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TMI Blog2022 (5) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... onvenience. 2. A perusal of the grounds of appeals, it would indicate that there are certain common grounds, in both the assessee's appeal and the Revenue's appeals which are as follows- i) Common ground raised in all the appeals of the assessee is, denial of claim of deduction under section 80IA(4) of the Income Tax Act, 1961 by treating the assessee-company as a 'Contractor' and not 'Developer' by the Department. However, the Revenue is challenging the action of the ld.CIT(A) in granting deduction under section 80IA(4) of the Act for the Asst.Year 2005-06 and 2006-07. ii) Revenue is also challenging deletion of penalty imposed under section 271(1)(c) of the Act for the Asst.Years 2007-08 to 2010- 11. While, the assessee challenges imposition of penalty under section 271(1)(c) of the Act for the Asst.Year 2010-11. iii) The second main ground in respective appeals is with regard to disallowance of interest income and other income as not eligible for deduction under section 80IA(4) of the Act. iv) Challenge is also made in some of the years that loss of eligible sites are not to be set off against profits of eligible sites for computing deduction under section 80IA(4) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tities. 5. Brief facts of the case is this that the assessee is a Private Limited Company, engaged in the business of development, operation and maintenance of infrastructure facilities such as development of roads, bridges, water treatment plants, canals, siphon work (irrigation projects), sewage treatment plant etc. by entering into contract with various Government authorities. Original return of income was filed on 1.11.2004 declaring total income at Rs.78,69,170/-. The return was finalized under section 143(3) of the Act on 30.11.2006 determining total income at Rs.1,86,13,536/-. By doing so, the ld.AO has restricted the deduction under section 80IA/80IB of the Act to Rs.79,00,417/- as against Rs.1,86,44,783/- claimed by the assessee, which in turn stood deleted by the Ld.CIT(A). Subsequently, the Ld. Commissioner of Income Tax noticed that assessment framed by the AO under section 143(3) of the Act was erroneous and prejudicial to the interest of the Revenue on ground that the AO, while passing the order, had not verified facts of the case and relevant materials in respect of entitlement of deduction claimed by the assessee under section 80IA of the Act and did not make throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g risk element, raises own finances and invests its own funds in the construction of the project, then the case of the assessee falls within the meaning of expression "developer". A perusal of the tender documents clearly shows that the assessee has to arrange own finances, purchase own plant & machinery and purchase all materials at own cost, deploy of qualified personnel for construction and development of infra projects. The authorities gave only general specifications for the project. However, for the specific drawings & designs recommended by the assessee, the same has to be approved by the competent authority and becomes part of the tender. Further that once the tender is awarded, the assessee has to pay earnest money, security deposits, performance guarantee by placing fixed deposits with banks. The assessee is also liable for liquidated damages/penalty, free maintenance and repair during defect liability period. During the construction of project, the assessee has to make all the arrangements and is liable for procurement of water, electricity, all materials, skilled, semi-skilled staff, labourers, plant & machinery, equipments& tools, and also wellbeing of the staff/labour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR supported the orders of the Revenue authorities. He has also filed a detailed written submissions dated 27.4.2022, which we will analyse the appropriate stage. 9. We have heard the rival submissions made by the respective parties; we have also perused the relevant materials including the orders passed by the authorities below. It appears from the record that the Ld. AO has denied deduction claimed under section 80IA(4) of the Act by holding that the assessee has acted as work-contract in the project awarded by the statutory bodies. The Ld.CIT(A) while upholding finding of the AO on this issue, also taken into consideration the submissions of the assessee as made before us. 10. It was further noted by the ld.CIT(A) that the similar claim raised by the assessee for the Asst.Year 2003-04 was allowed by his predecessor and granted deduction under section 80IA(4) of the Act. Further that it appears from the impugned order under challenge that in view of Explanation inserted after section 80IA(13) by Finance (No.2) Act, 2009 with effect from 1.4.2000, the Ld. CIT(A) deviated from the stand taken by his predecessor and confirmed order passed by the Ld. AO by holding that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the modifications, the enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility were eligible for deduction. Moreover the condition for transferring the infrastructure facilities to