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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri A. Mohan Alankamony & Shri S.S. Godara
ITA No.1577/Hyd/2017 Assessment Year: 2014-15 The Deputy Commissioner GVPR Engineers Limited, of Income Tax, C/o. M. Anandam & Co., Circle 2(2), Chartered Accountants, Hyderabad. 7A, Surya Towers, S.P. Road, Secunderabad – 500003. PAN : AAACG7614F (Appellant) (Respondent / Cross Appellant) Assessee by: Shri M.V. Anil Kumar Revenue by: Smt. D. Komali Krishna Date of hearing: 27/10/2021 Date of pronouncement: 23/11/2021 O R D E R Per S. S. Godara, J.M. These two Revenue and assessee’s cross appeals i.e., and 1617/Hyd/2017 for A.Y. 2013-14 and ITA No.1577 and 1618/Hyd/2017 for A.Y. 2014-15 arise against the Commissioner of Income Tax (Appeals) – 2, Hyderabad’s separate orders dt.30.06.2017 and 29.06.2017, passed in case Nos.0075 and 0436/2016-17, respectively, involving proceedings u/s 143(3) of the Act.
Heard both the parties. Case files perused.
It transpires during the course of hearing that the Revenue’s identical sole substantive grievance in both of its appeals and 1577/Hyd/2017 as well as the assessee’s former substantive ground in twin cross appeals ITA Nos.1617 and 1618/Hyd/2017; raise an identical issue of section ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited 80IA deduction in case(s) involving nine irrigation projects viz. KBJNL Work, Guddadamallapur LIS, Singatlur 2nd lift, Singatlur 3rd lift, Teggisiddapur, Sanyasikuppa Work, Ubrani Amurthapura LIS, Jammu Road Work and HMWS & SB Project; of varying sums which were declined by the Assessing Officer but accepted in CIT(A)’s both orders; as against the latter party’s assessee’s grievance that the learned lower authorities have erred in law and on facts in not treating it as a “developer” engaged in laying out new transmission / distribution power lines (again containing different sums); respectively. Learned CIT(A)’s detailed discussion deciding the instant twin issues thereby accepting the assessee’s corresponding deduction claim qua irrigation projects but declining it regarding distribution and transmission lines reads as under :
ITA Nos.1617 and 1618/Hyd/2017 and & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited ITA Nos.1617 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited
We further find that the assessee has filed very detailed paper books; and more particularly, relevant tender documents running into 184 pages along with the CBDT’s circular No.779 dt.14.09.1999 clarifying that profits derived from setting up distribution / transmission lines of power is squarely covered u/s 80IA of the Act.
Mr. Anil Kumar next sought to buttress to point out the assessee’s both foregoing activities i.e. development / maintenance of irrigation projects as well as laying new transmission lines distribution network in power sector; are duly eligible for the impugned deduction since it had acted as a developer. Having borne entire business as well as financial risk; as the case may be lastly referred to the CIT(A)’s detailed discussion treating it as eligible for the impugned deduction in preceding assessment years. 12 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited 4.1 We find no merit in the assessee’s stand. This tribunal’s co-ordinate bench recent order dt.12.05.2021 in ITA No.496/Hyd/2018 M/s. NEC NCC MAYTAS – JV Vs. DCIT has already decided the issue that development of such irrigation works in furtherance to government agencies / “works contracts” come under the statutory explanation to section 80IA inserted by the Finance Act 2009 w.e.f. 01.04.2000 substituting the earlier one introduced by the Finance Act 2007 w.e.f. 01.04.2007 as under :
“8. We have heard the foregoing rival submissions qua the instant issue of section 80IA deduction. The assessee has admittedly claimed the same taking itself as the developer by court that a corresponding commercial project firm of “infrastructural facility” as per section 80IA(4) Expln.(c) covering “a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system” only. Our attention has been invited to the corresponding project’s architectural design (supra). The assessee has thereafter pleaded that it has undertaken the business risk not only in the development of the said lift channel forming part of the irrigation project which has turned barren uneven tracks of land to a canal but also it had deployed all of the corresponding plant and machinery, labour force followed by retention money’s project thereby satisfying all the conditions of development of infrastructure facility. All these assessee's arguments fail to evoke our concurrence for the reasons given hereunder. 9.1 The assessee's first and foremost plea that we ought to adopt liberal interpretation while considering section 80IA(4) claim in the light of relevant facts in the instant case deserves to reject. Suffice to say, such a course of liberal interpretation is no more available while dealing with the Income Tax Act’s provisions as per honourable apex court’s recent constitutional bench’s decision in Commissioner of Customs (Import) Vs. Dilip Kumar and Co. (2018) 9 SCC 1 settling the law that a fiscal statute as well as an exemption clause incorporated therein ought to be construed in stricter parlance only. Their lordships make it clear that benefit of doubt in case of taxing provision goes to the tax payer and vice versa in an instance of an exemption provision. The assessee’s first argument is rejected therefore.
