Income Tax Appellate Tribunal - Delhi
Jaypee Infratech Ltd., Noida vs Assessee on 6 September, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'D' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
AND
SH.L.P.SAHU, ACCOUNTANT MEMBER
I.T.A .No.-414/Del/2015
(ASSESSMENT YEAR-2011-12)
M/s Jaypee Infratech Ltd., Vs ACIT,
Sector-128, Noida. Circle-2, Noida
PAN-AABCJ9042R
(APPELLANT) (RESPONDENT)
Assessee by Sh. Anil Chopra, CA &
Sh. Vinod Garg, CA
Revenue by Sulekha Verma, CIT DR
Date of Hearing 19.07.2016
Date of Pronouncement 06.09.2016
ORDER
PER DIVA SINGH, JM
The present appeal has been filed by the assessee assailing the correctness of the order dated 12.01.2015 of CIT(A)-1, Noida pertaining to 2011
-12 assessment year on the following grounds:-
1. "That the Learned Assessing Officer [Ld. AO] has erred on facts and in law in assessing the appellant on a total income of Rs.
18,55,39,36.310/- against the total income of Rs. Nil as returned and the Learned CIT (Appeals) [Ld. CIT(A)] has erred in sustaining the same.
2. That the assessment order involved is unlawful and against principles of natural justice without providing sufficient and proper lawful opportunity to the appellant and Ld. CIT(A) has erred in riot quashing the same.
3. That the unlawful assessment as made and order of Ld. CIT(A) are based on erroneous views, non appreciation of facts and law on suspicion and conjectures contrary to binding case laws in the appellant's favour, without proper consideration and rebuttal of filings and submissions on record.
I.T.A .No.-414/Del/2015
4. That the Ld. CIT(A) has erred in not admitting the additional evidence as filed by the appellant arid riot considering the same for grant of relief prayed for by the appellant.
OTHER INCOME
5. That the Ld. AO has erred on facts and in law in assessing a sum of Rs.19,57,55,569/- as income from other sources rather than as business income. The said amount is assessable as business income as an intrinsic part of income from the infrastructure facility project. The Ld. CIT(A) has erred in upholding the view of the Ld. AO.
6. That the Ld, AO has erred on facts and in law in not assessing the said other income of Rs. 19,92,85,259/- as business income derived from the eligible infrastructure facility and in not allowing deduction u/s 80IA in respect of the same. The Ld. CIT(A) has erred in upholding the view of the Ld. AO.
7. That the Ld. AO has erred on facts and in law in riot netting the interest income on FDRs of Rs. 14,50,06,637/- in other income against the substantially higher amount of interest paid having a nexus and common business with the said interest earned. The said interest is derived from the business of the infrastructure undertaking and is eligible for deduction u/s 80IA. The Ld. CIT(A) has erred in upholding the view of the Ld. AO.
8. That the Ld. AO has erred on facts and in law in assessing a sum of Rs. 75.75.63,278/- being income from FDRs as income from other sources. The Ld. AO has erred in not netting the interest income on FDRs against the substantially higher interest paid having nexus and common business with the said interest earned. The said interest has been netted against interest paid under capital work in progress as per AS-16. In any case, the said income is also derived from infrastructure facility and its lousiness income eligible for deduction u/s 80IA as an intrinsic part of the business of the infrastructure facility. The Ld. CIT(A) has erred in upholding the view of the Ld. AO.
DISALLWOANCE OF DEDUCTION U/S 80IA
9. That the Ld. AO has erred on facts and in law in riot allowing deduction u/s 80IA on the entire business income earned by the appellant, which has been assessed at Rs.17,92,96,91,790/- as the same has been derived from the eligible infrastructure facility entitled to 100% deduction of income u/s 80IA. The Ld. CIT(A) has erred in upholding the view of the Ld. AO.
10. That the Ld. AO has erred in not allowing deduction as claimed u/s 80IA. The appellant is eligible for deduction of its entire income u/s 80IA in context of its alternate claims u/s 80IA(4)(i) explanation (a) being road including toll road or alternately under explanation (b) as a highway project where housing or other activities are an integral part of a highway project as read with section 80IA(6). The appellant's claims in this matter are without prejudice to each other. The Ld. CIT(A) has erred in upholding the view of the Ld. AO. Page 2 of 95
I.T.A .No.-414/Del/2015
11.That a provision should be interpreted in such a mariner so that it subserves the purpose for which it is enacted and does not frustrate such purpose. Moreover, the beneficial provisions for tax deductions such as section 80IA to promote priority sectors are to be liberally construed: and there too even if two views are reasonably possible then the view favouring the appellant is to be adopted. As such also, the appellant is clearly entitled to deduction u/s 80IA of income derived from infrastructure facility.
12.That, inter alia, the appellant is entitled to deduction u/s 80IA(4) on the facts and aw involved as a developer of the infrastructure facility even if it is riot operating and maintaining the same in view of direct decisions in its favour including inter alia reported in ACIT v. Bharat Udyog Ltd. 118 ITD 336 which follows the decision of the Hon'ble Apex Court in K. P Verghese v. ITO 131 ITR 597 (SC) and as in TRG Industries (P) Ltd. v. DCIT (2013) 35 Taxrnann.com 253 (Amritsar - Tribunal).
DISALLOWANCE OF EXPENSES U/S 40(A)(IA)
13.That the Ld. AO has erred on facts arid in law in making a disallowance u/s 40(a)(ia) for impugned non deduction from interest and rent said to be paid of Yamuna Expressway Industrial Development Authority (YEIDA). The said disallowance has erroneously been made at a total amount of Rs. 56,34,34,816/-, whereas the correct total amount is Rs 55,93,52,816/- as seen from his order itself.
The Ld. AO has erred in making the said disallowance of alleged interest as it is not debited to P&L Account or claimed as expense but debited as current asset to Project Under Development. Similarly, out of lease rent, Rs. 2,01,282/- is debited to capital work in progress, Rs. 2,42,132/- to Project Under Development and only Rs. 10,149/- has been claimed as expense.
14.That moreover, the Ld. AO has erred in making the said disallowance without verifying or holding that the tax involved has not been paid by the payee. As such too, the said disallowance u/s 40(a)(ia) is liable to be deleted.
DISALLOWNACE OF DEPRECIATION
15.That the Ld. AO has erred on facts and in law in disallowing depreciation of Rs. 6,08.09,703/- The depreciation is on assets owned by the appellant for purposes of business on which much income has been assessed. ALL provisions of section 32 and relevant provisions of the Act are complied. The depreciation is admissible in toto. The Ld. CIT(A) has erred in upholding the view of the Ld.AO.
GENERAL
16.That the Grounds of Appeal, as herein are without prejudice to each other.
17.That the assessment as made and the order of the Ld.CIT(A) are against law and facts of the case involved.
Page 3 of 95
I.T.A .No.-414/Del/2015
18.That the appellant craves leave to add, amend, modify and/or forgo any of the grounds of appeal."
2. Ld. AR inviting attention to the grounds raised submitted that primarily the assessee's main prayer is addressed vide Ground Nos. 9 to 12 i.e. namely that the assessee's claim of deduction is covered under clause (a) of Explanation to section 80IA(4)(i). Only in the eventuality if the said prayer is held to be not allowable, then without prejudice to the main argument the assessee would be seeking adjudication on the alternate prayer that the deduction is allowable under Explanation (b) to section 80IA(4) and thus be governed by the provisions of section 80IA(6). In the eventuality it was submitted that the assessee fails in its main prayer and the allowability of the assessee's claim is being considered in the alternate ground then the assessee's petition for seeking admission of additional evidence would also need to be addressed. The said prayer it was submitted is addressed by the Ground No. 4 in the present proceedings.
2.1. Addressing the grounds it was submitted Ground No. 1 may be treated as a general ground and it addresses the entire addition and may not require any specific adjudication independently. Ground No. 2 it was submitted addresses lack of opportunity and the assessee would not want to press the said ground. Ground No. 3 it was submitted may be taken as an argument on the issues agitated in the subsequent grounds.
2.2. By way of Ground No. 5 and 6 it was submitted the assessee prays that the business income brought to tax as "income from other sources" would be on facts eligible for deduction under section 80IA(4). By Ground No. 7 benefit Page 4 of 95 I.T.A .No.-414/Del/2015 of netting is prayed for. Vide Ground No. 8, FDR's maintained in the course of the business it is being argued is business income and not income from other sources as it is income derived from infrastructure facility. It was his submission that the assessee would be arguing that there is nexus between interest income paid and earned. Ground No.13 it was submitted addresses the grievance against the disallowance made u/s 40(a)(ia). On this issue decision of the Jurisdictional High Court which being the Allahabad High Court it was submitted is in assesse's favour. Alternately even otherwise addressing Ground No. 14 it was submitted reliance is placed on the decision of the Hon'ble Apex Court in the case of the Hindustan Coca-Cola Beverage P. Ltd. vs CIT [2007] 293 ITR 226 (SC). By Ground No. 15 it was submitted the assessee prays for deletion of the addition made by way of a disallowance of depreciation on assets which are owned by the assessee and used for the purposes of business of the assessee. It was submitted that depreciation on the infrastructural assets has not been claimed as they have been duly capitalized. Ground Nos. 16 to 18 it was summed up are general grounds. Reliance in support of the grounds raised was placed on the written submissions filed separately for the main issues addressed in Ground Nos.9 to 12 and also another separate written submissions on the remaining grounds supported by paper Books consisting of case laws etc. relied upon addressing the arguments on facts and law.
3. Addressing first the main issue addressed vide Ground Nos.9 to 12, reliance was placed on the Synopsis and the written submissions filed. Inviting Page 5 of 95 I.T.A .No.-414/Del/2015 attention to the same it was submitted that the order of the ITAT dated 13.04.2015 in assessee's own case in ITA No. 3339/Del/2014 pertaining to 2009-10 assessment year fully addressed the issues in the present appeal. The issue it was submitted was fully covered in assessee's favour as considering the very same provisions for the very same activity in the initial year itself the ITAT has allowed assessee's claim thus following the precedent deduction is allowable to the assessee in terms of clause (a) of Explanation to section 80IA(4). Copy of the said order it was submitted is already available on record. 3.1. The above grounds it was submitted have been raised in the case of an assessee where the material facts continue to remain the same. Reading from the synopsis/written submissions it was argued that the assessee company which is incorporated under the Companies Act, 1956 was formed as a Special Purpose Vehicle (SPV) on 05/04/2007 for developing, operating and maintaining the toll road between Noida and Agra along with Service Road and associated structures with rights allotted to it to collect toll during the Concession period (which was fixed as 36 years) alongwith rights for sub lease/ development of land as integral part of the Yamuna Expressway Project. 3.1.1. It was submitted that Taj Expressway Industrial Development Authority (TEA) (constituted by Government of Uttar Pradesh (GoUP) vide Notification No. 697/77-4-2001-3(N) /2001 dated 24.04.2001 under U.P. Industrial Area Development Act, 1976) invited offers from interested parties of National / International Stature. The offers were invited by TEA on 14.05.2001 for Page 6 of 95 I.T.A .No.-414/Del/2015 development, operation and maintenance of 6 lane access controlled Expressway.
3.1.2. M/s Jaiprakash Associates Ltd. (formerly known as Jaiprakash Industries Ltd.) it was submitted was declared the successful Bidder. Reading from the synopsis filed it was submitted that these are admitted facts and are being addressed so as to demonstrate that the assessee scrupulously adhering to the requirements of the Agreement performed its end of the bargain and delivered a world class Expressway which is the showcase of the developmental activity of the country. The assessee on account of performing the tasks undertaken is entitled for claiming the statutory deduction u/s 80IA(4) Explanation (a) of the Act. It was submitted that in the performance of this herculean task meeting the stringent requirements of quality and deliverability it would not be out of place to state that the engineering developmental feat is a technological and developmental achievement in its own rights which has been subjected to rigorous and intense judicial scrutiny, media glare etc. and has faced various investigations, public interest litigation, Enquiry etc. where grant, purpose, aim and object of each and every aspect of this activity has been repeatedly enquired into at various levels right upto the level of the Apex Court. These intense legal and socio-economic scrutiny it was submitted is not withstanding the economic downturn and financial crunch experienced in the economy world over which was magnified in the case of the assessee due to its intense exposure to finance intensive activity. It was submitted by the ld.AR that he is not indulging in self praise and is only endeavouring to address the Page 7 of 95 I.T.A .No.-414/Del/2015 realities that despite all these unplanned economic hurdles; litigation /and enquiries faced from all corners has delivered a world class toll-road despite all odds still adhering to the quality of work agreed upon by fulfilling the requirements of the legislative promise which has been held out to the assessee in terms of clause (a) of Explanation to section 80IA(4) and even after facing the brunt of the order of the tax authorities u/s 263 the assessee finds its confidence shaken when despite the fact that this is not the initial year the tax authorities still want to depart from the accepted position. 3.1.3. Reverting to the facts of the case it was submitted that the State Government, in exercise of the power as vested under section 3 of the said Act, constituted, just prior to launching of the Project, an Implementing Authority, namely, "Taj Expressway Industrial Development Authority" (in Short TEA). The length of the expressway connecting Noida with Agra was about 160 Kms and it was to pass through a virgin area along the Yamuna River. The integrated land and toll road developmental activity it was submitted was visualized and contemplated would bring the benefits of growth and development by this infrastructural facility to this area along the Yamuna River. For the said purposes it was granted rights for land development of 25 million sq. mtrs of land on 90 years lease along the proposed 100 meters wide Expressway for creating commercial, amusement, industrial, institutional and residential development to the SPV Company. TEA accordingly it was submitted provided the "land for development" along the Expressway at five or more locations of which one location was in Noida or Greater Noida Page 8 of 95 I.T.A .No.-414/Del/2015 with an area of 5 million sq. mtrs. The aforesaid land for development it was submitted was in addition to the land for construction of Expressway and was an intrinsic part of the infrastructure facility project. 3.1.4. An Assignment Agreement it was submitted was executed amongst JAL, JIL and TEA for assignment of the Concession Agreement in the name of Jaypee Infratech Limited (JIL).
3.1.5. The main Objects of Jaypee Infratech Limited it was submitted were to implement all the objects of the Concession Agreement dated 7/2/2003 between Jaiprakash Industries Ltd. (now Jaiprakash Associates Ltd.) and Taj Expressway Industrial Development Authority (TEA). Elaborating the Project Details it was submitted that the concept of the Project Taj Expressway was an outcome of the Policy decision of the Government of U.P. under the statute called U.P. Industrial Area Development Act, 1976 (UP. Act No of 1976). These facts have been fully examined and considered by the Inquiry Commission headed by Shri. Sidheshwar Narayan, Justice (Retired) High Court Patna and Calcutta, arid TEA, M/s JAL incorporated a Special Purpose Vehicle (SPV) viz. Jaypee Infratech Limited (as "JIL") for development, operation and maintenance of 6 lane access controlled Expressway.
3.1.6. It was submitted that consideration for the Infrastructure Facility was primarily "land for development" as it was decided that Concessionaire (JIL) was entitled to collect and retain the Fee and toll from the users of the Expressway for concession period of 36 years and also Page 9 of 95 I.T.A .No.-414/Del/2015 retain the amounts from rights to further lease out the developed/undeveloped land (at five or more locations with an area of 5 million sq. mtrs. per land parcel) to subleases/end-user. It was agreed that the toll fee to be charged from the customers was not to exceed the fee as may have been notified by GOUP (Government of State of UP). "Land for Development" accordingly it was submitted is a Concession like the toll fee since the toll fee alone it was well understood would not have been able to ensure positive return on equity on the Project.
3.1.7. Elaborating the point made earlier that the issue has already been subjected to intense judicial scrutiny by way of litigation in a PIL thrust upon the assessee where again referring to admitted facts on record it was submitted a Public Interest Litigation was filed alleging that land has been transferred for inadequate consideration etc. of acquisition of land and despite the various kinds of allegations made against the assessee and the state etc. amongst others the Project was cleared by the Inquiry Commission Report and in the PIL also the issue was decided in assessee's favour and in favour of the State Government of U. P. The Apex Court it was submitted in the said case of Nand Kishore Gupta & Ors V. State of UP & Others held that the Expressway is a work of immense public importance and the creation of land parcels would give impetus to the industrial development of the State creating more jobs and helping the economy and thereby helping the general public. 3.1.8. The Inquiry commission it was submitted was appointed by the Governor of UP by a Notification No. 1889/77-4-2004-10N/2004, Lucknow Page 10 of 95 I.T.A .No.-414/Del/2015 dated June 22, 2004 to ascertain the facts and address the position of transparency of the Project. Relying on the findings of the Commission of Inquiry extracted in the synopsis filed at page 9 it was submitted that the Commission of Inquiry under the chairmanship of Shri Sidheshwar Narayan, Justice (Retired) High Court Patna and Calcutta in unambiguous terms concluded that "Considering the capital cost, gestation period and the uncertainties involved in the revenue from toll collection, inflation etc, it was necessary to strengthen the economic viability of the Project by some mechanism and, accordingly, it was decided to provide 2500 hectares of Land for Development to the successful Bidder along the Expressway". It was submitted that the Commission further held that: "The Taj Expressway Project being a land mark event in the Industrial development of State of U.P. is of immense public utility and also in the national interest". 3.1.9. Techno Economic Feasibility Report (TEFR) it was submitted as submitted by the assessee to YEA further addresses the fact that the toll fee has a 'Negative' Net Present Value (NPV) of the toll fee during the entire concession period.
3.2. In the said background it was submitted that considering the very same facts and the very same activity the Assessing Officer in 2009-10 Assessment year by an order dt. 30.12.2011 passed u/s 143 (3) allowed deduction claimed u/s 80IA. The said year it was submitted was the initial year. In the next assessment year, it was submitted a different Assessing Officer in 2010- 11 assessment year again assessed the income of the assessee by an order Page 11 of 95 I.T.A .No.-414/Del/2015 passed u/s 143 (3) and allowed the deduction claimed u/s 80IA. Thus where in the two immediately preceding assessment year, the revenue has accepted the claim of deduction by orders passed by two different Assessing Officers that the assessee's activity comes under the umbrella available under section 80IA(4) Explanation (a) thus the occasion to vary the stand in the year under consideration it was submitted does not arise. Addressing the factual history it was submitted that for the first time in 2009- 10 assessment year the order dated 30.12.2011 u/s 143(3) was set aside by the CIT, Noida by an order u/s 263 dated 30.03.2014 holding that there has been non-application of mind by the AO as the order was held to be based on erroneous views and non-appreciation of facts. The said order it was submitted has been quashed by the ITAT. Relying upon the order dated 13.04.2015 in ITA No. 3339/Del/2014 it was submitted that the ITAT examined these issues in detail and by a detailed order came to the conclusion that the benefit granted by the legislature vide clause (a) of Explanation to section 801A(4) of the act cannot be denied to the assessee. Relying on the said order it was submitted that various decisions of the different Courts had been taken into consideration by the ITAT and the arguments on the principles of Statutory Interpretation which would apply have all been considered and discussed at length in the said order in order to arrive at a conclusion to quash the order u/s 263.
