TMI Blog2018 (1) TMI 1571X X X X Extracts X X X X X X X X Extracts X X X X ..... e. running business of M/s. Anupam Bricks and Concrete Industries a proprietorship firm of Shri Budhmal Baid, Managing Director of the company in lieu of which the company had issued shares at a premium and the fact that by this process, the assessee acquired the assets including a Hot Mix plant. This fact was in the knowledge of the AO as well as he has considered this fact elaborately as reproduced above in his original assessment order, therefore, right or wrong, the decision taken by him cannot be revisited or reviewed by the AO invoking Sec. 147 of the Act because the AO does not have the power to review his own order. Relying upon the decision in the case of Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] we do not find any legal infirmity in the order passed by the Ld. CIT(A) and hence, the same is hereby upheld. Appeal of revenue is dismissed. - I.T.A. Nos. 990/Kol/2013 - - - Dated:- 10-1-2018 - Shri A. T. Varkey And Shri M.Balaganesh, JJ. For the Appellant Shri David Z. Chawngthu, Addl. CIT, Sr. DR For the Respondent Shri Miraj D. Shah, AR ORDER Shri A. T. Varkey, J. This appeal filed by the revenue is against the order of Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to M/s. ABCI Infrastructures (P) Ltd. from M/s. Maxxcom Vyapar (P) Ltd. w.e.f. 01/02/2002 and that your company had taken over M/s Anupam Bricks Concrete Industries (Hot Mix Plant Unit) w.e.f. 01/0212002 with the intent to change the nature of the existing business and to start a business of construction. Simultaneously, there were also changes in the portfolio of the directors. As per the Tax Audit Report1iled along with the return of income, it is seen that your company was engaged in the business of Civil Construction and Manufacturing of Construction Materials. As per the P L Ale., the total income for the year ended on 31/03/2005 was ₹ 4,69,31,185/- which included income of the company's Contract Unit as well as the Hot Mix Plant Unit. Deductions under Chapter VIA was claimed as per below (a) Deduction of ₹ 2,86,71 ,025/- u/s.801A of Act for the Contract Unit: During the year the company had undertaken various civil works for the Railways, State Government and other Local Authorities on contract basis. (b) Deduction of ₹ 68.94,257/- u/s.80IC of Act for the Hot Mix Plant Unit: The Separate Notes on Accounts for both the units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IC of the Act. 5. Before adverting to analyse the reasons, we would like to point out that though the AO reopened the assessment in respect of Sec. 80IC claim of the assessee that is for its hot mix plant in North Eastern Region, it is to be pointed out that in the original assessment by a reasoned order, the AO had denied 80IC claim made by the assessee. However, the AO has again in his reason to reopen the assessment has brought in the 80IC claim of the assessee and in the reassessment order has granted 80IC deduction to the assessee. It should be remembered that in CIT Vs. Sun Engineering (1992) 198 ITR 297 (SC), the Hon ble Supreme Court has held that the reopening of assessment is done for the benefit of the revenue and, therefore, since the AO in the original assessment had denied the claim u/s. 80IC of the Act, the AO while reopening the assessment ought not to have reviewed the earlier order passed by the AO in the original assessment, since AO does not enjoy the power of review of his own order. So the order granting 80IC deduction is per-se bad in law. 6. The AO can reopen an assessment only if he has reason to believe that income chargeable to tax has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Account, it has been found that assessee has earned interest of ₹ 28,34,024/- and on this interest income deduction u/s. 80IA was claimed by the assessee. 3.2. It is well settled in various cases that interest received from surplus fund will be treated as income from other source. Thus, deduction i/s. 80IA will not be allowed on interest income of ₹ 28,34,024/-. 3.3 Without prejudices to above, deduction will be allowed only on profit gains from industrial undertaking or enterprises engaged in' infrastructure development. Interest received is not part of the earning of the infrastructure developments, hence, deduction u/s. 80IA will not be allowed; on said income. It is also well settled in the various cases such as - i. In the case of Pandian Chemicals Limited Vs. C.I.T (2003) 262(ITR) 278 (Supreme Court) that interest income shall be treated as income from other sources and not under head business profession. ii. In the case of CIT; Vs. Menon Impex P Ltd. that interest on deposits was not derived from exports, it could not be said that there was a direct nexus between the interest income and the industrial undertaking. The assessee was therefore n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the earlier AO. So, the AO on the same material on which the predecessor of AO has taken a plausible view during the original assessment, has ventured in the reassessment to take a different