ITA Nos.1617 and 1618/Hyd/2017 and & 1577/Hyd/2017 GPVR Engineers Limited
We next examine the merits of the assessee's claim in light of section 80IA(4) r.w. Explanation ( c ) thereof. This is for the reason that the legislature has reintroduced the Explanation; formerly inserted by the Finance Act, 2007 w.e.f. 1.4.2007 that “For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise as the case may be,” followed by its substitution by the Finance Act, 2009 w.e.f. 1.4.2000 that “for the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in subsection (4) which is in the nature of a works contract awarded by any person (including the central or state government) and executed by the undertaking or enterprise referred in sub-section (1).”
Learned CIT-DR at this stage quoted Katira Constructions Limited Vs. Union of India and Others (2013) 352 ITR 513 (Guj) upholding vires of the latter explanation that the same is purely explanatory in nature than amending the existing provision and therefore, the question of it being levying any tax with retrospective effect would not rise. It is thus explicitly clear that their lordships have held this latter explanation in the nature of a plain and simple one; neither adding nor subtracting anything to the earlier explanation, inserted vide Finance Acts, 2009 and 2007; respectively. Learned CIT-DR further sought to pin point the fact that the latter explanation inserted vide Finance Act, 2009 w.e.f. ;1.4.2000 has rather covered a work contract as not entitled for the impugned deduction despite the fact that the concerned assessee satisfied all other conditions in sub-section (4) of section 80IA of the Act. We find force in Revenue’s instant argument as the Finance Act, 2009 substitutes the earlier explanation that the same would not cover a works contract for the purpose of providing deduction qua industrial undertaking or enterprise engaged in infrastructure development, etc. 12. There is yet another equally important aspect which requires our apt adjudication at this stage i.e. of the clinching legislative expression in the latter explanation “nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the central or the state government)”. We note that honourable apex court yet another larger bench decision in Kartar Singh Bhadana Vs. Hari Singh Nalwa & Ors Civil Appeal No.6931 of 2000 decided on 27.03.2001 had an occasion to deal with the expression “works” used in section 9-A of the Representation of People Act, 1951. Hon’ble court therein went by the shorter Oxford English Dictionary’s meaning that “work means a structure or apparatus of some kind; an architectural or engineering structure, a building edifice. When it was used in the plural, that is, as works, it meant architectural or engineering operations, a fortified building, a defensive structure, fortification or any of the 14 ITA Nos.1617 and 1618/Hyd/2017 and & 1577/Hyd/2017 GPVR Engineers Limited several parts of such structures”. Their lordships also took note of honourable jurisdictional high court’sjudgment in B. Laxmikantha Rao Vs. D Chinna Mallaiah AIR 1979 AP 132 whilst adopting the dictionary meaning of “work” in foregoing terms. We further quote Raghunath Rai Baraza Vs. PNB (2007) 135 Company cases 163 (SC) that it is the cardinal rule of interpretation that words used by the legislature are to be understood in their natural, ordinary or popular sense or constructed as per their grammatical meaning unless such a construction lead to some absurdity or there is something in the context or in the object of the statute to the contrary.
We go by the foregoing observations of their lordships and observe that the stages I & II of the Bhima Lift Irrigation project undertaken by the assessee containing “ all the civil works like canal approach to the tunnel, tunnel, surge pool pump house, delivery mains manufacturing, testing, inspection, packing, supply, erection and commissioning of electro mechanical and hydro mechanical equipment” indeed formed an architectural as well as engineering structure and therefore, amounts to an execution of a “works contract awarded by the state government” through its irrigation development only and covered u/s. 80IA Explanation incorporated in the Act by the Finance Act, 2009 w.e.f. 1.4.2000. Learned CIT-DR at this stage invited our attention to page 18 in assessee's Paper Book II Part 1 that it had purely executed “works contract” only in view of the fact that the irrigation department had issued it mobilization advances on multiple occasions from time to time. He next took us to agreement clause 3.15 containing “contract price and payment” making it evident that the assessee had to be paid on “fixed lump sum monthly basis” only. And further that the assessee was entitled to get “fixed lump sum monthly instalment payments provided value of the work executed is more than or equal to the fixed lump sum monthly instalment as indicated in the agreement.” The said agreement stipulated advance payments to the assessee qua supply of goods at the site. All these facts sufficiently indicate that the assessee, assuming that not accepting that it is the developer u/s. 80IA(4) of the Act, executed a works contract only under Explanation to section 80IA of the Act and therefore, not entitled for the impugned deduction.
The assessee next made a very strong endeavour to place reliance on a catena of case law (supra) including CIT Vs. ABG Heavy Industries Limited (2010) 322ITR 323 (Bom). We find that neither of these decisions deals with the interplay between the section 80IA(4) Vs. 80IA Explanation involving execution of works contract as is the factual position before us. The said case law distinguished, therefore.
