DCIT- 5(2)(1), MUMBAI vs. JSW INFRASTRUCTURE LTD., MUMBAI

Brief facts of the case are that the assesse company is engaged in the business of developing and operating mechanized modern ports. It also provides project management and consultancy services to its subsidiaries for developing port facilities for which it receives consultancy income. The assessee has filed its return of income for AY 2013-14 on 29/11/2013, declaring total income of Rs.16,69,00,180/- under normal provisions of the Act, and book profit of Rs.51,66,41,582/- under the provision of section 115JB of the I.T.Act,1961. The assessee has claimed deduction u/s 80IA of Rs. 37,18,20,551/-, in respect of profits of its Goa undertaking in original return filed u/s 139(1) of the I.T.Act, 1961. Subsequently, the assesee has filed revised return u/s 139(5) and has claimed additional deduction u/s 80IA of the Act, for Rs. 11,28,18,375/-, in respect of profits and gains of its Jaigarh undertaking. The case was selected for scrutiny and during the course of assessment proceedings, the Ld. AO noticed that the assessee has made additional claim of deduction u/s 80IA of Rs.11,28,18,375/- in respect of profits and gains of Jaigarh undertaking and such claim has been made in the revised return without making any claim in original return therefore, he opined that deduction claimed u/s 80IA is not available in view of specific provision of section 80A(5) r.w.s. 80AC of the I.T.Act, 1961. While doing so, the Ld. AO has relied upon the decision of ITAT, Mumbai Bench, in the case of Dwarakadas G. Panchmatiya Vs ACIT (2015) 153 ITD 625, where it was held that as per the provision of section 80AC, before claiming deduction of any income filing of return before the due date specified u/s 139(1) is mandatory and not directory. Therefore, rejected additional claim of deduction u/s 80IA of Rs.11,28,18,375/- in respect of profits of Jaigarh undertaking. Similarly, the Ld. AO has made additions towards disallowance of expenditure incurred in relation to exempt income u/s 14A by invoking provisions of Rule 8D(2) of I.T.Rules 1962 and determined total disallowances of Rs.13,30,85,624/- under the provisions of Rule 8D(2)(ii) & (iii) of I.T.Rules 1962.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged additions made by the Ld. AO towards disallowance of deduction claimed u/s 80IA, in respect Jaigarh undertaking, in light of certain judicial precedents. The assessee has also challenged additions made by the AO towards disallowances of expenditure incurred in relation to exempt income u/s 14A, on the ground that the assesee has not earned any exempt income for the year under consideration and hence, no disallowance could be made towards expenditure incurred in relation to exempt income. The Ld.CIT(A) after considering relevant submissions of the assessee and also by relied upon various judicial precedents, including in the decision of ITAT, Chennai Bench, in the case of ACIT vs Precot Meridian Limited (2014) 148 ITD 229 deleted additions made by the AO towards disallowances of deduction claimed u/s 80IA of the I.T.Act, 1961 by holding that a plain reading of section 80AC makes it clear that from the AY 2006-07 on wards deduction claimed u/s 80IA shall not be allowed, unless the assessee furnished a return on or before the due date specified under sub section (1) of section 139, but nowhere in the section, it was provided that unless, the assessee makes a claim in its return filed u/s 139(1), the said claim is allowable. We, further observed that when, assessee filed original return within due date specified u/s 139(1) and subsequently files a revision return under the provision of section 139(5) to rectify any omission or any wrong statement made in the return filed u/s 139(1), the same can take the character of original return and hence, the assessee entitled for additional deduction claimed u/s 80IA of the I.T.Act, 1961. The relevant findings of the CIT(A) are as under:-

A plain reading of section 80AC makes it clear that from the assessment year 2006-07, deduction claimed under section 80IA/80IB/80IC/80ID/80IE shall not be allowed unless the assessee furnishes a return ort or before due date specified under of sub-section (1) of section 139. Nowhere in the section it was provided that unless the assessee makes a claim in its return filed under section 139(1). The said claim Js allowable. The section does not speak of a claim to be made in the return filed under section 139(1). The section speaks_ of filing a return within the, time specified under section 139(1) and nothing else. Here the assessee fifed a return under section 139(1) within due date specified but no claim was made under section 80IA in such return. However, a revised return was filed under section 139(5) on 30.03.2010 claiming deduction under section 80IA at 37,27928/.r The section says unless the assessee files a return under section 139(10 within The due date, deduction under section 80IA/80IB/80IC/80ID/80IE shall not be allowed and at the same time section 139(5) provides for filing a revised return, when the assessee discovers any omission or any wrong statement made in the return already filed under sub-section (1) of Section 139 or return filed under sub-section(1) of section 142. This revised return can be fifed at any time before expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier".

