9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (5) TMI 1797 - AT - Income TaxDeduction u/s. 80IA(4) - contractor v/s developer - as per ao while executing the project had acted in the capacity of a contractor therefore the deduction cannot be allowed to the assessee as pre-requisite of the section to enable the assessee to claim deduction is that he should be a developer - HELD THAT - As in the own case 2014 (11) TMI 1266 - ITAT MUMBAI issue 80IA(4) was decided by the Tribunal. The facts and circumstances in the case during the year under consideration are exactly same. Respectfully following the order of the Tribunal we direct the A. O. to allow the claim for deduction u/s 80IA(4) of the Act. Disallowance made u/s. 14A r. w. Rule 8D - HELD THAT - As in the own case 2014 (11) TMI 1266 - ITAT MUMBAI profit was much more than the investment in the joint venture company therefore the disallowance made by the A. O. by invoking the provisions of section 14A of the Act was not justified. Accordingly the A. O. directed to delete the same. Disallowance of interest u/s 36(1)(iii) - We found that the cash profit of the assessee company that have been earned during the year as reduced by the amount of investment in joint venture company was in excess to the monies advanced to Chafal as on the cut-off date therefore it can be safely presumed that advance have been given against profits of the year and not out of interest bearing funds. This view has been supported by the decision of Hon ble Bombay High Court in the case of Reliance Utilities Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT Fact that no further advance was given during the year and no disallowance was made in the preceding year also supports the case of the assessee. Accordingly we do not find any merit in the action of the A. O. in disallowing the interest u/s 36(1)(iii) - Decided in favour of assessee.
Issues Involved:
1. Deduction under Section 80IA(4) of the Income Tax Act. 2. Disallowance under Section 14A of the Income Tax Act. 3. Disallowance under Section 36(1)(iii) of the Income Tax Act. 4. Charging of interest under Section 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Deduction under Section 80IA(4) of the Income Tax Act: The primary issue raised by the Assessing Officer (AO) was the allowance of deduction under Section 80IA(4) of the Income Tax Act. Both parties agreed that a similar issue had been adjudicated by the Tribunal for the Assessment Year (AY) 2008-09. The Tribunal referenced its previous decisions, including the case of CIT vs. ABG Heavy Industries Ltd., where it was held that the assessee was entitled to claim deduction under Section 80IA(4). The Tribunal observed that the term "development" should be interpreted in its ordinary sense and that the assessee's activities, such as installing and maintaining cranes, constituted development of infrastructure. It was further clarified that for claiming deduction under Section 80IA(4), it is not necessary to develop the entire project; developing a part of the project suffices. The Tribunal concluded that the assessee acted as a developer, not merely as a contractor, and was thus eligible for the deduction. The Tribunal directed the AO to allow the claim for deduction under Section 80IA(4). 2. Disallowance under Section 14A of the Income Tax Act: The second issue concerned the disallowance of Rs. 73,40,116/- under Section 14A of the Act. The AO made a proportionate disallowance from the interest expenditure, arguing that the assessee had advanced money to joint ventures without charging interest, resulting in exempt income. The assessee contended that its share capital and reserves were significantly higher than the investments made in joint ventures, implying that interest-free funds were used for these investments. The Tribunal referenced decisions from the Hon'ble jurisdictional High Court, including HDFC Bank Ltd., which supported the assessee's position. The Tribunal found that the assessee's cash profit exceeded the investments in joint ventures, thus disallowance under Section 14A was not justified. The AO was directed to delete the disallowance. 3. Disallowance under Section 36(1)(iii) of the Income Tax Act: The AO also disallowed Rs. 22,81,807/- under Section 36(1)(iii), arguing that the assessee had given interest-free funds to its subsidiary, Chafal Developers Pvt. Ltd. The assessee argued that the funds were advanced for business expediency and that Chafal was promoted specifically for implementing a project awarded by the Government of Maharashtra. The Tribunal noted that the cash profit of the assessee was more than the advances given to Chafal, and no fresh advances were made during the year. Citing the decision in Reliance Utilities & Power Ltd., the Tribunal concluded that the advances were made from profits and not interest-bearing funds, thus disallowance under Section 36(1)(iii) was not justified. 4. Charging of Interest under Section 234B of the Income Tax Act: The final issue involved the charging of interest under Section 234B. The Tribunal allowed this ground for statistical purposes, implying that further examination or recalculation might be required. Conclusion: The Tribunal allowed the assessee's appeal and dismissed the AO's appeal. The order was pronounced in the open court on 25th May 2017.
|
