DCIT, CIRCLE-1(2), BHUBANESWAR, BHUBANESWAR vs. M/S. ORISSA SPONGE IRON AND STEEL LTD, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA Nos.147, 148, 149, 150 & 151/CTK/2013

Assessment Years :2006-2007,2007-08, 2008-09, 2009-10 & 2010-11

Astt. Commissioner of Vs. ARSS Infrastructure Pvt. Income Tax, Circle-2(1), Ltd. Plot No. 38, Sector-A, Bhubaneswar. Mancheswar Estate, BBSR. PAN/GIR No. AADCA4203D (Appellant) .. ( Respondent)

Assessee by : Shri P.S.Panda/K.Agarwal, AR Revenue by : Shri Kunal Singh, CIT DR

Date of Hearing : 27 /06/ 2017 Date of Pronouncement : 28/06/ 2017

O R D E R PER N.S.SAINI, JUDICIAL MEMBER: These are appeals filed by the Revenue against a consolidated order

dated 4.10.2013 of the CIT(A),-II, Bhubaneswar for the assessment years

2006-07, 2007-08, 2008-09, 2009-10 & 2010-11, respectively.

are being disposed of by way of consolidated order for the sake of

convenience.

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these appeals is that the CIT(A) is not justified in law as well as on facts

in allowing the deduction u/s. 80IA(4) of the Act of Rs. 87,38,019/-,

Rs.2,24,72,782/-, Rs. 7,15,99,245/-, Rs. 13,37,17,310/- and Rs.

30,81,61,633/- for the assessment years 2006-07, 2007-08, 2008-09,

2009-10 & 2010-2011, respectively.

the assessee has claimed deduction from profits for construction of roads,

bridges and rail roads. The Assessing Officer was of the view that most of

the roads built by the assessee during the year under consideration does

not amount to creation of new infrastructure facilities as the assessee has

simply executed the work for upgradation/repairing/maintenance of old

roads, and this is evident from the copy of contract agreements called for,

which mention the nature of job to be performed as

widening/improvement of roads. Therefore, he held that the assessee

has not undertaken construction of any new infrastructural projects but

merely improved upon existing infrastructures, which were pre-existent

and the contracts for which were provided by government authorities.

According to the Assessing Officer, it is a case of government (contractee)

giving work to assessee (contractor) and by no stretch of imagination can

assessee claim to be the developer and not a contractor. Hence, he

disallowed deduction u/s.80IA(4) of the Act to the assessee of Rs.

87,38,019/-, Rs.2,24,72,782/-, Rs. 7,15,99,245/-, Rs. 13,37,17,310/-

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and Rs. 30,81,61,633/- for the assessment years 2006-07, 2007-08,

2008-09, 2009-10 & 2010-2011, respectively.

order dated 13.6.2013 of this Bench of the Tribunal passed in ITA

Nos.142 and 143/CTK/2010 and ITA Nos.483 and 484/CTK/2010 in the

case of the assessee itself in Assessment Years 2006-07 and 2007-08.

the assessee supported the order of the CIT(A).

authorities, we find that the issue which is involved in this ground of

appeal relates to allowability of deduction u/s.80IA(4) of the Act in the

case of the assessee in respect of its business of construction of roads,

bridges and rail roads. We find that this issue has already been decided

by this Bench of the Tribunal in the case of the assessee itself for the

assessment years 2006-07 and 2007-08 in appeals arising out of order

dated 13.6.2013 passed u/s.263 of the Act in ITA Nos.142 and

143/CTK/2010 and ITA Nos.483 and 484/CTK/2010 as under:

"Admittedly, the AO in the course of original assessment proceedings u/s. 143(3) of the act has called for the explanation of the assessee as also directed the assessee to prove its claim for deduction u/s. 80IA(4) of the Act. The assessee has responded to the AO. The AO after considering the explanation and the proofs as produced by the assessee found that the assessee was eligible for deduction u/s. 80IA(4) of the Act. A perusal of the order of the Id. CIT u/s. 263 of the Act does not anywhere show as to what is

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the specific error that the AO has committed when granting the assessee the deduction u/s. 80IA(4) of the Act. It is true that the Ld. CIT has referred to provisions of explanations substituted by the Finance Act, 2009 with retrospective effect from 01.04.2000. However, this explanation was available to the AO when the assessment for A/Y. 2007-08 was being completed. Still the AO held that the assessee was entitled to the deduction u/s. 80IA(4) of the Act. The said explanation admittedly was not available when the assessment for A/Y. 2006-07 was being completed u/s. 143(3) of the Act. For the A/Y. 2006-07, the order passed u/s. 263 of the Act could not be used for making order treating as assessment order erroneous on account of a subsequent amendment or substitution done to the provision. Under these circumstances, as it is noticed that the AO has chosen one of the two views in respect of the claim of deduction u/s. 80IA(4) of the Act and in view of the decision of the Hon'ble Karnataka High Court in the case of Gokuldas Exports & Ors., referred to supra, we are of the consideration view that the order passed u/s. 263 of the Act is not sustainable in law and consequently, the same stands annulled. This view of ours also finds support from the decision of the Hon'ble Bombaly High Court in the case of Ranka Jewellers vs. Addl. CIT (2010) 328 1TR 148.

Now coming to the merits of the deduction u/s. 80IA(4) of the Act. A perusal of the provisions of section 80IA(4) of the Act shows that in the explanation 'infrastructure facility' has been specified to mean a road including a toll road, a bridge or a rail system. Admittedly, the assessee is doing the business of development of railway tracks and bridges thereof as also roads. If, we are to accept the contention of Ld. CIT at the provisions of Section 80IA(4) of the Act after the substitution of the explanation to section 80IA of the Act was introduced was only for the purpose of giving the benefit of BOT contracts then, the explanation to section 80IA(4) of the Act becomes otiose. This is as explanation to section 80IA(4) of the Act specifically provides for the road to include toll road, a bridge or a rail system. BOT contract in respect of the railway system can never exist. Further, a perusal of the provisions of section 80IA of the Act shows that the term "works contract' is not defined in the said section. However, the terms 'works' and 'contract' is defined in the provisions of section 194C of the Act. If a particular word or term is not defined in the specific section then one could go to other sections in the said Act where the definition would be available to draw a meaning to the said terms. In the provisions of section 194C of the Act, work has been given an inclusive definition but in the subsequent portion it has excluded the manufacturing of supplying a product according to requirement or specification of a customer by using material purchased from a person other than such customer. As has been specified by the Ld. AR, the assessee is doing contract work but that work is according to the requirement and specification of the customer and the same has been done by using materials purchase from third parties other than the customers. Thus, though the assessee is doing a works contract the same would not fall within the meaning of the word 'works contract' for the purpose of the act due to the exclusion provided in the meaning of 'work' in section 194C of the Act. The issue raised by the Ld. CIT that the assessee is not doing the development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges

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thereof. Development encompasses within itself contract work. The agreement between the assessee and the customer being the government is for the development of the infrastructure facility being roads and rail systems and bridges by participating in the tenders. Under these circumstances, we are of the view that the AO was right in law in granting the assessee the benefit of deduction u/s. 80IA(4) of the Act. On this ground also, we are of the view that the Ld. CIT's order passed u/s. 263 of the Act is unsustainable and is liable to be quashed and we do so. Here, we may specifically mention that in view of the fact that the explanation to section 80IA(4) of the Act which has been substituted by the Finance, Act 2009 with retrospective effect of 01.04.2000 is attempting to take away the statutory benefit granted to the assessee u/s. 80IA(4) of the Act without making any amendment to the explanation to section 80IA(4) of the Act, the said explanation substituted by the Finance Act, 2009 w.e.f. 01.04.2000 being hindrance to the statutory deduction available to the assessee under the provision of section 80IA(4), the said explanation would have to stand down in view of the decision of the Hon'ble Supreme Court in the case of S. Sundarm Pillai, referred to supra. Consequently, on this ground also the order passed u/s. 263 of the Act by the Id. CIT for A/Y. 2006-07 and 2007-08 stands quashed. Appeals of the assessee are allowed. “

Respectfully following the Jurisdictional ITAT’s orders as mentioned above in the case of the appellant which is binding on me, I direct the AO to allow the claim of deduction made by the appellant u/s. 80IA(4) of the At. Hence, the addition made by the AO in this regard amounting to Rs.87,38,019/- is deleted.”

requirement to interfere with the order of the CIT(A) which is in

consonance with the above order of the Tribunal. We, therefore, do not

find any merit in this ground of appeal of the Revenue and, accordingly,

same is dismissed.

2007-08 and 2010-2011, the grievance of the Revenue is that the CIT(A)

was not justified in deleting the disallowance of Rs.9,840/-, for the

assessment year 2006-07, Rs.13,272/- for the assessment year 2007-08

and Rs.27,407/- for the assessment year 2010-2011 made by the

Assessing Officer towards employees contribution to PF U/S.36(1)(va) of

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the Act when the same was not deposited within the due date prescribed

under the PF Act.

that the assessee has not disputed the employees contribution to PF to

the appropriate authority within the due date prescribed under the PF Act

and hence, disallowed the deduction for the same u/s.36(1)(va) r.w.s.

u/s. 2(24)(x) of the Act.

it has been decided by the judicial authorities that the deposit of

employees contribution to PF if made before due date of filing of the

return by the assessee should be allowed as deduction u/s.36(1)(va) of

the Act.

of Hon’ble Delhi High Court in CIT Vs. AIMIL Limited [2010] 321 ITR 508

(DEL) , wherein, it has been held that the employees’ contribution

towards EPF and ESI etc. deposited after the due date but before the time

allowed for filing the return u/s.139(1) will not call for any disallowance

u/s.36(1)(va) of the Act. Hence, we confirm the order of the CIT(A) for

the above three assessment years under appeal and dismiss the ground

of appeal of the revenue.

