2024 (5) TMI 94 - AT - Income Tax

Deduction u/s 80IA(4) - Disallowance of project facility expenses - Revenue expenses or Capital expenditure - principle of consistency - assessee is engaged in business of building infrastructure facilities and earning income by way of collecting toll from vehicles running on roads constructed by the assessee - HELD THAT - We observe that the Department on identical set of facts, has allowed the claim of deduction u/s 80-IA(4) of the Act to the assessee both for the earlier assessment year i.e. A.Y. 2013-14 and also for the subsequent assessment years. Therefore, following the principle of consistency, in our considered view there is no infirmity in the order of Ld. CIT(A) in which he had held that assessee is eligible for claim of deduction under Section 80-IA(4) - for the impugned assessment year, the assessee did not claim deduction under Section 80-IA(4) of the Act for the simple reason that the assessee had incurred losses for the impugned year. In the case of ITO vs. Keval Construction 2013 (7) TMI 291 - GUJARAT HIGH COURT held that in case of disallowance / addition on account of non-deduction of TDS liability, this would increase the profits of the assessee from the business of developing housing projects and therefore, the ultimate profit would increase and the same would qualify for deduction under Section 80-IB of the Act. In the case of Virtusa (India) Pvt. Ltd 2013 (10) TMI 1395 - ITAT HYDERABAD ITAT held that the amount of statutory disallowance under Section 40(a)(ia) of the Act has to be considered as business profit eligible for deduction under Section 10A of the Act. In the case of Commissioner of Income-tax vs. Gem Plus Jewellery India Ltd. 2010 (6) TMI 65 - BOMBAY HIGH COURT the High Court held that where the Assessing Officer had enhanced income by disallowing employers as well as employees contribution towards Provident Fund / ESIC, exemption under Section 10A had to be granted on such enhanced income. Accordingly, when the claim of the assessee for grant of deduction under Section 80-IA(4) of the Act has not been disputed / disturbed by the Department in either the earlier or later / subsequent years, in our considered view, CIT(A) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction u/s 80-IA(4) of the Act with respect to income which has been enhanced on account of disallowances made by the AO. Appeal of the Department is dismissed.

Summary

Issues Involved:
The issues involved in this case are the deduction u/s 80IA(4), condonation of delay in filing the appeal, and the eligibility of the assessee for claiming deduction under Section 80-IA(4) of the Act.

Condonation of Delay:
The appeal of the Department was time-barred by 164 days, and an application for condonation of delay was filed citing administrative work as the reason for the delay. The delay was condoned after considering the reasons provided.

On Merits:
The assessee, engaged in building infrastructure facilities and collecting toll, claimed project facility expenses as revenue expenses. The Assessing Officer disallowed these expenses as capital expenditure. The Ld. CIT(A) upheld the additions but allowed the deduction u/s 80IA(4) after verifying the eligibility criteria and considering relevant case laws.

Department's Appeal:
The Department appealed the Ld. CIT(A)'s decision, arguing that the assessee did not claim the deduction under Section 80-IA(4) due to losses in the impugned year. The Counsel for the assessee highlighted that the claim was allowed for prior and subsequent years, maintaining consistency.

Judgment:
The Tribunal found no infirmity in the Ld. CIT(A)'s order, as the Department had allowed the deduction in previous and subsequent years. Citing relevant case laws, the Tribunal upheld the eligibility of the assessee for claiming deduction under Section 80-IA(4) of the Act, dismissing the Department's appeal.

This summary provides a detailed overview of the judgment, addressing each issue involved in the case.