2020 (1) TMI 457 - AT - Income Tax

Amortization u/s 35D(2)(c)(iv) regarding its IPO - AO denied claim since the assessee stood incorporated way back on 25.08.1995 and it had been carrying out its business activities, it could not be said that this expenditure was prior to commencement of the business. And that this expenditure pertained to IPO only and therefore, it carried imprint of capital expenditure as well - CIT(A) has deleted the impugned disallowance - HELD THAT - There can hardly be any dispute that this statutory provision prescribes amortisation of capital expenditure relating to specified items only u/s 35D which have been incurred; before the commencement of business or after the commencement of his business, in connection with the extension of its undertaking or in connection with his setting up a new industrial unit provided in sub-section 2(i) and (ii) of section 35D; respectively. We find that there is no rebuttal coming from the Revenue side about the purpose of assessee s capital raised as meant for investment in capital equipments, working capital requirement, general corporate purposes followed by issue expenses only. This tribunal s recent decision in ACIT vs. West Gujarat Expressway Ltd. 2015 (5) TMI 305 - ITAT MUMBAI allows similar instance of expenses of authorized share capital as amortizable falling under extension of the undertaking only. Thus the assessee s case comes u/s 35D(2)(ii) since in connection with extension of its undertaking only as evident from assessee s foregoing factual details. Section 80IA deduction and its exemption u/s 115JB MAT computation - treat the former assessment year 2010-11 as the lead assessment year - filing of belated revised return - HELD THAT - The impugned section 80IA deduction claim on merits, is already covered by the tribunal common order (supra) in assessment years 2005-06 to 2009-10 that it is a developer having undertaken business risk in similar infrastructural projects. Revenue s pleadings in the instant appeal nowhere pinpointed any distinction in law and on facts in all these assessment years. It is further noted that the assessee has been deployed its fixed assets and also paid retention money to the payers concerned. All this sufficiently indicates that the assessee s payers nowhere undertook any risk in the corresponding projects. Filing of belated revised return - we find that hon ble apex court s judgment in NTPC 1996 (12) TMI 7 - SUPREME COURT settled the law long back that if the assessee is a legally entitled for a deduction claim which is not taxable and the corresponding claim can also be allowed to be raised for the first time even in section 254 proceedings. It has also come on record that the assessee had very well explained the reasons of having not raised the impugned scheme due to the corresponding legislative amendments in section 80IA followed by CBDT s explanatory memorandums. This tribunal in ITO vs. S. Venkataiah 2012 (6) TMI 40 - ITAT HYDERABAD also holds that an assessee s legally allowable claim which could not be raised owing to circumstances beyond its control and pressed later on by way of belated return, could not be declined on account of mere technicality The legislature has nowhere employed such a restrictive expression in the new scheme of search assessment in section 153A to section 153C applicable w.e.f. 01.06.03. More particularly u/s 153A(1)(a) reads that the provisions of this Act shall so far as the case may be applied accordingly as if such return was furnished u/s 139 meaning that a return filed u/s 153A is treated as that filed u/s 139 of the Act only. Same analogy therefore applies to a revised return covered under the said general scheme of the Act only. We therefore hold that the Revenue s emphasis seeking to delete assessee s return itself as an invalid one does not deserve to be accepted. CIT-DR s further argument seeking to invoke section 80AC of the Act that no such deduction shall be allowed to him unless he furnishes the return of his income for such assessment order on or before the due date specified under sub-section (1) of section 139 also fails to evolve our concurrence since the assessee admittedly filed his return u/s 139(1) as on 13.10.10 only. The Revenue s emphasis for treating the assessee s section 153A return as belated is without any merit since the same was very much treated as a valid one as per the assessment order and more so, in view of the fact that the Assessing Officer made other disallowance/additions on merits as well We lastly notice more a perusal of assessee s corresponding development agreements running to pages 1 to 164 in paper book dated 27.10.09 and other similar records comprising 1-854 pages that it had very well undertaken business risks by raising capital deployment of fixed assets for carrying out the necessary infrastructural development and complied with retention money stipulations