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TMI Blog2024 (9) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... tuent partner of the JV/Consortium, more particularly, except entering into agreement, all other activities were carried out by the assessee We are of the considered view that the assessee is eligible for deduction under Section 80IA(4) of the Act towards profits derived from infrastructure project awarded to JV / Consortium, but executed by the appellant. The ld.CIT(A) after considering relevant facts, has rightly allowed the deduction under Section 80IA(4) of the Act. Thus, we are inclined to uphold the findings of ld.CIT(A) and reject the grounds taken by the Revenue. Disallowance of expenditure related to exempt income u/s 14A read with Rule 8D - CIT(A) to restrict disallowance under Section 14A read with Rule 8D to the extent of exempt income - HELD THAT:- As relying on Joint Investment Pvt. Ltd [ 2015 (3) TMI 155 - DELHI HIGH COURT] and Chettinadu Logistics (P) Ltd. [ 2018 (7) TMI 567 - SC ORDER] disallowance contemplated under Section 14A read with Rule 8D shall not exceed exempt income. Therefore, we are of the considered view that there is no error in the reasons given by the ld.CIT(A) or to restrict the disallowance to exempt income and thus, we are inclined to uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to development agreement with Central / State / Local Authorities and invested their own funds to develop such facilities will only be eligible for benefit of deduction. 5. Whether the ld. CIT(A) is correct in law in upholding the claim of the assessee u/s 80IA of the Act, which is only a constituent of the joint venture or consortia and do not fulfil the requirements of Section 80IA (4) of the Act and the assessee is not a developer but merely a contractor of the projects awarded to joint venture / consortia? 6. The ld.CIT(A) ought to have appreciated the fact that when huge borrowed interest bearing funds are deployed for earning exempt income restriction of the disallowance u/s 14A to exempt income alone would result in disproportionate reduction of taxable income which is not the intended purpose of Section 14A. 7. The ld. CIT(A) ought to have appreciated the fact that the words used in sub- section 1 of Section 14A are clear and unambiguous that what is not allowable is expenditure incurred for EARNING EXEMPT INCOME and, therefore, such disallowance cannot be restricted to EXEMPT INCOME EARNED. 2.1. The additional ground filed by the Revenue reads as under: The above issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IA(4) of the Act. The AO had also discussed each project executed by the appellant in light of agreement with relevant authorities and after considering relevant agreements and nature of projects executed by the assessee, observed that the appellant has claimed deduction under Section 80IA(4) of the Act in respect of projects executed by the appellant on its own on the basis of agreements entered into with State or Central Governments and also claimed deduction under Section 80IA(4) of the Act in respect of projects which were awarded to Joint Ventures (hereinafter referred as JV ) and Consortiums, wherein the assessee was one of the constituent members and the works were carried out by the assessee, in proportion to its shares as per the JV / Consortium agreement. However, as per the provisions of Section 80IA(4) of the Act, only the enterprise which enters into an agreement with the Government / Statutory Body is eligible for deduction. In the case of the JV / Consortium, the agreement was entered into by the JV / Consortium, whereas the deduction was claimed by its constituent member, which is in violation of Section 80IA(4) of the Act. Therefore, by taking note of relevant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely for the reason that the agreement is in the name of JV, the deduction under Section 80IA(4) of the Act cannot be denied to the assessee, when the assessee has satisfied all the conditions, including conditions of entering into agreement with relevant authorities. In this regard, the appellant relied on the decision of ITAT Visakhapatnam Bench in the case of M/s. Transstory (India) Ltd. Vs. ITO (supra). 5. The ld.CIT(A), after considering relevant submissions of the assessee, as well as the order of the Assessing Officer observed that, as could be seen from the facts brought on record, the appellant company is engaged into infrastructure development activity of various kinds, which are shown to be awarded directly as main developer / builder, while some were awarded to JV's / Consortia but executed by the assessee, as a constituent of the said JV, in proportion to their share. The profits related to the first two types of projects are claimed for deduction under Section 80IA(4) of the Act. The Assessing Officer has not disputed the fact that the assessee is otherwise eligible for deduction under Section 80IA(4) of the Act, upon satisfying all the conditions prescribed ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l only be eligible for the benefit of deduction. The ld.DR referring to the provisions of Section 80IA(4)(1)(b) submitted that, in order to be eligible for deduction under the said section, the enterprise shall enter into an agreement with the Central Government or State Government or a local authority, or any other statutory body for developing, operating, and maintaining a new infrastructure facility. In the present case, the appellant has claimed deduction in respect of profits derived from projects awarded to JV/ Consortia in light of agreement between relevant JVs/ Consortiums, and authorities, only on the ground that the project has been executed by the appellant. However, but fact remains that the exemption provisions should be strictly interpreted as held by ITAT Hyderabad Bench in the case of DCIT Vs. HES Infra Private Limited in ITA No. 184 and 185/Hyd/2018, wherein the Coordinate Bench has followed the decision of Hon'ble Supreme Court in the case Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company reported in (2018), 95 taxmann.com 327 (SC) wherein it has been clearly held that the exemption provisions should be strictly interpreted. Going by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eements entered into by the assessee. Therefore, he submitted that the assessee is eligible for deduction u/s 80IA(4) of the Act and ld.CIT(A) after considering relevant facts has rightly allowed deduction and their order should be upheld. 