Income Tax Appellate Tribunal - Hyderabad
M/S Ap Industrial Infrastructure ... vs Department Of Income Tax on 4 September, 2015
ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad 'B' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
and Shri B. Ramakotaiah, Accountant Member
ITA Nos.1806 & 1807/Hyd/2013
(Assessment years: 2009-10 & 2010-11)
Dy. Commissioner of Vs. A.P. Industrial Infrastructure
Income Tax, Circle 1(1) Corporation Ltd
Hyderabad 5-9-58/B 6th Floor, Parisrama
Bhavan, Basheerbagh, Hyderabad
PAN: AABCA 9029 K
(Appellant) (Respondent)
For Revenue: Shri S. Moharana, CIT (DR)
For Assessee: Shri B. Satyanarayana Murty
Date of Hearing : 26.08.2015
Date of Pronouncement : 04.09.2015
ORDER
Per Smt.P. Madhavi Devi, J.M.
Both are Revenue appeals for the A.Y 2009-10 and 2010-11 against the order of the CIT (A)-II, Hyderabad, dated 29.10.2013.
ITA No.1806/Hyd/2013 - A.Y 2009-102. Brief facts of the case are that the assessee company, a State Public Sector Undertaking, was in the business of development, operation and maintenance of industrial estates in the state of Andhra Pradesh. Assessee filed its e-return of income on 30.09.2009 admitting a taxable income of Rs.11,21,58,380. The return was processed u/s 143(1) on 25.03.2011 and a refund of Rs.58,17,080 was also issued. Thereafter, assessment proceedings u/s 143(3) were initiated and notice u/s 143(2) was Page 1 of 9 ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad issued and served on the assessee on 3.8.2010. During the pendency of the scrutiny assessment proceedings, assessee filed a revised return of income in physical mode on 30.05.2011 admitting the taxable income of Rs.16,36,73,160. AO observed that the revised return was filed beyond the time permitted and therefore, is legally invalid. However, since the assessee disclosed higher income as per the revised computation, he considered it for the purpose of determination of the taxable income. AO observed that in the revised return, assessee has claimed deduction of Rs.53,88,807 u/s 80IAB of the Act towards income from notified SEZ. He observed that assessee has not made the claim u/s 80IAB in the original return of income. He also observed that the assessee has filed Form 10CCB in support of claim u/s 80IAB only on the last date of hearing. Observing that the assessee has failed to furnish the P&L a/c and balance sheet of the respective units eligible for the claim u/s 80IAB, he observed that it is not possible to determine the eligible profit. Therefore, he disallowed the deduction by relying upon the judgment of the Hon'ble Supreme Court in the case of Goetze India Ltd (284 ITR 329 (S.C). Further he also observed that in the P&L a/c of the assessee, assessee has debited an amount of Rs.5,28,06,794 as interest paid to NTPC and that the assessee has not made deduction of tax at source u/s 192A of the Act. AO, therefore, proposed to disallow the claim u/s 40(a)(ia) of the Act. Assessee, however, replied that the role of the assessee was limited to acting as a mediator only and thus it was a back to back arrangement against interest income receivable from VIWSCO, which in turn was payable to NTPC. AO however, was not convinced with the assessee's contention and held that the assessee was bound to make TDS u/s 192A of the Act. Due Page 2 of 9 ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad to non deduction of TDS on interest of Rs.5,28,06,794 paid to NTPC, the AO disallowed the same u/s 40(a)(ia) of the Act and brought it to tax. He also made other disallowances and consequential additions to the assessee's income against which assessee preferred appeal before the CIT (A), who granted partial relief to the assessee by deleting both the additions discussed above and confirmed the other additions. Against the relief granted by the CIT (A), the Revenue is in appeal before us.
