2019 (9) TMI 1392 - AT - Income Tax

Allowability of deduction u/s 80IA(4)(i) - HELD THAT - This issue has been adjudicated against the assessee and in favour of the Revenue by the order of this Bench of the Tribunal in WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION 2019 (6) TMI 921 - ITAT KOLKATA wherein held no such details provided by the assessee before the AO in claiming the said project in New Town is an integral part of highway project. Therefore in our opinion the assessee is not entitled to claim deduction u/s 80IA. Interest on Treasury Account - Sum deposited Treasury Account of the State Government - Correspondence between the Government of West Bengal and the assessee - HELD THAT - The correspondence which lead to the assessee investing in the Government Treasury the terms and conditions under which such deposits/investments were made have to be examined. The type of accounts being maintained their numbers etc. have to be examined only on such detailed enquiry in our view it can be concluded as to whether the deposits/investments in question is a non-interest bearing deposits/investments or not - set aside the issue to the file of the AO for fresh adjudication in accordance with law. AO shall issue necessary notices to the Director of Treasury Directorate of Treasury and Accounts and thereafter he shall after examining all the necessary correspondence adjudicate the matter afresh in accordance with law. In the result this ground is allowed for statistical purposes. Taxability of interest income on fixed deposit - AO has brought to tax this amount on the ground that the assessee failed to credit the interest on F.Ds to the P L account and has directly deducted the same from project cost - HELD THAT - On a query from the Bench both parties agreed that the issue may be restored to the file of the AO with a direction to verify the claim of the assessee that the amount in question has already been offered to tax. The AO is directed to verify this claim and if it is found that the assessee has not offered this interest on F.Ds to tax in its return of income and accounts then he is directed to bring the same to tax.

Summary

Issues:
1. Allowability of deduction under section 80IA(4)(i)
2. Treatment of interest on Treasury Account
3. Taxability of interest income on fixed deposit

Issue 1: Allowability of deduction under section 80IA(4)(i):
The appeal by the Revenue challenges the order of the Commissioner of Income Tax (Appeals) regarding the deduction claimed by the assessee under section 80IA(4)(i). The Tribunal held that the assessee did not meet the necessary qualifications to claim the deduction under section 80IA of the Income Tax Act. The Tribunal noted that the assessee's income did not come from eligible business activities as required by the law. It was emphasized that the project developed by the assessee was not an integral part of any highway project, a prerequisite for claiming the deduction. The Tribunal agreed with the CIT(A) that the assessee failed to provide sufficient evidence to support its claim. Therefore, the deduction granted to the assessee was reversed, and the Revenue's ground was allowed.

Issue 2: Treatment of interest on Treasury Account:
The issue revolved around the interest income earned by the assessee on investments in the Treasury Account of the State Government. The assessee produced a letter from the Directorate of Treasury and Accounts, Government of West Bengal, stating that no interest is payable on certain deposits. The Tribunal directed the Assessing Officer (AO) to conduct a detailed examination of the correspondence between the Government and the assessee regarding the investments made in the Treasury Account. The Tribunal emphasized the need to verify the terms and conditions of the deposits/investments to determine if they were non-interest bearing. The matter was remanded to the AO for fresh adjudication based on a thorough examination of the correspondence and relevant details.

Issue 3: Taxability of interest income on fixed deposit:
The dispute involved the taxability of interest income on fixed deposits, with the AO treating it as business income and making an addition to the assessee's income. The CIT(A) overturned this decision, considering the interest income as a capital receipt that reduces the cost of the project. The Tribunal noted the discrepancy in the treatment of interest income by the CIT(A) and the assessee, who claimed that the interest income had already been offered to tax. The matter was referred back to the AO to verify if the interest income had been included in the return of income and accounts. The Tribunal directed the AO to tax the interest income if not previously declared, based on the specific circumstances of the case. The Revenue's ground on this issue was allowed for statistical purposes.

In conclusion, the Appellate Tribunal ITAT Kolkata delivered a detailed judgment addressing the three main issues raised by the Revenue in the appeal. The Tribunal provided thorough analyses for each issue, considering the legal requirements and evidence presented by the parties involved. The judgment highlighted the importance of meeting statutory qualifications for claiming deductions and the necessity of proper documentation and verification in tax matters.