3.3. Accordingly on the basis of these facts available on record it was his submission that the issue is a fully covered issue as far as the assessee is Page 12 of 95 I.T.A .No.-414/Del/2015 concerned which is why attention right at the outset has been invited to Ground Nos. 9 to 12 as the assessee is confident that the assessee need not argue the grounds relatable to the alternate prayer addressing section 80IA(6) and consequently to seek admission of additional evidence which has been denied by the CIT(A).
3.4. It was his submission that the activity of the assessee revolves around a "toll road" and it is the initial year which has to be seen in regard to the deduction available under section 80IA. The departmental argument that the deduction was to be denied to the assessee because the toll revenues had not been generated it was argued is incorrect. Had this been the intention of the Legislature then the specific words developing or maintaining and operating or developing, operating and maintaining would not have been necessitated and only the word operating would have been used. It was his submission that the specific scheme and activity has been looked into by the judicial inquiry commission constituted under the Chairmanship of retired Justice Sh. Sidheshwar Narayan and it was also a subject matter of litigation by a PIL filed before the Hon'ble Apex Court and in the said decision of Nand Kishore Gupta and others vs State of UP and others. Considering the specific terms and conditions of the integrated project.
3.5. It was his submission that the legislature has made a distinction between "a highway" and "a toll road" and the modalities for both would differ whereas in a highway the payment for construction may come in installments. In a toll road on the other hand the revenues would only be generated when it Page 13 of 95 I.T.A .No.-414/Del/2015 is operational and fully constructed. It was his submission that the amounts of funds required to construct the quality of toll road contemplated and visualized was admittedly monumental and accordingly instead of making cash available to the assessee company i.e. the company which was formed as a Special Purpose Vehicle (as "SPV")for developing operating and maintaining the six lane toll road between Noida and Agra along with service roads and associated structures was granted 5 parcels of land thereby allowing the assessee to develop and utilise the profits so generated from the development of these lands for utilising in the construction of the Taj Expressway. It was his submission that it is nobody's case that the Expressway has not been built. The Expressway has been built meeting the high standards required. It was his submission that land for development was the concession as admittedly the toll-fee alone could not be visualized as being capable to ensure positive return on equity on the project. Attention was invited to section 80IA subsection (1) and (2)thereof. Inviting attention to the proviso to subsection (2) of section 80IA it was submitted that 80IA(2) is subservient to 80IA(4) and is to be seen in the context of section 80IA(4). Referring to the said sub-section it was submitted that the Statute contemplated the situations realistically and made the deduction available to any enterprise carrying on the business of developing; or operating and maintaining; or developing, operating and maintaining any infrastructure facility. Relying on Iswar Singh Bindra 1968 AIR 1450 (SC) it was submitted that the word "and" had to be read as "or". Referring to the written Page 14 of 95 I.T.A .No.-414/Del/2015 submissions placed on record it was submitted that the Hon'ble Court held in the context of interpretation of statute that in certain cases the word 'and' had to be read as 'or'. The Hon'ble Apex Court quoted from Stroud's Judicial Dictionary, 3rd ED to state that sometime 'and' by force of contents, reads as 'or'. They also quoted Maxwell on Interpretation of statue, 11th ED to hold that to carry out the intention of the legislature, it is occasionally found necessary to read 'or' or 'and' one for the other. This view of the Apex Court it was submitted has been once again reiterated by the Hon'ble Supreme Court in a recent decision in the case of Spentex Industries Ltd. v. Commissioner of Central Excise, 920150 62 taxmann.com 101 (SC).
3.5.1. The CIT, Orissa vs Ganganam Chapolia [1976] 103 ITR 613 (ORI) "F" Bench decision was also relied upon so as to submit that it has been held by the Court that the word 'and' should be construed as 'or' where the context so requires.
3.5.2. Accordingly it was submitted that the words "develops and begins to operate................" In section 80IA(2) in the context of section 80IA(4) the word and in 80IA(2) has to be read as "and/or" in the context of 80IA(4) in the alternative to be or to be read as "or" so as to avoid unworkable, unreasonable or absurd interpretation which is not reconcilable with the rest of the statute/section 80IA(4). It was submitted that only when "and" in 80IA(2) is read as "or" that the provisions of section 80IA(4)(i) and 80IA(2) would be in harmony, workable and be in accordance with the text, context and object of the provisions. Accordingly it was his Page 15 of 95 I.T.A .No.-414/Del/2015 submission that the legislature does not use superfluous words and by contemplating both situations that is develops or operates the assessee is entitled to the deduction. The mere fact that the assessee is developing itself entitles the assessee to the deduction and the Revenue is not correct in its insistence upon the argument that the deduction is available only if the toll fee is collected and because the toll-fee is not collected in the year under consideration the benefit of the deduction is not available. It was also his submission that if the argument of the Revenue was to be accepted then there was no occasion for the legislature to include the word develops. 3.5.3. The said reasoning it was submitted was not based only on the arguments advanced in the present proceedings but is also based on the finding arrived at by the ITAT in the initial year itself i.e. 2009-10 assessment year which is why the assessee has taken the position that the issue is covered in its favour.
3.6. Inviting further attention to sub-section section (4) of section 80IA and Explanation (a) and (b) thereunder it was his submission that infrastructure facility has been defined as a road including toll road, a bridge or a rail system etc under clause (a); and in Explanation (b) it has been defined as a highway project including housing or other activities an integral part of the highway project. In the facts of the present case it was his submission that right from the judgement of the Apex Court in the PIL launched against the assessee up to the ITAT it has been held at all forums that the assessee is engaged in an integrated toll project. Referring to the facts it was submitted Page 16 of 95 I.T.A .No.-414/Del/2015 that the overall development in the area is directly responsible due to the direct activities of the assessee and assessee alone and this is an admitted fact on record. Accordingly the Revenue cannot be allowed to defeat the provisions by misreading and misapplying the provisions to the facts of the assessee who acting on the promise held out by the Legislature to the assessee undertook this herculean activity to develop in the barren undeveloped land an Expressway competing with the highest standards in the world. The tax authorities it was submitted in these circumstances are not justified in attempting to withdraw the legislative benefit available to the assessee on its whims and misreading the provisions and discarding precedent available. It was his submission that without any exaggeration and with no desire to seek sympathy he would only like to address the bare facts which are common knowledge that in this task which the assessee has undertaken and is carrying on, the assessee has faced not only various litigations and the departmental actions and various unsavoury criticisms but has also hit doldrums on account of the peculiar economic cycle of the downturn in the overall world economic cycle in the industry has faced various other situations which the assessee when it undertook the task never visualized would be visited upon it. It was submitted that the assessee not willing to hide behind excuses and changed realities has full on tackled the impediments and taken them in its stride to ensure that its work ethics is not compromised and has done and continues to follow through. However in these facts to still be subjected to the concerted departmental actions to misread the provisions of Page 17 of 95 I.T.A .No.-414/Del/2015 the Act and that too not in the first year but in the subsequent years it was submitted shakes the confidence of the assessee as it is an act of hitting below the belt. The issue it was submitted has already been examined by the ITAT and the order quashing the Revisional proceedings was heavily relied upon; reliance was also placed upon the two consecutive assessment orders u/s 143(3) passed by two separate Assessing Officer; it was submitted that the said authorities have already considered the relevant provisions moreover where all these issues have been again discussed at length and argued by both the sides before the ITAT. It was submitted that when these facts are coupled with the various decisions which have been considered by the ITAT and would be referred to again herein also which have also been considered by the ITAT, it was his submission that the claim of the assessee has to be allowed. Heavy reliance was placed upon the said decision on the basis of which it was argued that the issue is covered in assessee's favour. However, the Ld AR was required to specifically address the impugned order and specifically point out the infirmities which are being challenged in the present proceedings. 3.7. In response to the same, it was his submission that the CIT(A) in appeal has largely repeated what the Assessing Officer has observed. It was also his submission that the Ld. CIT(A) did not have the benefit of the order of the ITAT as reference to the specific dates of the respective orders it was submitted would show that the order of the ITAT came subsequently. 3.7.1. Referring to the impugned order it was his submission that after reproducing the facts as found by the Assessing Officer, the submissions of the Page 18 of 95 I.T.A .No.-414/Del/2015 assessee have been reproduced verbatim by the CIT(A) and thereafter from pages 60 onwards, the CIT(A) has come to the conclusion wherein after reproducing the specific section, he has referred to the fact that the assessee has admitted that toll road was inaugurated on 09.08.2012 an event occurring in 2013-14 AY. Accordingly without addressing the decisions relied upon and the arguments on the provisions of the Act advanced by the assessee it was submitted the CIT(A) he has proceeded to deny the relief claimed solely relying on this fact and misreading the words used by the Statute, it was submitted that the CIT(A) has concurred with the Assessing Officer to hold that the exemption claimed can be allowed only by invoking the provisions of section 80IA(6) without addressing the arguments advanced. 3.7.2. It was submitted that thereafter referring to the said fact, a discussion on how the AO has proceeded and without caring to address the facts, arguments and decisions relied upon on behalf of the assessee which though have been reproduced by him he has proceeded to dismiss the assessee's claim and also dismissed the prayer for moving additional evidence relying on section 119 subsection (c) of the Income Tax Act 1961 ignoring the fact that Rule 46A of the Income Tax Rules permit and contemplate situations where assessee can in certain situation petition for fresh evidence. The need for filing fresh evidences it was submitted arose as by way of abundant caution the assessee without prejudice to the main claim raised the alternate ground for which fresh evidence was necessary. However, the CIT(A) dismissed the main Page 19 of 95 I.T.A .No.-414/Del/2015 ground alongwith the alternate without prejudice ground raised by way of abundant caution holding as under:-
"Taking all the above into consideration and keeping in view the facts of the case and the relevant provisions of the law, I am convinced that appellant's claim for deduction u/s 80IA in respect of various heads of income declared in the return of income are not covered by the provisions contained in sections 80IA(4) as well as 80IA(6). Accordingly, AO's action in rejecting the claim for such deduction is upheld."
3.8. Addressing the remaining Grounds, attention was invited to the separate written submissions addressing Grounds Nos. 5, 6 and 7. Referring to the facts and the decisions relied upon as set out at pages 2 to 4 of the submissions in para is 1.1 to 1.7 the Ld. AR submitted that the following income of Rs.19,92,85,259/- has been treated as "other income" not entitled for deduction u/s 80IA by the tax authorities:-
1. Interest Rs.14,50,06,637
2. Profit on account of Currency Rs.35,29,690 Fluctuations
3. Other income Rs.5,07,48,932 Total Rs.19,92,85,259 3.8.1. It was submitted by the Ld.AR that the tax authorities have ignored the fact that the assessee is formed as a single object company. The income from sale / development of land and the other income in its P&L account is an integral part of the "business income" of the infrastructure facility and being business income it is eligible for deduction under section 80IA.
It was submitted that admittedly the assessee is carrying on infrastructure development. In the facts of the case, Interest income on facts it was submitted has both been paid and received and is related only to the infrastructure development business and has a nexus with the business. The Page 20 of 95 I.T.A .No.-414/Del/2015 source of FDR it was submitted is the real estate development as part of the assessee's infrastructure facility and the same are part of overall financial assets used for financial facilities for the infrastructure facility. Hence, Interest income earned on the said FDR it was submitted is income derived from infrastructure facility business. Accordingly as there is clear nexus the interest paid has to be netted off from the interest earned as both have been used for the common business and common objective. For netting the assessee relies on CIT v. Eastern Tar P. Ltd.301 ITR 427 (JHAR); CIT v. Pawan Kumar Jain 298 ITR 443 (DEL); CIT v Nectar Life Sciences Ltd, 203 Taxmann 318 (DEL); CIT v. Shahi Export House 195 Taxman 163 (DEL); CIT Vs Lok Holdings 308 ITR 356 (BOM); and ACG Associated Capsules (P) Ltd. v. CIT 343 ITR 89 (SC). 3.8.2. The FDRs it was submitted were part of total current assets which were sourced from real estate business and NCDs as part of working capital. It was submitted that they were charged as current asset to banks for financing facility and the income was used for the business of income from the integrated infrastructure facility and its business. It was submitted that no such disallowance was made in 2009-10 and 2010-11 AY and even in 2009-10 AY after giving the appeal effect to the order of the ITAT, no such disallowance was made by the AO and the amount has been fully allowed as business income by the AO as deduction u/s 80IA. 3.8.3. Addressing foreign currency fluctuation, it was submitted that the same is in the course of business of the infrastructure facility relating to amounts received from business constituents and should be assessed as business Page 21 of 95 I.T.A .No.-414/Del/2015 income. Reliance was placed on various decisions of Courts including CIT Vs Racha Udyog 230 CTR 72 (BOM) wherein it been held considering the decision of the Apex Court in CIT vs Liberty India that gains from exchange rate fluctuation are to be included in total turnover of assessee for computing deduction u/s 80HHC. In the facts of the present case also it was submitted the income has resulted in the course of the business of infrastructure facility and as such the income is derived from the business of eligible undertaking and is exempt u/s 80IA. Reliance was also placed on CIT v. Amber Exports (India), 326 ITR 455 (BOM); refer Raghunath Exports (P.) Ltd, v. CIT 11 taxmann.com 273 (Calcutta).
3.8.4. The Misc. Income it was submitted included income from sale of scrap/earth material and earnest money forfeited and forms a part of the main business income of the assessee.
3.8.5. Relying on the written submissions it was submitted that Ground No. 8 specifically addresses the interest income on the basis of which it was submitted that the said income is derived from infrastructure facility and was business income and not income from other sources. The assessee it was submitted is a SPV constituted to carry on the business of eligible undertaking i.e. infrastructure facility and the FDRs and interest thereon is an intrinsic part of the said business.
3.8.6. The present case it was submitted is not a case where business has not commenced. There is nexus between interest income paid and earned. Various banks/financial institutions have sanctioned loans for the infrastructure Page 22 of 95 I.T.A .No.-414/Del/2015 facility which were kept in bank temporarily and interest is earned thereon. Similarly, the proceeds from Initial Public Offer (IPO) were kept in bank temporarily and interest is earned thereon. The same source of funds (FDRs) it was submitted is used for development of infrastructure facility. The assessee has also charged the FDRs to banks for obtaining finance for the infrastructure facilities. Making of FDRs for working capital management was in the course of the business. It was submitted that the capitalization in the two respective parts of Expressway and project under development is based on the related funds as per CA certificate at PB page 68. The assessee it was submitted has adjusted the said interest income against the interest expenses paid on Term loans/NCDs and others. The expressway infrastructure facility it was submitted was being developed in the year was capital work-in-progress and a qualifying asset prior to completion under AS-16. The said interest earned it was submitted was to be netted against interest paid and the balance interest paid on funds for such capital work-in-progress is capitalized as per AS-16. Thus, both as per AS-16 and correct treatment in tax, the said interest would be netted and balance interest paid capitalized.
3.8.7. Reliance was also placed on 236 ITR 315 (SC) in the case of CIT v. Bokaro Steel Ltd., 247 ITR 268 (SC); CIT v. Karnataka Power Corporation, 315 ITR 255 (SC); Indian Oil Panipat Power Consortium Ltd. v. ITO. Hon'ble High Court in Pr. CIT Vs. Facor Power Limited, 66 taxmann.com 178 (Delhi) so as to submit that interest on FDRs placed with bank as margin money for procurement of various capital goods for setting up of power projects was not Page 23 of 95 I.T.A .No.-414/Del/2015 assessable as "income from other sources". The money placed in fixed deposits it was submitted was inextricably linked with setting up of power plants and was a capital receipt not liable to be taxed. As such, there was no interest on FDRs which can be assessed as income from other sources. This argument it was submitted would address Rs, 70.84 crores relating out of the total FDR interest of Rs. 75.75 crores. Balance 4.91 crores it was submitted was interest on FDRs, the source of funds of which were used for Project Under Development, being real estate development forming part of current asset/infrastructure facility. Here too netting of interest was to be allowed and the said amount cannot be taxed as income from other sources. It was submitted that the assessee has adjusted the interest against expressway capital work-in-progress i.e. project under development being real estate development part of infrastructure facility.
3.8.8. Without prejudice to the above argument it was submitted that it was all part of a single object business of the infrastructure facility in the course of business as such it would be assessable as business income even if not allowed to be netted against the said capitalization, It would be business income and not income from other sources and the entire business income is eligible for deduction u/s 80IA. It was re-iterated that this was not a case where business has not commenced.
3.9. Addressing the next issue addressed vide Ground Nos. 13 and 14 relying upon the written submissions again placed on record it was submitted that the Concession Agreement granted to the assessee an exclusive license and Page 24 of 95 I.T.A .No.-414/Del/2015 authority to operate and maintain the expressway for a period of 36 years from the date of commissioning and, during this period, to collect appropriate fees from the users of the expressway and rights for the development of 25 million square meters of land along the expressway. This part of the Concession Agreement it was submitted was implemented by Yamuna Expressway Industrial Development Authority i.e. YEIDA by transferring to the assessee company specific parcels of land, within the agreed 25 million square meters limit, under a set of long-term lease deeds. The said lease deeds or transfer deeds transfer substantially all risk and reward incidental to ownership to the assessee who became in substance the owner. Such lease as per AS 19 and AS 17 it was submitted was a finance lease or capital lease and not operating lease. Reliance was placed on the judgement of the Apex Court in Sri Shanti Sharma & Others v. Smt Ved Prabha & Others (1987) 4 SCC 193 and 1987 AIR 2028 wherein it has been held that the ownership of land is recognized on leasehold basis. It was argued the alleged non-deduction of TDS on what is stated to be "rent" and "interest" is erroneous. The so-called rent is lease expense which is part of the capital cost of acquisition of leasehold land and capitalized as such. The so-called interest is only EDC enhancement over time to cover for inflation.
3.9.1. Addressing the facts it was submitted that no amount of the so- called "rent" or "interest" is payable as per assessee's books as at end of the year as it has all been entirely paid. Thus it was submitted that there being no amount payable section 40(a)(ia) is not applicable. Reliance was Page 25 of 95 I.T.A .No.-414/Del/2015 placed on the decision of the Jurisdictional High Court in the case of CIT v. Vector Shipping Services (P) Ltd. reported in (2013) 38 taxmann.com 77 (Alla). It was submitted that the SLP against the said decision had been dismissed by the Apex Court in CC No. 8068/2014. Reliance was also placed upon Merilyn Shipping & Transporters Vs ACIT (Vishakhapatnam SB) 20 taxmann.com 244. It was submitted that the disallowance had been made u/s 40(a)(ia) read with section 1941 and section 194A for alleged non deduction of TDS. It was submitted that there is no rent or interest within the meaning of section 1941 and section 194A in this case.
3.9.2. It was also submitted that apart from the above arguments even otherwise on facts notwithstanding the above argument addition by way of a disallowance was not maintainable as the assessee has not claimed these amounts as an expense and has capitalised (interest of Rs 55,88,99,253/- these to project under development and out of lease rent Rs. 2,01,282/- is debited to CWIP; Rs.2,42,132/- to Project under development and only Rs. 10,149/- has been claimed as expense).