8. Per contra, the ld.CIT-DR submitted that there is no dispute with regard to the fact that the appellant is not entered into agreement on its own, but signed the said agreement as a constituent partner of the JV / Consortia. Further, as per clause (a) of Section 80IA(4)(1) of the Act, it only says that the project should be owned by a company or consortium of such companies, but when it comes to clause (b), it talks about entering into agreement with Central or State Government for developing projects. In the present case, there is no dispute with regard to the fact that the appellant has not entered into agreement with any of the Central or State Government or local authority, but executed works in proportionate to their share in respect of JV / Consortia. Therefore, if you strictly directly interpret the provisions of Section 80IA(4)(b), the assessee is not entitled for deduction under Section 80IA(4) of the Act and this fact has been reitera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined under Section 80IA(4) of the Act and thus, on being satisfied with the relevant provisions therein, the assessee is eligible for deduction under Section 80IA(4) of the Act. The only dispute is with regard to not satisfying clause (b) of Section 80IA(4)(1), which states that in order to claim deduction under Section 80IA(4) of the Act, the enterprises shall enter into an agreement with the Central government or State Government or local authority or any authority for developing, operating and maintaining or developing, operating and maintaining a new infrastructure facility. The appellant claims that it has satisfied clause (a) of Section 80IA(4) of the Act, because as a constituent partner of JV /Consortia, it has signed agreement with relevant Central or State Government or local authority for development of infrastructure project. Further, as per clause (a) of Section 80IA(4) of the Act, in order to claim deduction under Section 80IA(4), the enterprise should be owned by a company registered in India or by a consortium of such companies. Further, Clause (a) makes it clear that a company registered in India, or a consortium of such company registered in India should be owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee becomes a developer of the infrastructure project and also as a constituent partner of the JV/Consortium, satisfied the condition of entering into an agreement with relevant Central or State government or any authority as specified in clause (b) of Section 80IA(4)(1) of the Act. This is further fortified by the provisions of Section 80IA(4) of the Act and as per the proviso, the deduction is allowed to a successor entity in case one enterprise developed such infrastructure facility and after development, transfer such infrastructure facility to another Enterprise for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with agreement with the Central / State Government or 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. Going by the above provisions, when the law itself allowed the benefit to successor entity in case of transfer, then there is no reason as to why such deduction shall not be allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arded to the joint venture or the consortium, it is to be executed by its constituents or the joint ventures in a ratio agreed upon by the parties. In the instant case in case of a joint venture agreement, the assessee was entitled to execute the 40 per cent of total work awarded by the Andhra Pradesh Government to the joint venture and in case of a consortium it was agreed that the entire work is to be executed by the assessee itself. Therefore for all practical purposes, it was the assessee who executed the work contract or the project awarded to the joint venture. No doubt the joint venture is an independent identity and has filed its return of income and was also assessed to tax but it did not offer any profit or income earned on this project/works awarded to it nor did he claim any exemption/deduction under s. 80 - IA(4). These facts clearly indicates that the joint venture was only a de jure contractor but in fact the assessee was a de facto contractor. There is no dispute with regard to the fulfilment of other requisite conditions. The dispute was only raised that the contract was awarded only to the joint venture and not to the assessee and therefore assessee is not entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the Tribunal is that when the appellant has satisfied all the conditions prescribed under Section 80IA(4) of the Act, but merely for the reason that the agreement is entered into by JV / Consortium, the deduction under Section 80IA(4) cannot be denied. 13. Coming back to case laws relied upon by the ld.DR for the Revenue. The ld.DR relied upon the decision of ITAT, Hyderabad Bench in the case of DCIT Vs. HES Infra Pvt. Ltd (supra), We have gone through the decision of ITAT, Hyderabad Bench in the above case, and we find that, the Tribunal has gone on sole premise of interpretation of statutory provisions in light of the decision of Hon'ble Supreme Court in the case of Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) and held that in case of a person claiming deduction under the provisions of Section 80IA(4), the onus is on the assessee to prove that the assessee has fulfilled all the parameters laid down by the statute for claiming deduction. Since the appellant has not entered into agreement with these Government / statutory authorities, there is a violation as laid down by the statute and the assessee is not entitled to claim deduction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the statute, the assessee must be given the benefit of deduction, having been satisfied all the conditions, including the condition of entering into an agreement with the State Government or Central Government or with any local authority, as a constituent partner of the JV/Consortium, more particularly, except entering into agreement, all other activities were carried out by the assessee. Further, the earlier order of ITAT in assessee s own case was dt.15.02.2019 and order of the Hon'ble Apex Court in Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) is dated 31.07.2018. The Co-ordinate Bench of the ITAT had also taken note of the Judgment of the Hon'ble Apex Court in Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) while adjudicating the issue of deduction u/s 80IA(4) of the Act. Therefore, in our considered view, the arguments of the learned counsel for the revenue in light of the order of ITAT in the case of DCIT Vs. HES Infra (P) Ltd., that the earlier order of the Tribunal in assessee s own case, has not considered the Hon'ble Apex Court s decision in the case of Commissioner of Customs (Import), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is disallowance under Section 36(1)(va), in respect of belated payment of employee contribution to Provident Fund. The AO has disallowed the belated payment of Employees Contribution Provident Fund as noted in his assessment order at page 43 and disallowed sum of Rs. 1,00,39,226/-. The ld.CIT(A) deleted the addition made by the AO by following certain judicial precedents, including the decision of Hon ble Supreme Court in the case of CIT Vs. Vinay Cements reported in (2007) 213 CTR 268 (SC). The ld. D.R. referring to the subsequent decision of Hon ble Supreme Court in the case of Checkmate Service P. Ltd. Vs. CIT, reported in (2022) 143 taxmann.com 178 (SC) wherein the issue has been decided in favour of the Revenue and held that belated payment of Employees Contribution to PF and ESI beyond the due dates specified under respective statue is not allowable as deduction under Section 36(1)(va) read with 43B, read with Section 2(24)(x) of the Income Tax Act, 1961. 17. We find that the Hon ble Supreme Court in the case of Checkmate Services P. Ltd (supra) has considered the issue and held that in case of belated payment of employee contribution to PF and ESI, beyond the due date spec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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