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Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE
The appeal is filed by the assessee against the order dated 17/3/2015 passed by Pr. Commissioner of Income Tax- Noida for Assessment Year 2010- 11.
The grounds of appeal
are as under:- “1. That the Learned CIT (Ld. CIT) has erred on facts and in law in setting aside the assessment to be made de novo.
2. That the order of Ld. CIT is unlawful and beyond permissible jurisdiction under section 263 of the Income Tax Act (Act). The order of Learned Assessing Officer (Ld. AO) is not an erroneous order prejudicial to the interest of the revenue within the meaning of section 263 of the Act. As such too, the order of Ld. CIT is unlawful and is liable to be quashed.
3. That the Ld. CIT has referred to and relied upon the order in A.Y. 2009-10 of the Ld. CIT u/s 263 on similar issues. The said order of the Ld. CIT in A.Y. 2009-10 has been quashed by the Hon’ble ITAT vide order dated 13.04.2015 in ITA No. 333/Del/2014. In view of the precedent of the Hon’ble ITAT in this appellant’s case in the appellant’s favour, the order under appeal is unlawful, without merit and deserves to be quashed on all the issues involved.
4. That the assessment under section 143(3) has been processed by the Ld. AO after duly considering the material, explanations and submissions on record including in context of applicable law. Mere difference in view between the Ld. CIT and Ld. AO cannot form the basis of action under section 263. Provisions of section 263 do not permit substitution of the Ld. CIT’s opinion for the opinion of Ld. AO, particularly when the view of the Ld. CIT are contrary to the record, to precedents and case laws in appellants favour and contrary to the provisions of the Act.
5. That the appellant is entitled to the deduction under section 80IA(4) as allowed by the Ld. AO. Appellant is entitled to its claim inter alia in view of precedents in favour of the appellant. As such too, the Ld. CIT has erred in invoking jurisdiction under section 263 and setting aside the assessment to be made de novo. Moreover, it is settled law that even if two views are reasonably' possible, the view favouring the appellant is to be adopted and further the beneficial provisions of deductions from taxable income to promote investment in and development of infrastructure facility are to be interpreted liberally, so as to advance their objectives.
6. That, inter alia, the appellant is entitled to deduction u/s 80IA( 4) on the facts and law involved as a developer of the infrastructure facility, even if it has not commenced operating and maintaining but is developing the same, in view of direct decisions in its favour including inter alia reported in ACIT v.
Bharat Udyog Ltd. 118 ITD 336 which follows the decision of the Hon'ble Apex Court in K. P. Verghese v. ITO 131 ITR 597 (SC) and as held in TRG Industries (P) Ltd. v. DCIT (2013) 35 Taxmann.com 253 (Amritsar - Tribunal) and said decision of the Hon’ble ITAT in appellant’s own case in AY 2009-10.
7. That the Ld. CIT has erred in making certain erroneous observations regarding eligibility of interest income deduction u/s 80IA, regarding netting of interest expense with interest income, regarding deduction of depreciation and regarding reasonableness of payments to Jaiprakash Industries Ltd. in context of applicability of section 40A(2)(b). The Ld. CIT has erred in stating that the Ld. AO has not examined whether interest was deductible under section 80IA, whether section 40A(2)(b) was applicable and whether depreciation was admissible.
That the above claims as in ground 7 have been processed and correctly allowed after due consideration. There is no final finding by the Ld. CIT that these claims are incorrect. The assessee was duly entitled to these claims which are correctly allowed and as such too setting aside the assessment to be made de novo is unlawful and the order of the Ld. CIT deserves to be quashed.
9. That the order of the Ld. CIT is based on erroneous views and non appreciation of the facts and law involved including binding case law supporting the appellant which include decisions of the Hon'ble Apex Court and Hon'ble Jurisdictional High Courts. Inter alia the Ld. CIT has erred in not following the ratio of the decision in 131 ITR 597 (SC) in the case of K.P. Vargheese v. ITO. As such too, the assessee's claim under section 80IA(4) has been correctly allowed by the Ld. AO as also held by the Hon’ble ITAT in its said order in A.Y. 2009-10 in appeal against order of Ld. CIT u/s 263. The Ld. CIT has erred in setting aside the assessment.