In the case of the assessee, it had filed a revised return on 30/03/2010 which is before expiry of one year from the relevant assessment year and therefore the return filed is a valid return as per the provisions section 139(5), as the original return was filed under section 139111 within due date prescribed. Ln fact the assessee complied with the provisions of section 80AC of the Act by filing its original return on 29/09/2008 which is within the due date specified under section 139(1) of the Act. In view of our above observations, the submission of the Departmental Representative that since the assessee had not made any claim in its original return filed under section 139(1), no deduction is allowable under section 80IA of the Act, in view of the provisions of section 80AC, has no force. In the circumstances, we sustain the order of the Commissioner of Income Tax (Appeals) in allowing tie claim of the assessee under section BOIA of the Act.' 6.3.3 The appellant has also brought to my notice the decision of the Hon'ble Mumbai Tribunal in the case Kamdhenu Builders & Developers vs. Additional Commissioner of income Tax dated 27/01/2016 wherein observing with reference To deduction u/s 80IB(10) that "Section 80A(5) only requires filing of return, nowhere it suggests that claim should be made in the original return and not by way of revised return. When the original return of income has been filed well within the due date, the revised return filed thereafter before the completion of assessment proceedings, is a valid return of income to be considered by the AO. The assessee has Been given opportunity to file revised return u/s. 139(4) for removal of the any defect in the original return." and that "both the original return was filed well within the time limit prescribed under the law and the revised return filed before the AO completing the assessment that the assessee has fulfilled all the conditions u/s 80IB(10), therefore, entitled for deduction in respect of-housing project." allowed assessee's claim for deduction u/s.80IB(10) of The Act. 6.3.4 It is also observed Further that the Hon'ble Kolkata Tribunal in the case DCIT vs Mackintosh Burn Ltd wherein the assessee has filed revised return and claimed deduction u/s 80IA, has held that "Since The assessee had filed its return of income before the due date specified u/s. 139(1) of the Act for the relevant year, the question of denying the benefit u/s 80IA of the Act does not arise." 6.3.5 In the present case The appellant had filed its original return of income on 29/11/2013 claiming a deduction u/s 80IA of Rs. 37,1320,551/- and the return was revised on 30/12/2014 claiming an enhanced deduction of Rs. 48,46,38,926/- (Difference being additional claim of Jaigarh undertaking). The original return was filed well within the time limit prescribed under the law and the revised return filed before the AO completing the assessment Hence, the decision of Mumbai Tribunal in the case of Dwarkadas G. Panchatiya vs. ACIT-25(1), is distinguishable on facts since in that case the assessee had failed to file a valid return of income u/s. 139(1) within the time limits and hence it was held that the requirement of law i e. section 80AC rw s. 139{1) & 139(1B) was not satisfied.

Insofar as, disallowance of expenditure incurred in relation to exempt income u/s 14A, the Ld.CIT(A) by following the decision of Hon’ble Delhi High Court, in the case of Joint investment Private Limited vs CIT (215) 372 ITR 694 held that disallowance contemplated u/s 14A cannot shallow entire exempt income earned for the year under consideration. Further, when assesee has not earned any exempt income for the year under consideration, the question of disallowances of expenditure incurred in relation to such exempt income does not arise and accordingly, deleted additions made by the AO towards disallowances of expenditure incurred in relation to exempt income. Aggrieved by the Ld.CIT(A) order, the revenue is in appeal before us.

First issue that came up for our consideration from ground No.1 of revenue appeal is deduction claimed u/s 80IA, in respect of Jaigarh unit. The facts with regard to the impugned disputes are that the assessee has filed original return u/s 139(1) and claimed deduction u/s 80IA, in respect of GOA unit. Subsequently, the assesse has filed a revised return within time specified u/s 139(5) and made additional claim of deduction u/s 80IA for Rs.11,28,18,375/-, in respect of Jaigarh unit. The Ld. AO has disallowed additional claim of deduction u/s 80IA only on the ground that said claim was not made in the original return filed u/s 139(1) and in view of specific provision of section 80A(5) r.ws. 80AC, any deduction claimed without filing return on or before the due date specified u/s 139(1) shall not be allowed.