Government Authority was done away. Hence infrastructure projects for which agreement for development and/or maintenance/operation have been entered with Government Authorities were also became eligible w.e.f A.Y.2002-03. So the concept of BOT/BOOT was done away. Hence the appellant was eligible for deduction U/s. 80IA for developing various projects w.e.f A.Y.2002-03. Copy of relevant pages of budget speech, explanatory statement and memorandum regarding delegated legislation of 2001-02 is enclosed herewith (ANNEXURE-2). The explanation was introduced to clarify the provisions of Section 80IA so that a person who executes a work contracts entered into with the undertaking orenterprise referred to the said section were not eligible for deduction w.r.e.f. A.Y.2000-01. In memorandum explaining the provision in the finance bill 2307, the following words is used. "Thus in a case where a person make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the company is not eligible for deduction U/s. 80 IA for A.Y. 2000-01 and A. Y. 2001-02. As discuss in detailed on page no. 30 to 36 of our submission dated 10th July, 2010, up to A. Y. 2001-02 the deduction U/s. 80IA is available to assess ee company who develops infrastructure facility on BOOT/EOT basis only. The projects carried out by the company (B. T. Patil .....) were not on BOOT or BOT basis. Hence, the Mumbai Tribunal has held that the assessee is not eligible for deduction U/s. 80IA. Sir, due to modification in Section 80 IA, w.e.f. A. Y. 2002-03, development of infrastructure facility other than BOOT and BOT were also became eligible for deduction U/s. 80IA. Sir the appellant company has started claiming deduction U/s. 80IA w.e. f. A. Y. 2002-03 and appellate authorities has granted deduction U/s. 80 IA for all the years. Since the provisions for deduction U/s. 80IA for A. Y. 2000-01 and 2001-02 are different for A. Y. 2002-03 and subsequent years, the case of B. T. Patil is not applicable to the appellant company. The Judgment of ITAT. Raikot Bench in case of Tarmat Bel (JV) KCL. Rajkot Vs. ITO (ITA No. 1111/RJT/2010) for A. Y. 2007-08 : Sir, the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said case of B.T.Patil& Sons Belgaum Construction (P) Ltd vs. ACIT (TM) - 126 TTJ 577 it is held as under :- " Intention of the legislature is not to provide deduction under s. 80- IA(4) to anyone except the person or authority which is directly engaged in developing, maintaining and operating the infrastructure facility infrastructure facilities in respect of which the assessee is claiming deduction, are being set up by the State Government(s) or local/statutory authorities and the assesses is simply engaged in some construction work, thereby contributing partly in the attainment of the object of developing the infrastructure facility; under such circumstances it does not qualify for deduction within the framework of sub-s.(4)(i) itself; position has further been clarified by substitution of Explanation below s. 80IA with retrospective effect. Given the fact of appellant executing contracts awarded by State Government undertakings, local authorities like AUDA and in the light of the above decision, appellant cannot be said to be eligible for deduction u/s. 80IA(4). In view of the above-mentioned categorical finding of the Third Member of Mumbai Tribunal, the contentions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA of the Act as they are not developing any infrastructure facility but only providing assistance to the actual developer. 15. In view of the above, in order to ascertain whether a civil construction work is assigned on development basis or contract basis only the terms and conditions of the agreement needs to be considered. Only on the basis of the terms and conditions and the scope, ambit and nature of the contract assigned it could be ascertained whether it is a "work contract" or a "development contract". The right and obligations of the assessee in the projects implemented by the assessee on behalf of the Government entities is also required to be examined. Our this approach has also been strengthened by the observation made by the Rajkot Bench in the matter of Patel Infrastructure Pvt. Ltd. Vs. DCIT, ITA No.627/Ahd/2014, Asst.Year 2010-11. We, therefore proceed to analyse the facts of the present case to find out whether the assessee is acting as a "Developer or "Contractor". 16. We firstly proceed to deal with the financial involvement, risk factors and the liability involved in the project undertaken by the assessee for construction and development of infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance Sheet is of Rs.28,99,17,693/- raised by the assessee for the year under consideration. The assessee has to use and invest heavily in purchasing own plant & machinery equipments etc. in order to qualify for bid for tender and carry out the development of various projects. In this respect, the gross block of assets to the tune of Rs.2,07,53,968/- is reflected at page No.19 in the Schedule annexed to the paper book. The assessee has to employ own team of experience and qualified Project Manager, Construction Engineers and arrange for skilled, semi-skilled and unskilled workers as stipulated in clause 1.4 of the tender (page No.30). 