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TMI Blog2019 (6) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee by the decision of the Hon‟ble ITAT in the assessee‟s own case for the A.Y.2008-09 [ 2014 (8) TMI 959 - ITAT MUMBAI] , therefore, by honoring the said decision we allowed the claim of the assessee. Deduction u/s 80IAB - income from processing fees and lease premium - HELD THAT:- Issue has duly been covered by the decision of the Hon‟ble ITAT in the assessee‟s own case for the A.Y.2007-08 in [ 2013 (11) TMI 933 - ITAT MUMBAI] . We also find support of the decision in case of Shreeji Exhibitors Vs. ACIT [ 2015 (8) TMI 886 - ITAT MUMBAI] , Asiatic Stores Soda Fountain Vs. ITO, [ 2017 (10) TMI 1080 - ITAT MUMBAI] . Taking into account all the facts and circumstances, we are of the view that the income in question is liable to be treated as income from business. Taxability of grant from government under head business and rental income - deduction u/s 80IAB - HELD THAT:- Taking into account all the facts and circumstances and by relying upon the above mentioned law in City and Industrial Development Corporation of Maharashtra Ltd. Vs. ACIT [ 2012 (9) TMI 331 - ITAT MUMBAI] , we are of the view that the grant in sum of ₹ 1 crores released by G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on contractor advances? 3. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in holding that interest expenditure of the Appellant is not allowable as deduction under section 36(1)(iii) of the Act? 4. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in holding that the processing fees of ₹ 9,066/- and lease premium of ₹ 39 Lakhs is chargeable to tax under the head income from other sources and that deduction under section 80IAB is not available on the said receipts? 5. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in enhancing the income of the Appellant? 6. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in enhancing the income and holding that the grant of ₹ 1 Crore towards repairs maintenance of airports received by the Appellant is chargeable to tax under the head business income ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudice, the grant of I Crore received from Government of Maharashtra for repair maintenance of airports in Maharashtra is not the income of the appellant as there is diversion of income by way of overriding title. Ground 16: That without prejudice, the addition of one crore of grant received is illegal, had in law and highly excessive as the amount debited in the said account during the year is not reduced from the said account. The relevant facts are already on record and no new fact is required to be investigated. The above noted ground goes to the root of the matter. It is therefore humbly requested that the same may kindly be admitted and adjudicated. Reliance is placed on the decision of Hon‟ble Supreme Court in the case NTPC 229 ITR 383 (SC). 4. The brief facts of the case are that the assessee filed its return of income on 30.09.2010 declaring total loss to the tune of ₹ 8,97,42,143/-. The return was processed u/s 143(1) of the Act. Thereafter, the case was selected for scrutiny under CASS. Notices u/s 143(2) 142(1) of the Act were issued and served upon the assessee. On verification, it was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of interest income on fixed deposit of ₹ 59,58,791/- taxable under the head Income from other sources . At the very outset, the Ld. Representative of the assessee has argued that the present issue has been decided in favour of the Assessee by Hon‟ble ITAT in the assessee‟s own case for the A.Y.2008-09 in ITA. No.1223/M/2013 dated 27.08.2014, therefore, in the said circumstances, the interest on fixed deposit in sum of ₹ 59,58,791/- is liable to be treated as business income. The copy of order of the Hon‟ble ITAT in the assessee‟s own case for the A.Y.2008-09 in ITA. No. 1223/M/2013 dated 27.08.2014 is on the file in which the relevant para no. 6 is hereby reproduced as under.: - 6. We have carefully perused the orders of the authorities below and also perused the relevant material brought on record before us. The only issue to be decided is whether the FDs was made out of surplus funds of the assessee or out of the borrowings/advances received by the assessee and whether the deposits were made for a short period. We find that this issue has not been considered by the lower authorities on the facts of the case. In our consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 21,38.34,485/- (As per the order giving effect to CIT(A) order dated 03.03.20 14) Less: Income treated as Business Income (i) Interest income of ₹ 3,93,27,585/ ₹ 6,86, 16,552/- (ii) Interest income from contractors of ₹ 2,92,88,967/- Revised Income from Other sources ₹ 14,52,17,933/- Total Income Rs,53,84, 14,051/- Less: Deduction u/s. 80IAB ₹ 39,31,96,118/- Net Taxable Income ₹ 14,52,17,933/- Revised accordingly, Give credit of pre-paid taxes, TDS and regular taxes after due verification. Charge interest u/s. 234A, 234B, 234C, 234D and 220(2) as applicable and allow interest u/s 244A as per law. Issue revised Demand Notice/Refund accordingly. 