9911796707
TMI Blog2024 (10) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... ld appeal pending for last more than 12 years, but the material filed before us vide paper books are not sufficient for us to decide the issue . Even tender documents, agreements with the Government for executing the work, PERT chart, financial statements, Men, material and machines deployed, the roles and responsibilities performed by the assessee, details of deployment of funds, details of statutory clearances obtained, penal provisions in the agreements etc. were all not provided in the paper book filed by the assessee. It would be fit and appropriate in the interest of justice and fair play that the matter be restored back to the file of CIT(A) for fresh adjudication of this issue after making detailed analysis of all the specific work executed by the assessee in which the assessee has claimed that it acted as developer and claimed to be eligible for deduction u/s 80IA(4). Assessee as well the AO shall be given opportunity of being heard by the CIT(A), keeping in view principles of natural justice. The evidences filed shall be admitted by ld. CIT(A) in accordance with law. The appeal of the Revenue on this issue is allowed for statistical purposes. Disallowance u/s 14A read wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4), we have already restored the issue of disallowance u/s 80IA(4) to the ld. CIT(A) for fresh adjudication, and hence, in the fitness of the things and fair play keeping in view facts and circumstance of the case, this issue to the extent of confirmation of addition u/s 35D by us as well partly setting aside to the file of ld. CIT(A) for fresh adjudication vis- -vis higher deduction u/s 80IA(4), is restored to the file of ld. CIT(A) for fresh adjudication. - SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER For the Assessee: Sh. S.N. Soparkar, Sr. Advocate Sh. Parin Shah, A.R For the Revenue: Sh. Chetram Meena, Sr. DR ORDER PER BENCH: The Revenue has filed appeals for assessment year(s) : 2007-08 and 2008- 09, while the Assessee has filed Cross Objections for assessment year(s) 2007-08 and 2008-09, as well the assessee has filed cross appeal for assessment year 2008-09. First we shall take up appeal of the Revenue in ITA No. 2308/Ahd/2011 for assessment year 2007-08 and the C.O. No. 209/Ahd/2011 arising out of ITA No. 2308/Ahd/2010 for assessment year 2007-08 filed by the assessee, which have arisen from the appellate order passed by learned Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5711807 -4210016 -4239557 PATAN 99512262 9157581 8642915 VIDISHA 0 -1631133 -1631133 JOHDHPUR 367479 1002045 -1000144 AAI-SURAT 61717426 5585698 5266502 OTHER THAN INFRA 945584370 72957463 68067009 TOTAL RS. 1243854952 106030796 99597721 3.2 The AO asked the assessee to give explanation regarding its claim u/s. 80IA(4) as a developer. The assessee replied that it is eligible for deduction under section 80IA(4) as a developer. The assessee submitted that it has derived profits from an undertaking in respect of infrastructural activities being road development of Airport terminal Plant, Canal Syphone Work, Diaphram Wall and development of Airport terminal etc., with State or Central Government. The assessee submitted that the work carried out by the assessee is in the nature of development and not as construction contract. The assessee submitted that the work of development can be executed only by qualifying tender acceptance parties. The work is of development and not a part of only construction activities. The assessee submitted that its work cannot be termed in the nature of work contract. The assessee submitted that the dictionary meaning of a developer is very exhaustive and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil construct. The assessee is bound to performed work with the drawing specification which is part of the contract. Details of various agreement are as follows:- NMC Patan/Khari:- Extract from the Contract agreement:- ... The SSNNL has accepted a tender by the contractor for constructing NMC reach 357.196 km to 361.576 km .. The work of contractor are subject to the acceptance by SSNNL. The payment to be made by SSNNL to the contractor as herein after mentioned, the contractor hereby covenants with the SSNNL to complete construction in conformity in all respects with the provisions of the contract. Letter dated 1.12.2004 by Sardar Sarovar Narmada Nigam Ltd. to MSK includes:- You are requested to start the work of constructing Khari-II canal Syphon on Narmada Main Canal Ch.356.422 km immediately strictly in accordance with the contractual terms, conditions, specification relevant drawing from time to time. The work shall have to be claimed out as per the tender stipulations and under instruction direction of Engineer-in-charge subject to the approval in all respect and responsible to the superintending Engineer, in all contracts matter complete said work All the conditions related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of certain well defined jobs, planned, specified and well laid out by the developer as work contract. The company is not