TMI Blog2022 (9) TMI 1414X X X X Extracts X X X X X X X X Extracts X X X X ..... provision has been made on the basis of its past experience and on scientific basis, therefore, such provision is an allowable expenditure - CIT(A) deleted the addition holding that the assessee has been claiming that provision for maintenance has been made taking into account contractual provision, operating turnover of the year, type of project period of maintenance and other relevant factors - HELD THAT:- At the time of completion of the contract, liability arises in the hands of the assessee company to provide free maintenance to the various contractees for the period specified in the agreement. This liability arises at the time of the completion of the project itself and obviously the expenditure required can only be estimated on the basis of past experience, nature of the contract, type of the project and turnover of the assessee in that particular year. The ld. CIT(A) held that the assessee claimed that estimate has been made on best estimated basis based upon the experience in the construction industry and therefore, the objection of the Assessing Officer that the liability has not arisen during the year as it has been quantified on estimated basis is not correct. Fact n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance u/s 14A cannot be more than 0.5% on the average of the investments made on which the assessee received the dividend income. CIT(A) held that in the present case, the assessee has submitted the details of the dividend received and also worked out the disallowance following the decision of the Hon'ble Delhi High Court, which works out to Rs. 137.105 Lacs. CIT(A) following the judgment of the Hon'ble Delhi High Court restricted the amount to Rs. 137.105 lacs and determined at Rs. 134.585 lacs owing to the disallowance of Rs.2.52 lakhs made by the assessee. Placing reliance on the judgment of the Hon ble jurisdictional High Court, keeping in view, the average investments, the disallowance of Rs. 134.585 lacs ( Rs. 137.105 Rs.2.5 lacs) made by the Revenue u/r 8D(2)(iii) by considering 0.5% of the average investment of Rs.271.21 Cr. is hereby sustained. - ITA No. 1400/Del/2018, ITA No. 2062/Del/2018 - - - Dated:- 7-9-2022 - SH. N. K. CHOUDHARY, JUDICIAL MEMBER AND DR. B. R. R. KUMAR, ACCOUNTANT MEMBER For the Assessee : Sh. Rakesh Gupta, Adv. Sh. Deepesh Garg, Adv. For the Revenue : Ms. Sapna Bhatia, CIT DR ORDER Per Dr. B. R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in confirming the action of Ld. AO in making disallowance of Rs.8,26,887/- on account of advances written off and that too without observing the principles of natural justice. 3. In ITA No. 2062/Del/2018, following ground have been raised by the Revenue: 1. Whether on the facts and circumstances of the case the Ld. CIT(A) is correct in law in allowing the deduction u/s 80IA amounting to Rs. 125,84,03,631/- by rejecting the view of the AO that the agreement entered into by the assessee is of work contract nature and accordingly it is not eligible for deduction u/s 80IA of the Income Tax Act, 1961. 2. Whether on the facts and circumstances of the case the Ld. CIT(A) is correct in law in deleting the addition of Rs. 105,96,46,297/- made on the account of Provisions for maintenance by holding these expenditure similar to after sale service/ warranty expenditure. 4. Whether on the facts and circumstances of the case the Ld. CIT(A) is correct in law in excluding the Income from Malaysiya and Sri Lanka of Rs. 812,37,75,113/- from net profit for the working out of book profit u/s 115JB of Income Tax Act, 1961. ITA No.2062/Del/2018 (Departmental Appeal) 4. At t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e these works in specified period and to the satisfaction of the work awarding agencies. Further, in most of the cases, the remuneration/ assessee company s fee is a specified percentage of total cost of the work. The payment is to be released by the work awarding agencies on the basis of progress of the project/ cost incurred by IRCON. All these characteristics of contract agreements clearly indicate that these are work contracts and the assessee cannot be said as developer of these facilities. 7. The same issue stands adjudicated by the Co-ordinate Bench of ITAT in assessee s own case in ITA No.2401/Del/2013 for the A.Y. 2006-07. The operative part of the order is reproduced as under: 3.1 At the outset, we find that this issue has been adjudicated in favour of the assessee and the deduction has been held to be allowable vide the orders of the Co-ordinate of the ITAT for the A.Ys. 2000-01, 2001-02, 2003-04, 2005-06. For the sake of ready reference, the relevant portion of the order of the ITAT in the combined order in ITA No. 977/DEL/2010 for A.Y 2004-05 and ITA No. 2220/DEL/2011 for A.Y 2005-06 dated 30.01.2020 is reproduced below: 36. Ground No. 2 relates to the del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant cannot be termed as development, we are afraid then what can be called development? Therefore, we do not have any hesitation in holding in view of the arguments advanced from the sides of both parties and decisions relied upon that appellant was developing infrastructure facility and claimed deduction u/s 80IA in respect of income derived from the development of infrastructure facilities. Explanation inserted below section 80IA(13) does not prevent developers in claiming deduction u/s 80IA(4). Similarly showing the receipts as work receipts in the books of accounts of the appellant alone cannot determine the character of the appellant which in our opinion was that of development. The argument of revenue that infrastructure facility should be owned by the appellant is also misplaced in view of ITO vs. Cable 24 Constructions 354 ITR 13 (Guj.) and various decisions relied upon by the Ld. Counsel for the appellant. We also note that the Ld. CIT (DR) tried to raise issues which were not even the case of the assessing officer and this in our considered opinion is clearly impressible. Case laws relied by the revenue are clearly misplaced on facts and are clearly distingui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be rectified free of cost even though the Company has already handed over completed project to the client. The total project cost i.e. contract receipts, have already been received from the client in respect of the said projects before handing over the same to the client and no separate consideration is receivable. During the year an amount of Rs.2,27,42,328/- has been provided for non-DTAA project and Rs.7,18,000/- for DTAA projects. 