view, which action is akin to review of his own order which power AO does not enjoy. The Hon ble Supreme Court in CIT Vs. Kelvinator India Ltd. (2010) 310 ITR 561 (SC) has reiterated the well settled law that AO has no review powers as under: On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from April 1, 1989), they are given a go-by and only one condition has remained viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-April 1, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 to reintroduce the expression 'has reason to believe' in the place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same.' [Emphasis supplied] For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 8. From the aforesaid dictum of the Hon ble Supreme court, we note that the AO has no power to review and, therefore, the order is bad in law and has to be set aside. Moreover, on merits also, we note that in a similar case the Coordinate Bench of this Tribunal in DCIT Vs. Simplex Somdatt Builders JV, ITA No.1684/Kol/2011 for AY 2007-08 order dated 18.06.2013 in similar facts of the case has held that assessee s claim is allowable u/s. 80IA of the act as under: 11. We have considered the rival submissions. Admittedly, a perusal of the agreement entered into between the assessee and the Govt of Andhra Pradesh Irrigation CAD Department shows that the assessee has taken EPC/Turnkey contract of the flood flow canal project from SRSP. The name of the contract has been extracted ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is as per article 107 of the agreement. Thus, admittedly the work done by the assessee falls in the exclusion provided to the meaning of the work given in the Explanation to section 194C of the Act. Once it falls outside the meaning of term work for the purpose of section 194C, the question that arises is can it be said that the assessee is doing the work contract as provided in the substituted Explanation in section 80IA after sub clause (13)?, The answer would be emphatic no. 12. This is because the assessee is doing the activity of development of an infrastructure facility as provided under section 80IA(4). The project is a Turnkey project and it cannot form nor have a character of a works contract. Works contract would be applicable to the repairs and maintenance of an existing project. Works contract cannot be in relation to the development of a new project. One of the arguments raised by the learned Sr.DR that the intention of the substitution of the Explanation after sub clause (13) of section 80IA was to deny, the benefit of deduction u/s. 80IA(4) in respect of works contract, but to provide the deduction to such undertakings, which is doing the business of buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded the manufacturing or supplying a product according to requirement or specification of a customer by using material purchased from a person other than such customer. As has been specified by the Ld. AR, the assessee is doing contract work but that work is according to the requirement and specification of the customer and the same has been done by using materials purchase from third parties other than the customers. Thus, though the assessee is doing a works contract the same would not fall within the meaning of the word works contract for the purpose of the Act due to the exclusion provided in the meaning of work in section 194C of the Act. The issue raised by the Ld. CIT that the assessee is not doing the development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges thereof. Development encompasses within itself contract work. The agreement between the assessee and the customer being the government is for the development of the infrastructure facility being roads and rail systems and bridges by participating in the tenders. Under these circumstances, we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired assets includes a Hot Mix Plant valuing Rs. l8,77,160/- the profit from which was claimed as exempt under Section 80IB of Income-tax Act, 1961. 4.6.3. From the above points, it is clear that the assessee is not entitled to deduction u/s. 80IC as it has purchased old plant from M/s. Anupam Bricks Concrete Industries. Section 80IB requires that the undertaking is not formed by splitting up or the reconstruction of a business already in existence it should not be formed by transfer of machinery or plant previously used for any purpose . 4.6.4. Moreover, as per Form No. 10CCB of A.Y. 2002-03 clause 18(a) assessee has mentioned that 18. Eligible business under section 80-IB (a) has the industrial undertaking received any machinery or plant on transfer which was previously used for any purpose: Yes / No. The assessee has marked as 'Yes'. It is clear from Form No. 10CCB and accounts of statement as mentioned above that the assessee has used old plants and claimed deduction u/s. 80-IB from A.Y. 2003-04. 4.6.5. 0n the above grounds, assessee is not entitled to deduction u/s. 80-IB from AY 2003- 04. 4.6.6. In the A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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