Income Tax Appellate Tribunal - Hyderabad
Acit, Circle-2(2), Hyd, Hyderabad vs Ta Infra Projects Ltd., Hyd, Hyderabad on 26 April, 2017
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ITA.No.1382, 1383/H/2015, C.Os.4&5/H/2016 & ITA.No.1284/H/2015
M/s. TA Infra Projects Ltd., Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
ITA.No.1382 & 1383/Hyd/2015
Assessment Years 2010-2011 & 2011-2012
The ACIT, Circle-2(2) vs. M/s. TA Infra Projects Ltd.,
Hyderabad. Hyderabad - 500 016.
PAN AABCT4110E
(Appellant) (Respondent)
Cross Objection Nos.04 & 05/Hyd/2016
Arising out of
ITA.No.1382 & 1383/Hyd/2015
Assessment Years 2010-2011 & 2011-2012
M/s. TA Infra Projects Ltd., The ACIT, Circle-2(2)
Hyderabad - 500 016. vs. Hyderabad.
PAN AABCT4110E
(Cross-Objector) (Respondent)
ITA.No.1284/Hyd/2015
Assessment Year 2011-2012
M/s. TA Infra Projects Ltd., The DCIT, Circle-2(3)
Hyderabad - 500 016. vs. Hyderabad.
PAN AABCT4110E
(Cross-Objector) (Respondent)
For Revenue : Shri S. Srinivasu
For Assessee : Shri Syed Tausif Ali
Date of Hearing : 18.04.2017
Date of Pronouncement : 26.04.2017
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ITA.No.1382, 1383/H/2015, C.Os.4&5/H/2016 & ITA.No.1284/H/2015
M/s. TA Infra Projects Ltd., Hyderabad.
ORDER
PER BENCH :
The main appeals are by Revenue against the order of CIT(A)-2, Hyderabad dated 11th September, 2015 and cross-objections/ Appeal by the assessee. Since issues are common, these appeals are heard together and are decided by this common order. We have heard the Ld. D.R. and Learned Counsel and perused the documents placed on record.
2. Briefly stated, assessee-company is engaged in manufacture of pipes for water-supply and sewerage schemes and also undertakes turnkey contracts in infrastructure sector. It filed return of income for the A.Y. 2010-2011 declaring total income of Rs.3,31,08,017 after claiming deduction under section 80IA of the Act. The A.O. has disallowed the claim of 80IA on the reason that assessee has not developed any infrastructure project and only undertaken work contracts. In an appeal, the Ld. CIT(A), following the ITAT order in earlier year allowed assessee's contentions. Hence, Revenue is aggrieved and preferred appeal raising a ground on deduction allowed under section 80IA(4). Assessee filed cross-objection in support of CIT(A) order.
2.1. For A.Y. 2011-2012, assessee filed return of income declaring total income of Rs.2,94,38,293. In the assessment made under section 143(3), A.O. taking a stand as in earlier year, disallowed claim of deduction under section 80IA to the extent of Rs.74,13,126. In addition to that A.O. also disallowed an amount of Rs.1,03,00,100 being business expenses made without deduction of tax, therefore, disallowable under section 40(a)(ia) of the Act. There are other disallowances also which Ld. CIT(A) has given relief to the assessee and 3 ITA.No.1382, 1383/H/2015, C.Os.4&5/H/2016 & ITA.No.1284/H/2015 M/s. TA Infra Projects Ltd., Hyderabad.
Revenue is not in appeal. Ld. CIT(A) allowed the deduction under Section 80IA(4) while confirming the disallowance u/s 40(a)(ia). Ld CIT(A) however held that the disallowed amount would be profit of the eligible units for deduction u/s 80IA.
3. Revenue is in appeal on the allowance of deduction u/s 80IA and decision of Ld. CIT(A) in allowing proportionate deduction on the amount disallowed u/s 40(a)(ia). Assessee is aggrieved on the confirmation of disallowance under section 40(a)(ia) by the CIT(A) and raised the grounds accordingly. The cross-objection is in support of claim with reference to section 80IA, which Ld. CIT(A) following the ITAT order has given relief to the assessee.