11. On appraisal of the above mentioned order giving effect to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of loans and borrowings the assessee and whether the FDs were for short period of time. The assessee is directed to file necessary details before the .40. The AG is expected to give a fair and reasonable opportunity of being heard to the assessee. 5 .2.3 A perusal of the accounts of the appellant audited by the Comptroller a Auditor General of India (CAG) shows that during the year, the company has received Interest on Short term Deposits amounting to ₹ 3,18,52,281/-. Perusal STATEMENT SHOWING DETAILS OF SOURCE OF FIXED DEPOSITS and interest thereon reveals that out of 17 deposits, deposits were for five months and I remaining 11 deposits were for periods less than three months The sources of the funds were grant for land acquisition and application money of nonconvertible debentures. For example, a sum of ₹ 40 crores was placed in ED in Canara bank on 19/0412010 with maturity date of 12/06/2010 out of grant for land acquisition received on 10/04/2010. This FD earned interest of ₹ 21.36 lakhs. Similarly, FD was made in OBC Bank for ₹ 20 crores on 19/04/2010 with maturity date of 20/07/2010 out of grant for land acquisition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from Industrial Undertaking but having a direct and proximate connection with the business of industrial undertaking of the assessee was eligible for deduction u 80-IA also supports the appellant. The decision of Hon'ble [TAT Ahmedabad in AC/s vs Mundra Port and Special Economic Zone Ltd., I.T.A. No.1878/Ahd/2011 also supports the appellant's contention. 5.2.6 In the facts and circumstances of the case, I find that the appellant had temporarily, and for short period parked funds received as grant/non-convertible debentures in FDs to reduce interest burden as a prudenTttii1nIs decision. Hence, the assessing officer is directed to verify the dates of receipts of grants and non- convertible debenture application monies and include the interest for claiming deduction u/s. 80-lAB of the Act. This ground of appeal is allowed. 12. Subsequently, the CIT(A) has further decided the matter of controversy in favour of the assessee for the A.Y.2012-13 and the relevant finding has been given in para no. 5.2.1. In view of the above said decision, we are of the view that the issue has been squarely covered by the decision of the Hon‟ble IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts are not distinguishable at this stage also. Subsequently, the issue has been decided by CIT(A) in favour of the assessee in the A.Y.2011-12 2012-13. Since the matter of controversy has duly been covered in favour of the assessee by the decision of the Hon‟ble ITAT in the assessee‟s own case for the A.Y.2008-09 in ITA. No.1223/M/2013 dated 27.08.2014, therefore, by honoring the said decision we allowed the claim of the assessee and treated the interest income in sum of ₹ 1,42,29,269/- as business income. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO. 3 15. This issue is alternative to the issue no. 1 2 whereas we have already treated the interest income as income from business, therefore, this issue is not liable to be adjudicated. ISSUE NO. 4 16. Under this issue the assessee has challenged the income from processing fees of ₹ 9,066/- and lease premium of ₹ 39 lakhs respectively as income from other sources. At the very outset, the Ld. Representative of the assessee has argued that the issue has duly been covered by the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ‟s business is in place and therefore, the business of the assessee both set up and commenced too. Accordingly, ground 1 and 4 are allowed. 47. Ground no.2 relates to treating of certain receipts amounting to ₹ 13,56,67,380/- as income from other sources‟. In the above paragraphs, with regard to the interest income, we have already adjudicated and given our finding while dealing with the issues in the AY 2005-06. AO is directed to treat the relevant receipts as income from other sources. With regard to the other receipts, we direct the AO to reexamine his conclusions in the light of our findings on the core issue of set up‟ and commencement of the business, which is decided in favour of the assessee. Thus, ground 2 is decided pro-tanto. 17. Thereafter the matter of controversy came before the Commissioner of Income Tax (Appeals) in the A.Y. 2012-13 which has been decided in favour of the assessee treating the said income as income from business. The facts are not changed or varied at this stage. However, in this regard, we also find support of the decision in case of Shreeji Exhibitors Vs. ACIT (2015) 42 ITR 596, Asiatic Stores Soda Foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case titled as City and Industrial Development Corporation of Maharashtra Ltd. Vs. ACIT (2012) 138 ITD 381 (Mumbai). The relevant finding is hereby reproduced as under.: - 37. We have heard the arguments advanced from either side at length and have also perused the material brought and placed before us for consideration. 