Case Law Details
DCIT Vs TA Infra Projects Ltd. (ITAT Hyderabad)
As amount disallowed under section 43B would become profits of business in the computation of income under the head “Profits and gains of business or profession”. Consequently, if the amounts disallowed were pertaining to the projects on which the claim under section 80-IA was made, the same had to be allowed as profits get increased to that extent. Therefore, AO was directed to examine the working of profits and allow the deduction.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
These are Revenue appeals against the orders of the Commissioner (Appeals)-2, Hyderabad, dated 14-10-2015 & 30-1-2017 for the assessment years. 2012-13 & 2013-14. Assessee raised cross-objections against both the appeals. Since common issues are involved in these appeals, we have heard them together and decided by this common order.
2. Briefly stated, assessee-company is engaged in manufacture of pipes for water supply and sewerage scheme and also turnkey contractors in infrastructure sector. For the assessment year 2012-13, assessee has declared income of Rs. 62,62,130, after claiming deduction under section 80IA of the Income Tax Act [Act]. Assessment was completed by the assessing officer (AO) making the following additions/disallowances :–
i. Claim of deduction under section 80IA — Rs. 1,11,16,842
ii. Disallowance under section 40(a)(ia) — Rs. 19,59,12,583
iii. Disallowance under section 43B — Rs. 1,68,00,000
3. For the assessment year 2013-14, assessee declared income of Rs. 62,04,940, after claiming deduction under section 80IA. The assessment was completed by the assessing officer making the additions and additions/disallowances :–
i. Claim of deduction under section 80IA — Rs. 17,26,516
ii. Disallowance under section 40(a)(ia) — Rs. 19,51,00,964
Aggrieved on the above disallowances made by the assessing officer, assessee preferred appeals before the Commissioner (Appeals) and Commissioner (Appeals) has given relief. Revenue is aggrieved and preferred the grounds in respective assessment years. The issues are considered commonly in this order, after hearing the rival contentions of the learned AR and learned DR.
Issue of section 80IA:
4. In both the assessment years under consideration, assessing officer was of the view that assessee is only executing works contract as a contractor and not as a developer of infrastructural facilities. Assessing officer was of the opinion that assessee has not fulfilled all the conditions and requirements of the provisions of section 80IA for claim of deduction.
4.1. Before the learned Commissioner (Appeals), assessee not only justified how it was entitled for deduction under section 80IA but also relied on the orders of ITAT, Hyderabad ‘A’ Bench in ITA No. 129/Hyd/2013, dt. 30-8- 2013 for the assessment years. 2004-05 to 2009-10 in its own case. Learned Commissioner (Appeals) following the above order, gave relief to assessee.
4.2. It was the contention of learned DR that assessee is not involved in infrastructural development that is required under section 80IA and was only involved in works contract, hence not eligible for deduction. It was the submission of the learned Counsel that assessee is involved both as contractor as well as infrastructural developer and the claim was made only the extent of projects which are as infrastructural developer and furnished the details of works undertaken.
i. Infrastructural contracts (6 projects) — Rs. 30,25,56,324
ii. Infrastructural Projected executed directly — Rs. 41,42,59,321
4.3. It was submitted that claims were made only on the direct infrastructural projects which were to the extent of Rs. 57.59% and not on full contracts executed by assessee. Further, learned Counsel has placed on record the orders in assessment years 2010-11 and 2011-12, wherein the matter was referred to the assessing officer who after ascertaining that assessee is eligible for deduction allowed them.
