Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

ACIT, Circle-8, Ahmedabad. Versus Zydus Intrastructure Pvt. Ltd.

2016 (8) TMI 696 - ITAT AHMEDABAD

Addition u/s.41 - Held that:- The impugned creditors were having regular business transactions in subsequent years also and the actual payments were made to these parties in the subsequent years and the very foundation called for an addition u/s 41(1) of the Act gets demolished if an assessee proves that the impugned liabilities were paid off. From going through the observation of ld. CIT(A) and also the fact that the impugned creditors were paid in subsequent years, we find no reason to interfe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

one so. We find no reason to interfere with the order of ld. CIT(A) on this issue. - Deduction u/s.80IAB - income earned from operation and maintenance of SEZ - Held that:- From going through the proviso (2) of section 80IAB of the Act which says that if the work of operation and maintenance of SEZ is transferred from one developer to another then the deduction allowable in sub-sec.(1) of sec.80IAB will be allowed to transferee developer for the remaining period of the remaining of consecuti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at Ahmedabad, we find that in clause (ii) under the main clause (III) referring to general condition it reads that operation and maintenance of the facilities will be met as per the standard in the specific manner and proposition of the user. - We are of the view that assessee being a developer of SEZ is eligible for deduction u/s 80IAB for income earned from operation and maintenance of SEZ. In the result ground no.3(a) of Revenue is dismissed. - Deduction u/s 80IAB on the income receiv .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n in books of account for F.Y.2008-09 and as far as F.Y.2007-08 was concerned, the income relating to water charges was impossible to be incorporated in the account of F.Y. 2007-08 as they were already closed and finalised and, therefore, this amount of ₹ 23,09,372/- was shown as a prior period income from water charges. In the given facts and circumstances, we are of the view that as the assessee being eligible u/s 80IAB of the Act for a particular block of years it will not make any impa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Sr. DR Respondent by Shru Mukesh M. Patel, AR ORDER Per Manish Borad, Accountant Member This appeal of Revenue for Asst. Year 2009-10 is directed against the order of ld. CIT(A)-XIV, Ahmedabad dated 30.4.2012 in appeal No.CIT(A) XIV/Jt.CIT, R-8, 224/2011-12 passed against order u/s 143(3) of the IT Act, 1961 (in short the Act) framed on 23/12/2011 by Jt. CIT, Range-8, Ahmedabad. Revenue has raised following grounds :- 1. The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ctivities of operation and maintenance. : (b) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow the deduction u/s.80IAB of the Act on the income received from sale of scrap and professional fees. (c) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing to allow the deduction u/s.80lAB of the Act on the prior period income. 4. On the facts and in the circumstances .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

EZ). Return of income for Asst. Year 2009-10 was filed on 16.09.2009 disclosing income at ₹ 73,88,600/-. Case was selected for scrutiny assessment. During the course of assessment proceedings ld. Assessing Officer observed that assessee has credited the profit and loss account by income on account of operation and maintenance of SEZ which was included in the deduction u/s 80IAB of the Act. However, ld. Assessing Officer was of the view that such income from operation and maintenance is not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee was assessed at ₹ 2,29,43,074/-. 3. Assessee went in appeal before ld. CIT(A) and the same was partly allowed with major relief given by ld. CIT(A). 4. Now Revenue is in appeal before the Tribunal. 5. Ground No.1 of Revenue s appeal is as under :- 1. The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of ₹ 84,841/- made by the Assessing Officer u/s.41 of the Act. 6. Ld. DR supported the order of Assessing Of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

no addition was called for u/s 41(1) and ld. CIT(A) has rightly deleted the same. 8. We have heard the rival contentions and perused the material on record. Revenue has challenged the order of ld. CIT(A) for deletion of the addition made u/s 41(1) of the Act for cessation of liability. We observe that ld. CIT(A) has deleted the addition u/s 41(1) of the Act of ₹ 84,841/- by observing as under :- 3.3 Decision I have carefully perused the assessment order and the submissions given by the ap .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and produced before the A. O. After consideration of all facts, I am in agreement with the submission of the appellant that the payment has been made in the subsequent year. The A. O. also has not given any specific finding regarding the fact that the liability has ceased to exist. He has applied the provisions by generally mentioning the provisions of section 41 (1) and only on the reason that the confirmation was not submitted. Unless, if is established by the A. O. that the liability has ceas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