20. So far as financial aspect is concerned, it appears from the tender documents that for construction, commissioning and trial run of 126 MLD capacity sewage treatment plant at Vasna, Ahmedabad including operation and maintenance for 36 months, the estimated cost was Rs.292,594,995/-, and one percent of which being Rs.29,25,949/- was to be deposited as earnest money by the assessee in accordance with Memorandum of Working. The assessee was to deposit security deposit at the rate of 5% of the contract value, which shall be released 12 months after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for safety of all the concerned. In this regard the assessee has to take Workmen Compensation Insurance and also liable to pay compensation as per clause 36, page No.57. The assessee is directed to employ only such labourer who shall produce a valid certificate of having been vaccinated against smallpox/ cholera within a period of last three years. For that, the Contractor shall be responsible for and shall pay expenses for providing medical aid to any workmen who may suffer a bodily injury as a result of an accident. 23. As per Clause 37A [page no.58 of Tender document ("TD"for short)]the contractor shall provide all necessary personal safety equipment and first aid apparatus available for the use of the person employed on the site and shall maintain them in the same condition suitable for immediate use at any time and shall comply with certain regulations stipulated under the same Clause. Sufficient numbers of huts on suitable plot of land for the use of the labourers as per the specification provided in the TD has to be built by the contractor i.e. the assessee herein. The assessee has to provide drinking water, proper sanitation, drainage, rest rooms etc. as stipulated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bodies. We will be dealing with the same at the appropriate level. 26. The Ld. DR submitted written submission dated 27.4.2022 in support of the case made out by the Revenue for rejecting the claim of the assessee under section 80IA(4) of the Act. The said written submissions read as under: "2. The above cases came up for hearing on 20/4/2022. As directed by Hon'ble bench, I am filling the written Submission (Two sets) in the above appeal for kind consideration while adjudicating the case. The same may kindly be taken on record. 3. The assessee is a pvt. Ltd. Company engaged in carrying out various contract work for Govt. and local bodies and claimed deduction u/s. 80IA(4) for the A.Y.s in question. 4. A perusal of the above section, shows that deduction u/s. 80IA for are indeed available to an assessee whose gross total income includes profits and gains derived by an undertaking for businesses referred in sub section (4) of section 80IA. It is also evident that development of an airport is included as a business activity in the explanation to sub section (4). It is however seen that the explanation placed at the bottom of section 80IA introduced by Finance Act, 2009 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up Sabarmati River Cleaning Project and invited tender for following works: * Interception and diversion of untreated sewage flowing through storm water drains into river Sabarmati. * Construction of Sewage Treatment Plants * Improvement and refurbishment of sewage pumping stations and sewage treatment plants 7. The assessee had successfully awarded the tender by the AMC and had to execute the work as per term and condition of the tender document. 8. The said document clearly stipulates that the appellant was a successful bidder to the said tender and was being awarded the contract to complete the job on the detailed terms and conditions prescribed therein. It is pertinent to note that the para 2.14 of the additional instruction to the tenderer clearly mention that conditions of contract and specification shall be rigidly enforced and no relaxation on the grounds of customs prevailing shall be allowed. Further, para 2.17 stipulates that the tenderer shall be considered to have visited the site of work, fully acquainted himself with the local situation regarding materials, labour, and other factors pertaining to work and studied the plans and estimates before submitting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire Sabarmati River Cleaning Project the appellant has entered the shoes of a 'developer'. The appellant has thus tried to make a distinction between a mere contractor doing civil construction work with a contractor who is interested with a wide and varied gamut of responsibilities. The distinction itself has been found to be flawed. A contractor would be a person who agrees to undertake all the different activities at an agreed rate. In the instant case, the AMC had issued a composite contract to the appellant with the directive of completing Sabarmati River Cleaning Project as per pre decided terms and conditions and under strict supervisions and monitoring as mentioned above. 