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Income Tax Appellate Tribunal, ‘’ B’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned two appeals have been filed at the instance of the Assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals) Gandhinagar, arising in the matter of assessment order passed under s. 143(3) r.w.s. 153C of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18 & 2018-19.
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The only effective issue raised by the assessee is that the ld. CIT-A erred in not adjudicating the additional ground of appeal raised by the assessee during the proceedings before him.
The ld. AR before us filed a paper book running from pages 1 to 81 and submitted that the assessee has raised the additional ground of appeal before the ld. CIT-A for making the claim under section 80(IA)(4) of the Act. In support of his contentions, the ld. AR drew our attention on pages 65 to 81 containing the following details: Sr.No. Description Page No. 2. Acknowledgment of E-filing of additional 65 ground of appeal alongwith audit repoort u/s.80IA(4) 3. Acknowledgement of E-filing of written 66 submissions, revised computation of income,risk and responsibility, and tender documents for claim u/s.80IA(4) 4. Additional ground of appeal 67 5. Revised computation of total income 68-69 6. Audit Report in Form no.10CCB alongwith 70-81 annexures. It is certified that above pages are field/on record as under: -Before CIT(A): 65 to 81 3.1 The learned AR also drew our attention on the detailed submission made before the learned CIT(Appeal) running from pages 1 to 64 for claiming deduction under section 80(IA)(4) of the Act. But the ld. CIT-A while deciding the appeal filed by the assessee has inadvertently failed to consider the additional ground raised by the assessee before him. Thus, the ld. AR before us prayed to restore the issue to the file of the ld. CIT-A for fresh adjudication as per the provisions of law.
On the other hand, the ld. DR before us submitted that it is the only legal ground which can be raised during the stage of any proceedings, but a factual
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issue is not permitted to be raised during the proceedings. However, the ld. DR left the issue at the discretion of the Bench.
We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 250(5) of the Act empower the ld. CIT-(Appeal) to admit any ground of appeal not specified in the memo of appeal if he is satisfied that the assessee has inadvertently failed to raise such ground of appeal. Undeniably, the ground was raised by the assessee before the learned CIT-A but the same has not been considered while deciding the appeal filed by the assessee. To this extent, we are satisfied with the arguments raised by the ld. AR for the assessee. However, in our considered view, it is the discretion of the ld. CIT-A to admit or not to admit the additional ground raised by the assessee. However, such discretion should be exercised by the learned CIT(Appeal) as per the provisions of law and should pass a speaking order either accepting or rejecting such additional ground of appeal. If the ld. CIT-A is inclined to admit the additional ground of appeal raised by the assessee, then the ld. CIT(Appeal) will decide the issue on merit as well as per the provisions of law. With this observation, the ground of appeal of the assessee is allowed for the statistical purposes.
In the result, the appeal filed by the assessee is allowed for the statistical purposes.
Coming to ITA No. 870/AHD/2023 for AY 2018-19, an appeal by the assesee.
The assessee has raised following grounds of appeal: 1. That on facts, and in law, the learned National faceless Appeal Centre(NFAC) has grievously erred in law and on facts in confirming the addition of Rs.75,23,496/- (profit on sale of machinery Rs.1,61,255 + sub contract income Rs.44,13,776 + sub contract income Rs.44,13,776 + indirect income Rs.29,48,465) as undisclosed income, ignoring
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the fact that the said income is already included as income in the audited accounts of the appellant. 2. That, on facts, and evidence on record, the appellant has already excluded the profit on sale of machinery of Rs.1,61,255/- and sub contract income Rs.44,13,776/- from the profits eligible for deduction u/d 80IA(4) of the Act and had claimed this deduction only on proportionate indirect income of Rs.29,48,465/- 3. The appellant craves leave to add, alter, amend any ground of appeal. 8. The interconnected issue raised by the assessee is that the learned CIT-A erred in denying the benefit of deduction under section 80IA(4) of the Act with respect to the profit on the sale of machinery, sub-contract income and indirect income of ₹ 1,61,255.00, Rs. 44,13,776.00 and Rs. 29,48,465 respectively.
The AO during the assessment proceedings found that the assessee has shown income from other sources in the financial statements. The details of such other income stand as under:
Interest income A/c Bank of Baroda FDR Rs.46,85,854/- 2. Interest income A/c Sardar Sarovar Bond Rs.2,55,000/- 3. Profit on Sale of Machinery Rs.1,61,255/- 4. Interest Received on I.T Refund Rs.2,10,360/- 5. Sub Contract Profit Income Rs.43,95,894/- 6. Sale of scrap Rs.3,20,850/- 7. Gain on Cessation of Liability Rs.3,71,365/- 9.1 The AO further found that the assessee out of the aforesaid income has claimed deduction under section 80IA(4) of the Act with respect to the income profit on sale of machinery ₹ 1,61,255.00, sub-contract income ₹ 44,13,776.00 and indirect income of ₹ 29,48,465.00 but as per the AO such income was not eligible for deduction under section 80IA(4) of the Act. Thus, the AO disallowed the same.
9.2 The AO also found that the assessee has not offered profit on sale of machinery amounting to ₹ 1,61,255.00 to tax and therefore the AO also made the addition to the total income of the assessee of such loss on the sale of machinery.
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In effect, the AO made an addition of ₹ 75,23,496.00 to the total income of the assessee.