4.4. We have considered the rival contentions, objections of the DR and submissions of the AR. As can be seen from the order of Commissioner (Appeals), he has followed the order of ITAT in earlier years. At the out set, it is to be agreed that the issue is covered in favour of assessee by the orders of the ITAT in earlier years in assessee’s own case which the learned Commissioner (Appeals) has followed. Consequently, we do not see any reason to interfere with the order of Commissioner (Appeals), as there seems to be no change in facts and circumstances of the case in the years under appeal. However, assessing officer has not distinguished on what percentage assessee has claimed under section 80IA and what are the contracts undertaken. In earlier years, as seen from the orders of assessment years 2010-11 and 2011-12, assessing officer has issued an annexure, identifying various projects. The matter was sent back to assessing officer for verification. The order of ITAT in [ITA Nos. 1382 & 1383/Hyd/2015, dt. 26-4-2017] is as under :–
“4. As can be seen from the above, the major issue which Revenue is contesting is with reference to deduction under section 80IA. At the outset, both the parties have agreed that this issue is covered in favour of the assessee by the orders of the ITAT in earlier year in assessee’s own case, which the learned Commissioner (Appeals) has followed. Consequently, we do not see any reason to interfere with the order of the Commissioner (Appeals) as there are no change in facts and circumstances of the case for the years under appeal. However, while passing the order the assessing officer has stated that certain contracts were not eligible for deduction under section 80IA. This which seems to have been quantified in an annexure was not placed on record. Learned Counsel for the assessee has stated that the claim made was only with reference to the infrastructure projects and not on work contracts which the assessee itself has segregated and claimed. However, he has no objection if this aspect is verified by the assessing officer Therefore, while agreeing with the order of the Commissioner (Appeals) in granting the deduction under section 80IA, subject to verification of quantum of income on the eligible infrastructure projects, as per the directions of the ITAT in earlier years. Revenue grounds are accordingly partly allowed”.
4.5. In view of that, since assessee ascertains that it has claimed only the deduction on infrastructural projects undertaken by it, assessing officer is directed to examine this aspect and allow the claim after verification as in earlier years. The ground is considered partly allowed for statistical purposes.
4.6. Similar is the case in assessment year 2013-14 also. The above directions given for assessment year 2012-13 will equally apply as the assessee has submitted that the claim in this year is only to an extent of 20%.
i. Infrastructure contracts (6 projects) — Rs. 32,93,79,115
ii. Infrastructure Projects executed Directly — Rs. 7,83,29,410
Assessing officer is directed to examine this aspect and allow the claim after verification as in earlier years. The ground is considered partly allowed for statistical purposes.
Issue of section 40(a)(ia):
5. In both the years, assessing officer has invoked the provisions of section 40(a)(ia) to disallow the amounts on which TDS was not deducted or TDS deducted but not paid. learned Commissioner (Appeals) invoking the decision of the Special Bench of ITAT in the case of Merilyn Shipping and Transport Ltd., v. ACIT (2012) 136 ITD 23 (SB)(Visakha.)(Trib.) has allowed the amounts. While doing so, he however has also restricted the disallowance only to the amount of TDS deducted and not paid in assessment year 2012-13, whereas deduction under section 40(a)(ia) requires deduction of the entire amount on which TDS was not deducted or paid. The order of Commissioner (Appeals) in assessment year 2012-13 is as under :–
“6.6. In the instant case, the assessee has paid the amount without deducting the tax. As it is evident from the facts that the assesee has already paid the sub contract/other expenditure of Rs. 19,59,12,583 during the year itself and nothing was payable as on 31st March and this fact was not disputed by the AD also. Therefore, the issue involved is squarely covered by the ratio laid down by the Hon’ble ITAT, Special Bench, Visakhapatnam and the Hon’ble ITAT, Hyderabad ‘A’ Bench in the cases of Merilyn Shipping & Transport and Janapriaya Engineering Syndicate (mentioned supra) respectively.
6.7. In view of the above, I am of the considered opinion that the action of the assessing officer is not justified in making the said disallowance under section. 40(a)(ia) of the Act, as the said amount has already been paid during the previous year. Respectfully following the said decisions, I hereby direct the assessing officer to delete the disallowance of Rs. 19,59,12,583 made under section 40(a)(ia) of the Act.
6.8. As it has already been mentioned in the earlier paragraphs that an amount of Rs. 45,71,306 was shown as TDS payable in the balance sheet. In other words, the amount of Rs. 45,71,306 is pending for payment on 31-3-2012. Therefore, the amount was outstanding as ‘payable’. As a result, the said amount of Rs. 45,71,306 is disallowed under section 40(a)(ia) of the Act”.
5.1. After considering the rival contentions, as the issue is now decided by the Hon’ble Supreme Court of India in the case of Palam Gas Service v. CIT (2017) 394 ITR 300 (SC) in which it was held that even the amounts paid during the year are also covered by the provisions of section 40(a)(ia), the Special Bench decision of the ITAT in the case of Merilyn Shipping and Transport Ltd., v. ACIT (supra) is no longer a valid one. Consequently, the order of Commissioner (Appeals), relying on the above, for giving relief is to be set aside.
