WERE COMMISSION E D WITHOUT ANY PROBLEM EVEN THIS SUM IS TRANSFERRED BY US TO PROFIT & LOSS ALE. UNDER THE HEAD DEVELOPMENT CHARGES IN RESPECT OF WHICH NO DEDUCTION U/S 80IA OF THE I.T. ACT, 1961 HAS BEEN CLAIMED. THE ASSESSEE VIDE ITS LETTER DATED 3.12.2010 HAS SUBMITTED AS UNDER: - AS REGARDS QUERY RAISED BY YOUR HONOURS IN SUB PARA (F) OF SR. NO.(1) OF THE QUESTIONNAIRE ASKING US TO GIVE SCHEDULE OF ALL THE PAYMENTS THAT HAVE BEEN RECEIVED FROM MIS. NEG MICON AND HOW THEY HAVE BEEN ACCOUNTED FOR WE ARE ENCLOSING HEREWITH A STATEMENT WHICH INFACT IS ANNEXURE TO FORM 16A FOR CERTIFICATES OF TDS WHICH COVERS ALL THE PAYMENTS, EXCLUDING RS.5,07,93,756/ - FOR SUPPLY OF MATERIALS ON BACK TO BACK BASIS. AS REGARDS YOUR QUERY IN SUB CLAUSE (F) OF MAIN QUESTION (I) OF THE ANNEXURE WE SUBMIT THAT DURING THE YEAR WE HAVE RECEIVED I RECEIVABLE A TOTAL SUM OF RS.17,90,03,143I - FROM MIS. NEG MICON OUT OF WHICH A SUM OF RS,2,83,29,387/ - WAS FOR BACK TO BACK PAYMENTS TO THEIR LABOUR CONTRACTORS A SUM OF ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 3 4 RS.5,07,93,756/ - WAS REC EIVABLE TOWA RDS BACK TO BACK PAYMENT TO THEIR MATERIAL SUPPLIER AND THE BALANCE SUM OF RS.9,98,80,000/ - WAS RECEIVABLE TOWARDS TRANS BACK TO BACK PAYMENTS TO THEIR MATERIAL SUPPORTER AND THE BALANCE SUM OF RS.9,98,80,000/ - WAS RECEIVABLE TOWARDS TRANSMISSION CHARGES O UT OF WHICH AGAIN A SUM OF RS.3,46,80,000/ - WAS TREATED AS ADVANCE AT THE YEAR END SINCE WIND TURBINES IN RESPECT THEREOF COULD NOT BE COMMISSIONED EVEN TILL 31.03.2006 AND WERE COMMISSIONED IN THE NEXT YEAR LEAVING A SUM OF RS.6,52,00,000/ - BEING THE RECE IPTS FOR TRANSMISSION CHARGES WHICH SUM HAS BEEN CREDITED N OUR PROFIT AND LOSS ACCOUNT. 4.2. THE AO HOWEVER, IN PARA 7.3 AT PAGE 5 & 6 OF THE ASSESSMENT ORDER HAS REJECTED ASSESSEES CONTENTION HOLDING AS UNDER: THAT THOUGH DURING THE COURSE ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED BITTS ISSUED BY PARTIES TO THE ASSESSEE AND CORRESPONDING BILLS RAISED BY THE ASSESSEE TO MIS. NEG MICON FROM A PERUSAL OF THE BILLS IT IS SEEN THAT PARTIES HAVE RAISED INVOICES IN THE NAME OF THE ASSESSEE AND THE ASSESSE E H PAYMENT MADE TO THE ASSESSEE ITSELF, IT IS SEEN THAT MIS. NEG MICON HAS DEDUCTED TDS ON THE PAYMENT MADE TO THE ASSESSEE ON THE BILLS RAISED BY IT. HOWEVER, THE ASSESSEE HAS NOT DEDUCTED ANY TDS ON THE PAYMENTS MADE TO THE4 SUB - CONTRACTORS. SINCE THE A SSESSEE HAS NOT CLAIMED THESE AS EXPENSES , THE PAYMENTS MADE TO SUBCONTRACTORS DO NOT COME UNDER THE PURVIEW OF SECTION 40(A)(IA) OF THE ACT. HOWEVER, THEY ARE RECEIPTS OF THE ASSESSEE FROM MIS. NEG MICON AS TDS HAS BEEN DEDUCTED ON SUCH BILLS AND CLAIMED BY THE ASSESSEE. HENCE, RS.2,83,29,387/ - IS ADDED TO THE INCOME OF THE ASSESSEE. 