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TMI Blog2022 (4) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.80IA of the Act, in respect to flat maintenance charges, water charges, rent, grant received from transfer to income, interest on water charges and maintenance charges and miscellaneous income and lease premium. As the AO has applied his mind to the facts of the case and reached to a conclusion that the assessee has claimed deduction based on some evidences that means, he has taken a possible view. It is to be noticed that the Hon ble Madras High Court in the case of Arul Mariammal Textiles Ltd.,[ 2018 (8) TMI 1729 - MADRAS HIGH COURT ] has categorically held that interest on margin money by way of fixed deposits kept with the assessee s banker so as to enable bank to open a foreign letter of credit which was essential for purpose of import of critical components for carrying on business of the assessee, was eligible for claim of deduction u/s.80IA of the Act We noted that the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd.[ 2000 (2) TMI 10 - SUPREME COURT ] as categorically held that once the AO after making due enquiries adopted one of the view and granted partial relief, CIT is not permitted to exercise power u/s.263 of the Act because when two views are poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2014- 15 in ITA No.1312/CHNY/2018 reads as under:- 1.1 The impugned order of the CIT u/s263 is erroneous, opposed to law and facts and is liable to be set aside. 1.2 The CIT erred in passing the order without application of mind and without adverting to the detailed submissions made before him. 2.1 The CIT erred in invoking the provisions of Section 263 in so far as the assessment order is neither prejudicial to the interests of the Revenue nor erroneous. 2.2 The CIT erred in holding that the Assessing Officer did not conduct proper verifications or enquiries and has not applied his mind with respect to the issues considered in the 263 order, which is contrary to the records. 3. At the outset, the ld.counsel for the assessee stated that originally the assessee had challenged these orders of PCIT before the Tribunal in ITA No.1311 & 1312/CHNY/2018 and the Tribunal vide order dated 19.07.2018 confirmed the revision order passed by the PCIT and the assessee carried the matter before the Hon'ble Madras High Court and the Hon'ble Madras High Court, in both the years in TCA Nos. 823 & 826 of 2018 vide order dated 31.01.2020 admitted the following substantial question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese assessment years. The ld.counsel for the assessee took us through the grounds raised which are reproduced above. The ld.counsel first of all took us through the show cause notice issued by PCIT dated 20.02.2018, which is enclosed in assessee's Paperbook at pages 93 to 96, wherein the PCIT has doubted the issue of contribution to guidance amounting to ₹ 5,00,000/- and claim of deduction u/s.80IA of the Act on interest income of ₹ 1,80,03,358/-, sundry income of ₹ 10,55,33,636/- and other operating revenue of ₹ 7,34,67,288/- which represents interest on old loans and advances. This is as regards to assessment year 2013-14. As regards to assessment year 2014-15, the same contribution to guidance amounting to ₹ 5,00,000/- and the claim of deduction u/s.80IA of the Act i.e., excess claim of deduction of ₹ 54,19,14,875/-. 4. The ld.counsel for the assessee first of all took us through the claim of deduction made u/s.80IA of the Act in the return of income at page 24 of assessee's paper-book. The ld.counsel stated that the AO vide letter dated 25.04.2016 (which is enclosed in assessee's paper-book at pages 66 & 67), wherein the relevant details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Oragadam Project, the eligible business under section 80IA of the Income Tax Act, 1961, we have included the following income. i. Plot maintenance charges 36,50,582 ii. Water Charges 5,74,02,133 iii. Rent 2,03,17,777 iv. Grant received 18,05,129 v. Interest on water charges, Maintenance Charges etc., 7,03,262 vi. Misc income 39,99,697 8,78,78,580 These incomes are derived from the business of developing, maintaining and operating the infrastructure facility and hence eligible for deduction u/s 80IA of the Act. The ld.counsel stated that this questionnaire and reply is enclosed in assessee's paper-book at pages 86 to 90. The ld.counsel also stated that complete details in regard to claim of deduction i.e., Government order, allotment order, copy of lease deed executed between assessee and Renault and Nissan Automotive India P Ltd., and date of commencement of production is given to the AO. The same are at page 90 of assessee's paper-book as under:- Please find the following attachments i. GO(MS) No.174 dated 02.06.2008 ii. Allotment order ref. No.P&SP/SIGC-O-Expn/R&N/29/2009 iii. Memorandum of Understanding between Government of Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA of the Act of which the eligibility of the assessee is not even in doubt, is nothing but a whimsical and the arbitrary view of the Revenue authorities and the same is opposed to common sense and business prudence of a common businessman. 