2017 (11) TMI 2041 - AT - Income Tax

Deduction u/s 80IA - profit from infrastructure development in respect of 18 construction projects - AO observed that assessee has only carried out the entire projects only in the capacity of works contractor and hence as per the Explanation to Section 80IA by the Finance Act 2007 with retrospective effect from 1.4.2000 it is not entitled for deduction u/s 80IA(4) - HELD THAT - As decided in own case for the Asst Year 2011-12 segregation of projects carried out by the assessee in Table A and Table B as was done in the earlier years as rightly pointed out by the ld DR before us were neither done by the ld AO nor by the assessee during the year under appeal. Moreover it is not in dispute that the assessee had indeed carried out some projects which were carried forward from earlier years. Hence in the interest of justice and fair play we deem it fit and appropriate to remand this issue to the file of the ld AO to find out the list of projects that are eligible for deduction u/s 80IA of the Act in the light of the decisions of this tribunal for the earlier years and decide the same afresh in accordance with law. Accrual of income - retention money as income of the year - assessee is following mercantile system of accounting - assessee s contention is that in respect of retention money the income arise to the assessee only when the said amount of retention money is received by the assessee and not at the time of raising of the bills - HELD THAT - As decided in assessee own case for Asst Year 2011-12 retention money in works contract with Government is taxable only on receipt basis as held by the Jurisdictional High Court in the case of Commissioner of Income-tax Vs. Simplex Concrete Piles (India) 1988 (12) TMI 52 - CALCUTTA HIGH COURT

Summary

Issues Involved:
1. Deduction under Section 80IA of the Income Tax Act.
2. Addition of retention money as income.

Detailed Analysis:

1. Deduction under Section 80IA of the Income Tax Act:

Facts and Background:
The assessee filed its return for the Assessment Year 2012-13, claiming a deduction under Section 80IA amounting to Rs 68,90,60,412/- for profits from infrastructure development across 18 projects. The assessee argued that its activities fell within the definition of "infrastructural facility" as specified in the Explanation to Section 80IA. However, the Assessing Officer (AO) rejected the claim, stating that the assessee acted merely as a works contractor, not fulfilling the conditions for the deduction.

CIT(A) Decision:
The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the deduction, referencing previous decisions for Assessment Years 2006-07 to 2008-09 and 2011-12, which recognized the assessee as engaged in developing infrastructure facilities eligible for Section 80IA deduction. The CIT(A) emphasized maintaining judicial consistency.

Revenue's Grounds of Appeal:
The Revenue contended that:
- The assessee acted as a works contractor without ownership in the projects.
- The nature of the work did not meet the legislative intent for Section 80IA.
- The assessee's activities did not qualify as "infrastructure facility" under Section 80IA.

Tribunal's Analysis and Decision:
The Tribunal referred to its previous decision for Assessment Year 2011-12, where it upheld the assessee's eligibility for Section 80IA deduction. It reiterated that the assessee was a developer, not merely a works contractor, and thus qualified for the deduction. However, the Tribunal noted the need to segregate projects eligible for deduction, as done in previous years. Consequently, the issue was remanded to the AO to determine the eligible projects in accordance with earlier Tribunal decisions.

2. Addition of Retention Money as Income:

Facts and Background:
The assessee, engaged in infrastructure development, raised bills where 10% was retained by clients until project verification. The assessee revised its return to exclude Rs 10,60,18,958/- as retention money, arguing it should be taxed upon receipt, not when billed. The AO, following the mercantile system of accounting, included the retention money as income, asserting it was receivable and thus taxable.

CIT(A) Decision:
The CIT(A) sided with the assessee, referencing several judicial decisions, including from the Calcutta High Court, which supported the non-taxability of retention money until received. The CIT(A) noted the consistency in the assessee's treatment of retention money across previous years and upheld the exclusion from taxable income.

Revenue's Grounds of Appeal:
The Revenue argued that under the mercantile system, the entire bill amount, including retention money, should be credited as income. The Revenue cited the decision in DCIT vs. Amarshiv Construction (P) Ltd., which the CIT(A) allegedly ignored.

Tribunal's Analysis and Decision:
The Tribunal referred to its decision for Assessment Year 2011-12, which upheld the non-taxability of retention money until received, based on the Calcutta High Court's precedent in CIT vs. Simplex Concrete Piles (India) Pvt Ltd. The Tribunal dismissed the Revenue's appeal, maintaining that the retention money should not be included in the assessee's income until actual receipt.

Conclusion:
The appeal was partly allowed for statistical purposes, with the issue of Section 80IA deduction remanded to the AO for further verification, while the decision regarding retention money was upheld in favor of the assessee.