DCIT, CIRCLE - 3(1) , KOLKATA vs. M/S. SPPL PROPERTY MANAGEMENT PVT. LTD., , KOLKATA

1 ITA No. 22/Kol/2020 SPPL Property Management Pvt. Ltd., AY 2014-15

आयकर अपील�य अधीकरण, �यायपीठ –“A” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Hon’ble Shri P. M. Jagtap, Vice President and Hon’ble Shri A. T. Varkey, JM] I.T.A. No. 22/Kol/2020 Assessment Year: 2014-15

Deputy Commissioner of Income- Vs. M/s. SPPL Property Management tax, Circle-3(1), Kolkata. Pvt. Ltd. (PAN: AAICS7168Q) Appellant Respondent

Date of Hearing (Virtual) 09.07.2021 Date of Pronouncement 16.07.2021 For the Appellant Shri Dinesh Aibor Jayal Sawkuie, CIT For the Respondent Shri S. Jhajharia, FCA

ORDER Per Shri A. T. Varkey, JM: This is an appeal preferred by the revenue against the order of the Ld. CIT(A)-10, Kolkata dated 31.10.2019 For AY 2014-15.

“Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made by the A.O. of Rs. 4,47,35,486/- on account of disallowance of deduction claimed u/s. 80lA(4)(iii) of the Act in respect of profit derived from "Industrial Park Salarpuria Softzone disregarding the fact the assessee failed to furnish CBDT notification in accordance with Industrial Park Scheme, 2020 which is mandatory for claim of deduction u/s. 80-IA(4)(iii)”. 2.1. Brief facts as noted by the AO is that the assessee Company had claimed deduction u/s 80-IA(4)(iii) for Rs.16,07,99,016 for the four projects. The AO noted that assessee had filed the Audited accounts of the assessee Company as well as Form 10CCB and separate accounts of each declared eligible project. According to AO, the authorized representative could not furnish the Notification of the CBDT in accordance with the Industrial Park Scheme 2002, as notified in the Gazette of India, which is mandatory for claim of deduction u/s 80-IA( 4) iii) in respect of the project of 'Salarpuria Touchstone' and 'Salarpuria Softzone', in spite of calling or the same through notices issued u/s 142(1) dated 8/8/2016 &

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29/8/2016, till the passing of assessment. Therefore, the deduction u/s 80-IA(4)(iii) in respect of the project of 'Salarpuria Touchstone' and 'Salarpuria Softzone' was disallowed and the sum of Rs.6,32,25,256 is added back to the total income of the assessee.

2.2. Aggrieved by the aforesaid action of the AO, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same in respect of Salarpuria Softzone . Aggrieved by the action of the Ld. CIT(A), the revenue is before us.

2.3. We have heard rival submissions and carefully gone through the facts and circumstances of the case. We note that the AO has observed that the assessee company has filed its return of income for AY 2014-15 on 29.11.2014 declaring a total income of Rs.41,04,26,777/-. The AO noted that the assessee filed a revised return on 29.03.2016 declaring a total income of Rs.40,88,96,546/-. The AO took note of the fact that the assessee claimed deduction u/s. 80IA of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for Rs.16,03,16,963/- and income of Rs.24,85,79,580/- was offered to tax. Later the case was selected for complete scrutiny through CASS.

2.4. The AO notes that the assessee company had income from maintenance of properties/housing projects/industrial parks and rent and other miscellaneous receipts from such establishments and also from trade of flats of group companies. The AO noted that the assessee company’s income included income from operation and maintenance of ‘Industrial Park Projects’ and per first proviso to section 80-IA(4)(iii) of the Act, the profit from such activity being eligible for 100% deduction under Chapter VIA of the Act. The AO noted that the assessee company had been claiming such deduction since AY 2006-07. The AO acknowledges that he collected information and evidence from the assessee company by issuing statutory notice as per law.

2.5. Coming to the facts of the ground no.1 the AO noted that the assessee company has claimed deduction u/s. 80-IA(4)(iii) of the Act for Rs.16,07,97,016/- for the following projects:

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2.6. The AO acknowledges that the assessee had submitted the audited accounts as well as Form No. 10CCB and separate accounts of each declared eligible projects. The AO found that out of five (5) projects which is named therein in the chart cited supra two (2) of the projects the Ld. AR could not submit the notification of the CBDT as per the Industrial Parks Scheme, 2002 which according to the AO, is mandatory for claiming of deduction u/s. 80-IA(4)(iii) i.e. project of Salarpuria Touchstone and Salarpuria Softzone, therefore, deduction claimed u/s. 80IA(4)(iii) of the Act in respect of both these projects were disallowed and a sum of Rs.6,32,25,256/- was added back to the total income of the assessee. On appeal, the Ld. CIT(A) has given relief to the assessee in respect of the project named “Salarpuria Softzone” by allowing deduction of Rs.4,47,35,486/- and upheld the action of the AO in respect of the other project “Salarpuria touchstone” and confirmed the disallowance of Rs.1,84,89,770/-. The revenue is in appeal in respect of the relief granted to the deduction in respect of the project “Salarpuria Softzone” to the tune of Rs.4,47,35,486/- and the assessee is not in appeal against the action of the Ld. CIT(A)

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confirming the action of the AO in respect of “Salarpuria Touchstone” (which issue according to the Ld. AR is subjudice in the Hon’ble Karnataka High court).

