2012 (12) TMI 1242 - AT - Income Tax

Summary

Issues Involved:
1. Legality and applicability of section 153A.
2. Eligibility for deduction u/s 80IA.
3. Treatment of liabilities written back u/s 41(1).

Summary:

Legality and Applicability of Section 153A:
The assessee argued that the assessments u/s 153A were invalid as no incriminating material was found during the search. The Tribunal held that once a search is conducted, the AO is bound to issue notices u/s 153A, and the proceedings must be completed as per the law. The Tribunal sustained the CIT(A)'s decision, stating that the AO was correct in issuing notices u/s 153A even if no incriminating material was found, as the section begins with a non-obstante clause, overriding other provisions.

Eligibility for Deduction u/s 80IA:
The AO disallowed the deduction u/s 80IA, arguing that the assessee was a contractor and not a developer. The CIT(A) allowed the deduction, noting that the assessee was engaged in infrastructure development and met the conditions of section 80IA(4). The Tribunal upheld the CIT(A)'s decision, referencing various judgments, including Patel Engineering and ABG Heavy Industries, which clarified that a contractor can also be considered a developer if they undertake the development of infrastructure facilities. The Tribunal concluded that the assessee was eligible for the deduction as it fulfilled the necessary conditions.

Treatment of Liabilities Written Back u/s 41(1):
The AO rejected the assessee's claim to include the written-back liabilities for the deduction u/s 80IA. The CIT(A) accepted the assessee's method of bifurcating the written-back liabilities based on the proportion of turnover from 80IA and non-80IA projects. The Tribunal upheld the CIT(A)'s decision, stating that the bifurcation method was reasonable and that the written-back liabilities should be included in the business income for the deduction u/s 80IA.

Conclusion:
The appeals filed by the department and the cross objections filed by the assessee for the assessment years 2000-01 to 2004-05 were dismissed. The departmental appeal for the assessment year 2005-06 was also dismissed. The Tribunal confirmed that the assessments u/s 153A were valid, the assessee was eligible for the deduction u/s 80IA, and the written-back liabilities were correctly included for the deduction.