2024 (9) TMI 20 - AT - Income Tax

Notional income on account of designated returns - whether no income as arisen or accrued to the Appellant? - HELD THAT - The issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case 2023 (8) TMI 1510 - ITAT DELHI from AY 2006-07 to A.Y. 2011-12 held as the assessee had already recovered the entire cost of the project on actual basis from collection of tolls, advertisement and rental income and, therefore, the assessee cannot collect the toll. In this light, it can be safely concluded that the assessee did not earn 20% designated return on the cost of the project. Thus, addition on account of designated return does not have any legs to stand and deserves to be deleted. Revenue subsidy - The issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case 2023 (8) TMI 1510 - ITAT DELHI from A.Y. 2006-07 to A.Y. 2011-12 as extracted the relevant articles of lease of land by Noida elsewhere. The very basis of the enhancement by the ld. CIT(A) that the lands were transferred to the assessee by Noida is fallacious and completely in disregard to the relevant articles mentioned elsewhere. The lands were given on lease and, therefore, there is no question of ownership being transferred to the assessee and, therefore, there is no question of any addition on this account. Interest u/s 43B - HELD THAT - Issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case 2023 (8) TMI 1510 - ITAT DELHI from A.Y. 2006-07 to A.Y. 2011-12 provisions of section 43B(e) of the Act apply only to loans/borrowings from any financial institutions. It does not apply to the deep discount bonds issued to the public. In our considered opinion, the amount over and above the face value which is payable on maturity is nothing but the interest amount which accrues to the assessee every year and recognized by the assessee in its books of account. Therefore, the interest payable on deep discount bonds is to be allowed on accrual basis and not on payment basis. AO is directed to delete the same. Capital Subsidy/Set off of Capital Subsidy - HELD THAT - Issue stands covered by the order of the Co-ordinate Bench of ITAT in assessee s own case 2023 (8) TMI 1510 - ITAT DELHI A.Y. 2006-07 to A.Y. 2011-12 no capital subsidy to be reduced and there is no basis for re-computing the depreciation. Claim of depreciation u/s 32/Brought forward depreciation - We find that this issue has not been adjudicated by the CIT(A). Since, the primary adjudication has not been done by the first appellate authorities, hence we deem it fit to remand the issue to the ld. CIT(A) for adjudication.

Issues Involved:
1. Invocation of section 251(1)(a) and enhancement of income.
2. Taxation of notional income on account of designated returns.
3. Denial of deduction under section 80-IA on designated returns.
4. Addition of revenue subsidy to total income.
5. Denial of deduction under section 80-IA on revenue subsidy.
6. Classification of rental income.
7. Disallowance of unpaid interest under section 43B.
8. Set-off of unabsorbed depreciation.
9. Treatment of capital subsidy and depreciation claim.
10. Levy of interest under sections 234B and 234C.
11. Initiation of penalty proceedings under section 271(1)(c).

Detailed Analysis:

1. Invocation of Section 251(1)(a) and Enhancement of Income:
The Tribunal found that the invocation of section 251(1)(a) by the CIT(A) and the enhancement of the appellant's income were invalid and contrary to the provisions of law. This ground was upheld in favor of the assessee.

2. Taxation of Notional Income on Account of Designated Returns:
The Tribunal noted that the issue of designated returns had been previously adjudicated in the assessee's favor in earlier years. It was held that no right was accrued to the assessee to receive the alleged designated return, making the entire addition notional and against the concept of real income. Consequently, the addition on account of designated returns was deleted.

3. Denial of Deduction Under Section 80-IA on Designated Returns:
The Tribunal found that this issue had not been adjudicated by the CIT(A). Therefore, it was remanded back to the CIT(A) for primary adjudication.

4. Addition of Revenue Subsidy to Total Income:
The Tribunal observed that the issue of revenue subsidy had been previously adjudicated in favor of the assessee. It was held that the lands were given on lease and not transferred, making the basis for enhancement by the CIT(A) fallacious. Hence, the addition on account of revenue subsidy was deleted.

5. Denial of Deduction Under Section 80-IA on Revenue Subsidy:
Similar to the designated returns, the Tribunal found that this issue had not been adjudicated by the CIT(A). Therefore, it was remanded back to the CIT(A) for primary adjudication.

6. Classification of Rental Income:
The Tribunal noted that this issue had not been adjudicated by the CIT(A). Consequently, it was remanded back for primary adjudication.

7. Disallowance of Unpaid Interest Under Section 43B:
The Tribunal referred to a previous order where it was held that section 43B(e) applies only to loans/borrowings from financial institutions and not to deep discount bonds issued to the public. Therefore, the interest payable on deep discount bonds should be allowed on an accrual basis. The disallowance of unpaid interest was deleted.

8. Set-off of Unabsorbed Depreciation:
The Tribunal found that this issue had not been adjudicated by the CIT(A). Therefore, it was remanded back for primary adjudication.

9. Treatment of Capital Subsidy and Depreciation Claim:
The Tribunal referred to a previous order where it was held that there was no capital subsidy to be reduced, and thus no basis for recomputing depreciation. The addition made by the CIT(A) was deleted.

10. Levy of Interest Under Sections 234B and 234C:
The Tribunal found that the levy of interest under sections 234B and 234C was erroneous and deserved to be deleted. This ground was upheld in favor of the assessee.

11. Initiation of Penalty Proceedings Under Section 271(1)(c):
The Tribunal did not specifically address this issue in the judgment provided.

Conclusion:
The appeals were allowed for statistical purposes, and the Stay Applications were dismissed as infructuous. The Tribunal remanded several issues back to the CIT(A) for primary adjudication and upheld the deletion of additions on account of designated returns, revenue subsidy, and unpaid interest under section 43B. The levy of interest under sections 234B and 234C was also deleted.

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