38. Coming to the arguments of the Senior Counsel that the assessee must be treated as Government or surrogate or an agent, has to be considered and adjudicated at first. To consider the taxation point of view, we have to refer to Article 289 of the Constitution, wherein Article 289(1) says, The property and income of a State shall be exempt from Union Taxation . Article 289(2) reads, Nothing in clause (1) shall prevent the Union from imposing or authorizing the imposition of, any tax to such extent, if any, as Parliament by Law provide in respect of a trade or business of any kind carried on by, or on behalf of the Government or State, or any operation connected therewith, or any property used or occupied for the purpose of such trade or business, or any income accruing or arising in connection therewith and Article 289(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of APRTC, reported in 52 ITR 524 (SC), the Advocate General sought to include activities in clause (2) in clause (1), the Hon‟ble Apex Court negated the same by saying no exception can be taken . Therefore, the functions and / or activity has to be seen primarily. The Hon‟ble Supreme Court, thus observes, Reading the three clauses together, one consideration emerges beyond all doubt and that is that the property as well as the income in respect of which exemption is claimed under clause (1) must be the property and income of the State, and so, the same question faces us again : is the income derived by the appellant from its transport activities the income of the State ? If a trade or business is carried on by the State departmentally and income is derived from it, there would be no difficulty in holding that the said income is the income of the State. It may be that the statute under which a notification has been issued constituting the appellant corporation may provide expressly or by necessary implication that the income derived by the corporation from its trading activity would be the income of the State . This observation read together with section 113( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division, Bombay The Budget Branch, Industries Labour Department, Bombay The Director of Publicity, Bombay. 42. We find that according to MR TP Act, 1966, the machinery sections, i.e. sections 113 113A talk of appointment of Development Authority and Local Authority and accordingly, through various Resolutions, in compliance of these sections, MR TP Act has appointed the assessee as the Development Authority for development to new townships and Local Authorities for streamlining the functions of already existing towns like Aurangabad, Nashik, Nagpur etc. This, itself shows that the assessee is acting totally on behalf of the Government. Another distinguishing feature that can be seen in that as soon as the Project is complete, the project gets handed back to the State, i.e. when there is a development project, as per phases, and in the case of local authority, as and when the authorizing committee is satisfied, the reins are transferred to the municipal boards, from whom, the project was taken over, as we have seen from Resolution no. 10375 dated 06/08/2010. 43. In tune with these observations, read with sections 113 113A of MR TP Act alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Coming to the treatment of rental income in sum of ₹ 1,05,000/- as business income. We noticed that the main object of the assessee is sale and leasing of land. This issue has been decided by CIT(A) in favour of the assessee for the A.Y.2011-12 2012-13. The CIT(A) has given the finding which is reproduced as under: - 5.5 This ground relates to considering the income from lease rental of appellant as income from other sources and denying deduction u/s 80- IAS. The assessing officer has discussed this at para 5.7 of his order. He has held that income from rent of building and lease premium of land located in SEZ has no nexus with the aLe2ants business and hence treated it as income from other sources . 5.5.2 It is not in dispute that the appellant is a Government company. MADC has been formed to play a lead role in the planning and implementation of the Multi-modal National Hub Airport at Nagpur (MIHAN) project. The main objects of the appellant company as per clause Ill (A) of the Memorandum of Association is to design, plan, construct, erect, build, remodel, repair, execute, develop, operate, sale, lease, rent, improve, administer, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial to the decision of the said issues. ISSUE NO. 11 22. Under this issue the assessee has challenged the confirmation of the addition raised u/s 14A of the Act in sum of ₹ 8,09,084/-. The Ld. Representative of the assessee has argued that the assessee nowhere earned exempt income, therefore, no disallowance required is required u/s 14A of the Act. In support of the in support of the claim, the Ld. Representative of the assessee has relied upon the decision in the case of Principal CIT Vs. McDonald s India (P.) Ltd. (2019) 101 taxmann.com 86 (Delhi). PCIT Vs. Ballapur Industries ITA No. 51/2015 (BHC) The factual position is not in dispute as the assessee did not earn any exempt income. The amount in sum of ₹ 315345/- has been received on account of Tenements, which has already been taxed in the return of income. In this regard the reference has been given at page 82 of the paper book wherein the amount has been shown under the head details of other income-other income from nonresident as income received from Tenements. In view of the above mentioned law, it is quite clear that the assessee did not earn exempt income in the relevant A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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