TMI Blog2008 (11) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 14,59,358 and advertisement income at Rs. 48,93,530 on which deduction under s. 80-IA of the Act was claimed. The assessee vide entry dt. 19th Feb., 2007 was asked by the AO to explain as to how deduction under s. 80-IA of the Act was applicable to the case of the assessee. It was explained that as per s. 80-IA(4) the benefit under s. 80-IA(1) of the Act was available to an enterprise carrying on the business of developing, operating and maintaining any infrastructure facility. The infrastructure facility as per Expln. (c) of s. 80-IA(4) includes sanitation and sewerage system. The construction of public toilets in public places ensures proper sanitation and hygiene and therefore, is an infrastructure facility and was entitled for deduction under s. 80-IA of the Act. In the toilet division the assessee's main source of income was income from advertisement. As the advertisement income was not an income from sanitation vide order sheet entry dt. 1st March, 2007 the assessee was asked to explain as to why advertisement income should not be treated as income from other source in view of decision rendered by Hon'ble Calcutta High Court in the case of Mukherjee Estate (P) Ltd. vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions of the agreement with the NDMC, which prescribes the fees/charges from the use of the infrastructure facility. He also referred to cl. (xi) according to which the bidder shall be at liberty to utilise the walls of the structure for the purpose of advertisement. The area on which advertisements are displayed shall not exceed 50 per cent of the plinth area. The remaining area shall carry social massages as approved by the NDMC. He, therefore, concluded that the liberty given to the assessee to utilize the walls of the structure of the toilets for the purpose of advertisements was in form of incentives given to the assessee for developing an infrastructure facility and the same could be incidental, but not income derived from industrial undertaking. He placed reliance on the decision of Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99 : (2003) 262 ITR 278 (SC) and in the case of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC). He accordingly came to the conclusion that the advertisement income could not be said to be income derived by the assessee from the business of development, operating and maintenance of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facility' means- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (e) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway or inland port." 8.2 The assessee has built the toilet systems and operating under the agreement with NDMC. The activities of the assessee are not covered in cl. (a), cl. (b) and cl. (d) of the Explanation. Under cl. (c) a water supply project, water treatment project, irrigation project is to be treated as infrastructure facility. Obviously the assessee is not engaged in any of such activities. There are two more infrastructure facilities, the one being the "sanitation and sewerage system" and the other being "solid waste management system". Obviously the construction and operation of toilet systems will not fall under "solid waste management system". Now it is to be seen whether the assessee is engaged in business of developing, operating and maintaining any infrastructure facility in the nature of sanitation and sewe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nicipal corporation manual/laws for the definition of expression "sanitation and sewerage system" appearing in cl. (c) of the Explanation. We, therefore, are of the considered view that the entire matter should be examined afresh by the AO whether the assessee is eligible for deduction under s. 80-IA of the Act. If it is found that the assessee is entitled for deduction under s. 80-IA of the Act, the question of determination of income from advertisement will arise subsequent to the determination of applicability of provisions of s. 80-IA of the Act to the undertaking of the assessee. Our observations while disposing of the matter will not impair or injure the case of the AO or will not cause prejudice to the Explanation and defence of the assessee in claiming deduction under s. 80-IA of the Act. The assessee will be at liberty to raise any plea before the AO in support of its claim. We, accordingly set aside the matter to the file of AO with the directions to examine the eligibility of deduction under s. 80-IA in the light of above discussions and in accordance with the provisions of law. The AO is directed accordingly. 9. The next issue for consideration relates to confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the presumption of the AO that the settlement amount paid was required to be adjusted first towards the principal amount and thereafter towards interest is highly arbitrary, misconceived and against the order of the BSFC and legal and accounting principles. The assessee having itself treated the waived claim in respect of interest to the extent of Rs. 5,23,978 as income under s. 41(1) there is no case for further addition. He placed reliance on the decision of Tribunal, Calcutta Bench in the case of IFB Securities Ltd. vs. ITO (2006) 101 TTJ (Kol) 829 in support of the contention that any payment made on settlement will be first adjusted towards accrued interest and surplus if any towards outstanding principal amount. 11. The learned CIT(A) considered the scheme of one-time settlement. He observed that BSFC scheme clearly envisaged that the gross settlement amount should be first adjusted against the principal amount disbursed and the balance against the interest payable and the relief will be towards the interest payable. In the instant case the total outstanding amount was of Rs. 19,06,147 consisting of principal amount of Rs. 3,95,542 and interest payable of Rs. 15,10,695. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned senior Departmental Representative relied on the order of CIT(A). 13. We have heard both the parties and gone through material carefully. Under OTS Scheme, 2004, BSFC waived off amount of Rs. 9,19,430 and balance amount of Rs. 9,86,717 was to be paid by the assessee. The assessee was given an option to make payment either by depositing the entire balance amount of Rs. 9,46,717 after adjustment of application money of Rs. 40,000 within 90 days from the date of issue of order of settlement. In this case no interest was payable on balance settled amount of Rs. 9,46,717. Under second option the assessee was to make payment of Rs. 2,06,679 as initial amount within 90 days of settlement order and balance amount in four equal instalment of Rs. 1,85,009.50 each along with interest chargeable on balance amount @ 14 per cent per annum calculated on simple interest basis to be calculated from the date of issue of letter for settlement to the concern, till the date of final payment on reducing balance basis. It was also provided that any payment made during the settlement period will first be adjusted towards accrued interest and surplus, if any, towards outstanding balance settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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