Income Tax Appellate Tribunal - Chennai
L & T Chennai - Tada Tollway Limited , ... vs Ito Corporate Ward 4(4) , Chennai on 29 March, 2019
आयकर अपील य अ धकरण, 'डी' यायपीठ, चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH: CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं ी इंटूर रामा राव, लेखा सद य के सम%
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.1790/Chny/2017
&
C.O No.137/Chny/2017
नधा&रण वष& /Assessment Year: 2014-15
Income Tax Officer, Vs. M/s. L & T Chennai - Tada
Corporate Ward-4(4), Tollway Ltd.,
Chennai. Post Box No.979,
TCTC Building, 1st Floor,
Mount Poonamallee Road,
Manapakkam,
Chennai - 600 089.
[PAN: AABCL 4774G]
(अपीलाथ)/Appellant) (*+यथ)/Respondent/Cross
Objector)
अपीलाथ) क, ओर से/ Appellant by : Shri M. Srinivasa Rao, CIT
*+यथ) क, ओर से /Respondent by : Shri N.V. Balaji, Advocate
सन
ु वाई क, तार ख/Date of Hearing : 06.03.2019
घोषणा क, तार ख /Date of pronouncement : 29.03.2019
आदे श / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue and the Cross Objection (CO) filed by the assessee-company directed against the common order of the learned Commissioner of Income Tax (Appeals)-8, Chennai ITA No.1790/Chny/2017 & CO.137/Chny/2017 (AY: 2014-15) :- 2 -:
(hereinafter called as 'CIT(A)') dated 23.05.2017 for the assessment years (AY) 2014-15.
2. Now we shall take the Revenue's appeal in ITA No.1790/Chny/2017.
3. The Revenue raised the following grounds of appeal in ITA No.1790/Chny/2017:
"1. The order of the CIT(A) is contrary to law and facts of the case.
2. The CIT(A) erred in allowing assessee's claim of deduction u/s 801A of the Incometax Act 1961.
2.1 It is submitted that from the AY 2014-15 it is mandatory that audit report in Form No. 1OCCB should be submitted electronically while filing the return of income.
2.2. The CIT(A) failed to note that the assessee company has filed Form No. 1OCCB only on 06.11.2015, i.e beyond the due date prescribed.
2.3 It is submitted that Rule 12(2) of the Incometax Rules mandates that where an assessee is required to furnish a report of audit specified u/s 801A/801B/8OIC the same shall be furnished electronically.
2.4 It is submitted that CBDT has also issued a notification No. 42/2013 dated 11.06.2013 amending the Incometax Rules which reads that where an assessee is required to furnish a report of audit u/s 801A/8OIC the same shall be furnished electronically. 2.5 It is submitted that the decision of the Apex Court in the case of M/s G.M Knitting Industries P Ltd reported in 376 ITR 456 is not applicable as electronic filing of audit report alongwith the return of income has been made mandaLory only with effect from the AY 2014-15.
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored." ITA No.1790/Chny/2017 & CO.137/Chny/2017 (AY: 2014-15)
:- 3 -:
4. The brief facts of the case are as under:
The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of development of infrastructure. The return of income for the AY 2014-15 was filed on 30.09.2014 disclosing Nil income. Against the said return of income, the assessment was completed by ITO, Ward-4(4), Chennai (hereinafter called as 'AO') vide order dated 30.12.2016 passed u/s. 143(3) of the Act at total income of Rs.38,24,23,617/-. The respondent- assessee was awarded contract of developing the expansion and construction of four lane to six lane in Chennai-Tada stretch on NH-5 in the pattern of build-operate-transfer basis. The appellant was given toll collection rights for a period of 15 years on the existing four lane road. During the period of construction the toll collection revenue collected by the assessee has been treated as capital receipt. The submissions of the respondent-assessee were extracted in the assessment order vide para 3.1. The sum and substance of the stand of the assessee-company is that the assessee-company was permitted to collect the toll on the existing road towards grant of the Government for funding of the project and the amount collected is deposited in escrow account and the amount so collected should only go to reduce the project cost and cannot be taxable income. The submissions have been duly considered by the AO and rejected the above contention citing that there was no stipulation in ITA No.1790/Chny/2017 & CO.137/Chny/2017 (AY: 2014-15) :- 4 -:
the construction agreement regarding grant by the Government towards the project cost. Further, the submissions that the toll fee was collected on the existing road is towards the viability gap funding is also rejected by AO, as it is not supported by the terms of the agreement. Alternative adjustment of the assessee is that it should be granted deduction u/s.
80IA of the Act on the profits derived from the toll fee on the ground that no audit report in the prescribed form filed i.e., in Form-10CCB along with return of income was filed.
5. Being aggrieved, an appeal was preferred before ld. CIT(A), who vide impugned order had directed the AO to allow deduction u/s. 80IA of the Act after considering the CBDT Circulars governing the issue and the Hon'ble Supreme Court decision in the case of CIT v. GM Knitting Industries (P.) Ltd. [2015] 376 ITR 476 (SC). Being aggrieved by the above decision by the ld. CIT(A), the Revenue is in appeal before in the present grounds of appeal.
6. It is contended that furnishing of audit report in prescribed form along with the return of income is mandatory therefore, the ld. CIT(A) ought not have held that filing of audit report is only directed in nature the ld. Departmental Representative also placed reliance on the CBDT Notification No.42/2013 dated 11.06.2013. It is further submitted that the decision of the Hon'ble Supreme Court in the case of GM Knitting ITA No.1790/Chny/2017 & CO.137/Chny/2017 (AY: 2014-15) :- 5 -:
Industries (P.) Ltd. (supra) is not applicable. On the other hand, the ld. Counsel for the assessee placed reliance on the orders of lower authorities.
