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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
ORDER Per Shri A.T.Varkey, JM This is an appeal filed by the assessee against the order of Ld. CIT(A)-18, Kolkata dated 16.12.2015 for AY 2008-09.
The only issue to be decided in this appeal is as to whether interest written back as well as insurance claim receipt is to be treated as part of business income and the deduction u/s. 80IA of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) should have been allowed thereon in the facts and circumstances of the case. For that, the assessee has raised the following three grounds: “1. For that in the facts and circumstances of the case, the interest written back of Rs.3,47,72,165/- should be treated as part of business income and deduction u/s. 80IA should have been allowed thereon.
2. For that, in the facts and circumstances of the case, insurance claim receipt of Rs.9,52,547/- received by the assessee should be treated as business income and deduction u/s. 80IA should have been allowed thereon.
Mapex Infrastructure Pvt. Ltd., AY 2008-09
For that in the case the impugned amount of waiver of interest of Rs.347,72,165/- and/or insurance claim receipt of Rs.952,547 be not treated as business income, then these amounts cannot be at all be subjected to levy of income tax as these are not of income nature.”
3. Brief facts of the case as noted by the AO are that the assessee company is engaged n the business of Highway Developer of NH 2 (Panagarh-Palsit Section). The assessee filed its return of income on 24.09.2008 declaring a total income of Rs.11,13,95,302/-. Thereafter, it filed revised return declaring a total income of Rs.7,66,23,137/-. During the year, the assessee company had written back interest liability of Rs.3,47,72,165/- and the same was initially shown “as income from other sources” in the original return and offered for tax. However, in the revised return the assessee has treated it as income from “business” activity and claimed deduction u/s. 80IA of the Act. Assessee also submitted that this interest was payable to Gamuda WCT(Offshore) Pvt. Ltd. based at Mauritius. On the request of the assessee vide letter dated 30.03.2006 for waiver of interest payment on the loan from M/s. Gamuda WCT(Offshore) Pvt. Ltd., the said lender company waived off the interest as per the clause as provided in loan agreement between them. According to assessee, waiver of interest has been done as per the contract and with prior approval of RBI. The said plea of assessee was not acceptable to the AO and as per him, deduction u/s. 80IA of the Act is available only and exclusively for development, operating and maintenance of highways which is an infrastructural facility. Therefore, the AO disallowed the deduction u/s. 80IA of the Act by holding that this income is not derived from infrastructure project development activity. On appeal, the Ld. CIT(A) confirmed the action of the AO and held that the interest income of the assessee was not derived from business of infrastructure development and hence, the said income is not liable for deduction u/s. 80IA of the Act. In respect of insurance claim of Rs.9,52,547/-, before the Ld. CIT(A) the assessee submitted that the insurance claim of Rs.9,52,547/- is reimbursement of cost of damage and replacement of crash barriers on the side of Highways and claimed deduction u/s. 80IA of the Act. The Ld. CIT(A) confirmed the action of AO with regard to denial of deduction u/s. 80IA of the Act in respect of insurance claim in view of the decision of Mapex Infrastructure Pvt. Ltd., AY 2008-09 Hon’ble Delhi High Court in the case of Kohinoor Foods Ltd. Vs. CIT 353 ITR 264, Aggrieved, assessee is before us.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AY 2006-07 was the first year wherein the assessee claimed deduction u/s. 80IA of the Act for the projects of NH 2 (Panagarh-Palsit Section). In the original return of income, assessee company had written back interest liability of Rs.3,47,72,165/- and the same was initially shown “as income from other sources” and offered for taxation. However, in the revised return later filed, the assessee has treated the interest income as income from “business” activity and claimed deduction u/s. 80IA of the Act. We note that the assessee had taken loan from M/s. Gamuda WCT(Offshore) Pvt. Ltd. and as per the loan agreement between the parties there was a clause for waiver of interest and since the lender company M/s. Gamuda WCT(Offshore) Pvt. Ltd had waived the interest off, the assessee had written back the amount of interest of Rs. 3,47,72,165/- as interest income but mistakenly in the original assessment it was shown as “Income from Other Sources” whereas according to the assessee, the lender company has sanctioned the loan for the project for which sec. 80IA deduction has been allowed, and therefore the interest is inextricably linked with the project for which 80IA deduction has been allowed and, therefore, the said amount of interest should be allowed for deduction as per sec. 80IA of the Act. We note that the authorities below did not had any occasion to verify whether the assessee’s this contention is correct or not. Therefore, in the interest of justice and fair play, we are inclined to set aside the order of the Ld. CIT(A) and remand the matter back to the file of the AO with a direction to verify as to whether the assessee’s contention that the loan amount from M/s. Gamuda WCT(Offshore) Pvt. Ltd. was sanctioned for the purpose of the project for which 80IA deduction was allowed. If the loan was sanctioned for the project for which 80IA deduction has been allowed, then the interest amount which has been waived off is to be added to the income of the assessee and higher deduction u/s. 80IA of the Act is to be allowed. And if the loan was not for the project for which 80IA deduction has been allowed, then the interest amount which has been waived off need not be added for deduction under 80IA. With the aforesaid direction, the issue in respect of interest
Mapex Infrastructure Pvt. Ltd., AY 2008-09 element is disposed off. Coming to the insurance claim of Rs. 9,52,547/-, we note that the authorities below has not applied their mind in respect of the said claim of the assessee, therefore, we are inclined to set aside the order of the Ld. CIT(A) on this issue and remand the matter to the file of the AO for fresh adjudication after affording reasonable opportunity of being heard and by a speaking order.
In the result, appeal of assessee is allowed for statistical purposes.
Order is pronounced in the open court on 13th December, 2017