10. That the order of the Ld. CIT, setting aside the assessment to be made de novo, rather than giving a final finding is unlawful, as also held by the Hon’ble ITAT in the said appeal in appellant’s case in A.Y. 2009-10 following the decision of the Hon’ble Delhi High Court in Globus Infocom Ltd. 369 ITR14.
That without prejudice, in the alternative, as the appellant is eligible for deduction under section 80IA(6) , even as per the view of the Ld. CIT, then in any case on the facts and law involved, the assessee is entitled to relief and deduction in this matter, be it under 80IA(4) OR 80IA(6). Setting aside the assessment to be made de novo is unlawful, uncalled for and would be merely an academic exercise if permitted.
That the grounds of appeal as herein are without prejudice to each other.”
The assessee company is an infrastructure company engaged in the business of development, operation and maintenance of the six-lane access controlled expressway along with service road and associated structures and sale/development of leasehold land along the proposed expressway. The company was incorporated on 5th April, 2007. The Assessee company is a subsidiary of M/s Jai Prakash Associates Ltd. During the year, gross turnover at Rs. 6,40,65,46,500/-, and as per Profit and loss account net Profit was shown at Rs. 5,87,34,77,424/-. The assesse filed returns declaring taxable income of Rs. NIL on 14.10.2010 through E-Filling. Later on, the case was selected for scrutiny through CASS. Accordingly, notice u/s 143(2) of the I.T. Act, 1961 was issued on 06.09.2011 and served upon the assessee. Subsequently, notices u/s 143(2) and 142(1) along with questionnaire were also issued requiring the assessee to furnish certain details/information. In response to the same, the Asssessee’s Representatives attended the assessment proceedings from time to time and furnished details and replies to the queries raised during the course of assessment proceedings. Books of accounts with bills/ vouchers were produced. The replies submitted by the assessee were gone through by the Assessing Officer along with the Concession Agreement and Assignment Agreement with the state government relating to Yamuna Expressway which is connecting Noida to Agra in the state of Uttar Pradesh. The Assessing Officer held that the assessee furnished necessary details/documents is respect of its claim of deduction u/s 80IA in respect of its eligible business u/s 80IA(4) of the IT Act, 1961 therefore, assessee is eligible for deduction u/s 80IA of the Act. Therefore, assessee's claim of deduction u/s 80IA was accepted by the Assessing Officer. An order under Section 263 of the Act was passed on 30.03.2014 for A.Y. 2009-10 in which it was held that the Assessing Officer in that year, had passed an order which was erroneous and prejudicial to the interest of revenue, insofar as the allowance of deduction under section 80IA of the Act was concerned as also for the reason that such deduction has been allowed in respect of ineligible income and depreciation had been allowed even while the project was incomplete.
In the backdrop of the said order, the assessment records for the year under consideration were examined by the Pr. Commissioner of Income Tax and a questionnaire dated 05.11.2012 was issued in the case during the course of the assessment proceedings whereby the case of payments, covered under section 40A(2)(b) of the Act and the reasonableness of such expenses; the details of loans and advances along with the details of interest; details of sundry debtors of more than Rs 25 Lacs; and details of deduction claimed, if any, under Chapter VIA of the Act along with justification stating as why the deduction claimed be accepted by the Department, were called for. From the details furnished, the Pr. Commissioner of Income Tax observed that payments made to M/S Jai Prakash Associates Ltd, a party covered under section 40A(2)(b) of the Act of Rs 21,11,49,36,781 was a debtor to the extent of Rs 102,63,50,000 and further loans and advances was given to the party amounting to Rs 420,00,00,000. As regards the response to the query regarding the reasonableness of payment made to related parties, a statement was given that such payments are "reasonable, essential and incurred during the course of business". As regards the query regarding deduction under Chapter VIA of the Act, it was stated that the company has claimed the deduction and the requisite auditor certificate was enclosed in Form No 10CCB. A show cause notice on 19/1/2015 was issued to the assessee inviting objections. The response to the show cause notice was filed vide letters dated 17.02.2015 & two letters both dated 03.03.2015. Firstly, it was stated that two assessing officers, in the preceding assessment year and the assessment year under consideration, held that the assessee was eligible for deduction under section 80IA (4) (i) of the Act read with the Explanation (a) thereof. It was contended that the first year in which the deduction had been claimed was in the preceding year and detailed explanations was filed with regard to the eligibility of the assessee in accordance with the aforesaid provisions, during the course of the revisionary proceedings under section 263 for that year. The order passed under section 263 for the year was contested in the ITAT. It was contended that in terms of the Concession agreement, the assessee was engaged in the development of an eligible infrastructure facility and the rights for income from the development of land was an integral part of the said project. It was reiterated that the case of the assessee falls within the clause (a) and not clause (b) of the Explanation, referred to above. It was contended that the provisions of section 80IA (6) of the Act are* attracted for the case which falls within clause (b). The limits and requirements of that section are not applicable to the assessee company. At the same time, without prejudice to be out of contention, the assessee also has made an alternative claim under section 80 IA (6). It has also been contended that the deduction, being a beneficial provision, or promote investment in and development of infrastructure facility and therefore, they are to be interpreted liberally so as to advance their objectives.
