2023 (5) TMI 1002 - AT - Income Tax

Deduction u/s.80IA(4) - not doing activities as defined - proof of effluent treatment plant and process - AO has denied the claim holding that assessee is not doing activities as defined in Section 80IA(4) which includes carrying out infrastructure project of water treatment project or effluent treatment plant - HELD THAT - The explanation below Sub-Section (4) to Section 80IA states that for the purpose of this clause infrastructure facility means a water supply project water treatment system irrigation project sanitation and sewerage system or solid waste management system . As brought to our notice that CBDT vide Circular No.1/2006 dated 12/01/2006 have also clarified that effluent treatment plant shall be considered as part of water treatment plant and shall be eligible for tax u/s.80IA. As explained that the assessee gets effluent water and this water contains Potassium Carbonate Sodium carbonate Potassium Hydroxide in dissolved form. This aqueous stream containing the dissolved salts is received by the assessee. Then this stream is concentrated in multi-effect evaporator to remove the water contents. The concentrated stream is then crystallized using cooling water. During crystallization process Potassium Carbonate and Sodium carbonate crystals are formed as mixture. The Crystallized slurry is filtered in centrifuge. The wet cake is dried in dryer generate Potassium Carbonate Sodium carbonate mixture. The mother liquor and wash liquids sold as Potash Lye contains Potassium Hydroxide. Thus it is purely effluent treatment plant and process. Apart from that the assessee has obtained consent to set-up/consent to operate from the Maharashtra Pollution Control Board (MPCB) for setting up the ETP/WTP Thus assessee s effluent water treatment plan categorically falls within the ambit and scope of Section 80IA(4) as misinterpreted by the AO so as to deny the claim of deduction u/s.80IA(4). Nowhere the AO has pointed out as to what are the conditions laid down in Section 80IA(7) has not been fulfilled because assessee had filed and obtained the audit report alongwith revised return on 19/02/2018. Nowhere the AO has held that revised return is invalid. In any case the reason which was given before the ld. AO was that Form No.10CCB and working of 80IA was though obtained before the date however inadvertently it was deleted for the A.Y.2017-18 and once assessee realizes his mistake in Form 10CCB together with working of 80IA(4) were then correctly filed electronically alongwith revised return of income. In these circumstances it cannot be held that there is any violation of any provisions of law and in any case if the claim and audit report was there before the ld. AO during the course of assessment proceedings and no fault has been pointed out therein; the same cannot be the ground for denial of deduction u/s.80IA. Decided in favour of assessee.

Issues Involved:
1. Deletion of addition representing deduction claimed under Section 80IA(4) of the IT Act.
2. Deletion of addition representing disallowance out of business expenses from 'other expenses'.
3. Failure to appreciate the findings of the Assessing Officer and overlooking the findings made during the assessment proceedings.
4. Additional grounds regarding audit report filing and eligibility for deduction under Section 80IA(4).

Summary:

Issue 1: Deletion of Addition Representing Deduction Claimed under Section 80IA(4)
The Revenue challenged the deletion of an addition of Rs. 5,67,13,974/- claimed under Section 80IA(4) by the Assessing Officer (AO). The AO denied the deduction, arguing that the assessee was not engaged in activities defined under Section 80IA(4) and was not operating an infrastructure facility. The AO highlighted that the assessee's revenue was from the sale of products like Potassium Carbonate and Caustic Potash Lye, not from running an effluent treatment plant. However, the CIT(A) allowed the deduction, referencing a certificate from the Maharashtra Pollution Control Board and CBDT Circular No.1/2006, which clarified that effluent treatment plants qualify as infrastructure facilities under Section 80IA. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee's activities fell within the scope of Section 80IA(4).

Issue 2: Deletion of Addition Representing Disallowance out of Business Expenses
The Revenue also contested the deletion of an addition of Rs. 56,50,000/- made by the AO, representing disallowance out of business expenses from 'other expenses'. The Tribunal reviewed the findings and upheld the CIT(A)'s decision to delete the addition, finding no merit in the Revenue's grounds.

Issue 3: Failure to Appreciate the Findings of the Assessing Officer
The Revenue argued that the CIT(A) failed to appreciate the AO's findings and the detailed verification process undertaken during the assessment proceedings. The Tribunal, after reviewing the case, found no merit in the Revenue's contentions and upheld the CIT(A)'s findings, which were based on substantial evidence and proper interpretation of the law.

Issue 4: Additional Grounds Regarding Audit Report Filing and Eligibility for Deduction
The Revenue raised additional grounds, arguing that the audit report in Form 10CCB was filed late, making the deduction under Section 80IA(4) inadmissible. The Tribunal noted that the assessee filed the audit report along with the revised return on 19/02/2018, and the AO did not declare the revised return invalid. The Tribunal found no violation of Section 80IA(7) and dismissed the additional grounds, stating that the audit report and deduction claim were validly filed and should not be grounds for denial.

Conclusion
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that allowed the assessee's deduction under Section 80IA(4) and deleted the disallowance of business expenses. The decision was pronounced on 15th May, 2023.

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