10. A detailed examination for the voluminous contract awarded by AMC indicates that every bit of work was pre-decided by them with clear stipulation that no deviation shall be made by the contractor being the appellant without prior consent or approval of AMC. The argument of the appellant that its activities under the impugned contract cannot be said to be limited to execution of simpliciter of contractual work because it encompasses work of highly technical and independent nature carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 5.3.2004 for starting of work. The assessee has not furnished any further details. The assessee has claimed deduction u/s. 80-IA(4) of Rs.80,19,970/-. The work order to be executed as per approved terms / conditions. The work has to be completed within stipulated time allowed. The assessee has not been allowed to add excess quantity without prior approval of the competent authority (contractee). The work has to be carried out under the strict supervision, instructions and guidelines of Dy. Executive Engineer. Nowhere the agreement speaks about the development of infrastructure facilities by the assessee company. The work carried out by the assessee was of extension nature to the project / site. Therefore, the work carried out does not come within the purview of provisions of Section 80-IA (4) of the Act and explanation given there under as discussed in above paras. (ii) Palanpur - Widening of over-bridge: The assessee has furnished a copy of work order dated 6.9.2004 in support of the work. On verification of description of work, it is seen that the contract work carried out was widening of railway over-bridge on Palanpur-Deesa road. The assessee has not furnished any furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The assessee company has acted simply as a contractor with specific conditions and terms. (v) Water Treatment Plants (Kutch) This work was undertaken from Gujarat Water Supply and Sewerage Board, Gandhinagar by the assessee in joint venture consortium with M/s. Aquafill Polymers Co, Pvt. Ltd., Ahmedabad. The assessee has furnished a copy of work order dated 16.01.2004 for construction of water treatment plants with commissioning and training. The contract amount was Rs.13.01 crores. The assessee has furnished copy of an agreement entered into between the assessee and Aquafill Polymers Co. Pvt. Ltd., Ahmedabad for the above work. This work contract was executed and performed strictly as per works specification, terms and conditions of the contract under direct supervision of Executive Engineer, ERR Division, Bhuj and Gandhidham. The work was to be executed with terms / conditions approved as well as within stipulated time allowed. This work is a part of "Earthquake Rehabilitation and Reconstruction Programme". It is not a development of new infrastructure facility by the assessee company. (vi) VatamanPipali Road The assessee has furnished copy of work order dated 22.3.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become eligible for deduction u/s. 80-IA of the Act. (viii) Ambaji Mata Site Development: This work was undertaken by the assessee from Ambaji Mata Trust for which the assessee claims that the Trust is controlled by the Government of Gujarat. The assessee has not furnished any further details of the work. The assessee has claimed deduction of Rs.4,83,746/- u/s. 80IA in respect of new college complex. It has been pointed out by the assessee that no deduction has been claimed in respect of construction of college building but in respect of work relating to site development and amenities etc., the assessee has entered into an agreement with a Trust. But, it has not entered into any agreement with the Central Government or State Government or a local authority or any other statutory body. Therefore, it is not entitled for deduction u/s. 80IA(4) of the I. T. Act, 1961 in respect of the works relating to site development and amenities etc. The contract with a Trust, which is being administered by the trustees appointed by the Government of Gujarat, cannot be said to be contract with Government. In absence of any evidence and satisfaction of the above conditions, the assessee cannot, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in the section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person and executed by an undertaking or enterprise. The central question is, whether in the present case, the explanation below sub-section (13) to section 80-IA introduced by the Finance Act No.2 of 2009 with effect from 1.4.2000 transgresses the legislative competence of the Parliament. The Hon'ble court decided the issue in favour of the revenue that such explanation brought with retrospective effect from 01-04-2000 by the Finance Act No. 2 of 2009 was very well within the competence of the Parliament. As such, there was no issue whether the assessee is acting as a developer or works contractor. Therefore, in our considered view no reference can be made to such judgment for deciding the issue on hand whether the assessee is acting as a developer or the works contractor." 