2.7. It is noted that the AO has disallowed the claim in respect of the project named “Salarpuria Softzone” since the assessee was unable to furnish a copy of the relevant CBDT notification. However, it is noted that the approval for the project has been granted by Ministry of Commerce & Industry on 25.07.2006 and the Ld. AR drew our attention to the later development which has taken place wherein the CBDT vide notification dated 08.09.2020 has notified the “Salarpuria Soft Zone” as under:

2.8. From a perusal of the above, we note that the CBDT has albeit late had issued notification in accordance to law in respect of M/s. Softzone Tech Park Ltd., therefore, this project is eligible for deduction u/s. 80-IA(4)(iii) of the Act. We also note that the Ld. CIT(A) has given relief to the assessee by taking note of this Tribunal’s decision in the case of M/s. Salarpuria Softzone Vs. JCIT in ITA Nos. 665 & 666/Kol/2013 and cross appeal being ITA Nos. 581 & 813/Kol/2013 for AYs. 2008-09 & 2009-10 which was pronounced by this Tribunal “B” Bench vide order dated 29.02.2016 which has been reproduced by the Ld. CIT(A) from pages 14 to 20 of his order. We also note that the Tribunal has taken note of the decision of the Hon’ble Karnataka High Court in a case of CIT Vs. Ittina properties Pvt. Ltd., ITA No. 556 of 2013 and 105 of 2014 dated

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15.07.2014 in similar matter as well as the decision of Hon’ble Bombay High Court in the case of CIT Vs. Akruti City Ltd. (2013) 214 Taxman 398 (Bom) wherein the Hon’ble Bombay High Court has held that once industrial park was approved by Ministry of Commerce & Industry, CBDT has to suo moto issue notification and any delay on the part of the CBDT in issuing notification would not warrant the assessee being denied benefit of deduction u/s. 80-IA(4)(iii) of the Act. Hon’ble High Court has decided this issue as under:

2.9. Taking note of the ratio of these decisions the Tribunal has given relief to that assessee (Salarpuria Soft Zone) for claiming deduction u/s. 80-IA(4)(iii) of the Act and following the same, the Ld. CIT(A) has given the benefit of the claim of deduction of Rs.4,47,35,486/- u/s. 80-IA(4)(iii) of the Act at 100% of the business profit derived from the industrial park Salarpuria Softzone. We find that the CBDT notification (supra) and the tribunal’s decision (supra) in the case of M/s. Salarpuria Softzone (supra), so we are of the opinion that the Ld. CIT(A) has correctly allowed the deduction and no infirmity could be pointed out by the Ld. CIT, DR, therefore, we confirm the action of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.

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“2. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made by the AO of Rs.7,44,875/- on account of disallowance of deduction claimed u/s. 80IA (4)(iii) of the Act disregarding the fact that such income is not directly related to operating and maintenance of the eligible projects and thus cannot be claimed for computing deduction u/s. 80IA(4)(iii) of the I. T. Act, 1961.” 3.1. Brief fats of this issue as noted by the AO that the assessee in its profits of eligible projects of 'Salarpuria G R Tech Park', 'Salarpuria Hallmark' and 'Salarpuria Infozone' had included other income Rs.7,44,875/-. The AO notes that in order to operate and maintain the industrial parks had collected definite maintenance charges from the occupants of the Industrial Parks from which maintenance expenditures were met and profit was derived. According to AO, during the assessment hearings the issue of earning of 'other income' from the eligible projects were examined and it was found that there is no nexus between the operation / maintenance activity and the extra other income earned from such projects, and therefore the sum of Rs.7,44,875 is treated as an non-eligible income to qualify for deduction u/s 80 IA(4)(iii). According to AO, the authorized representative could furnish no logic or evidence to prove otherwise. According to AO, other 'miscellaneous' income of Rs.7,44,875 is not directly related to operating and maintenance of the eligible projects and thus added back to the income of the assessee.

3.2. Aggrieved by the aforesaid action of AO, the assessee preferred an appeal before the Ld. CIT(A) who allowed the claim u/s. 80IA(4)(iii) of the Act. Aggrieved, the revenue is before us.