The Ld. DR submitted that the Ld.CIT(A) was erred in deleting the additions made by the Ld. AO towards disallowances of deduction claimed u/s 80IA of the I.T.Act, 1961 without appreciating and understanding the provisions of section 80AC that if, the findings of the Ld.CIT(A) are accepted, then the purpose of introduction of provision of section 80AC in the statue book is defeated. The Ld. DR, further submitted that although, the ld.CIT(A) has followed few decisions of the Ld. ITAT to come to the conclusion that nowhere, in the section mandates that deduction should be claimed in the return filed, but if you go through the provision of section 80AC, the main purpose behind insertion of said provision into the statue book is to deny the benefit or deduction, if the person claims said deduction without filing return within due date specified u/s 139(1) of the I.T.Act, 1961. He further submitted that the Ld.CIT(A) without considering these aspects deleted additions made by the AO, on the ground that once, return has been filed u/s 139(1), then the assesee can claim deduction by filing revised return within due date specified u/s 139(5) of the I.T.Act, 1961.

The Ld. AR for the assesse, on the other hand, strongly supporting order of the Ld.CIT(A) submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT in number of case, where the law has been explained in light of provision of section 80AC and held that as per the provision of section 80AC filing of return within due date specified u/s 139(1) is mandatory, but there is no stipulation as to claiming deduction in the return of income, as long as, the claim is within due date specified under sub section (5) of section 139, then the assessee is entitled for deduction u/s 80IA of the I.T.Act, 1961. The Ld.CIT(A) after considering relevant facts has rightly deleted additions made by the AO towards disallowances of deduction claimed u/s 80IA and his order should be upheld.

The next issue that came up of our consideration from ground No.3 of revenue appeal is re-computation of book profit u/s 115JB of the I.T.Act 1961, in respect of disallowance of expenditure incurred in relation to exempt income u/s 14A of the I.T.Act, 1961. We find that the Ld.CIT(A) has deleted adjustments made by the AO to book profit computed u/s 115JB of the I.T.Act, 1961, in respect of 14A disallowances by following the decision of Hon’ble Bombay High Court in the case of CIT vs Bengal Finance and Investments Pvt.Ltd. in of 2013, where it was held that amount disallowed u/s 14A of the Act, cannot be added to arrive at book profit for purpose of section 115JB of the Act,1961. Further, the Ld.CIT(A) had also relied upon the decision of ITAT special bench, Delhi,in the case of ACIT vs Vireet Investment Pvt.Ltd. 82 taxmann.com 415, where it was held that computation under clause (f) of Explanation (1) to section 115JB(2) is to be made without resorting to computation as contemplated u/s 14A r.w.s.Rule 8D. We find that the finding of facts recorded by the Ld.CIT(A), in light of above two decisions is in accordance with law and does not called for any interference from our side and hence, we are inclined to uphold the findings of Ld.CIT(A) and reject ground taken by the revenue.

In the result, appeal filed by the revenue is dismissed.

The revenue has raised the following grounds of appeal. i. Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) was justified in deleting the addition made under Rule 8D(2) of the Income Tax Rules 1962 holding that no exempt income has been earned, without appreciating the fact that CBDT after analyzing section 14A vis-à-vis Rule 8D has clarified in circular no.5/2014 dated 11.02.2014 that ‘Rule 8D read with section 14A of the Income –tax Act, 1961 provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. ii. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in not confirming the disallowance made u/s 14A r.w.r. 8D to Book Profit as per clause (f) to Explanation 1 u/s 115JB of the Income Tax Act 1961 overlooking the judgment of Hon’ble Delhi

The facts and issues involved in this appeal is relates to disallowances of expenditure incurred in relation to exempt income u/s 14A r.w.Rule 8D of I.T.Rules 1962 and further, adjustments to book profit computed u/s 115JB of the I.T.Act, 1961, in respect of disallowances made u/s 14A of the I.T.Act, 1961. We find that similar issue has been decided by us in for AY 2013-14. The reasons given by us in preceding paragraph shall mutatis mutandis apply to this appeal also. Therefore, for similar reasons, we are inclined to uphold the order of the Ld.CIT(A) and dismissed appeal filed by the revenue.

As a result, both appeals filed by the revenue are dismissed.