also and the actual payments were made to these parties in the subsequent years and the very foundation called for an addition u/s 41(1) of the Act gets demolished if an assessee proves that the impugned liabilities were paid off. 9. From going through the observation of ld. CIT(A) and also the fact that the impugned creditors were paid in subsequent years, we find no reason to interfere with the order of ld. CIT(A), we uphold the same. This ground of Revenue is dismissed. 10. Ground No.2 of Re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ure of ₹ 59,999/-incurred on purchase of software was basically a license fees and are capital in nature subject to 25% depreciation (applicable for intangible asset) and after allowing ₹ 11,040/- on the cost of software of ₹ 91,999/- made an addition of ₹ 80,959/-. 13. When the matter travelled before ld. CIT(A) it was held that the software license expenditure which are valid for long term but are part and parcel of the computer system and are eligible for 60% depreciat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sset under the block of intangible assets eligible for depreciation @ 25% whereas ld. CIT(A) has also treated the expenditure of ₹ 91,999/- as capital expenditure but has categorized it along with computers and directed the Assessing Officer to allow depreciation @ 60% by observing as under :- 4.3 Decision: I have careful!/ perused the assessment order and the submissions given by the appellant. The appellant has submitted that since the software involves rapid obsolescence, the claim of r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

been grouped as eligible to rate of depreciation @ 60% and, therefore, A. O. should have allowed the depreciation @ 60% in place of 25% at/owed by him. The appellant has also disputed the finding of the A, O. that the software were used for less than 180 days. The A. O. is directed to verify the claim from the facts available on record and allow the depreciation accordingly as per the provisions of the Act, The grounds of appeal are accordingly partly allowed. 15. It is almost a settled issue th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow the deduction u/s.80IAB of the Act on the income derived from activities of operation and maintenance. : (b) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow the deduction u/s.80IAB of the Act on the income received from sale of scrap and professional fees. (c) The Ld. Commissioner of Income-Tax (App .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r charges income, operation and maintenance charges which were claimed by assessee to be eligible for deduction u/s 80IAB of the Act whereas ld. Assessing Officer was of the confirmed view that assessee was not eligible for deduction u/s 80IAB for income earned in operating and maintenance of SEZ. In view of this observation ld. Assessing Officer denied deduction u/s 80IAB of the Act for ₹ 1,53,66,673/- on account of following :- i) Income from operation & maintenance inclusive of prio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fficer. 21. Ld. AR submitted as under - 1.0 Tax Incentives for SEZ - A Historical Overview, which prima-facie explains the logical justification of our claim for Deduction in respect of Income from Operation & Maintenance 1.1 Prior to the introduction of Sec. 80-IAB, which came to be inserted in the Income- tax Act, 1961, by the Special Economic Zones Act, 2005, w.e.f. 10-02-2006, similar deduction for SEZs was allowed under the provisions of Sec, 80-IA(4)(iii) of the Income-tax Act. As per .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt years out of fifteen years beginning from the year in which the undertaking or enterprise develops the industrial park or special economic zone. As per the proviso to the said sub-section, where an undertaking develops an industrial park or a special economic zone and transfers the operation and maintenance of such park or zone to another undertaking, the benefit of deduction u/s. 80-IA(1) was to be allowed to such transferee undertaking for the remaining period in the ten consecutive assessm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.4 In the above context, there is no logical reason as to why the benefit of deduction, earlier available to an undertaking in respect of income from development, operation and maintenance, could have been intended by the Legislature to be restricted only for development income under the new scheme of deduction u/s. 80-IAB, more so when the overall ambit and scope of tax incentives for SEZ Developers and Entrepreneurs were enlarged. Infact, if there was any such legislative intention, the explan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

80-IA(4)(iii) of the Income-tax Act. The period of 10 years of deduction, provided u/s. 80-IAB, is obviously intended to ensure that even after the completion of the Development, the income from Operation and Maintenance of the SEZ also continues to enjoy the benefit of 100% deduction. 1.6 Moreover, as per the second Proviso to Section 80-IAB, where an undertaking being a Developer of a Special Economic Zone transfers the operation and maintenance of such SEZ to another Developer, the benefit o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of such SEZ to another Developer, the benefit of deduction is to be allowed to the transferee Developer as well, for the remaining period in the ten consecutive assessment years, as if the operation and maintenance were not so transferred to the transferee Developer. 2.0 Introduction of the term 'Developer' as defined in the SEZ Act and the important meaning & context of the same 2.1 Whereas the earlier provisions of Sec.80-IA applied to an assessee being "any undertaking whic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vernment which, has been granted a letter of approval under sub-section (10) of Sec. 3 and includes an authority and a Co-Developer. 2.2 Under Sec. 3(10), it has been provided that the Central Government shall on receipt of communication by the Board, grant a letter of approval on such terms and conditions and obligations and entitlements as may be approved by the Board to the Developer, being the person or the State Government concerned. 2.3 In this context, we wish to invite your kind attentio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

