TMI Blog2022 (10) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2017 passed by the Ld. Commissioner of Income Tax (Appeals) 9, Ahmedabad arising out of the order dated 17.10.2016 passed by the DCIT, Circle-3(1)(2), Ahmedabad under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to the Act ) for Assessment Year 2014-15, whereby and whereunder mainly the claim under Section 80IA(4) of the Act made by the assessee has been denied on finding that the assessee is a work contractor and not a developer. 2. The assessee has come up in appeal with the following grounds: (1) That on facts, and in law, the learned CIT(A) has grievously erred in confirming the disallowance of deduction claimed u/s.80IA(4) of the Act of Rs.4,08,99,861/- (6,77,15,250 - 2,68,15,389). (2) That on facts, and in law, it ought to have been held that the entire deduction claimed, is allowable as such without set-off of losses of Rs.2,68,15,389/- of lossmaking infrastructure facilities. (3) That on facts, and in law, the learned CIT(A) has grievously erred in not deciding the ground regarding exclusion of only net interest income for the purpose of allowance of deduction u/s 80IA(4) of the Act. (4) That on facts and in law, the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifies that this section will not apply to any business which is in the nature of a works contract . In other words, the essence of this section is that, the benefit of section 80-IA(4) would be available to a developer and not to a contractor simplicitor. In the present case the lower authorities have denied the benefit of section 80-IA(4) to the appellant-company on the assumption that the appellant-company is engaged in executing merely a work contract and it is not carrying on the business of developing an infrastructure facility. The assessee has undertaken entirely and exclusively the projects awarded by the local government authorities, as it is evident from the records as explained and already narrated hereinabove and therefore, there is hardly any basis for assuming that it is merely a contractor executing a works contract. The difference between a developer and a contractor has to be properly analyzed and understood. This issue has come up before the Hon'ble ITAT, Amritsar Bench in the case of M/s. TRG Industries P. Ltd. in ITA Nos. 433 etc./Asr/2009. The Tribunal after relying various case laws has laid down the following parameters when to treat an assessee as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only after furnishing bank guarantees in the form of fixed deposits. In the present case, the assessee itself had to procure materials for the projects and make payments. It has also to deploy men and machineries. Therefore, both the cases, i.e. case of the assessee before this Tribunal and the assessee before the ITAT, Hyderabad (referred above) are clearly distinguishable on all respects. 42. Before parting with the matter we would like to mention that we have considered the judgements relied upon by the Ld. AR passed by different judicial forums including the judgement passed in the matter of Patel infrastructure and Katira construction (supra) passed by the Rajkot Bench and Katira construction passed by the Hon ble jurisdictional High Court wherein the constitutional validity of insertion of explanation below sub Section 13 of Section 80 IA of the Act was challenged. The Ld. Representative appearing for the Revenue vehemently argued on this point that the jurisdictional High Court in the said matter already decided the issue against the assessee. Fact remains that the jurisdictional High Court in that particular matter dealt with the constitutional validity of the inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el appearing for the assessee submitted before us that Ground No.2 has also been decided in favour of the assessee by the Co-ordinate Bench in ITA No.118/Ahd/2009 20. On the contrary, the Ld.DR relied upon the orders passed by the authorities below. 7. We have heard the parties and perused the materials available on record. Upon careful perusal of the Co-ordinate Bench order, it appears that the issue has already been examined thoroughly and decided in favour of the assessee. The observation made by the Co-ordinate Bench in this regard is as follows: 50. Now we deal with third common issue viz. the Revenue authorities are erred in setting off loss of four infrastructure facilities from the profits of other infrastructure facilities despite having legal provisions that deduction should be allowed on standalone basis. This common issue is raised for the Asst.Year 2007-08 to 2013-14 and 2015-16 2016-17. 51. In Assessment Year 2007-08 the Ld AO disallowed the entire claim of deduction under 80 IA of the Act to the tune of Rs. 67, 23, 899 due to the reason that the appellant has not considered and setting off loss from 8 projects while calculating deduction under chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter the Hon ble Court was pleased to observed as follows: 5. In the case of Commissioner of Income tax(Central) Madras vs. Canara Workshops P.Ltd. Reported in 161 ITR 320, in the context of deductions provided under section 80E of the Act, the Supreme Court held that the merit earned by one industry not to be lost or diminished for loss by some other industry when assessee was carrying on two priority industries. It was held that loss in one industry is not to be set off against profits from the other and the deduction would be on the whole profits from the profit making industry. It was held that in the application of section 