TMI Blog2012 (4) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the case and in law, the learned CIT(A)-I, Surat has erred in ignoring the material evidences in the form of agreement executed by the assessee with the Local Authorities. (3) On the facts and in the circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in deleting disallowance of ₹ 56,98,144/- made by the A.O. u/s.80IB of the Act. (4) On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. (5) It is, therefore, prayed that the order of the CIT(A) may be setaside and that of Assessing Officer may be restored to the above extent. 3. Facts in brief in respect of the issue raised as emerged from the corresponding assessment order passed u/s.143(3) dated 17.12.2007 were that the assessee-company is stated to be in the business of solid waste management. For the year under consideration, the assessee has claimed a deduction u/s.80-IA of ₹ 56,98,146/-. A show cause was issued and in compliance the assessee has informed the facts as under, only relevant portion reproduced. 3. REGARDING DEDUCTION U/S.80IA 3.1. Biomedical Waste Plant Surat a. Our clie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipur (Rajasthan) for setting up centralized biomedical waste treatment facility on a land provided by the local body on lease agreement for 30 years. As per Clause II of the said agreement, the incineration plant i.e. bio medical waste treatment plant was to be set up by EEEPL at its own cost at the said site. Clause No.III makes it very clear that the lease agreement is meant only for providing land by local body and in such type of infrastructure development contracts on big scale, the land facility is provided by the Government body or Local Authority. However, as per the said agreement, plant is to be set up by EEEPL at its own cost and the operation and maintenance of the said plant is to be performed by EEEPL. Accordingly, EEEPL had set up the plant at its own cost. Thus the terms of the agreement clearly indicates that the ownership of plant lies with EEEPL. b. It is humbly submitted that the cost of plant of BMW Udaipur branch is reflected in the books of accounts of EEEPL which clearly suggests that the infrastructure facility is owned by the company and it has entered into an agreement with the Local Authority and therefore, the provisions of Section 80IA(4)(i) are ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain from different agencies. Thus, the sub-contractors of the assessee also carry out the same work for which the assessee claims deduction available to the owner of the infrastructure. If the assessee was eligible to claim deduction then the sub-contractors were also eligible to claim the deduction. However, it is not the intention of the law to allow the deduction to the contractor or subcontractor. k. The explanation to the section 80IA which was inserted by the finance Act, 2007 w.r.e.f 01.04.2000, is very clear that the deduction is not to be allowed to the person who executes a works contract entered into with the undertaking or enterprise, as the case may be. It can be seen from the above discussion that the assessee is a contractor and working for various authorities and executing contracts for them. In view of the above, I am satisfied that the assessee is not eligible to claim deduction u/s.80-IA of the Act. Accordingly, the assessee s claim of deduction u/s.80IA of the Act is disallowed. Penalty proceedings u/s.271(1)(c) are being initiated separately for failure to disclose the true particulars of income / for furnishing inaccurate particulars of Income or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has not acted as a Developer but merely as a Contractor . The next plank of argument is that the TDS certificates issued by the Government Authority have also clearly stated the assessee as a Contractor Bill . Therefore, the payments have been made to a Contractor and not to a Developer . His next plank of argument is that the assessee has not owned the infrastructure because as per one of the terms of the agreement after the expiry of the lease of thirty (30) years the assessee has to vacate the premises. He has argued that being a Contractor the assessee had no right over the property and the property in fact has been owned by the Municipal Council. Ld.DR has also drawn our attention on clause(5) of the Agreement that the operation and maintenance shall be observed and under supervision of Municipal Council of Udaipur. The assessee has offered a rate of construction and constructed the property on turn-key basis. On account of these reasons, the assessee was not entitled for the claim of deduction u/s.80IA(4). 6. From the side of the respondent-assessee, ld.AR Mr.S.N.Soparkar appeared and supported the order of CIT(A). He has drawn our attention on the annual a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement dated 15/07/2004. However, it was not so in the agreement dated 14/11/2002 executed with Surat Municipal Corporation. Be that as it was, merely mentioning the assessee as Contractor the exact nature of the execution of the work do not alter. Rather, this controversy has been resolved by Respected Co-ordinate Bench in the case of Patel Engineering Ltd. 94 ITD 411(Mum.)cited-supra. We are convinced with the argument of the ld.AR that a contractor can also be a developer. In this context, our attention has been drawn on a latest decision of Hon ble Gujarat High Court pronounced in the case of CIT vs. Radhe Developers (2012)341 ITR 403 (Guj.), wherein the issue was in respect of claim of deduction u/s.80IB(10) of IT Act and the assessee happened to be developer-cum-building contractor . The Hon ble Court has held that the said developer had to make the construction and to engage labour on contract, therefore the term developer has to be understood in common parlance as well as in legal sense. The Hon ble Court has taken the help of Websters- encyclopedia and other dictionaries and thereupon opined that the term developer carries a much wider connotation. As far as the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or sale any of the bio-product. 7.3. We have also examined the other agreement dated 14/11/2002 which in its nomenclature says Agreement for treatment of Bio Medial waste on BOOT (Build, Own, Operator, Transfer) basis between Surat Municipal Corporation and En-Vision Enviro Engineers Pvt.Ltd. For the removal and disposal of refuse, rubbish and garbage of various hospitals, clinics, nursing homes in Surat, it was required by the Municipal Corporation to handle and manage the same, hence, invited Boot Tender. The assessee has offered and on a token rent of Re.1/- per square meter per annum, the said agreement was entered into for seven years. The assessee is to make the construction on the land as per the approved plans. The assessee has to install necessary equipment and machinery. One of the clauses is very clear that En-Vision shall bear all the expenses for putting up the said plan . The assessee is entitled to charge for treatment of waste per kg. as fixed by Municipal Corporation from time to time. One of the clauses, thus is clear that the rate shall be as per the quotations agreed upon. On termination of agreement, the project is to be taken over. At this juncture, ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enance of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under section 80IA. The condition of a certificate from the port authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The aa developed the facility on a BOLT basis under the contract with JNPT. On the fulfilment of the lease of ten years, there was a vesting in the JNPT free of cost. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April, 1995. The assessee was entitled to the special deduction under section 80-IA. 9. Under the totality of the facts and circumstances of the case and after due consideration of the legal provisions in the light of the case law cited, we hereby hold that the assessee is entitled for the claim of deduction u/s.80IA(4) of IT Act. In the result, we hereby confirm the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A is not within its ambits. The AO has therefore has held as under:- b) The law is very clear in this regard and hence the initial year of the assessee for carry forward of the loss etc. is taken as AY 2003-2004. In view of the same the working will be as follows AY 2003-2004 Net Income of the BMW Project -Rs.9,414 Less Depreciation as per IT Act Rs.34,89,998 -Rs.34,99,412 AY 2004-05 Net Income of the BMW Project Rs.9,26,204 Carried forward loss of the last AY -Rs.34,99,414 Carry forward for the next AY -Rs.25,73,208 AY 2005-06 Net Income of the BMW Project Rs.56,98,146 Carried forward loss of the last AY -Rs.25,73,208 Rs.31,24,938 Claim u/s.80IA of the Act for the AY 2005-2006 Rs.56,98,146 Less Allowable Dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of deduction made u/s.80IA of the Act. This fact has also to be looked into by ld.CIT(A). Lastly, we want to place on record that a decision of Hon ble Madras High Court pronounced in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs. Asst.CIT in Tax Case reported at (2010) 231 CTR (Mad.) 368 and an order of ITAT Mumbai in M.Pallonji Co.(P) ltd. vs. JCIT (2006) 6 SOT 287 have been cited, however, these decisions were not available when the first appeal was decided. Due to this reason as well, we deem it proper to refer this issue back to the stage of CIT(A) to reconsider as per law, needless to say after providing adequate opportunities of hearing to both the parties. Resultantly, this ground of the assessee may be treated as allowed but for statistical purposes. 13. Rest of the grounds pertaining to interest u/s.234B and penalty u/s.271(1)(c) are either consequential or pre-mature in nature, hence need no adjudication. 14. In the result, Assessee s appeal for AY 2005-06 may be treated as allowed but for statistical purposes. 15. For A.Y. 2004-05, the assessee has raised the following Cross Objection. 1. The learned CIT(A) has erred in law and on facts in ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and specially sub-clause(c) requires due consideration reproduced below:- Explanation-2 For the purpose of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) .. (b) .. (c) where can assessment has been made, but (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject or excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.] 15.3. At the first round of assessment, there was no discussion at all in respect of the eligibility of the deduction u/s.80IA(4) as is evident from the said initial order passed u/s.143(3) dated 09/11/2006 through which the total income was assessed at ₹ 41,82,870/-. Therefore, reasons were recorded for reopening of the assessment on 29/03/2010, wherein it was mentioned that the assessee was not eligible to claim the deduction u/s.80IA(4) which was wrongly allowed, hence the income has escaped assessment. Under these circumstances, we are of the view that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the appellant company as the investments were made in routine course of business activities. 16.1. In respect of this ground, facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the IT Act dated 25/11/2009 were that the assessee has earned exempted dividend of ₹ 4,98,896/-. The assessee has not shown any expenditure in relation to such exempted income. As per AO, it was not possible to earn any income without incurring certain expenditure. He has referred section 14A(3) and IT Rule 8D for the purpose that a scientific method has been provided for determining the expenditure related to the exempted income. Applying the said formula, the AO has worked out the disallowance of expenditure at ₹ 2,84,215/-. When the matter was carried before the first appellate authority, the disallowance was confirmed, although it was mentioned that Rule 8D was not applicable for the Asst.Year under consideration being inserted with effect from 24/03/2008. 17. However, on hearing the submissions of both the sides, we are of the view that as suggested by both the sides, this issue requires readjudication as per the decision of Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the proviso to that Section, the disallowance thereunder could be effectively made from assessment year 2001-2002 onwards. The fact that the Tribunal failed to consider the applicability of Section 14A in its proper perspective, for assessment year 2001-2002 would not bar the Tribunal from considering disallowance under Section 14A in assessment year 2002-2003. c) The decisions reported in Sridev Enterprises (supra), Munjal Sales Corporation (supra) and Radhasoami Satsang (supra) holding that there must be consistency and definiteness in the approach of the revenue would not apply to the facts of the present case, because of the material change introduced by Section 14A by way of statutory disallowance in certain cases. There, the decisions of the Tribunal in the earlier years would have no relevance in considering disallowance in assessment year 2002- 2003 in the light of Section 14A of the Act. 73. For the reasons which we have indicated, we have come to the conclusion that under Section 14A(1) it is for the Assessing Officer to determine as to whether the assessee had incurred any expenditure in relation to the earning of income which does not form part of the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat purpose, the Assessing Officer is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record; vii) The proceedings for Assessment Year 2002-03 shall stand remanded back to the Assessing Officer. The Assessing Officer shall determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income / income from mutual funds which does not form part of the total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer shall provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case. ( emphasis given) On the basis of above decision, we are also of the view that it depends on the facts of each case. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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