3.9.3. Addressing the rent component the assessee also it was submitted reliance is placed on Krishak Bharati Cooperative Ltd v. ACIT (2012) (Delhi High Court) wherein it has been held that lease premium paid in long-term leases of land is capital expenditure and not allowable as advance payment of rent. Section 1941 of the Act it was submitted refers to rent for the use of any land. The said section it was submitted would cover operating leases wherein rent is charged for the use of land and substantially all of the risks and Page 26 of 95 I.T.A .No.-414/Del/2015 rewards incidental to ownership are retained by the lessor. Under a long-term lease of the finance or capital lease type, what is granted to the lessee it was submitted is not just the right of use but a much larger bundle of rights of ownership. Such long-term leases of land it was submitted would be outside the purview of s.1941. Hence, the lease rent payments by the company it was submitted would not be liable for deduction of tax at source under s. 1941. Reliance was placed on the decision of the Apex Court in the case of Podar Cement Pvt Ltd 226 ITR 625 (SC) for the proposition that income tax provisions do not operate by de jure ownership but de facto ownership. 3.9.4. Addressing the interest component it was submitted that under the terms of the Concession Agreement as well the Lease Agreement, the lessor (YEIDA) has undertaken to carry out some external developments. For the said development it was submitted YEIDA was entitled to charge the external development charges (EDC) from the lessee (i.e. the company). The external development was carried out by YEIDA in planned phases over a period of time. The charges for the same were also collected by them accordingly over a period of time in a phased manner. The per square meter rate at which EDC was payable by the lessee company was determined in the first instance with reference to a base year or zero year, which in this case was the year 2010. Since the actual external development as well as the payments in respect of the same become due in phases and were to be spread over a number of years, YEIDA provided for an additional payment, over and above the rate fixed with reference to the base year, by way of inflation or compensation for the Page 27 of 95 I.T.A .No.-414/Del/2015 escalation in the cost of development. This component of EDC which was charged, in reality and substance, to neutralize the escalation-cost of external development, and was added to the cost fixed with reference to the base year, was loosely referred to by YEIDA as "interest". It was submitted that on consideration of facts it would be clear that the escalation-cost of external development, which has been loosely given the nomenclature of interest by YEIDA, does not actually constitute "interest" within the meaning of section 2(28A) of the Act. It was submitted that it was certainly not in respect of any moneys borrowed by the company. It was also not in respect of any debt incurred because, at the time the land was demised to the assessee company under the lease, no external development-assets exist in the books of YEIDA, and no services by way of external development were made available to company (the lessee). Accordingly, no debt by way of any cost of external development could be said to have been incurred by the company at the time of execution of the lease deed, as no external development had actually been provided by YEIDA at that point of time. It was argued that where there was no debt, there could be no deferment of its payment, and no question of incurring any interest. The payments by the company under the nomenclature of so- called interest as a part of the EDC charges it was submitted could not be held as payments of interest within the meaning and scope of section 194A read with section 2(28A) of the Act. Hence, the subject payments are not liable for deduction of tax at source under section 194A.
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I.T.A .No.-414/Del/2015 3.9.5. It was also submitted that interest as defined in 2(28A) of the Act means interest payable on money borrowed or debt incurred- There is no money borrowed or debt incurred in this case and accordingly there was no interest or related TDS liability. Reliance was placed on 335 ITR 94 (DEL). Relying upon Ghaziabad Development Authority v. Dr N. K.Gupta 258 ITR 337 (NCDRC); CIT v. HP. Housing Board 340 ITR 388 (HP); Delhi Development Authority v. ITO 53 ITD 19 (DEL- ITAT), it was argued that it has been held that payments under the nomenclature of 'Interest' do not constitute interest within the meaning of section 194A read with section 2(28A).
3.9.6. It was also submitted that it is an absolute premise of income-tax jurisprudence that tax cannot be recovered on the same income twice. It is on this premise that the Hon'ble Supreme Court in Hindustan Coca Cola Beverage P. Ltd. v. Commissioner of Income-tax (2007) 293 ITR 226 (S.C.) and several High Courts in various other cases have uniformly ruled that once tax on any income has been paid by the payee the Department cannot collect tax on the same income from the payer u/s 201 of the Act. Reliance was placed CIT v. Ansal Landmark Township (P) Ltd. (2015) 61 Taxmann.com 45 (Del.) to rely on the law declared wherein the Hon'ble Apex Court has held that Second proviso to sec. 40(a)(ia) was declaratory and curative in nature and it was to be given retrospective effect from 1.4.2005. It was submitted that the Ld. CIT (Appeals) has decided the Appeal in favour of Appellant in TDS matter regarding non- deduction of TDS on interest on account of deferment of payment of EDC in TDS Appeal for this year. It was submitted that except for minor amount of Rs. Page 29 of 95
I.T.A .No.-414/Del/2015 10149/- the remaining has been capitalized thus no 40(a)(ia) disallowance is called for.
3.9.7. It was submitted that it has been consistently argued that these items are not covered by 194A or 1941. It was submitted that if the disallowance is sustained then it would lead to increase in taxable business income. Since the entire business income is deductible u/s 80-IA accordingly without prejudice to the argument that no disallowance is called for in the alternative this addition would lead to enhanced deduction u/s 80-IA which has erroneously not been considered by the Ld. AO. 3.10. Addressing the next issue pertaining to disallowance on depreciation made by the AO and sustained by the CIT(A) it was submitted that the tax authorities had proceeded on the basis of the reasoning that there was no receipt from toll road construction which was in progress during the year. It was submitted that the complete profit declared by the assessee is from sale of plots/built up properties and hence it has been concluded that no depreciation was to be allowed. The income from sale of plot/built up properties it was submitted was an intrinsic part of the infrastructure project and facility. Even otherwise it was argued the income is assessed as business income and depreciation is admissible against the business income involved. The depreciation it was submitted was claimed on assets owned by the assessee and used for the purposes of the business and all provisions of section 32 and relevant provisions of the Act have been complied with. It was submitted that admittedly expressway was under construction as Page 30 of 95 I.T.A .No.-414/Del/2015 capital work in progress, depreciation on assets having direct nexus with the same have in any case not been claimed as deduction but capitalized as part of capital work in progress.
3.10.1. Without prejudice to the main argument it was submitted that the assessee would like to submit that although there is no justification for the disallowance however if the said prayer is rejected and then in any case it would lead to enhancement of business income and higher corresponding deduction u/s 80-IA was allowable.
3.11. Accordingly relying upon these written submissions, facts, evidences and case law as considered by the ITAT and addressed in the written submissions it was his contention that the issues are covered in favour of the assessee.
4. The Ld. CIT DR referring to the facts of the case submitted that in the facts of the case the assessee is not clear whether its case is covered under section 80IA(4) or 80IA(6). Addressing the relevant provision it was her submission that the arguments of the assessee are based on incorrect facts and incorrect appreciation of the decision of the ITAT. The tax authorities it was submitted have consistently examined the facts and rejected the primary claim holding that it is against the provisions. The assessee thereafter it was submitted before the CIT(A) put forth the alternative prayer and a speaking order has been passed by the CIT(A) after due consideration of all facts and law applicable thereon. Accordingly, the arguments made by the assessee on facts and law, it was submitted are entirely misconceived. It was submitted that when the provision of the Act are Page 31 of 95 I.T.A .No.-414/Del/2015 considered it would transpire that the claim has correctly been rejected. It was submitted that it is an admitted fact and not under dispute that the assessee was given parcels of land for development. The specific parcels of land it was emphasized were not small measly parcels but were huge parcels of land for the purposes of developing housing and road of specific requirements. Accordingly in the circumstances it was her submission it is sub-section (6) of section 80IA which would be relevant and the requirements of the said section, it was emphasised are very clear and specific wherein the law requires that under Rule 18BBE and by way of Form No.10CCC certain conditions and stipulations have been set out which evidently as per record have not been fulfilled. It was submitted that there is no creation of any special account and accordingly all along even before the CIT(A) the assessee has been arguing and seeking admission of additional evidences to show compliances which were never made at the relevant point of time. It was her argument that infact the assessee is completely unclear as to which is the relevant section under which its claim can be said to be covered. Reliance placed upon the order of the ITAT, it was her submission is of no help and the reliance placed by the assessee is a mistake as the ITAT at specific page 65 vide para 22 has decided the issue in favour of the Revenue. It was also her argument that the ITAT in the 263 proceedings was required only to consider whether the power of review has been correctly exercised by the Commissioner or not. Accordingly the finding of the ITAT on this limited issue it was submitted cannot be said to be deciding the issue in the present Page 32 of 95 I.T.A .No.-414/Del/2015 proceedings. Attention was invited to para 127 at page 145 of the Tribunal's order which had also been relied upon by the Ld. AR also, relying upon the same and reading it again it was her submission that the explanation (b) of sub-section 4 of section 80IA(A) was applicable and thus as a result of this, the requirements of it section 80IA(6) were required to be fulfilled. 4.1. Referring to the facts of the case it was her submission that the Assessing officer noticed that the toll road was inaugurated on a specific date which fell in assessment year 2013-14. Thus once it was noticed that when the toll road had not even been inaugurated, the occasion to collect toll charges did not arise. Referring to the facts it was her submission that the ITAT in the aforesaid order was only considering the grounds which were before the ITAT as would be evident from page 146 of the said order and the decision it was submitted was in favour of the Revenue. Inviting attention to the assessment order pages 4 and 5 it was submitted that the facts relatable to the claim of the assessee under section 80IA are discussed there and a perusal of the same would show that the toll road was inaugurated on 09.08.2012 that is in the assessment year 2013-14. Thus in view of the fact that in the year under consideration, the income declared from business did not contain any income from the infrastructure facility being the toll road and after considering the reply of the assessee read alongwith the relevant provisions of the Act, the claim made under subsection has been rejected. 4.2. Attention was invited to page 8 of the assessment order so as to bring out the fact that the assessee in the year under consideration has earned income Page 33 of 95 I.T.A .No.-414/Del/2015 from sale of plots, sale of built-up properties, lease rentals, transfer fees, FDR bank interest, profit on account, currency fluctuations and miscellaneous income. In the context of these facts it was her submission that where the assessee's income admittedly is from development of plots etc. it cannot be said to be earned from the infrastructure facility namely road including a toll road as is the requirement of the specific provision under which the assessee claims its case falls.
4.3. Referring to the without prejudice claim put forth by the assessee that it may be allowed to claim deduction under section 80IA(6) it was her submission that the CIT(A) has examined and considered the said claim and come to the conclusion that it was not allowable as the mandatory requirements of creating a special reserve account of such profits has not been fulfilled. 4.4. In the midst of the arguments the ld.CIT DR inviting attention to the Paper Book page No. 20 and 21 submitted that the General Certification appended by the assessee on record that documents were filed before the authorities is not a sufficient certification in terms of the ITAT Rules as the assessee must identify which document was filed before which authority. Thus, without appropriate Certification Ld.CIT DR insisted, she would not be willing to continue her arguments.
5. The Ld. AR in reply submitted that according to his understanding, Certification was in order. However he was willing to Re-certify the Paper Book as required by the CIT DR but before conceding to the departmental request he sought permission to highlight that the Certification is not general and is Page 34 of 95 I.T.A .No.-414/Del/2015 specific. Referring to the Paper Book, it was submitted that although the final line in the Certificate does read as "Certified to be compiled from the Papers on record and/or filed before the authorities as detailed above" but the description in the Index itself it was submitted makes it clear as to a description of the specific document included in the Paper Book and before which authority, it had been filed.
5.1. As an illustration it was submitted the documents described at Serial No. 2 to 6 admittedly were before the Assessing Officer as well as the CIT(A) as these were the computation of taxable income, financial statement for the year; the copy of the Tax Audit Report in form 10CCB. 5.2. Similarly documents at serial No. 8, 9 and 10 it was pointed out have been described as having been filed during assessment proceedings. The document at Sl.No.11 it was submitted is described as a reply filed before the Assessing Officer dated 29.03.2014. Serial No. 12, 13 and 14 it was submitted have been shown to have been filed before the CIT(A). The document at Sl.No. 15 it was submitted has been described as the copy of the Remand Report Document at Serial No.16 it was submitted is described as a reply to the Remand Report. The document at Serial No. 17 it was submitted is the order of the ITAT and the document at Serial No. 18 is described as a copy of the assessment order for 2009-10 and 2010-11 assessment years.
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I.T.A .No.-414/Del/2015 5.3. Accordingly, it was his submission that the Certification is in order however if the Ld.CIT DR insists he was willing to Re-certify the same. Considering the submission, the Ld.CIT DR gave up the objection. 5.4. Considering the Paper Book and the Certification appended which issue was given up by the Ld.CIT DR herself, we find that the objection of the Ld. CIT DR that certificate in assesseee's Paper Book is not in order and is unwarranted and unjustified and on facts and the objection is without any basis.
6. Reverting back to her arguments, the Ld.CIT DR invited attention to the paper book page No. 20 and 21 which is the copy of the form 10CCB certified by an Chartered Accountant. Referring to column No. 14 of the same it was submitted that where the assessee is required to indicate "the nature of the infrastructure facility" the assessee has indicated it as "Road including toll road" and thus it was her argument that the AO in the present proceedings has been guided by assessee's own disclosure. This fact it was submitted has been taken note of by the CIT(A) also. Thus by its own conduct the assessee it was submitted is unsure of its claim.
6.1. Inviting attention to paper book page 28 it was submitted that date of commencement is shown as 05.04.2007. The fact that toll fee has been collected for the first time in 2013-14 AY is an admitted fact. Inviting attention to page 62 of the CIT(A)'s order it was her submission that after referring to the relevant provision and addressing the requirements therein the CIT(A) on facts Page 36 of 95 I.T.A .No.-414/Del/2015 dismissed the prayer of the assessee for placing additional evidence on record holding as under:-
"During the assessment proceedings, the appellant has submitted additional evidence under Rule 46(A) of the income Tax Rule,1962 with the request for its acceptance and consideration, in the appellant proceedings on the plea that assessee was prevented by sufficient cause from producing the same before the AO. In this regard the assessee has submitted auditors' certificate dated 15.11.2014 in form no. 10CCC under Rule 18BBE of Income Tax Rules and has contended that the auditor's certificate has been received only after the assessment was completed vide order dated 31.3.2014 and it was not possible to file the same in the course of assessment before assessing officer.
Subsequently, a copy of above request alongwith additional evidence was sent to the AO for remand report which was received in this office on 10.12.2014 and the same was forwarded to the assessee for rejoinder which has since been received in this office on 23.12.2014. For the sake of convenience both remand report as well as appellant's rejoinder have been reproduced in the foregoing para of this order. I have carefully considered the rival contentions and find that the AO has vehemently argued for rejection of additional evidence."
6.2. Relying upon the findings arrived at therein it was her submission that considering the fact that special reserve and compliances of other condition as prescribed under section 80IA(6) had not been made and they could not have been made as throughout the assessment proceedings the assessee has maintained that the income declared in the return was eligible under section 80IA(4). Thus for the first time before the CIT(A) the position is changed. As a result of this, the occasion to consider the case having been covered under section 80IA(6) does not arise. The said claim it was submitted was floated by the assessee only after the claim before the CIT(A) u/s 80IA(4) was dismissed by the Assessing Officer and it was then that the assessee came up with a claim that the exemption should be considered under section 80IA(6). The arguments of the assessee that the compliances prescribed under Page 37 of 95 I.T.A .No.-414/Del/2015 section 80IA(6) being procedural in nature should be interpreted leniently and the claim for exemption should be considered under section 80IA(6) it was submitted have all been considered and found to be devoid of merit. Accordingly it was her submission that in the circumstances of the case since the assessee is still aggrieved then it could have applied to the board under section 119 (2)(c) of the Income Tax Act for relaxation of the provisions and sought for relief from the said forum as only the Board by an order can give such a relaxation subject to compliance of conditions mentioned therein and placing the same before the Parliament. Accordingly it was her submission that it is only the Parliament which could have relaxed the conditions as the requirements for waiving even for the Board are very stringent as has been noticed by the CIT(A).
6.3. Addressing the arguments advanced in support of the claim that "interest income" "miscellaneous income" etc has wrongly been treated as "income from other sources", it was her submission that the issue is well- settled by the judgement of the Hon'ble Apex Court in the case of Pandian Chemicals Ltd. vs CIT [2003] 262 ITR 278 (SC)/[2003] 183 CTR 99 (SC) which was followed by another judgement of the Hon'ble Apex Court namely Liberty India vs CIT [2009] 183 TAXMAN 349 (SC)/317 ITR 218 (SC)/[2009] 225 CTR 233 (SC) and copies of the above decisions including the other decisions relied upon by the department have been placed in the departmental Paper Book pages No. 91 to 98. A perusal of the same it was submitted would show that apart from the above two decisions of the Apex Court, reliance was placed on Page 38 of 95 I.T.A .No.-414/Del/2015 K.R.Nair vs DCIT 262 ITR 669 (Kerala) and Nanji Topanbhai vs ACIT [2000] 243 ITR 192 (Kerala).
6.4. It was her submission that these were surplus funds of the assessee and the assessee's Notes to Accounts states that these were temporary placement of surplus funds. Thus, it was submitted that they could not be said to be interlinked with the business of the assessee.
7. At the close of the arguments Ld. CIT DR filed Paper Book containing written submissions from page 1 to 11 of Principal CIT, Noida; Copy of Assignment Agreement dated 19.10.2007 between the assessee, JAL and Taj Expressway Industrial Development Authority (page 12 -90); and the copies of decision relied upon (page 91 to 98).
7.1. A perusal of the written submission shows that the Revenue relies upon the following arguments so as to address the provisions invoked:-
1. "Section 80- IA(1) grants deduction in respect of any profits and gains derived by an undertaking from any business referred to in sub-section (4) thereof.
2. Under sub-section (2), the deduction is admissible for a period of ten consecutive years out of 20 years beginning with the year in which the undertaking develops and begins to operate the infrastructural facility referred in clauses (a), (b) and (c) to Explanation to sub-section (4).
3. As per sub-section (2A), the admissible deduction is 100% of the profits and gains of eligible business for first five Assessment Years, "commencing at any time during the period as specified in sub-section (2)" i.e., from the year in which "the undertaking or enterprise develops and begins to operate any infrastructural facility" and thereafter, 30% of profits and gains for the further period of five years.
4. The clause (a) of the Explanation to sub-section (4) covers infrastructural facility being " a road including a toll road, a bridge or a rail system" whereas clause (b) thereof refers to " a highway project including housing or other activities being an integral part of the highway project".
5. Sub-section (6) states that notwithstanding anything contained in subsection (4), where housing and other activities are an integral Page 39 of 95 I.T.A .No.-414/Del/2015 part of the highway project and the profits of which are computed on such basis and manner as may be prescribed, "such profit shall not be liable to tax where the profit has been transferred to a special reserve account and the same is actually utilized for the highway project...before the expiry of three years...".
6. The basis and manner in which the profits of housing and other activities are to be computed for the purposes of sub-section (6) are specified in Rule 18BBE which mandates maintenance of separate accounts for the activities of housing and other activities and submission of a certificate specifying the amount credited to the reserve account and the amount utilized during the relevant previous year for the highway project. The certificate is to be furnished in Form 10CCC which is to be required to be submitted along with the return of income.
7. From the above, it is apparent that in respect of an assessee claiming to be engaged in building and infrastructural facility in the nature of a highway project including housing and other activities being an integral pan of the highway project, the profits arising from housing and other activities would be exempt from tax under sub-section (6) whereas the profits arising exclusively from highway project would be admissible for deduction under sub-section (1) read with sub-section (2) and (2A).