4.3 IN THE COURSE OF APPEAL PROCEEDINGS ASSESSEES AR HAS SUBMITTED AS UNDER: IN THIS REGARD AND IN CONTINUATION TO WHAT HAS BEEN STATED HEREINABOVE MY ONLY SUBMISSION, IN SU PPORT OF THE CONTENTION THAT THE SAID SUM IS NOT REQUIRED TO BE ADDED IN THE CASE OF APPELLANT COMPANY AS AN ALLEGED UNRECORDED RECEIPT, BECAUSE ONCE THE LD. AO HERSELF HAS ACCEPTED THE FACT THAT THIS SUM WHICH IS SIMPLY ROUTED THROUGH ASSESSEE HAS INFACT BEEN PASSED ON TO OTHER FOR CARRYING OUT WORK FOR MIS. NEG MICON AND THE SALD PAYMENT HAS NOT BEEN CLAIMED AS A DEDUCTION IN THE BOOKS OF ACCOUNTS, THE QUESTION OF AMOUNT RECEIVED EVEN ARITHMETICALLY WHICH IS MEANT ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 35 FOR GIVING TO OTHERS LEGALLY AND AS PER P RINCIPLES OF ACCOUNTANCY CANNOT BE TREATED AS UNRECORDED RECEIPT, AS IN THE PROCESS. ASSESSEE HAS CORRECTLY NEITHER SHOWN THE RECEIPT NOR THE PAYMENT. 23. THE LD. CIT(A) , HOWEVER, CONFIRMED THE ADDITION BY HOL DING THAT THERE WAS NO REASON FOR MSEB TO ROUT E THE PAYMENT PAYABLE TO MIS. NEG MICON THROUGH THE ASSESSEE. THE LD. CIT(A) ALSO NOTICED THAT THE TDS HAS BEEN DEDUCTED U/S 194C OF THE ACT ON THE IMPUGNED PAYMENT AND TDS CERTIFICATE HAS BEEN ISSUED IN THE NAME OF THE ASSESSEE. THE LD. CIT(A) FURTHER NOT ICED TH E ASSESSEE HAS NOT PRODUCED ANY MOU TO SUPPORT THE CLAIM THAT PAYMENT WAS TRANSFERRED ON BACK TO BACK BASIS TO MIS. NEG MICON . HE ALSO OBSERVED AS TO HOW THE ASSESSEE WOULD HAVE CARRIED OUT THIS WORK ON BEHALF OF MIS. NEG MICON WITHOUT DERIVING ANY COMMERCIAL BENEFIT. THE LD. CIT(A) ALSO NOTICED THAT THE ASSESSEE HAS NOT DEDUCTED AT SOURCE ON THE PAYMENT MADE TO MIS. NEG MICON . ACCORDINGLY, T HE LD. CIT(A) DID NOT AGREE WITH THE CONTENTION S OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY THE AO . 24. WE HAVE HEARD THE PARTIES ON TH IS ISSUE AND PERUSED THE RECORD. W E NOTICED TH AT MSEB HAS DEDUCTED TDS ON THE AMOUNT OF RS.2,83,29,387/ - WHICH IS CLAIM ED TO HAVE BEEN RECEIVED BY ASSESSEE ON BEHALF OF MIS. NEG MICON . AS RIGHTLY POINTED OUT BY CIT(A) T HE ASSESSEE DID NOT SUBSTANTIATE ITS SUBMISSIONS WITH ANY CORRESPONDENCE/AGREEMENT ENTERED BETWEE N THE ASSESSEE AND MIS. NEG MICON . IT IS ALSO NOT CLEAR FROM THE ORDERS AS TO WHETHER THE TDS A MOUNT DEDUCTED ON THE ABOVE SAID PAYMENT HAS BEEN CLAIM ED BY ASS ESSEE OR IT HAS BEEN CLAIM ED BY MIS. NEG MICON . CLAIM FOR TDS AMOUNT DEDUCTED ON THE ABOVE SAID PAYME NT, TO SOME EXTENT, WILL THROW LIGHT ON THIS ISSUE. IN THE ABSENCE OF ANY EVIDENCE SUPPORTING THE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 36 CLAIM OF THE ASSESSEE, IT WILL BE DIFFICULT FOR THE TAX A UTHORITIES TO ACCEPT THE CONTENTION OF THE ASSESSEE. 