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Facts
The assessee, a special purpose vehicle, treated connection charges as capital receipts and amortized them. The AO and CIT(A) held them to be revenue receipts taxable on a receipt basis, a stance later accepted by the assessee under Vivad-se-Vishwas. However, for AY 2017-18, the assessee initially offered income on an amortized basis, leading to excess taxation.
Held
The Tribunal held that the CIT(A)'s order was incorrect as the department's inconsistent stance (accepting amortized income in earlier years but demanding receipt basis for the impugned year) resulted in excess taxation for the assessee. An additional ground regarding deduction under Section 80IA was admitted and remanded.
Key Issues
1. Whether the consistent treatment of connection charges by the department across assessment years should be followed for AY 2017-18, despite the assessee's subsequent acceptance of the receipt basis. 2. Admissibility of an additional ground for deduction under Section 80IA.
Sections Cited
143(3), 80-IA, 80IA(4)
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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-Addl/JCIT(A)-5, Mumbai (hereinafter referred to as the “Ld. CIT(A)”] dated 04.01.2024 for the AY 2017-18. 2. The first issue raised by the assessee is against the order of Ld. CIT(A) confirming the order of AO wherein the AO has accepted the income of connection charges received by the assessee on amortized basis which is against consistency as
3. Facts in brief are that the assessee is a special purpose vehicle set up by Jamshedpur Utility and Services Co. Ltd. and Voltas Ltd.in accordance with Development Agreement dated 08.09.2007 with Kolkata Metropolitan Development Authority for setting up an infrastructure facility of a water supply and sewerage plant catering to Sector-V, Salt Lake , Kolkata on a Build Operate Transfer basis for a period of 30 years. The said plant was completed in December, 2010 and made operational from January 4, 2011. The assessee treated the receipt of connection charges as capital receipt and then amortized the same to the profit and loss account in the earlier AY 2012-13. In that assessment year the case was selected for scrutiny u/s 143(3) wherein the AO vide order dated March 21, 2015 held that connection charges were revenue receipt and the amount actually received was to be taxed on receipt basis which was confirmed by the Ld. CIT(A). Similar addition was made in the assessment order for AY 2013-14 and AY 2014-15 and was also confirmed by the Ld. CIT(A) and the assessee filed appeal before the ITAT. In the meantime the assessee opted for Direct Vivad-se-Viswas, 2020 which was in vogue thereby the assessee accepting the position and stand of department with regard to connection charges being taxed on receipt basis. In the impugned assessment year, the assessee has already filed return of income on October 31,2017 by offering connection charges on the amortization basis at Rs. 75,60,148/- and not on receipt basis which would be Rs. 56,05,913/-. This has happened because the return of income was filed prior to the assessee going into VSVS 2020. Since the assessee has accepted the revenue’s stance in the taxation of connection charges on receipt basis , therefore the return of AY 2017-18 already filed before the assessee going into VSVS which resulted into the connection charges being offered in excess to tune of Rs. 19,54,235/- on amortized basis. The return was accepted by the AO which is in variance to the stand of the departments in other assessment years as stated hereinabove.
Assessment Year: 2017-18 Naba Diganta Water Management Ltd. 4. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by rejecting the submissions of the assessee on the ground that the AO had already accepted the return and the assessee has not filed any revised return of income. The ld CIT(A) also noted that if the assessee contention is accepted it will lead to the assessed income being less than the income as per the return of income .
5. After hearing the rival contentions and perusing the material on record, we find that the return in the instant case was filed on 31.10.2017 whereas the assessee accepted the revenue’s treatment of income of connection charges on receipt basis by going into VSVS 2020. Now the issue is in regard to the return income already filed by the assessee wherein the income of connection charges was offered to tax on amortized basis resulting into excess income being offered in the return to the tune of Rs. 19,54,235/- by the assessee. The AO accepted the return and the Ld. CIT(A) dismissed the appeal on the ground that income cannot be the lesser than the returned income. In our opinion, the said stance of the department is in variance to the principle of consistency as in the assessment earlier years wherein the department has accepted the income on receipt basis by rejecting the accounting followed by the assessee of offering the said income on amortised basis. Therefore, the order passed by the Ld. CIT(A) is incorrect so far as the Ld. CIT(A) has given a finding that income cannot be lesser than the returned income as the change of stance by the revenue would result in the excess taxation of income by Rs. 19,54,235/- which was already offered on amortized basis. Therefore we set aside the order of Ld. CIT(A) and direct AO to assess the income of connection charges on receipt basis. Accordingly, ground no. 1 is allowed.
Besides, the assessee has taken an additional ground vide application dated 31.12.2014 which is extracted below:
“2. The appellant submits that by a letter dated October 31, 2017, it had filed its Form 10CCB(Page 3-11 A of PB-11) along with its return wherein the Appellant had submitted that it isentitled to deduction under section 80-IA(4) of the Act of the Act but is not claiming benefitof the same as the gross total income after set-off of the carried forward losses/unabsorbeddepreciationis notpositiveand that inthe eventtheissues connection charges anddepreciationis earlier yearsis decidedagainst itandthe earlier year losses and/orunabsorbed depreciation are not available the Appellant reserves its right to substantiatethe claim of deduction under section 80-IA(4) of the Act.
