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2013 (2) TMI 71 - AT - Income TaxUnexplained cash credit u/s.68 - CIT(A) deleted the addition admitting fresh evidence u/r 46A - Held that - As now the assessee has informed that the labour charges have actually been paid in the subsequent years & drew the attention on certain evidences to corroborate that the balance outstanding amount had already been paid as on date, therefore should have been allowed. At this stage of second appeal, it is not possible to examine the veracity of such documents which were not placed before the AO. Therefore considering it proper as also justifiable to again restore this issue back to the file of the AO, so that the Revenue Department can examine the correctness of the claim that the amount in question in fact was not an amount as qualified u/s.68, but the impugned amounts were in the nature of the amounts which are qualified u/s.41(1). By adopting the recourse of setting aside to assessment stage , the grievance of infringement of Rule 46A is also addressed. After ascertaining that the amounts in question in fact were the liabilities to be paid by the assessee and not cash deposits or loans, the AO is then directed to verify the correctness of the claim now as that those liabilities were squared up by making the payment in the years to come - in favour of revenue for statistical purposes. Rejection of Deduction u/s.80-IA - project of infrastructure - whether the assessee s nature of work had fallen under the definition of a contractor or a developer - Held that - The total turnover of the assessee was received mainly in respect of development of arch-bridges, made over railway-track or under bridges on Delhi Ghaziabad Section & execution of RCC Box Bridge by applying pushing method for passing under main track and executed contract & also provided under-bridge below railway-track. On the basis of this examination it was wrong on the part of the AO to hold that the assessee has merely acted as a contractor as by analyzing the nature of work executed by the assessee, it can be gathered that the assessee had acted as a developer. The assessee has undertaken the responsibility of execution of the work. The assessee has developed its own design and on getting approval applied the technology for completion of infrastructure facility. Terms and conditions of the agreement executed with certain Government Departments have also established that the risk in execution of work has also been undertaken by the assessee. The Revenue Department has wrongly interpreted the word owned in section 80IA(4)(i)(a). Thus to conclude the act do not prescribe that the infrastructure facility is to be owned by such an enterprise. The infrastructure facility is always the property of the Government and an enterprise is bound by the agreement to transfer the same after the settled period. The assessee s execution of work fall within first category, i.e. developing of infrastructure facility. The decisions of ABG Heavy Industries(2010 (2) TMI 108 - BOMBAY HIGH COURT), Koya & Company (2012 (5) TMI 158 - ITAT HYDERABAD), Radhe Developers (2007 (6) TMI 316 - ITAT AHMEDABAD) and Bharat Udyog Ltd. (2008 (6) TMI 225 - ITAT BOMBAY-F) thus support the stand taken by the assessee - thus the assessee is eligible for the deduction u/s.80IA - in favour of assessee. Disallowance on account of freight and warehouse charges u/s.40(a)(ia) - CIT(A) deleted the addition - Held that - As decided in CIT vs. J.K. Construction Co. 2013 (2) TMI 54 - GUJARAT HIGH COURT under a situation when the TDS amount is duly deposited in the Government Exchequer before the due date of filing of return, then the provisions of section 40(a)(ia) are not to be invoked for the purpose of disallowance of expense. In the present case, on the basis of the undisputed fact that the TDS was deposited within the said prescribed date, therefore we hereby dismiss this ground of the Revenue - in favour of assessee. Deduction u/s 80IA - civil work executed at Mazgaon Dock Ltd. (MDL) - Held that - As in respect of the civil work executed at MDL the nature of work was found to be a repair work. The assessee has not demonstrated that there was development of any infrastructure facility. Facts as culled out from the records reflect that the assessee had carried out the civil work like excavation, concrete flooring and also provided steel enforcement bar for RCC flooring, etc.. Since the basic condition is that for the purpose of claim of deduction u/s.80IA(4) an Enterprise should develop an infrastructure facility as defined in Explanation and the work executed with Mazgaon Dock Ltd. was not within the said definition, therefore the nature of civil work executed did not qualify for deduction u/s.80IA(4) - against assessee. Disallowance of expenditure under mutual agreement - allowed only Rs 1 Lac only - Held that - Revenue Authorities have appreciated the evidence and thereafter arrived at the conclusion that there was no justification for claim of an amount Rs.1 lac due to lack of factual as also legal corroboration. The assessee has not substantiated its claim in respect of an outstanding liability per-say of Rs.1 lac, therefore in the absence of any cogent evidence, the factual finding of the authorities below affirmed and dismiss this ground - against assessee. Disallowance of deduction on account of liquidated damages retained by the appellant s customer - Held that - The assessee has furnished the copy of account of MDL in its book & a letter of the Chief Manager (CW) dated 08/06/2005, wherein as per the subject the assessee has executed Concrete flooring with anchor plate in Alcok Yard in between existing Gantry rail track and retained liquidated damages provisionally at 6% amounting to Rs.1,73,106/-. Later on, an amount of Rs.41,497/- was refunded. The MDL has deducted Rs.1,31,610/- as per letter dated 10.10.2008 as liquidated damages. Thus in terms of the provisions of section 41(1), the assessee is under obligation to account for the impugned claim in Asst.Year 2008-09. See Rotork Controls India Pvt.Ltd.(2009 (5) TMI 16 - SUPREME COURT OF INDIA) - in favour of assessee. Disallowance of deduction on account of depreciation on motor cars - the cars in question were in the name of the directors - Held that - As decided in CIT vs. Aravali Finlease Ltd. 2011 (8) TMI 814 - GUJARAT HIGH COURT that although the vehicle was registered in the names of the Directors but it was asset of the assessee, hence depreciation on the said vehicle is to be allowed. Also see ITO vs. Electro Ferro Alloys Ltd. 2011 (10) TMI 495 - ITAT, AHMEDABAD - in favour of assessee.