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grievance of the Revenue is that the CIT(A) is not justified in deleting the

addition of Rs.11,00,000/- made by the Assessing Officer towards bogus

expenses.

a-vis the bills/vouchers of expenses, the Assessing Officer found that in

some cases bills are handmade and not properly vouched. Therefore, the

Assessing Officer disallowed Rs.11,00,000/- on estimate basis being a

part of such expenses claimed by the assesse and added the same to the

income of the assessee.

u/s.153A r.w.s. 143(3) of the Act, where the Assessing Officer should be

assessing the concealed income of the assessee as per the seized material

found during the course of search, there was no scope for adhoc

disallowance or additions based on estimation. The assessee relied on the

decision in the case of CIT vs. Ashim Krishna Mandal, 270 ITR 160(Cal)

and ACIT vs. Saf Yeast Co.P Ltd ( ITA No.4230/Mum-E Bench/2011.

deleted the disallowance observing that it was fact that the disallowance

of expenditure was made by the Assessing Officer on estimated basis and

that u/s.153A/143(3) aims at assessing the undisclosed/concealed income

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of the assessee and not to make the addition to the income of the

assessee on adhoc basis by making disallowance of expenditure.

A.R.supported the order of the CIT(A).

no contrary decision could be pointed out by ld D.R. to the decisions

relied upon by the CIT(A) while deleting the addition. Also no specific

error in the order of the CIT(A) could be pointed out by ld D.R. Further,

no material was brought on record to show that the addition was made on

the basis of any seized material found during the course of search.

Hence, we find no infirmity in the order of the CIT(A) and dismiss the

ground of appeal of the revenue.

grievance of the revenue is that the CIT(A) is not justified in deleting the

addition of Rs.33,000/- made by the Assessing Officer u/s.40(a)(ia) of the

Act.

assessee has incurred expenses of Rs.33,000/- towards advertising from

which no tax has been deducted u/s.194J of the Act. The Assessing

Officer was of the view that the assessee violated the provisions of

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section 40(a)(ia) of the Act, hence made disallowance of Rs.33,000/- and

added to the income of the assessee.

assessee was already been assessed u/s.143(3) of the Act before the date

of search and no adverse view had been taken by the Assessing Officer

regarding the above expenditure and the Assessing Officer had allowed

the expenditure claimed by the assessee in full. The CIT(A) after

considering the submissions of the assessee held that the contention of

the assessee that the authenticity of expenditure was already decided in

the original order u/s.143(3) of the Act. The above amount of

expenditure in any case does not form the concealed income of the

assessee nor it is a wrong claim made by the assessee. Therefore,

disallowing the same under the provisions of section 40(a)(ia) does not

arise.

supported the order of the CIT(A).

deduction of TDS by the assessee u/s.194J of the Act by invoking the

provisions of section 40(a)(ia) of the Act. We find that while making

assessment u/s.153A/143(3) of the Act, the addition has to be made on

the basis of material found and seized during the course of search. No

material has been brought on record by the Assessing Officer to show that

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some material was seized during the course of search on the basis of

which the addition of Rs.33,000/- was made to the income of the

assessee. The addition not being based on seized material, in our

considered view, cannot be sustained. We find no infirmity in the order of

the CIT(A), which is hereby confirmed and dismiss this ground of appeal

of the revenue.

Ground No.5 of the appeal for the assessment year 2007-08, Ground No.2

of the appeal for the assessment years 2008-09 and 2009-2010 and

Ground No.3 for the assessment year 2010-2011, the grievance of the

revenue is that the CIT(A) is not justified in accepting the findings of the

Assessing Officer in violation of Rule 46A.

evidence produced by the assessee before the CIT(A), which was relied

upon by the CIT(A) while passing the order. Hence, we dismiss this

ground of appeal for all the assessment years under appeal.

Cuttack; Dated 28 /06/2017 Parida, SPS

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Copy of the Order forwarded to : 1. The Appellant/Assessee: Astt. Commissioner of Income Tax, Circle-2(1), Bhubaneswar. 2. The Revenue: ARSS Infrastructure Pvt. Ltd. Plot No. 38, Sector-A, Mancheswar Estate, BBSR.

SR.PRIVATE SECRETARY ITAT, Cuttack