29. The Revenue has also dealt with this issue, as to whether the assessee can be termed as "developer" or a "contractor" as submitted in para-5 of the written submissions. In fact, it only attempts to give a general meaning of the term "contractor" and "develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue in regard to submission of weekly project report to the engineers, working to be done as per the approval of engineer, no alteration without approval, work to be kept open for inspection and supervision of engineer. In our considered opinion, these are only administrative terms for monitoring and supervision of the project undertaken by the assessee and not at all relevant to decide, whether the assessee is a "developer" or "contractor". We have further noted the arguments advanced by the DR in respect of clauses-12, 12A, 13, 14, 15 and 18 of the TD. at page No.48 therein, the terms stipulated in TD. In fact the clause 12 states conditions to be fulfilled if the specification of work provides for use of any special description of materials to be supplied from Municipal Corporation. Page17 of the TD being part of Annexure-IV as referred by the Revenue only states the rate of cement and material if supplied by the AMC. However, from the record it appears that the assessee has arranged the necessary requirement of water, electricity connection, cement and other required qualitative materials at its own cost as per pages 95 & 96 of the tender. It is further supported by the audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by owning risk and responsibilities, raising own finance for the project, getting men, material and project equipments, drawing specifications for the approval of competent authorities. Therefore, the work executed by the assessee is not work-contracts simplicitor, rather they are for the development of infrastructure facility which justify the assessee's claim to treat it as a 'developer' and not 'contractor' as per the principles laid down by the Hon'ble jurisdictional High Court in the case of Radhe Developers (supra). 34. So far as the contentions of the Revenue in respect of contract works of various projects performed by the assessee for the F.Y. 2005-06 no supporting documents have been furnished, nor the work undertaken by the assessee falls within benevolent provision of Section 80IA(4) of the Act are concerned, we find that in most of the cases, it was alleged that the assessee has not supplied any documents which could justify its work done as a developer qua claimed by the assessee for deduction under Section 80IA(4) of the Act. In fact, we find that the assessee has filed relevant materials/documents in order to prove that the assessee was engaged in developing infras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggest that the assessee has been entrusted with the work of development infrastructure facilities, and therefore being a 'developer', the assessee would be entitled for deduction under section 80IA(4) of the Act. Relevant to mention that perusal of all tender documents mentioned hereinabove reveals that the terms and conditions mentioned therein are almost same except the figures and name of the project. 36. In para-11 of the written submissions, the Revenue has disputed that various work undertaken and executed by the assessee as a contractor and not as a developer. The assessee-company is merely acting as an agency and executing the work awarded to it with specific conditions. The project-wise contentions was raised by the Ld. DR in his written submissions, which we have already extracted hereinabove. In response thereto, we would like to analyse different projects undertaken by the assessee for the Asst.Year 2005- 06 which is summarized in tabular form as under: Sr. No. Particulars of Projects Documents available Type of work 1. Mahi Weir Scheme across Mahi River Page No.53 of the PB Construction of Weir Diaphragm Walls, Training Walls of Mahi River scheme acro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee viz. construction, commissioning and trial run of 126 MLD capacity sewage treatment plant including operation and maintenance for 36 months at Vasna, Ahmedabad. 8. Ambaji Mata Site Development Page No.91 of PB The contention of the Revenue that agreement was entered into with the Trust and not with the Government. It is not true, because this Trust is 100% governed by the Govt. of Gujarat, and it is a local authority/ statutory as envisaged in section 80IA(4) of the Act. Project includes site development and construction of roads. 37. The terms and conditions of tender documents / agreements / work order and comprehensive view of the activities undertaken by the assessee clearly demonstrates that the assessee-company has undertaken substantial activities in respect of various projects awarded by various statutory bodies, which makes the assessee to qualify as a developer of Infra facility and to make claim necessary benefits under section 80IA(4) of the Act. 38. The provisions of section 80IA(4) of the Act provides that deduction would be available to any enterprise which carries on the business of - (i) developing or (ii) operating and maintaining or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess to mention that the assessee qualified all the criterion fixed by the Amritsar Bench 40. We have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as to claim the impugned deduction. 