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2013 (3) TMI 458 - AT - Income TaxDeduction u/s 80IA in - Sec. 115VT of the Income tax Act, 1961. - Assessee is eligible for deduction u/s 80IA in respect of profits derived from Kakinada Port, Jam Nagar Port and Dahej Port though the assessee did not enter into an agreement for operation and maintenance of infrastructure facility with the Central Govt/State Govt./Local Authority or Statutory Authority - Held that - It was explained by the assessee to the assessing officer that the assessee company had entered into agreements for operation and maintenance of infrastructure facilities viz., ports with the developers thereof, who in turn had entered into agreements with specified authorities for the purpose of development, operation and maintenance of these ports. Further, under the original agreement between the specified authorities and the developers of the port, the developers had the power to sub contract the operation and maintenance of the port infrastructure as and where necessary. Further the deduction u/s. 80IA already granted to the assessee for the earlier assessment years as decided by the Tribunal by the order cited above, being so, we are not in a position to take any contrary view in this matter in view of the order of the Tribunal in the case of Micro Instruments Co. Ltd. vs. ITO 2008 (7) TMI 981 - ITAT CHANDIGARH wherein it was held that the assessee s claim for deduction u/s. 80IB has been allowed in the initial assessment year and also thereafter, claim for such deduction cannot be denied for subsequent years without any justification. - we are of the opinion that claim u/s. 80IA has to be allowed . As regard addition u/s. 115VT of the Income tax Act, 1961 - Held that - When we compute the book profit in accordance with the provisions of section 115JB of the Act, the assessee is required to credit the Tonnage Tax Reserve Account as per book profit shown in the audited P & L Account and Balance Sheet. There is no dispute in this case that audited P & L Account shows the book profit at ₹ 7,22,74,369. If there is no dispute regarding this profit shown in the audited P & L Account and Balance Sheet, the Assessing Officer is precluded from tinkering the same. Explanation (1) to subsection (2) of section 115JB also does not provide for increase of the profit shown in the P & L account by an amount like donation or prior period items which is said to be added by the lower authorities. We do not find these two elements i.e., donation and prior period items in the Explanation 1 to subsection (2) of section 115JB of the Act. Being so, in our opinion, the Assessing Officer cannot add these two items to the book profit for the purpose of determining the transfer of profit to Tonnage Tax Reserve Account. We also place reliance on the judgement of Supreme Court in the case of Apollo Tyres Ltd. vs. CIT(2002 (5) TMI 5 - SUPREME Court) - Decided against the assessee.
Issues Involved:
1. Eligibility for deduction under Section 80IA for profits derived from Kakinada Port, Jam Nagar Port, and Dahej Port. 2. Addition of Rs. 33,55,204 under Section 115VT of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Eligibility for Deduction under Section 80IA Revenue's Argument: The Revenue contended that the CIT(A) erred in holding that the assessee is eligible for deduction under Section 80IA. The primary reasons were: - The assessee did not enter into an agreement for the operation and maintenance of infrastructure facilities with the Central/State Government, Local Authority, or Statutory Authority. - The assessee operated as a contractor, not as a developer or operator of the entire infrastructure facility. Assessee's Argument: The assessee argued that: - The Tribunal in its earlier order had allowed the deduction under Section 80IA in the assessee's own case. - The amendment to Section 80IA by the Finance Act 2007 or 2009 has no application to their case. - The Special Bench decision in B.P. Patil vs. ACIT is not relevant as it pertains to developers, not O&M operators. - Even partial O&M activities are entitled to the deduction under Section 80IA, supported by CIT Vs. ABG Heavy Industries Ltd. (322 ITR 323). Tribunal's Findings: The Tribunal upheld the CIT(A)'s decision, stating: - It is not necessary for the assessee to undertake the entire O&M of the port infrastructure. - An agreement with the authority specified in Section 80IA(4)(i)(b) is not mandatory. - The services rendered by the assessee are an integral part of the O&M of the port infrastructure. - The Tribunal referenced CIT Vs. ABG Industries Ltd., which supports the deduction for even part of the O&M activities. - The Tribunal also noted that the assessee's agreements with developers, who had agreements with specified authorities, fulfill the requirements of Section 80IA. Conclusion: The Tribunal confirmed the order of the CIT(A) allowing the deduction under Section 80IA for Kakinada Port, Jam Nagar Port, and Dahej Port, and dismissed the Revenue's appeals. Issue 2: Addition of Rs. 33,55,204 under Section 115VT Facts: The assessee filed its return of income, claiming deductions under Section 80IA. The Assessing Officer reopened the assessment and added Rs. 33,15,204 to the total income, citing a shortfall in the Tonnage Tax Reserve Account as per Section 115VT(5). Assessee's Argument: The assessee contended that: - The CIT(A) erred in confirming the addition by incorrectly adopting the book profit. - The book profit for Section 115VT should be the same as defined under Section 115JB, based on audited financial statements. - The CIT(A) incorrectly used the total income computed under normal provisions instead of the audited book profit. - Disallowable expenses under normal provisions should not affect the book profit for Section 115VT. Revenue's Argument: The Revenue supported the Assessing Officer's decision to remove unrelated expenses (donations and prior period expenses) and recompute the book profit, thereby increasing the Tonnage Tax Reserve requirement. Tribunal's Findings: The Tribunal held that: - The book profit for Section 115VT should be computed as per the provisions of Section 115JB. - The Assessing Officer cannot add items like donations and prior period expenses to the book profit for determining the Tonnage Tax Reserve. - The Tribunal relied on the Supreme Court judgment in Apollo Tyres Ltd. vs. CIT, which restricts the Assessing Officer from altering the net profit shown in the audited P&L account. Conclusion: The Tribunal allowed the assessee's appeal, rejecting the addition of Rs. 33,15,204 under Section 115VT. Final Judgment: - All three appeals of the Revenue are dismissed. - The assessee's appeal is allowed.
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