TMI Blog2017 (5) TMI 1797X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 36(1)(iii) - We found that the cash profit of the assessee company that have been earned during the year as reduced by the amount of investment in joint venture company, was in excess to the monies advanced to Chafal as on the cut-off date, therefore it can be safely presumed that advance have been given against profits of the year and not out of interest bearing funds. This view has been supported by the decision of Hon ble Bombay High Court in the case of Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] Fact that no further advance was given during the year and no disallowance was made in the preceding year also supports the case of the assessee. Accordingly we do not find any merit in the action of the A. O. in disallowing the interest u/s 36(1)(iii) - Decided in favour of assessee. - I. T. A. 3500/Mum/2015, I. T. A. 4756/Mum/2015 - - - Dated:- 25-5-2017 - S/SHRI RAJENDRA, ACCOUNTANT MEMBER AND RAM LAL NEGI, JUDICIAL MEMBER For the Revenue : Ms. Arju Grodia For the Assessee : Shri Neelkanth Khandelwal Order u/s. 254(1)of the Income- tax Act,1961(Act) PER RAJENDRA, AM Challenging the order dt. 31. 03. 2015 of CIT(A)-11,Thane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of ITAT in the case of Patel Engineering Ltd. (supra). As against such case of the AO Ld. CIT(A) has followed mainly the decision of ITAT in the case of Patel Engineering Ltd. (supra) and has allowed relief to the assessee. We have to examine that whether or not assessee is entitled to get deduction under section 80 IA(4) in the light of aforementioned objection of the AO and plea of the assessee. It is the case of the assessee that AO has committed an error in holding that assessee has acted as a contractor in place of the claim of the assessee that it has worked as a developer of the infrastructure project. For raising such contention the assessee has placed reliance not only on the decision in the case of Patel Engineering Ltd. (supra) but also on the decision of Hon ble Bombay High Court in the case of ABG Heavy Industries Ltd. (supra). It may be mentioned here that AO has passed the impugned assessment order A. Y 2004-05 on 31/3/2006 when the benefit of decision of Hon ble Bombay High Court in the case of CIT v/s ABG Heavy Industries Ltd. was not available. The assessee in that case did not develop, operate or maintain the entire port but only part of the function of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued then it will be a condition impossible of compliance because of the magnitude of the entire project. For qualifying deduction under section 80 IA(4) what would be necessary will be that the work carried on by the assessee must be an integral part of the project and if it is so, then it cannot be said that assessee is not eligible for deduction under section 80 IA(4) for the reason that the assessee on its own did not develop an infrastructure project. Therefore, observations of the AO that assessee did not develop an infrastructure project and only part of the work was carried out cannot disentitle the assessee to claim the deduction. 10. 4. The nature of works carried out by the assessee regarding the project have been stated in para-4 of the assessment order for A. Y. 2004-05. It inter-alia include manufacturing , supplying , lowering, laying, jointing, testing and commissioning of 2200 mm diameter MS Pumping Main with cement mortar. In-lining outcoating from clear water reservoir at Godakondala to MBR at Gungal and similar activities were carried out in respect of other places which have been specified by the AO. The activity of the assessee is not limited only to const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the sake of completeness para-22 23 of the decision is reproduced below: 22. Another submission which was urged on behalf of the revenue is that under clause (iii) of sub-section (4A) of section 80-IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1-4-1995. The same requirement is embodied in sub-clause (c) of clause (i) of sub-section (4) of the amended provisions of section 80-IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfill the condition. This submission is fallacious both in fact and in law. As a matter of fact, the Tribunal has entered a finding that the assessee was operating the facility and this finding has been confirmed earlier in this judgment. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1- 4- 1995. Therefore, the requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1- 4-199. . After section 80-IA was amended by the Finance Act of 2001, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rementioned observations of their Lordships, pre or post amendment the requirement of section 80 IA(4) is that deduction will be available an enterprise engaged in (i) developing; or (ii) operating and maintaining or (iii) developing, operating and maintaining the infrastructure facility and such position was to be always construe to hold the field. Therefore, only development of infrastructure project is sufficient to make entitle an enterprise to be eligible for deduction under section 80 IA(4). 10. 