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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN, HONBLE & MS. PADMAVATHY S., HONBLE
Since all the issues involved in these Since all the issues involved in these three three appeals are common and identical, therefore, they have been are common and identical, therefore, they have been are common and identical, therefore, they have been clubbed, heard together and consolidated order is being clubbed, heard together and consolidated order is being clubbed, heard together and consolidated order is being passed for the sake of convenience and brevity. We shall passed for the sake of convenience and brevity. We shall passed for the sake of convenience and brevity. We shall take up No. 4940/Mum/2024, A.Y 2014-1 15 as lead case and facts narrated therein. The a case and facts narrated therein. The assessee has raised ssessee has raised the following grounds of appeal: the following grounds of appeal:
1. "Whether on the facts and in the circumstances of the case 1. "Whether on the facts and in the circumstances of the case 1. "Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) was justified in allowing claim of and in law the Ld.CIT(A) was justified in allowing claim of and in law the Ld.CIT(A) was justified in allowing claim of deduction deduction deduction u/s.801A u/s.801A u/s.801A of of of the the the Act Act Act amounting amounting amounting to to to Rs.4,40,47,969/ Rs.4,40,47,969/-."
2. "Whether on the f 2. "Whether on the facts and in the circumstances of the case acts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate the fact that the and in law the Ld.CIT(A) failed to appreciate the fact that the and in law the Ld.CIT(A) failed to appreciate the fact that the assessee has not fulfilled the conditions laid down for assessee has not fulfilled the conditions laid down for assessee has not fulfilled the conditions laid down for claiming deduction u/s.801A of the Act." claiming deduction u/s.801A of the Act."
3. "Whether on the facts and in the circumstances of the case 3. "Whether on the facts and in the circumstances of 3. "Whether on the facts and in the circumstances of and in law the Ld.CIT(A) failed to appreciate that the and in law the Ld.CIT(A) failed to appreciate that the and in law the Ld.CIT(A) failed to appreciate that the assessee was involved in carrying out work in the nature of assessee was involved in carrying out work in the nature of assessee was involved in carrying out work in the nature of rehabilitation whereas there is no reference to the term 'road rehabilitation whereas there is no reference to the term 'road rehabilitation whereas there is no reference to the term 'road widening' anywhere in work order and has not carried out widening' anywhere in work order and has not carried out widening' anywhere in work order and has not carried out any work of any work of development of new infrastructure facility or development of new infrastructure facility or maintaining the same." maintaining the same."
4. "Whether on the facts and in the circumstances of the case 4. "Whether on the facts and in the circumstances of the case 4. "Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate the fact that the and in law the Ld.CIT(A) failed to appreciate the fact that the and in law the Ld.CIT(A) failed to appreciate the fact that the assessee upon completion of the contractual obligations has assessee upon completion of the contractual obligations has assessee upon completion of the contractual obligations has been paid the agreed contract price as per work completed een paid the agreed contract price as per work completed een paid the agreed contract price as per work completed whereas whereas whereas section section section 801A 801A 801A stipulates stipulates stipulates development development development or or or maintenance of infrastructure facility." maintenance of infrastructure facility."
5. "Whether on the facts and in the circumstances of the case 5. "Whether on the facts and in the circumstances of the case 5. "Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate the and in law the Ld.CIT(A) failed to appreciate the fact that the relationship between assessee and the government is that of relationship between assessee and the government is that of relationship between assessee and the government is that of the contractor and the contractee and the assessee has the contractor and the contractee and the assessee has the contractor and the contractee and the assessee has acted as a contractor only on a specific contract allotted by acted as a contractor only on a specific contract allotted by acted as a contractor only on a specific contract allotted by its principals, cost of which has been reimbursed from the its principals, cost of which has been reimbursed from the its principals, cost of which has been reimbursed from the principals who are the actual owner/developer?" ipals who are the actual owner/developer?" ipals who are the actual owner/developer?"
6. "Whether on the facts of case and in law, the Ld.CIT(A) 6. "Whether on the facts of case and in law, the Ld.CIT(A) 6. "Whether on the facts of case and in law, the Ld.CIT(A) was justified to allow the assessee's appeal by considering was justified to allow the assessee's appeal by considering was justified to allow the assessee's appeal by considering additional evidences such as Form No.10CCB and copy of additional evidences such as Form No.10CCB and copy of additional evidences such as Form No.10CCB and copy of the the agreement agreement of of the the enterprises enterprises with with the the Central Central Government or a State Government or a local authority or a Government or a State Government or a local authority or a Government or a State Government or a local authority or a statutory body for carrying on the statutory body for carrying on the tate Government or a local tate Government or a local authority or a statutory body for carrying on the business of authority or a statutory body for carrying on the business of authority or a statutory body for carrying on the business of developing or operating and maintaining or developing, developing or operating and maintaining or developing, developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility ing and maintaining a new infrastructure facility ing and maintaining a new infrastructure facility without following the statutory procedure including Rule 46A without following the statutory procedure including Rule 46A without following the statutory procedure including Rule 46A of the I.T. Rules in this respect." of the I.T. Rules in this respect."