Aggrieved assessee preferred an appeal to the ld. CIT-A who confirmed the order of the AO by observing as under: 4.5 I have gone through the assessment order carefully and considered the submissions of the appellant. From the working of eligible deduction u/s 801A it appears that the appellant has worked out the amount of deduction at Rs. 9,22,41,113/- which includes Rs. 1,61,255/- being to sale of machinery, Rs. 44,13,776/- being to sub-contract income and Rs.29,48,465/- being to indirect income. The Id. AO has denied deduction u/s 80IA(4)(i) on above 3 items. 5. In the assessment order the Id. AO has held that the income of Rs. 44,13,776/- on account of sub contract is not a part of the income derived from development of infrastructure. Thus, the claim of deduction against this amount has been denied by the Id. AO. The appellant has submitted that the amount of sub contract profit of Rs.43,95,894/- has already been included in other income of Rs. 1,04,00,578/- which is a part of total revenue of Rs. 108,47,40,420/-, The amount of profit Rs. 6,57,56,993/- which has been taken for the computation of total income, includes the amount of other income of Rs. 1,04,00,578/-. It means that the deduction u/s 80IA(4)(i) has been claimed against this entire indirect income. 5.1 From the submission of the appellant it is evident that the appellant has claimed deduction against the profit earned by it on account of sub-contract business. The income earned from the business of sub contract does not form part of the income derived from the business of development of infrastructure. Therefore, the Id. AO has rightly denied deduction u/s 80IA(4)(i) on this amount and made addition of Rs. 44,13,776/-. On the basis of the assessment order and in view of the details and documents uploaded by the appellant, I am of considered opinion that the addition made by the Id. AO deserves to be sustained. Accordingly, the ground of appeal on this is dismissed and not allowed. 6. The Id. AO made addition of Rs. 1,61,255/- on account of profit on sale of machinery. From the submission of the appellant, it is evident that the appellant has claimed deduction against the profit earned by it on account of sale of machinery. The profit earned on account of sale of machinery does not form part of the income derived from the business of development of infrastructure. Therefore, the Id. AO has rightly denied deduction u/s 80IA(4)(i) on this amount and made addition of Rs. 1,61,255/-. On the basis of the assessment order and in view of the details and documents uploaded by the appellant, I am of considered opinion that the addition made by the Id. AO deserves to be sustained. Accordingly, the ground of appeal on this is dismissed and not allowed. 7. Regarding addition of Rs. 29,48,465/-, it is noticed that this amount has been derived by the appellant from the indirect income of Rs. 1,04,00,578/- in proportion to the total turnover and the turnover of eligible business. The appellant has also claimed deduction on this indirect income but it has not offered any explanation as to how this
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amount, forming part of indirect income (not pertaining to the eligible business u/s 801A(4)(i)), is eligible for deduction. Therefore, the Id. AO has rightly denied deduction u/s 80IA(4)(i) on this amount and made addition of Rs. 29,48,465/-. On the basis of the assessment order and in view of the details and documents uploaded by the appellant, I am of considered opinion that the addition made by the Id. AO deserves to be upheld. Accordingly, the ground of appeal on this is dismissed and not allowed. 11. Being aggrieved by the order of ld. CIT-A, the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 54 and contended that there was no deduction claimed under section 80IA(4) of the Act with respect to the profit on sale of machinery of ₹ 1,61,255.00 and sub- contract income of Rs. 44,13,776.00. As per the ld. AR, the profit from the sale of machinery has already been adjusted in the schedule of the fixed assets and the depreciation was claimed after such adjustment. As such there is no provision under the Act to tax the profit on sale of machinery of ₹ 1,61,255.00 if the relevant block of assets exists in the books of accounts. The ld. AR in support of its contention has drawn our attention to the schedule of fixed assets placed on pages 8 and 9 of the paper books. Regarding the subcontract income, the ld. AR contended that the assessee has not claimed any deduction of Rs. 44,13,776.00 while calculating the amount eligible for deduction under section 80IA(4) of the Act.
12.1 The ld. AR regarding the balance amount of Rs. 29,48,465.00 submitted that this is the only amount which was claimed as deduction while calculating the eligible profit under section 80IA(4) of the Act.
On the other hand, the ld. DR before us vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. As regards the profit on the sale of machinery, we
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note that the gross amount of sale consideration of such plant and machinery amounting to ₹ 15,23,810.00 has already been adjusted in the block of assets which can be verified from the depreciation schedule placed on page 9 of the paper book which was prepared under the provisions of the Income Tax Act. Thus, such amount cannot be taxed separately by the revenue. Once the impugned amount of profit on the sale of machinery of ₹ 1,61,655 has already been adjusted in the block of assessee, there is no provision to show the same as income chargeable to tax. 14.1 Regarding the subcontract income of Rs. 44,13,776.00, we note that such income has not been made subject to deduction under section 80-IA(4) of the Act and therefore we are not in agreement with the findings of the authorities below.
14.2 Regarding the balance amount of Rs. 29,48,465.00 which was subject matter of deduction under section 80-IA(4) of the Act, we note that there is a precondition for claiming the deduction of the profit/income if it is derived from the eligible activity. However, the ld. AR before us has not submitted sufficient documentary evidence in support of his contention. On question by the Bench at the time of hearing, the learned counsel requested to restore the issue to the file of the ld. CIT-A for fresh adjudication as per the provisions of law and further assured to furnish the necessary details to justify the claim of the assessee. Per contra, the learned DR did not raise any serious objection if the matter is referred to the file of ld. CIT-A for fresh adjudication as per the provisions of law. Accordingly, in the interest of justice and fair play we are inclined to extend one more opportunity to the assessee to justify its claim for deduction of Rs. 29,48,465 as per the provisions of law. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
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In the combined result, the appeal bearing No. 349/AHD/2022 for AY 16. 2017-18 is allowed for statistical purposes and the appeal bearing No. 870/AHD/2022 for AY 2018-19 is partly allowed for statistical purposes.
Order pronounced in the Court on 05/04/2024 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) ( WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 05/04/2024 Manish