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Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
Date of hearing: 30/05/2023 Date of pronouncement: 30/05/2023 ORDER Per Laliet Kumar, J.M The above appeals are connected appeals filed by both the Revenue as well as the Assessee feeling aggrieved by the order passed by the learned CIT (A) in the above said appeals. Since identical grounds have been raised in all these appeals, for the sake of convenience, all these appeals were heard together and are being disposed of by this common order.
A.Y 2011-12 is taken as the lead case and the grounds raised by the assessee is reproduced below:
1) The learned CIT (A) erred both in law and on facts 2) The learned CIT (A) erred in holding that the projects undertaken by the assessee are infrastructural projects and not work contracts and hence the assessee is eligible for deduction u/s 80IA on the profits earned from such projects. 3) Any other ground that may be urged at the time of hearing”.
At the outset, the learned DR drew the attention of the Bench to the order passed by the learned CIT (A), more particularly para 6, 6.5 and 6.6 of the order of the learned CIT (A) which is reproduced below:
It was submitted that on the basis of the said paragraphs from the order of the learned CIT (A), that the learned CIT (A) relied upon the order of the Tribunal passed for the A.Y 2007-08. Thereafter, the learned DR drew the attention of the Bench to the order passed by the Tribunal in for the A.Y 2007-08 vide order dated 27.08.2012 which reads as under:
“23. In the case of GVPR Engineers Ltd. v. ACIT, 51 SOT 207 (Hyd) (URO) wherein the Tribunal held that deduction u/s. 80IA is available to developers who undertake entrepreneurial investment risk and not for the contractors, who undertake only business risk. Without any doubt, the assessee clearly demonstrated that the plant and machinery, technical know-how, expertise and financial resources.
Therefore, if the contracts involve design, development, operation & maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract, to deny the deduction under section 80IA. The contracts which contain above features to be segregated have to be granted deduction under section 80IA and the other agreements which are pure works contracts hit by the Explanation to section 80IA(13) are not entitled for deduction under section 80IA. The profit from the contracts which involve design, development, operating & maintenance, financial involvement and defect correction and liability period is to be computed by the Assessing Officer on pro rata basis of turnover. The Assessing Officer is directed to examine the records, accordingly, and grant deduction on eligible turnover.
In the case of KMC Construction Ltd. v. ACIT, 51 SOT 214 (Hyd) (URO) wherein the Tribunal has taken the same view.
In the case of Sushee Hi-Tech Constructions Pvt. Ltd. vs. DCIT, in & 1165/Hyd/2009 and ITA No. 1171/Hyd/2010 dated 16th March, 2012 wherein the Tribunal held as follows: " ... The assessee should not be denied the deduction under section 80IA of the Act as the contracts involves, development, operating, maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract. In our opinion the contracts which contain above features to be segregated and on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from such contracts which involves development, operating, maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine and grant deduction on eligible turnover as directed above."
In view of the above order of the Tribunal on similar issue relating to deduction u/s 80-IA(4), we are inclined to remit the issue back to the file of the Assessing Officer to decide the issue in the light of the above orders”.
On the basis of the above said order of the Tribunal for the A.Y 2007-08, it was submitted that the Tribunal had merely remanded back the matter to the file of the Assessing Officer with the above said direction. It was submitted that the Assessing Officer was duty bound to examine the record and record a categorical finding on the various aspects mentioned in the order. It was submitted by the learned DR that since the order of the learned CIT (A) was based on the direction of the Tribunal for the A.Y 2007-08 and in the said decision had directed the Assessing Officer to carry out the assessment and record a categorical finding on the aspect of design, development, operation maintenance and financial involvement and defect correction and liability period. Since nothing has been decided in the appeal of the assessee for the A.Y 2007-08 by the Tribunal, it was wrong on the part of the learned CIT (A) to rely upon the direction of the Tribunal for the A.Y 2007-08 while deciding the appeal of the assessee. Therefore, it was submitted the order passed by the learned CIT (A) is without any basis and therefore, the same is required to be quashed.
Per contra, the learned AR drew the attention of the Bench to the order of the Tribunal for the A.Y 2007-08 wherein this specific direction was issued by the Tribunal to the Assessing Officer to record a finding on the aspects of design, development, etc. (Para No.23 to 26), it was submitted that the Assessing Officer while passing the assessment order has not carried out and implemented the direction of the Tribunal in letter and spirit and instead has expanded the scope of its direction without any authorization or warrant from the Tribunal and decided the issue for the A.Ys 2007-08 onwards. He had drawn our attention to the Assessing Officer’s order in appeal for 2007-08 wherein the Assessing Officer in Para 7 at Page 8 mentioned as under:
“7. Though not specifically warranted by the ITAT, examination of conditions laid down by section 80IA vis-à-vis assessee’s context is also attempted to further provide elaboration on the issue, as under”.
We have heard the rival arguments made by both the sides and perused the material available on record. Undoubtedly the Tribunal for the A.Y 2007-08 has directed the Assessing Officer to carry out the proceedings and record a categorical finding about the entitlement of the assessee on certain parameters laid down in the order dated 12.08.2012. The order of the Assessing Officer for the A.Ys 2006-07 & 2007-08 and thereafter clearly shows that the above direction of the Tribunal has not been followed by the Assessing Officer in strict sense and no finding has been recorded by the Assessing Officer on the very aspect highlighted by the Tribunal. Since the direction of the Tribunal has not been implemented by the Assessing Officer for the A.Y 2006-07/ 2007-08 under consideration and further that the learned CIT (A) had wrongly relied upon the direction of the Tribunal for the A.Y 2006-07/2007-08 had recorded the finding in favour of the assessee, we find neither the Assessing Officer nor the learned CIT (A) understood the directions of the Tribunal in right earnest and both have wrongly decided the issue. In the light of the above, we deem it proper to restore the issue back to the file of the Assessing Officer with a direction to decide the issues in the light of the directions for the A.Y 2007-08 of the Tribunal and record a categorical finding about the entitlement of the assessee. Therefore, present appeal is remanded back to the file of the Assessing Officer with a direction to redo the entire exercise as indicated by the Tribunal for the A.Ys 2006-07 & 2007-08.
Since we have already remanded back the appeal for the ay 2011-12 to the file of the Assessing Officer, following similar reasonings, the remaining appeals of the assessee and revenue are also remanded back to the file of the Assessing Officer to carry out the similar exercise for all the A.Ys falling in the present set of appeals.
In the result, appeals filed by the Revenue as well as the Assessee are allowed for statistical purposes.