7. "The Appellant prays that the order of the CIT(A) on the 7. "The Appellant prays that the order of the CIT(A) on the 7. "The Appellant prays that the order of the CIT(A) on the above ground be set aside and that of the ACIT-1(2)(1), above ground be set aside and that of the ACIT above ground be set aside and that of the ACIT Mumbai be restored." Mumbai be restored."
8. "The Appellant craves leave to amend or alter any grounds 8. "The Appellant craves leave to amend or alter any grounds 8. "The Appellant craves leave to amend or alter any grounds or add a new ground which may necessary. " or add a new ground which may necessary. "
There is a delay of 4 days in filing of these appeals by There is a delay of 4 days in filing of these appeals by There is a delay of 4 days in filing of these appeals by the revenue. After perusing the petition for condonation the revenue. After perusing the petition for condonation the revenue. After perusing the petition for condonation filed by the revenue dated 24/09/2024 by the revenue dated 24/09/2024 and hearing the and hearing the parties on this application parties on this application, we are convinced that the , we are convinced that the revenue was prevented by revenue was prevented by ‘sufficient cause’ from filing the from filing the appeals in time. Therefore, keeping in view the principles Therefore, keeping in view the principles laid down by Hon’ble Supreme Cour laid down by Hon’ble Supreme Court in the case of t in the case of Land Acquisition Collector Vs. Mst. Katiji & Ors., [1987] AIR Acquisition Collector Vs. Mst. Katiji & Ors., [1987] AIR Acquisition Collector Vs. Mst. Katiji & Ors., [1987] AIR
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4 1353 (SC), we condone the delay and hence we condone the delay and hence the appeals are the appeals are admitted for hearing admitted for hearing on merits.
All the grounds raised by the Department are inter- All the grounds raised by the Department are inter All the grounds raised by the Department are inter related and inter related and inter-connected and relates to challenging the to challenging the order of the ld. CIT(A) in allowing the claim of deduction order of the ld. CIT(A) in allowing the claim of deduction order of the ld. CIT(A) in allowing the claim of deduction u/s 80IA of Act, to the assessee. Therefore, we have u/s 80IA of Act, to the assessee. Therefore, we u/s 80IA of Act, to the assessee. Therefore, we decided to dispose of decided to dispose of all the grounds by way of this the grounds by way of this present consolidated order. present consolidated order.
Ld. DR appearing on behalf DR appearing on behalf of the department of the department reiterated the grounds of appeal raised before us and reiterated the grounds of appeal raised before us and reiterated the grounds of appeal raised before us and relied upon the orders passed by the AO. It was relied upon the orders passed by the AO. It was relied upon the orders passed by the AO. It was submitted that Ld. CIT(A) was not justified in allowing submitted that Ld. CIT(A) was not justified in allowing submitted that Ld. CIT(A) was not justified in allowing the claim of deduction u/s 80IA of the Act as the the claim of deduction u/s 80IA of the Act as the the claim of deduction u/s 80IA of the Act as the assessee had not fulfilled th assessee had not fulfilled the contentions laid down for e contentions laid down for claiming the deduction and thus wholly relied upon the the deduction and thus wholly relied upon the the deduction and thus wholly relied upon the order of the AO. of the AO.
6. Whereas on the contrary the Ld. A hereas on the contrary the Ld. AR reiterated the R reiterated the same arguments as were raised by him before CIT(A) and same arguments as were raised by him before CIT(A) and same arguments as were raised by him before CIT(A) and heavily relied upon the orders passed by the Hon’ble heavily relied upon the orders passed by the heavily relied upon the orders passed by the Income Tax Settlement Commission Income Tax Settlement Commission (referred to as (referred to as “ITSC”) in assessee’s own assessee’s own case and also relied upon the and also relied upon the orders of the Coordinate Bench of ITAT in assessee’s Coordinate Bench of ITAT in assessee’s Coordinate Bench of ITAT in assessee’s own case for the A.Y 2018 own case for the A.Y 2018-19 in and 19 in and 98/Mum/2023. The Ld.AR also relied upon t . The Ld.AR also relied upon the decisions he decisions in the following cases: in the following cases:
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5 1. CIT Vs. ABG Heavy Industries Ltd. 322 ITR 323 CIT Vs. ABG Heavy Industries Ltd. 322 ITR 323 CIT Vs. ABG Heavy Industries Ltd. 322 ITR 323 (Bom) 2. Adhunik Infrastructure Pvt Ltd.,Vs. JCIT, Infrastructure Pvt Ltd.,Vs. JCIT, Infrastructure Pvt Ltd.,Vs. JCIT, ITA No. 1281/Kol/2015 1281/Kol/2015 3. Bhinmal Contractors Property and Land Developers Bhinmal Contractors Property and Land Developers Bhinmal Contractors Property and Land Developers P Ltd, Vs. ACIT, [2018] 93 taxmann.com 296 P Ltd, Vs. ACIT, [2018] 93 taxmann.com 296 (Bom) (Bom) 4. Pr. CIT Vs. Montecarlo Construction Ltd, [2024] 161 Pr. CIT Vs. Montecarlo Construction Ltd, [2024] 161 Pr. CIT Vs. Montecarlo Construction Ltd, [2024] 161 taxmann.com 222 (Guj) taxmann.com 222 (Guj) 7. We have heard the counsels for both the parties and We have heard the counsels for both the parties and We have heard the counsels for both the parties and have gone through the documents placed on record, have gone through the documents placed on record, have gone through the documents placed on record, judgments cited before us and the orders passed by the judgments cited before us and the orders passed by the judgments cited before us and the orders passed by the revenue authorities. rities.
