TMI Blog2014 (4) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... ure development projects in the State of Gujarat – thus, there is no infirmity in the order of the CIT(A) – Decided against Revenue. Disallowance of deduction u/s 80IA(4) of the Act – Held that:- CIT(A) held that the appellant works as a nodal agency for implementation of various works undertaken/decided by the government - the grants for the projects is not its revenue income at all - the grants which are utilized for specified projects have been held to be not income but diversion of funds at source – the appellant is doing the work of a concern engaged in work which is in the nature of a works contact awarded by any person and executed by it - as per the amended Explanation below section 80IA(13) with retrospective effect from 1.4.2000; the work should not be of the nature of contract and not only contract - the project costs and source not being revenue of the appellant, it being not affected by the actual cost and efficiency of work, the assets created and the source not being of the appellant at any stage and it being entitled to a fixed remuneration for its professional services - it clearly falls in the excluded category as per the amended Explanation below section 80IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1,97,288/- made on account of depreciation and the AO also made addition of Rs.5,35,77,935/- on account of interest received from the Fixed Deposit receipts. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions of the assessee, deleted the addition qua administrative expenses and disallowance of depreciation following the Tribunal's order in assessee's own case for AYs 2002-03, 2003-04, 2005-06 in ITA Nos.1205/Ahd/2006 dated 29/04/2009, 2113/Ahd/2006 dated 29/04/2009 and 2218/Ahd/2008 dated 13/08/2008 respectively. The ld.CIT(A) also deleted the addition made in respect of accrual of interest on Fixed Deposits. 3. Apropos to Ground No.1, ld.CIT-DR relied on the decision of ld.CIT(A). 3.1. On the contrary, the ld.counsel for the assessee submitted that the issue is covered by the decision of Hon'ble Gujarat High Court in the case of CIT vs. Gujarat Urban Development Co.Ltd. in Tax Appeal No.14 of 2010, dated 13/06/2011. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO has disallowed the expenditure as cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the case-laws relied upon by the parties. We find that the ld.CIT(A) has given a finding on fact that the assessee is 100% government owned company appointed as a Nodal Agency for implementation of various infrastructure development projects all across Gujarat. He has further given a finding on fact that the observation of the Assessing Officer in para-13.3 particularly on page-6 of the assessment order that the interest is not credited to the respective Grant accounts is factually incorrect, as a perusal of the balance-sheet and the respective ledger accounts of the Grant/Project clearly show that I fact the interest is credited to the respective account. The Hon'ble Jurisdictional High Court in Tax Appeal No.828 of 2013 formulated following substantial question of law for determination:- Whether in law and on facts, the ITAT was right in not treating the interest of Rs.1,25,44,938/- accrued to Fixed Deposits as income of the assessee? 6.1. The Hon'ble High Court dismissed the appeal affirming the view of the Hon'ble Tribunal and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the expenses while observing that the assessee has not commenced its business and the expenses claimed in the P L account have already been disallowed. On the contrary, the ld.CIT(A) has given a finding on fact that the business of the assessee has already been commenced. It is observed by the ld.CIT(A) that the amount paid by the assessee-company way by way of participation fees to Gujarat Vibrant Summit to encourage development activities in the State. The assessee had also participated in the same by putting up a stall since the main object of the assessee-company is also to carry out activities for infrastructure development projects in the State of Gujarat. Therefore, we do not find any infirmity in the order of the ld.CIT(A), the same is hereby upheld. Thus, this ground of the Revenue's appeal is rejected. 8. Ground Nos.4 5 are general in nature require no independent adjudication. 9. In the result, appeal of the Revenue in ITA No.1116/Ahd/2011 for AY 2007-08 is dismissed. 10. Now, we take up Assessee's appeal in ITA No.787/Ahd/2012 for AY 2008-09. The assessee has raised the following grounds of appeal:- 1. Ld.CIT(A) erred in law and on facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the decision of the ld.CIT(A) as contained in para-5.1 of his order. After some argument, ld.Sr.counsel for the assessee fairly conceded that the issue is decided against the assessee by the Hon'ble Jurisdictional High Court rendered in the case of Katira Construction vs. Union of India reported at (2013) 352 ITR 513 (Guj.). 12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact, which reads as under:- 5.1. I have considered the facts of the case, the submissions, the assessment order, the amendment in the law and the decisions of the courts. The following pertinent observations are made after considering these:- There is no doubt that the appellant works as a nodal agency for implementation of various works undertaken/decided by the government. The appellant bears no risk whatsoever of the cost or success of the projects. The appellant gets a fixed percentage of the money spent on the project. Supposedly, on a project originally estimated at Rs.100 crore, the actual cost over runs to any amount may be even Rs.500 crore; t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ld.CIT(A) was that the assessee does not bear any risk and consequences arising from the project. In view of the ratio laid down by the Jurisdictional High Court rendered in the case of Katira Construction Ltd. Union of India(supra), we do not find any infirmity in the order of the ld.CIT(A), therefore ground Nos.1 to 3 of the assessee's appeal are rejected. 13. Ground Nos.4 is against levy of interest u/s.234B 234C of the Act. Charging of interest is being consequential, therefore the ground of the assessee is rejected. 14. Ground No.5 is against initiation of penalty u/s.271(1)(c) of the Act. This ground is being pre-mature and, hence, the same is rejected as such. 13. In the result, assessee's appeal in ITA No.787/Ahd/2012 is dismissed. 14. Finally, we take up Assessee's appeal in ITA Nos.2670 2671/Ahd/2013 for AYs 2009-10 2010-11. The assessee has following grounds in its appeals: (a) ITA No.2670/Ahd/2013 1. Ld.CIT(A) erred in law and on facts in confirming action of AO denying deduction claimed u/s.80IA(4) of the Act. Both the lower authorities erred in holding appellant as a buffer agency awarding contracts to local bodies on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... percentage of project cost. This observation of ld.CIT(A) without appraising himself of the facts of the case is completely irrelevant and uncalled for since it traversed beyond assessment order that deserves to be reversed and deduction as claimed u/s.80IA(4) of the Act be granted. 3. Ld.CIT(A) further erred in law and on facts in not taking cognizance of the two decisions relied upon by the appellant directly applicable to the facts of the case but referred to decisions having no bearing to the facts. Ld.CIT(A) failed to appreciate controversy in proper perspective taking relevant facts into consideration to hold the appellant as developer entitled to claim deduction u/s.80IA(4) of the Act instead of denying deduction by choosing to follow appellate order of earlier year. It be so held now. 4. Ld.CIT(A) erred in law and on facts in confirming action of AO in treating interest receivable on unutilized grants as taxable in the hands of the appellant. Ld.CIT(A) failed to appreciate that any income earned or generated on the deposits made from grant received towards infrastructure development was an integral part of the grant earmarked for the project. D.CIT(A) factually erred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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