THAKUR INFRAPROJECTS P. LTD,RAIGAD vs. DCIT-PANVEL CIRCLE, RAIGAD

Per Rajesh Kumar, Accountant Member:

“1. In the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in retaining the disallowance u/s 80IA of Rs 68,22,830/-. The addition made may please be deleted.

2 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd.

2. In the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance of labour charges to 1% of the total purchases to Rs. 4,16,430/-. The addition retained may please be deleted.

3. Without prejudice to above, in the facts and circumstances of the case and in law, the Ld. CIT(A) had erred in restricting to 1% of purchases for A.Y. 2011-12 of Rs. 4,16,43,098/- instead of 1% of purchases for A.Y. 2012-13 of Rs. 3,03,80,063/-. In the facts and circumstances of the case and in law, the Ld. CIT(A) had erred in upholding the addition of Rs.34,541/- u/s 14A read with rule 8D of the Act. The addition retained may please be deleted.

4. Without prejudice, in the facts and circumstances of the case and in law, the Ld CIT(A) has erred in retaining the working under rule 8D, which is defective and erroneous.”

3 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. lot with access road at truck terminal, Kalamboli, Navi Mumbai on BOT basis and is responsible for repair, maintenance and operation of the said parking lot. It was submitted that it involved complete creation of infrastructure facility and operation and maintenance of the project for next 20 years. The said project was awarded by CIDCO to the assessee and after it was constructed, it was inspected by CIDCO and a work completion certificate was granted to the assessee. The said truck terminal operated by the assessee has the following facilities: > Parking of truck at small fee > Safety and security of truck and material there in > Eating facilities > Pure drinking water facility > Repair facilities including the tyre puncher, engine repairing, body repairs, coloring, Radiators works, spare parts stores, servicing center, leath Machine work etc. > Bathroom and washing facilities > Rest room > Security Monitoring for all parking area by way of CCTV cameras.

4 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. 4.1 In this context it is also worthwhile to look at the claim, done by the assesee. During A. Y. 2011-12 the assessee has claimed deduction u/s. 80IB on this very project. However during A. Y. 2012-13 deduction has been claimed u/s. 80IAB. Thus even the assessee is not clear under which section it is claiming the deduction. In this context it is also worthwhile to have a look at the relevant portion of the audit report in form No. 10CCB wherein the project is specified. For the sake of clarity the same is reproduced below:

16. Development, operation, Maintenance of ………. (a) ……. (b) …….. ………

4.2 In this case the assessee has developed a parking lot on a CIDCO land at Truck Terminal No.5. On this project the assessee intends to claim deduction u/s. 80IA of I. T. Act 1961 on the plea that it is an integral part of Highway project. As brought out above this project is not on the highway & hence there is no question it being an integral part of the Highway. The fact is that CIDCO instead of developing a parking lot on its own, has allowed the assessee to develop a parking lot on its land on BOT basis and has allowed collection of parking charges. For having used the CIDCO land the assessee is paying a yearly fee to CIDCO. The assessee is also making a -handsome profit on account of operation and maintenance of the parking lot. The parking lot is being run in a commercial way for profit. The project developed by the assessee is at per with any other parking lot in a park, mutiplex or a shopping mall. If the claim of the assessee is in accordance with the provisions of I. T. Act, 1961, income from all such parking lots will also be eligible for deduction u/s. 80IA ofl. T. Act, 1961. However there is no specifc provision in section 801A which allows deduction u/s. 801A for such projects.

4.3 Infrastructure facility eligible for deduction u/s. 80IA has been specified in the Act. As per explanation (b) to section SOIA(4) an infrastructure facility means a highway project including housing or other activities being an integral part of the project. However in the case of the assessee the parking lot developed, operated and maintained by the assessee is not on the highway and hence is not a part of any highway project. The highway near the parking lot is Panvel Taloja road and is a very old state highway and the same is not developed by the assessee. Further more parking lot is not even on Panvel Taloja highway. Therefore the parking lot on which deduction u/s. 80IA is claimed obviously is not an infrastructure facility eligible for deduction u/s. 80IA of I. T. Act, 1961. Looking at the provisions of section 80IA of I. T. Act, 1961, and the intentions behind the introduction of the section, I am of the clear view, that the claim of the assessee u/s. 80IA is not in accordance with the provisions of I. T. Act, 1961. Therefore the claim of deduction u/s. 80IA of Rs.68,22,830/- is disallowed. Since the assessee has furnished inaccurate particulars of income, penalty proceedings u/s. 271(1) (c) of the Act are initiated separately.”