25. AT THE SAME TIME, THE ASSESSEE CANNOT BE TAXED ON RECEIPT TO WHICH IT IS NOT ENTITLED TO. H ENCE, WE ARE OF THE VIEW, THE ASSESSEE MAY BE PROVIDED WITH ONE MORE OPPORTUNITY TO SUBSTANTIATE ITS SUBMIS SIONS WITH ANY CREDIBILITY EVIDENCE. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE C IT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER FOR EXAMIN ING IT AFRESH. ISSUE NO. 3: - 23 . ISSUE NO. 3 IS IN CONNECTION WITH THE INTEREST IN VIEW OF THE PROVISION U/S 220(2) OF THE ACT WHICH IS SQUARELY IN NATURE AND NOWHERE REQUIRED FOR ANY ADJUDICATION . ITA. NO. 1385/M/2012: - 24 . THE FACTS OF THE PRESENT CASE IS QUITE SIMILAR TO THE FACTS OF THE CASE AS DISCUSSED IN ITA. NO.4518/M/2011, TH EREFORE, THERE IS NO NEED TO REPEAT THE SAME . 25 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. AS REGARDS TREATMENT OF RS. 3,46,80,000/ - (TRANSMISSION CHARGES) 1.1 THE ID. CIT (A) - 20 ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE AMOUNT OF RS 3,46.80,00O/ - ACCRUED AS EVACUATION' TRANSMISSION CHARGES' AS INCOME OF THE YEAR WHEN THE SAID AMOUNT WAS CREDITED IN THE PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 - 03 - 2007 (I,E ASSESSMENT YEAR 2007 - 08). 1.2 THE ID. CIT (A) - 20 ERRED IN LAW AND O N FACTS IN TREATING THE AMOUNT OF 3,46,80,000 - AS INCOME OF THE PREVIOUS YEAR 2005 - 06 (I.E. A.Y,2006 - 07) ON RECEIPT BASIS. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 37 1.3 THE ID. CIT (A) - 20 ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE FACT THAT THE APPELLANT COMPANY FOLLOWS ''MERCANTILE S YSTEM OF ACCOUNTING' AND AS SUCH TREATED THE AMOUNT OF RS.3,46,80,000, - AS INCOME OF THE EARLIER YEAR I.E. YEAR ENDED 31 - 03 - 2006. 2. AS REGARDS ADDITION /DISALLOWANCE OF RS. 5,90,414/ - 2.1 THE ID. CIT (A) - 20 ERRED IN LAW AND ON FACTS IN DISALLOWING THE AMOUNT OF RS.5,90,414/ - INCURRED BY THE APPELLANT COMPANY TOWARDS SITE MANAGEMENT DEVELOPMENT EXPENSE DURING THE FINANCIAL YEAR 2006 - 07. 2.2 THE ID. CIT (A) - 20 ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS. 5,90,414/ - OUT OF SITE DEVELOPMENT AND MANAGEMENT EXPENSES INCURRED BY THE APPELLANT COMPANY. 