26. Our view is fully supported by the judgments relied upon by the learned counsel for the assessee quoted above, whereas we find distinction of the facts in the case law relied upon by the Revenue and therefore, we have no hesitation to hold that the interest income earned by the assessee on margin money deposits with the bank and interest on short-term loans and advances in the form of belated payments made by customers was very much profits and gains of the business of the assessee and therefore, the assessee was entitled to deduction under section 80-IA of the Act in respect of such interest income also. 27. Having arrived at the said conclusion in favour of the assessee, we do not consider it even necessary to answer the question whether the reopening of the assessment to bring to tax such income under the head "Income from other sources" and denying deduction under section 80-IA of the Act is required to be answered, as that issue rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of the Assessee. Therefore, whatever income accrued is merely incidental and not the prime purpose of doing the act in question, which resulted into accural of some additional income and therefore, the said income is not liable to be assessed and is eligible to be claimed as deduction. 26. Thus, for the above reasons, we are of the clear view that the Assessee is entitled to deduction and the Tribunal erred in applying the decision of the Pandian Chemicals, which is distinguishable, for the reasons set out by us above. 6.2 The ld.counsel for the assessee stated that this issue is considered by the Hon'ble Bombay High Court in the case of CIT vs. Nirav Modi, 390 ITR 292 (Bom) (2016), wherein the issue of lack of enquiry and identical enquiry was discussed and the Hon'ble Bombay High court considered this aspect vide para 7 to 9 as under:- 7. Firstly, the Revenue contends that the exercise of powers under Section 263 of the Act is justified as in this case, as no inquiry in respect of the gifts received during the subject years was done by the Assessing Officer for the Assessment orders for Assessment Years 2007-08 and 2008-09. This according to the Revenue is evident f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion about its veracity that further scrutiny is called for. If there is nothing on record to indicate that the evidence produced is not reliable and the Assessing Officer was satisfied with the same, then it is not open to the CIT to exercise his powers of Revision without the CIT recording how and why the order is erroneous due to not examining the donors. Thus, this objection to the impugned order by the Revenue is also not sustainable. 9. It was next submitted that no enquiry was done by the Assessing Officer to find out whether the donor Mr Deepak Modi (father) had received money from M/s. Chang Jiang as claimed. Nor any inquiry was done to find out whether the sister had in fact earned amounts on account of Foreign Exchange Transactions as claimed by her. We find that this enquiry of a source of source is not the requirement of law. Once the Assessing Officer is satisfied with the explanation offered on inquiry, it is not open to the CIT in exercise of his revsional powers direct that further enquiry has to be done. At the very highest, the case of the Revenue is that this is a case of inadequate inquiry and not of "no enquiry." It is well settled that the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of Malabar Industrial Co. Ltd., vs. CIT, [2000] 243 ITR 83 held that if there exists two views, the CIT could not exercise jurisdiction u/s.263 of the Act as per settled legal position. The Hon'ble Supreme Court noted that for an order of AO to be interfered within exercise of revisional powers, the CIT has to find in the first instance that the order is erroneous and secondly, the order is prejudicial to the interest of Revenue. Once the twin conditions are fulfilled, the CIT can exercise jurisdiction u/s.263 of the Act. The Hon'ble Supreme Court further noted that the AO after making due enquiries adopted one of the view and granted partial relief u/s.80I of the Act, the CIT cannot take a different view but would not be sufficient to take a different view to exercise power u/s.263 of the Act because when two views are possible and CIT does not agree with the view taken by the AO, the assessment order cannot be treated as erroneous and prejudicial to the interest of Revenue unless the view taken by the AO is unsustainable in law. 6.4 In view of the above, the ld.counsel for the assessee stated that the PCIT has wrongly assumed the jurisdiction u/s.263 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 5 lakhs in each of the years claimed by assessee as deduction. 8.1 Subsequently the PCIT issued show-cause notice for both the years stating that the contribution to guidance and the claim of deduction u/s.80IA of the Act allowed by AO in assessment year 2013-14, is to be withdrawn. The claim of deduction u/s.80IA of the Act for assessment year 2014-15 was disallowed by AO on various incomes but the PCIT noted that even in assessment year 2014-15, the AO failed to take note that the business income available is to the extent of ₹ 30,42,89,961/- and thereby, he wrongly allowed the claim of deduction u/s.80I of the Act on excess amount of ₹ 54,19,14,875/-. We noted that the AO during the course of assessment proceedings, in both the years has applied his mind to the facts of the case by issuing show cause notice and calling for the information and examining the same. The AO, in both the years, allowed the claim of deduction u/s.80IA of the Act, after going through all the details and formed an opinion on the basis of details filed by the assessee in regard to various incomes i.e., including interest income in assessment year 2013-14. As regards to assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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