5 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. “9. I have carefully gone through the facts of the case, findings of the AO in the assessment order, submissions of the Ld. AR and material placed on record. From the facts of the case it is noticed that in the return of income the appellant had claimed the deduction of Rs 8,73,817/- u/s 80IB of the Act in A Yr 2011-12 and Rs.68,22,830/- u/s 801AB of the Act in AYr 2012-13. In the absence of audit report with the return of income, the AO could not ascertain the exact nature of income against which the said deductions have been claimed. Accordingly the AO resorted to call for audit reports along with the other details for justifying the genuineness of above claims. In compliance the AR of the appellant attended the proceedings and reclassified the claim of above deductions u/s 80IA of the Act instead of 80IB/80IAB of the Act claimed in the original returns of income. As regard non filing of audit reports along with IT returns iS conducted it is stated that merely not filling the audit report along with IT returns will not disentitle the appellant for claiming above deduction. As per A.O. the deduction u/s 80IA of the Act is admissible only if the account of the appellant have been audited by the CA and the audit report duly signed and verified by such accountant is furnished along with return of income. In view of these facts the AO concluded that there is no consistency in the stand of the appellant and non filing of audit report along with the return of income also affirms that the appellant is not sure about correctness of its claim which he had made u/s. 80IB/80IAB of the Act as above. The AO further observed that the auditor in the audit report referred the truck parking terminal as an industrial park/SEZ, which was corrected and claimed as truck parking terminal during the assessment proceedings.

9.1 From the facts of the case it is noticed that the appellant had entered into an agreement with CIDCO for repairs, maintenance and operation of parking lot i.e. truck parking terminal in 6.40 hectare piece of land, at Kalamboli Steel market, which is located Diva Panvel Railway Line on its eastern side and NH 4 bypass (Mumbai-Pune old express way) on its southern side. Accordingly it had repaired the truck parking terminal and as per agreement, started collecting the parking charges from the truckers. It has also created other amenities such as dhaba, small shops, rest rooms, canteens, restaurant, repair shops etc., in the said land for providing facilities to the truck drivers and also merchandizing the goods and services on commercial basis for profits. As per agreement, the certain part of the fees collected against parking was also paid to the CIDCO, with an annual increment of 10%. The appellant had claimed the above deductions with the plea that the truck parking terminal is an integral part of highway projects, hence eligible for said deduction, as per provisions of Sec 80IA(4) of Act.

9.2 The AO, however, observed that the truck parking terminal is an independent contract between appellant and CIDCO for repair, maintenance and operating it, for certain period on contract basis and has nothing to do with the highways, which have been built either by the Government or other players independently, hence the truck parking terminal, awarded by way of contract for repair, maintenance and operation, cannot be classified as integral part of the highway. The AO further observed that the CIDCO has awarded the contract of truck parking terminal to the appellant for repair, maintenance and operating it for certain period, by way of contract, hence the same cannot be classified as infrastructure developed by the appellant, as has been defined in the provisions of Explanation (b) to Sec 80IA(4) of 6 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. the Act, which inter-alia state that "(b) a highway project including housing or other activities being an integral part of the highway project”. The AO further noticed that the appellant is collecting truck parking charges from various truck owners and the same is shared with the CIDCO, as per their agreement, with annual increment of 10%, on commercial basis.