11. The ld. CIT(A) deleted the addition holding that the assessee has been claiming that provision for maintenance has been made taking into account contractual provision, operating turnover of the year, type of project period of maintenance and other relevant factors. It was held by the ld. CIT(A) that as per contract agreement the assessee is liable to provide free of cost maintenance to the clients for the period mentioned in the agreement. At the time of completion of the contract, liability arises in the hands of the assessee company to provide free maintenance to the various contractees for the period specified in the agreement. This liability arises at the time of the completion of the project itself and obviously the expenditure required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion of DTAA is not provided in that explanation. The Ld. CIT(A) confirmed the action of the Assessing Officer. 22.3 Before us the Ld. Counsel of the assessee submitted that issue in dispute is covered in the favour of the assessee by the decision of the Tribunal in the case of the assessee for assessment year 200001, wherein it is held that when such income is not to be taxed as per DTAA, it cannot be brought to tax indirectly under the deeming fiction under section 115JB of the Act. 22.4 The Ld. DR, on the other hand relied on the order of the lower authorities. 22.5 We have heard rival submission and perused the relevant material on record. The Tribunal in ITA No. 2596/Del/2004 in the case of the assessee for assessment year 2000-01 has adjudicated on the identical issue in dispute involved as under: 9. We considered the above heard the rival submissions made by the parties in respect of Ground No.7 and it is seen that income earned from permanent establishment in foreign countries is liable to be excluded from the computation of book profit in view of the decision in the case of the bank of Tokyo-Mitsubishi UFJ Ltd vs. ADIT 152 1TD 796 (Del.), which has been affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The issue of deduction of CSR expenses read with Explanation 2 to Section 37(1) w.e.f. 1st April 2015 has been examined by the Co-ordinate bench of this Tribunal in the case of ACIT vs. Jindal Power Ltd. (2016) 70 taxmann.com 389 (Raipur Tribunal) wherein it was held as under:- 18. We have also take note of the fact that in view of insertion of Explanation 2 to Section 37(1), with effect from 1st April 2015, which provides that for the removal of doubts, it is hereby declared that for . the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession , the expenses incurred in discharging corporate social responsibility are not deductible in computation of business income. Learned Departmental Representative submits that this amendment should be treated as clarificatory in nature, as it is stated to be in so many words, and we should, therefore, hold that the expenses in discharging corporate social responsibility were outside th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-amendment law, and when such a benefit appears to have been the objective pursued by the legislature, it would be a purposive interpretation giving it a retrospective effect but when a tax legislation imposes a liability or a burden, the effect of such a legislative provision can only be prospective. We have also noted that the amendment in the scheme of Section 37(1) is not specifically stated to be retrospective and the said Explanation is inserted only with effect from 1st April 2015. In this view of the matter also, there is no reason to hold this provision to be retrospective in application. As a matter of fact, the amendment in law, which was accompanied by the statutory requirement with regard to discharging the corporate social responsibility, is a disabling provision which puts an additional tax burden on the assessee in the sense that the expenses that the assessee is required to incur under a statutory obligation in the course of his business are not allowed deduction in the computation of income. This disallowance is restricted to the expenses incurred by the assessee under a statutory obligation under section 135 of Companies Act 2013, and there is thus now a line o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 and there was increase in investment during the year by an amount of Rs. 198.93 crores. Thus according to AO the amount claimed to have disallowed by the assessee was not commensurate to the exempt income. In his view there were also incidental expenditure of collection, telephone follow up etc. 27. Accordingly invoking the provisions of clause (iii) of Rule 8D(2), the AO made a disallowance of Rs.1,94,86,000/- after considering the disallowance made by the assessee itself amounting to Rs.2.52 lakhs. 28. During the course of appellate proceedings, it was argued before ld. CIT(A) that the case of assessee is covered with the decision of the Jurisdictional Delhi High Court in the case of M/s ACB India Vs. ACIT, where Hon'ble High Court held that the disallowance u/s 14A cannot be more than 0.5% on the average of the investments made on which the assessee received the dividend income. ld. CIT(A) held that in the present case, the assessee has submitted the details of the dividend received and also worked out the disallowance following the decision of the Hon'ble Delhi High Court, which works out to Rs. 137.105 Lacs. The ld. CIT(A) following the judgment of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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