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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: Shri Rama Kanta Panda & Shri Laliet Kumar
Per Shri Laliet Kumar, JM.
1. This appeal filed by the revenue is directed against the order dated 28.11.2019 of Learned Commissioner of Income Tax (Appeals), Hyderabad relating to AY 2016-17.
2. The revenue raised the following grounds of appeal:
1. The Ld.CIT(A) erred in not providing opportunity to the AO to submit his view on the additional evidence filed.
2. The ld.CIT(A) erred in allowing deduction claimed by the assessee u/s. 80IA without affording opportunity to the AO on information submitted before the ld.CIT(A). 3.Any other ground that may be raised at the time of hearing.
2 ITA 167/Hyd/2020 3. The ld.DR had drawn our attention to the order passed by the AO whereby the AO had recorded the following finding:-
3.1 It is observed that, the assessee has claimed deduction u/s. 80IA at Rs. 2,02,99,030/-. During the year under consideration, it is seen from the details submitted that the assessee company has purchased used machinery from M/s. R.R.Enterprises, Secunderabad, during the F.Y.2014-15 relevant to the AY.2015-16. As per explanation -2 of Sec.3 of 80-IA .t is clearly stated that any machinery plant or any part thereof previously used for any purpose is transferred to a new business and the total value of machinery so transferred does not exceed 20% of the total value of the machinery. In the instant case, the value of the machinery is more than 20%. The details of Opening WDV, plant & machinery added during the year and depreciation claimed as per the 3eD report for the AY.2015-16 are produced as under:
Plant & Machinery added during the A.Y.2015-16 Descriptio Rate of Opening Additions Depreciatio WDV at n of Block Depreciatio WDV during n end of of asset n the year allowable year Plant & 15% 1341614 3400483 4562784 4285819 machinery 4 7 7 Plant & Machinery added during the A.Y.2016-17 Plant & 15% 4285819 1015223 7199284 4581114 machinery 7 3 6 From the above table it can be seen that total value of machinery including added during the year is Rs.4,74,20,981/- and out the above value of machinery added during the year is Rs.3,40,04,837/- which contributes to 70.71 % during the AY.2015-16. During the year under consideration the assessee introduced new Plant & Machinery worth RS.1,01,52,233/- and on introduction of the machinery during the year under consideration, value of used plant & machinery is 54.53% of total value of Plant & Machinery. Therefore, vide this office notices u/s 142(1), dated 06-11-2018 and 21-11- 2018, the assessee was asked to justify its claim of deduction u/s 80IA 3.2 In reply the assessee submitted its claim as under:
" the provisions of section 80IA(4)(iv) reads as under:- as undertaking which, (c) undertakes substantial renovation and modernization of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2017.
Explanation - for the purposes of this sub-clause, "Substantial renovation and modernization" means an increase in the plant & machinery in the network of transmission or distribution lines by at least fifty percent of the book value of such plant and machinery as on the 1st day of April,2004.
As the assessee company has been carrying the execution of distribution lines as above said, it claimed exemption to the extent of Rs.2,02,99,031/- u/s 80IA(4)(iv) of the Act, 1961 for the Asst. year 2016-17."
3 ITA 167/Hyd/2020 3.3 The assessee further submitted that during the course of execution of work of Ajmer Vidut Nigam Ltd, Ajmer, the assesee company utilized existing plant and machinery and the assesse company acquired plant & machinery to the tune of Rs.3, 14,25,410/- from RR enterprises and the same was put to use on dt.04-03-2015. This plant and machinery has been used for carrying out the execution of the works of Bindu Urja Infrastructure Ltd, Turu Hydro Energy Private Limited, Vasavi Power, RR Enterprises, IDRBT undertaken by the assessee company.
3.4 The above contention of the assessee is not tenable because the provisions of section 80IA(3)(ii) reads as under:
It is not formed by the transfer to a new business of machinery or plant previously used for any purpose ( Provided that nothing contained in this sub-section shall apply in the case of transfer, either In whole or in part, of machinery or plant previously used by a State Electricity Board referred to in c1ause(7) of section 2 of The Electricity Act, 2003 (36 of 2003), whether or not such transfer is in pursuance of the splitting up or reconstruction or reorganization of the Board under Part XIII of the Act.)
3.5 From the above submissions of the assessee and as per provisions of Income Tax Act the following conclusions can be drawn.
The Plant & machinery used by the assessee is used one and which contributes to 70.71 % and in the year under consideration its value is 54.53% i.e. more than 20% as stipulated in the Act.
The assessee relied on provisions 80IA(4)(iv)(c),however, even this is not applicable to the case of the assessee, because the assessee is not engaged in business of transmission of power also, nor modernizing the existing network of transmission or distribution lines, it only engaged in execution of the work.
As per the assessee it says, Explanation to provisions of Section 80IA(4)(iv)(c) are applicable in its case, but the section stipulates fifty percent of the used machinery, in the instant case, the value of Plant & machinery introduced is 70.71%, which is more than 50%.
The assessee is not a contractor as per the form NO.26AS submitted, it is only a sub-contractor.