3.3. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the only reason given by the AO to disallow the claim raised by the assessee u/s. 80IA(4)(iii) of the Act was that this amount claimed as deduction had no nexus with the operation & maintenance activity of the assessee and since no evidence could be furnished by the assessee to establish the nexus the claim for deduction he disallowed. On appeal, the Ld. CIT(A) noted that the miscellaneous income of Rs.7,44,875/- is aggregate of miscellaneous income earned from three (3) Industrial parks viz. M/s. Salarpuria G. R. Tech Park (Rs.96,670/-), M/s. Salarpuria Hallmark (Rs.31,590/-) and M/s. Salarpuria Infozone

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(Rs.7,44,875/-). It was taken note by the Ld. CIT(A) that this amount was earned on account of sale of waste materials leftover by the occupants and also on account of some interest earned on electric deposit made with BESCON for electric connection for consumption in park; and for the maintenance of the three (3) industrial park named as M/s. Salarpuria G. R. Tech Park, M/s. Salarpuria Hallmark and M/s. Salarpuria Infozone. It was taken note by the Ld. CIT(A) that the waste materials accumulated and piled up in the respective parks were finally disposed of at nominal prices which was necessary, since the materials which is none re-usable were getting accumulated/piling up which needed to be removed. Therefore, the removal of waste material is to keep the three parks clean and tidy which is part and parcel of the maintenance activity of the assessee company. Therefore, according to the assessee, the income generated from such sale of waste materials and the interest earned in the process are part of the assessee’s business activity of operating and maintenance of industrial parks and cited various judicial decisions before the Ld. CIT(A) to buttress its claim. It was brought to our notice that this kind of disallowance was made by the AO for the first time and in the previous years and subsequent years there has been no such disallowance on similar/identical income which the assessee had received from sale of waste/scrap materials which was necessary for maintaining the parks. Therefore, citing the rule of consistency the Ld. AR supported the order of the Ld. CIT(A). We note that the Ld. CIT(A) has given a finding of fact that all the items claimed under the head ‘Miscellaneous Income’ have a direct nexus with the business of the assessee namely operation and maintenance of the three (3) eligible industrial parks. The Ld. CIT(A) has noted that in the facts of the case the profits and gains from sale of scrap and the interest income constitutes income from business and citing the decision of the Hon’ble Apex Court in Sanjeeb Lal 365 ITR 389 was of the opinion that purposive interpretation is required to be made while adjudicating such claims. We find that since the scraps or waste materials which were left behind by the occupants when they shift from the Park were getting accumulated in the parks and removal of the same was necessary to keep the Park clean & tidy which activity is the task of assessee i.e. operation & maintenance of the Park, so the income which was generated from the sale of scrap/waste material (non-reusable) and interest from BESCOM have nexus with the maintenance and operation of the industrial parks. The deposits interest

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from BESCOM which was clarified by the Ld. AR of the assessee that without deposit of money, electric connection and un-interrupted supply of electricity could not be given by the BESCOM, therefore, for smooth operation and maintenance of the parks uninterrupted electricity is the necessity and, therefore, the interest income in this way is having nexus with the maintenance and the operation of the park and have direct nexus with the income (interest) which is a plausible view of Ld. CIT(A), which we do not want to interfere because in earlier years & subsequent years, such a disallowance was made by the AO. Therefore, applying the Rule of consistency we uphold the action of Ld. CIT(A) and we dismiss the ground of Revenue.

“3. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 43,00,997/- as rental income earned in the three industrial parks ignoring the fact that profit derived from Industrial Parks Salarpuria Softzone was treated as non-eligible income to qualify for deduction u/s 80IA(4)(iii)?

4.1. Brief facts of the case as noted by the AO is that the assessee has shown he Revenue from operations of Salarpuria GR Tech Park, Salarpuria Hallmark and Salarpuria Infozone included Rs. 43,00,997/- as income from ‘rent’. This rent income was claimed by the assessee to be from letting out spaces in the Industrial Parks to the occupants. According to AO, the authorized representative gave no further explanations. The AO noted that the assessee company was not the owner of the eligible projects, it had entered into agreement with the developers of the Projects to operate and maintain the Parks built by the developers and enjoyed the deduction under Chapter VIA as per first provision to Section 80IA(4)(iii). According to AO, letting out spaces on the premises of any eligible project is not an activity, which can be related to ‘operate and maintain’ the projects. The AO therefore, disallowed deduction u/s 80IA(4)(iii) to the extent of Rs. 43,00,997/- derived from letting out eligible projects space, and add back the sum to the income of the assessee.

4.2. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to allow the appeal of the assessee. Aggrieved, the revenue is before us.