as well(supra). The assessee has also been treated as a developer in earlier assessment years. We therefore conclude that the CIT(A) has rightly accepted the assessee s revised claim to allow its section 80IA deduction There is hardly any dispute that the impugned section 115JB MAT provision is in the nature of a non-obstante clause since containing the clinching statutory expression notwithstanding anything contained in any provision of the Act. There is no exception thereto in the relevant deduction provision u/s 80IA. We thus apply the legal latin maxim generalia specialibus non-derogant , i.e the general provision must yield to the special provision and hold in light of the coordinate bench s detailed discussion that the assessee s grievance seeking MAT exemption regarding its section 80IA deduction claim of ₹ 23,90,63,499/- does not carry any merit. The same stands rejected therefore. Section 80IA deduction claim in normal provision followed by its exemption from section 115JB MAT computation - HELD THAT - This assessee s paper books indicate this claim was neither declined in assessment order dated 22.03.2013 nor in the CIT(A) s order. Rather no such ground was raised as per Form 35. The fact also remains that the assessee has placed on record its identical details of having carried out infrastructural development. We therefore keep in mind the clinching facts of the assessee s corresponding details in the paper book and deem it appropriate to restore the instant issue forming subject matter of second and third substantive grounds back to the Assessing Officer for adjudication as per law in light of our detailed discussion in preceding paragraphs in assessment year 2010- 11. We make it clear that the assessee would not be entitled for section 115JB MAT exemption going by our findings in lead assessment year. Entitled for exemption of income derived from joint venture - section 251(1)(a) power of CIT(A) to set aside the issue back to the Assessing Officer - HELD THAT - We find from the former assessment year s assessment order dated 22.03.13 para 4.3 that there is no other reasoning whatsoever in the Assessing Officer s opinion to decline the impugned exemption. The CIT(A) s order under challenge on the other hand holds that the assessee had filed all the relevant documents to the Assessing Officer which had nowhere been considered. We therefore observe that although the Revenue has argued on the basis of section 251(1)(a) that the power of CIT(A) to set aside the issue back to the Assessing Officer stands omitted w.e.f. 01.06.01, the impugned argument direction are against the law. The same deserves to be rejected since the assessing authority has been directed to go by the actual and than on estimation basis figures only. We thus decline the Revenue s foregoing arguments. Suffice to say, the Assessing Officer directed to finalise his consequential factual verification as per law. Section 115JB exemption claim qua its joint ventures - we hold that the Assessing Officer shall take into account all factual as well as legal aspects (section 115JB Explanation 1(fa) not applicable in the impugned assessment year 2010-11 2011-12) in his consequential computation. Allow the assessee s education cess(es) in both assessment years in both assessment years as allowable deduction in law. MAT exemption of the impugned education cess - HELD THAT - We find that the section 115JB Explanation 2(iv) and (v) makes it clear that the secondary and higher education cess(es) on income tax have been included in Explanation (1)(a) thereof. We therefore decline the assessee s latter grievance on the instant issue. Section 115JB MAT adjustment exemption regarding its retention money - HELD THAT - After giving our thoughtful consideration to the rival contentions in favour and against the impugned relief, we notice that this issue is no more res integra since the tribunal s order in DCIT vs. M/s Mcnally Bharat Engineering Ltd. 2020 (1) TMI 203 - ITAT KOLKATA holds that such a retention money cannot be regarded as income even for the purpose of computing section 115JB book profits. Learned coordinate bench holds that retention money does not partake character of income till the time the contractual obligation in issue are fully performed to the satisfaction of the payer/other parties concerned. We adopt the very reasoning mutatis mutandis and direct the Assessing Officer to grant the impugned section 115JB MAT exemption to the assessee regarding retention money amounts in issue. Its above substantive grounds are accepted. Section 153A proceedings are not liable to be invalid since initiated without any incriminating documents found during the course of search in question - HELD THAT - The impugned assessment is indeed based on incriminating material found during search have gone unrebutted from the assessee s side. We therefore decline its first substantive ground.