9.2 From the above facts it is seen that this truck parking terminal was already existing in the Kalamboli Steel Market and the contract was awarded to the appellant for renovating/repairing, maintaining and operating it for certain period, to generate income for itself as well as for CIDCO, on commercial basis. It is pertinent to mention here that in the country where ever there are big market hubs/shopping centers/malls, such parking lots are maintained by the contractors on contract basis, by way of repair, maintenance and operation and the revenue is shared between the contractors and the land parking terminal owners. In this case the appellant had developed other amenities, such as rest rooms, restaurants, drinking water facilities, repair shops, other retain shops of daily needs etc.. to facilitate the people coming therein including drivers, for commercially exploiting the facilities. Keeping in view the facts as discussed above, in my considered opinion, the contract of truck parking terminal, awarded to the appellant for repair, maintenance and operating, for certain period, on commercial basis, cannot be classified as infrastructure under any provision of Sec 80IA(4) of the Act, hence not eligible for claim of deduction made u/s 80IA of the Act. As regards the case laws relied by the appellant are concerned, it is seen that they are distinguishable from the facts of the case under dispute, hence not comparable. Accordingly the claims of deduction of Rs 8,73,817/- and Rs. 68,22,830/-, for A Yr 2011-12 and 2012-13, respectively, disallowed by the AO, are hereby sustained and above grounds of appeal, for both the years, are dismissed.”

10. Learned counsel for the assessee, on the other hand, submitted that the issue is squarely covered in favour of the assessee by the Tribunal's decision as mentioned above. In the said order the Tribunal had held as under : "After hearing both sides, we find that the assessee has claimed deduction under section 80-IA on bus shelters treating the same as integral part of highway and development infrastructure. For the purpose of highway system the building of the bus shelters are functional necessity and these are inextricably connected with the infrastructure required for highway. Without bus shelters the smooth movement of the vehicles and the operation of the vehicles through the highway shall not be of desired level. Thus the bus shelters are functionally necessary part and parcel of the highway infrastructure. By holding so we find that the learned Commissioner of Income-tax (Appeals) has rightly allowed the appeal of the assessee on this issue. We uphold the same and dismiss this ground of appeal

taken by the Department."

11. Learned counsel further submitted that the abovesaid order of the Tribunal had been appealed against by the Department in the hon'ble High Court and the hon'ble Calcutta High Court has not yet reversed the decision of the Income-tax Appellate Tribunal. Hence he submitted that the Tribunal's orders should be sustained. Learned counsel further submitted that the issue involved is covered in favour of the assessee by the decision of the Tribunal in the case of Dy. CIT v. Selvel Advertising (P.) Ltd. [2015] 58 taxmann.com 196 (Kol.) wherein the identical issue has been decided in favour of the assessee. In that case it was also pointed out that 10 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. the hon'ble Calcutta High Court had passed an order confirming the order of the Income-tax Appellate Tribunal in quashing a revision order passed by the learned Commissioner of Income-tax under section 263 of the Act whereby allowance of section 80-IA of the Act on bus shelters and foot overbridges was disallowed.

12. Learned counsel for the assessee further submitted that section 80-IA of the Act provides for deduction on account of profits and gains derived by an industrial undertaking from any business referred to therein. Learned counsel further submitted that the hon'ble apex court in the case of Liberty India (supra ) dealt with the question whether the profit from the Duty Entitlement Pass Book Scheme (DEPB) and the Duty Drawback Scheme could be said to be profit derived from the business of an industrial undertaking eligible for deduction under section 80-IB of the Income-tax Act. Hence he submitted that this case law does not support the case of the Department. He further submitted that the very agreements under which the assessee has developed, operated and maintained the infrastructure facility at its own cost provided for revenue generation by the assessee by the display of commercial advertisement on the infrastructure facility developed by it. Learned counsel further submitted that the assessee was also not to charge any amount from the public users of the infrastructure facility developed by it. That the assessee was however permitted to use the infrastructure facility developed by it to raise revenue by display of commercial advertisements on it. That the provision in the agreements relating to generation of revenue in the manner aforesaid is inextricably and directly connected with the development, operation and maintenance of the infrastructure facility provided for in the agreements. Learned counsel further submitted that the assessee did not merely develop the infrastructure facility but the assessee also operated and maintained the infrastructure facility which activity are also covered by section 80-IA of the Act. In this regard learned counsel further referred to the decision of the hon'ble Calcutta High Court in the case of CIT v. Cement Mfg. Co. Ltd. [ITAT No. 130 of 2014, dated 15-1-2015]. In this case the hon'ble Calcutta High Court has upheld the Income-tax Appellate Tribunal's decision holding that the assessee was entitled to deduction under section 80-IC of the Act by treating the transport and interest subsidy as part of the business profit. Accordingly, learned counsel for the assessee submitted that the assessee's claim of deduction under section 80-IA of the Act cannot be disallowed.

taken by the Department."