conceiving the project. f. The company is not planning the project but is carrying out the part of activities and raising the detailed RA bills to the developer and getting the payment for the same on supervision certification by the developer. The company in no way is involve in financing the project as revealed by the RA bills issued TDS certificate issued by the Executive Engineer. The assessee has raised RA bills, contractor construction work bills for the activities undertaken by it at the part rate as agreed by in the tender and work contract collected the payment for the same. g. The receipt of payment u/s. 194C itself clearly indicates that the assessee company has acted as a contractor not as a developer or owner of the project. h. The assessee failed to prove that investment, risk and reward is belonging to it for the development project, which is the basic requirement of the developer. However, the assessee has incurred the operative investment, and taken risk and reward for the execution of the work/civil contracts delegated to them through tender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject as the entire cost of the infrastructure was being borne by the assessee. The income on which deduction u/s. 80IA has been claimed was related to the contract works executed by the assessee and was not on BOT, BOOT, or BOLT basis. Thus works carried out by the company were not as developer but as a contractor and by virtue of agreements the company received the payments from time to time by raising the RA bills. 7. Thus the claim of 80IA being a developer is not rational and genuine and hence withdrawn. 4. Aggrieved by the assessment framed by the AO, the assessee filed first appeal with ld. CIT(A), and the assessee claimed itself to be developer of infrastructure projects rather than being merely as construction contractor. The assessee submitted that the assessee being developer of infrastructure projects is eligible for deduction u/s 80IA(4), but the AO denied the deduction u/s 80IA on the grounds that the assessee is construction contractor undertaking work contracts. The main bone of contention of the assessee on merits of the issue is that the assessee is engaged in the business of developing Road, Bridges etc., i.e. the infrastructure facilities after entering into agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltimately give complete shape to the project and fully implement the project to the satisfaction of the owner. Thus, merely because assessee has acted under Government contract, it cannot be denied deduction under section 80IA(4) and nor it can be held that it has acted only as work contactor. The role of the developer is much larger than that of the contractor which includes planning, designing, know how, funding, risks, human resource planning, execution in time which are carried out at the sole risk of the assessee. It was submitted before ld. CIT(A) that it was not merely the construction of a particular infrastructure facility but developing the facility and hence developing the State. The assessee also referred to its financial statement and submitted that the assessee has made huge financial investments, human resources, technical expertise etc.. The assessee possesses its own technical knowledge of how to develop and lay roads, dams, bridges etc., and it has its own technical as well managerial pool of manpower for the same. The assessee has purchased and employed its own material for development of the infrastructure facility .Thus, the assessee submitted that the entire p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l coat with Asphalt plant and paver and other Road Machinery. 4 Indroda Ahmedabad Irrigation Construction of Work of Weir Across River 1214009 1640653 Sant Sarovar Department Sabarmati at lndroda Gandhinagar 5 Patan Kharti Sadar Sarovar Narmada Construction of Canal Syphon Across the River Khari II@ 99512262 8642915 Canal Nigam Ltd. CH 356.420 of Narmada Main Canal - The entire work done with Machinery like Batching Plant, Transit Mixers, Ropway etc 6 STP - Jashpur Capital Project Division Turnkey work including Designs Construction 76 MLD 5711807 -4239557 Gujrat state Govt. Sewerage Treatment Plant Complete with Maintaining and Running the Plant for 3 years 7 MPRRDA- Madhya Pradesh Rural Road Construction/Upgradation of Rural Road and PMGSY 0 -1631133 Vidisha Development Project Package MP 4502 8 VMC- Vadodara Municipal Construction of 1800 MM RCC Graviety Trunkline from 47582093 8977069 Pipeline Corporation Shrenik Cross Road to Atladra Sewage Treatment Plant+D4 9 Jodhpur Rajasthan Urban Infra Providing Laying Jointing and Commissioning of sanitary 367479 -1003946 Pipeline Develop. Project sewer in Pal III Zone including construction of manholes, serive connection along with rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO in ITA No. 1111/ RJT/2010, delivered on 23/09/2010 on the very same issue and similar facts and allowed the deduction u/s 80IA(4) of the Income Tax Act, 1961. The observation of the Hon'ble ITAT on various issues relating to deduction u/s. 80IA(4) are as under- We find force in the argument