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2017 (3) TMI 1896 - AT - Income TaxDeduction u/s 80IA(4) - Claim denied as assessee was not engaged in development of new infrastructure project - whether merely increasing the thickness widening of an existing road would not qualify as a new infrastructure project ? - HELD THAT - We do not agree with the authorities below that it is merely work of the maintenance and repairs but in fact it is a work of bringing into existence new infrastructure facility which is in the nature of road. We therefore allow the ground taken by the assessee and hold that the assessee is entitled for deduction u/s 80IA(4) of the Act and direct the Assessing Officer to allow deduction to the assessee - As deduction u/s 80IA (4) is liable to be allowed and ground of appeal no. 1 raised by the appellant is allowed. Disallowance of interest income earned by the appellant-company on account of fixed deposits created as Debt Service Reserve Account against the term loan taken for the purpose of business - HELD THAT - Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case under consideration and the facts in assessee s own case for A.Y. 2006-07 nor placed any material on record to demonstrate that the decision of Tribunal in assessee s own case for A.Y. 2006-07 2013 (4) TMI 758 - ITAT PUNE has been set aside by the Higher Judicial Authorities. With respect to the interest income being eligible for deduction u/s 80IA(4) we find that Ld. CIT(A) has given a finding that the fixed deposit was an essential part for availing the loan whereby assessee was required to maintain Debt Services Reserve account and for that purpose it had to necessarily place fixed deposit and on such fixed deposits the assessee had earned interest. He therefore held it to be connected with the business of the assessee. CIT(A) thereafter relying on the various decisions cited therein has allowed the claim of the assessee. Before us Revenue has not placed any material on record to demonstrate that as to how the decisions relied upon by Ld. CIT(A) would not applicable to the present facts of the assessee. Considering the totality of the aforesaid facts we find no reason to interfere with the order of Ld. CIT(A) and thus the grounds of the Revenue are dismissed.
Issues Involved:
1. Deduction under Section 80IA(4) of the Income Tax Act for infrastructure projects. 2. Eligibility of interest income on fixed deposits for deduction under Section 80IA(4). Issue-wise Detailed Analysis: 1. Deduction under Section 80IA(4) of the Income Tax Act for Infrastructure Projects: The Revenue challenged the allowance of deduction under Section 80IA(4) of the Income Tax Act by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2010-11. The Assessee, a partnership firm engaged in infrastructure projects, filed its return showing nil taxable income but was assessed with a total income of Rs.1,75,65,950/- after the Assessing Officer (AO) denied the deduction claim under Section 80IA(4). The AO's contention was that the projects undertaken by the Assessee, such as the Hanumangarh-Sutargarh Road Project and the Ahmadnagar-Ashti-Jamkhed Project, involved mere improvement and widening of existing roads, which did not qualify as new infrastructure facilities under Section 80IA(4). The AO relied on Circular No. 4 of 2010 issued by the CBDT to support this view. The CIT(A), however, allowed the Assessee's appeal, holding that the work involved strengthening and widening the roads, which amounted to creating new infrastructure facilities. The CIT(A) referenced the ITAT Pune's decision in the Assessee's own case for A.Y. 2006-07, which concluded that such improvements and strengthening amounted to new infrastructure facilities eligible for deduction under Section 80IA(4). Upon appeal, the Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide any distinguishing facts or evidence contrary to the Assessee's claims or the previous ITAT decision. The Tribunal affirmed that the projects involved significant improvements, including widening and strengthening the roads, which qualified as new infrastructure facilities under Section 80IA(4). 2. Eligibility of Interest Income on Fixed Deposits for Deduction under Section 80IA(4): The second issue was whether the interest income of Rs.9,60,890/- earned on fixed deposits, which were maintained as a Debt Service Reserve Account for availing loans, qualified for deduction under Section 80IA(4). The AO denied this deduction, arguing that the interest income was not derived from the business of the undertaking. The CIT(A) reversed this decision, stating that maintaining fixed deposits was a requisite condition for obtaining the loan, thus directly connecting the interest income to the business of the infrastructure project. The CIT(A) relied on judicial precedents, including ITAT Delhi's decision in Jaiprakash Power Venture Ltd. vs. DCIT and ITAT Cuttack's decision in Maxcare Laboratories Ltd. vs. ACIT, which supported the view that interest earned on such deposits is eligible for business income deduction under Section 80IA(4). The Tribunal agreed with the CIT(A), noting that the Revenue failed to demonstrate how the cited decisions were inapplicable to the Assessee's case. The Tribunal found no reason to interfere with the CIT(A)'s order, thus dismissing the Revenue's appeal on both counts. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the Assessee's deduction claims under Section 80IA(4) for both the infrastructure project profits and the interest income on fixed deposits. The Tribunal emphasized adherence to judicial precedents and the lack of contrary evidence from the Revenue.
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