2022 (6) TMI 938 - AT - Income Tax

Deduction u/s 80IA(4) - container terminal developed by assessee - HELD THAT - After going through the adjudication of Ld. CIT(A), we find that second container terminal under consideration was jointly developed by the assessee and CITPL and it was a new infrastructural facility. The assets owned by the assessee and CITPL were expressly identified and listed in the exhaustive license agreement dated 07.03.2007. Assessee, as a licensor, provide reasonable access to the licensee to all infrastructural facilities and utilities including water, electricity and telecommunication facilities necessary during the construction stage or operational phase for the project facilities and services in accordance with the agreement. The assessee was vested with the authority of developing and providing infrastructural facilities for ports. The container terminal developed was a part of Chennai Port. The term Port is mentioned as an infrastructural facilities in the explanation (d) to Sec.80IA(4). The term port as defined in CBDT Circular No. 10 dated 16.12.2005 includes structures at the ports for storage, loading and unloading etc. The project fulfilled all the stipulate conditions. The gross revenue was split at source level between the assessee and CITPL. The same is further supported by the certificate from CITPL wherein it was certified that the profits / losses of CITPL were arrived at by considering their respective revenue share only. The other entity has been allowed similar deduction and there is no reason as to why the deduction is not available to the assessee. Thus, the adjudication in the impugned order could not be faulted with - Decided in favour of assessee. Disallowance u/s 14A - AR made a limited prayer that while computing the disallowance u/r 8D(2)(iii), only those investments should be considered which has yielded exempt income during the year - HELD THAT - Accepting AR prayer we direct Ld. AO to recompute disallowance u/s 14A r.w.s. 8D(2)(iii) by considering only those investments which have actually yielded any exempt income during the year. This ground stands partly for statistical purposes. The assessee s appeal stands partly allowed for statistical purposes. Suo moto allowance made by assessee - AY 2013-14 - We direct Ld. AO to re-compute disallowance u/r 8D(2)(iii) by considering only those investments which have actually yielded any exempt income during the year. The disallowance u/r 8D(2)(i) 8D(2)(ii) stand confirmed. The suo-motu disallowance as offered by the assessee shall be adjusted from the aggregate disallowance. Finally, the income / loss of the assessee shall be re-computed by taking correct figures of aggregate disallowance as made u/s 14A. The assessee s appeal stands partly allowed for statistical purposes.

Summary

Issues Involved:
- Disallowance under Rule 8D
- Eligibility for deduction under section 80IA
- Disallowance under section 14A

Analysis:

1. Disallowance under Rule 8D:
The assessee appealed against the disallowance under Rule 8D for Assessment Years (AY) 2012-13 and 2013-14. The issue was previously decided in favor of the assessee by the ITAT "D" Bench for AY 2011-12. The Revenue raised grounds stating the CIT(A)'s order was contrary to the law and facts. The Ld. CIT(A) had confirmed the disallowance under Rule 8D. The Tribunal considered the arguments and upheld the disallowance under Rule 8D for AY 2012-13, but directed the Assessing Officer to recompute the disallowance for AY 2013-14 by considering only investments that yielded exempt income during the year.

2. Eligibility for Deduction under Section 80IA:
The main issue revolved around the assessee's eligibility for deduction under section 80IA for the development of a container terminal jointly with another entity. The Ld. AO denied the deduction, stating that the actual operations were carried out by the other entity. However, the Ld. CIT(A) allowed the deduction after considering the terms of the license agreement and the development of the infrastructural facility by the assessee. The Tribunal affirmed the CIT(A)'s decision, emphasizing that the conditions for the deduction were met, and the terminal was jointly developed by both entities. The Tribunal dismissed the Revenue's appeal, upholding the assessee's eligibility for the deduction.

3. Disallowance under Section 14A:
Regarding the disallowance under section 14A, the assessee challenged the disallowance made by the Ld. AO for AY 2013-14. The Ld. AO computed the disallowance based on direct and indirect expenses. The Tribunal directed the Assessing Officer to recompute the disallowance under Rule 8D(2)(iii) for AY 2013-14 by considering only investments that yielded exempt income during the year. The disallowance under Rule 8D(2)(i) and 8D(2)(ii) was confirmed, and the assessee's appeal was partly allowed for statistical purposes.

In conclusion, both appeals filed by the assessee were partly allowed for statistical purposes, while the Revenue's appeal was dismissed. The Tribunal provided detailed reasoning for each issue, ensuring a thorough analysis and fair adjudication of the matter.