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TMI Blog2018 (1) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the IT Act. In all such situations, it cannot be treated that a return filed at any stage of such proceedings could be treated as non est in law and invalid for the purpose of deciding exemption. In this manner the aforementioned questions of law B and C have been answered in favour of assessee. Applying the aforementioned position of law, as the present assessment is made by the A.O. u/s 147 r.w.s 143(3) on the basis of return filed by the assessee in response to notice u/s 148 and such assessment is pending in statutory hierarchy of adjudication, the benefit of claiming deduction u/s 80IA cannot be denied to assessee, therefore, we are of the opinion that deduction cannot be disallowed merely on the ground that the return filed by the assessee was filed in response to notice u/s 148 and it was not filed u/s 139(1). This is apart from main claim of the assessee that in any case the deduction was claimed in the return filed u/s 139(1) inadvertently by the erstwhile proprietary concern of Shri Naresh Kumar Tomar, which may be considered to be a reasonable cause for the present assessee for not filing the return within the prescribed statutory period u/s 139(1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book. CIT(A) also has taken into consideration the fact that Form no. 10CCB, complete in all respect was filled before the completion of the assessment. A.O. also has not denied that the said Form complete in all respects was filled before him as he has observed that initially incomplete Form was filled by the assessee. Taking into consideration all these facts, we are of the opinion that deduction u/s 80IA of the Act cannot also be denied to the assessee on the ground that the report initially submitted along with letter dated 16-01-2014 in Form no. 10CCB did not contain complete particulars as the assessee had submitted complete Form during the course of assessment proceeding itself on 04-03-2014. Allowability of deduction u/s 80IA on business profits, we are of the opinion that Ld. CIT(A) did not commit any error in holding that under the facts and circumstances of the case, the assessee is eligible for claiming deduction u/s 80IA and he was right in directing the A.O. to modify the assessment order accordingly. Order of the CIT(A) that issue regarding allowability or otherwise of deduction u/s 80IA of the Act on the nterest earned on FDRs and NSCs was decided by way of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of Shri Naresh Kumar Tomar while filing the return of income of Shri Naresh Kumar Tomar for A.Y 2007-08. 3. It was further pointed out that M/s Arham Technologies Pvt. Ltd had not filed its return of income for A.Y. 2007-08. Thus, the proceedings u/s 147 of the Act were initiated in the case of the assessee vide notice dated 26-03-2013 issued u/s 148. In response to such notice, the assessee vide reply filed on 23-04-2013 submitted that original return was filed within time on 03-09-2007 in which the deduction was claimed u/s 80IA. It was submitted that PAN was mistakenly quoted of Naresh Kumar Tomar instead of M/s Arham Technologies Pvt. Ltd. It was submitted that return already filed u/s 139(1) of the Act on 03-09-2007 vide acknowledgement no. 0000009215 may be treated as return filed in response to u/s 148. However, vide letter dated 30-04-2013, the assessee submitted copy of return electronically filed on 29-04-2013 vide e-filling acknowledgement no. 618240451290413 at gross total income of ₹ 92,22,111/- and total income was declared at nil after claiming deduction u/s 80IA. 4. The copy of reasons was supplied to the assessee. As assessee didn't file objections, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted on 04-03-2014 copy of which has been filed at Pages 31 to 33 of the paper book. Thereafter, A.O has proceeded to disallow the claim of deduction of u/s 80IA of the Act. 7. The A.O has rejected the claim of deduction u/s 80IA of the Act mainly on the ground that the assessee has failed to submit its return of income u/s 139(1) of the Act. He observed that for the first time only on 29-04-2013, the assessee had filed its return of income for A.Y 07-08 in response to notice u/s 148 of the Act and the contention of the assessee that first return of income was filed on 03-09-2007 by mistake under incorrect PAN is not acceptable. He held that section 80AC inserted w.e.f 01-04-2006 clearly provides that to claim deduction, return has to be filed u/s 139(1) of the Act and such position has been explained in the explanatory notes by Circular no. 40/2006 dated 28-12-2006 and thus A.O has held that in view of provisions of 80AC, the deduction cannot be allowed to the assessee. 8. The A.O also observed that the assessee was not able to prove that it is a 'developer'. He observed that Explanation after subsection (13) of section 80IA clearly states that deduction u/s 80IA(4) shall no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing sub-contract charges, hire charges and labour cost etc. It was also submitted that under same scenario for A.Y 2010-11 and A.Y 2012-13, the A.O had accepted that the assessee is entitled to claim deduction u/s 80IA. To support such contention, copies of both the assessment orders were filed. 