DCIT, CIRCLE-4(1)(1), AHMEDABAD, VEJALPUR, AHMEDABD vs. VIJAY M. MISTRY CONSTRUCTION PRIVATE LIMITED, AHMEDABAD

ITA 963/AHD/2025Status: DisposedITAT Ahmedabad06 October 2026AY 2017-189 pages
AI SummaryPartly Allowed

What were the facts?

The appeals by the Revenue challenge the orders of the NFAC for Assessment Years 2017-18 and 2018-19, concerning the deletion of disallowances made by the Assessing Officer (AO). For AY 2017-18, the Revenue disputes the deletion of Rs. 20,83,62,422/- under Section 80IA and Rs. 1,66,667/- under Section 14A read with Rule 8D. For AY 2018-19, the Revenue contests the deletion of Rs. 8,04,22,541/- under Section 80IA and Rs. 16,50,000/- under Section 80G. The assessee, Vijay M. Mistry Construction Private Limited, is engaged in executing government works contracts. The AO disallowed the Section 80IA deduction, arguing the assessee was a contractor, not a developer. The AO also made a disallowance under Section 14A. The CIT(A) deleted both these disallowances for AY 2017-18. For AY 2018-19, the CIT(A) deleted the Section 80IA disallowance and a Section 80G disallowance related to CSR expenses.

What did the Tribunal hold?

For AY 2017-18, the Tribunal held that the eligibility of the assessee for deduction under Section 80IA(4) had already been examined by a coordinate bench in the assessee's own case for earlier years, which found the assessee eligible after considering tender documents and the nature of activities. Since the Revenue failed to demonstrate any material change in the projects or contracts and did not produce relevant tender documents despite opportunities, the Tribunal followed the coordinate bench's decision, upholding the CIT(A)'s deletion of the Section 80IA disallowance. The first three grounds of the Revenue were dismissed. Regarding the Section 14A disallowance, the Tribunal found that the CIT(A)'s deletion was incorrect because the assessee had earned exempt income, and the absence of opening/closing balances in the balance sheet did not negate the applicability of Rule 8D. Therefore, the addition of Rs. 1,66,667/- under Section 14A read with Rule 8D was upheld. Furthermore, this disallowance was correctly considered for computing book profit under Section 115JB. The Revenue's ground on this issue was allowed. For AY 2018-19, the Tribunal held that the decision on the Section 80IA issue for AY 2017-18 was applicable mutatis mutandis, and thus the Revenue's grounds were dismissed. Regarding the Section 80G deduction for CSR expenses, the Tribunal noted that the assessment and appellate orders did not specify the recipient funds. Following its consistent view that only donations to Swachha Bharat Kosh and Clean Ganga Fund are ineligible, the Tribunal set aside the matter to the AO to verify if the donation was made to these specific funds. If not, the AO was directed to verify other eligibility conditions under Section 80G and allow the deduction as per law. This ground was allowed for statistical purposes. The appeals were partly allowed for AY 2017-18 and partly allowed for statistical purposes for AY 2018-19.

What were the issues?

1. Whether the assessee, a contractor executing government works contracts, is eligible for deduction under Section 80IA(4) of the Income Tax Act, 1961, as against the Revenue's contention that it does not meet the definition of a 'developer' and that the legislative intent of Finance Act (No. 2) of 2009 bars work contractors from such deduction, citing precedents like CIT v/s. N. C. Budharaja & Co. (SC) and Katira Construction Ltd (Guj. HC). 2. Whether the deletion of disallowance under Section 14A read with Rule 8D, amounting to Rs. 1,66,667/- for AY 2017-18, was justified, despite the assessee earning exempt income and the AO's assertion that Rule 8D is mandatory when exempt income is earned. 3. Whether the deletion of disallowance of Rs. 16,50,000/- under Section 80G for AY 2018-19, related to CSR expenses, was correct, given the Revenue's claim of absence of supporting documentary evidence, contradictions in financial statements, and discrepancies in the ITR and audit report, and the Revenue's argument that past ITAT orders relied upon by the CIT(A) are under appeal before the Gujarat High Court. Assessee's Contention (Issue 1): The assessee argued that the applicability of Section 80IA(4) was examined by a coordinate bench in its own case for earlier years, which held it eligible after reviewing tender documents and the nature of work. The current year's activities are identical, and the CIT(A) correctly followed the Tribunal's decision. Revenue's Contention (Issue 1): The assessee is a mere contractor and does not operate any infrastructure facility, thus not fulfilling the conditions for deduction under Section 80IA(4). The AO rightly disallowed the claim. The CIT(A) erred in deleting the disallowance by ignoring legal precedents and the legislative intent of the Finance Act (No. 2) of 2009. Revenue's Contention (Issue 2): The CIT(A) erred in deleting the disallowance under Section 14A read with Rule 8D, as Rule 8D is mandatory when exempt income is earned. The deletion was based on the absence of opening/closing balances, which is incorrect as investments were made and redeemed within the year. Assessee's Contention (Issue 2): The addition made under Section 14A was not required for computing book profit under Section 115JB. Revenue's Contention (Issue 3): No deduction under Section 80G is allowable for CSR expenses. The CIT(A) erred in deleting the disallowance due to absence of evidence and contradictions. Assessee's Contention (Issue 3): The donation was not made to Swachha Bharat Kosh and Clean Ganga Fund, which are specifically debarred. Therefore, the deduction is allowable as per law, relying on Sequel Logistics Private Limited Vs PCIT.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 14A,Section 115JB,Section 80G

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI NARENDRA PRASAD SINHA & SHRI SANJAY KUMAR

For Appellant: Shri Mehul K. Patel, Advocate
For Respondent: Shri Kiran Unavekar, CIT-DR
Hearing: 01.09.2026Pronounced: 06.10.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

These two appeals are filed by the Revenue against the separate orders of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] both dated 13.02.2025 for the Assessment Years (A.Y.) 2017-18 and 2018-19 in the proceeding u/s 143(3) of the Income Tax Act [hereinafter referred as “the Act”]. As the main issue involved in the two appeals is common, both the matters were heard together and are being disposed of vide this common order for the sake of convenience. We will first take up the appeal f

The order continues below.

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