The appellant submits that subsequent to the adjustments made in the earlier years and thesame having attained finality, the gross total income of the Appellant would turn positive.In light of the same the Appellant has filed an additional ground claiming the benefit ofdeduction under section 804A.
The Appellant submits that the aforesaid claim was made before the Assessing Officer byway of a letter dated October 31, 2017 (page 1, 2 of PB- II) and the same can be madebefore this Hon'ble Tribunal by way of an additional ground and reliance in this regard isplaced on the decision of PCIT v Eastern Coalfields Ltd (ITAT/96/2018- Calcutta HighCourt) (Pg 52 at 54 last para), wherein the Hon'ble Calcutta High Court while affirmingthe decision of the Hon'ble Tribunal in admitting the additional ground has also held thatthe decision of the Hon'ble Supreme Court in Goetz India Ltd v CIT 284 ITR 323 (SC)does not impinge on the power of the appellate authority and only deals with the power ofthe Assessing Officer.
The Appellant submits that the said issue has not been examined by the Assessing Officerand prays that the said issue may be remanded to the Assessing Officer for examination ofthe claim on merits.”
Facts in brief are that the assessee has set up an infrastructure facility in 2008 which was completed and commissioned in 2010 whereby the assessee was providing water and sewerage connection in Sector V, Salt Lake, Kolkata as stated hereinabove. The infrastructure facility was set up and commissioned in FY 2010-11 for the relevant to assessment years 2011-12 and such it was entitled to claim of deduction u/s 80IA of the Act for having set up the infrastructure facility. But the same could not be claimed till A.Y. 2015-16 due to losses. The assessee opted to claim deduction u/s Assessment Year: 2017-18 Naba Diganta Water Management Ltd. 80IA for the first time in AY 2016-17 and has accordingly filed requisite audit report in Form 10CCB. The assessee made its claim deduction u/s 80IA of the Act in AY 2017-18 of Rs. 4,36,30,100/- vide letter dated 31.10.2017 filed in the office of AO stating therein that in case there was assessment a taxable income during the course of assessment proceedings. Hence the assessee has filed the additional ground.
The Ld. A.R vehemently submitted before us that the additional ground was filed to claim the deduction u/s 80IA in respect of infrastructure facility which was set up by the assessee in F.Y. 2008 and completed and Commissioned in FY 2010-11 for providing water and sewerage facility to stand Sector V, Salt Lake, Kolkata. The Ld. A.R submitted that the assessee has already filed form 10CCB vide letter dated 31.10.2017 though there was no profit from the undertaking and therefore no deduction is claimed u/s 80IA(4) of the Act as gross total income after set off of carried forward losses/ unabsorbed depreciation is not positive but in the evet of there being positive income during assessment proceedings , then the assessee would be entitled to make its claim u/s 80IA. The Ld. A.R stated that the additional ground may kindly be allowed as it is legal issue which is arising out of the assessment records. The Ld. A.R in defense of argument relied on the following decision of Hon’ble Supreme Court: i) Jute Corporation of India Ltd. Vs CIT in 187 ITR 688 ii) National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 And also Hon’ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal)
The Ld. A.R submitted that in the above decisions it has been held that even if the claim was not made in the return and/or before the AO or CIT(A) could be made before the appellate authority.
Assessment Year: 2017-18 Naba Diganta Water Management Ltd. 9. The Ld. D.R on the other hand submitted that the assessee has not made the the said claim before the lower authorities and therefore it should not be admitted at this stage.
After hearing the rival contentions and perusing the material on record, we find that the assessee staked its claim with regard to the deduction u/s 80IA of the Act qua the income arising from the infrastructure facility set up by the assessee to provide water and sewerage facility to Sector V, Salt Lake, Kolkata. Apparently the issue which has not been examined by the AO or CIT(A). Now the assessee has raised an additional ground of appeal which in our opinion deserves to be admitted considering the following ratio laid down in the following decisions namely i) Jute Corporation of India Ltd. Vs CIT (supra), ii) National Thermal Power Co. Ltd v. CIT (supra) and iii) by the Hon’ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal). We therefore inclined to admit the same. The assessee has also filed paper book (vol. II) which comprised certain documents which were not before the lower authorities. Therefore we admit the additional evidences filed by the assessee and restore the issue to the file of AO with the direction to decide the same after verification of these evidences in accordance with the provisions of the Act after affording a reasonable opportunity to the assessee. In the result, the appeal of the assessee is allowed for statistical purposes. 11.
Order is pronounced in the open court on 15th January, 2025
Sd/- Sd/- (Pradip Kumar Choubey /�द�प कुमार चौबे) (Rajesh Kumar/राजेश कुमार) Judicial Member/�या�यक सद�य Accountant Member/लेखा सद�य Dated: 15th January, 2025 SM, Sr. PS Assessment Year: 2017-18 Naba Diganta Water Management Ltd. Copy of the order forwarded to: 1. Appellant- Naba Diganta Water Management Ltd., GN 11-19, Sector-V, Salt Lake, Kolkata-700091 2. Respondent – ACIT, Circle-2(1), Kolkata 3. Ld. CIT(A)- Addl./JCIT(A)-5, Mumbai 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)