2012 (8) TMI 633 - ITAT HYDERABAD

Deduction under Sec 80IA(4) - AO denied the claim of the assessee on the ground that assessee was not developer rather a work contractor – Held that:- there is no requirement that the assessee should have been the owner of the infrastructure facility. - the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor.

The term ‘contractor’ is not necessarily contradictory to the term ‘developer’. On the other hand, rather section 80IA(4) itself provides that assessee should develop the infrastructure facility as per the agreement with the Central Government, State Government or a Local Authority. So, entering into a lawful agreement and thereby becoming a contractor should in no way be a bar to the one being a ‘developer’. The assessee has developed infrastructure facility as per the agreement with Maharashtra Government/APSEB, therefore, merely because in the agreement for development of infrastructure facility the assessee is referred to as a contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a ‘developer’; nor will it debar the assessee from claiming deduction u/s 80IA(4).

Disallowance of interest - assessee has made an investment in subsidiaries – Held that:- Assessee is not able to explain what were the business advantages assessee derived from these interest free advances to sister concerns and also not able to explain whether the amount advanced to sister concern was actually used for the business purposes or not - assessee has not shown the commercial expediency – In favor of revenue

Applicability of provisions of section 40A(3) of the IT Act - assessee made a cash payment in excess of Rs. 20,000 – Held that:- Assessee could not show any reasonable cause for making the cash payment exceeding Rs. 20,000. The assessee also not brought on record any exceptions to make cash payments as provided in Rule 6DD of IT Rules, 1962 – In favor of revenue

Disallowance of property tax - property tax paid on the property which was provided as a collateral security to the State Bank of India for obtaining the loan and it was necessary for the assessee to incur such expenditure so as to retain the security provided – Held that:- Property on which the property tax was paid was not owned by the assessee. The liability of payment of property tax on the property is on the owner of the property and not on any other person – Disallowance justified

Disallowance of expenditure incurred on increasing the share capital - assessee claimed to allow this expenditure as a deduction u/s. 35D of the IT Act – Held that:- Expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital, is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profit making – in favor of revenue