7 It may also be pointed out that the appeal filed by the Revenue for A. Y 2004-05 was earlier allowed by the Tribunal on the basis of Larger Bench decision in the case of M/s. B. T. Patel Sons Belgaum Construction Pvt. Ltd. (supra) and it was brought to our notice that in view of the subsequent decision of Hon ble Bombay High Court, Larger Bench decision was not followed by the Tribunal and the matter was decided by the Tribunal vide its order dated 28/2/2013 in the case of B. T. Patel Sons Belgaun Construction Pvt. Ltd. (supra), a copy of this decision was placed on our record. The directions of Hon ble Bombay High Court in pursuance to which such order was passed are also de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of ABG Heavy Industries Ltd. (supra). Para -4 of the said order is reproduced below: 14. In this background, the assessee could certainly claim the deductions under the provision of Section 80 IA. One has to see the substance and not the Form Essentially, though it was a Joint Venture, it was converted into assessee s venture. The Other Venturer withdraw and the entire work was executed by the assessee though in the name of Joint Venture. The Joint Venture is nothing but the venture of the assessee company and the other person not being a party after drawing the question of Joint Venture does not arise. The Venture was fully carried out by the assessee company. Taking the substance of the transaction, the assessee are entitled to all the profits in respect of the contract executed by them, hence the assessee would certainly be entitled to deduction under the provisions of 80IA as they have fulfilled all the other conditions. This view get from decision in the case of ITAT, Indore Bench, in case of Ayush Ajay Constructions Ltd. (supra). Thus, while giving effect to the opinion of Third Member u/s. 255(4) of the Act, we take view in conformity with order of jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had advanced money to its joint ventures without charging any interest and that the assessee has earned exempt income of Rs. 51,01,008/- being share of profit received from various joint ventures which is exempt from tax u/s 10(24) of the Act. 7. It was contended by the ld. Counsel for the assessee that the provisions of section 14A of the Act are not applicable to the facts of the given case inasmuch as assessee s share capital and reserves and surplus aggregating Rs. 47,12,58,552/- are far in excess of the investment that have been made in joint venture entities that aggregate Rs. 15,42,04,123/-. Thus the presumption is that interest free funds have been utilized for making the said investments in joint ventures that have resulted in earning of exempt income. Reliance was placed on the decision Hon ble jurisidictional High Court in the case HDFC Bank Ltd. in Income Tax Appeal No. 330 of 2012 order dated 23- 7-2014. 8. Reliance was also placed by the ld. Counsel for the assessee on the decision of the Tribunal in the case of Binayak Tex Processors Ltd. wherein it was held that the provisions of section 14A are not applicable where the assessee is able to show near proximi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 14A of the Act was not justified. Accordingly the A. O. directed to delete the same. Respectfully following the above order, we decide the effective Ground against the AO. ITA/3500/Mum/2015: 3. First effective ground of appeal,raised by the assessee, is about disallowance made u/s. 14A r. w. Rule 8D of the income tax Rules, 1962(Rules) amounting to Rs. 58. 16 lakhs. We found that similar issue was dealt with and decided by the Tribunal in the earlier year (supra). We are reproducing para 5-15 of the order . 5. The assessee is also aggrieved for disallowance of Rs. 73,40,116/- u/s 14A of the Act. 6. We have considered the rival contention and found from the record that the A. O. has made a proportionate disallowance of a sum of Rs. 73,40,116/- out of interest expenditure debited to the profit and loss account. Observation of A. O. was that assessee had advanced money to its joint ventures without charging any interest and that the assessee has earned exempt income of Rs. 51,01,008/- being share of profit received from various joint ventures which is exempt from tax u/s 10(24) of the Act. 7. It was contended by the ld. Counsel for the assessee that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JV for which separate disallowance has been considered by the A. O. 11. The Hon ble jurisdictional High Court in the case of CIT vs. Reliance Utilities Power Ltd. [2009] 313 ITR 340 held that if there are funds available, both interest free and overdraft/loans taken, then presumption would arise that investments would be out of the interest free fund generated or available with the company, if, the interest free funds were sufficient to meet the investments. Recently, the Hon ble Bombay High Court again followed the same principle in the case of HDFC in Income Tax Appeal No. 330 of 2012 vide order dated 23rd July, 2014. Applying the proposition of law laid down in the judicial pronouncements, we found that in the instant case profit was much more than the investment in the joint venture company therefore the disallowance made by the A. O. by invoking the provisions of section 14A of the Act was not justified. Accordingly the A. O. directed to delete the same. 12. The A. O. has also disallowed an amount of Rs. 22,81,807/- u/s 36(1)(iii) of the Act. The A. O. has discussed this issue at page 8 9. The A. O. has made a proportionate disallowance of a sum of Rs. 22,81,807/- o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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