of the A.R. before us that entering into a contract and that too with the Govt. only is a pre-condition u/s. 80IA(4) and hence merely because there is a contract between the Govt. and the assessee, that does not make the assessee a contractor for the purpose of a works contract only. Any person carrying on business may be required to carry out some work or the other in the course of pursuing its overall business objectives. But what does not mean that such a person does not or cannot carry out something more than such work only. In the present case, we have already held that although the appellant entered into a contract with the Govt., the contract is part of the primary conditions of Sec. 80IA(4) and further the nature of work carried out shows that the appellant not only directly (and not indirectly) carried out work as per the contract but it employed various resources of its own by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aum Construction Pvt. Ltd V/S ACIT reported in 126 TTJ 577. The ITAT observed that facts in the case of B.T Patil sons are quite different. In that case, the assessee was employed as a subcontractor to carry out civil work and that a portion of the contract was assigned to that assessee who carried out the assigned work in the capacity of a subcontractor. The ITAT held that in the case of the present assessee (Tarmet), the facts are totally different. The appellant itself is the developer. It is not a subcontractor. Therefore, the ratio of the judgment in the case of B.T. PATIL SONS Belgaum Construction Pvt. Ltd is not applicable to the present case. 2.3.2 It is further, stated by the Ld. A.R. that even after the amendment brought to the statute book vide Finance (No. 2) Act, 2009 with retrospective effect from 01/04/2000, various CIT(A)'s had also considered the similar matter with identical set of facts and circumstances and deleted the addition made by the AO. The Ld. A.R. put three cases on records, wherein the Ld.CIT(A) have deleted the addition made by the AO on account of 80IA(4) and allowed the claim of the assessee regarding deduction. Which are as under: 1. SADBHAV EN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SSB- Gondal and MPAKVN project. 3. Rajkamal Builders Infrastructures (Pvt.) Ltd. Appeal No.CIT(A)-XI/819/2008-09 2.5 I have given my careful consideration to the provisions of section 80IA(4), the facts of the case, the A.O's findings and the written submissions of the appellant.in accordance with the provisions of section 80 IA(4), any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing. operating and maintaining any infrastructure facility will be eligible for deduction subject to fulfilment of certain conditions. In the instant case, the issue for consideration is whether the appellant is developing any infrastructure facility or whether he is a mere contractor. Going by the nature of works carried on, I am inclined to accept the contention of the appellant that their business is one of developing infrastructure facilities. There is force in the contention of the appellant that initial capital investment (by way of security deposit with government, purchase of materials, payment to labour, Margin money Fixed deposit with bank for obtaining bank guarantee etc.) is made by them and the payment is received step by step on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey regarding those projects. The appellant is also required to make investment in key equipments and manpower apart from financial investments. The Ld. A.R. also submitted that the development of infrastructure facility involved huge risk, as well and for that the appellant is required to give security and performance guarantee. The appellant is also liable for liquidated damages. 2.3.5 In my considered opinion the appellant's case is identical to the case of M/s. Tarmat Bel (JV) KCL. Rajkot decided by the Hon'ble ITAT, Rajkot. The appellant has claimed the deduction u/s. 80IA(4) for the 10 (Ten) projects as reproduced in para 2.2.4 of this appellate order. From the written submissions as well as oral argument of the Id. A.R. it is observed that all the ten projects for which deduction has been claimed the appellant took the entire risk of the project and deployed its own resources. In the light of these facts the appellant cannot be termed as mere contractor. Since the appellant performed all those tasks which is performed by the developer, the appellant cannot be denied the benefit available to the developer. It is also observed that all the arguments of the A.O have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Vijay M Mistry Construction Pvt. Ltd. 2938/Ahd/2011 Ahmedabad 2. Katira Construction Ltd. 185 ITD 173 Rajkot 3. Patel Infrastructure Pvt. Ltd. 627/Rjt/2014 Rajkot 4. Rajkamal Builders Infrastructure Pvt. Ltd. 118/ahd/2009 Others Ahmedabad 6. The issue involved in the C.O. filed by the assessee is with respect to disallowance of expenditure of Rs. 26,719/- by the AO which disallowance stood confirmed by the ld. CIT(A). The assessee has claimed transaction tax of Rs. 24,710/- which was disallowed by the AO in the absence of any