8. Any relaxation of the provisions of Chapter VI-A (including the prescribed Rules thereto) is governed by Section 119(2)(c) of the Act which mandates only the Board in the event that it finds it desirable or expedient to avoid genuine hardship in any case, to do so subject to the condition that the default (in compliance for which the relaxation is sought) was due to circumstances beyond the control of the assessee and it has complied with such requirement before the completion of the assessment. Further, every such order is to be laid before each House of Parliament.
9. The assessee has begun to operate the infrastructural facility w.e.f 09.08.2012 and hence prior to this date it had only profits which are attributable to sale of land, transferred to it in terms of Concessionaire Agreement. Therefore, in respect of profits exclusively from the highway project, the assessee could have made a claim for deduction under Section 80-IA only w.e.f Assessment Year 2013-14.
10. The case of the assessee would squarely fall within clause (b) of Explanation to sub-section (4) and therefore, the assessee would be eligible for exemption in respect of profits from housing and other activities wholly under sub-section (6) and the provisions of sub-section (4) are not material for the reason that the infrastructural facility has not commenced operation in the years under consideration.
1l. The assessee has admittedly not created any special reserve. Neither has it maintained separate accounts for housing and other activities nor has it furnished Form 10CCC during either with return of income or during the assessment proceedings. Page 40 of 95
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12. The denial of claim for deduction by the Assessing Officer in the proceedings under Section 143(3) for A.Y.2011-12 was based on valid grounds and has been upheld as such by the CIT (Appeals) in the appellate order for A.Y.2011-12 dated 12.01.2015.
13. The plea of the assessee that it has complied with the provisions of Section 80-IA(6) in spirit is fallacious in as much as firstly, the substantive provisions of the statute, which grants a vested right either to the revenue or to the assessee, cannot be ignored and secondly that the circumstances under which the provisions of Chapter VI-A can be relaxed has been provided for in the statute itself in Section 119(2)(c) of the Act. The assessee's action of creating special reserve post facto after the conclusion of assessment proceedings and furnishing a certificate of Form 10CCC dated 15.11.2014 is irrelevant for determining the eligibility of the deduction."
7.2. The written submission of the Revenue filed by the Ld.CIT DR also contains the following written submissions under the name and signature of Pr. CIT, Noida addressing the issues raised by the assessee in the grounds moved. These are extracted hereunder for ready-reference:-
1(a) "On this, a brief of technicalities involved has been discussed in preceding pages. In addition to the above, the assessee's claim that it does not fall within the ambit of the development of an Infrastructure facility in the nature of an highway including housing and other activities being an integral part of the highway project, is legally untenable being based on a specious distinction made between an highway, expressway, toll, tailgate, toll plaza and toll road, contrary to principles of linguistic and legal interpretation laid down by Hon'ble Supreme Court in the case of MCD Vs. Mohd.Yasin (142 ITR 737).
a) The terms Toll Road, Highway and Expressway, on one hand and toll, toll gate and toll plaza on the other are not analogous terms.
b) Road is a generic term and Highway & Expressway members of the same genus.
c) Levy of toll will not denigrate the character of a highway.
From the above cited case law, it is noteworthy to mention that 'Highway and Expressway are of same genus' and 'Levy of toll will not denigrate the character of a highway'. Thus in essence expressway is a highway and is a broader connotation than a toll road.
1(b)It is seen that 'highway' and 'toll road' have not been used in concessionaire agreement and the word 'expressway1 has been used several times. There was a contract between assessee Page 41 of 95 I.T.A .No.-414/Del/2015 company and Taj Expressway Authority for developing, operating and maintaining a six lane controlled access Expressway with limited access and exit points between Noida and Agra and a fees/toll was payable to assessee company for vehicles using the Expressway at toll plazas.
1(c) It has been contended by the assessee in scrutiny proceedings that land received for sale and/or development under the concession agreement is in fact a part of the compensation received by us for developing, operating and maintaining the toll road, contradicting the facility as defined in concession agreement. It contradicts with concessionaire agreement as there isn't mention of toll road whereas Expressway finds repeated mentions. Again only toll booth and plaza is mentioned only at very few instances in the agreement. Even quoting from the objects of the agreement (at para 20 of the order):
A. "The Government of UP has set up TEA for anchoring development of Taj Expressway Project, which, interalia, includes construction of six lane, 160km long Super Expressway with service roads and associated facilities connecting Noida and Agra, passing through a virgin area along the Yamuna river".
1(d)It is seen from the objects of the agreement that the facility is an Expressway rather than at toll road. Highway as per definition, is a public road specially an important road that joins cities or towns together. Intertwining the objects of agreement and the definition of Highway the facility refers to highway and not just toll road as contended by the assessee. Hence it does not fall in clause (a) of explanation to Section 80IA(4)(i). Correlating it with case law cited, (MCD Vs. Mohd.Yasin (142 ITR 737).), Highway and Expressway are members of the same genus.
1(e) as per agreement between TEA (Taj Expressway Authority) and the assessee group, an expressway was to be constructed between two prominent cities and toll would be charged on that expressway. At that very time and even now, this expressway is a prominent landmark in infrastructure. Merely having mention of toll plazas in agreement can't change the genus of highway/expressway as discussed citing case law of MCD Vs. Mohd.Yasin (142 ITR 737), adjudicated by the same Apex Court. 2(a).On the issue of whether profits and gains earned from sale/sublease of land during the financial period as this activity is in ambit of infrastructure facility development, clause (b) of Explanation to section 80IA(4)(i) of the Act is quoted which refers to a "highway project including housing or other activities being an integral part of the highway project" is applicable to the extant case.
2(b)As per agreement, it mentions under the head "Grant of Concession" that the Concessionaire shall be granted, by TEA, rights for land development of 25 million sq. meters of land along the proposed Expressway for commercial, amusement, industrial, institutional and residential development. The assessee himself Page 42 of 95 I.T.A .No.-414/Del/2015 treats it as integral project but refutes to apply Clause (b) of Explanation to Section 80IA(4)(i). Holding its contention, it stresses the income from sale of land as derived one. On careful perusal of the agreement, while the assessee accepts the Concession for a period of 36 years commencing from the date of commencement, is it willing to give back the land given as incentive after 36 years to the TEA? The law is clear that allied activities cannot fall in clause
(a). During the year, the entire profits were derived from allied activities and hence the deduction granted for profits derived from allied activities cannot be adjudicated under clause (a) of Explanation to Section 80IA(4). If the allied activities eligible for deduction is included in clause (a) of Explanation to Section 80IA(4), then what is the intent of clause (b) in the Income tax Act, 1961.
2(c). Drawing from the above, the contention of the Revenue is that it falls under clause (b) of Explanation to Section 80IA(4)(i). If it falls in clause (b), then it is subject to non-obstante provisions of sub- section (6) of Section 80IA. If assessee has erred in including allied activities in clause (a) instead of clause (b), then what is the utility of clause (b).
3. Another issue pertaining to allowability of deduction u/s 80IA(2) is with regards to commencement of actual operations. Sub-section (2) of Section 80 IA reads as under:
"The deduction specified in sub-section (1) may, at the option of the assesses be claimed by him for any 10 consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructural facility.....".
3(a) The language is clear from sub-section (2) of Section 80IA of the Act. The conjoint letter 'develops and begins' signifies actual commencement of the infrastructural facility. The date of incorporation of the assessee concern cannot by any stretch of logic mean that commencement of infrastructural facility has taken place. Though the Act says it is at option of the assessee but the same has to be in right nomenclature i.e the facility should have begun to run and in this extant case, thrown open to the public. The assessee has begun to operate the infrastructure facility w.e.f. 09.08.2012 when the Expressway was inaugurated by the Hon'ble Chief Minister of UP and hence prior to this date, it had only earned profits from sale or sub lease of land and therefore, the assessee would be ineligible for deduction/exemption u/s 80IA of the Act for AY 2011-12". 3(b) As per sub-clause (c) of clause (i) of sub-section (4) of section 80IA of the Act, the deduction would be admissible to the enterprise which "has started or starts operating and maintaining the infrastructure facility on or after 01.04.1995" and therefore, the deduction to the assessee which has entered into an agreement for developing, operating and maintaining an infrastructure facility, under provisions of Section 80IA(4) of the Act would be admissible only from the year in which the operation of facility Page 43 of 95 I.T.A .No.-414/Del/2015 begins. The word "started" is intended to cover cases where the commencement is after 01.04.1995. The wording of clause (c) of sub-section (4) reiterates the condition of sub-section (2) in as much as it makes the start of the operation and maintenance of infrastructure facility, a prerequisite for the grant of deduction. 3(c) As per proviso to sub-clause (c) to Section 80IA(4)(i) of the Act, wherein it is also provided that if developer of an infrastructure facility transfers the same, then the transferee enterprise would also be eligible for deduction, meaning thereby the enterprise which only develops infrastructure facility is eligible for deduction and in case developer transfers the facility for operation or maintenance to another enterprise then the transferee would be eligible for deduction for unexpired period . the case of the assessee is one in which it has entered into an agreement for developing, operating and maintaining infrastructure facility, a distinct category of eligible project specifically covered under sub- clause (iii) of clause (c) of Section 80IA(4) of the Act and the assessee has not entered into an agreement only for developing of infrastructure facility as envisaged in sub-clause (i) of clause (c) of sub-section (4) and as per provisions of the Act, the deduction would be admissible only on the commencement of the operation. There can be an instance where an assessee has entered into an agreement with Centre/State Govt/Statutory Authority only for development of infrastructure facility and after completion of development, the developer assessee transfers such facility to another entity and in consideration thereof, receives consideration and earns profits, then transferor is entitled to deduction arising to it and for this situation, the statute of the Act provides that in such cases also, the deduction would be available to the developer and therefore a provision has been provided to clause
(c) of sub-section (4) of Section 80IA of the Act.
3(e) The real side of the story is that during this assessment year and also to few successive assessment years till AY 2012-13, there was huge boom in real estate in National Capital Region of Delhi, including Noida and Greater Noida where the assessee concern has been given vast land parcel as part of incentives for building Expressway. If one analyzes the trend of profits from sale of the land from AY 2008-09 to the present day, the figures show that the huge profits were achieved from AY 2009-10 to AY 2012-13 as there was spurt in real estate. The assessee concern was the biggest real estate player in this area and thus, was the biggest benefactor. In an attempt to conceal this windfall profit, the designing of the tax planning was such that by giving it colour of deduction u/s 80IA large chunk of profits meant for taxation be concealed and deliberately avoided.
4. The claim of deduction by the assessee is irrelevant and inconsistent with its professed principal of interpretation ignoring the merits and facts of the case .If the allied activities eligible for deduction is included in clause (a) of Explanation to Section 80IA(4), then what is the intent of clause (b) in the Income tax Act, Page 44 of 95 I.T.A .No.-414/Del/2015 1961. Also then, what is the utility of clause (b). Moreover, then what is the intent of Clause (b) of Explanation to Section 80IA(4), utility and usage of Section 80IA(6) along with its associated Rule 18BBE and Form 10CCC.
On grounds of appeal no. 2.3. and 4 The assessee has raised the grounds of Ld CIT(Appeals) going against law and principles of natural justice, has based the order on errors and non-appreciation of facts, suspicion and conjectures and has not admitted additional evidence. The copies of orders of Assessing Officer and Ld CIT(Appeals) have been annexed as Annexure 1 & 2. On perusal of exhaustive analysis of facts and circumstances of the case, there is nothing to be alleged that Ld CIT(Appeals) have not followed canons of justice. Instead sufficient opportunities have been provided and matter has been adjudicated on facts and circumstances of the case.
On other income Grounds no. 5-8 have been raised on additions main on other grounds and the same has been exhaustively discussed in orders of l_d CIT(Appeals) as well as that of Assessing Officer. On disallowance of deduction u/s 80IA Grounds no. 9-12 have been raised on disallowance of deduction u/s 80IA which dealt at length in preceding pages. Even going by the principles laid down in this case, the facts say that as per agreement between TEA (Taj Expressway Authority) and the assessee group, an expressway was to be constructed between two prominent cities and toll would be charged on that expressway. At that very time and even now, this expressway is a prominent landmark in infrastructure. Merely having mention of toll plazas in agreement can't change the genus of highway/expressway as discussed citing case law of MCD Vs. Mohd.Yasin (142 ITR 737), adjudicated by the same Apex Court. At no point has the Hon'ble Tribunal held that an expressway is a toll road and specified the reasons thereof."
8. The Ld.AR in reply submitted that the argument of the Ld. CIT DR that the claim can be made under section 80IA(6) but in 2013-14 assessment year and not in the year under consideration, is neither here nor there as it amounts to making a mockery of assessee's claim. It was his submission that before advancing such an argument the Revenue needs to first cross the hurdle as to how "a toll road" can be classified to be "a highway project". It was re-iterated that the parties concerned were aware that a toll road was being Page 45 of 95 I.T.A .No.-414/Del/2015 contemplated and the fact that the toll fees collected will be very low and thus to make up for this deficit and to ensure that a constant flow of funds remains available to the assessee to carry out this mammoth infrastructural integrated project for the benefit of the state the assessee was allowed to develop these parcels of land so as to ensure that there is a constant flow of funds to meet the heavy financial requirements for the infrastructural facility. It was submitted that the fact that the assessee has constructed the Agra Expressway which is probably one of the best in the world, it was submitted is a fact on record and it was his argument the assessee is confident that considering the relevant provisions, facts and circumstances, the past history of the issue evident from the orders of the Assessing Officers in 2009- 10 & 2010-11 AYs and the order of the ITAT quashing the Revisionary order passed by CIT, Noida u/s 263 the issue is fully covered in his favour by Explanation (a) of Section 80IA(4) and thus unless he is directed to specifically address the without prejudice ground raised addressing the allowability of the claim u/s 80IA(6) he would rely on his main argument namely the fact that in two consecutive years two different Assessing Officers have considered the case to be fully covered under section 80IA(4); and the order of the ITAT considering the very same facts and the provisions quashed the proceedings u/s 263 in the first year wherein the position was sought to be upset by the Revenue the issue of allowability of claim u/s 80IA(4) is a settled issue. As the legal position is well settled as the allowability of the claim has to be considered in the first year and admittedly the first year is in favour of the assessee. Page 46 of 95
I.T.A .No.-414/Del/2015 8.1. It was vehemently submitted that the innuendo by the Ld.CIT DR that the date of inauguration as 09.08.2012 was discovered by the Assessing Officer was incorrect on facts as the record would show that this specific date was pointed out by the assessee itself. It was his submission that once the user of funds is considered it would be seen that the utilization of funds far exceeds the funds generated. Accordingly it was submitted that unless the assessee is required to argue the allowability of its claim under section 80IA(6), he is under instructions not to argue further.
9. Since considering the grounds raised, the Revenue had already argued that the without prejudice ground cannot be allowed relying on the findings recorded by the CIT(A) and supplemented by the arguments before the Bench the Ld.AR was directed to complete his arguments on the grounds raised unless the grounds are being given up. Once the issues had been argued by the Revenue where we understand that the departmental stand clarified by Ms. S.Verma, CIT DR was that if at all the deduction was to be allowed it could be considered in 2013-14 AY only and as far as the claim in the year under consideration was concerned the deduction could neither be allowed under the main ground nor under the without prejudice ground raised relying on sub- section (6) of Section 80IA.
9.1. Accordingly, addressing the alternate prayer, Ld. AR submitted that the issue is not an after by the assessee. Inviting attention to the orders of the tax authorities, it was submitted that it has been agitated without prejudice to the main prayer right from the stage of the Assessing Officer's objections to Page 47 of 95 I.T.A .No.-414/Del/2015 allowing the claim under section 80IA(4). It was submitted that a perusal of the assessment order would show that the Assessing Officer has discussed, considered and dismissed the said issue. Thus, the submissions of the Ld.CIT DR that the assessee is not sure under which section the deduction is to be claimed it was submitted is without merit. It was his submission that the record would show that all along the assessee has been sure that the deduction was to be claimed under sub-section (4) of section 80IA however when the AO objects to allowability of the same, he creates a situation where the assessee has been forced to examine the options from all angles. It was his argument that it is very easy to sit on the chair and find faults with the person actually working on the ground. In the facts of the present case it was his submission that the assessee acting upon the legislative intent evident from the Statute has constructed "a toll road" and there is no dispute on the date when it was inaugurated and the date from which the toll collection started. However on a reading of the specific section which specifically uses the word "develops" the Legislature was well aware that it is an ongoing activity as the Statute has not used the word "developed". The specific provision at the cost of reiteration, it was submitted has been interpreted by two different Assessing Officers in a certain manner and the interpretation which the Revenue wants to put forward has already been tested and examined by the ITAT as the proceedings under section 263 have been directed to be quashed by a very speaking order by the ITAT. The general and vague argument that the issue is decided in Revenue's favour it was submitted is a mis-statement of facts and Page 48 of 95 I.T.A .No.-414/Del/2015 self-evident from record. Specific para 22 at page 26 of the order of the ITAT, it was submitted records that the Apex Court has upheld the observation of the High Court recording the immense public importance of the Expressway by which the state gains advantages by the creation of the five zones for industry, residence amusement which would be complimentary to the Expressway leading to planned development of this industrially backward area holding the Expressway and the five parcels of land being complementary to each other and parts of an integral scheme and thus for a public purpose. In these facts and circumstances, it was submitted there can be said to be no doubt in holding that the assessee was correct in making its claim under section 80IA(4). However on account of the insistence of the Assessing Officer to deny the claim made u/s 80IA(4) the alternate claim was made. The claim u/s 80IA(4) having been dismissed, it was submitted was argued without prejudice before the CIT(A). The main argument therein was also that the claim is allowable under section 80IA(4). Accordingly making the assessee's position clear it was submitted that without prejudice to the main argument, the assessee sought to place additional evidences before the CIT(A) as admittedly the compliances for making the claim u/s 80IA(6) were not complied within the year under consideration and have been complied with in the balance sheets for 31.03.2009 to 30.03.2011 in 2013-14 AY. The conclusion of the CIT(A) that the issue has to be decided under section 119(2)(c) by the Board it was submitted is an incorrect and mischievous reading of the statutory provisions. The said conclusion it was submitted is oblivious to Rule 46 A of the IT Rules Page 49 of 95 I.T.A .No.-414/Del/2015 which on facts permit the raising of fresh evidences before the CIT(A) and the Rule elaborately sets out under what circumstances filing of fresh evidences can be allowed. The argument that sufficient opportunity was available to the assessee it was submitted is of no relevance as the filing of fresh evidence has been necessitated as the main prayer was dismissed by the AO holding that in the earlier years the assessee has relied on sub-section (4) of section 80IA thus the claim now u/s 80IA(6) cannot be accepted. The AO also rejecting the prayer relied on the fact that in terms of sub-section (6) the assessee was required to maintain a Reserve in a specific manner and to utilize it in a specific manner which also formed the basis of dismissing the alternate prayer. In the circumstances, it was submitted the assessee was required to file additional evidence before the CIT(A) who failed to exercise his authority fairly and appropriately. The fact that the evidences sought to be filed were not available at the time the assessment proceedings is self-evident as the need for making the prayer admittedly arose only during the assessment proceedings for the first time when the assessee was faced with the scenario that the deduction under section 80IA(4) was not being allowed. It was submitted it is then, that, the necessity to file the fresh evidence arose. It was his submission that there is ample case law available wherein the procedural requirements of filing the forms alongwith the return have been permitted even during the assessment stage. Accordingly this harsh and unreasonable reading of the legal provisions invoked was assailed. It was submitted that the assessee has no objection if after admitting the evidence its correctness and sufficiency is Page 50 of 95 I.T.A .No.-414/Del/2015 examined by the AO. The additional evidences, it was submitted is available at pages 52 to 55 of the paper book. Accordingly it was a prayer that in the eventuality the assessee fails in the main ground then the prayer made in the alternate ground may be considered and for deciding the same the fresh evidences may be admitted as the evidences are material and crucial for deciding the alternate claim and the issue may be sent back. 9.2. Replying to the arguments of the Ld. CIT DR that there has to be direct nexus for allowability of assessee's claim it was submitted that it is a fact on record that these incomes are derived from the business of the assessee which is an integrated business thus it is not a case where surplus and idle funds have been kept in banks waiting for opportunities to invest. The following judgements, copies of which have been placed at Serial No. 7 of the case law Paper Book was heavily relied upon Commissioner of Income Tax vs Dharam pal Prem Chand Ltd. 317 ITR 0353 (Del); CIT vs Eltek SGS P.Ltd. [2008] 300 ITR 6 (Delhi); CIT vs Lok Holdings (Bom.) 308 ITR 356. Infact it was his submission that the nature of assessee's business as considered by the ITAT has already considered these issues conclusively as the present forum is concerned as the issue is purely factual.