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4.3. We have heard rival submissions and gone through the facts and We have heard rival submissions and gone through the facts and We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO did not allow the benefit of deduction of rental income of case. We note that the AO did not allow the benefit of deduction of rental income of case. We note that the AO did not allow the benefit of deduction of rental income of Rs.43,00,997/- earned from three (3) industrial parks u/s. 80IA(4)(iii) of the Act. On appeal, earned from three (3) industrial parks u/s. 80IA(4)(iii) of the Act. On appeal, earned from three (3) industrial parks u/s. 80IA(4)(iii) of the Act. On appeal, the Ld. CIT(A) examined as to whether this receipt h the Ld. CIT(A) examined as to whether this receipt had direct nexus with the ad direct nexus with the business of operating and maintenance of the eligible business (3 industrial parks). The Ld. CIT(A) operating and maintenance of the eligible business (3 industrial parks). The Ld. CIT(A) operating and maintenance of the eligible business (3 industrial parks). The Ld. CIT(A) after considering the facts noted that the rental income was earned by the assessee by after considering the facts noted that the rental income was earned by the assessee by after considering the facts noted that the rental income was earned by the assessee by allowing “KIOSKS/STALLS” within the indus allowing “KIOSKS/STALLS” within the industrial parks and the eligible business of the trial parks and the eligible business of the assessee. The Ld. CIT(A0 found that the income derived from letting out of such assessee. The Ld. CIT(A0 found that the income derived from letting out of such assessee. The Ld. CIT(A0 found that the income derived from letting out of such “KIOSKS/STALLS” and the resultant benefit in the hands of the assessee was for providing “KIOSKS/STALLS” and the resultant benefit in the hands of the assessee was for providing “KIOSKS/STALLS” and the resultant benefit in the hands of the assessee was for providing better services to the occupants of the i better services to the occupants of the industrial parks and, therefore, was an extended ndustrial parks and, therefore, was an extended portion of the business activity of operating and maintenance of the industrial parks. The portion of the business activity of operating and maintenance of the industrial parks. The portion of the business activity of operating and maintenance of the industrial parks. The Ld. CIT(A) noted that the said “KIOSKS/STALLS” were given on rent so that the persons Ld. CIT(A) noted that the said “KIOSKS/STALLS” were given on rent so that the persons Ld. CIT(A) noted that the said “KIOSKS/STALLS” were given on rent so that the persons working in various companies o working in various companies operating from the industrial parks s to get coffee, tea and refreshment as well. Moreover, the Ld. CIT(A) has taken note of the CBDT Circular No. 16 refreshment as well. Moreover, the Ld. CIT(A) has taken note of the CBDT Circular No. 16 refreshment as well. Moreover, the Ld. CIT(A) has taken note of the CBDT Circular No. 16 of 2016 which clarifies that the lease rent from letting out buildings/developed space along of 2016 which clarifies that the lease rent from letting out buildings/developed space along of 2016 which clarifies that the lease rent from letting out buildings/developed space along with other amenities in the industrial park (SEZ) need to be treated as busine ities in the industrial park (SEZ) need to be treated as busine ities in the industrial park (SEZ) need to be treated as business income. In this respect, the CBDT circular is reproduced as under: respect, the CBDT circular is reproduced as under:

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4.4 It was also brought to our notice that the AO in earlier years had allowed the claim of It was also brought to our notice that the AO in earlier years had allowed the claim of It was also brought to our notice that the AO in earlier years had allowed the claim of the assessee in respect of this rental income by treating it as business income and allowed the assessee in respect of this rental income by treating it as business income and allowed the assessee in respect of this rental income by treating it as business income and allowed the claim u/s. 80IA(4)(iii) of the Act. In the light of the CBDT circular ( the claim u/s. 80IA(4)(iii) of the Act. In the light of the CBDT circular ( the claim u/s. 80IA(4)(iii) of the Act. In the light of the CBDT circular (supra) and taking note of the fact that in earlier years and subsequent years the lease rent income note of the fact that in earlier years and subsequent years the lease rent income note of the fact that in earlier years and subsequent years the lease rent income from letting off of kiosks/stalls of Rs.43,00,997/ Rs.43,00,997/- to be treated as business income and be treated as business income and since in earlier years and subsequent years this claim was not disa years and subsequent years this claim was not disallowed and for the first time this llowed and for the first time this disallowance is made, so by applying the Rule of consistency, the disallowance was not disallowance is made, so by applying the Rule of consistency, the disallowance was not disallowance is made, so by applying the Rule of consistency, the disallowance was not warranted since there is no change in facts or law. Therefore, the action of Ld. CIT(A) is warranted since there is no change in facts or law. Therefore, the action of Ld. CIT(A) is warranted since there is no change in facts or law. Therefore, the action of Ld. CIT(A) is confirmed. Therefore, we confirm the orde Therefore, we confirm the order of the Ld. CIT(A) and dismiss this ground of r of the Ld. CIT(A) and dismiss this ground of revenue’s appeal.

5.1. The facts of the case as noted by the AO The facts of the case as noted by the AO as per 26AS data relating to the assessee, the s per 26AS data relating to the assessee, the total receipt for the year was Rs. 90,92,17,176/ total receipt for the year was Rs. 90,92,17,176/-, which while as per the final accounts and , which while as per the final accounts and the ITR, total revenue from operation was shown as Rs. 75,62,42,439/ the ITR, total revenue from operation was shown as Rs. 75,62,42,439/ the ITR, total revenue from operation was shown as Rs. 75,62,42,439/-. The AO noted that the Revenue declaration was he Revenue declaration was lesser by Rs. 15,29,74,737/-. Therefore, the AO asked the Therefore, the AO asked the Authorized representative was asked to reconcile the difference in response Authorized representative was asked to reconcile the difference in response Authorized representative was asked to reconcile the difference in response and he acknowledges that assessee pursuant to the same had filed acknowledges that assessee pursuant to the same had filed reconciliation statement. reconciliation statement. The AO