Issues Involved:
1. Unexplained Cash Credit under Section 68 of the IT Act. 2. Deduction under Section 80-IA of the IT Act for infrastructure projects. 3. Disallowance under Section 40(a)(ia) of the IT Act. 4. Deduction of Court Settlement Expenses. 5. Deduction of Liquidated Damages. 6. Depreciation on Motor Cars registered in the name of Directors. Detailed Analysis: 1. Unexplained Cash Credit under Section 68 of the IT Act: Facts: The Assessee and Revenue both filed appeals regarding the addition of Rs. 12,40,087/- under Section 68 for unexplained cash credits from two parties, P.G. Shringapure and Dipen U. Patel. The ITAT had previously remanded the matter to the AO for re-examination. Decision: The AO added the amount due to the assessee's failure to provide satisfactory evidence. The CIT(A) reclassified part of the amount under Section 41(1) and granted partial relief. The ITAT restored the issue back to the AO to verify the correctness of the claims and compliance with Rule 46A. 2. Deduction under Section 80-IA of the IT Act for Infrastructure Projects: Facts: The Assessee claimed deductions under Section 80-IA for various infrastructure projects, which the AO disallowed, arguing the assessee was a contractor, not a developer. Decision: The CIT(A) partially allowed the claims, distinguishing between projects qualifying for the deduction and those that did not. The ITAT held that the assessee acted as a developer and was entitled to the deduction for most projects, except for some repair works. The ITAT emphasized that the nature of the work and terms of the agreements indicated the assessee's role as a developer. 3. Disallowance under Section 40(a)(ia) of the IT Act: Facts: The AO disallowed Rs. 66,14,143/- for late payment of TDS on labor and freight charges. Decision: The CIT(A) allowed the deduction, noting the TDS was paid before the due date of filing the return. The ITAT upheld this decision, referencing jurisdictional High Court rulings that support the allowance if TDS is paid before the return filing due date. 4. Deduction of Court Settlement Expenses: Facts: The Assessee claimed Rs. 2,00,000/- as a settlement expense, which the AO disallowed partially, allowing only Rs. 1,00,000/-. Decision: The CIT(A) upheld the AO's decision due to lack of evidence for the additional Rs. 1,00,000/-. The ITAT affirmed this, citing insufficient corroboration from the assessee. 5. Deduction of Liquidated Damages: Facts: The Assessee claimed Rs. 1,73,107/- as liquidated damages, which the AO disallowed, arguing it was crystallized in a later year. Decision: The CIT(A) upheld the disallowance, and the ITAT agreed, noting the liability was contingent and should be accounted for in the year it was settled. 6. Depreciation on Motor Cars registered in the name of Directors: Facts: The AO disallowed depreciation on cars registered in the name of a director. Decision: The CIT(A) upheld the disallowance. However, the ITAT reversed this, referencing judicial precedents allowing depreciation if the company owns the asset, even if registered in a director's name. Summary of Results: 1. Assessee's appeal for A.Y. 2001-02 is allowed for statistical purposes. 2. Revenue's appeal for A.Y. 2001-02 is allowed for statistical purposes. 3. Assessee's appeal for A.Y. 2005-06 is partly allowed. 4. Revenue's appeal for A.Y. 2005-06 is dismissed. 5. Assessee's appeal for A.Y. 2006-07 is partly allowed. 6. Revenue's appeal for A.Y. 2006-07 is partly allowed. 7. Assessee's appeal for A.Y. 2007-08 is allowed. 8. Assessee's appeal for A.Y. 2008-09 is partly allowed.
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