3. AS REGARDS ADDITION OF RS.4,46,000 TO LEASE RENT INCOME 3.1 THE ID, CIT (A) - 20 ERRED IN LAW AND ON FACTS IN TAKING L/25TH OF LEASE RENT RECEIVED DURING THE YEAR INSTEAD OF TA KING PRO - RATA OF L/25TH ON TIME BASIS DEPENDING UPON THE MONTHS REMAINING IN THE YEAR OF RECEIPT AND ADDING RS. 4,56,000/ - LO THE RETURNED INCOME FOR THE YEAR, 4. THE APPELLANT COMPANY THEREFORE PRAYS THAT THE ADDITIONS /DISALLOWANCES MADE BY THE ASS ESSING OFFICER TO ITS RETURNED INCOME MAY PLEASE BE DELETED AND RELIEF AS PER THE GROUNDS OF APPEAL MAY PLEASE BE ALLOWED. 5. THE APPELLANT COMPANY CRAVES LEAVE TO ADD. AMEND, ALTER, VARY AND OR DELETE ANY OF THE GROUNDS OF APPEAL AS MAY HE ADVISED FR OM TIME TO TIME. ISSUE NO. 1: - 26 . UNDER THIS ISSUE THE ASSESSEE HAS RAISED THE ISSUE OF TREATMENT OF RS.3,46,80,000/ - IN THE YEAR IN WHICH THE WORK HAS BEEN COMPLETED. THIS ISSUE HAS ALREADY BEEN DISCUSSED IN ITA. NO. 4518/M/2011 . IT IS SPECIFICALLY HELD THAT THE ADVANCE OF RS. 3,46,80,000/ - IS LIABLE TO BE TREATED IN THE YEAR WHEN THE WORK WAS COMPLETED I.E. A.Y. 2007 - 08. ACCORDINGLY, THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 38 ISSUE NO. 2: - 27 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE OF RS.5,90,414/ - TOWARDS SITE MANAGEMENT DEVELOPMENT. IT IS NECESSARY TO ADVERT THE FINDING OF THE CIT(A) IN THIS REGARD: - 6.7 I HAVE PERUSED THE ASSESSMENT ORDER, REMAND REPORT AS WELL AS COU NTER COMMENTS ON REMAND REPORT OF THE APPELLANT. SINCE THE DISALLOWANCE WERE MADE WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD OR BY CARRYING OUT ADEQUATE ENQUIRIES THE MATTER WAS REMANDED TO THE AO TO CONDUCT ENQUIRY U/S 250(4) ON THEM. 6.8. THE AP PELLANT IN ADDITION TO WHAT IT HAD PROVIDED DURING ASSESSMENT PROCEEDINGS HAD OFFERED TO PRODUCE WHATEVER FURTHER EVIDENCES REQUIRED TO SUBSTANTIATE ITS CLAIM WHICH WAS NOT CALLED BY THE A O. THUS, IN SPITE OF HAVING THE MANDATE GIVEN BY THE CIT(A) VIDE HIS LETTER DATED 18.11.2010 TO EXAMINE THE RECORDS AND CONDUCT FURTHER ENQUIRY THE AO SUBMITTED A REMAND REPORT WHICH IS NO DIFFERENT FROM HE POSITION AS IT EXISTED AT THE ASSESSMENT STAGE. THE ADDITIONS AND DISALLOWANCES WERE MADE AT ASSESSMENT STAG E IN A SUMMARY MANNER WITHOUT CONFRONTING TH E APPELLANT. AT REMAND STAGE TO THE POSITION REMAINED UNCHANGED. 