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2014 (4) TMI 789 - AT - Income TaxDeletion of interest on FDRs Held that - CIT(A) has held that the assessee is 100% government owned company appointed as a Nodal Agency for implementation of various infrastructure development projects all across Gujarat - the interest is not credited to the respective Grant accounts is factually incorrect the decision in COMMISSIONER OF INCOME TAX II Versus SAR INFRACON PVT LTD. 2014 (3) TMI 728 - GUJARAT HIGH COURT followed - the assessee has credited the interest accrued to the respect grant accounts thus, there is no infirmity in the order of the CIT(A) Decided against Revenue. Disallowance of expenses on contribution to Gujarat Vibrant Summit 2007 Held that - The CIT(A) has held that the business of the assessee has already been commenced - the amount paid by the assessee-company way by way of participation fees to Gujarat Vibrant Summit to encourage development activities in the State - The assessee had also participated in the same by putting up a stall since the main object of the assessee-company is also to carry out activities for infrastructure development projects in the State of Gujarat thus, there is no infirmity in the order of the CIT(A) Decided against Revenue. Disallowance of deduction u/s 80IA(4) of the Act Held that - CIT(A) held that the appellant works as a nodal agency for implementation of various works undertaken/decided by the government - the grants for the projects is not its revenue income at all - the grants which are utilized for specified projects have been held to be not income but diversion of funds at source the appellant is doing the work of a concern engaged in work which is in the nature of a works contact awarded by any person and executed by it - as per the amended Explanation below section 80IA(13) with retrospective effect from 1.4.2000; the work should not be of the nature of contract and not only contract - the project costs and source not being revenue of the appellant, it being not affected by the actual cost and efficiency of work, the assets created and the source not being of the appellant at any stage and it being entitled to a fixed remuneration for its professional services - it clearly falls in the excluded category as per the amended Explanation below section 80IA(13) thus, they are not eligible for deduction Decided against Assessee.
Issues Involved:
1. Deletion of additions made on account of disallowance of administrative and other expenses, depreciation, and interest income. 2. Disallowance of expenses claimed as expenditure on account of contribution to Gujarat Vibrant Summit 2007. 3. Denial of deduction claimed under section 80IA(4) of the Income Tax Act. 4. Levy of interest under sections 234B and 234C. 5. Initiation of penalty under section 271(1)(c). Detailed Analysis: 1. Deletion of Additions (Revenue's Appeal - ITA No.1116/Ahd/2011 for AY 2007-08): - The Revenue challenged the deletion of additions made by the Assessing Officer (AO) on account of disallowance of administrative and other expenses, depreciation, and interest income. - The CIT(A) had deleted these additions based on previous Tribunal orders in the assessee's own case for earlier assessment years, which were upheld by the Gujarat High Court in the case of CIT vs. Gujarat Urban Development Co.Ltd. - The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the order as the issues were already settled by the High Court. Thus, the Revenue's appeal was dismissed. 2. Disallowance of Expenses for Gujarat Vibrant Summit 2007: - The AO disallowed expenses claimed by the assessee for participation in the Gujarat Vibrant Summit 2007, stating that the business had not commenced. - The CIT(A) found that the business had commenced and the expenses were for participation fees to encourage development activities in the State of Gujarat. - The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. 3. Denial of Deduction under Section 80IA(4) (Assessee's Appeals - ITA No.787/Ahd/2012 for AY 2008-09, ITA No.2670/Ahd/2013 for AY 2009-10, ITA No.2671/Ahd/2013 for AY 2010-11): - The AO disallowed the deduction claimed under section 80IA(4), stating that the assessee was not a developer but a nodal agency awarding contracts. - The CIT(A) upheld the AO's decision, noting that the assessee did not bear any risk and was entitled to a fixed percentage of the project cost. - The Tribunal found that the issue was settled against the assessee by the Gujarat High Court in the case of Katira Construction vs. Union of India, and upheld the CIT(A)'s decision, dismissing the assessee's appeals for AY 2008-09 and AY 2009-10. - For AY 2010-11, the Tribunal followed the same reasoning and dismissed the appeal on this ground. 4. Levy of Interest under Sections 234B and 234C: - The Tribunal noted that the levy of interest under sections 234B and 234C is consequential and upheld the CIT(A)'s decision in this regard, dismissing the relevant grounds in the assessee's appeals. 5. Initiation of Penalty under Section 271(1)(c): - The Tribunal found that the initiation of penalty under section 271(1)(c) was premature and did not require adjudication at this stage, dismissing the relevant grounds in the assessee's appeals. Interest on FDRs (Assessee's Appeal - ITA No.2671/Ahd/2013 for AY 2010-11): - The AO treated interest on Fixed Deposit Receipts (FDRs) as taxable income. - The CIT(A) upheld the AO's decision. - The Tribunal, following the Gujarat High Court decisions in Gujarat Municipal Finance Board and Gujarat Power Corporation Ltd., directed the AO to delete the addition, allowing the assessee's appeal on this ground. Conclusion: - Revenue's appeal for AY 2007-08 was dismissed. - Assessee's appeals for AY 2008-09 and AY 2009-10 were dismissed. - Assessee's appeal for AY 2010-11 was partly allowed, with the issue of interest on FDRs decided in favor of the assessee.
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