11. Learned counsel further submitted that the abovesaid order of the Tribunal had been appealed against by the Department in the hon'ble High Court and the hon'ble Calcutta High Court has not yet reversed the decision of the Income-tax Appellate Tribunal. Hence he submitted that the Tribunal's orders should be sustained. Learned counsel further submitted that the issue involved is covered in favour of the assessee by the decision of the Tribunal in the case of Dy. CIT v. Selvel Advertising (P.) Ltd. [2015] 58 taxmann.com 196 (Kol.) wherein the identical issue has been decided in favour of the assessee. In that case it was also pointed out that the hon'ble Calcutta High Court had passed an order confirming the order of the Income-tax Appellate Tribunal in quashing a revision order passed by the learned Commissioner of Income-tax under section 263 of the Act whereby allowance of section 80-IA of the Act on bus shelters and foot overbridges was disallowed.

12. Learned counsel for the assessee further submitted that section 80-IA of the Act provides for deduction on account of profits and gains derived by an industrial undertaking from any business referred to therein. Learned counsel further submitted that the hon'ble apex court in the case of Liberty India (supra ) dealt with the question whether the profit from the Duty Entitlement Pass Book Scheme (DEPB) and the Duty Drawback Scheme could be said to be profit derived from the business of an industrial undertaking eligible for deduction under section 80-IB of the Income-tax Act. Hence he submitted that this case law does not support the case of the Department. He further submitted that the very agreements under which the assessee has developed, operated and maintained the infrastructure facility at its own cost provided for revenue generation by the assessee by the display of commercial advertisement on the infrastructure facility developed by it. Learned counsel further submitted that the assessee was also not to charge any amount from the public users of the infrastructure facility developed by it. That the assessee was however permitted to use the infrastructure facility developed by it to raise revenue by display of commercial advertisements on it. That the provision in the agreements relating to generation of revenue in the manner aforesaid is inextricably and directly connected with the development, operation and maintenance of the infrastructure facility provided for in the agreements. Learned counsel further submitted that the assessee did not merely develop the infrastructure facility but the assessee also operated and maintained the infrastructure facility which activity are also covered by section 80-IA of the Act. In this regard learned counsel further referred to the decision of the hon'ble Calcutta High Court in the case of CIT v. Cement Mfg. Co. Ltd. [ITAT No. 130 of 2014, dated 15-1-2015]. In this case the hon'ble Calcutta High Court has upheld the Income-tax Appellate Tribunal's decision holding that the assessee was entitled to deduction under section 80-IC of the Act by treating the transport and interest subsidy as part of the business profit. Accordingly, learned counsel for the assessee submitted that the assessee's claim of deduction under section 80-IA of the Act cannot be disallowed.

13. We have carefully considered the submissions and perused the records. We find that the issue on merits as to whether the assessee is entitled to deduction under 12 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. section 80-IA of the Act for construction of foot over-bridge as well as bus shelter is covered in favour of the assessee by the decision of the Tribunal and the hon'ble Calcutta High Court as referred to in the submissions of learned counsel for the assessee. The Tribunal in the assessee's own case as well as in the case of Selvel Advertising (P.) Ltd. (supra ) has held that bus shelters and foot overbridges should be considered as part of the infrastructure facility for claiming deduction under section 80-IA of the Act. This issue was also supported by the decision of the hon'ble Calcutta High Court in the case of Selvel Advertising (P.) Ltd. (supra ) wherein the hon'ble High Court has upheld the Income-tax Appellate Tribunal's decision quashing the revision order passed by the learned Commissioner of Income-tax under section 263 of the Act wherein bus shelters and foot overbridges were not to be considered as part of the infrastructure facility for claiming deduction under section 80-IA of the Act.