10. We have heard the rival submissions and perused the material available on record. We find on a consideration of the facts recorded in the assessment order, which we note have been upheld by the CIT(A), alongwith the arguments of the parties before the Bench advanced in the present proceedings when these are considered alongside the issues addressed and the arguments of the Page 51 of 95 I.T.A .No.-414/Del/2015 respective parties which have been recorded in detail in the order dated 13.04.2015 of the Co-ordinate Bench in ITA No.3339/Del/2014 pertaining to 2009-10 AY, we find that the Ld.AR on facts was justified in his claim that the issue addressed in the present appeal is covered by the aforesaid order of the ITAT. We note that the Ld. AR was at pains to canvass that the issues on facts including the specific provision invoked; the statutory principles invoked to interpret the same have all been taken into consideration by the ITAT and we note that after addressing the main issue the Ld. AR expressed his reluctance to address the alternate claim u/s 80IA(6) advanced by way of without prejudice arguments. The reluctance to argue the without prejudice claim despite the raising of the ground which then appeared surprising can be better appreciated now after going through the gamut of arguments advanced by the parties which we find is a virtual repetition of the arguments advanced before the Co-ordinate Bench. We find on a detailed consideration of the issues addressed by the Co-ordinate Bench in the aforesaid order that the reluctance to address the alternate claim on facts was thus not misplaced as the Co- ordinate Bench, it is seen has fully considered the issues considering more or less similar arguments of the parties before the Bench. Thus on facts the preliminary belief expressed by the Ld.AR that the assessee deserves to succeed on its main plea we find was not misplaced. The reasons for coming to the above preliminary conclusion are elaborated hereinafter in greater detail. For which purposes, we first propose to make a detailed examination of the issues, arguments, reasoning and conclusions arrived at in the aforesaid order. Page 52 of 95
I.T.A .No.-414/Del/2015 We find that the arguments advanced by the parties in the present proceedings which have been extracted from the written submissions filed and brought out as orally argued are in fact verbatim to what was argued before the Co-ordinate Bench. It is seen that on behalf of the assessee the arguments advanced in respect to the challenge posed to the Revisionary order passed by Commissioner, Noida u/s 263 in 2009-10 AY alleging that it was bad in law as the assessment order u/s 143(3) was claimed to be neither erroneous nor prejudicial to the interests of Revenue and was claimed to have been passed correctly after due enquiry wherein it was submitted the ITAT held that the AO instead of taking one of the possible views infact took the only correct view available. The departmental stand considered by the ITAT on the other hand it is seen has considered the very same arguments as advanced by the Ld.CIT DR in the present proceedings where the Revenue had argued that the relevant provisions having been incorrectly appreciated by the AO on facts where deduction u/s 80IA(4) has wrongly been granted and if at all deduction had to be allowed it was to be considered u/s 80IA(4) Explanation (b) r.w.s 80IA(2) and that too only on fulfilling the requirements as mandated u/s 80IA(6) and not in the year under consideration. We find similar arguments have been advanced before us also. We note that the Co-ordinate Bench accordingly in order to decide the claims and counter-claims of the parties undertook a detailed enquiry and made an examination of facts and the relevant provisions of the Act going on to finally to quash the proceedings u/s 263 and went on to hold that the claim of deduction was allowable and has been correctly allowed Page 53 of 95 I.T.A .No.-414/Del/2015 u/s 80IA(4) holding that the business activities of the assessee company fell within the ambit of clause (a) of Explanation to section 80IA(4). In order to decide the issue it goes without saying that the relevant provisions were necessarily required to be addressed by the Co-ordinate Bench. We extract the relevant provisions considered by the Co-ordinate Bench in 2009-10 AY which is the base year form the aforesaid order as the issues addressed in the present proceedings refer to the very same provisions.
10.1. The relevant provision reads as under:-
Deduction in "respect of profits and gains from' industrial undertakings or enterprises engaged in infrastructure development, etc. 80IA [(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of profits and gains derived from such business for ten consecutive assessment years.] (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fiteeen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park (or develops a special economic zone) rendered to in clause (iii) of sub-section (4) or generates power or commences transmission or distribution or power (or undertakes substantial renovation and modernisation of the existing transmission or distribution lines."
(3) xxxxxx (4) This section applies to-
(i) any enterprise carrying on the business l[of (i) developing or
(ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely:
a) it is owned by a company registered in India or by a consortium of such companies 2[ or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act.] Page 54 of 95 I.T.A .No.-414/Del/2015 (5) xxxxxxx (6) The amount of deduction in the case of the business of a ship shall be thirty per cent of the profits and gains derived from such ship for a period of ten consecutive assessment years including the initial assessment year provided that the ship -
(i) is owned by an Indian company and is wholly used for the purposes of the business carried on by it ;
(ii) was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and
(iii) is brought into use by the Indian company at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995."
10.2. It may be appropriate to refer to the specific grounds raised by the assessee before the Co-ordinate Bench which were required to be considered. A perusal of specific Ground Nos. 5, 7, 8 and 9 before the Co-ordinate Bench would show that the arguments advanced in respect thereto on facts are repeated in the present proceedings also. A perusal of Ground Nos. 5 & 8 raised before the Co-ordinate Bench, it is seen covers the main claim advanced by the assessee in the present proceedings. Ground No. 7 before the Co- ordinate Bench, we find addresses the disallowance of interest on FDRs and depreciation i.e. the issues addressed in Ground Nos.5 to 8 in the present proceedings. The issue addressed in Ground No. 9 addresses the alternate claim advanced by the assessee. For ready-reference, these respective grounds are reproduced hereunder:-
GROUNDS COSNDIERED BY ITAT IN ITA NO.3339/DEL/2014
5. That, inter alia, the appellant is entitled to deduction u/s 80IA(4) on the facts and law involved as a developer of the infrastructure facility, even if it has not commenced operating and maintaining but is developing the same, in view of direct decisions in its favour including inter alia reported in ACIT v. Bharat Udyog Ltd. 118 ITO 336 which follows the decision of the Page 55 of 95 I.T.A .No.-414/Del/2015 Hon'ble Apex Court in K. P. Verghese v. ITO 131 ITR 597 (SC) and as held in TRG Industries (P) Ltd. v. OCIT (2013) 35 Taxmann.com 253 (Amritsar - Tribunal).
7. That the Ld. CIT has erred in stating that the Ld. AO has not applied his mind to other claims for example deduction in respect of interest on FDs and whether depreciation was admissible even while the project was not complete. These claims have been processed and correctly allowed after due consideration. There is no final finding by the Ld. CIT that these claims are incorrect. The assessee was duly entitled to these claims which are correctly allowed and as such too setting aside the assessment to be made de novo is unlawful and the order of the Ld. CIT deserves to be quashed.
8. That the order of the Ld. CIT is based on erroneous views and non-appreciation of the facts and law involved including binding case law supporting the appellant which include decisions of the Hon'ble Apex Court and Hon'ble Jurisdictional High Courts. Inter alia the Ld. CIT has erred in not following the ratio of the decision in 131 ITR 597 (SC) in the case of K.P. Vargheese v. ITO wherein it was held that literal construction that leads to absurdity, unjust result or mischief is to be avoided. Construction which permits achieving the obvious intention of the legislature and provisions of rational construction are to be adopted. As such too, the assessee's claim under section 801A(4) has been correctly allowed by the Ld. AO. The Ld. CIT has erred in setting aside the assessment.
9. That without prejudice, in the alternative, as the appellant is eligible for deduction under section 80IA(6), even as per the view of the Ld. CIT, then in any case on the facts and law involved, the assessee is entitled to relief and deduction in this matter, be it under 801A(4) OR 80IA(6). Setting aside the assessment to be made de novo is unlawful, uncalled for and would be merely an academic exercise if permitted.
(emphasis provided) 10.3. A perusal of the above would show that the claim of the assessee that the issues stands considered by way of a binding precedent was not misplaced. Hence as observed the reluctance of the Ld.AR to address the without prejudice claim of allowability of assessee's claim of deduction u/s 80IA(6) can be better appreciated and as we had noted infact the Ld.AR had to be directed to complete his arguments on all the grounds which the assessee wished to press Page 56 of 95 I.T.A .No.-414/Del/2015 as the allowability of the alternate claim also stood opposed by the Revenue. However now, as noted on minutely going through the arguments of the respective parties and the facts on record which necessarily include the reasoning on facts and law adopted by the Assessing Officer which has been upheld by the CIT(A), we find that the Departmental stand as brought out in the orders in the present proceedings has been fully considered and addressed by the parties before the Co-ordinate Bench where the Revisionary power exercised by the Ld. Commissioner was a subject matter of consideration by virtue of the challenge posed by the assessee in appeal before ITAT. We find that the arguments and the written submissions advanced by the Ld. CIT DR in the present proceedings under the name and signature of Principal Chief Commissioner of Income Tax, Noida which has been extracted in the earlier part of this order, it is seen are verbatim to what has been argued before the Co-ordinate Bench and has been reproduced by the Co-ordinate Bench at pages 40 to 43 of the said order. We further find that the Co-ordinate Bench in order to decide whether the Revisionary power exercised by the Ld. Commissioner qua the assessment order under challenge dated 30.12.2011 in 2009-10 AY was erroneous and prejudicial to the interests of the Revenue necessarily had an occasion to consider the very same provision; the very same facts and events; the facts borne out from the very same Agreements and the very same arguments by the parties. It is seen that considering these facts, arguments and provisions of law the Co-ordinate Bench noted in para 18 at Page 57 of 95 I.T.A .No.-414/Del/2015 pages 53 and 54 of their orders that the following prime issues emerged for their consideration for adjudication:
Para 18 .............................
.............................
(i) Whether in view of concession agreement and allied documents, the assessee claim falls u/s 80IA(4)(i) Explanation clause (a) or (b) and whether the assessee is developing a road (including toll road) or highway?
(ii) Whether in the background of concession agreement and judgment of the Hon'ble Supreme Court in the case of Nand Kishore Gupta vs State of UP, the AO was correct in treating the subject year as falling in the eligible period u/s 80IA(2) of the Act in the light of the fact that the assessee did commence the development of the infrastructure facility since 5.4.2007 and was actively developing the infrastructure facility during the assessment year under consideration?
(iii) Whether the AO took a plausible reasonable and sustainable view by allowing the assessee claimed deduction under clause (a) of Explanation to Section 80IA(4)(i) of the Act?
(iv) Whether the assessment order questioned and alleged by the ld.
CIT, is unsustainable and not in accordance with law and has been passed without application of mind, in the peculiar facts and circumstances of the case, specially in the light of the provisions of section 80IA(4) r/w its sub-sections (2) & (6) and other relevant provisions of the Act and the Income Tax Rules, 1962.
(v) Whether the CIT Noida was in error by invoking provisions of section 263 of the Act in the peculiar facts and circumstances of the present case, specially when he has not decisively concluded the issue i.e. whether the assessee is developing a toll road or a highway project and left it midway without any decisive conclusion/direction?
(vi) Whether the ld. CIT exercised its powers u/s 263 of the Act in revising the assessment order on the issue of allowability of deduction u/s 80IA(4) of the Act on interest earned from FDR and without show causing the assessee in the notice u/s263 of the Act &on the issue of allowability of depreciation and, therefore, the same is not valid and void ab initio on these issues."
(emphasis provided) 10.4. A perusal of the issues as summed up in issue (i) to issue (iii) would show that the issues addressed in the main plea of the assessee in the present Page 58 of 95 I.T.A .No.-414/Del/2015 proceedings stands considered and addressed by the Co-ordinate Bench. A careful reading of the aforesaid order, we note would show that the Co-ordinate Bench has extracted the specific provision in para 19 and thereafter in para 20 (at pages 56 to 64) has extracted the relevant portions of the Concession Agreement dated 07.02.2003 between TEA and the assessee and proceeded to analyse the same in para 21. We further note that the arguments advanced in the present proceedings by the parties are identical to what has been advanced before the Co-ordinate Bench. The arguments on behalf of the assessee recorded in paras 22 to 23 read alongwith the departmental stand as addressed in para 24 by the Co-ordinate Bench shows that the very same arguments have been repeated before us. It is seen from the aforesaid order of the Co-ordinate Bench that the arguments advanced on behalf of the assessee are a virtual repetition of what has been argued before us. It is seen that the Co-ordinate Bench has considered these arguments and on a reading of para 25 to 29 addressing the legal position on the specific provisions as settled by the various Courts in Para Nos. 30 and 31 of their order and taking note of the objections of the Ld. CIT DR addressed in para 32 have proceeded to consider the ratio of the various decisions cited and record their agreement with the view canvassed by the assessee to hold in para 34 that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally so as to advance the objective of the provision and not to defeat it. We further note that the Co-ordinate Bench in para 38 summing up the respective stand of the parties before the Co-ordinate Bench proceeded Page 59 of 95 I.T.A .No.-414/Del/2015 from para 39 onwards to record, the submissions of the assessee on facts on record including the Agreements; the objects guiding the same and project details and the facts on record. Specific note may be made of para 43 at pages 80 wherein before the Co-ordinate Bench it was argued on behalf of the assessee that "land for development" is actually a consideration like the toll-fee since the toll fee alone would not have been able to insure positive return on equity on the project. In para 44 the Co-ordinate Bench it is seen has addressed the litigation in the Apex Court by the assessee in a PIL alleging inadequate consideration for acquisition of land amongst other issues wherein the very same Agreements/scheme and activities was a subject matter of consideration. A perusal of Paras 49, 50 and 51 of the Co-ordinate Bench brings out the arguments advanced by the parties before the Co-ordinate Bench on the specific provision of law applicable. A perusal of the same shows that the arguments are identical in the present proceedings also. The Co-ordinate Bench it is seen considering these undertook to consider the meaning of the words "Highway", "Expressway," "Toll plaza" and "road including toll road" in paras 52 to 57 and thereafter considering how these words have been used in the Agreement proceeded to reject the departmental view canvassed namely that the assessee is engaged in the development of infrastructure facility of a "highway including housing or other activities being an integral part of the highway project". On the basis of the discussion it was the considered opinion of the Co-ordinate Bench that the business activities of the assessee company fell within the ambit of clause (a) of Explanation to Section 80IA(4). Page 60 of 95
I.T.A .No.-414/Del/2015 In view thereof, the Co-ordinate Bench in para 58 concluded that on account of these observations and findings the alternate claim of the assessee and the objections of the CIT DR about non-compliance of requirements of sub-section (6) of section 80IA become academic and infructuous.
10.5. A perusal of para 61 to 63 of the order of the Co-ordinate Bench brings out the submissions on facts relatable to the other issues canvassed in the present proceedings. A further reading of Paras 64 to 69 would bring out that the submissions before the Co-ordinate Bench have been repeated by the Revenue in the present proceedings also. Similarly the reply of the assessee thereon addressed in para 70 by the Co-ordinate Bench it is seen is re-iterated in the present proceedings before us. We note that before the Co-ordinate Bench the representation for the assessee and the Revenue was made by the very same Ld.AR and the CIT DR hence the candid belief of the Ld.AR that the issues are considered and decided. To revert back to the order of the Co- ordinate Bench, we find that in Paras 71 to 85 considering the position of law on the facts as marshalled it was concluded by the Co-ordinate Bench that the issues as formulated as Issue No.(i),(ii) and(iii) were to be decided in favour of the assessee.
10.6. In the face of this clear cut finding of the Co-ordinate Bench available on record as far as the present proceedings are concerned we find that no case has been made out by the Ld. CIT DR on the basis of repeating the arguments already considered by the Co-ordinate Bench wherein no distinguishing fact, circumstance, position of law was cited on behalf of the Revenue to canvass a Page 61 of 95 I.T.A .No.-414/Del/2015 contrary view except a repetition of the arguments on facts and law as advanced before the Co-ordinate Bench. The said departmental stand is notwithstanding the fact that apart from the order of the ITAT in the base year itself which stands finalized we also note that there are two separate and distinct orders passed by two different Assessing Officers considering the very same facts and the provisions of law in the orders passed u/s 143 (3) who have considered and allowed an identical claim of the assessee by way of scrutiny assessments u/s 143(3). This is also notwithstanding the fact that the issue has to be settled in the first year i.e. the initial year which was 2009 - 10 assessment year.