3. The ld DR, while supporting the order of the AO, submitted that the CIT (A) has granted relief to the assessee u/s 80IAB of the Act, even though (i) assessee has not made the claim in its original return of income and (ii) the assessee has not filed form No.10CCB alongwith the revised return of income in which the assessee has made the claim. He further submitted that Rule 18BBB prescribes that the audited report is to be filed alongwith the return of income and therefore, the CIT (A) ought not to have considered Form No.10CCB filed on the last date of hearing and given relief on the basis of such a report. He also submitted that the reliance of the CIT (A) on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Prudhvi Brokers & Shareholders Pvt. Ltd (ITA No.3908 of 2010) dated 21.06.2012 is also misplaced as according to him, the facts therein are disginguishable from the facts of the case before us. As regards the issue of interest expenditure disallowed u/s 40(a)(ia) of the Act for non deduction of tax at source, the ld DR supported the orders of the AO and submitted that the CIT (A) has applied the amended provisions of section 40(a)(ia) of the Act to the facts of the case, even though such provision was applicable prospectively and was not applicable to the year before us. He Page 3 of 9 ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad submitted that the CIT (A) ought not to have considered that NTPC has offered the interest income and therefore, ought not to have held that the disallowance u/s 40(a)(ia) is not to be made in the hands of the assessee.
4. The ld Counsel for the assessee, on the other hand, supported the order of the CIT (A) and submitted that as regards deduction u/s 80IAB is concerned, it is true that the assessee did not make any claim u/s 80IAB in its original return of income, but the assessee had made the claim in its revised return filed on 30.05.2011. He submitted that filing of Form No.10CCB alongwith the return of income was only a technical requirement and the assessee had filed the same before the AO though on the last date of hearing. He submitted that inspite of observing that it was a belated return, by taking into account the taxable income returned in the revised return of income, AO has accepted the same and therefore, it was a valid return. Therefore, according to him, the AO was wrong in saying that the assessee's claim is not allowable because it was not made in its original return of income. He submitted that the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. (Supra) is not applicable to the facts of the case before us as the assessee has made the claim by way of filing the revised return of income which has been acted upon by the AO.
5. On the objections of the Revenue that the assessee has not maintained separate books of accounts for eligible units and therefore, the deduction is not allowable, the ld Counsel for the assessee submitted that Form No.10CCB is certified by the Chartered Accountant, based on the audited accounts and Page 4 of 9 ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad therefore, there is sufficient compliance in order to make the claim.
6. Having regard to the rival contentions and material on record, we find that the assessee's claim of deduction u/s 80IAB was disallowed on the following grounds:
i) That assessee has not made the claim in its original return of income;
ii) That the assessee has not filed Form 10CCB alongwith the return of income; and
iii) That the assessee has not maintained separate books of accounts.
7. As regards the first objection, we find that it is not sustainable as the assessee had filed a revised return of income in which the claim u/s 80IAB was made. According to the AO, the revised return was barred by limitation, but the fact that he has acted upon it by accepting the income returned therein belies his contention that it is not a valid return. Having accepted the revised return in part, he cannot ignore the claim of the assessee u/s 80IAB of the Act. As regards the second objection that Form 10CCB was not filed along with the return of income, we find that Rule 18BBB required that Form 10CCB be filed along with the return of income, we are of the opinion that it would also fulfil the requirement if it is filed before completion of the assessment proceedings. In the case before us, the the assessee has filed Form No.10CCB on the last date of hearing due to which AO could not have verified the same to appreciate the correctness of the claim. As regards the third objection, we find that the CIT (A) has relied on section 80IA(10) dealing with Page 5 of 9 ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad similar provisions as section 80IAB to hold that the AO in computing the profit and gains of the eligible business for the purpose of the deductions u/s 80IA, can take the amounts of profit as may be reasonably deemed to have been derived therefrom. Thus, it is clear that even if the assessee is not maintaining separate books of accounts for eligible units, the AO shall compute the deduction on a reasonable basis provided the business transacted between eligible business and any other person produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business. In the case before us, the CIT (A) has simply applied the said provision without examining whether the assessee satisfies the conditions prescribed thereunder. Therefore, though we agree with the order of the CIT (A) that the assessee's claim u/s 80IAB needs to be considered, we find that the CIT (A) has not considered the correctness of the claim of the assessee u/s 80IAB of the Act. Therefore, for verification as to whether the assessee satisfied the conditions u/s 80IA(10) of the Act and for computation of deduction u/s 80IAB of the Act, we deem it fit and proper to remand the issue to the file of the AO. This ground of the appeal is treated as allowed for statistical purposes.
