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2019 (11) TMI 1434 - AT - Income TaxDeduction u/s 80IA(4) - assessee opted the deduction u/s 80IA(4) from Assessment Year 2012-13 onwards being the initial year but did not opt for the other two eligible units - Assessee made claim during the course of assessment proceedings by filing the audit report on Form 10CCB - A.O rejected the claims as claim made otherwise than by way of revised return cannot be entertained by the AO and requisite Form No. 3CCB was to be obtained and also filed before due date of the return hence the claim of the appellant is not eligible to be entertained - Profits and gains from all the three units were to be considered on consolidated basis no individually. HELD THAT - As relying on case of ACIT V/s Admanum Finance Limited 2016 (6) TMI 1295 - ITAT INDORE A.O has not justified in declining the legitimate claim made by the assessee during the course of assessment proceedings relating to deduction u/s 80IA(4) of the Act irrespective of the fact that claim was neither made in in original return of income nor revised return was filed. First sub issue raised in ground no.1 is decided in favour of assessee. Whether the Ld. A.O was justified in denying the benefit u/s 80IA(4) of the Act for not filing the audit report in Form 10CCB along with the return of income? - Hon'ble Jurisdictional High Court in the case of CIT Vs. Panama Chemicals Works 2006 (8) TMI 159 - MADHYA PRADESH HIGH COURT dealt the similar issue holding that the claim of the assessee u/s 80IA(4) is justified if it has not filed the audit report in Form 10CCB along with return of income but submitted later on during the assessment proceedings. Whether before allowing deduction u/s 80IA(4) of the Act, profit and loss of each unit needs to be considered on individual basis or consolidated profit loss of all the eligible units basis? - Co-ordinate Bench, Chennai in the case of Shriram Properties Pvt. Ltd V/s ACIT 2013 (9) TMI 446 - ITAT CHENNAI decided similar issue in favour of the assessee thereby holding that profits and loss of individual units and not consolidated units are to be considered for granting deduction u/s 80IB. Initial year for claiming deduction of profits of eligible undertaking for 10 consecutive assessment years out of the slab of 15 or 12 years as prescribed in the Section, Hon ble High Court of Madras in the case of Commissioner of Income Tax Vs M/s. G. R. T. Jewelers (India) Pvt. Ltd 2016 (3) TMI 1071 - MADRAS HIGH COURT answered the question raised in favour of the assessee 'that the initial assessment year in Section 80lA(5) would only mean the year of claim of deduction under Section 80lA and not the year of commencement of eligible business'. The Honourable High Court of Madras further referred the Circular No. 1/2016 dated 15.02.2016 issued by the Central Board of Direct Taxes which clarified the position of law in respect of the claim to be made under section 80lA A.O should have accepted the legitimate claim made by the assessee claiming deduction u/s 80IA(4) of the Act, for the eligible undertaking namely wind mill at Jodha, Rajasthan and also accepted the audit report filed for making such claim during the course of assessment proceeeings. Further since the assessee opted claim u/s 80IA(4) of the Act for only Jodha unit, the loss of other two eligible undertakings were not required to be set off against the profits of Jodha unit since assessee had opted Assessment Year 2012-13 as initial assessment year for claiming deduction u/s 80IA(4) of the Act only for Jodha unit and not for other two units at Shajapur (M.P.). Ld. A.O is therefore directed to allow the deduction u/s 80IA(4). Denial of deduction of cess paid -whether the education cess paid by the assessee along with the income tax and surcharge is deductible as expenditure u/s 37 or it is not deductible as per provisions of Section 40(a)(ii) of the Act which refers to the amount not deductible ? - HELD THAT - We observe that similar issue came up before the Hon'ble High Court of Rajasthan in the case of Chambal Fertilizers and Chemicals Limited 2018 (10) TMI 589 - RAJASTHAN HIGH COURT wherein Hon'ble High Court referred to Circular No. No.91/58/66-ITJ(19) dated 18.5.1967 and also various judgments we are are inclined to hold that the education cess is not a tax and thus is an expenditure u/s 37 of the Act which cannot be claimed against the profits and gains of the business carried out by the assessee. Thus finding of Ld. CIT(A) is reversed.
Issues Involved:
1. Deletion of addition on account of guarantee commission fees. 2. Deletion of disallowance made under Section 14A of the Income Tax Act. 3. Deletion of disallowance out of colliery and repairs and maintenance expenses. 4. Eligibility for deduction under Section 80IA(4) for the profits derived from power generation through Wind Mill units. 5. Deductibility of education cess paid as an expenditure under Section 37 of the Income Tax Act. Detailed Analysis: 1. Deletion of Addition on Account of Guarantee Commission Fees: The Revenue's appeals for Assessment Years 2012-13, 2013-14, and 2014-15 included the issue of whether the Commissioner of Income-tax (Appeals) [CIT(A)] was justified in deleting the additions made on account of guarantee commission fees for computing arm’s length price for the corporate guarantee given by the appellant on behalf of the Associated Enterprise (AE). The tribunal dismissed these appeals as non-maintainable based on the CBDT circular No.3/2018 and subsequent amendment dated 8th August 2019, which prescribes a monetary limit of ?50 lakhs for filing appeals. 2. Deletion of Disallowance Made Under Section 14A: The appeals also questioned the deletion of disallowances made under Section 14A of the Income Tax Act for various assessment years. These disallowances were also dismissed by the tribunal citing the same CBDT circular, as the tax effect was below the prescribed monetary limit. 3. Deletion of Disallowance Out of Colliery and Repairs and Maintenance Expenses: The Revenue challenged the deletion of disallowances out of colliery and repairs and maintenance expenses. The tribunal dismissed these appeals as non-maintainable due to the tax effect being below the monetary limit specified in the CBDT circular. 4. Eligibility for Deduction Under Section 80IA(4): The assessee's cross appeal for Assessment Year 2012-13 involved the issue of whether the CIT(A) erred in not allowing the claim of deduction under Section 80IA(4) for profits derived from the eligible power generation business through Wind Mill units. The tribunal analyzed three sub-issues: - Whether the claim made during assessment proceedings without a revised return can be entertained. - Whether the absence of an audit report in Form 10CCB along with the return invalidates the claim. - Whether the deduction should be allowed for each unit individually or after consolidating profits and losses of all eligible units. The tribunal concluded that: - The Assessing Officer (AO) is duty-bound to compute the correct income even if the claim was not made in the original return but during assessment proceedings. - The audit report in Form 10CCB can be submitted during assessment proceedings. - Deduction under Section 80IA(4) should be provided for each eligible unit individually, not on a consolidated basis. 5. Deductibility of Education Cess as an Expenditure Under Section 37: The cross objections raised by the assessee for Assessment Years 2013-14 and 2014-15, and additional grounds for Assessment Year 2012-13, involved whether the education cess paid should be allowed as an expenditure under Section 37. The tribunal referred to the judgment of the Hon’ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Limited, which held that education cess is not a tax and is thus deductible as an expenditure under Section 37 of the Income Tax Act. The tribunal allowed the assessee's claim for deduction of education cess. Conclusion: The tribunal dismissed all the appeals filed by the Revenue for the assessment years in question due to the tax effect being below the monetary limits specified in the CBDT circular. The assessee's cross appeal and cross objections were allowed, granting the deduction under Section 80IA(4) for the profits from the eligible power generation business and allowing the deduction of education cess as an expenditure under Section 37.
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