us, development, operation and maintenance of the Special Economic Zone are an integral part of the terms and conditions and obligations and entitlements granted to the Developer under the Letter of Approval. 3.0 Scope of Exemption from MAT & DPT to SEZ Developer - a clear pointer to the scope of Deduction u/s 80-IAB 3.1 In the above context, it is also meaningful and relevant to examine the provisions of Sec. 115JB(6) in relation to exemption from Minimum Alternate Tax (MAT) and Sec. 115O(6 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

from IVIAT is applicable in the case of a Developer as referred to u/s. 80-IAB in respect of all income accruing or arising from any business carried on or services rendered, which would very much cover not only income from development of SEZ, but also income on account of operation and maintenance of SEZ also. When the relevant benefit of exemption in respect of income from operation and maintenance is granted under MAT, there is no logical basis or justification for not granting similar benefi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

31st March, 2006), as well as the Developer referred to under the new provisions of Sec. 80-IAB (as notified on or after 1st April, 2005). Therefore, the provisions of Sec. 115O(6) have referred to both the categories viz. "any undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone," or "Developer," for purposes of availing the benefit of exemption from DOT. It would be indeed naive to inte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Special Economic Zones for the purpose of allowing deductions under sub-section (1)." 4.2 Section 80-IA(7) lays down the condition that the deduction to the eligible undertaking shall not be admissible unless its accounts for the relevant year have been duly audited and Audit Report in the prescribed Form No. 10CCB is furnished. In this connection we wish to invite your kind attention to the Audit Reptort in Form No. 10CCB filed in our own case, wherein under Column 16, the relevant deta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rmat of the prescribed Form No. 10CCB, is a clear pointer and support to the logical contention presented by us hereinabove, that there is in effect no change in the basic scheme of granting of deduction to a notified SEZ under the provisions of Sec. 80-IAB, with reference to the earlier provisions under Sec. 80-IA(4)(iii), applicable to SEZs notified upto 31st March, 2006. The fact that Form No. 10CCB continues to refer to 'Development, Operation & Maintenance of SEZ' and determinat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gard to the language used. In the case of C.W.S. (India) Ltd. vs. CIT 208 ITR 649 (SC), the Hon'ble Supreme Court was pleased to hold as under: "While we agree that literary construction may be the general rule in construing taxing enactments, it does not mean that it should be adopted (sic) if it leads to a discriminatory or incongruous result. Interpretation of statutes cannot be a mechanical exercise. Object of all the rules of interpretation is to give effect to the object of the en .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he language of the statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

draftsman in doing his revision rather than a deliberate attempt to introduce an irrational rule: 'the canons of construction are not so rigid as to prevent a realistic solution'." (p. 228) We are, therefore, of the opinion that the Full Bench of the Kerala High Court was right in taking the view it did on this aspect and we agree with it." 5.2 "A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally".... .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tivities were exempt under section 81 of the Income-tax Act, 1961. The question for interpretation was whether the co-operative society which carried on the business of ginning and pressing was a society engaged in 'marketing' of the agricultural produce of its members. The Court held that object of section 81(1) was to encourage and promote the growth of cooperative societies and, consequently, a liberal construction must be given to the operation of that provision. And since ginning an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dule relevant to the respective assessment years. The Court held that since words 'paper and pulp' were mentioned in the Schedule, the intention was to refer to the paper and pulp industry and since Straw Board Industry could be described as forming part of the paper and pulp industry, it was entitled to benefit. The section, read as a whole, was a provision directed towards encouraging industrialization by permitting an assessee setting up a new undertaking to claim benefit of not payin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

