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2016 (5) TMI 535 - AT - Income TaxDeduction u/s 80IA(4) - Held that - The assessee is engaged in the business of developing, operating and maintenance of container freight station (CFS) at Nhava Sheva, Mumbai, which is also approved by the concerned ministry of Government of India and duly entered into an agreement with CIDCO. As per the terms of the agreement, CIDCO allowed the assessee to set up and operate the CFS for a period of 60 years. Since, the issue has been discussed in detail after analyzing the facts and after placing reliance upon certain decisions like fro Hon ble Apex Court in Bharat Sanchar Nigam Ltd. vs UOI (2006 (3) TMI 1 - Supreme court ) and CIT vs Paul Brothers (1992 (10) TMI 5 - BOMBAY High Court ), notification S.O. 744E, dated 01/09/1998, as amended by SO 391E dated 28/05/1999, decision in CIT vs Western Outdoor interactive Pvt. Ltd. 2012 (8) TMI 709 - BOMBAY HIGH COURT and then affirmed the decision of the CIT(A), in favour of the assessee. Disallowance made u/s 14A - Held that - Where no exempt income was earned by the assessee in the relevant assessment years and since the genuineness of expenditure is not in doubt, there is no question of disallowance u/s 14A of the Act - Decided in favour of the assessee.
Issues Involved:
1. Deduction under section 80IA(4) of the Income Tax Act, 1961. 2. Disallowance under section 14A of the Income Tax Act. 3. Disallowance under section 14A from book profit under section 115JB of the Income Tax Act. Issue-wise Detailed Analysis: 1. Deduction under section 80IA(4): The Revenue contested the allowance of deduction under section 80IA(4) by the Commissioner of Income Tax (Appeal). The assessee, a company engaged in developing, operating, and maintaining a Container Freight Station (CFS) at Nhava Sheva, Mumbai, claimed this deduction. The Assessing Officer (AO) disallowed the deduction, arguing that the agreement with CIDCO was not a BOT/BOLT agreement and that CFS is not an infrastructure facility as per section 80IA(4). The AO also noted that the assessee did not obtain the necessary certificate from the competent authority. However, the Commissioner (Appeals) found that the assessee had been allowed this deduction since the assessment year 2002-03 and that CFS qualifies as an infrastructure facility under section 80IA(4). The Tribunal upheld this view, citing that the deduction, once allowed, cannot be withdrawn in subsequent years if there is no change in facts. The Tribunal also referenced several judicial decisions, including CIT v/s Western Outdoor Interactive Pvt. Ltd. and CIT v/s Paul Brothers, to support its conclusion. 2. Disallowance under section 14A: The Revenue challenged the deletion of disallowance made under section 14A, arguing that the assessee should have disallowed expenses related to earning exempt income. The assessee contended that no exempt income was earned during the relevant assessment year, making the disallowance hypothetical. The Tribunal referred to the Delhi High Court's decision in Cheminvest Ltd. v. CIT, which held that no disallowance under section 14A should be made if no exempt income is earned. The Tribunal found no infirmity in the Commissioner (Appeals)'s decision to delete the disallowance, thus dismissing the Revenue's ground. 3. Disallowance under section 14A from book profit under section 115JB: The Revenue argued that the disallowance under section 14A should also apply to the book profit calculation under section 115JB. The Tribunal noted that this issue was consequential to the second issue. Since the disallowance under section 14A was not justified, it could not be added back to the book profit under section 115JB. The Tribunal upheld the Commissioner (Appeals)'s decision, dismissing this ground as well. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals)'s decisions on all grounds. The Tribunal emphasized that the deduction under section 80IA(4) was rightly allowed as CFS qualifies as an infrastructure facility, and the disallowance under section 14A was not applicable as no exempt income was earned by the assessee. Consequently, the disallowance under section 14A could not be added to the book profit under section 115JB.
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