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TMI Blog2016 (1) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax (Appeals) failed to appreciate the TDS Provisions under Section 194A had not been applicable to the payments made by the appellant." 3. The assessee is a company incorporated under the Companies Act, 1956. The entire shares of the assessee are owned by Government of West Bengal. All the directors of the assessee are nominated by the Government of West Bengal. The assessee was formed for development of land for housing and for developing, operating and maintaining infrastructure facilities like sanitation and sewerage, drainage, water supply etc. The assessee also develops land by dividing land into several plots and offers it for sale to individuals, cooperatives, government projects etc. 3.1. In the course of assessment proceedings for A.Y.2005-06 there was an item of debit of a sum of Rs. 9,71,17,977/- in the profit and loss account of the Assessee. The aforesaid sum was claimed as deduction in computing the income of the assessee under the head "income from business". The nature of this expenditure was explained by the assessee before the AO as "compensation for delay delivery of plots". The assessee explained before the AO that as per the offer of allotment of plot o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the expression "interest" as provided u/s 2(28A) of the Act. The aforesaid provision reads as follows :- "2(28A) "interest" means interest payable in any manner in respoec5t of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect o0f the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised; " It was submitted by him that the payment in question made by the assessee to the allottee was not in respect of any money borrowed or debt incurred and therefore the same cannot be characterised as interest. Consequently there was no obligation on the part of the assessee to deduct tax at source u/s 194A of the Act. The ld. Counsel placed reliance on the following two decisions :- i) CIT vs H.P.Housing Board (2012) 340 ITR 388 (HP) ii) Ghaziabad Development Authority vs Dfr. N.K.Gupta 258 ITR 337. In the case of H.P. Housing Board there was a delay in construction of house and therefore H.P.Housing Board paid interest to the allottees on the agreed rate in terms of the letter of allotment. The question before the Hon'ble Himachal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is further qualified by the word "claim" or other similar right or obligation and the liability of the assessee in question arises out of the claim made by an allottee of plot is also not acceptable. The expression "including a deposit, claim or other similar right or obligation" has to be read ejusdem generis with the expression "moneys borrowed or debt incurred". In other words the expression "interest" should be traceable to transactions in the form of borrowing of money. The decisions referred to by the ld. Counsel for the assessee clearly lay down the proposition that the nature of payment for delay in delivery of the plots is in the nature of damages and not in the nature of interest. We, therefore, are of the view that the amount in question cannot be characterised as interest within the meaning of section 194A of the Act. Consequently there was no obligation on the part of the assessee to deduct tax at source. Consequently no disallowance could be made u/s 40(a)(ia) of the Act. We therefore direct the disallowance made by the AO and sustained by the CIT(A) should be deleted. Ground Nos. 1 and 2 raised by the assessee are accordingly allowed. 6. Ground Nos. 3 and 4 raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asury account of the assessee. There is no allegation that the State Government has refused to pay interest on the treasury account maintained by the assessee. It cannot also be said that the interest in question cannot be recognised owing to denial by the State Government of its obligation to pay interest or for the reason that the State Government is unable to pay interest. In such circumstances we are of the view that the revenue authorities were justified in bringing to tax interest on the premise that there was an accrual of income under the mercantile system of accounting. We do not find any ground to interfere with the order of the CIT(A). Ground Nos. 3 and 4 raised by the assessee are dismissed. 8. Ground No.s 5 and 6 raised by the assessee read as follows :- "5. That the Commissioner of Income Tax (Appeals) was wrong in confirming the action of the Assessing Officer in disallowing the appellant's claim for deduction u/s 80- IA. 6. That without prejudice to the contention raised in Ground No.5 above, the Commissioner of Income-tax (Appeals) failed to appreciate the fact that the appellant had been responsible to develop the infrastructure facilities of the area notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port, inland waterway 32[, inland port or navigational channel in the sea];]" 9.1. The assessee did not make a claim for deduction before the AO. However, such a claim was made before the CIT(A). The CIT(A) had not allowed the claim of the assessee for the following reasons :- Appeal on ground no. 5 is against the not allowing the assessee to set off brought forward losses/unabsorbed depreciation. The appellant did not claim any deduction u/s. 80lA of the I.T. Act, 1961 but seeing the positive income calculated by the A.O. the assessee filed a petition u/s. 154 of the LT. Act 1961 for allowing deduction u/s. 80lA in view of the positive income arrived as per the assessment order. The A.O. in his order did not accept the assessee's contention of allowing deduction u/s. 80lA on the basis of its finding that the company had no valid license from Govt. of W.B. to develop infrastructure. I have considered the finding of the A.O. the written submission filed by the A.R. and copies of orders/notifications relating to formation of the assessee company which was filed before the Hon' ble Tribunal. After going through the orders and notifications of the assessee company i.e. West ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nos. 1 to 4 are allowed." 