10.7. In the said background, we would briefly sum up the facts in the present proceedings wherein we find that the view expressed by the AO has been upheld by the CIT(A) without addressing the submissions extracted in the order. A perusal of the reasoning adopted by the AO in the present proceedings shows that the fact that "the toll road was inaugurated on 09.08.2012 i.e. during the period relevant to A.Y. 2013 - 2014" was a fact taken note of by and the AO in the present proceedings also and this fact was one of the foundational facts noted by Ld.CIT, Noida in his order u/s 263. In the facts of the present case also the AO held that "it was found that the income declared from business during the year did not contain any income from the infrastructure facility being toll road. On noticing the above facts, a show cause dated. 13.03.2014 was issued to the assessee requiring clarification and justification on the claims made by the assessee u/s. 80IA(I), which has been abstracted Page 62 of 95 I.T.A .No.-414/Del/2015 above." The existence of this fact was also one of the main reasons considered by CIT, Noida. The replies of the assessee in the AO's words shows that the arguments advanced before the Co-ordinate Bench and repeated before us intact were argued before us also. The assessee has argued before the AO as found recorded in the assessment order "that the assessee claims that he is covered u/s. 80 IA (4) (i) r/w Expln. (a). The assessee has referred to Sec. 80 IA (2) whereby it has been contended that the deduction u/s. 80 IA is allowable for any 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking or enterprise develops or begins to operate any infrastructure facility. It has been further submitted that Sec. 80 IA applies as provided in. Clause (i) of sub - sec, 4 of Sec. 80 IA to any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils" all the conditions. A reading of the following reasoning of the AO shows that the factum of income from sale of plots etc. as before the CIT, Noida was a fact taken note of. The AO notes that "the issue of deduction u/s. 80 IA has been carefully examined w.r.t. material on record and various explanations and documents filed by the assessee. In this case, during the year, the assessee has earned income from sale of plots, sale of built up properties, lease rentals, transfer fees, FDR bank interest, profit on account currency fluctuations and misc. Income. The assessee has claimed the complete income from all these sources as exempted u/s. 80 IA (4) (i) r/w. Expln. (a)." The said claim was rejected by the AO holding that "the claim of assessee that his income is Page 63 of 95 I.T.A .No.-414/Del/2015 exempted u/s. 80 IA (4) (i) r/w. Expln. (a) is not tenable under the facts of the case." The reasoning adopted in subsequent paras it is seen is identical to what has been canvassed by the Revenue before the Co-ordinate Bench and considered by it and also re-iterated in the present proceedings before us by the Revenue. It is seen that the AO considering the provisions in the facts where "toll road" was inaugurated on 09.08.2012; where the disclosures in the Notes to Accounts refered to "road including toll road" and the income is derived from sale of plots, built of properties, lease rentals etc. the assessee's claim was held to be not allowable. It is further seen that the reliance placed on the precedent available in the form of assessment orders u/s 143(3) in 2009-10 AY was dismissed by the AO in the following manner:-
"The assessee has also submitted that in earlier years i.e. in A.Y. 2009 - 2010 and A.Y. 2010 -2011, under more or less, similar facts and circumstances, he claimed deduction u/s. 80 IA which was allowed u/s. 143 (3). The assessee has also quoted the decision reported at 191 ITR 321 (SC) in the case of RADHA SWAM1SATSANG VS. CIT for the legal preposition that the principle of consistency should have been followed, In this regard, there is no dispute that initially in Asstt.'s u/s. 343 (3) the said deduction was allowed to the assessee. However, vide order u/s. 263 dtd. 30.03.2014 passed by Commissioner of Income Tax Noida has already cancelled the said deduction u/s. 80 IA in A.Y. 2009 - 2010 and the said issue set-aside to the file of Assessing officer for fresh adjudication. Hence, as on date the said deduction does not survive so far as A.Y 2009 - 2010 is concerned.
(emphasis provided) 10.8. Thus we find that the AO in these peculiar facts in the face of the order u/s 263 of CIT, Noida was unable to look beyond the said order and could not have taken guidance from the view taken by the AO in the scrutiny assessments made u/s 143(3) by the Assessing Officers in 2009-10 and 2010- 11 AYs. The impugned order it is seen is dated 12.01.2015 and thus admittedly Page 64 of 95 I.T.A .No.-414/Del/2015 was passed before the order of the ITAT which is dated 13.04.2015. Thus the benefit of the said order was not available to the Ld.CIT(A) also. We note that though the Ld.CIT DR in her Paper Book of 98 pages has filed copy of Assignment Agreement dated 19.10.2007 entered into between the assessee;
JAL and Taj Expressway Industrial Development Authority at pages 12 to 90 of the Paper Book however, no argument was advanced on behalf of the Revenue referring to the said Agreement so as to canvass that the facts as appreciated by the ITAT in 2009-10 AY in its order dated 13.04.2015 are incorrect. Infact the said Agreement was not referred to at all in the course of the arguments.
Reference to this specific fact is made so as to address the factual position that it is not the case of the Revenue that appreciation of facts in the order by the Co-ordinate Bench is disputed by the Revenue and infact facts as appreciated by the ITAT are not disputed by the Revenue at all. The observation is significant as the claim of the assessee has been that the aforesaid order of the ITAT in the initial year has considered the facts which continue to remain identical and concluded the issue in favour of the assessee thus judicial precedent available deserves to be followed. Thus in this background, we note that no change in fact or circumstances despite filing a copy of the Assignment Agreement has been pleaded by the Revenue. Reverting to the facts as considered qua Ground Nos. 5, 7, 8 and 9 raised before it we note that the issues enquired into by the Co-ordinate Bench as set out in notice issued u/s 263 by the CIT, Noida are found extracted by the Co-ordinate Bench in para 4.
It is seen that the Co-ordinate Bench after extracting the reply on behalf of the Page 65 of 95 I.T.A .No.-414/Del/2015 assessee before the CIT, Noida proceeded to reproduce the written submissions of the Ld.AR on behalf of the assessee. On a perusal of the same, we have noted that identical arguments have been raised before the Co-ordinate bench.
Thereafter the arguments of the Revenue have been extracted. A perusal of the same as we have already noted shows that they are identically worded as in the present proceedings a fact which has been noticed by us in the earlier part of this order. The Co-ordinate Bench after setting out the facts; the specific provision of law; the Agreement dated 07.02.2003 between the Taj Expressway Industrial Development Authority (TEA) Statutory body constituted under UP Industrial Development Act 1976 relevant portion of it are found extracted in para 20 at pages 57 to 64 by the Co-ordinate Bench has proceeded to analyse these in para 21 to hold as under:-
21. In view of above agreement, the assessee was under obligation to do "work" as mentioned in para 2.1 of chapter II and in turn, concession was granted by the TEA to the assessee as mentioned in chapter III, the land for construction of Expressway and land for development was provided to the assessee and the same was released by the TEA, as per terms of 4.1 and 4.2, respectively, of Chapter IV of the agreement. As per above provisions and terms of the agreement, the TEA has to provide land for expressway and land for development to the assessee on cost of acquisition plus a lease rent of Rs.100/- per hectare per year.
The assessee was under obligation to construct Expressway between Agra and Noida in U.P. and concession as mentioned in Chapter-III was granted to the assessee. From vigilant perusal of the concession agreement, we note that the assessee, in turn, was given the right to collect toll fees from expressway users and also granted right to decide the disbursement and purpose of land given for development and the rights to use the land as its own or to sub- lease the same to a third party in accordance with urban development policy and applicable rules of the Government of UP."
(emphasis provided) 10.9. The Co-ordinate Bench it is seen in para 22 (also relied upon by the Ld.CIT DR) took cognizance of this specific act of State which was questioned Page 66 of 95 I.T.A .No.-414/Del/2015 by a litigant before the Apex Court in PIL in Civil Appeal No.7468 of 2010 in the case of Nandkishore Gupta vs State of UP and concluded that on a reading of paras 30 and 34 of the said judgement the work of development of the Expressway and development of the land are integral and inseparable part of the project/scheme. The aforesaid paras extracted in para 22 by the Co- ordinate Bench from the decision of the Apex Court are extracted hereunder for ready-reference:-
22. ...............
"The Expressway is a work of immense public importance. The State gains advantages from the construction of an Expressway and so does the general public. Creation of a corridor for fast moving traffic resulting into curtailing the traveling time, as also the transport of the goods, would be some factors which speak in favour of the Project being for the public purpose. Much was stated about the 25 million square meters of land being acquired for the five parcels of land. In fact, in our opinion, as has rightly been commented upon by the High Court, the creation of the five zones for industry, residence, amusement etc., would be complimentary to the creation of the Expressway. It cannot be forgotten that the creation of land parcels would give impetus to the industrial development of the State creating more jobs and helping the economy and thereby helping the general public. There can be no doubt that the implementation of the Project would result in coming into existence of five developed parcels/centers in the State for the use of the citizens. There shall, thus, be the planned development of this otherwise industrially backward area. The creation of these five parcels will certainly help the maximum utilization of the Expressway and the existence 3 of an Expressway for the fast moving traffic would help the industrial culture created in the five parcels. Thus, both will be complimentary to each other and can be viewed as parts of an integral scheme. Therefore, it cannot be said that it is not a public purpose.
.................. (last part of para 30) We have already considered this question that in the present case, there is nothing to indicate that the acquisition is for the Company i.e. for Jaiprakash Industries Ltd. It is only, therefore, that we are at pains to point out that the Government was only using the Company for implementing its policy."
(last part of para 34) (emphasis provided) Page 67 of 95 I.T.A .No.-414/Del/2015 10.10. Considering the same, the Co-ordinate Bench came to the following conclusion:-
23. "Hence, in view of above observations of Hon'ble Apex Court in para 30, we may safely infer that the land for development of the Expressway and development of five land parcels for industrial, commercial, amusement and residential purposes was allotted to the assessee under concession agreement. The work of the development of the Expressway and development of the land are integral and inseparable part of the project/scheme. We may also point out that the land for development was not allotted only for residential/housing purpose but also for the purpose of industrial, commercial and amusement etc., hence the concession agreement was intended to use the assessee company for implementation of the development policy of U.P. Government as observed by Hon'ble Apex Court in last operative part of para 34 of the judgment in the case of Nand Kishore Gupta (supra).
(emphasis provided) 10.11. It is seen that thereafter in paras 28 onwards considering the arguments of the parties before the Bench on the principles applicable for interpretation of the specific provisions vis-à-vis the facts of the case the Co- ordinate Bench finally concluded in para 34 that the Incentive provisions in a taxing statute have to be interpreted liberally. For ready-reference, the relevant extracts addressing the reasoning for the aforesaid conclusion is reproduced hereunder:-
28. "On careful consideration of above rival submissions of both the sides, firstly we are in agreement with the contentions of the ld. AR that the allegation of non-compliance of the CBDT Circular No. 1/2006 (supra) has not been mentioned by the ld. CIT Noida in the notice issued to the assessee u/s 263 of the Act (supra). Secondly, the construction of language and words used by the legislature in sub-
section (2) of section 80IA of the Act and used by the CBDT in Circular No. 1/2006 (supra) are similar viz. "develops and begins to operate". The heading given by the legislation to section 80IA of the Act reads as "Deductions in respect of profits and gains from industrial undertaking or enterprise engaged in infrastructure development etc." which, to our humble understanding, express the intention of the legislature that the exemption therein section 80IA of the Act is available for the undertakings or enterprise which are engaged in the Page 68 of 95 I.T.A .No.-414/Del/2015 business of infrastructure development etc. Meaning thereby infrastructure development is paramount consideration for grant of exemption u/s 80IA of the Act. If the literal meaning is given to the conjunctive word "and" between "develops" and "begins to operate"
then the enterprise would be entitled to exemption only when the enterprise develops and begins to operate infrastructure facility on or after 1.4.1995, as required by condition (c) of section 80IA(4)(i) of the Act.
29. Under said interpretation as given by the Revenue authorities, the enterprise would be entitled for exemption u/s 80IA(4) of the Act only after completion of the project even if development takes more than one year to start operations and then only the income derived from operating and maintaining of infrastructure facility would be eligible for exemption and enterprises engaged in development activities would never be entitled for exemption. Obviously, this cannot be an intention of legislature and CBDT circular (supra) while framing the provision of section 80IA of the Act and issuing Circular No.1/2006 (supra) respectively.
30. At this juncture, we respectfully take cognizance of the decision of Hon'ble Supreme Court in the case of K.P. Verghese (supra) and decision of Full Bench of Hon'ble Orissa High Court in the case of Gangaram Chopalia (supra) and decision of Hon'ble Jammu & Kashmir High Court in the case of CIT vs J&KTDC (2001) 248 ITR 94 (J&K), as relied by the ld. AR. In the case of K.P. Varghese v ITO (supra), the Apex Court held that the interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. The relevant part of the decision reads as under:-
"A statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even do some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction. Speeches made by the members of the legislature on the floor of the House when the bill is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for its introduction can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India, that the interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible."Page 69 of 95
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31. Ld. AR placing reliance on the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. vs CIT (1992) 196 ITR 188 (SC), the ld. AR submitted that if provision for checking abuse is found to have resulted into nullifying the very purpose of its enactment then the provisions of taxing statutes should be interpreted liberally so as to advance the objective of the provisions and not frustrate it. Ld. AR has further drawn our attention towards decision of Hon'ble Bombay High Court in the case of CIT vs ABG Heavy Industries Ltd. (2010) 322 ITR 323 (Bombay) and submitted that after considering the ratio of the decision of Hon'ble Apex Court in the case of Bajaj Tempo Ltd. (supra) it was also held that an assessee did not have to develop the entire part of eligible business or activity in order to qualify for a deduction u/s 80IA of the Act.
32. Ld. DR contended that the toll was inaugurated on 9.8.2012 (relevant to AY 2013-14). Hence, literal meaning does not allow to grant exemption u/s 80IA of the Act from AY 2009-10. Ld. AR placing rejoinder submitted that the assessee started its operation from 5.4.2007. Hence income earned from the activities which are inextricably linked with the main object and scope of work, commencement of business operation are eligible for exemption u/s 80IA of the Act. Firstly, we note that Hon'ble Apex Court laid a basic principle for interpretation of beneficial taxation statutes in the case of Bajaj Tempo Ltd. (supra) which reads as follows:-
"A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. BY THE COURT: "If a provision for checking abuse is found to have resulted in nullifying the very purpose of its enactment and the Legislature intervenes, then it can be assumed that the Legislature, having been satisfied of the failure of the purpose for which the provision was inserted, proceeded to cure the defect by suitably amending the provision or removing it."
33. In the decision of ABG Heavy Industries (supra) the Hon'ble Bombay High Court referring to the ratio of the decision of Hon'ble Apex Court in the case of Bajaj Tempo (supra) held the assessee did not have to develop the entire port/project into to qualify for a deduction u/s 80IA of the Act. Their lordships further held that the Parliament did not legislate a condition impossible of compliance. The relevant operative part of this order reads as follows:-
"19 . The obligations which have been assumed by the assessee under the terms of the contract are obligations involving the development of an infrastructure facility. Section 80-IA of the Act essentially contemplated deduction in a situation where an enterprise carried on the business developing, maintaining and operating an infrastructure facility. A port was defined to be included within the purview of the expression "infrastructure Page 70 of 95 I.T.A .No.-414/Del/2015 facility". The obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under section 80-IA. Parliament did not legislate a condition impossible of compliance. A port is defined to be an infrastructure facility and the circular of the Board clarified that a structure for loading, unloading, storage, etc., at a port would qualify for deduction under section 80-IA. The condition of a certificate from the Port Authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The assessee developed the facility on a BOLT basis under the contract with JNPT. On the fulfillment of the lease of ten years, there was a vesting in the JNPT free of cost."
34. Therefore, in view of ratio laid down by Hon'ble Apex Court in the case of Bajaj Tempo (supra) and by Hon'ble Bombay High Court in the case of ABG Heavy Industries (supra), we respectfully note that a provision in taxing statute granting incentives for promoting growth and development should be construed liberally and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it also has to be construed so as to advance the objective of the provision and not to frustrate it or to defeat its purpose. We further respectfully note the ratio of the decision of Hon'ble Bombay High Court in the case of ABG Heavy Industries (supra) wherein it was categorically held that the assessee did not have to develop the entire port or project in order to qualify for exemption u/s 80IA of the Act and that should not be an intention and expectation of legislature to legislate a condition impossible of compliance." 10.12. The Co-ordinate Bench again in para 38 summed up the controversy in the following manner:-
38. "Having heard arguments of both the sides and after having gone through relevant material placed on record, written submissions, gist of case laws relied by both the parties, we note that the main controversy in this case is mainly that the assessee is claiming that as per objects of the company, concession agreement and main activities of the company, the company developed a toll road between Noida and Agra and his claim for deduction falls on four corners within the ambit of clause (a) of Explanation to section 80IA(4)(i) of the Act. Per contra, the main contention of the ld. CIT, Noida is that the assessee developed "a highway project" which was inaugurated on Page 71 of 95 I.T.A .No.-414/Del/2015 9.8.2012 by Hon'ble Chief Minister, Government of UP which falls under clause (b) of Explanation to section 80IA(4)(i) of the Act and said period is related to financial year 2012- 13 pertained to AY 2013-14 and since the project of the assessee had not started its operation in the period related to AY 2009-10, therefore, the AO wrongly allowed the claim of the assessee."
(emphasis provided) 10.13. On a reading of para 50 of the said decision, it is seen that the arguments as advanced before the CO-ordinate Bench have been re-iterated in the present proceedings also as these form the basis of the denial of assessee's claim before the AO:-
50. "...............The ld. CIT DR further contended that since the assessee company has not commenced business operations during the year under consideration and the assessee has begun to operate infrastructure facility w.e.f. 9.8.2012, when the expressway was inaugurated, hence, prior to this date, the assessee had earned only profits which are attributable to sale of land which was transferred to it in the terms of concession agreement, therefore, the assessee would be eligible for deduction u/s 80IA only w.e.f. AY 2013-
14. ................The following reply of the assessee as extracted in para 51 has been considered.
51. Ld. AR also placed a rejoinder to the above submissions of the ld.
CIT DR that the concession agreement was executed for development of expressway and development of road. Ld. AR has further drawn our attention towards assessee's paper book page 180 to 184 and submitted that it was clarified before the AO that in consideration of the assessee, in agreeing to develop, design, engineer, finance, procure and construct toll road, the assessee has been granted right for land development of 25 million sq mtr of land in addition to the right to collect "toll fee" and the revenue/profits generated from sub-leasing of the plots/land earned by the assessee company or the income derived from the "business" of development of road also covers within its scope the profits from all activities that are integral part of the business of the road development. Ld. AR also invited our attention towards Form No. 10CCB r/w auditor's certificate under Rule 18BBB that the assessee is certified to be engaged in developing, operating and maintaining the infrastructure facility which is certified to be "road including toll road". 10.14. As noted earlier in order to adjudicate upon the claims and counter- claims, the Co-ordinate Bench undertook to consider the meaning of Page 72 of 95 I.T.A .No.-414/Del/2015 "highway", "expressway", "toll", "toll gate" so as to address the terms as used in the Concessionaire Agreement. After considering these, it was concluded in para 54 that the use of Expressway, the toll fees and the cumulative stipulation that the assessee was tasked to developing, operating and maintaining a six laned controlled access expressway with limited access and exit points between Noida and Agra where fee was payable to the assessee for vehicles using the Expressway at toll-plazas on the toll-road, leading the Co-ordinate Bench to finally conclude in para 57 that the business activities of the assessee company fall within the ambit of clause (1) of Explanation 80IA(4) of the Act. The reasoning and conclusion is extracted hereunder:-
52. "On careful consideration of above rival submissions, we note that firstly it would be just and proper to consider the meaning of the "highway", "Expressway", "Toll", "Toll gate", "toll plaza" and "road including toll road" which are being repeatedly used by both the sides during arguments. We may point out that these words have not been defined in Income Tax Act and neither the ld. AR nor ld. CIT-DR has placed any reference of meaning to the above stated terms. Therefore, we are compelled to refer available dictionaries to properly understand the appropriate meaning of these terms/words for proper adjudication of actual aspects of this case, which read as under:-
(A) Highway - a public road that everyone has right to use (Ref.
Chamberlain dictionary, First Indian Edition 2001 at page 635)
- A public road especially an important road that joins cities or towns together (Ref. Cambridge Dictionary, low price edition 1996 at page 669) (B) Expressway - a major road for fast moving traffic, especially with three lane per carriageway and limited access and exit points (Ref. Chamberlain dictionary, first Indian edition 2001 at page 462 & 892.)
