MADHU REANSPORT COMPANY PRIVATE LIMITED. ,KOLKATA vs. ITO, WARD-II(1), KOLKATA. , KOLKATA

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ITA 1233/KOL/2024Status: DisposedITAT Kolkata24 April 2025AY 2008-098 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 40(a)(ia) of the Act was not justified. It noted that the recipient, M/s Srei Infrastructure Pvt. Ltd., had offered the interest income to tax, which was a key finding from the first round of appeal. The Tribunal relied on the Supreme Court's decision in Hindustan Coca Cola Beverages (P) Ltd. Vs. CIT, stating that no disallowance should be made if the payee has offered the income to tax. Furthermore, the Tribunal found that Form 26A was not applicable for the Assessment Year 2008-09, as it was introduced by amendment in 2012. Therefore, the order of the CIT(A) was set aside, and the Assessing Officer was directed to delete the addition. Regarding the deduction under Section 80IA, the Tribunal found the CIT(A)'s finding to be perverse and factually incorrect. It noted that the assessee had filed its return within the time allowed under Section 139(1), although it did not claim the deduction initially. The Tribunal reiterated that a claim for deduction could be made before the appellate authority for the first time, as had happened in the first round of litigation where the CIT(A) had allowed the deduction by admitting an additional ground. Accordingly, the Tribunal set aside the CIT(A)'s order and directed the AO to allow the deduction of ₹1,08,41,626/- under Section 80IA.

What were the facts?

This is the second round of litigation before the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2008-09, concerning an appeal by Madhu Transport Company Private Limited against an order of the National Faceless Appeal Centre, Delhi. The primary dispute involves the disallowance of interest paid to M/s Srei Infrastructure Pvt. Ltd. under Section 40(a)(ia) of the Income Tax Act, 1961, due to alleged non-filing of Form 26A. In the first round, the assessee's appeal was allowed by the CIT(A) as the recipient had offered the interest to tax. The appeal was later restored to the AO due to the assessee's non-appearance. The AO re-added the interest, and the CIT(A) confirmed it, citing non-filing of Form 26A and the recipient's failure to substantiate offering the interest to tax. A second issue concerns the denial of deduction under Section 80IB of the Act, as the assessee had not claimed it in its original return filed under Section 139(1).

What were the issues?

1. Whether the disallowance of interest paid to M/s Srei Infrastructure Pvt. Ltd. under Section 40(a)(ia) of the Income Tax Act, 1961, is justified when the recipient has offered the interest income to tax, despite the assessee not filing Form 26A? - Assessee's contention: The disallowance is not warranted as the recipient has offered the interest to tax, and the decision in Hindustan Coca Cola Beverages (P) Ltd. Vs. CIT (2007) 293 ITR 226 (SC) should apply. Furthermore, Form 26A was not applicable for the impugned assessment year. - Revenue's contention: The disallowance is justified because the assessee failed to file Form 26A and substantiate that the recipient had offered the interest income to tax, as required by the law and the proviso to Section 201(1) of the Act. 2. Whether the deduction under Section 80IB of the Income Tax Act, 1961, can be allowed when the claim was not made in the original return filed under Section 139(1), but was allowed as an additional ground in the first round of appeal? - Assessee's contention: The claim for deduction under Section 80IA (mistakenly referred to as 80IB in the issue framing but discussed as 80IA in the judgment) can be made before the appellate authority for the first time, even if not claimed in the original return, as evidenced by the first round of appeal where it was allowed. - Revenue's contention: The deduction under Chapter VIA, including Section 80IA, is not allowable unless the return of income is furnished on or before the due date specified under Section 139(1), as per Section 80AC of the Act.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 201,Section 80IB,Section 80IA,Section 139(1),Section 80AC

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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri G.P. Shukla, AR
For Respondent: Shri Subhro Das, DR
Hearing: 23.04.2025Pronounced: 24.04.2025

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 31.03.2024 for the AY 2008-09.

2.

The ground no. 1 is general in nature and needs no adjudication.