satisfactory reply. So far as claim of the assessee of Rs. 70,830/- as income tax expenses is concerned, the assessee submitted that the assessee has already disallowed Rs. 68,824/-, and the AO disallowed the remaining amount of Rs. 2009/- and added the same back to the income of the assessee. Aggrieved by the assessment order passed by the AO, the assessee filed first appeal with ld. CIT(A). The ld. CIT(A) rejected the claim of the assessee. Aggrieved by the appellate order passed by ld. CIT(A), the assessee has filed Cross Objection before the Tribunal and the ld. Senior Advocate Shri S N Soparkar submitted, at the outset, that there is a disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for obtaining the work as contractor only. The assessee is registered with sales tax authorities of Gujarat and Madhya Pradesh as work contractor as per the registration certificates. The assessee failed to prove that it has ownership of project to develop . The assessee is executing civil construction activities as per the specifications designs and plans provided by the Developer of the infrastructure project. The supervision of the project is undertaken by those who have given the civil construction work to the assessee. The assessee is bound to perform work with the drawing specification which is part of the contract. The AO then discussed in the assessment order at page number 5-8 about two of the work orders executed by the assessee. The ld. CIT(A) granted relief to the assessee with respect to 10 projects on the grounds that the assessee is a Developer and not a Contractor . The ld. CIT(A) observed that the assessee has taken the entire risk of the project and deployed its own resources,and in view of the above, the assessee cannot be categorized as Contractor. We have elaborated in the preceding para s of this order, the findings/observations of both the AO as well ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriods as specified in sub-section (2) and thereafter, thirty per cent of such profits and gains for further five assessment years.] (3) This section applies to 40 [an 41 [undertaking]referred to in 42 [clause (ii) or] clause (iv) 43 [ 43a [or clause (vi)]] of sub-section (4)] which fulfils all the following conditions, namely : (i) it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of an 44 [undertaking] which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such 44[undertaking]as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose: 45 [Provided that nothing contained in this sub-section shall apply in the case of transfer, either in whole or in part, of machinery or plant previously used by a State Electricity Board referred to in clause (7) of section 2 of the Electricity Act, 2003 (36 of 2003), whether or not such transfer is in pursuance of the splitting up or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o another enterprise (here after in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. 50 [Explanation. For the purposes of this clause, infrastructure facility means (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port 51 , airport, inland waterway 52 [, inland port or navigational channel in the sea];] 53 [(ii) any undertaking which has started or starts providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aying of such network of new lines for transmission or distribution; 64 [(c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 65 [2011]. Explanation. For the purposes of this sub-clause, substantial renovation and modernisation means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004;] 66 [(v) an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant, if (a) such Indian company is formed before the 30th day of November, 2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and such Indian company is notified 67 before the 31st day of December, 2005 by the Central Government for the purposes of this clause; (b) such undertaking begins to generate or transmit or distribute power before the 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or other activities are an integral part of the highway project and the profits of which are computed on such basis and manner as may be prescribed 70 , such profit shall not be liable to tax where the profit has been transferred to a special reserve account and the same is actually utilised for the highway project excluding housing and other activities before the expiry of three years following the year in which such amount was transferred to the reserve account; and the amount remaining unutilised shall be chargeable to tax as income of the year in which such transfer to reserve account took place. (7) 71 [The deduction] under sub-section (1) from profits and gains derived from an 72 [undertaking] shall not be admissible unless the accounts of the 72 [undertaking] for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form 73 duly signed and verified by such accountant. (8) Where any goods 74 [or services]held for the purposes of the eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertaking or enterprise with effect from such date as it may specify in the notification. (12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. 