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noted that the reconciliation statement filed by the assessee affirmed that the ‘maintenance charges’ as per 26AS was Rs. 57,17,66,220/- but as per accounts the ‘maintenance charges’ was Rs. 43,96,85,407/-. According to AO, no explanation was offered for the difference of Rs. 13,20,80,813/-. Therefore, AO was of the opinion that Rs. 13,20,80,813/- was not offered to tax and thus the sum of Rs. 13,20,80,813/- was added to the total income of the assessee as undisclosed income.

5.2. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) and the Ld. CIT(A) deleted the addition of Rs.13,20,80,813/-. Aggrieved, the revenue is before us.

5.3. We have heard rival submissions and gone through the facts and circumstances of the case. At the outset, it was brought to our notice by the Ld. AR that before passing the assessment order u/s. 143(3) of the Act dated 22.12.2016, the AO had in fact issued a draft assessment order dated 01.12.2016 placed from page 166 to 168 of Paper Book wherein the AO had proposed to make addition on three (3) items which have already been discussed (supra issues raised from Ground no. 1 to 3) and in that draft order the AO had not mentioned about the proposed additions of Rs.13,20,80,813/- pertaining to this ground no. 4 of Revenue appeal and Rs.2,02,30,945/- (ground no. 5) of the revenue appeal. According to the Ld. AR, no opportunity was given by the AO before finding fault on these two faults and making these two additions. Therefore, during the first appellate proceedings before the Ld. CIT(A) the assessee filed all the details/reconciliation respect of the addition of Rs.13,20,80,813/- and the Ld. CIT(A) after calling for remand report from AO and after going through the facts of the case has given relief to the assessee. We note that the Ld. CIT(A) has called for the remand report (which has been reproduced from page 31 to 32 of the impugned order) and thereafter taking note of the rejoinder filed by the assessee to the remand report (which is reproduced from page 33 to 37 of the impugned order) and thereafter the Ld. CIT(A) has found that the addition of Rs.13,20,80,813/- was not warranted, since he found there was a difference between the maintenance charge received (a) as appearing in 26AS data Rs.57,17,66,220/- and (b) that disclosed and credited in the audited accounts Rs.43,96,85,407/- thus the difference of Rs.13,20,80,813/-. According to

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the AO, it was the undisclosed income since the assessee was not able to explain the the AO, it was the undisclosed income since the assessee was not able to explain the the AO, it was the undisclosed income since the assessee was not able to explain the difference by filing reconciliation statement. difference by filing reconciliation statement. However as we noted no opportunity was give we noted no opportunity was give by AO to reconcile the difference, so question of assessee filing the reconciliation statement by AO to reconcile the difference, so question of assessee filing the reconciliation statement by AO to reconcile the difference, so question of assessee filing the reconciliation statement does not arise anyway the assessee had filed the same before the Ld. CIT(A) and Remand does not arise anyway the assessee had filed the same before the Ld. CIT(A) and Remand does not arise anyway the assessee had filed the same before the Ld. CIT(A) and Remand report has been obtained in this regard. report has been obtained in this regard. The assessee contended before the Ld. CIT(A) that The assessee contended before the Ld. CIT(A) that the difference of Rs.13,20,80,813/ the difference of Rs.13,20,80,813/- was made by the AO terming it as undisclosed income was made by the AO terming it as undisclosed income ignoring the fact that such difference ignoring the fact that such difference was on account of rental receipt of Rs.70,09,943/ s on account of rental receipt of Rs.70,09,943/- and reimbursement of electricity charges and generator charges for which net income (receipt icity charges and generator charges for which net income (receipt icity charges and generator charges for which net income (receipt less expenditure) of Rs.1,49,07,169/ f Rs.1,49,07,169/- and Rs.2,02,26,996/- was already offered to tax and was already offered to tax and such an addition would amount to double deduction and, therefore, the AO had erred in such an addition would amount to double deduction and, therefore, the AO had erred in such an addition would amount to double deduction and, therefore, the AO had erred in making the addition. The assessee had filed the reconciliation which is found placed at page ition. The assessee had filed the reconciliation which is found placed at page ition. The assessee had filed the reconciliation which is found placed at page 163 of the paper book which is as under: 163 of the paper book which is as under:

5.4. The Ld. AR drew our attention to page 211 of the paper book relevant portion of The Ld. AR drew our attention to page 211 of the paper book relevant portion of The Ld. AR drew our attention to page 211 of the paper book relevant portion of which is as under:

