By TIOL News Service

KOLKATA, FEB 27, 2014: THE issues before the Bench are - Whether when the CIT(A) has given detailed findings about the project bieng 'foreign' in nature, Sec 80HHB benefits can be diallowed by a mere cryptic order passed by the Tribunal and Whether such project work can be categorised as a mere repair and maintenance work. And the verdict favours the assessee.

Facts of the case

The assessee is engaged in assembly, reassembly, installation, renovation, continuous updating of machineries, plants, mechanical, electronic and air conditioning systems on board foreign vessels mostly while the vessel is sailing on high seas with the help of highly efficient, quality conscious and competent technicians approved for the class of vessels they are to work on with most modern computerised techniques. It could not file any evidence or document to show that there was any kind of project/contract with any foreign company except that it was engaged in supplying labourer on a particular project. Thus, the Tribunal disallowed deduction under Section 80HHB.

The assessee's counsel pointed out the recordings made by the CIT, wherein it was observed that the assessee, on receipt of order for the requirement of men, material, technology, cost and time was meticulously worked out, the plans got approved in principles, the equipment and technicians were carefully selected and were approved; the project was executed with a high degree of knowhow, vigilant supervision and monitoring maintenance of highest quality, efficiency, cost and time schedules was ensured. The workmen and the work executed had to be approved by International Agencies and certificate of seaworthiness of the vessel had to be obtained at every port of sail. To call it simple repair and maintenance with the help of labourers was too simplistic and lack of understanding of the nature of the job. The work was foreign project within the meaning of Section 80HHB(2)(b)(ii)/(iii) as it included planning and designing or doing something and had been executed as a single integral work order. It was technically also a project as it included a man, job design, control system design and design of a method of employing specific technology to do the work. Entire consideration was attributable to such execution of the projects. Certificate of Auditors on Form No.10CCA had been furnished. AO was satisfied with other requirements for eligibility for entitlement to deduction U/s. 80HHB. The assessee was granted deduction for Rs.4,32,346 and the disallowance of claim u/s.80HHB was deleted.

Held that,

++ the assessee's consel has submitted that the Tribunal in exercise of appellate power was duty bound to demonstrate infirmity in the findings recorded by the CIT (A), which the Tribunal did not do. The Tribunal by a cryptic order has disallowed the benefit capriciously rather than on the basis of any reason. Advocate for the Revenue had submitted that the expression ‘foreign project’ has been defined in subsection 2(b) of Section 80HHB and the Tribunal was of the view that the assessee was not involved with any work in any foreign project;

++ we have considered the submissions and are of the opinion that the submission advanced by the assessee's counsel must be accepted. The question of fact was duly considered by the CIT (A) and the Tribunal unnecessarily and without any reason interfered with the same. The order of the Tribunal, as such, is reversed and the order of the CIT (A) is restored.

(See 2014-TIOL-241-HC-KOL-IT)