4. As can be seen from the above, the major issue which Revenue is contesting is with reference to deduction under section 80IA. At the outset, both the parties have agreed that this issue is covered in favour of the assessee by the orders of the ITAT in earlier year in assessee's own case, which the Ld. CIT(A) has followed. Consequently, we do not see any reason to interfere with the order of the CIT(A) as there are no change in facts and circumstances of the case for the years under appeal. However, while passing the order the A.O. has stated that certain contracts were not eligible for deduction under section 80IA. This which seems to have been quantified in an annexure was not placed on record. Learned Counsel for the Assessee has stated that the claim made was only with reference to the infrastructure projects and not on work contracts which the assessee itself has segregated and claimed. However, he has no objection if this aspect is verified by the A.O. Therefore, while agreeing with the order of the CIT(A) in granting the deduction under section 80IA, subject to verification of quantum of income on the eligible infrastructure projects, as per the directions of 4 ITA.No.1382, 1383/H/2015, C.Os.4&5/H/2016 & ITA.No.1284/H/2015 M/s. TA Infra Projects Ltd., Hyderabad.
the ITAT in earlier years. Revenue grounds are accordingly partly allowed.
5. Since the issue in A.Y. 2011-2012 is also similar, CIT(A) orders are confirmed, subject to verification of the eligible amount as directed above. Accordingly, Revenue grounds are considered as partly allowed.
6. Coming to the issue of disallowance of Rs.1,03,000 made by the A.O. under section 40(a)(ia) in AY 2011-12, it was the contention of the assessee that these amounts were compensations paid in respect of demolition of structures, trees and crops which were ready for harvesting, while laying the infrastructure pipelines as part of the project. The provisions of TDS are not applicable for a such payments made for compensation and expenditure is incurred towards commercial expediency. Ld. CIT(A) while not agreeing with the contention of the assessee on the disallowance, however accepted the alternate contention that the amount disallowed in the business computation would be eligible for deduction under section 80IA, following the principles laid down by the Hon'ble Bombay High Court in the case of Gem Plus Jewellery vs. CIT 330 ITR 175 and the decision of the Hyderabad Bench of ITAT in the case of M/s. Koya and Company Construction P. Ltd., Hyderabad vs. DCIT, Circle-2(1), Hyderabad (ITA.Nos.221/Hyd/2009 dated 22.03.2012). As noted above, Assessee is contesting disallowance under section 40(a)(ia) whereas Revenue is contesting the direction of the CIT in allowing proportionate deduction under section 80IA. As far as the assessee's ground is concerned the disallowance under section 40(a)(ia) is not warranted by virtue of the decision of the Special Bench in the case of M/s. Merlyin Shipping & Transports vs. Addl. CIT, Range-1, Visakhapatnam 136 ITD 23 (Visakhapatnam) (SB) as there are no outstanding payments at the end 5 ITA.No.1382, 1383/H/2015, C.Os.4&5/H/2016 & ITA.No.1284/H/2015 M/s. TA Infra Projects Ltd., Hyderabad.
of the year and the entire amount has been paid during the year which was claimed. Therefore, without going to the merits of the issue whether the amounts are covered by the provisions of TDS or not, respectfully following the decision of the Special Bench in the case of M/s. Merlyin Shipping & Transports (supra) and the directions of the A.P. High Court, we hereby allow assessee's contentions that disallowance under section 40(a)(ia) is not warranted. Consequently, the Revenue ground is not maintainable. However, Revenue ground is also not maintainable on the simple reason that Ld. CIT(A) followed the principles laid down by the Hon'ble Bombay High Court in this case that whatever is disallowed while computing the business income, the same would be eligible for deduction. Subsequently, the Board has also accepted the above principle and issued instructions in November, 2016 directing the A.O. to consider the amounts disallowed as profit / business income to be eligible for the purpose of computing deduction under various provisions. In view of this, grounds of Revenue on this issue are not maintainable.
7. The Cross-Objections are in respect of the order of the CIT(A) under section 80IA. Since the order of the CIT(A) is upheld the cross- objections become academic in nature.
8. In the result, Revenue's appeals are partly allowed and Appeal and cross-objections of the assessee are allowed.
Order pronounced in the open Court on 26.04.2017.
Sd/- Sd/-
(SMT. P. MADHAVI DEVI) (B. RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 26th April, 2017.
VBP/-
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ITA.No.1382, 1383/H/2015, C.Os.4&5/H/2016 & ITA.No.1284/H/2015 M/s. TA Infra Projects Ltd., Hyderabad.
Copy to
1. The ACIT, Circle-2(2), 8th Floor, 'B' Block, Room No.824, I.T. Towers, A.C. Guards, Hyderabad - 500 004.
2. M/s. TA Infra Projects Ltd., 6th Floor, Tirumala Heights, behind Shoppers Stop, Begumpet, Hyderabad - 500 016.
3. CIT(A)-2, Hyderabad.
4. Pr. CIT-2, Hyderabad.
5. D.R. ITAT "A" Bench, Hyderabad.
6. Guard File.