6.9. ON THE OTHER HA N D , THE APPELLANT HAD FURNISHED DETAILS OF EXPENDITURE INCURRED WHICH PRIMA - FACIE DISCHARGES ITS ONUS. HOWEVER, IT IS OBSE RVED THAT SOME AMOUNTS HAVE BEEN DEBITED UNDER THE HEAD MISCELLANEOUS EXPENSES WITHOUT FURTHER DETAILS EXCEPT THE NAME OF THE PERSON TO WHOM PAYMENT IS MADE. THIS IS NOT CONTRADICTED BY THE AR OF THE APPELLANT AND, THEREFORE, EVEN IF THE SAME IS VOUCHE D IT CANNOT BE SAID THAT THEY ARE AMENABLE TO CROSS - VERIFICATION. IN THESE CIRCUMSTANCES, IT WOULD BE FAIR AND REASONABLE TO DISALLOW 15% OF RS.39,36,096/ - AMOUNTING TO RS.5,90,414/ - WHICH WILL TAKE CARE OF THOSE DISALLOWANCE WHICH MAY NOT BE FULLY SU BSTANTIATED. ACCORDINGLY, DISALLOWANCE TO THE EXTENT OF RS.5,90,414/ - IS CONFIRMED AND THE APPELLANT GETS ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 39 RELIEF OF RS.33,45,682/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 28 . ON APPRAISAL OF THE ABOVE SAID FINDING, WE NOTICED THAT THE SAID PAYMENT WA S NOT PROPERLY MENTIONED AND IN DETAILS THE NAME OF PERSONS HAS ALREADY BEEN MENTIONED. THE SAID PAYMENT WAS NOT VERIFIABLE, THEREFORE, THE CIT(A) DISALLOWED THE 15% OF TOTAL EXPENSES TO THE TUNE OF RS.39,36,096/ - WHICH SEEMS JUSTIFIABLE SPECIFICALLY IN TH E CIRCUMSTANCES, WHEN NO EVIDENCE OF ANY KIND WAS PRODUCED BEF ORE US IN SUPPORT OF HIS CLAIM, THEREFORE IN THE SAID CIRCUMSTANCES, WE CONFIRMED THE FINDING OF THE CIT(A) ON THIS ISSUE. ISSUE NO. 3: - 29 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDI TION OF RS.4,46,000/ - TO LEASE RENT INCOME. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 7 GROUND OF APPEAL NO. 4 RELATES TO AN ADDITION OF RS.2,68,75,200/ - AS ADVANCE DEPOSIT OF LEASE RENT. 7.1 IN GROUNDS OF APPEAL IT WAS STA TED BY THE APPELLANT BY THE AO WAS ERRED IN LAW AND ON FACTS IN ADDING THE ENTIRE AMOUNT RECEIVED BY THE APPELLANT COMPANY AS ADVANCE LEASE RENT RECEIVED DURING THE F.Y. 2006 - 07. 7.2. I WAS FURTHER CHALLENGED THAT THE AO ERRED IN LAW AN D ON FACTS IN NOT APPRECIATING THAT THE LEASE RENT OF RS.2,75,20,000/ - IS RECEIVED IN ADVANCE BY THE APPELLANT COMPANY FROM VARIOUS SUB - LESSEES FOR THE ENTIRE PERIOD OF 25 YEARS OF THE SUB - LEASE AS A DEPOSIT AND OUT OF ADJUSTED IN EACH YEAR. 7.3. IT WAS AL SO STATED THAT THE AO ERR3ED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING WHERE ALL INCOME AND EXPENSES ARE ACCOUNTED ON ACCRUAL BASIS AND NOT ON CASH RECEIPT BASIS WHEREBY THE ADVANCE ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 40 LEA SE RENT OF 2,75,20,000/ - IS ACCRUED OVER THE ENTIRE PERIOD OF 25 YEARS OF THE SUB - LEASE. 7.4. THE AO HAS MADE THIS ADDITION AT PARA 8.2 OF PAGE 11 OF ASSESSMENT ORDER FROM WHICH IT IS EVIDENT THAT AS PER TDS RECONCILIATION STATEMENT ASSESSEE HAD RECEIVED A DVANCE LEASE RENT OF RS.2,75,20,000/ - OUT OF WHICH IT HAD OFFERED A SUM OF RS.6,44,800/ - AS ITS COME AND SINCE ACCORDING TO THE AO THE APPELLANT HAD NOT PROVIDED ANY BASIS OR REASON FOR NOT SHOWING THE BALANCE AMOUNT EXCEPT STATING THAT THE SAME IS OFFERED ON PRO - RATA BASIS OVER A PERIOD OF 25 YEARS WITHOUT GIVING ANY DOCUMENTARY EVIDENCE THE BALANCE SUM OF RS.2,68,75,200/ - WAS ADDED. 