3. The issue raised in ground no.2 is against the order of ld. CIT (A) confirming the addition as made by the ld. AO u/s 40(a)(ia) of the Act on the ground that form 26A was not filed by the assessee in respect of amount of interest paid on which no TDS was deduction at source.

5.

The tribunal restored the appeal to the file of the ld. AO when the assessee failed to appear on the appointed date of hearing. Now, in the set aside assessment proceeding, the ld. AO again added the amount being interest paid to M/s Srei Infrastructure Pvt. Ltd. on the ground that the facts are different from the decision relied upon by the assessee in the case of Hindustan Coca Cola Beverages (P) Ltd. Vs. CIT (2007) 293 ITR 226 (SC),.

6.

In the appellate proceedings, the ld. CIT (A) has gone a step further while affirming the order of AO by holding and observing as under:-

“9. Considering the aforesaid clear mandate of law, as the assessee company except for harping on its claim that the respective payees had included the interest incomes in their respective returns of income for the year under consideration and paid taxes on the same, had however failed to substantiate the same in the manner required under law, therefore, we find no infirmity in the view taken by the lower authorities who had rightly made/sustained the disallowance u/s.40(a)(ia) of the Act. Before parting, we may herein observe that the assessee company had not only failed to file both before the AO and the CIT(Appeals) the certificates of the accountants in the prescribed form i.e. in "Form 26A"_ r.w 31ACB, certifying that the respective payees had fulfilled all the conditions mentioned in the "1st proviso" to Sub-section (1) to Section 201 of the Act, but the Ld. AR on being queried during the course of hearing of the appeal had candidly admitted that the said certificates had till date have not been obtained by the assessee from the said payees. In so far the reliance placed by the Id. AR on the order passed by the ITAT in the case of RKP Company Vs. ITO, Ward-1, Korba, dated 24.06.2016, the same being distinguishable on facts would not assist the case of the assessee company. We, say so, for the reason that a perusal of the record in the present case before us, reveals that both the lower authorities had categorically observed that the assessee had failed to produce the certificates/evidence Relying on the above discussion the GOA of the assessee is dismissed.”

7.

After hearing the rival contentions and perusing the materials available on record, we find that in this case, the interest was paid to M/s Srei Infrastructure Pvt. Ltd which was duly offered to tax by the recipient. We observe this fact from the appellate order passed in the first round passed by the ld CIT(A) that the payee of the interest has offered the sum to tax by incorporating the same in his return of income and therefore, case is clearly covered by the decision of Hon'ble Apex Court in the case of Hindustan Coc Cola Beverages (P) Ltd. Vs. CIT (supra), wherein it is held that no disallowance has to be made u/s 40(a)(ia) of the Act if the receiver/ payee of income has offered same to tax in the return of income. Therefore, there cannot be any disallowance on this account. Moreover, the finding of the ld. CIT (A) that assessee has not filed the form no.26A read with 31ACB a certificate from Chartered Accountant, certifying the payee had fulfilled all the conditions mentioned in the First Proviso to Sub Section 1 to Section 201 but after perusing the said section along with Rule 31ACB of the Income Tax Rules, 1962, we note that the form 26A was not applicable during the impugned assessment year as the same was brought by IT(11th Amendment) Rules, 2012 with effect from 12.09.2012, which provides that under Rule 31ACB, the assessee is required to obtain a certificate from Accountant under First Proviso to

8.

The second issue raised by the assessee is against the order of ld. CIT (A) not allowing the deduction u/s 80IB of the Act.

9.

The facts in brief are that in the set aside proceeding, the ld. AO noted that the assessee has not made his claim in the return filed u/s 139(1) of the Act . In other words no claim u/s 80IA was made in respect of deduction claimed by the assessee qua the profit from the infrastructure facilities. The AO observed that the assessee has also not made its claim by filing a revised return of income and therefore, the same is not allowable to the assessee.

10.