41. So far as case law relied on by the Revenue on the decision of ITAT, Hyderabad Bench in the case of M/s.NEC NCC Maytas-JV in ITA No.496/Hyd/2018 is concerned, the same is distinguishable on facts. In that case assessee has not executed entire project but only a part of the project was undertaken, whereas in the instant case, the assessee has executed entire project. In that case, the assessee has not established entrepreneurial risk or financial involvement of assessee before the lower authorities and the assessee was only a JV withno assets and no wherewithal to execute the projects. Payments were released on multiple occasions from time to time i.e. fixed sum on monthly basis and also received a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) of the Act. Thus, the issue of claim of deduction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has huge surplus funds, the same was parked with the bank and earned interest income, which was not part of the income earned from any industrial activities but receipts from the investment of surplus fund with bank. The AO accordingly disallowed interest income and other income to the tune of Rs.65,58,550/-. In appeal preferred by the assessee, the CIT(A) confirmed the action of the AO. Hence, assessee is before the Tribunal. 46. Before us, the counsel for the assessee reiterated submissions as were made before the lower authorities. The counsel further submitted that the interest income is earned only on fixed deposits for obtaining bank guarantee and security deposit to be placed mandatorily as per the tender when work was awarded. Hence, such interest income is business income and eligible for deduction under section 80IA(4) of the Act. In support of his contentions, the counsel relied upon the following decisions: i) AVM Cine Products Vs. DCIT, (2021) 123 taxamnn.com 41 (Mad); ii) CIT Vs. Alloys Ltd. (2017) 84 taxmann.com 256 (Guj) iii) Empire Pumps P. Ltd. Vs. ACIT, (2015) 54 taxmann.com 317 (Guj) 47. For countering the above submissions of the assessee, the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals for Asst.Year 2004-05, 2005-06, 2007-08to 2010-11 and 2012-13to 2016-17, in the absence of any changed circumstances, our finding and decision in the Asst.Year 2004-05 will apply mutatis mutandis in the instant appeals also. 50. Now we deal with third common issue viz. the Revenue authorities are erred in setting off loss of four infrastructure facilities from the profits of other infrastructure facilities despite having legal provisions that deduction should be allowed on standalone basis. This common issue is raised for the Asst.Year 2007-08 to 2013-14 and 2015-16 & 2016-17. 51. In Assessment Year 2007-08 the Ld AO disallowed the entire claim of deduction under 80 IA of the Act to the tune of Rs. 67, 23, 899 due to the reason that the appellant has not considered and setting off loss from 8 projects while calculating deduction under chapter VIA of the Act. 52. We have heard the respective submissions made by the parties; we have also perused the relevant materials available on record. It appears that while rejecting the claim of the assessee the Ld. AO observed as follows: "3.1 On perusal of above chart, it is seen that the assessee has earned profit in 16 sites aggrega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry when assessee was carrying on two priority industries. It was held that loss in one industry is not to be set off against profits from the other and the deduction would be on the whole profits from the profit making industry. It was held that in the application of section 80E, profits and gains earned by one priority industry cannot be reduced by loss suffered by another industry owned by the assessee. Each industry must be considered on its own working, while adjudging its claim to the deduction under section 80E. 6. In this context, Allahabad High Court in the case of Commissioner of Income-Tax and another vs. Modi Xerox Ltd. (supra) found that the assessee was a multi-unit company carrying on three different activities and had three separate units for such activities. Two of these units were profit making units and the third was a loss making unit. Qua the profit making unit, the assessee had claimed deduction under section 80HH and 80I of the Act. With this background, it was held and observed as under: "37. We have considered the facts and circumstances of the present case and the law laid down by the apex court and the decision of the Delhi High Court referred h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the profit shall be taken into account as if it was the only source of income of that unit. In this view of the matter, we are of the view that there is no error in the order of the Tribunal." 7. We respectfully agree with the view expressed by Allahabad High Court. This view is not in conflict with the decision of the Supreme Court in the case of Synco Industries Ltd. (supra). In such case, it was found that the assessee had two industrial units namely, one in oil and another in chemicals. The assessee was making profits in chemical unit but incurring losses in oil unit. In this background, it was held that while computing gross total income, income should include both profit in chemical unit and loss in oil unit. If the result thereafter is nil, the assessee cannot get benefit of special deductions under section 80HH and 80I etc. In the context of computation of deduction under section 80I, the Supreme Court observed that while computing quantum of deduction under section 80I(6), the Assessing Officer, no doubt, has to treat the profits derived from an industrial unit as the only source of income in order to arrive at a deductions under chapter VI. It was further observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut in other units." 