Summary

Issues Involved:
1. Condonation of delay in filing the cross-objection.
2. Section 35D amortization of expenses.
3. Section 80IA deduction disallowance.
4. Section 115JB MAT computation.
5. Exemption of income derived from joint ventures.
6. Section 40(a)(ii) education cess disallowance.
7. Retention money under Section 115JB MAT computation.
8. Validity of Section 153A proceedings without incriminating documents.

Detailed Analysis:

1. Condonation of Delay in Filing the Cross-Objection:
The assessee's cross-objection suffered from a delay of 1016 days. The delay was attributed to financial difficulties, insolvency proceedings, and a change in management, which led to a communication gap and oversight in tax matters. The tribunal condoned the delay, emphasizing the principle of substantial justice over technical considerations, citing the Supreme Court's decision in "Collector Land Acquisition vs. MST Katiji & Ors."

2. Section 35D Amortization of Expenses:
The Revenue's appeals challenged the CIT(A)'s deletion of the disallowance of ?1,12,60,000/- claimed by the assessee under Section 35D for IPO expenses. The tribunal upheld the CIT(A)'s decision, noting that the expenses were related to the extension of the undertaking and were eligible for amortization under Section 35D(2)(ii). The tribunal referenced case law supporting the treatment of such expenses as related to business expansion.

3. Section 80IA Deduction Disallowance:
The Revenue contested the CIT(A)'s decision to allow Section 80IA deductions of ?23,90,63,499/- for AY 2010-11 and ?18,17,75,627/- for AY 2011-12. The tribunal upheld the CIT(A)'s decision, stating that the assessee had undertaken business risks and invested in infrastructural projects, qualifying for the deduction. The tribunal also rejected the Revenue's technical arguments about the validity of the revised return, emphasizing that the assessee's claim was legitimate and supported by previous tribunal decisions.

4. Section 115JB MAT Computation:
The assessee sought to exempt its Section 80IA deduction from MAT computation. The tribunal rejected this claim, citing the legal principle that general provisions must yield to special provisions. The tribunal referenced the coordinate bench's decision in "M/s. Rockline Developers P. Ltd. vs. ITO" and held that Section 115JB does not allow for such exemptions.

5. Exemption of Income Derived from Joint Ventures:
The Revenue's appeals challenged the CIT(A)'s decision to exempt income derived from joint ventures. The tribunal upheld the CIT(A)'s decision, directing the Assessing Officer to verify the actual figures and treat the income from AOPs as exempt under Section 86. The tribunal also directed the Assessing Officer to consider factual and legal aspects in the consequential computation.

6. Section 40(a)(ii) Education Cess Disallowance:
The assessee contested the disallowance of education cess under Section 40(a)(ii). The tribunal allowed the claim, referencing the coordinate bench's decision in "DCIT vs. ITC Infotech" and the Rajasthan High Court's judgment in "Chambal Fertilizers and Chemicals Ltd." However, the tribunal rejected the claim for MAT exemption of the education cess, citing specific provisions in Section 115JB.

7. Retention Money Under Section 115JB MAT Computation:
The assessee sought MAT exemption for retention money. The tribunal allowed this claim, referencing the coordinate bench's decision in "DCIT vs. M/s Mcnally Bharat Engineering Ltd.," which held that retention money does not partake the character of income until contractual obligations are fulfilled.

8. Validity of Section 153A Proceedings Without Incriminating Documents:
The assessee argued that the Section 153A proceedings were invalid due to the absence of incriminating documents. The tribunal rejected this argument, noting that the Assessing Officer had based the assessment on incriminating documents found during the search. The tribunal upheld the CIT(A)'s finding that the assessment was based on relevant seized documents.

Conclusion:
The tribunal dismissed the Revenue's appeals and partly allowed the assessee's cross-objection and cross-appeal, providing relief in several areas while upholding some of the CIT(A)'s decisions. The tribunal emphasized the principles of substantial justice, proper interpretation of statutory provisions, and adherence to judicial precedents.