In the appellate proceedings, the ld. CIT (A) also rejected the claim of the assessee by observing and holding as under:-

“GOA 2: I find that the mandatory condition for claiming deduction under Chapter VIA is that the claim should be made in a return of income filed within time. For ready reference section 80AC is reproduced below: [Deduction not to be allowed unless return furnished.79 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after- (i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.-Deductions in respect of certain incomes", no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.] In view of the same the GOA is dismissed.”

“2.7. Viewed in the above perspective, the claim for deduction made by the appellant u/s 801A of the Act, has been exáïained. In the statutory audit report, available on record, the Statutory Auditors certified the fact that: (1) The appellant company had entered into an agreement with Indian Railways under Wagon Investment Scheme on (WIS) 18.07 2006 and as per the said Scheme, the appellant company had purchased four BOXN rakes of Railway Wagons and put the same at the disposal of Indian Railways for 10 years. Thereafter, as per the agreement, the ownership of the wagons will transfer to Indian Railways. (ii) In consideration of the same, the appellant company had got 10% freight rebate on normal tariff rates. The said rebate granted to the appellant company for a period of 10 years for guaranteed supply of six wagons per month. Further, two additional wagons per month had been provided to the appellant without giving the rebate of 10%. (iii) The appellant company is maintaining set of books for its operation from Railway wagons at 86B/2 Gajraj Chambers, 2nd Floor, Topasia Road, Kolkata, West Bengal. (iv) For the previous year, relevant to the assessment year, under consideration, the appellant company had received premium from its clients for providing Railway Wagons as per their requirement. Thus the said premium was directly related to the said infrastructure facility i.e. on account and due to confirm supply of railway wagons. (v) For purchasing the Railway Rakes, the appellant company had taken loan from Srei Infrastructure Finance Limited and Directors. (vi) Cost includes interest paid on loan and depreciation on Railway Rakes. Kolkata Branch of the appellant company was looking after all the matters with respect to the said infrastructure facility i.e. for railway rakes. Administrative and selling expenditure incurred by Kolkata Branch was taken into consideration for calculating the claim u/s 801A of the Act. 2.8. The aforementioned facts, certified by the Statutory Auditors, have been verified from the facts obtaining from the record. Infrastructural facility means and includes, amongst others, Rail System. The Indian Railways had formulated a Build - own - lease Transfer Scheme [BOLT scheme). Under this Scheme, a Private Limited Company will provide the necessary and crucial components of a Railway System, own them for a stipulated period but will not maintain or operate the same. Instead, the enterprises will handover the assets back to the Indian Railways and operation and shall ultimately transfer the same to Indian Railways. The private enterprises can claim the benefit of deduction u/s 801A in respect of the infrastructure facility meant for development and augmentation of the Railway System and not to other infrastructure facilities including rolling stocks as per Circular No 733 dated 03.01.1996 rolling stocks are eligible for deduction u/s 801A of the Act. The new fleet of wagons, which were kept at the

3.

The total relief allowed is summarized below: Vide Para No.1.12. Rs. 73,20,545/- Vide Para No.2.9. Rs.1,08,41,626/- Total relief Rs.1,81,62,171/- 4. In the result, the appeal is allowed.”

12.

In the appellate proceeding before the ld. CIT (A) against the order of ld. AO in the second round , the ld. CIT (A) dismissed the appeal of the assessee on the ground that the return of income has not been filed by the assessee within the time allowed u/s 139(1) of the Act and therefore, deduction u/s 80IA is not allowable to the assessee which is perverse finding and factually incorrect. We note that the assessee has filed the return of income within time on 26.09.2008, originally declaring total income of ₹2,30,38,305/-, without claiming the deduction u/s 80IA of the Act in respect of rail and infrastructure system. In our opinion, if the assessee is not made any claim in the return filed u/s 139(1) of the Act, then the same could be made before the appellate authority for the first time. In our opinion, the ld. CIT (A) in the first round has rightly given the finding while allowing the appeal of the assessee by admitting the additional ground which

13.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 24.04.2025.

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