The CIT passed order u/s 263 of the Act as under:-
“8. In view of the above, the assessment framed u/s 143(3) of the I.T. Act, 1961 dated 12/3/2013 is considered erroneous and prejudicial to the interest of revenue having been completed without proper appreciation of the relevant provisions of law and/or the binding decision of the Apex Court and without proper examination, which was warranted in the facts and circumstances of the case. Accordingly, the aforesaid assessment is set- aside with a direction to the AO to make a fresh assessment de-novo after proper examination of all relevant facts and appreciation of the provisions of law, after affording adequate opportunity of being heard to the assessee.”
Aggrieved by this, the assessee filed appeal before us.
The Ld. AR submits that in assessee’s own case for Assessment Year 2009- 10 order u/s 263 was set aside by the ITAT in vide order dated 13.04.2015. The Ld. AR further submitted for Assessment Year 2011-12 the contesting issue which was taken into account in the present assessment year was also decided in favour of the assessee (ITA No. 414/Del/2015 dated 06.09.2016. Therefore, order u/s 263 does not sustain in the present Assessment Year.
8. The Ld. DR could not controvert these factual aspects and the orders of the ITAT in assessee’s own case for Assessment Year 2009-10 & 2011-12.
We have heard both the parties and perused the material available on record. The Tribunals order in the assessee’s own case, the issue contested herein in is already decided for Assessment Year 2009-10 by this Tribunal. The ITAT held as under:
“127. In light of aforesaid discussion, if we analyse the facts and circumstances of the present case, we observe that the assessee company is in the business of developing, operating and maintaining infrastructure facility project since its incorporation w.e.f. 5.4.2007. We also observe that the development of the toll road with controlled access and exit points and right to collect toll from the users clearly put the Expressway within the ambit of road which is a toll road. We further hold that the development of Five land parcels adjacent to Expressway are inseparable and integral part of one project and the assessee is entitled and eligible for deduction u/s 80IA (4) of the Act on the income earned and derived from the business of development of Infrastructure facility during AY 2009-10 after commencement of its business w.e.f. 5.4.2007 at the option of the assessee which cannot be denied by wrongly putting the case of the assessee in clause (b) of Explanation to section 80IA(4)(i) of the Act.
In view of out aforesaid observations and conclusion, on the facts of the case, we are inclined to hold that the view taken by the AO, while granting deduction u/s 80IA(4) of the Act to the assessee, is reasonable and plausible which cannot be held as legally unsustainable and not in accordance with law and also being passed without application of mind. We, therefore, are of the considered opinion that the impugned notice and order of Ld. CIT is not valid and void ab initio ………”
Since in the present case the order u/s 263 of the Act passed by the Principal CIT is based on the order for A.Y. 2009-10, the very essence of the said order has been decided by the Tribunal in assessee’s own case in favour of the assessee, therefore, the order u/s 263 of the Act passed by the Pr. CIT is set aside.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 20th September, 2017.