10. So far as it relates to eligibility of interest income for deduction u/s 80IA of the Act amounting to ₹ 4,31,338/-, which was assessed by the A.O under the head 'income from other sources', it was submitted that the interest was income in the nature of business and is eligible for deduction u/s 80IA. It was submitted that the amount deposited in FDR and NSC were made as a mandatory security deposit to get the infrastructure projects, therefore, there was nexus with the business, hence, the same is eligible for u/s 80IA. For this purpose also, reliance was placed on several judicial pronouncements. The gist of these decisions are also reproduced in the order of the ld. CIT(A), while reproducing the submissions of the assessee in Para 3 of the impugned order. 11. After considering all the submissions made by the assessee, ld CIT(A) has shortlisted three reasons pointed out by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances deduction was allowed to the assessee company by the assessing officer in respect of A.Ys 2010-11 and 2012-13. 13. Regarding third reason of non-submission of complete Form no. 10CCB, ld. CIT(A) has observed that Form no. 10CCB complete in all respect was filed before completion of assessment. Thus, keeping in view all these facts and discussions, he has held that the assessee is entitled to deduction claimed u/s 80IA and he has directed to the A.O. to modify the assessment order accordingly. Ld. CIT(A) has also held that interest earned by the assessee from FDRs and NSCs, having close nexus with the business of the assessee was also eligible for deduction u/s80IA in view of several judicial pronouncements relied upon by the assessee. Thus, ld. CIT(A) deleted the addition made by the A.O. The Department is aggrieved with the deletion and has raised following grounds of appeal: "1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of ₹ 92,22,110/- on account of disallowance made u/s 80IA of the Income Tax Act, 1961. 2. The appellant craves to leave to add, alter, amend or modify any/all grounds of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return was filed on 30th September 2007 by the erstwhile entity. Thus, the claim of deduction was made well within the time prescribed by the statute u/s 139(1) of the Act. He submitted that filling of return in the name of erstwhile proprietary concern was an inadvertent mistake. In response to notice issued u/s 148, the return was filed in which the same claim of section 80IA was made. He submitted that the deduction cannot be disallowed to the assessee for the simple reason that the assessee did not submit return within the prescribed period under the provisions of Section 139(1) of the Act. 15. He submitted that the main reason to disallow the claim, as stated by the A.O in the assessment order, is the applicability of provisions of Section 80AC of the Act as the assessee did not file its return u/s 139(1), therefore, the deduction has been held to be not allowable by the A.O. It was submitted by the Ld. Counsel that the provisions of Section 80AC have been held to be directory in nature in several judicial pronouncements and for this reason ld. CIT(A) has held that the deduction cannot be disallowed merely for the reason that assessee has failed to file its return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the relation of the provision to other consider which may arise on the facts of any particular case have all to be taken into account in arriving at the conclusion whether the provision is mandatory or directory. He contended that their Lordships in the said case after taking into consideration various definitions and available case laws, have come to a conclusion that real intention of the legislature while enacting sub-section (5C) of Section 80G of the Act was to ensure application of donation to specific purpose by specified date and that part of the provision was mandatory. In order to find out the donations are applied for stipulated purpose, requirement of rendition of account was introduced. It was never the intention of the legislature that such institutions or funds should pay the taxes on the donations received even when necessary applications with the provisions by expending the donations for specified purpose made. Thus, their Lordships have held that exemption u/s 80G(5C)(v) could not be disallowed merely for non-rendition of account within statutory prescribed period by treating the provision of rendition of account as mandatory. Thus, it was pleaded by Ld. AR th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission of the assessee that the work was outsourced, ld. CIT(A) has held that the assessee is eligible for claiming deduction u/s 80IA of the Act. He further submitted that a fresh Form no. 10CCB was filed during the course of assessment proceedings in which all the deficiencies mentioned by the A.O. were removed and referred to the letter submitted by the assessee to the A.O. on 04-03-2014 copy of which is filed at pages 31 to 33 of the paper book. Therefore, he pleaded that on this ground also, the claim of the assessee has rightly been held to be allowable by the Ld. CIT(A). 18. We have heard both of parties and their contention have carefully been considered. On three grounds, the A.O. has rejected the claim of the assessee regarding deduction u/s 80IA(4)(i)(b) of the Act. The first ground taken by the A.O is that the assessee has failed to meet the mandatory requirement as specified in section 80AC of theAct filling its return u/s 139(1) of the Act, therefore, it is not eligible to claim deduction u/s 80IA of the Act. The ld. CIT(A) has admitted the claim of the assessee on the ground that provisions of 80AC are directory in nature. Ld. Counsel of the assessee has relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year." 57. A bare perusal of this section makes it clear that the legislature itself has allowed the assessee to file return belatedly subject to fulfillment of conditions written in the said section. Therefore, once those conditions are met, then return filed by the assessee would for all technical purposes be considered being filed u/s 139(1). Thus, keeping in view the various decisions noted earlier, we do not find any reason to deny the claim of assessee on the ground of filing the return belatedly." 