80E, profits and gains earned by one priority industry cannot be reduced by loss suffered by another industry owned by the assessee. Each industry must be considered on its own working, while adjudging its claim to the deduction under section 80E. 6. In this context, Allahabad High Court in the case of Commissioner of Income- Tax and another vs. Modi Xerox Ltd. (supra) found that the assessee was a multi unit company carrying on three different activities and had three separate units for such activities. Two of these units were profit making units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the only source of income. Therefore, from the decision of the apex court, two principles of law emerge one for the purposes of computation of gross total income the losses of other units are to be taken into account but for the purposes of calculating the deduction of industrial undertaking, the loss sustained in another unit cannot be taken into account and only the profit shall be taken into account as if it was the only source of income of that unit. In this view of the matter, we are of the view that there is no error in the order of the Tribunal. 7. We respectfully agree with the view expressed by Allahabad High Court. This view is not in conflict with the decision of the Supreme Court in the case of Synco Industries Ltd. (supra). In such case, it was found that the assessee had two industrial units namely, one in oil and another in chemicals. The assessee was making profits in chemical unit but incurring losses in oil unit. In this background, it was held that while computing gross total income, income should include both profit in chemical unit and loss in oil unit. If the result thereafter is nil, the assessee cannot get benefit of special deductions under section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne has to give effect to the computed deduction in order to arrive at the total income of the company and while giving effect, one has to consider the provisions of section 80IA and 80IB of the Act. In other words, while considering the gross total income of the assessee, deduction under section 80IA and 80IB of the Act are required to be allowed after adjusting loss worked out in other units. 9. We therefore, do not find any error in the view expressed by the Tribunal following the decision of the Allahabad High Court. Tax Appeal is therefore, dismissed. 55. We have further considered the judgement passed by the Mumbai Bench in the case of Punit construction company, reported in 92 taxmann.com 28(Mum. Tri) wherein it has been specifically decided that in terms of provisions of sub Section 5 of Section 80 IA, deduction has to be given unit wise without considering profit or loss of other eligible units. In that view of the matter respectfully relying upon the same we allow this ground of appeal preferred by the assessee with the direction upon the AO to grant relief to the assessee only on the profitmaking unit without setting off loss suffered by other eligible units. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arantee the assessee has to keep certain amount fixed deposits as margin money. These fixed deposits were made out of borrowed funds for giving security deposits to the Government. Therefore, claim of deduction under section 80IA was fully allowable. However, the AO did not accept this explanation of the assessee. He was of the view that since the assessee has huge surplus funds, the same was parked with the bank and earned interest income, which was not part of the income earned from any industrial activities but receipts from the investment of surplus fund with bank. The AO accordingly disallowed interest income and other income to the tune of Rs.65,58,550/-. In appeal preferred by the assessee, the CIT(A) confirmed the action of the AO. Hence, assessee is before the Tribunal. 46. Before us, the counsel for the assessee reiterated submissions as were made before the lower authorities. The counsel further submitted that the interest income is earned only on fixed deposits for obtaining bank guarantee and security deposit to be placed mandatorily as per the tender when work was awarded. Hence, such interest income is business income and eligible for deduction under section 80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accepting the claim of the assessee that the income earned from the deposits is business income is eligible for deduction under section 80IA of the Act. Accordingly, this common ground raised in the appeals under consideration is allowed in favour of the assessee and against the Revenue. 49. As aforesaid, since the above issue is also identical to the assessee s appeals for Asst.Year 2004-05, 2005-06, 2007-08to 2010-11 and 2012-13to 2016-17, in the absence of any changed circumstances, our finding and decision in the Asst.Year 2004-05 will apply mutatis mutandis in the instant appeals also. 11. In the absence of any different fact, we do not find any reason to deviate from finding made by the Co-ordinate bench and therefore respectfully relying upon the same, we allow this ground of appeal preferred by the assessee. 12. The Ld. Counsel appearing for the assessee submitted before us that Ground No.4 has also been decided in favour of the assessee by the Co-ordinate Bench in ITA No.118/Ahd/2009 20. On the contrary, the Ld.DR relied upon the orders passed by the authorities below. 13. We have heard the parties and perused the materials available on record. Upon ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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