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2013 (6) TMI 599 - AT - Income TaxDeduction u/s.80IA disallowed - AO denied the claim of the assessee on the ground that assessee was not developer rather a work contractor - Held that - As relying on assessee s own case 2012 (8) TMI 633 - ITAT HYDERABAD 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 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). In favour of assessee. Disallowance of interest - whether investments were made out of its own funds or loan funds? - Held that - There is no dispute that monies have been given to the other parties for business purposes. It is a common trade practice to give advances to the parties to carry on the work on behalf of the assessee. When the assessee has not charged interest on such loans given, the CIT(A) is not entitled to work out any notional interest and make any disallowance/addition to that extent.See S.A. Builders V/s. CIT(2006 (12) TMI 82 - SUPREME COURT). Thus additions deleted. In favour of assessee.
Issues Involved:
1. Disallowance of deduction under Section 80IA. 2. Disallowance of interest amounting to Rs. 19,48,604. 3. Charging of interest under Sections 234B and 234C. Issue-wise Detailed Analysis: 1. Disallowance of Deduction under Section 80IA: The primary issue concerns the disallowance of deduction under Section 80IA of the Income-tax Act, which was previously adjudicated by the Tribunal for assessment years 2005-06 to 2007-08. The Tribunal's findings established that the assessee qualifies as a developer rather than a mere works contractor. The Tribunal emphasized that the provisions of Section 80IA (4) apply to enterprises engaged in developing, operating, and maintaining infrastructure facilities. The Tribunal clarified that the term "developer" includes entities undertaking the development of infrastructure, irrespective of ownership of the infrastructure facility. The Tribunal also noted that the amendments introduced by the Finance Acts of 2007 and 2009 aimed to distinguish between developers and mere contractors, ensuring that developers undertaking entrepreneurial and investment risks are eligible for deductions. The Tribunal concluded that the assessee, having undertaken significant risks and responsibilities in developing infrastructure facilities, is entitled to the deduction under Section 80IA (4). Consequently, the Tribunal directed the Assessing Officer to grant the deduction on eligible turnover, segregating contracts involving development, operating, maintenance, financial involvement, and defect correction from mere works contracts. 2. Disallowance of Interest Amounting to Rs. 19,48,604: The second issue pertains to the disallowance of interest amounting to Rs. 19,48,604. The assessee contended that the investments were made from its own funds and not from borrowed funds, and some investments were made during the course of its business activity to protect and promote its business interests. The Tribunal, referencing the Supreme Court's decision in S.A. Builders V/s. CIT (288 ITR 1), held that the CIT(A) is not entitled to work out any notional interest and make disallowance/addition when the assessee has not charged interest on such loans given. Consequently, the Tribunal set aside the orders of the CIT(A) and deleted the addition made by the Assessing Officer. 3. Charging of Interest under Sections 234B and 234C: The final issue relates to the charging of interest under Sections 234B and 234C of the Income-tax Act. The assessee argued against the interest charged, but the Tribunal deemed this ground as consequential, requiring no separate adjudication. The Tribunal directed the Assessing Officer to consider the assessee's objections and recompute the interest, if necessary, while giving effect to the order. Conclusion: The Tribunal allowed the assessee's appeal, granting the deduction under Section 80IA, deleting the disallowance of interest, and directing the Assessing Officer to reconsider the charging of interest under Sections 234B and 234C. The order was pronounced on 17.06.2013.
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