7.5. IN COURSE OF APPELLATE PROCEEDINGS THE APPELLANT FILED A PA P ER BOOK WHICH WAS FORWARDED TO THE AO WHERE IT WAS EXPLAIN ED THAT ONE OF THE BUSINESS ACTIVITY OF THE ASSESSEE IS SETTING UP OF WIND P O WER PROJECT FOR WHICH IT HAD TAKEN LAND ON LONG TERM LEASE FROM MIDC WHICH WAS DEVELOPED AND DIVIDED INTO PLOTS AND GIVEN TO ON SUB - LEASE TO VARIOUS WIND MILL OWNERS THROUGH WIND MILL TURBINE SUPPLIERS FOR A PERIOD OF 25 YEARS. FROM THESE OWNERS, OWNERS THE ABOVE AMOUNT WAS RECEIVED FOR THE ENTIRE PERIOD OF 25 YEARS AS DEPOSIT/ADVICE TO B Y ADJUSTED OVER - A PERIOD OF 25 YEARS ON PRO - RATA BASIS TOWARDS ANNUAL LEASE. THE LEASE AGREEMEN TS WERE ALSO FILED. SINCE THE AMOUNT RECEIVED PERTAIN TO A PERIOD OT - 25 YEARS EVEN - THOUGH THE TAX WAS DEDUCTED AT SOURCE AS PER PROVISIONS OF THE LAW AT THE TIME OF RECEIPT ITSELF THE SAME WAS TO BE OFFERED FOR TAX IN A PERIOD OF .26 YEARS PRO RATA - BASIS A ND ACCORDINGLY PRO RATA CREDIT FOR TDS ALSO HAS TO ALLOW IN THE YEAR IN IS OFFERED. IT WAS FOR THIS REASON THAT THE ASSESSE E COMPANY HAS OFFERED THE INCOM E OF RS.6,44,800/ - / - PERTAINING TO YEAR UNDER APPEAL THOUGH INADVERTENTL Y CREDIT FOR THE ENTIRE IDS WA S CLAIMED IN THE YEAR ITSELF. 7 6. I N THE REMAND REPORT THE ASSESSING OFFICE REITERATED THE FACT THAT SINCE CREDIT FOR ENTIRE TDS HAS BEEN CLAIMED ' IN TIME CURRENT YEAR THE CORRESPONDING DEPOSIT/ADVANCE IN ENTIRETY HAS ALSO TO BE - TAXED. TIN THE CURRENT YEAR. THE APPELLANT D REW ATTENTION TO THE ORDER U/S 263 'DATED 15.10. 2009 PASSED BY CIT FOR A.Y.2006 - 07 WHERE THIS ASPECT WAS EXAMINED AT PAR 6 PAGE 9 & 10 OF ORDER AND THE APPELLANT'S CONTENTION THAT SINCE THE AMOUNT SINCE THE AMOUNT PERTA INED TO 25 YEARS THE INCOME ON THE SAME HAS BE OFFERED ON PRORATE BASIS WAS UPHELD. IN THE CURRENT YEAR A SUM OF RS .2,68,75,200/ - OUT OF DEPOSIT/ADVANCE RECEIVED, 'HAS BEEN ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 41 OFFERED' AND THE BALANCE SUM AT SHO WN IN THE BALANCE - SHEET AS THE DEPOSIT/ADVAN CE AGAINST LEASE IS TO BE ADJUSTED IN SUBSEQUENT YEAR . LT WAS ALSO HIGHLIGHTED THAT FOR A. Y . 