8. As regards the deletion of disallowance of the interest paid to NTPC u/s 40(a)(ia), we find that the assessee is a Nodal Agency and the loans are routed through the assessee. Visakhapatnam Industrial Water Supply Company Ltd (WIWSCO) has taken a loan of Rs.350 crores in financial year 2004-05 from NTPC, VMC and RINL of Rs.50 crores, 60 crores and 240 crores respectively and the interest was agreed to be charged @ 10% on the above loan amount. It is also observed that the interest Page 6 of 9 ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad receivable and interest payable are both reflected in the books of accounts of the assessee and there is no income to the assessee as it is only a conduit to receive interest from VIWSCO to make payment to the lenders. It was submitted by the ld Counsel for the assessee that all the three organizations who have lent money to VIWSCO are govt. organizations and therefore, there was no requirement of making any TDS from the payments made to them and that since NTPC had ceased to be a govt. organization and became a public sector undertaking from the relevant previous year, the assessee was required to deduct tax at source while making the payment to NTPC. He submitted that in order to avoid unnecessary complications, assessee had requested VIWSCO to operate directly with the lenders and that for the relevant A.Y NTPC had already offered the interest receipt in its books of accounts. We find that the assessee had furnished a certificate from the Managing Director of NTPC to this effect. We find that the CIT (A) has taken note of amendment to section 201 and section 40(a)(ia) made by the Finance Act of 2012 w.e.f. 1.4.2013 to the effect that the said provisions would not apply, if the payee has taken the amount in computing its income and paid tax thereon. We find that the CIT (A) has observed that the proiviso that was inserted w.e.f. 1.4.2013 are to remedy unintended consequences and therefore, the same are treated as clarificatory in nature and retrospective in operation. Therefore, the CIT (A) has granted relief to the assessee.
9. At the time of hearing the ld Counsel for the assessee filed before us copies of the orders of the Tribunal at Agra in the case of Satish Chand Agarwal Vs JCIT, ITA No. 339/Agra/2013 and Rajeev Kumar Agarwal Vs ACIT, ITA No. 337/Agr/2013 both Page 7 of 9 ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad dated 29.05.2013, wherein after discussing the issue at length, the Tribunal has held that insertion of provisos are treated as declaratory and clarificatory in nature and therefore, it has retrospective effect from 1.4.2005 i.e. from the date from which sub clause (ia) of section 40(a)(ia) was inserted by the Finance Act, 2004. Respectfully following the said decision of the Tribunal on the legal issue about the retrospective effect of the amended provisions of section 40(a)(ia), we see no reason to interfere with the order of the CIT (A). Therefore, the Revenue's appeal is dismissed.,
10. In the result, appeal filed by the Revenue in ITA No.1806/Hyd/2013 is dismissed.
ITA No.1807/Hyd/2013 - A.Y 2010-1111. In the Revenue appeal for A.Y 2010-11, there is only one ground of appeal against the deletion of disallowance of interest payment made to NTPC by the AO u/s 40(a)(ia) of the Act. For the detailed reasons given in our order in Revenue's appeal in ITA No.1806/Hyd/2013 for A.Y 2009-10, this ground of the Revenue is also rejected.
12. In the result, both the Revenue appeals for A.Ys 2009-10 and 2010-11 are dismissed.
Order pronounced in the Open Court on 4th September, 2015.
Sd/- Sd/-
(B. Ramakotaiah) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 4th September, 2015.
Vnodan/sps
Page 8 of 9
ITA Nos 1806 and 1807 of 2013 AP Industrial Infrastructure Corpn Ltd Hyderabad Copy to:
1. Dy. Commissioner of Income Tax, Circle 1(1), 4th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad
2. M/s. A.P. Industrial Infrastructure Corporation Ltd, 5-9-58/B 6th Floor, Parisrama Bhavan, Basheerbagh, Hyderabad
3. CIT (A)-II Hyderabad
4. CIT-I Hyderabad
5. The DR, ITAT, Hyderabad
6. Guard File By Order Page 9 of 9