77 [(12A) Nothing contained in sub-section (12) shall apply to any enterprise or undertaking which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007.] 78 [(13) Nothing contained in this section shall apply to any Special Economic Zones notified on or after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (1). This clarification was inserted by Finance Act, 2007 wef 01.04.2000 and was later modified by Finance Act, 2009. The main controversy in this appeal revolves around this explanation which was inserted below sub-section 13 to Section 80IA. The AO has held that the assessee is Contractor executing work contract, while the assessee is contending that it is not Contractor but developer. The word Developer , Contractor , work contract are not defined in the 1961 Act. The word contractor refers to a person who executes contract/work order for others without taking any future risks and responsibilities of the work undertaken except normal business risk of completing the work contract successfully as directed by Contractee, while developer undertakes the project to develop and construct at its own responsibility and takes all the risks and responsibilities aassociated with the project awarded to it . In this execution of work order, the Contractor is a given a work order by Contractee along with the designs and specification and his job is to be simply execute the wok order. The role and responsibility of the Contractor ends with the finishing of work order to the satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority, the manner in which execution of the work took place, analysis of the financial statements to identify deployment of financial resources by the Contractor/developer, deployment of men, machine and material by Developer/Contractor in executing the work awarded, PERT chart prepared, the role and responsibility of the Contractor/Developer prior to execution of work, during the execution of work and post execution of work. The provisions for claim of deduction /exemption are to be strictly construed and any ambiguity is to be decided in favour of Revenue. Reference is drawn to the judgment and order of Constitutional Bench of Hon ble Supreme Court in the case of Commissioner of Customs(Imports) v. Dilip Kumar Company, reported in (2018) 95 taxmann.com 327(SC). The ld. Sr. Advocate has heavily relied on the judgment and order of Hon ble Gujarat High Court in the case of Montecarlo Construction Limited (supra) . In this judgment and order, the Hon ble Gujarat High Court has dismissed the appeal filed by Revenue on the grounds that there are concurrent finding of the facts by ld. CIT(A) as well ITAT, therefore, no question of law, much less any substantial question of law arises f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for statistical purposes. We order accordingly. 7.2 W.r.t. the issue raised by the assessee in the CO filed, regarding dis-allowability of deduction of the expenses to the tune of Rs. 26,719/- both by the AO as well by ld. CIT(A) . The assessee has claimed that once deduction u/s 80IA(4) is allowed, then even if the income increases owing to disallowance of aforesaid expenditure, the deduction u/s 80IA(4) shall go up and hence disallowance is tax-neutral. This contention of the assessee is consequential to the issue of grant of deduction u/s 80IA(4), and we have already set aside and restored the matter to the file of ld. CIT(A) for adjudicating afresh issue of allowability of deduction u/s 80IA(4) in the preceding para s of this order, and hence this issue of disallowability of expenses to the tune of Rs. 26,719/- is also restored back to the file of ld. CIT(A) to be adjudicated afresh after adjudicating the first issue. The ld. CIT(A) shall give proper opportunity of being heard to both the AO as well the assessee. We order accordingly. 8. Thus, both the Revenue Appeal and CO filed by the assessee for assessment year 2007-08 are allowed for statistical purposes. We order accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the parties, we condone the delay of one day beyond the limitation as provided u/s 253(3) of the 1961 Act. If justice is pitted against technicalities, the Courts will lean towards advancement of justice rather than technicalities. We order accordingly. 12. The assessee has raised following grounds in CO in memo of CO filed with ITAT, Ahmedabad Bench, Ahmedabad, which is listed as CO No. 210/Ahd/2011 for assessment year 2008-09 :- Grounds in C.O. raised by Assessee-CO No. 210/Ahd/2011 arising out of ITA no. 2352/Ahd/2011 for assessment year 2008-09. 1. The learned Commissioner of Appeals- VIII, Ahmedabad erred in confirming addition to the extent of Rs. 66,86,461 made by the Assessing Officer by way of disallowance of expenses u/s 14 A r.w. rule 8 (d) of Income tax Rules. 2. The learned Commissioner of Appeals- VIII, Ahmedabad erred in directing the Assessing Officer to exclude expenditure of Rs. 6,25,967 as qualifying expenditure for the purpose of deduction u/s 35 D of the Income tax Act, 1961 by way of expenditure on increasing the authorized Share capital of the Company. 