2006 - 07 WHERE A SIMILAR ISSUE HAS ARISEN THE ASSESSING OFFICER HAS ACCEPTED THE PLEA OF THE ASSESSEE AND THE ONLY PROPORTIONATE' SUB - LEASE AMOUNT OF TOT AL ADVANCE/LEASE R ECEIVED WAS ASSESSABLE IN RESPECTIVE YEAR AND CREDIT FOR TDS WAS TO BE GIVEN PERTAINING TO THE INCOME OFFERED ' 7.7 IN THIS REGARD WHEN CONFRONTED WITH THE - FACT THAT THOUGH THE APPELLANT HAD REC EIVED RS.2,75,20,000/ - THIS YEAR AND SO 1/25 TH AMOUNT SHOWED COME TO RS.11,00,8000 THEN WHY ONLY RS.6,44,800/ - WAS OFFERED IT WAS SUBMITTED THAT THE PRORATE WAS WORKED ON PROPORTIONATE TIME BASIS DEPENDING UPON THE MONTHS REMAINING IN THE YEAR OF RECEIPT. 7.8. I HAVE EXAMINED THE ASSESSMENT ORDER REMAND REPORT VARIOUS SUBMISSIONS MADE BY THE APPELLANT. THIS IS A RECURRING ISSUE WHICH WAS SUBJECT MATTER OF ADDITION OF ENTIRE AMOUNT OF LEASE ADVANC ED /DEPOSIT IN A.Y.2002 - 03 AND A.Y.2006 7. NO DOUBT THE APPELLANT RECEIVED ADVANCE AMOUNT OF RS.2,7 5,20,000/ - ADJUSTABLE AGAINST ANNUAL LEASE OVER THE ENTIRE LEASE PERIOD OF 25 YEARS. THE APPELLANT HOWEVER CLAIMED CREDIT OF ENTIRE TDS RELATABLE TO THIS AMOUNT IN THE CURRENT YEAR. THE AO THEREFORE, INVOKED THE PROVISIONS OF SECTION 199 THAT UNLESS THE IN COME FROM WHICH THE TAX HAS BEEN DEDUCTED HAS BEEN OFFERED IN THE RETURN OF INCOME, NO CREDIT FOR SUCH TAX DEDUCTED OR COLLECTED CAN BE GIVEN. 7.8.1. THE ASSESSING OFFICER, THEREFORE HAS OUGHT TO MAKE OUT THE CASE THAT ENTIRE LEASE DEPOSIT IS CHARGEABLE TO YEAR THE APPELLANT ON THE OTHER HEAD CONTENDS THAT BASED AND THE METHOD OF ACCOUNTING FOLLOWED AND ACCEPTED BY THE ASSESSING OFFICER IN THE A.Y. 2006 - 07 AND ALSO BY THE HONBLE CIT - 9 MUMBAI VIDE HIS ORDER U/S.263 FOR ASSESSMENT YEAR ONLY 1/25 TH OF THE AMOUNT SHOULD BE ASSESSED EVERY YEAR. 7.8.2 THERE IS MERIT IN THE APPELLANT'S CONTENTION. THE HON'BLE CIT - 9 MUMBAI PASSED AN ORDER U/S.263 FOR A.Y. 2006 - 07 DATED 15.10.2009 WHEREIN ONE OF THE ISSUE ADD RESSED WAS THIS. THE APPELLANT CLAIMED BEFORE THE H ON'BLE CIT - 9 THAT IT HAD LAND VARIOUS PARTIES FROM WHICH A SUM OF RS.9.60 CRORES WAS RECEIVED AS DEPOSIT WHICH WAS TO BE APPROPRIATED TOWARD RENT EVERY YEAR IN EQUAL PROPORTION FOR A TERM OF 25 YEARS. THUS, ACCORDING TO THE APPELLANT ONLY A SUM OF RS.38,40 ,600/ - 1/25 TH WAS T AXABLE AS INCOME IN THE A.Y. 2006 7. IT OFFERED TO WITHDRAW THE EXCESS CLAIM OF TDS OF RS.27,25,203/ - PROPORTIONATE TO THE BALANCE E RENT OF ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 42 RS.9,21,60,000/ - . THE HONBLE CIT - 9 ACCEPTED THE CLAIM AND DIRECTED THE AO TO WITHDRAW THE EXCE SS CLAIM OF TDS IN TERMS OF PROVISIONS OF SECTION 199 OF THE I.T. ACT, 1961. THE AO THEREAFTER, PASSED THE ORDER ON 27.12.2010 GIVING EFFECT TO THE ORDER U/S 263 OF THE CIT WHEREIN NO ADDITION WAS MADE AT THE BALANCE RENT OF RS.9,21,60,000/ - 7.8.3 THE SAME PRINCIPLE LINE WAS ADOPTED BY THE CIT - 20 WHILE DECIDING THE APPEAL FOR A.Y.2002 - 03 DATED 20.03.2011 WHEREIN ON RECEIPT OF ADVANCE DEPOSIT OF RS.1,19,62,000/ - ONLY RS.4,78,480/ - BEING 1/25 TH OF THE ABOVE SUM WAS MADE CHARGEABLE TO TAX IN THAT YEAR AND THE AO WAS DIRECTED TO GRANT CREDIT FOR TDS PROPORTIONATELY. 