- A wide road built for fast moving traffic travelling long distances with a limited number of points at which drivers can enter and leave it. (Ref. Cambridge dictionary, low price edition 1996 at page 485) (C) Toll - a charge payable to use of a bridge or road (Ref. Concise Oxford Dictionary, at page 1507) (D) Toll gate - a barrier across a road where a charge must be paid to proceed further (Ref. Concise Oxford Dictionary, Edition at page Page 73 of 95 I.T.A .No.-414/Del/2015 1507).
- A gate at the start of a road or a bridge at which you pay anamount of money in order to use the road or bridge.
(Cambridge Dictionary, low price edition 1996 at page 1533) (E) Toll Plaza - a row of toll booths on a toll road (Ref. Concise Oxford Dictionary edition at page 1507) (F) It is pertinent to note that "Toll plaza" has also been defined at page 9 of the concession agreement as structures and barriers erected on the Expressway. For the purpose of regulating the entry/exit of vehicles in accordance with the provisions of this Agreement." The word "Tolling contract" has been also defined at page 9 of the agreement as the contract, if any, entered into by the concessionaire i.e. assessee with tolling contractor for operation of "Toll Plazas", including collection of fees for and on half of the concessionaire."
53. In view of above referred definitions, in our humble understanding, a "highway" is a public road that everyone has right to use; an "Expressway" is major road for fast moving traffic with three lane per carriage way, meaning thereby both way six lane, with controlled limited access and exit points; whereas a "Toll" is a fee or charge payable to use of a road or bridge; Tollgate" is a gate at the start of a road or bridge at which user pays an amount of money (toll). For the use of road or bridge; and "Toll plaza" is a row of toll booths on a toll road.
54. Turning to the facts of the present case, we may note that in the concessionaire agreement the words, "highway" and "toll road" have not been used and the word "Expressway" has been used several times which has been defined at page 6 of the agreement as the access controlled 6-lane Expressway between Noida and Agra with service roads and associated facilities and on the same page 6 of the agreement the word "Fees" has also been defined as "Fees means the charges levied on and payable for vehicles using the Expressway in accordance with the fees as may be settled under this agreement." The cumulative meaning of these words used in definitions and other stipulations of the agreement make it vivid that there was a contract between assessee company and the TEA for developing, operating and maintaining a six lane controlled access Expressway with limited access and exit points between Noida and Agra and a fees/toll was payable to assessee company for vehicles using the Expressway at toll plazas i.e. at row of toll booths on toll road.
55. Ld. DR placing reliance on the decision of Hon'ble Supreme Court in the case of Ishikawaijima Harima Heavy Industries Ltd. vs DIT, Mumbai (2007) 288 ITR 408 (SC) submitted that the object of the contract in question may be inferred from the stipulation and terms and conditions of the contract and as per intention of the parties to the contract, any other meaning or intention can not be given to the contract Page 74 of 95 I.T.A .No.-414/Del/2015 and the agreement (supra) between the assessee company and TEA is intended to develop, operate and maintain a "toll road", therefore, the AO took a reasonable and plausible view in allowing exemption u/s 80IA(4) of the Act.
56. The relevant operative part of decision of Hon'ble Supreme Court in the case of Ishikawaijima Harima Heavy Industries Ltd. (supra) reads thus:-
"In constructing a contract, the terms and conditions thereof are to be read as a whole. A contract must be construed keeping in view the intention of the parties. No doubt, the applicability of the tax laws would depend upon the nature of the contract, but the same should not be construed keeping in view the taxing provisions."
57. "On the basis of foregoing discussion, we are of the considered opinion that the business activities of the assessee company fall within the ambit of clause (a) of Explanation to section 80IA(4)(i) of the Act. We decline to agree with the ld. CIT-DR that the assessee is engaged in the development of infrastructure facility of a "highway including housing or other activities being an integral part of the highway project.
58. Although the ld. AR has also placed an alternative claim u/s 80IA(6) but in view of our observations and findings, as set out above, the alternative said claim of the assessee and objections of ld. CIT DR about non-compliance of requirement of sub-section (6) of section 80IA of the Act becomes academic and infructuous and we refrain ourselves to deliberate further on the alternate claim of the assessee as well as legal objections of ld. CIT DR."
(emphasis provided) 10.15. A careful reading of the order of the Co-ordinate Bench brings out that considering the above reasoning which happens to be the main plea in the present proceedings the Co-ordinate Bench also was required to address the issue specifically considering the facts that since the income available then was only from sale/sub-lease of land for 2009-10 AY. Thus, the issue whether the assessee company is eligible for exemption u/s 80IA(4)(i) of the Act, we find has already been considered by the Co-ordinate Bench on similar facts. A further reading of paras 59 onwards and facts as set out in paras 60 to 61 which infact Page 75 of 95 I.T.A .No.-414/Del/2015 is based on the terms of the Agreement reproduced in para 20 by the Co- ordinate bench and analyzed in para 21 would show on considering the very same facts; the arguments of the parties and discussion in para 35 to 50 it can be seen that it is identical to what has been considered by the AO in the present proceedings and argued by the Ld.CIT DR before us. These facts and discussions are even relevant for considering the departmental stand in respect of the arguments in support of "Other Income" as not being "derived" from eligible business directly. These arguments also address the facts relatable to the disallowance made by the AO u/s 40(a)(ia) in the present proceedings which issues we shall come to subsequently. For the moment we note that a perusal of the paras 60 to 63 of the order passed by the Co-ordinate Bench would show that facts recognizing that in addition to the collection of toll fee the grant of land was made to the assessee for development on cost of acquisition plus lease premium of Rs.100/- per hectare per annum (facts relatable in part to 40(a)(ia) claim) for which the assessee in turn was under
obligation to develop, design, engineer, frame, procure and construct toll road as result of which it was canvassed that the income from sale/development of land was indeed income derived from "Business" of development of toll road and would be eligible for deduction. We find that similar arguments have been advanced before us also. Considering the arguments advanced on behalf of the Revenue in paras 64 to 69 it is noted the Co-ordinate Bench finally in paras 71 to 81 came to the conclusion that development is a continuous process which starts from the date of commencement of business and beginning Page 76 of 95 I.T.A .No.-414/Del/2015 of the developmental activities and ends only when development work concludes. Thereafter operation and maintenance starts. The Co-ordinate Bench considering the facts, the language used and the legislative intent held that the assessee's claim was allowable.
10.16. We first reproduced para 60 to 63 to bring out the facts and arguments accepted by the Co-ordinate Bench:-
60. "Ld. AR further contended that the assessee company entered into any concession agreement with TEA for development of an Expressway between Noida and Agra and assessee was given a right to collect toll/fees from the users of Expressway, hence, Expressway was actually a toll road. Ld. AR further pointed out that the assessee company, in addition to collection of toll right, was also granted 25 million sq. Meter land for development on cost of acquisition plus lease premium of Rs. 100/- per hectare per annum and in turn the assessee company was under obligation to develop, design, engineer, frame, procure and construct toll road and hence, the income from sale/development of land was indeed income derived from "Business" of development of road and would be eligible for deduction.
61. Ld. AR, reiterating assessee's arguments and submissions before AO vide letter dated 21.12.2011, submitted that the consideration for developing, operating and maintaining the said infrastructure facility is provided, inter alia, by way of right to develop and sub lease the adjoining land allotted to assessee is evident from concession agreement executed between assessee and the TEA and relevant extracts, conditions and clauses clearly demonstrate that the assessee was under obligation of development, operation and maintenance of the Expressway and development of 25 million sq. Metre land along the proposed Expressway for commercial, industrial, institutional, amusement and residential development. It was also explained that as per concession agreement, the assessee company was under obligation to pay cost of acquisition plus lease rent of Rs.100/- per hectare per annum for the land proposed to be used for construction of Expressway and also for the 25 million square Meter land for development along the proposed expressway at five or more locations. Ld. AR further explained that the assessee was not granted any title over the Expressway and land used for construction of Expressway except right to collect toll/fees as prescribed by Govt. of UP from time to time only during concession period of 36 years and assessee was granted land for development with right to further sub-
lease developed or undeveloped land to sub lessees or land users. Page 77 of 95
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62. Ld. DR has further drawn our attention towards Chapter IV of concession agreement clauses 4.3(d), 4.4 and 4.5 and submitted that the object of the infrastructure scheme can be seen from the global tender notice inviting offers to show that the infrastructure facility as envisaged was road including toll road along with development of infrastructure for commercial, industrial, amusement, residential and institutional development. Further, the land was to be offered on acquisition cost on lease for 90 years by the TEA and the development of the said land and works thereon was a means for compensation and consideration to the infrastructure developer i.e. the assessee in view of the same. It was an obligation on the assessee towards the objective of the infrastructure development and as source of funds for meeting the investment involved in the project. Ld. AR vehemently contended that in view of above facts, the revenue/profits generated from sub- leasing of plots/land earned by the assessee are definitely an income derived from the "Business" of development of road and would be eligible for deduction. Ld. AR pointed out that the development of land was an integral and inseparable part of the business of road development due to its inextricable proximity with financial viability of the project and the word "Business" is wide enough to cover within its scope the profits from all activities that are integral part of road development. To support assessee's claim, ld. AR also pointed out that since sub-lease of plots is made pursuant to the rights granted under the concession agreement, therefore, the income earned from sub- lease of land plots is the income derived from "Business" of road development and hence, the same eligible for exemption u/s 80IA(4)(i) of the Act because the assessee started its business operations from 5.4.2007 onwards.
63. Ld. AR has again drawn our attention towards submissions of the assessee dated 23.12.2011 before the AO and submitted that the income from sub-lease of land for development is income derived from the business of infrastructure facility. Ld. AR further illustrated that in case the assessee had received a sum of money as consideration from the state government, then undisputedly the said sum of money would be income from the business of infrastructure facility and if instead of a sum of money, the assessee has been allotted land for development with related rights and obligations, then obviously the income on sub- lease of the land is just a sum of money in kind on its realisation and is income from the business of said infrastructure facility. Ld. AQR further contended that the said income from sub lease of land has been utilized for developing the infrastructure facility and same was actually utilized during the relevant financial year for infrastructure facility project and the overall cost/capital expenditure was for exceeding from the income derived therefrom and as such there was no taxable income." 10.17. The Assessee's re-joinder as recorded by the Co-ordinate Bench is also reproduced hereunder for the sake of completeness:-
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70. "Ld. AR placing rejoinder to the above legal contentions of the revenue, submitted that the language used in clause (c) is "has started"
or "starts". The expression "has started" indicates the events which have already occurred whereas the expression "starts" indicates the events which would occur and since the assessee is in the business of developing, operating and maintaining "road including toll road" which business has commenced on 5.4.2007, therefore, the condition laid down in clause (c) of sub-section 80IA(4)(i) is wholly satisfied. Ld. AR, reiterating his arguments before the AO, submitted that deduction is available even to an enterprise only "developing the infrastructure facility", meaning thereby an enterprise not operating and maintaining the infrastructure facility but only developing the same is also eligible for deduction u/s 80IA of the Act. Ld. AR also contended that if a view is taken that as per clause (c) of section 80IA(4)(i) the deduction is available only after the enterprise starts "operating and maintaining"
the infrastructure facility, the enterprise only developing such infrastructure facility would never be eligible for any deduction under this section, because such an enterprise would never "operate or maintaining" the infrastructure facility. Ld. AR repeated his earlier arguments and submitted that it is a settled legal preposition that a provisions should be interpreted in such a manner so that it subserves the purpose for which it is enacted and does not frustrate the same. 10.18. Considering the arguments, the Co-ordinate Bench concluded that the assessee is in the business of development of infrastructure facility of "road including toll road" and the assessee's activities fell within the ambit of clause
(a) of Explanation to sub-section 80IA(4)(i) of section 80IA rejecting the conclusions drawn by the CIT, Noida as the activity of sub-lease or sale of land for development which was received by the assessee was found to be a major part of consideration of project and it was found to be an inseparable part of the main business activity of development of infrastructural facility.
10.19. For ready-reference, these relevant extracts are reproduced hereunder:-
71. "In our humble understanding, statutory provision should be interpreted in the light of intention of legislation, heading given to the provision, language used therein and the context in which the particular proviso of the Act requires interpretation. The heading given by legislature to section 80IA of the Act reads as under:-Page 79 of 95
I.T.A .No.-414/Del/2015 "Deduction in respect of profits and gains from Industrial undertaking or enterprises engaged in infrastructure development etc. "
72. Meaning thereby the provisions of Section 80IA of the Act is related to the deduction in respect of profits and gains from enterprises engaged in infrastructure development etc. We further note that as per language used therein sub-section (1) grants deduction in respect of any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4) thereof, under sub-section (2) the admissible deduction is 100% of the profits and gains of eligible business for ten (10) consecutive assessment years (AY) out of twenty (20) AYs beginning with the AY in which such undertaking or enterprise develops and begins to operate any infrastructure facility referred in clause (iii) of sub-section (4).
73. We may further note that sub-section (4)(i) r/w clause (a) and (b) are related to deduction in respect of the enterprise carrying on business of
(i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils the following conditions:-
(a) It is owned by a company registered in India or by consortium of such companies;
(b) It has entered into an agreement with Central Government or a State Government or a local authority or any Statutory Body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility.
(c) It has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. As per proviso to sub-clause
(c) above in case of transfer of infrastructure facility or after 1.4.1999 by an enterprise which developed such infrastructure facility or transferor enterprise to another enterprise i.e. transferee enterprise shall apply to the transferee enterprise as if it were the enterprise to which this clause
(c) applies and the deduction form profits and gains would be available to such transferee enterprise for the remaining or unexpired period. The above noted meaning of aforesaid provisions is apparent from the language used therein.
74. Now if we consider the object of legislation, then as we have noted earlier that as per the heading given to the provision of section 80IA of the Act, the object of legislation is to provide deduction to the enterprises which are engaged in infrastructure development etc. It means that the infrastructure development is the main object of this provision to encourage entrepreneurs to put their resources and endeavours towards infrastructure development. In sub-section (2) the words "develops and begins to operate any infrastructure facility" have been used. We also note that explaining the first and second condition or eligibility of deduction is prescribed in clauses (a) and (b) to sub-section (4)(i) of the Act.
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75. Noticeably, sub-section (4)(i) mandates that any Enterprise carrying on the business of (i) development or (ii) operating and maintaining or
(iii) developing, operating and maintaining any new infrastructure facility will be entitled for deduction explaining the third condition for eligibility of deduction whereas in clause (c) to sub-section (4)(i) it has been prescribed that the enterprise would be eligible for deduction when it started or starts operating and maintaining the infrastructure facility on or after 1st day of April 1995.
76. Before going further to interpret third condition prescribed in clause
(c) of sub-section (4)(i) as per our humble understanding, we note that the development is a continuous process which starts from the date of commencement of business and beginning of the development activities and comes to an end when development work concludes and thereafter operation and maintenance thereto is started. When the intention of legislation is that the entrepreneurs should be encouraged and promoted towards infrastructure development etc., then it is a positive inference that the legislation intended to grant deduction for the enterprises which only develops or which operates and maintains or which develops, operate and maintain infrastructure facility. Our aforesaid view also finds support from proviso to sub clause (c) to section 80IA (4)(i) of the Act, wherein it is also provided that if developer of an infrastructure facility transfers the same, then the transferee enterprise would also be eligible for deduction as if it were the enterprise to which this clause (c) applies i.e. transferor enterprise, meaning thereby the enterprise which only develops infrastructure facility is eligible for deduction and in case developer transfers the facility for operation or maintenance to another enterprise then the transferee would also be eligible to deduction for the remaining or unexpired period as per sub section (2) or other relevant provisions of the Act. Hence, in view of above discussion, we may point out that the legislation has categorically adopted the date of 1st day of April 1995 for mandatory starting or commencement date of infrastructure facility development and the enterprises which started developing or starts operating and maintaining infrastructure facility on or after 1str day of April, 1995 are held to be eligible for deduction u/s 80IA(4)(i) of the Act.
77. We may further observe that the elaborate meaning of collective and cumulative reading of sub section (2) and (4)(i) mandates three pre- conditions in clause (i) of sub-section (4) viz. (a), (b) and (c) and it is required for the enterprise which claim deduction that all three conditions should be fulfilled simultaneously. If the intention of legislation was the deduction would be allowed only to the enterprise who develops and begins to operate and maintain infrastructure facility then it was not required to segregate or mandate the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining as stipulated in sub section (4)(i) and condition (a) and
(b) thereto. This interpretation also finds support from proviso to Page 81 of 95 I.T.A .No.-414/Del/2015 subclause (c) i.e. third condition wherein the transferee of infrastructure facility is also held to be eligible in the same manner in which the transferor which developed such infrastructure facility, is eligible for the remaining or unexpired period of deduction. In this situation, we may safely infer or draw a conclusion that the intention of the legislation is to grant deduction not only to an enterprise which develops, operates and maintains but also to an enterprise which only develop infrastructure facility. We, therefore, decline to acceptance interpretation of section 80IA of the Act as given by ld. CIT DR in her written submissions placed before us during arguments.
78. We further consider the contention of the ld. AR that the company started and began to operate its business activities from 5.4.2007 and irrespective of the fact that the infrastructure facility was formally inaugurated by the Hon'ble Chief Minister of UP Government on 9.8.2012, the assessee is eligible for deduction w.e.f. AY 2009-10 (relevant to Financial Year 2008-09) and onwards as and when business activities of developing infrastructure has begun, then income derived from business would be certainly eligible for deduction. Ld. AR has also contended that the activity of sub lease or sale of land for development, which was received by the assessee as a major part of consideration of project, is an integral and inseparable part of main business activity of development of infrastructure facility, therefore, income/profits derived during AY 2009-10 from sub-lease of land are the first degree operational profits of the business which is eligible for deduction u/s 80IA(4)(i) read with Explanation (a) thereto.
79. Since we have already held that the assessee company is in the business of development of "road including toll road"
infrastructure facility and the enterprises which only develops infrastructure facility are eligible for deduction u/s 80IA(4)(i) of the Act from the date when it begins to operate its business activity of development of infrastructure facility. Ld. CIT DR could not demolish these contentions of the assessee including the contention that the business operations of eligible enterprises visualises the development of infrastructure facility. When development activities come to an end or completed and such activity begins to facilitate the intended users, the act of operation and maintenance starts only after creation of entire or part development of infrastructure facility as per requirement. Further, the development work may spread over years which falls under several assessment period/years and if the beneficiary is expected to complete the project or completion of project is considered to be a pre-condition for deduction, then the eligible developing enterprise will have to wait till completion of the entire project during whole development period, which may have spread over several years, for want of this impractical condition. In this situation, the eligible enterprise would become eligible only in the last year of development wherein development work ends and infrastructure Page 82 of 95 I.T.A .No.-414/Del/2015 facility begins to operate, this certainly can not be an intention of the beneficial taxation legislation.
80. We further decline to accept the contention of ld. CIT, Noida and ld. CIT DR that since the assessee has not maintained separate books of accounts and has not created a reserve as required in Rule 18BBC and has not field required utilization certificate in Form 10CCC, therefore, the assessee is not entitled for deduction u/s 80IA(4)(i) of the Act as the sale of land or other activities being integral part of its highway project because since by earlier part of this order, we have held that the assessee is in the business of development of infrastructure facility of "road including toll road" and the assessee activities fall within the ambit of clause (a) of Explanation to sub-section (4)(i) of section 80IA of the Act and allegations and conclusion of ld. CIT, Noida are contrary to the facts and circumstances of the Act.