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Note 20 Revenue from Operations For the year ended For the year ended 31.03.2014 31.03.2013 Income from Sale of Flats (Traded) 5,71,41,601.00 Income from Services Maintenance Charges 43,96,85,407.06 39,07,52,381.47 Electricity Charges 1,49,07,168.57 1,44,20,281.00 Generator Maintenance 2,02,26,996.93 94,52,858.40 Other Misc. Charges 9,07,989.00 Other operating Income Rent Received 70,09,943.20 63,94,677.00 53,98,79,105.76 42,10,20,197.87 Total

Note 21 Other Income For the Year ended For the year ended 31.03.2014 31.03.2013 Miscellaneous income 11,24,232.72 66,07,302.90 Compensation Claim 17,34,844.25 64,70,895.00 Professional Charges Received 24,61,999.34 Profit on Sale of Investment (Flats) 4,76,21,712.34 Profit on Sale of Fixed Assets 81,002.00 Interest Income On Fixed Deposit 1,59,146.00 2,41,513.00 On Debentures [Related Party Note28(k)] 77,72,389.00 On Bescom Deposit 74,10,882.00 On others 6,85,257.00 On short Term Loans and Advances [related Party note 28(k)] 20,44,53,470.00 14,07,75,716.00 Total 27,35,04,935.13 15,40,95,426.90

Note 22 Purchase of Goods Year Ended 31.03.2014 For the Year ended 31.03.2013 Purchase of Flats in Salarpuria Greenage 3,98,70,567.25 Salarpuria Melody 2,67,43,600.00 Total 6,66,14,167.25

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5.5 By drawing our attention to these facts the Ld. AR stated that the assessee had income from electricity charges to the tune of Rs.1,49,07,168/- and generator maintenance of Rs.2,02,26,996/-. According to the Ld. AR, in respect of Rs.12,01,38,071/- the customers had deducted TDS which was generator/electricity charges reimbursement. It was pointed out that the electricity and generator maintenance income where no TDS was deducted was to the tune of Rs.87,14,59,551/-. Thus, the electricity and generator maintenance charges come to Rs.99,15,97,622/- when deducted by the expenses on account of electricity and generator maintenance charges, the net receipt is only to the tune of Rs.3,51,34,164/- which tallies with the P&L Account, so there is no difference and it was reconciled. The Ld. CIT(A) after going through the reconciliation and submissions made by the Ld. AR held as under: “3. I have carefully considered the submissions of the Ld. A.O in the Remand Report as well as the submissions of the appellant countering the findings of the Ld. A.O, as made out in the said report. I note that the addition of Rs. 13,20,80,813/- is on account of alleged difference in amount of income so reported in the 26AS data and that disclosed by the appellant in its Profit & Loss Account for the year. The Ld. AO in his order has concluded that since, such difference has not been considered and accounted for in the relevant year under consideration, the addition was duly warranted. In the Remand Report, I observe that the Ld. AO has reiterated the earlier findings, without responding to the factual contentions as made out by the appellant, duly supported by necessary documentation. Moreover, he has no comments to make on the specific submission and reconciliation statement given by the e appellant. The appellant in its submission has specifically explained the alleged cause of the difference in the two data i.e. data as per 26AS and amount so shown credited in the P & L Account. On a perusal of the reconciliation, it was observed that the difference is mainly due to three figures: a. TDS deducted on the reimbursement received by the appellant Rs. 12,01,38,071/- b. TDS on service tax by some parties Rs. 43,32,799/- c. Rental income considered in P & L Account but not considered by AO for the purpose of difference Rs. 70,09,943/- Rs. 13,20,80,813/- 4. The appellant in its submission has also explained that the bill for reimbursement raised on different parties were Rs.99,15,97,622/-, whereas the amount expended was Rs.95,64,63,358/- and therefore the difference being Rs.3,51,34,164/- was booked as "income" and which appears for electricity at Rs. 1,49,07,168.57 and for generator maintenance Rs.2,02,26,996.93 aggregating to Rs.3,51,34,165.50 and the same has been duty reflected in the P & L Account for the subject A.Y 2014-15. The appellant has submitted the complete list of the parties (for reimbursement) along with the amount of reimbursement so raised on each of them and the amount expended on their behalf and this complete information was also filed before the Ld. AO. In the background of the forgoing findings, I observe that the impugned addition made by the Ld. AO is completely unjustified, as Hon'ble courts have opined “several occasions that merely on the basis the data in 26AS the addition cannot be sustained. In such respect, it is further observed