7.8.4 THUS TWO AUTHORITIES OF COORDINATE RANT HAVE TAKEN A IDENTICAL STAND AND HENCE FOLLOWING THE PRINCIPLE OF JUDICIAL CONSISTENCY, IT WOULD BE FAIR AND PROPER IF 1/25 TH OF RS.2,75,20,000/ - WHICH COMES TO RS.11,00,800/ - IS BROUGHT TO TAX IN THIS YEAR AD CREDIT OF TDS GRANTED PROPORTIONATELY. 7.8.5 THE APPELLANT CONTENTION THAT IT HAS TAKEN RS.6,44,800/ - ON THE PROPORTIONATE TIME BASIS AND THUS HAS OFFERED 1/25 TH OF RS.1,05,60,000/ - FROM BHARTI SHI PYARD LTD, MUMBAI AS IT WAS RECEIVED IN THE EARLIER PART OF YEAR WHILE THE BALANCE RECEIVED FROM OTHER PARTIES WAS OFFERED AT LESSER AMOUNT AS IT WAS RECEIVED ON LATER PART OF THE IS REJECTED. THE APPELLANT HAS TO OFFER LEASE ADVANCE/DEPOSIT FORM ALL THE 7 PARTIES THIS YEAR ON A UNIFORM BASIS AS PER THE AGREEMENT. 7.8.6 TO SUM UP, THE ADVANCE DEPOSIT T O BE BROUGHT TO TAX THIS YEAR WOULD BE RS.11,00,800/ - AND NOT 6,44,800/ - . THE AO WILL GRANT TDS CREDIT PROPORTIONATELY TO R S.11,00,800/ - . THE APPELLANT GETS R ELIEF OF THE BALANCE SUM OF RS.2,64,19,200/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 30 . ON APPRAISAL OF THE ABOVE SAID FINDING, WE NOTICED THAT THE MATTER OF CONTROVERSY HAS BEEN ADJUDICATED BY THE CIT(A) ON THE BASIS OF THE DECISION BY THE CIT(A) - 20 F OR THE A.Y. 2002 - 03 THE TOTAL LEASE RENT WAS TO THE TUNE OF RS.2,75,20,000/ - AND 1/5 TH COMES TO THE TUNE OF RS.11,00,800/ - WHICH WAS LIABLE TO BE TAXED IN THE FURTHER 25 YEARS. SINCE THE FINDING OF THE CIT(A) IN THE EARLIER YEAR NOWHERE CHANGED OR VERIFIED AND WE ALSO FINDING ITA. NO. 4518/MUM/2011, 547/MUM/2012 & 1306/MUM/2012 173/MUM/2012 & 1385/MUM/2012 A.YS. 2002 - 03, 2006 - 07 & 2007 - 08 43 IT JUSTIFIABLE TO ASSESS THE 1/25 TH RENT IN THE NEXT 25 YEARS , W E ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS QUITE JUSTIFIABLE WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DE CIDED IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE. 31 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCE D IN THE OPEN COURT ON 31.1 0 .2018 . SD/ - SD/ - ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBA I DATED : 31. 10 . 201 8 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDEN T. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI