DCIT, CIR-6(2), KOLKATA, KOLKATA vs. M/S WEST BENGAL INFRASTRUCTURE DEVELOPMENT CORPORATION LTD., KOLKATA

The solitary issue of revenue’s appeal is against the order of Ld. CIT(A) directing the AO to work out or recalculate the eligible profit/loss in respect of each unit in respect of deduction u/s. 80IA of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

Briefly stated facts as stated by the AO in the assessment order are that the AO was of the view that the assessee was not eligible to claim deduction u/s. 80IA of the Act, for the year under consideration, for the reason that the deduction claimed had no direct nexus with the core activities of industrial undertaking of the assessee. It was also noted by the AO that in the show cause letter issued to the assessee that it had calculated the eligible deduction u/s. 80IA of the Act at Rs.5,25,56,714/- whereas the claim had been restricted to Rs.3,84,73,489/- for want of sufficient gross total income just to reduce the total income to Nil. According to AO, the assessee did not have any surplus funds from its core activities and its income consists mainly of interest on bank deposits, rent, other income, miscellaneous income and maintenance & service charges. He, therefore, referred to the Income & Expenditure A/c of all the 13 branch offices to prove his point, as depicted in the order, to the effect that none of the branches had any surplus income, after setting off the 2 West Bengal Infrastructure Development Corpn. Ltd., AY- 2011-12 Incidental expenditure relatable to the eligible business activities for claiming deduction u/s 80lA of the Act. Then he relied on the case laws of Liberty India vs. CIT [2009] 317 ITR 218 (SC) and Pandian Chemicals vs. CIT [2003] 262 ITR 278 (SC) to put across his point that none of the income as mentioned above could be held to be derived from the eligible business which could be claimed as deduction u/s 80lA of the Act. In response to the show cause letter in this regard, the assessee responded to the effect that all Incomes arose from the business of infrastructure development operation and maintenance for which all the surplus emanating there from were eligible for deduction u/s 801A of the Act. It was contended that all expenses directly attributable to the business of development maintenance and operation of infrastructure facilities were capitalized and included in either under the head Fixed Assets or Development of Industrial Areas and Estates. It was further stated that the income from the business of BBIIDC was being credited to the Income and Expenditure Account of each of its units at their gross values; And that expenses debited to the Income & Expenditure A/c had been for that particular unit as a whole. The assessee then went on to explain that the various expenses incurred as well as the income earned on account of Interests earned under various heads were having direct nexus with the business of Infrastructure Development. According to AO, the explanations offered by the assessee was found to be not acceptable to the AO, therefore, he rejected the same and came to the conclusion that the assessee was not eligible to claim deduction u/s 80lA of the Act for the reason that the incomes earned under different heads from its various units did not have first degree nexus with its core business of Infrastructural development. Thus, the AO disallowed the claim of the assessee u/s 80lA of the Act to the extent of Rs.3,84,73,489/-. Aggrieved, assessee preferred appeal before the Ld. CIT(A), who directed the AO to work out the eligible profit/loss in respect of each unit, then gross up the income/loss of the individual units and allow admissible deduction, if any, in accordance with law. Aggrieved, Revenue is before us.

We have heard rival submissions and gone through the facts and circumstances of the case. We note that the issue has been dealt with by coordinate bench of this Tribunal in assessee’s own case for AY 2010-11 wherein the Tribunal vide para 5.3 of its order has held as under: “Having heard the rival submissions, perused the material on record, we are of the view that the order of LD. CIT(A) has to be confirmed as nothing has been brought on record to show that the conclusion of the CIT(A) are incorrect. We are of the view that the AO should be directed to give appeal effect of the order passed by the CIT(A)-XII, Kolkata in appeal No. 140/XII/cir-10/13-14, dated 14.02.2014, and we do so. With the above observations, we dismiss the appeal of the assessee.”

In the result, the appeal of revenue is dismissed. Order is pronounced in the open court on 26th April, 2018. Sd/- Sd/- (Dr. A. L. Saini) (Aby. T. Varkey) Accountant Member Judicial Member Dated :26th April, 2018 Jd.(Sr.P.S.) Copy of the order forwarded to: Appellant – DCIT, Circle-6(2), Kolkata.

Respondent – M/s. West Bengal Infrastructure Development Corporation 2 Ltd., 5, Council House Street, 3rd floor, Kolkata-700 001. The CIT(A), Kolkata 3.