KLSR Infratech Limited Vs DCIT (ITAT Hyderabad)
Summary: ITAT Hyderabad allowed seven appeals of KLSR Infratech Limited covering AYs 2015-16 to 2020-21. For AY 2017-18, the Tribunal held that entries in a diary seized from the residence of the Managing Director could not by themselves establish unexplained expenditure under Section 69C. The Revenue had failed to establish the foundational fact that the disputed cash entries represented expenditure actually incurred outside the books. Accordingly, the balance addition of Rs.14,07,218 sustained by the CIT(A) was deleted.
The Tribunal also rejected treatment of Rs.2,98,54,070 as unexplained money under Section 69A. The amount arose from reversal of an earlier accounting entry for labour expenditure that had been withdrawn and offered as additional income. The corresponding debit to cash did not represent a fresh receipt from an unexplained source. Consequently, its recharacterisation under Section 69A and taxation under Section 115BBE were vacated.
On deduction under Section 80IA(4), the Tribunal held that interest on FDRs maintained as margin/security for bank guarantees required for eligible infrastructure projects could have a direct and proximate nexus with the eligible business. The AO was directed to include such interest while computing the deduction, subject to verification that the deposits were actually maintained for the relevant bank guarantees and were not independent investments of surplus funds. The findings were applied, as relevant, to the connected appeals.
Seven Appeals Covering AYs 2015-16 to 2020-21
KLSR Infratech Limited, engaged in execution of infrastructure-related contracts and projects, filed seven appeals arising from orders of the CIT(A)-11, Hyderabad. The appeals related to AYs 2015-16, 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21.