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r all questions germane for concluding the assessment would be relevant and claims which may result in modification of the returns already filed could also be entertained, particularly when it relates to claims for exemptions. This is so because the finality of assessment would not be achieved in all such cases, until the termination of all such appellate remedies. Under such circumstances, the Tribunal was not justified in denying exemption under section 80P of the IT Act on the mere ground of belated filing of return by the assessee concerned. A return filed by the assessee beyond the period stipulated under section 139(1) or 139(4) or under section 142(1) or section 148 can also be accepted and acted upon provided further proceedings in relation to such assessments are pending in the statutory hierarchy of adjudication in terms of the provisions of the IT Act. In all such situations, it cannot be treated that a return filed at any stage of such proceedings could be treated as non est in law and invalid for the purpose of deciding exemption under section 80P of the IT Act. We thus answer substantial questions of law B and C formulated and enumerated above." 20. From the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging subcontractors and manual labor for doing some earth excavation work does not entitle any corporate to qualify itself as a 'Developer'. Against such reason given by the A.O. Ld. CIT(A) has taken into consideration the submissions of the assessee that the projects awarded to the assessee were in capacity of 'Developer' which included maintenance thereof also and assessee has availed the services of outside agencies for equipments etc. on which the assessee has incurred huge cost of ₹ 353 lakhs including sub-contract charges, hire charges and labour cost etc. He has also taken into consideration the assessment orders passed by the A.O. in respect of A.Ys 2010-11 and 2012-13 in which under same facts the A.O has admitted the claim of the assessee regarding deduction u/s 80IA except interest income which was not considered to be eligible for deduction u/s 80IA of the Act. 22. Reference is made to the letter filed by the assessee before the AO on 04-03-2014. Copy of such letter is filed at Pgs. 31 to 33 of the paper book. In response to query of the AO regarding admissibility of claim of deduction u/s 80IA(4), the submissions of the assessee are incorporated in Para 4 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the assessee on account of its not being classified as 'Developer' in respect of impugned assessment year. Rather, after about one year, the claim of the assessee regarding deduction u/s 80IA was again accepted by the A.O. in respect of A.Y. 2012-13. The AO has conveniently ignored the submissions of the assessee in letter filed on 04-03-2014 and it has not been described by him that how the assessee which was already considered eligible for claiming deduction u/s 80IA being a developer in respect of A.Y. 2010-11 cannot be considered as developer for A.Y. 2007-08. Keeping in view all these facts and also the principle of consistency, we are of the opinion that it will be incorrect to deny the claim of the assessee regarding deduction u/s 80IA on the ground that the assessee does not fall within the category of 'Developer'. 22. Now coming to the third reason given the A.O. to deny the claim of deduction u/s 80IA that initially the assessee did not submit complete Form no. 10CCB. In this regard Ld. AR, during the course of hearing, has relied upon reply filed before A.O. dated 04-03-2014, copy of which has been filed at pages 31 to 33 of the paper book. In point no. 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been decided by CIT(A) vide Para 6 of the impugned order. However, while filling the appeal, the revenue has impugned the entire amount of deduction amounting to ₹ 92,22,111/- which comprises of two components namely a sum of ₹ 87,90,773/- being an income from business and ₹ 4,31,338/- being interest earned on FDRs and NSCs. In the above part of this order, we have already held that CIT(A) is correct in holding that the assessee is eligible for claiming deduction u/s 80IA on business profit. Therefore, addition of ₹ 87,90,773/- has rightly been deleted by CIT(A) and we decline to interfere in the deletion to the extent of ₹ 87,90,773. 25. To the extent of deletion of addition of ₹ 87,90,773/-, we find no infirmity in the order of the ld. CIT(A) and accordingly, to that extent, ground of Revenue is dismissed. However, so far as it relates to the issue of allowability or otherwise of a sum of ₹ 4,31,338/- being interest earned on FDRs and NSCs, the issue has to be adjudicated separately. In respect of A.Ys. 2010-11 and 2012-13, similar disallowance has been made by the A.O. In respect of impugned assessment year Ld. CIT(A) has allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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