81. In view of foregoing discussion, we are of the considered view that the beneficial taxation provisions deserve a liberal interpretation which actually subserve the very purpose and object of the legislation and does not defeat or frustrate the same as has been held in several decisions and orders of Hon'ble Supreme Court and High Court including decision in the case of Hon'ble Apex Court in the case of CIT vs Vatika Township Ltd. 367 ITR 466 (SC)."
10.20. The position was again re-iterated by the Co-ordinate Bench in categoric terms as would be evident from the following extract:-
101. "We may further note that by the earlier part of this order, we have held that the assessee company is into the business of development of infrastructure facility i.e. which is a toll road as per its operational features and controlled and chargeable access and exit and the assesses' claim under clause (a) of Explanation to section 80IA (4) (i) of the Act is justifiable and plausible as per relevant provisions of the Act in the light of the character, facts and circumstances of the business of the assessee. Hence, we are of the considered opinion that the prepositions of two views is not applicable to the present case and even if view posed by the Ld. CIT is analysed then we note that the Ld. CIT himself has not conclusively decided that the assessees' claim of deduction falls under ambit of clause (b) of explanation to section 80IA (4) (i) of the Act."
10.21. Considering the ratio of the decisions relied upon by the Revenue to show that the assessment order in the base year was erroneous and prejudicial to the interest of the Revenue, the Co-ordinate Bench dismissed the claim and Page 83 of 95 I.T.A .No.-414/Del/2015 upheld the correctness of the order again in categoric terms by holding as under:-
110. "In view of ratios laid down by the judgments, as relied by the Ld. CIT DR and having gone through the facts of these cases, at the outset, we sincerely note that judgments are the light houses in the path of adjudication of taxation appeals but we respectfully observe that the benefit of the ratio of the same is not available to the Revenue as the present case is neither a case of "no enquiry" nor is a case where the AO, failed to make necessary enquiry and the assessment order was passed without any discussion or enquiry and the AO allowed the claim of the assessee without application of mind and thus, we respectfully hold that the benefit of the ratio of these orders/ judgments are not available for the Revenue in the present appeal as the facts and circumstances of the present case are clearly distinguishable from the facts of these cases and instant case is not a case wherein the AO passed assessment order without any enquiry, without application of mind and the AO failed to make proper enquiry."
(emphasis provided) 10.22. We note that the assessment order in the base year has also been examined by the Co-ordinate Bench in the light of the ratio of the Hon'ble Delhi High Court in CIT vs DLF Ltd. (2013) 350 ITR 555 (Delhi) to see whether the assessment order passed by the AO could be considered to be unsustainable in law. Considering the ratio of the said judgement, the Co-ordinate Bench found that the requisite shortcoming was not evident in the assessment order. 10.23. The Co-ordinate Bench in para 119 it is seen even proceeded to consider the issue of allowability of deduction on the income earned by the assessee from interest on fixed deposits of surplus funds with banks and allowability of depreciation claimed and allowed by the AO and it noted that in the absence of specific notice by CIT, Noida thereon the disallowance directed was not permissible. Not stopping there the Co-ordinate Bench noting the arguments of the assessee proceeded to hold "this issue is covered in favour of Page 84 of 95 I.T.A .No.-414/Del/2015 the assessee on all four corners" and summed up the position in para 127 of their order holding as under:-
127. "In the light of aforesaid discussion, if we analyse the facts and circumstances of the present case, we observe that the assessee company is in the business of developing, operating and maintaining infrastructure facility project since its incorporation w.e.f. 5.4.2007. We also observe that the development of the toll road with controlled access and exit points and right to collect toll from the users clearly put the Expressway within the ambit of road which is a toll road. We further hold that the development of the Expressway between Noida and Agra and development of Five land parcels adjacent to Expressway are inseparable and integral part of one project and the assessee is entitled and eligible for deduction u/s 80IA (4) of the Act on the income earned and derived from the business of development of Infrastructure facility during AY 2009-10 after commencement of its business w.e.f. 5.4.2007 at the option of the assessee which cannot be denied by wrongly putting the case of the assessee in clause (b) of Explanation to section 80IA(4)(i) of the Act."
(emphasis provided) 10.24. Accordingly on considering the peculiar facts and circumstances of the present case and the relevant provisions which have been considered by the Co-ordinate Bench in the base year and considering the assessment order which was u/s 143(3) in the base year which remains undisturbed and the assessment order u/s 143(3) in the immediately preceding assessment year which has been passed by a different Assessing Officer then the one who passed the order in the base year, we find that the Revenue has failed to make out a case to show how the claim of deduction under clause (a) of Explanation u/s 80IA(4) can be held to be disallowable. No fresh argument has been placed by the Revenue before us to either show infirmity in the reasoning adopted in the judicial precedent available or to justify why it should not be followed. The repetition of arguments already advanced which have been Page 85 of 95 I.T.A .No.-414/Del/2015 considered and not accepted by the Co-ordinate Bench in a speaking order cannot be of much help. In the absence of any infirmity justifying deviation from the view taken in the base year, we find no justification for deviating therefrom on same set of facts and law. Finding ourselves in agreement with the conclusions arrived at by the Co-ordinate Bench in the base year, we find that the assessee succeeds in its main prayer. Accordingly the without prejudice claim u/s 80IA(6) becomes academic and requires no adjudication at this stage.
10.25. We find that the issues of "other income" and depreciation can be said to have also been considered to some degree by the Co-ordinate Bench. Similarly the facts relatable to the claim u/s 40(a)(ia) have also been noted in passing by the Co-ordinate Bench. Since facts relatable to this are not in dispute the issue is claimed to be allowable in the light of the proposition of law canvassed on admitted facts. These aspects, we shall elaborate hereinafter. 10.26. Addressing the remaining issues in the present appeal, it is seen that vide Ground number and 7 the assessee before the Co-ordinate Bench addressed the denial of deduction in respect of interest on FDRs and depreciation. Qua Depreciation, it is seen that the arguments on behalf of the parties before the Bench have been found recorded in paras 93 onwards by the Co-ordinate Bench. A perusal of the same shows that the Revenue argued that that the assessee had claimed deduction u/s 80IA of the Act on interest income on FDs made by deploying its surplus funds in the bank and the same has been erroneously accepted by the AO. The Ld. CIT- DR in the facts of that case Page 86 of 95 I.T.A .No.-414/Del/2015 relied upon Vodaphone Essar Ltd. (2013) 153 TTJ (Chd) 451, so as to canvass that where, in a given situation, an identical issue had been overlooked by the AO and the CIT had invoked the powers available u/s 263 of the Act, it was held by the ITAT that the AO had failed to make proper investigation into the eligibility of the assessee in violation to the claim of deduction u/s 80IA of the Act on the business profits, interest and other income received during the year, therefore, the order of the AO was held to be erroneous and prejudicial to the interest of the Revenue and the Tribunal upheld the order of the CIT u/s 263 of the Act. We find that the Co-ordinate Bench also proceeds to record the arguments of the Ld. CIT DR by noting that it was also pointed out before them that the Assessee had claimed depreciation amounting to Rs. 22.97 crores and had been granted by the AO even while the highway project had not been completed, therefore Ld. CIT rightly held that the assessment order was patently erroneous and prejudicial to the interest of the Revenue.
10.27. We find that the said submission of the Revenue was opposed by the assessee before the Co-ordinate Bench as would be evident from the following para:-
95. "The Ld. AR placed brief rejoinder to the above submissions and contentions of the Ld. CIT-DR and pointed out that the AO made sufficient and required enquiry about claim of the assessee as the AO raised several queries during assessment proceedings and the assessee submitted detailed replies supported by various documents and evidence to show that the claim of the assessee is sustainable and further, the AO adjudicated the queries by passing a detailed note sheet vide dated 30.12.2011 and therefore, it cannot said that the AO did not make adequate, proper and required enquiry while allowing the claim of the assessee. The Ld. AR also pointed out that the AO took a reasonable and plausible view which cannot be held as unsustainable by any Page 87 of 95 I.T.A .No.-414/Del/2015 stretch of imagination. The Ld. AR finally submitted that the Ld. CIT did not conclusively hold that the order of the AO is not sustainable and the Ld. CIT is not empowered to set aside the assessment order, without any conclusion, for fresh adjudication without any legal cause or basis, hence, impugned order is not valid and justified."
(emphasis provided) 10.28. It is seen that considering the facts and the power invoked by CIT, Noida the Co-ordinate Bench proceeded to consider the issues in the following manner:-
99. "In the light of above stages emerged from the language used in section 263 of the Act and the proposition & ratio of the decisions relied by both the parties, we proceed to examine the validity of assumption of jurisdiction."
10.29. As extracted earlier the Co-ordinate Bench observed that prima-facie there must be material on record to show that the order was not sustainable.
The following paras 101 and 103 extracted hereunder will bring out the position:-
101. "We may further note that by the earlier part of this order, we have held that the assessee company is into the business of development of infrastructure facility i.e. which is a toll road as per its operational features and controlled and chargeable access and exit and the assesses' claim under clause (a) of Explanation to section 80IA (4) (i) of the Act is justifiable and plausible as per relevant provisions of the Act in the light of the character, facts and circumstances of the business of the assessee. Hence, we are of the considered opinion that the prepositions of two views is not applicable to the present case and even if view posed by the Ld. CIT is analysed then we note that the Ld. CIT himself has not conclusively decided that the assessees' claim of deduction falls under ambit of clause (b) of explanation to section 80IA (4) (i) of the Act. ..............
103. In the present case, the AO has raised a number of queries regarding the claim of the assessee u/s 80IA (4) of the Act which were replied by the assessee through detailed submissions supported by relevant documents and other evidence coupled with several legal propositions and decisions. It is also pertinent to note that the AO has passed a detailed order / note sheet entry (enclosed here with this order as Annexure - A for sake of clarity and brevity) while dealing and adjudication the issue of allowability of the claim of the assessee for Page 88 of 95 I.T.A .No.-414/Del/2015 deduction u/s 80 IA (4) of the Act. We may respectfully take note of the decision of Hon'ble Bombay High Court in the case of Gabriel India Ltd.
(supra) and hold that the order of the AO cannot be held as erroneous merely because, according to the Ld. Commissioner, the order should have been written more elaborately in so many words for invoking supervisory provisions u/s 263 of the Act. There must be some prima facie material on the record to show that the order is unsustainable in law and the tax which was legally eligible has not been imposed."
10.30. Thus observing as under in para 111 the Co-ordinate Bench considering the various case law cited before the Bench finally relying upon CIT(A) vs DLF India (2013) 350 ITR 555 (Delhi) decided the issue in favour of the assessee holding that the assessment order is neither erroneous nor prejudicial to the interests of the Revenue thus it cannot be revised under section 263 of the Act but also that in order to exercise the power u/s 263 there should be an element of "unsustainability" in the order of the Assessing Officer which was found to be missing. In the said background, addressing the claim of the assessee addressed vide Ground No.5 to 8 clubbed under the heading "Other income" we find that apart from the argument that identical claims have been allowed by two different Assessing Officers in 2009- 10 and 2010-11 AYs in the scrutiny assessment order passed u/s 143(3) with due enquiry wherein the correctness of the base year has been upheld by the ITAT in the aforesaid order, it has also been argued on behalf of the assessee that in the set aside proceedings the AO himself had allowed the said claim which factual assertion has not been assailed by the Revenue. Reliance by the assessee it has been placed even before us on decision of the Hon'ble Bombay High Court in the case of Lok Holding 308 ITR 356 (Bombay) so as to submit that the bank interest earned is business income for an assessee engaged in Page 89 of 95 I.T.A .No.-414/Del/2015 construction business. The Bombay High Court in the said decision it was submitted had considered the decision of Hon'ble Apex Court in the case of Tuticorin Alkali (supra).
10.31. We further find that the income from sale/lease of plots has been in very categoric terms been held to be eligible for deduction under clause (a) of Explanation to section 80IA(4). We further note that in para 57 considering the gamut of business activities on the basis of the Agreements and documents on record which admittedly had accepted that the only aim and object of the assessee was developing infrastructure facility the Co-ordinate Bench in para 57 held that the business activities of the assessee company fell within the ambit of clause (a) of Explanation to Section 80IA(4). The source of the Bank interest admittedly is income from the sale/lease of plots in banks temporarily till the payments are due; or TPO funds temporarily in Banks; or the funds sourced through the development activity by way of sale and development of plots which were to be utilized for developing the infrastructure facility having been temporarily parked in banks and used for raising loans from the banks against Guarantees etc. The utilization of these amounts admittedly is again for the very same sole purpose of infrastructural facility. In the circumstances, we find the income is necessarily, directly and inextricably linked with the eligible business of the assessee. Considering the character of the same, the facts and circumstances of the specific and peculiar nature of assessee's business, the nexus is direct. The income can be said to be inseparably linked with the sole business purpose of the assessee which is the infrastructural Page 90 of 95 I.T.A .No.-414/Del/2015 facility. The acceptance of this fact by way of precedent is not only evident from the fact that the income was included in eligible business by two different Assessing Officers in two separate assessment orders but is also evident from the order of the Co-ordinate Bench in the base year itself. 10.32. A perusal of the reasoning in the assessment order shows that AO has held that interest income is not derived from eligible business. The order u/s 263 order it is seen is the reason to deviate from the view taken in two consecutive years and hence proceeded to deviate from the precedent and disallowed the claim. As discussed earlier, the issue of what constitutes the eligible business has already been examined by the Co-ordinate Bench. These amounts shown as interest admittedly proceeds from the funds kept in the Banks from IPO and development proceeds from land temporarily and are exclusively applied to the sole business of developing infrastructural facility. In the peculiar facts of the present case, we find on facts and considering the precedent available nothing has been brought on record to justify deviating from the view taken. The decisions relied upon operate on facts their own. Thus, we hold that interest income is to be treated as business income of the assessee. The miscellaneous income qua sale of scrap etc. again being directly and inextricably linked with the development of infrastructural facility it is to be treated as business income. Same is the position for money forfeited in the peculiar facts of the present case. However, on these last two sources of income since supporting evidences are not available the issue is restored for verification on facts. The claims principally we find are directly linked to the Page 91 of 95 I.T.A .No.-414/Del/2015 only business activity of the assessee in terms of the Agreement and findings thereon and principally it deserves to be allowed. Similarly gains from foreign exchange fluctuations arising directly out of the sole business activity of the assessee which is the infrastructural facility development we hold is inextricably linked and having a direct first degree nexus with the sole business of the assessee thus income therefrom we hold has to be allowed and treated as business income.
10.33. Considering the issue of depreciation we note that facts relatable to it have already been addressed in the earlier part of this order. We find that consistently it has been canvassed that depreciation relates to the assets which have been used for the business and the requirement relatable to its claim stand fulfilled. The Ld.AR has also argued that when business income of the assessee was exempted u/s 80IA(4) of the Act, then why assessee would assail a wrong disallowance of depreciation as in such an eventuality the deduction would stand automatically enhanced and infact apart from opposing the stand on principles there is no purpose to assail the same. We find that the claim of the assessee is that depreciation claimed is limited to the assets used in the business and the ownership of the assets is not in doubt. The past precedent of no disallowance having been made on the said issue is also cited. Apart from that the additional argument that incase disallowance is sustained then it goes to inflate the income of the assessee and the fact that the only income of the assessee is the business income wherein deduction is claimed and allowable the purpose of denying the same departing from the precedent with Page 92 of 95 I.T.A .No.-414/Del/2015 no purpose was questioned. We find on considering the orders of the tax authorities and the precedent including the aforesaid order of the Co-ordinate Bench the claim of the assessee subject to verification on facts deserves to be allowed. On a consideration of the reasoning qua depreciation recorded by the AO and upheld by the CIT(A), we find that the only reasoning taken is that since the project of toll road construction was in progress where from no receipt was declared the profit being solely from sale/lease of plots the claim was disallowed. In view of the categoric finding of the Co-ordinate Bench that the business has commenced the reasoning adopted cannot be sustained. Subject to verification of ownership and user principles the claim has to be allowed. We note that disallowance of the said expenditure anyway would go to inflate the income and result in an enhanced deduction on a fact which may have escaped the tax authorities. Accordingly, we hold that principally depreciation on assets used in the developing of infrastructural facility and owned by the assessee has to be allowed. We restore the issue for verification on facts.
10.34. Coming to the next issue addressed in the present proceedings i.e the disallowance made and sustained u/s 40(a)(ia), we find considering the arguments and facts and the reasoning adopted by the AO that TDS was not deducted for payment of interest u/s 194A and for payment of lease rent in term of section 194I. The assessee has disputed that there was no need to deduct on the basis of facts and Agreements so as to argue that there is no "interest" payment as it is actually EDC i.e. External Development Charges Page 93 of 95 I.T.A .No.-414/Del/2015 which are to be made in a phased manner so as to cover for inflation over time; and "rent" is also actually a lease expense and not rent as understood and is part of capital acquisition of lease hold land and capitalized. The Ld.AR has also raised the argument that in terms of the decision of the Jurisdictional High Court in the case of CIT vs Vector Shipping Services [2013] 38 taxmann.com 77 (All.) there is no amount of the so-called "rent" or "interest" payable in the year under consideration and the said decision it has been submitted has not been upset till date as SLP against the said decision has been rejected by the Apex Court in Co No.8068/2014. It has also been argued that apart from the amount of Rs.10,149/- it has not even been claimed as an expense. Apart from that various other submissions as recorded in the earlier part of this order have been advanced. Considering the same and the orders of the tax authorities and decisions of the Courts relied upon which we find have been relied upon before the CIT(A) also and have not been addressed are of the view that where the assessee has not claimed it as an expense the occasion to make an addition by way of a disallowance does not arise and if at all it had to be made it could be limited only to Rs.10,149/- which is the amount claimed as an expense. We also find that reliance has been placed on the decision of the Jurisdictional High Court to argue that as far as the assessee is conceded nothing was payable in terms of the decision of the Jurisdictional High Court in CIT vs Vector Shipping Services. The applicability of which decision has not been disputed by the Revenue. Accordingly, in the circumstances, we direct that subject to verification on facts that no amount is payable as per assessee's Page 94 of 95 I.T.A .No.-414/Del/2015 books at the end of the year the relief in principle has to be allowed. We note that the arguments that per se section 194A and 194I itself are not applicable is left open as the issue becomes academic at this stage. 10.35. Before parting, we make it clear that the ratio of the decision relied upon by the parties have been taken into consideration while arriving at the conclusion, even though they have not been specifically referred to. The reason for not referring to the same has been on account of the fact that the issues in the present appeal revolves on facts and circumstances peculiar to its own which in terms of judicial propriety we find lay down a binding precedent on the very same character of activity, facts, Agreements as to what constituting the business of the assessee in the light of the provisions. Thus the issues having been considered on facts reference to decisions which operate on facts peculiar to their own has been reproduced from.
11. In the result, the appeal of the assessee is partly allowed for statistical purposes.
The order is pronounced in the open court on 06th September 2016.
Sd/- Sd/-
(L. P. SAHU) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR, ITAT NEW DELHI
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