9. We therefore, do not find any error in the view expressed by the Tribunal following the decision of the Allahabad High Court. Tax Appeal is therefore, dismissed." 55. We have further considered the judgement passed by the Mumbai Bench in the case of Punit construction company, reported in 92 taxmann.com 28(Mum. Tri) wherein it has been specifically decided that in terms of provisions of sub Section 5 of Section 80 IA, deduction has to be given unit wise without considering profit or loss of other eligible units. In that view of the matter respectfully relying upon the same we allow this ground of appeal preferred by the assessee with the direction upon the AO to grant relief to the assessee only on the profitmaking unit without setting off loss suffered by other eligible units. Thus, this ground of appeal preferred by the assessee is allowed. 56. As aforesaid, since the above issue is also identical to the assessee's appeals for Asst.Year 2008-09 to 2013-14, 2015-16 and 2017-18, in the absence of any changed circumstances, our finding and decision in the Asst.Year 2007-08 will apply mutatis mutandis in the instant appeals also. 57. Fourth common ground i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned disallowance of interest expenditure and this ground of appeal of the assessee is, thus, allowed. 63. As aforesaid, since the above issue is also identical to the assessee's appeals for Asst.Year 2010-11 to 2013-14, in the absence of any changed circumstances, our finding and decision in the Asst.Year 2007-08 will apply mutatis mutandis in the instant appeals also. 64. Now we take up other ground viz. the Revenue authorities are erred in making addition by disallowing the assessee's claim of bad debts. This ground raised in A.Y.2010-11 and 2011-12. 65. During the course of assessment proceedings, upon perusal of the details of bad debts written off, as submitted by the assessee, it was found by the AO that an amount of Rs.16,50,000/- was given as advance to M/s.Ruturaj Traders has been written off. A show cause notice was issued directing the assessee to explain as to why the said amount should not be disallowed as an expenditure considering the same as in the nature of loan and advances and not in the nature of trade liability. Further that, during the assessment year 2009-10, disallowance under section 36(1)(iii) of the Act was made on the same amount in the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nied by the revenue to the tune of Rs.10,00,000 which has been contributed by the assessee to one political party by account payee cheque during A.Y. 2008-09. 69. We have heard the parties; perused the relevant materials available on record. 70. The same was claimed as deduction under chapter VI-A at hundred percent under section 80 GGB in the return filed by the assessee appearing at page 1 of the paper book filed before us and the returned income was shown at Rs.54, 24,610. However the Ld AO on page 16 of his order has started the computation of income by taking the figure at Rs.64,24,614/- and disallowed the above claim. During the assessment by and under the reply dated 16.07.2010 the assessee had drawn the attention of the Ld AO to the annexed donation receipt. The same is further filed before us. In view of the provision of law under section 80 GGB we, therefore, allow this deduction of Rs.10,00,000 as claimed by the assessee. This ground of appeal preferred by the assessee is, therefore, allowed. 71. The other common ground raised by the assessee is in respect of disallowance of employees contribution made under section 36(i)(va) of the Act. The is identical issue is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, supported by audit reports under Section 80 IA(7) in Form No. 10 CCB and none of the particulars or figures are found to be untrue or wrong. The disallowance is made only due to a bona fide difference of opinion between the assessee and the Department as to whether the assessee is a 'developer' or 'contractor'. It further appears that relying on the decision passed in the matter of Reliance Petro Products Pvt. Ltd., reported in 322 ITR 158 (SC) the penalty was deleted by the Ld. CIT(A) which according to us is without any ambiguity so as to warrant interference. We, thus, find all the appeals preferred by the revenue as above as devoid of any merit and therefore, dismissed. 78. CO No. 195/A/2015 for AY 2008-09 is not pressed by the assessee due to smallness of amount. Hence, the same is dismissed as not pressed. 79. ITA No. 118/Ahd/2009 for A.Y. 2002-03 is not pressed by the assessee due to smallness of amount. Hence the same is dismissed as not pressed. 80. Assessee's appeal is against the imposition of penalty under Sections 271(1)(c) of the Act. i) ITA No. 2917/A/2016 for AY 2010-11 81. The instant appeal has been preferred by the assessee against the confirmation of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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