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that the appellant has duty explained the so called difference between the two datas, and there does not arise any occasion on the part of the Ld. AO to make such addition merely on the basis of such difference in the 26AS data and amount reflected in the P & L Account. Further, it is also observed that an amount cannot be an income just because TDS has been deducted since the liability to pay tax depends on the changeability of such income which defined in sec. 4 of the Act. In my carefully considered view on such issues, under the provision of sec. 4 of the Act, if an amount does not bear the character of income the same cannot be made chargeable to tax and cannot be converted to income only because payer of the sum deducts tax under some misconception of law. 5. In the case of appellant as well simply because the payer have deducted tax u/s 194C on the reimbursement so made by them, the same cannot be treated as income merely on the basis of Form 26AS data. That observed, I note that the appellant has successfully explained that the difference in reimbursement has been offered to tax i.e. net income earned on account of reimbursement has also been offered' to tax and hence the appellant itself has taken the net earning of such amount for the A.Y 2014-15, and hence no separate addition in such respect can be called for. In such respect, I also draw strength from the following judgments : a. Administrator of Estate of Ld. Edulji Framroze Dinshaw (EFD) 103 Taxmann.com 452 (Mumbai ITAT) b. DCIT v. Lyod Insulation India Ltd. (ITA No.2400/Del/2011 dt. 9.8.2012) - for the proposition that "income of tax prayer is not regularly to be computed merely with reference to the TDS certificate but assessment of income is altogether an independent excise". 6. In the aforesaid case the Ld. AO has not been able to point out any loophole in the submission of the appellant; moreover, I am satisfied that the appellant has explained and reconciled the alleged differences, and as such the addition made by the Ld. A.O is unsustainable on the bare facts of the case. The additions are therefore directed to be deleted, and accordingly Grounds 6 &. 7 of this appeal stand allowed.” 5.6. The Ld. CIT DR could not point out any infirmity in the impugned order(supra) passed by the Ld. CIT(A). The Ld. CIT(A) after going through the facts and the reconciliation filed as well as after going through the complete list of parties (who deducted TDS on reimbursement along with the amount of reimbursement) which is placed at page 164 to 165 of the paper book, has made a factual finding that there is no difference which warrants any addition on this count. In the light of the aforesaid discussion we are of the opinion that the AO erred in making the addition merely on the basis of the data in 26AS and the Ld. CIT(A) after perusal of the reconciliation and other documents filed has rightly deleted the addition which does not require any interference from our part and, therefore, we confirm the order of the Ld. CIT(A) on this issue. Therefore, this ground of appeal of revenue is dismissed.

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6.1. Brief facts of the case as noted by the AO is that the assessee in the profit and loss account had debited a sum of Rs. 2,02,30,945/- as sundry balance written off. Therefore, the AO asked the assessee to furnish the details of sundry balances written off with reference to opening debtors and closing debtors and the year of accounting to revenue of such balances. According to AO, the assessee could not furnish any such details. Therefore, the sum of Rs. 2,02,30,945/- was added back to the total income of the assessee.

6.2. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to delete the same. Aggrieved, the revenue is before us.

6.3. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. CIT(A) has given relief to the assessee by holding as under: “7. Having carefully perused the facts of the case, I find that the contention of the appellant is correct on facts, that the Ld. A.O r did not include the proposed addition of Rs.2,02,30,945/- that the assessee company had debited in Audited P/L a/c sum of Rs.2,02,30,945/- on account of sundry balances written off under the head "other expenses" in Schedule - 27 of the Audited Accounts. I also observe that the Ld. A.O did not give any show-cause in the matter, and saddled the appellant with this addition. That observed, I note that on facts the impugned amount of Rs.2,02,30,945/- had been actually written off in the P&L a/c. and had been credited to the sundry debtors account, by the assessee company. there is no gainsaying that after 1st day of April, 1989, for/ . allowance of bad debt / business loss it is adequate / enough if the debt is written off as "irrecoverable" in the accounts, as has also been decided by the Hon'ble supreme Court in the case of TRF Ltd. v. CIT (2010) 190 Taxman 391 (SC). In that situation, in my considered view the position of law is amply clear after 01.04.1989. In my considered view of the matter, when the admitted and undisputed position is that the debt / advances have been written off and the loan and advances was given in ordinary course. of regular business activities of the assessed the decision of' The Apex Court was adequate for the appellant in so far as the action of writing off of debt was sufficient to claim the loss. Such a position has been elaborated in recent judgments, and one such judgment is the case of the Hon'ble ITAT, New Delhi in Capital services (India) Vs Add). CIT, Range-12, New Delhi [ ITA No. 2897 /Del/2007 for A.Y 2000-01 ] and CO in [ITA No. 2807 /Del /2007 for A.Y 2000- 01 ] dated 10th June, 2015. The relevant portion of the judgment is reproduced as under: 9. We have heard rival parties and have gone through the material placed on record. We find that Ld. CIT(A) himself supported a finding that in earlier year, the assessee was allowed deduction on account of software by ITAT and we further find that during the year

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1995-96 to 1997-98, Hon'ble Delhi High Court had also confirmed the order of ITAT and had dismissed the appeal of Revenue. We further observe that Hon'ble Delhi High Court had recorded a finding of fact that expenditure was incurred on M S Office and not on customized software and had therefore, confirmed the ITAT order. In the present case, the A.O. had noted in the assessment order that expenditure was incurred on application software and, therefore, assessee cannot be said to have incurred expenditure on customized software. In the case law of CIT (A) Vs Asahi India Safety Glass Ltd. 203 Taxman 277 relied upon by Ld. A.R. the Hon'ble Court has held that expenditure incurred on application software is a revenue expenditure. In the present case as noted by A.O. the expenditure was incurred on application software. Therefore, respectfully following the Hon'ble Delhi High Court, we hold the expenditure incurred on application software to be revenue in nature and therefore, we allow Ground No.2.