exhaustively dealt with this issue before allowing the appeal by observing as under :- 5.3 Decision: I have carefully perused the. assessment order and the submissions given by the appellant. The A. O. has disallowed the' claim of income of the appellant by operation and maintenance of the SEZ as the section 80IAB mentions only the word 'developing1. The appellant has submitted that the claim is in accordance with the provisions of section 801AB and should therefore be allowed. In order .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ection, be allowed, in computing the total income ot the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for ten consecutive assessment years" The word 'developer1 has further been defined in Explanation to Section 80IAB which reads as under: "Developer shall have the meaning as assigned underclause (g) of Sec. 2 of the Special Economic Zones Act." Further, section 2(g) of the SEZ Act has defined the term dev .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the State Government concerned. A combined reading of the provisions of section 80IAB of the Income Tax Act with Section 2(g) and Section 3(10) of the Special Economic Zone Act show that a person would be considered as a developer in accordance with the grant of letter of approval on the basis of terms and conditions and obligation and entitlement as may be approved by the Board who is approving the setting up of the SEZ. Therefore, if the approval has been granted for developing, operating and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s made there under." Thus, it is clear from the letter of approval that development, operation and maintenance of the Special Economic Zone are an integral part of the terms and conditions and obligations and entitlements granted to the Developer. Therefore, in view of the preceding discussion, the word 'developer' also include the activities of operation and maintenance of the SEZ in the case of the appellant. The interpretation by the A. O. that operation and maintenance are diffe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re the Act provides for deduction in respect of profits and gains derived from operation and maintenance activities in the hands of transferee developers, if any developer after developing a SEZ transfers the operation and maintenance of such SEZ to another developer is also, in my opinion, not justified. The activity of development, operation and maintenance are continuous in nature. Once a person takes up the work of development ot a facility and starts allotting or selling plots in the SEZ, i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction 80IAB has been incorporated. In the case of the appellant, the approval given is for all the activities. If would not be out of place to mention here that the provisions of section 80IA(4) initially had the words developing, maintaining and operating or developing, maintaining and operating. However, once the difficulty or anomaly in implementation of the language was observed, the provisions were subsequently amended from 01/04/2001 and the words or were introduced to take the work of dev .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed from operation and maintenance, we find that provisions of section 80IAB is self- explanatory which reads as under :- [Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone. 80-IAB. (1) Where the gross total income of an assessee, being a Developerm, includes any profits and gains derived by an undertaking or an enterprise from any business of developing a Special Economic Zone, notified on or after the 1st day of April, 200 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g from the year in which a Special Economic Zone has been notified by the Central Government : Provided that where in computing the total income of any undertaking, being a Developer for any assessment year, its profits and gains had not been included by application of the provisions of sub-section (13) of section 80-IA, the undertaking being the Developer shall be entitled to deduction referred to in this section only for the unexpired period of ten consecutive assessment years and thereafter i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Developer for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee Developer. (3) The provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA shall apply to the Special Economic Zones for the purpose of allowing deductions under sub- section (1). Explanation.-For the purposes of this section, Developer and Special Economic Zone shall have the same meanings respectively as assigned to them .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee is eligible for deduction u/s 80IAB for the income from operation and maintenance of SEZ then certainly transferor i.e. developer is eligible for deduction u/s 80IAB from operation and maintenance. 25. Further from going through the letter issued by Government of India Ministry of Commerce & Industries dated 21st June, 2006 to the assessee for setting up of a sector specific Special Economic Zone for Pharmaceuticals at Ahmedabad, we find that in clause (ii) under the main clause (III) ref .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

peal -wherein Revenue is aggrieved with the order of ld. CIT(A) directing the Assessing Officer to allow deduction u/s 80IAB on the income received from sale of scrap and professional fees. During the year under appeal, the respondent has shown miscellaneous income from sale of scrap at ₹ 91,000/- and plan approval fees of ₹ 16,535/- earned in the regular course of business. During assessment proceedings these income were not considered as eligible for deduction u/s 80IAB of the Act .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ealthcare Ltd. [308 ITR 263]. Considering the judgment of Hon'ble Gujarat High Court, I am of the opinion that sale of scrap of iron and steel which is generated from the activity of construction of the infrastructure facility should be treated as derived from the activity and, therefore, the appellant is entitled for deduction on the same. The claim of deduction on professional income on account of receipt of plan approval fee collected by the appellant also has a direct nexus with the acti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of deduction u/s 80IAB on these amounts of ₹ 91,000/- and ₹ 16,535/-. We uphold the order of ld. CIT(A). So ground no.3(b) of Revenue is also dismissed. 30. Further we also observe that ld. Assessing Officer while making disallowance of ₹ 1.52 crores also referred to the prior period income of ₹ 23,09,372/- earned by the assessee from raw water charges. We also observe that ld. Assessing Officer has not raised any objection against the allowability of deduction u/s 80IAB .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version