12.2 At the outset ld. Counsel for the assessee, Senior Advocate Shri S N Soparkar stated that the CO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to 01.04.2004. It is a public listed company and shares are traded on the recognized stock exchange . The assessee submitted that the company has not done or carried out any activities in the investment nor has incurred any expenditure for earning the dividend income and as such provision of section 14A are not applicable. It was further submitted that the assessee has paid up Share Capital of Rs. 10,78,14,000/- while Reserves and Surplus are to the tune of Rs. 45,92,60,310/-, aggregating to Rs. 56,70,74,310/-. The assessee submitted that there are other funds available with the assessee also which do not carry any interest expenditure . The AO observed that the assessee has earned dividend income of Rs. 13,118/- exempt from tax. The assessee has also exempt income from joint venture of Rs. 9,01,43,693/- which is more than the income earned by the assessee. Apart from this, the assessee is also claiming deduction under section 80IA from various projects subject to 80IA, which is also claimed exempt. The AO observed that the assessee has made investment in shares of joint ventures where the income claimed is exempt and the assessee has invested in joint ventures. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 58,64,606/- and bank charges to the tune of Rs. 24,64,381/- and stamp paper/legal charges to the tune of Rs. 1008885/-, which were earlier included by AO as part of interest expenditure paid by the assessee. Thus, the disallowance Section 14A u/r 8D(2)(b) stood reduced to Rs. 57,89,411/- as against Rs. 76,15,655/- made by the AO. The ld. CIT(A) confirmed the additions of Rs. 8,97,050/- as was made by the AO by invoking Section 14A of 1961 Act read with Rule 8D(2)(c) of 1962 Rules. 13.5. Aggrieved by decision of ld. CIT(A), the assessee filed second appeal with ITAT, and the ld. Senior Advocate Shri S N Soparkar submitted that the additions are to be restricted to the exempt income earned by the assessee. It was submitted that exempt income from dividend is merely Rs. 13,118/. Further, it was submitted that even if the same was added to the income, then deduction u/s 80IA shall go up. Further, it was submitted that owned funds are more than the investment and hence no disallowance of interest expenditure by invoking Section 14A read with Rule 8D are warranted. While ld. DR supported the orders of the authorities below. 13.5 We have considered rival contentions and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) for fresh adjudication. We order accordingly. Preliminary Expenses 14. The next issue concerns with disallowance of Preliminary expenses to the tune of Rs. 13,40,328/- u/s 35D. The AO observed that the assessee has written off preliminary expenses of Rs. 13,40,328/- under section 35D of the Act. The assessee was asked to explain the working of the preliminary expense. The AO observed that these are the expenses incurred by the assessee company in the preceding years for increase in the authorized share capital of the company. The AO referred to the decision of Hon ble Supreme Court in the case of Brooke Bond India Ltd. v. CIT 225 ITR 798 (SC). The AO referred to provisions of Section 35D and observed that Preliminary expenses incurred for increase in authorized capital are not even mention in sub-section 2 of Section 35D. The AO disallowed the expenses to the tune of Rs. 13,40,328/- both under Section 35D as well under section 37 of the Act. 14.2 The assessee fied first appeal before the ld. CIT(A) challenging the additions as were made by the AO. The ld. CIT(A) observed that partly expenses were incurred for public issue and the assessee has claimed deduction u/s 35D to the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee will be entitled for higher deduction u/s 80IA(4), we have already restored the issue of disallowance u/s 80IA(4) to the ld. CIT(A) for fresh adjudication, and hence, in the fitness of the things and fair play keeping in view facts and circumstance of the case, this issue to the extent of confirmation of addition u/s 35D by us as well partly setting aside to the file of ld. CIT(A) for fresh adjudication vis- -vis higher deduction u/s 80IA(4), is restored to the file of ld. CIT(A) for fresh adjudication. We order accordingly. 15. In the result, the Appeal of Revenue for assessment year 2008-09 is allowed for statistical purposes, the CO filed by the assessee for assessment year 2008-09 is dismissed and the appeal filed by the assessee for assessment year 2008-09 is partly allowed for statistical purposes, as indicated above 16 Thus, in nut-shell, the Appeal of Revenue for assessment year 2007-08 and CO filed by the assessee for assessment year are allowed for statistical purposes. The appeal of the Revenue for assessment year 2008-09 is allowed for statistical purposes, the CO filed by the assessee for assessment year 2008-09 is dismissed and the appeal filed by the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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