7. We heard the rival submissions and perused the material on record. The admitted facts of the case are that the respondent-assessee was awarded the contract of expanding the NH from four lane to six lane at the stretch of Chennai-Tada, it entered into the concession agreement with NHAI. It is further stated that during the concession period, the assessee was entitled to collect the toll fees on existing four lane road and toll collection fee so collected should be adjusted towards viability gap funding. Then, the issue that arises for consideration is whether the toll fee so collected during the construction period should go to reduce the project cost or is eligible for deduction u/s. 80IA of the Act. From the perusal of the provisions of s. 80IA(4) of the Act, it is clear that in order to be entitled to deduction sub s. (4) of s. 80IA of the Act, an assessee should carry on developing or operating and maintaining any infrastructure facilities which fulfills all the following conditions namely: a) it is owned by a company registered in India or by consortium of such companies b) it is entered into an agreement with the Central Government or State Government or a local authority or any other statutory body for development or operating and maintaining a new infrastructure facility, it fulfills prescribed conditions and deriving income ITA No.1790/Chny/2017 & CO.137/Chny/2017 (AY: 2014-15) :- 6 -:
from such business is eligible to deduction and deriving income from eligible business is sine qua non to be eligible for deduction but, in the present case, admittedly, the assessee-company had not derived any profits from the activities of developing or operating and maintaining any infrastructure facilities. It is only in the process of developing infrastructure facilities. There is no nexus between the toll fee collected and the development of infrastructure facilities and therefore, the assessee company is not entitled to deduction u/s. 80IA(4) of the Act in respect of the toll fee collected during the concession period. The ld. CIT(A) had misdirected himself in directing the AO to allow the deduction u/s. 80IA of the Act. Therefore, we reverse the findings of ld. CIT(A) on this issue.
8. In the result, appeal filed by the Revenue is allowed. CO No.137/Chny/2017:
9. The assessee raised the following cross objections:
"1. The Assessing officer ought to have appreciated that the toll collected is not nature of revenue receipt. The Assessing officer ought to have appreciated that the Appellant does not have absolute right to receive and appropriate the toll collected in any manner and hence the same should not be a taxable income.
2. The Assessing officer ought to have appreciated that the fact that the toll collected is in nature of capital grant provided by NHAI and same should be adjusted against the cost of the asset as per the provisions of section 43(1) of the Act.
3. The Assessing officer has erred in not granting 40% of the Total Project Cost as in nature of viability gap funding (i.e grant) provided by the NHAI. The Assessing officer ought to have appreciated that the viability gap funding is to the extent of 40% of the Total project ITA No.1790/Chny/2017 & CO.137/Chny/2017 (AY: 2014-15) :- 7 -:
cost as per letter from NHAI dated 5th March 2015 which was furnished by the Company during the course of assessment proceedings and accordingly permitted the same to be deduct from the toll collected in computing the taxable profits.
4. Without prejudice to the above, the Assessing officer ought to have treated 40% of the Interest cost incurred (till 31.03.2014) in connection with the toll project as Viability Gap Funding.
5. Without prejudice to the above, where the toll collected are deemed to be in nature of income, the assessing officer ought to have allowed the total cost incurred by the appellant as deduction in computing the taxable profits.
6. Without prejudice to the above, the assessing officer ought o have appreciated that the strengthening cost and administrative and maintenance cost are revenue in nature and should be allowed as deduction in computing the taxable profits.
7. The assessing officer erred in denying the adjustment of the other income against the pre operative expenses. The Income from investments was inextricably linked with the process of setting up the project and such receipts should be treated as capital receipt and reduced from the cost of capital asset.
8. Your respondent prefers the Cross Objection on these grounds and such other grounds that may be adduced before the Hon'ble Tribunal before or at the time of hearing of this objection."
10. The CO is filed by the assessee-company contending that the toll fee collected by the assessee is eligible for deduction u/s. 80IA(4) of the Act, and the same should only go to reduce the cost of the project. This contention is not dealt by the ld. CIT(A), as he held that the assessee is eligible for deduction u/s. 80IA(4) of the Act in respect of the toll fee collected. In the Revenue appeal, we held that the toll fee collected during the concession period are not eligible deduction u/s. 80IA(4) of the Act in the absence of nexus between the development of infrastructure facilities and the toll fee collected. Therefore, we direct the ld. CIT(A) to ITA No.1790/Chny/2017 & CO.137/Chny/2017 (AY: 2014-15) :- 8 -:
deal with the alternative contentions of the assessee and accordingly, the cross objections filed by the assessee are partly allowed. Hence, the CO filed by the assessee is partly allowed.
11. In the result, appeal filed by the Revenue is partly allowed and the CO filed by the assessee is partly allowed.
Order pronounced on the 29th day of March, 2019 in Chennai.
Sd/- Sd/-
(एन.आर.एस. गणेशन) (इंटूर रामा राव)
(N.R.S. GANESAN) (INTURI RAMA RAO)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER
चे नई/Chennai, 2दनांक/Dated: 29th March, 2019. EDN, Sr. P.S आदे श क, * त3ल4प अ5े4षत/Copy to:
1. अपीलाथ)/Appellant 2. *+यथ)/Respondent 3. आयकर आयु6त (अपील)/CIT(A) 4. आयकर आयु6त/CIT 5. 4वभागीय * त न ध/DR 6. गाड& फाईल/GF