2019 (1) TMI 526 - AT - Income Tax

Disallowance of claim for deduction under section 80IA - Held that - From the above specific sub-clause (a) to clause (iv) of section 80IA, it is clear that the intention of Legislation for substituting clause (iv) to section 80IA(4) to the Undertaking is only to extent the benefit of the provisions of section 80IA to such undertaking, which is neither a company nor a consortium of companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act as required under clause (i) to section 80IA(4) only to encourage electric power generation and its distribution. Since the authorities below have not disputed any other parameters of eligibility criteria, we are of the considered opinion that the assessee is eligible to claim deduction under section 80IA(4)(iv) of the Act. The orders of authorities below and direct the Assessing Officer to allow the deduction claimed by the assessee. Thus, the ground raised by the assessee is allowed. Disallowance of infrastructure development charges and erection & commission charges as well as transmission and wheeling charges under section 40(a)(ia) - Held that - As per the remand report dated 08.09.2016, the AO has clarified that the impugned payments were prior to commissioning of the windmill and the amounts have been capitalized. Further, in the remand report, AO has stated that a perusal of the Profit and Loss statement shows that the impugned payment has not been claimed as revenue expenditure by assessee, but capitalized as evident from the depreciation schedule. The provisions of section 40(a)(ia) is applicable only when the assessee has claimed an expenditure and no disallowance can be made under section 40(a)(ia) if the payments were not claimed as an expenditure. Both the disallowances made by the AO u/s 40(a)(ia) and confirmed by the ld. CIT(A) stand deleted. - decided in favour of assessee.

Summary

Issues:
1. Disallowance of claim for deduction under section 80IA of the Income Tax Act, 1961.
2. Confirmation of disallowances of infrastructure development charges and transmission and wheeling charges under section 40(a)(ia) of the Act.

Issue 1: Disallowance of Claim for Deduction under Section 80IA:
The assessee claimed a deduction under section 80IA of the Act, but the Assessing Officer disallowed it as the assessee did not qualify under section 80IA(4). The ld. CIT(A) upheld the disallowance. The Tribunal noted that the partnership firm did not meet the requirements specified in section 80IA(4)(i) as it was not a company or consortium of companies. However, a specific substitution clause (iv) to section 80IA(4) extended the benefit to undertakings involved in power generation and distribution. Since the assessee met the criteria under section 80IA(4)(iv), the Tribunal allowed the deduction, overturning the decisions of the authorities below.

Issue 2: Confirmation of Disallowances under Section 40(a)(ia):
The Assessing Officer disallowed infrastructure development charges and transmission expenses under section 40(a)(ia) due to non-deduction of TDS. The ld. CIT(A) upheld these disallowances. The Tribunal considered that the expenses were capitalized and not claimed as revenue expenditure by the assessee. As per the remand report, the payments were made before the windmill commissioning and were capitalized, evident from the depreciation schedule. Since the payments were not claimed as expenditure, the provisions of section 40(a)(ia) did not apply. Therefore, the Tribunal deleted the disallowances made under section 40(a)(ia) by the Assessing Officer and confirmed by the ld. CIT(A).

In conclusion, the Tribunal allowed the appeal filed by the assessee, overturning the disallowances of deduction under section 80IA and infrastructure charges under section 40(a)(ia) of the Income Tax Act, 1961.