10. The ld. Counsel for the assessee submitted that in view of the aforesaid order of the CIT(A) the claim of the assessee for the aforesaid deduction should be allowed. The ld. DR submitted that the revenue has filed an appeal being ITA No.213/Kol/2012 against the order of CIT(A) for A.Y.2008-09 and therefore the said order cannot be said to be final. It was also pointed out by him that the impugned order of the CIT(A) is later in point of time than the order of the CIT(A) for A.Y.2008-09. It was also submitted that the CIT(A) while deciding the appeal for the assessee has not looked into the condition laid down in section 80IA(4)(i)(b) of the Act. According to him therefore the claim of the assessee for deduction u/s 80IA(4)(i) of the Act ought to be disallowed. 11. We have considered the rival submissions. The requirement of section 80IA(4) of the Act is that the assessee to claim the said deduction has to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure. "Infrastructure facility" has been defined under explanation to section 80IA(4)(i) of the Act and the same includes housin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the assessee is partly allowed. ITA NO.1741/Kol/2013 (A.Yr.2007-08) 16. This is an appeal by the assessee against the order dated 14.01.2013 of CIT(A)-XII, Kolkata relating to A.Y.2007-08 17. Grounds Nos.1 and 2 raised by the assessee in this appeal are identical to ground nos. 1 and 2 raised by the assessee in ITA No.1739/Kol/2013 for A.Y.2005-06. For the reasons stated therein while deciding the aforesaid grounds these grounds of appeal are allowed. 18. In the result ITA No.1741/Kol/2013 of the assessee is allowed. ITA NO.1742/Kol/2013 (A.Yr.2009-10) 19. This is an appeal by the assessee against the order dated 15.03.2013 of CIT(A)-XII, Kolkata relating to A.Y.2009-10. 20. Grounds Nos.1 and 2 raised by the assessee in this appeal is with regard to the claim of deduction u/s 80IA of the Act. The facts and circumstances under which the deduction u/s 80IA of the Act was claimed by the assessee and disallowed by the AO is identical to the facts and circumstances as it prevailed in A.Y.2005-06. While deciding the identical ground nos. 5 and 6 for A.Y.2005-06 in ITA NO.1739/Kol/2013 we have already set aside the order of CIT(A) in this regard and remand the question of allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -08. Therefore the aforesaid sum should be excluded from the total income in A.Y.2008-08. The CIT(A) rejected the claim of the assessee for the reasons that the assessee should raise an objection in this regard only in A.Y.2007-08 and not in A.Y.2008-09. The CIT(A) was also of the view that in A.Y.2008-09 the assessee has included the sum of Rs. 26.17 crore as prior period income in the accounts. CIT(A) accordingly dismissed the grounds of appeal of the assessee. Aggrieved by the order of the CIT(A) the assessee has raised ground nos. 3 and 4 before this Tribunal. 27. We have heard the rival submissions. We have also perused the order of the assessment of the assessee for A.Y.2007-08. At para 3 of the said assessment order, the AO has discussed the question as to whether the sum of Rs. 26.17 crore should be added as other income of the assessee. The assessee submitted that the said item of the income has been considered in A.Y.2008-09 besides relying upon Accounting Standard-XVI of ICAI. The AO has thereafter observed that a sum of Rs. 26.17 crores being penal interest collected for period payment on sale value of the land during the year is required to be included in other income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only when the registration of deeds for the entire allotted land/flat would be completed. However, CAG commented in its report that since the appellant had allotted and handed over the land for an aggregate sale value of Rs. 242.60 crores (having cost of Rs. 37.93 crores) and the control of land passed to the allottees, the appellant should have accounted for such sale in its accounts resulted in understatement of profit of Rs. 204.67 crores. The appellant had considered the income from sale of land in the next year's accounts relating to A.Y.2009-10. The appellant had submitted that the land being stock in trade and not being a capital asset, the definition of transfer u/s 2(47) of the I.T.Act, 1961 is not applicable to assessee company and the sale of land which is held as stock in trade should be recognised only when the legal title of the land is transferred to the relevant allottee. The assessee is consistently following this method of accounting and in A.Y.2009-10 appellant had already accounted for the relevant sales of Rs. 203.3 crores. The assessee is entitled to relief of Rs. 204.67 crores. Therefore ground nos. 9 & 10 are allowed." Aggrieved by the order of the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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