14. As regards the issue raised by the learned Departmental representative that the income which is the subject matter of claim of deduction under section 80-IA of the Act was not derived from the business of advertising of bus shelters and foot overbridges, we find that this is altogether a new issue which is not even the case of the Assessing Officer. The Assessing Officer has made the disallowance only on the ground that construction of bus shelter and foot overbridge cannot be treated as development of infrastructure facility. Hence they do not qualify for deduction under section 80-IA of the Act. This aspect of the Assessing Officer's disallowance has been duly overruled by the learned Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. The same also draws support from the hon'ble Calcutta High Court decision in the case of Selvel Advertising (P.) Ltd. (supra ). In these cases it has been held that development of foot overbridges and bus shelters do qualify for deduction under section 80-IA of the Act on account of infrastructure development. When the Assessing Officer has not raised any issue as to whether the income of the assessee can be considered to be income derived from the industrial undertaking and the same was also not the subject-matter of consideration before the learned Commissioner of Income-tax (Appeals) nor any such ground has been raised before the Income-tax Appellate Tribunal, in our considered opinion the learned Departmental representative cannot now enlarge the scope of the Revenue's appeal before us.

15. In this regard we also draw support from the hon'ble Madhya Pradesh High Court exposition in the case of Kamal Kishore & Co. v. CIT [1998] 232 ITR 668 for the following proposition (headnote) : "Section 253 of the Income-tax Act, 1961, permits appeals to the Appellate Tribunal. Under sub-section (2) of this section, the Commissioner may, if he objects to any order, direct the Assessing Officer to appeal to the Appellate Tribunal against the order. It is thus clear that there has to be an appeal and there has to be a specific objection. Under Order 41, rule 2, of the Code of Civil Procedure also it is clear that the appellant shall not except by leave of the court, urge or be heard in support of any ground of objection not set forth in the memorandum of appeal."

16. On the basis of the above ratio the hon'ble High Court had held that admittedly the ground of status was not taken by the Department in terms of section 253(2) of the Act. No leave was obtained to urge the ground in regard to the status as 13 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. regards the liability to tax. The Tribunal erred in law in setting aside the findings given by the Appellate Assistant Commissioner that the assessee was a separate entity and the assessment made in the case of the assessee should be treated as substantive.

17. Thus from the above we hold that the issue which was not the basis of disallowance by the Assessing Officer and the same was not the subject-matter of consideration by the learned Commissioner of Income-tax (Appeals) and the same was also not the subject-matter of the ground of appeal

taken before the Income- tax Appellate Tribunal the issue now being raised by the learned Departmental representative need not be adjudicated by us. Hence on the issue as to whether foot overbridges and bus shelters qualify for deduction of section 80-IA of the Act we hold that the learned Commissioner of Income-tax (Appeals) is correct in holding the assessee's entitlement for deduction under section 80-IA of the Act. Accordingly, this ground of appeal raised by the Revenue stands dismissed.”

8. Since the facts of the assessee’s case are similar to the one as decided by co-ordinate bench of the Tribunal, we are therefore respectfully following the same, set aside the order of Ld. CIT(A) and direct the AO to allow the deduction under section 80IA of the Act.

9. The issue raised in ground No.2 is against the part confirmation of disallowance on account of labour charges equal to 1% of the total purchases which comes to Rs.4,16,430/- by Ld. CIT(A) as against the disallowance on adhoc basis of Rs.7,25,120/- made by the AO on the ground that these expenses were incurred in cash whereas the issue raised in ground No.3, a without prejudice ground that the Ld. CIT(A) has erred in restricting the disallowance to 1% of the purchases for assessment year 2011-12 of Rs.4,16,43,098/- instead of 1% of the purchases for assessment year 2012-13 i.e. Rs.3,03,80,063/-.

10. The facts in brief are that the AO noticed from the profit & loss account that assessee has claimed the labour charges under the head direct expenses of Rs.3,03,80,063/-. The AO

14 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. noticed on the basis of bills and vouchers furnished by the assessee that there were no proper bills issued by third party and in some cases the expenses were incurred in cash. The AO calculated the amount of such cash expenses at Rs.7,25,120/- and added the same to the income of the assessee.

15 & 743/M/2018 M/s. Thakur Infraprojects Pvt. Ltd. and direct the AO to disallow a sum of Rs.1,00,000/-. Ground no. 2 is partly allowed and ground no. 3 is without prejudice to ground 2 and therefore need not be adjudicated.

Ground no. 1 is not pressed at the time of hearing and therefore dismissed as not pressed.