Mr. Afzal’slast argument seeks to buttress the point that such a strict interpretation employed in dealing with an instance of development of an infrastructure project would tantamount to closing 15 ITA Nos.1617 and 1618/Hyd/2017 and & 1577/Hyd/2017 GPVR Engineers Limited the deduction chapter altogether and more particularly, when this assessee has borne all risks and responsibilities of the lift irrigation project by paying reduction money and performance guarantee(s) as well. We hold that this last argument also fails to cut any ice since the assessee has merely performed a works contract and its retention money or the so called performance guarantee only gave an assurance to the irrigation development that it had carried out the corresponding construction etc. as per the specified design norms than involving any business risk. We accordingly hold the view of our independent appreciation of facts as well as assessment findings that the assessee is a contractor having executed works contract only.
We also deem it appropriate to quote Adam Smith’s ‘The Wealth of Nations’ (published in 1776 and called as the founding work on modern economics) that “ It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
Nevertheless, the same connotation applies in the facts of the instant case. It is clear that the assessee has first of all been paid mobilization advances by the state government’s department on periodic basis, and, then only it executed the corresponding lift irrigation project works contract followed by its yet another claim of section 80IA of the Act deduction (supra). We are afraid that such a liberal interpretation would amount to going against the stricter interpretation principle in view of honourable apex court decision (supra). We accordingly conclude both the learned lower authorities have rightly disallowed assessee's 80IA deduction claim involving varying sum(s) (supra) in their respective orders. The same stands confirmed. These assessee's appeals are dismissed therefore.”
Suffice to say; the foregoing detailed discussion has thrown sufficient light as to what amounts to ‘work contracts’ to imply “architectural or engineering operations” only. There could be hardly any dispute that both irrigation works as well as laying of distribution and transmission power lines herein amounts to “architectural or engineering operations” only. We therefore adopt the foregoing detailed discussion mutatis and mutandis to uphold the Assessing Officer’s action disallowing the assessee’s impugned twin deduction claims on these very grounds and hold that even if and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited the assessee is taken as a “developer” of the corresponding infrastructural facility going by section 80IA(4) or necessary implication or interpretation; as the case may be, it would still hit by the former latter explanation inserted in the Act by the Finance Act, 2004 w.e.f. 01.04.2000. We therefore accept the Revenue’s instant identical sole substantive grievance that the CIT(A) has erred in law and on facts in treating the assessee as eligible for section 80IA(4)(i)(c) deduction(s) involving varying sums and also reject latter former ground that both the lower authorities had wrongly denied section 80(IA)(4)(iv)(b) claims in above terms; respectively.
We further make it clear that although the learned CIT(A) deciding the issue in assessee’s favour is stated to have been upheld in this tribunal’s order(s), in preceding assessment years, we find that the said bench(es) nowhere discuss the clinching operation of the following “Explanation” as well as the nature and ambit of a “works contract” which renders the same as per incuriam only in light of CIT Vs. B.R.Constructions (1993) 202 ITR 222(AP) that an adjudication not based on correct appreciation of facts does not amount to a binding precedent as under :-
It may be noticed that precedent ceases to be a binding precedent - (i) if it is reversed or overruled by a higher court, (ii) when it is affirmed or reversed on a different ground, and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited (iii) when it is inconsistent with the earlier decisions of the same rank, (iv) when it is sub silentio, and (v) when it is rendered per incuriam.
In paragraph 578 at page 297 of Halsbury's Laws of England, Fourth Edition, the rule of per incuriam is stated as follows : "A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of co- ordinate jurisdiction which covered the case before it, in which case it must decided which case to follow; or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force."
We accordingly accept the Revenue’s sole grievance as well as main appeals and 1618/Hyd/2017 and reject assessee’s former ground raising section 80IA deduction issue in the very terms.
We next proceed to deal with the assessee’s identical latter substantive ground that both the learned lower authorities have erred in law and on facts in disallowing the alleged “prepaid” bank guarantee commission of Rs.58,47,746/- and Rs.59,03,406/-; respectively. Learned CIT(A) has upheld the Assessing Officer’s action mainly on the ground that the same is prepaid in nature without discussing as to in what circumstances assessee had prepaid its claim amount or whether it had been only or exclusively incurred for the purpose of business u/s 37 of the Act. We thus restore the assessee’s instant sole substantive grievance back to the Assessing Officer 18 and 1618/Hyd/2017 and ITA Nos.1576 & 1577/Hyd/2017 GPVR Engineers Limited for his adjudication afresh after verifying all necessary facts as per law within three effective opportunities of hearing. The assessee’s appeals ITA Nos.1617 and 1618/Hyd/2017 are partly allowed for statistical purposes in above terms.
These Revenue appeals and 1577/Hyd/2017 are allowed and assessee’s cross appeals ITA Nos.1617 and 1618/Hyd/2017 are partly allowed for statistical purposes in foregoing terms. A copy of this common order be placed in the respective case files.