ii) Bad Debts: Ld. A.R. submitted that bad debts had been written off by assessee in its books of accounts and, therefore, its case was squarely covered by the order of Hon'ble Supreme Court in the case of TRF Ltd. Vs CIT 323 ITR 397 placed at paper book 39 of compilation of judgements. Ld. A.R. further relied upon the case law of Auto Meters Ltd. 292 ITR 345 decided by Hon'ble Delhi High Court placed a paper book pages 42-43. Inviting our attention to A.O.'s objection in disallowing the write off of bad debts, Ld. A.R. submitted that the A.O. had disallowed the claim holding that loan given by assessee has not fully become irrecoverable as the loanee was not declared BIFR Company and the case was pending with BIFR. Ld. A.R. submitted that the A.O. had held that till the final conclusion was pending before BIFR there was chance that assessee could get a part of amount and therefore, loan cannot be said to have become irrecoverable. In this respect, Ld. A.R. submitted that Hon'ble Supreme Court in the case law of TRF Ltd. has clearly held that the bad debt claim is available to an assessee when he writes off in its books of accounts therefore, as the assessee had written off the claim in its books of account, the claim of deduction is in accordance with law.

Ld. D.R. on the other hand submitted that the A.O. has passed a detailed order in this respect and Ld. CIT(A) has also upheld the same holding that the loan of assessee was a secured loan and there was a chance of recovery of at least partial amount and therefore, loss on account of bad debts was not ascertained. In view of the fact that debt had not become bad, therefore, he highly placed reliance on the orders of authorities below.

We have heard rival parties and have gone through the material placed on record. From the facts of the case, we observe that the assessee is a NBFC and advancing loans is one of the main objects of the company and the assessee had advanced loan to one of its customers namely Grapco Industries in ordinary course of money lending business and it is also a fact that the amount recoverable form the loanee has been written off in the books of accounts of assessee. It is also observed that the assessee had classified the loan recoverable from Grapco Ltd. as a non performing asset as per RBI norms as noted at para 5.3 of A.O.'s order. The A.O. and Ld. CIT(A) has not allowed the claim of assessee holding that deduction is allowed in respect of bad debts which is written off as irrecoverable in the accounts and not in respect of any debt which may be written off in its accounts. Both the authorities below has held that primary condition for allowing the bad debt is that it should have become bad and only then it can be written off as irrecoverable. Ld. CIT(A) has held that only when proceedings in BIFR are concluded in the case of Grapco and after recovering whatever is recovered , the dues of assessee can be ascertained. However from the order of Hon'ble Supreme Court in the case of TRF Ltd. VSs CIT 323 ITR 397 placed at paper book page 38-40, we find that Hon'ble Apex Court has held that for a claim of bad debt, the assessee has to only establish that debt has been written off and it was not necessary to establish that debt has become irrecoverable. Admittedly, the debt has been written off as noted in the assessment order itself and the loan was given in ordinary course of regular business activities of the assessee. Therefore, as per

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the Hon'ble Supreme Court decision, the action of writing off of debt was sufficient to claim the loss. In the judgements relied upon by Ld. A.R., the Hon'ble Supreme Court had remitted back the claim of bad debt to A.O. as in that case, the facts of writing off of debt was not examined by A.O. However, in the present case, the debt has actually been written off therefore, relying upon the ratio of judgement of Hon'ble Supreme Court, we hold that the claim of assessee in respect of bad debt written off is allowable and in view of the same, we allow ground No.3 of appeal. In view of the factual and legal matrix being similar for the case at hand, I am unable to sustain the action of the Ld. AO in disallowing the impugned sum of Rs. 2,02,30,94/- disallowed as “bad debts”. The disallowance therefore stands deleted and the ground of appeal no. 8 is adjudicated in favour of the appellant company.”

6.4. We note that the amount in question i.e. Rs.2,02,30,945/- includes sundry debtor as well as loans and advances. The loans and advances are not allowable u/s. 36(v)(iii) of the Act. Break-up of the amount in question, which has been written off has not been given. Therefore, the allowability of the loans/advances written off by the assessee have to be examined by the AO. According to the Ld. AR, even if the advances are not allowable u/s. 36(v)(iii) of the Act still it is allowable as business expenditure u/s. 28 of the Act. Be that as it may, on this issue the order of the Ld. CIT(A) is set aside and this issue is remitted back to the file of the AO for examining whether the advances/loans which were written off can be treated as business loss which he may decide in accordance to law after giving opportunity of being heard to the assessee.

Sd/- Sd/- (P. M. Jagtap) (A. T. Varkey) Vice President Judicial Member Dated: 16th July, 2021

Jd.(Sr.P.S.)

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Copy of the order forwarded to: 1. Appellant- DCIT, Circle-3(1), Kolkata