2022 (11) TMI 226 - AT - Income Tax

Deduction u/s. 80IA - AO referred to the provisions of Explanation to section 80IA(13) of the Act with retrospective effect from 01.04.2000 and held that the assets developed/created are not pertaining to the assessee and the assessee is entitled only to a fixed remuneration for its professional services and, therefore, disentitling it from deduction u/s. 80IA - According to the assessee, it has been set up by the Government of Goa as a SPV to develop infrastructure facilities which are developed by the assessee by appointing various contractors - CIT-A confirmed part addition - HELD THAT - From the perusal of meritorious and factual findings given by the Ld. CIT(A) for granting relief to the assessee by allowing the deduction u/s. 80IA(4) of the Act for an amount partly since no contrary material, both on fact or law has been brought on record, we find no reason to interfere with the said findings given by the CIT(A) as discussed and reproduced above. We also note the fact that the claim of deduction u/s. 80IA(4) of the Act by the assessee is for the eighth consecutive year and for the past seven preceding years, the claim of the assessee has been consistently allowed. From the tabulation given, we note that in the present case, deduction has been allowed for all the earlier assessment years and the Ld. AO has now sought to disallow the deduction for the eighth year which otherwise is allowable for consecutive period of ten assessment years. In the instant case before us, as there is no change in the facts and the applicable law, if the deduction has been allowed in the initial assessment years, the same cannot be withdrawn in the subsequent years without making disallowance in the initial assessment years. While confirming the allowance of deduction granted by the Ld. CIT(A), we also place reliance on the decision of the Hon ble jurisdictional High Court of Bombay in the case of ABG Heavy Industries Ltd. 2010 (2) TMI 108 - BOMBAY HIGH COURT In respect of the addition confirmed by the Ld. CIT(A) and agitated by the assessee before us, we do not find any merit in the claim made by the assessee for allowing these items of other income in eligible for deduction u/s. 80IA of the Act. We do find no reason to interfere with the fact based findings given by the Ld. CIT(A) on this issue as discussed and reproduced above. Both the appeal of assessee and the revenue are dismissed.

Summary

Issues Involved:
1. Disallowance of deduction claimed by the assessee under Section 80IA of the Income-tax Act, 1961.
2. Treatment of other income amounting to Rs. 23,97,310/-.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IA:
The primary issue in these cross appeals pertains to the disallowance of a deduction of Rs. 3,37,35,560/- claimed by the assessee under Section 80IA of the Income-tax Act. The assessee, a Public Limited Company promoted by the Government of Goa, is involved in infrastructural development projects. The Government reimburses the assessee based on the expenditure incurred for various projects. The assessee had claimed a deduction under Section 80IA for the eighth consecutive year, which had been allowed in the preceding seven years. However, the Assessing Officer (AO) disallowed the deduction, treating the assessee as a nodal agency rather than a developer, relying on the decision of the ITAT Ahmedabad in the case of Gujarat Urban Development Co. Ltd.

The assessee contended that it is a developer of infrastructure facilities and not merely a contractor. The term "contractor" is not contradictory to "developer," and entering into a lawful agreement with the government does not bar the assessee from being considered a developer. The CIT(A) agreed with the assessee, noting that the assessee had developed infrastructure facilities as per agreements with government bodies and was thus eligible for the deduction under Section 80IA. The CIT(A) also distinguished the facts of the assessee's case from the Gujarat Urban Development Co. Ltd. case and relied on the decision of the ITAT Mumbai in the case of B.T. Patil & Sons Belgaum Construction Pvt. Ltd., where the assessee was held eligible for the deduction under Section 80IA.

2. Treatment of Other Income:
The second issue involves the treatment of other income amounting to Rs. 23,97,310/-. The CIT(A) sustained the addition of this amount, holding that the sources of other income, such as application fees, sale of tender documents, and processing fees, were not directly related to the eligible business of developing infrastructure facilities. The CIT(A) noted that for income to qualify for deduction under Section 80IA, it must be derived from the eligible business. Since the other income did not emanate from the development of eligible infrastructure projects, it was rightly taxed under the head "Income from Other Sources" as per Section 56 of the Act.

Conclusion:
The Tribunal upheld the findings of the CIT(A), granting relief to the assessee by allowing the deduction of Rs. 3,13,38,250/- under Section 80IA and sustaining the addition of Rs. 23,97,310/- as other income. The Tribunal noted that the deduction under Section 80IA had been consistently allowed in the past seven years, and there was no change in facts or law to warrant a disallowance in the eighth year. The appeals of both the assessee and the revenue were dismissed.