The assessee also has not submitted Form No.10CCB claiming deduction U/s. 80IA while filing of the Return of Income or during the course of scrutiny proceedings.
In view of the above, the assessee is not eligible for deduction u/s 80lA of the Act. Therefore, the deduction claimed u/s 80lA is disallowed.
Addition: 2,02,99,030 Income Returned : Rs.2,50,74,660 Add: Disallowance u/s.80lA as Discuss above : Rs.2,02,99,030 Income assessed : Rs.4,53,73,690
4 ITA 167/Hyd/2020 Tax thereon RS.1 ,35,22, 107 Book profit u/s 115JB Rs. 4, 73,18,143 Tax thereon Rs.87,53,856 Tax under normal provisions is more than the tax as per provisions of Section 115JB. Hence, tax in computed as per normal provisions.
Demand notice u/s 156 of the Income Tax Act, 1961 is enclosed herewith.
Penalty proceedings u/s.271 (1 )(e) of the I.TAct. is initiated separately.
4. It was submitted that feeling aggrieved by the order, the assessee had preferred the appeal before the ld.CIT(A) and the ld.CIT(A) had granted the relief and the finding of the ld.CIT(A) are recorded in para 5.5 and 5.6 to the following effect:-
5.5 It is evident from the submissions of the appellant as well as the material on the record that: i. The appellant was not formed by splitting up or reconstructions of a business already in existence. ii. the appellant was not formed by the transfer to a new business of machinery or plant previously used for any purpose. iii. As there is no new business, then the usage of plant and machinery is not applicable to the appellant’s company. iv. The appellant has not used the plant and machinery purchased from the RR Enterprises I r for execution of the work at Rajasthan, on which the appellant claimed the deduction u/s 801A( 4) of the Act. v. The appellant used the plant and machinery so purchased for execution of the works at NF railway division at Guwahati. vi. As per the depreciation schedule the appellant has acquired any new plant and machinery for the year under consideration amounting to Rs.1,01,52,233/- which pertains to vehicles, No plant and machinery was purchased during the year under consideration. vii, The condition stipulated u/s 801A(3)(ii) is not applicable to the appellant for the year under consideration. viii, From the Form No,10CCS filed during the course of appellate proceedings, it is certified that the appellant is in the business of development of Infrastructure and not formed by the splitting up or the reconstruction of a business already in existence.
5 ITA 167/Hyd/2020 ix. It is also certified by the appellant that it has not received any machinery or plant or transfer which was previously used for any purpose. 5.6 It is seen from the above, that the appellant's claim made u/s 801A( 4)(i) and 80lA(4)(iv)(c) is apparently in order, As the AR filed Form No,10CCB during the course of appeal proceedings, the 11.0 is directed to verily the same and if found in order, the deduction of Rs,2,02,99,031/- u/s 80111.(4)(i) and 801A(4)(iv)(c) of the Act may be allowed accordingly. As a result, the grounds raised in this regard are allowed for statistical purposes.
5. It was submitted by the ld.DR that the findings of the ld.CIT(A) are contrary to the findings of the AO, as there were no whisper either of execution of work at NF railway division at Guwahati or purchase of vehicles in submission before the AO and order passed based on that. It was submitted that the above two facts (5.5 & iv & v) have been incorporated by the ld.CIT(A) in the order while granting the relief to the assessee without any material on record and without affording opportunity to the AO. In view of the above, it was submitted that the order passed by the ld.CIT(A) is cryptic non-speaking and contrary to the facts available on record.
Per contra, the ld.AR had submitted that as per Block of asset, the assessee had only purchased the vehicles during the assessment year and the plant and machinery were acquired by the assessee from R.R. Enterprises in the AY 2015-16 (i.e. earlier assessment year) and not in the present assessment year. Our attention was drawn to the Block of and depreciation schedule of the assets (PB-13).
We have heard the rival contention of the parties and perused the material available on record. Undoubtedly, the Block of assets was not referred to either before the AO or before the ld.CIT(A) by assessee for proving its case. In our view, the ld.CIT(A), merely relied on the basis of the submission made by the assessee in the appellate proceedings and had not examined the relevant
6 ITA 167/Hyd/2020 material, after affording the opportunity to the AO. The above said facts are required to be verified and if it is found that plant and machinery, purchased by the assessee and other assets fulfill the criteria as laid down by the Act more particularly section 80IA(3)(ii) and 80IA(4)(iv) of the Act, then the necessary consequential deduction would be given to the assessee in accordance with law. In view of the above proposition, we deem it appropriate to remand back the matter to the file of the AO to pass a fresh order after considering the submission of the assessee and the document, available on record or qua other documents which may be filed by the assessee for the above said proposition. In the light of the above, the matter is remanded back to the file of the AO for fresh adjudication of the issue. Needless to say, that the Tribunal has not expressed any opinion on the eligibility of the assessee to claim 80IA(4) for the electrification work and the appeal of the revenue is allowed for statistical purposes.
In the result, the appeal filed by the revenue is allowed for statistical purposes.
Order pronounced in the Open Court on 25th May, 2023