6. However, assessee in the cross-objection has raised the issue that assessee has not been treated as assessee-in-default under the provisions of section 201(1) of the Act and following the decision of the Hon’ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd. v. CIT [CM Appeal No. 3774 of 2015 in ITA No. 160 of 2015, dt. 28-8-2015], the disallowance under section 40(a)(ia) could not be made, if assessee is not treated as assesseein- default. It was further submitted that assessee is in a position to produce the certificates that the payee has included the amount received from assessee in its returns and has paid entire taxes on the income. Since these issues are not examined by the assessing officer, we are of the opinion that the disallowance under section 40(a)(ia) is required to be re-considered by the assessing officer, after giving due opportunity to assessee. For this purpose, orders of assessing officer and Commissioner (Appeals) on this issue are set aside and the matter is restored to the file of assessing officer.
Deduction under section 80IA:
7. One more issue involved in assessment year 2012-13 is with reference to objections of Revenue that Commissioner (Appeals) erred in allowing the deduction under section 80IA on the amount disallowed under section 43B. The order of learned Commissioner (Appeals) in para 7.3 and 7.4 is as under :–
“7.3. I have perused the alternate ground raised by the AR. As the disallowance of Rs. 1,68,00,000 made by the AD as above is sustained vide Para No.7.2. of this order, the profits of the assessee will be increased to this extent. In this regard, the Hon’ble ITAT, Hyderabad ‘A’ Bench in the case of M/s. Koya and Company Construction Pvt. Ltd., Hyderabad for the assessment year 2006-07 vide order ITA No. 221/Hyd/2009, dt. 22-3-2012 in the Page 57 Para 35 of the said order, held as under :–
“The next ground in ITA No. 221/Hyd/2009 for the assessment year 2006-07 is with regarding to the issue that the assessee is not entitled to deduction under section 80IA(4) on the sum of Rs. 50,00,000 which was added while computing the total income of the assessee. The assessing officer added Rs. 50,00,000 on account of discrepancies in vouchers. There was a survey under section 133A of the Income Tax Act in the premises of the assessee on 7-2-2008. It was found that the sand purchases and labour payments are supported by self made vouchers and not by regular bills. On this count Rs. 50,00,000 is added to the business income of the assessee. According to the assessee’s counsel, this amount has to be considered as business income and deduction under section 80IA(4) has to be allowed.
We have heard the parties on this issue. In this case, the addition is made towards the discrepancies in vouchers and the addition is treated as business income. Once the addition is resulted in business income, on the same logic corresponding is to be given. This ground of the assessee is allowed.”
7.4. Since the issue involved in the appeal is similar with that of the decision mentioned supra, the assessee is entitled for deduction under section 80IA(4) on this amount of Rs. 1,68,00,000. Hence, the assessing officer is directed to recompute the deduction under section 80IA after taking into account the said amount of Rs. 1,68,00,000 to the profits of the assessee and corresponding deduction may be given. As a result, the alternate grounds raised by the AR are allowed”.
7.1. The amount of Rs. 1,68,00,000 was disallowed under section 43B. The said disallowance was confirmed by learned Commissioner (Appeals). assessee contention was that the said amount will increase the profits of business and the corresponding claim under section 80IA(4) will get increased. Learned Commissioner (Appeals) accepted the contention as stated above. We do not see any reason to interfere with the order of learned Commissioner (Appeals), as the amount disallowed under section 43B will become profits of business in the computation of income under the head ‘business’ or ‘profession. Consequently, if the amounts disallowed are pertaining to the projects on which the claim under section 80IA was made, the same has to be allowed as profits get increased to that extent. Assessing officer is directed to the examine working of profits and allow the claim. The grounds raised by revenue has no merit.
8. In the result both the Revenue appeals are partly allowed for statistical purposes.
9. Cross-objections by assessee are mainly in support of the orders of Commissioner (Appeals) and on the issue of 40(a)(ia), the matter was already been restored to the file of assessing officer. Accordingly, Cross-objections are also considered partly allowed for statistical purposes.
10. To sum-up, both the Revenue appeals and the Cross-objections are partly allowed for statistical purposes.
