ACIT- CIR.-1,, NAGPUR vs. SHRI MANMIT ELECTRICAL INFRASTRUCTURE,, NAGPUR

Shri Abhay Agarwal appearing on behalf of the assessee submitted that the assessee company is an electrical contractor. The company is laying network of new high tension/low tension electric lines for distribution of electricity and claimed deduction u/s. 80IA(4)(iv)(b) of the Act. Prior to the formation of company, the activities were carried out by the sole proprietorship firm in the name of M/s. Manmit Electricals & Civil Contractors. Shri Harmitsingh Bhagwansingh Sethi was proprietor of the said firm. The same proprietorship firm was subsequently converted into a private limited company and entire business of the proprietorship firm was taken over by the company. There has been absolutely no change in the activities carried out by the assessee company. The Co-ordinate Bench of the Tribunal in the case of proprietorship firm for the assessment years 2007-08, 2008-09, 2009-10 and 2010-11 has held, assessee is eligible for claiming deduction u/s. 80IA(4) of the Act. The ld. AR placed on record copy of the order of Tribunal in by the Department for the assessment year 2009-10 decided on 30-06-2017. The ld. AR pointed that vide same order the appeals of Revenue in ITA No. 526/Nag/2014 for the assessment year 2007-08 and ITA No. 527/Nag/2014 for the assessment year 2010-11 were dismissed by the Tribunal, granting relief to the assessee.

Shri U.U. Kasar representing the Department vehemently defended the impugned order. However, the ld. DR fairly admitted that the Tribunal in earlier assessment years has decided the issue of erstwhile proprietorship firm’s eligibility for claiming deduction u/s. 80IA(4) of the Act.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The Revenue in appeal has assailed the order of Commissioner of Income Tax (Appeals) in allowing the benefit of deduction u/s. 80IA(4) to the assessee. The Assessing Officer in assessment proceedings held that the work carried out by the assessee is ‘works contract’ awarded by MSEDCL and hence, the assessee is not eligible for claiming deduction u/s. 80IA(4) of the Act. We find that for similar reasons the benefit of deduction u/s. 80IA(4) was denied to the assessee (formerly a sole proprietorship firm M/s. Manmit Electricals & Civil Contractor). The assessee carried the issue in appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) after considering the facts and documents on record held that the assessee is eligible for claiming deduction u/s. 80IA(4) of the Act. Thereafter, the Revenue carried the issue in appeal before the Tribunal in (supra). The Tribunal vide order dated 30-06-2017 upheld the findings of Commissioner of Income Tax (Appeals) and dismissed the appeal of Revenue. The relevant extract of the findings of Tribunal on the issue are as under : “6. On appraisal of the above said finding, we find that the learned Commissioner (Appeals) has decided the matter of controversy in favour of the assessee on the basis guideline laid down by the Hon’ble Supreme Court in State of A.P. v/s Kone Elevators India Pvt. Ltd., 3 SCC 389 (2005). The nature of the work of assessee has duly been explained in the letter dated 27th June 2008, while awarding the contract by MDEDCL. The assessee get the work in pursuance to short listing of tender bids and after ascertaining the expertise in the field of electrical work. The nature of work of the assessee has duly been treated as contract of sale in view of the guidelines settled by the Hon’ble Supreme Court in Kone Elevators India Pvt. Ltd. (supra). At this stage also, the facts are same. No new law has been produced before us to deviate from the findings of the learned Commissioner (Appeals) on this issue. At this stage, we also noticed that the case of the assessee for the assessment year 2008-09 has been decided in ITA no.115/Nag./2013 dated 28th August 2015, by the Tribunal, Nagpur Bench, in which the claim of the assessee under section 80IA(4) has been allowed. In view of the said circumstances, we are of the view that the learned Commissioner (Appeals) has passed the order judiciously and correctly which is not required to be interfered with at this appellate stage. Hence, both the issues are decided in favour of the assessee.”

Similar objections were raised by the Revenue in for the assessment year 2007-08 and in ITA No. 527/Nag/2014 for the assessment year 2010-11 against the order of Commissioner of Income Tax (Appeals) holding assessee eligible for benefit of deduction u/s. 80IA(4) of the Act. The Tribunal vide composite order dismissed the appeal of Revenue for the remaining two assessment years as well. The Revenue has not disputed the fact that the activities carried out by the erstwhile sole proprietorship firm M/s. Manmit Electricals & Civil Contractor and the assessee company are in any manner different. Thus, in view of the facts of the case and the decision of Co-ordinate Bench, we find no reason to interfere with the well reasoned findings of Commissioner of Income Tax (Appeals) in allowing benefit of deduction u/s. 80IA(4) to the assessee.

In the result, the impugned order is upheld and the appeal of Revenue is dismissed being devoid of any merit.