From the records, we noticed that the assessee From the records, we noticed that the assessee From the records, we noticed that the assessee company is engaged in the business of execution of civil company is engaged in the business of execution of civil company is engaged in the business of execution of civil and development contracts and during the year under and development contracts and during the year under and development contracts and during the year under consideration the return of income was filed declaring consideration the return of income was filed declaring consideration the return of income was filed declaring taxable taxable income income of of Rs. Rs. 65,43,894/ 65,43,894/- after after claiming claiming deduction u/s 80IA of the Act of Rs. 4,40,47,969/-. deduction u/s 80IA of the Act of Rs. 4,40,47,969/ deduction u/s 80IA of the Act of Rs. 4,40,47,969/ However the AO disallowed the claim of the assessee by However the AO disallowed the claim of the assessee by However the AO disallowed the claim of the assessee by holding that ‘Hence it is crystal clear that the assessee Hence it is crystal clear that the assessee Hence it is crystal clear that the assessee company has not carried out any work of development of company has not carried out any work of development of company has not carried out any work of development of new infrastructure f new infrastructure facility in these cases’ and that ‘ acility in these cases’ and that ‘ Simply relying of an existing road would not be classified Simply relying of an existing road would not be classified Simply relying of an existing road would not be classified as a new infrastructure facility for the purpose of section as a new infrastructure facility for the purpose of section as a new infrastructure facility for the purpose of section 80IA(4)(i) of the Income Tax Act 80IA(4)(i) of the Income Tax Act.’
Mainly relying upon relying upon two reasons, disallowance disallowance of claim was made. It was also argued by the revenue that claim was made. It was also argued by the revenue that claim was made. It was also argued by the revenue that I.T.A. No. 4942/Mum/2024 I.T.A. No. 4942/Mum/2024 I.T.A. No. 6 the department has filed appeal against the order of ITSC the department has filed appeal against the order of ITSC the department has filed appeal against the order of ITSC allowing deduction u/s allowing deduction u/s 80IA(4)(i) of the Act.
In order to support their contentions, In order to support their contentions, Ld. AR In order to support their contentions, submitted that assessee has carried out submitted that assessee has carried out the contracts of the contracts of road widening and renovation of existing road and road widening and renovation of existing road and road widening and renovation of existing road and therefore the assessee cannot be termed as work therefore the assessee cannot be termed as work therefore the assessee cannot be termed as work contractor, as the work contractor, as the work that is being done by the being done by the company is construction construction and and of of maintaining maintaining the the infrastructure and for that assessee has infrastructure and for that assessee has to purchase the purchase the material and is bearing the risk by way of indemnifying material and is bearing the risk by way of indemnifying material and is bearing the risk by way of indemnifying the agencies of any defect in the construction of road. the agencies of any defect in the construction of the agencies of any defect in the construction of
Apart the assessee has also submitted that the issue the assessee has also submitted that the issue the assessee has also submitted that the issue in question has been th in question has been thoroughly examined by the Board examined by the Board and it has been d and it has been decided that widening of an existing road of an existing road by constructing additional lanes as a part of a highway by constructing additional lanes as a part of a highway by constructing additional lanes as a part of a highway project by an undertaking would be regarded as ‘new project by an undertaking would be regarded as project by an undertaking would be regarded as infrastructure facility’ infrastructure facility’ for the purpose of Sec. for the purpose of Sec. 80IA(4)(i) of the Act.
Even otherwise assessee has Even otherwise assessee has filed paper book filed paper book containing details of work orders containing details of work orders of eligible projects, of eligible projects, which contains Form No. 10CCB, Financial Statements, Form No. 10CCB, Financial Statements, Form No. 10CCB, Financial Statements, ITR-V and the computation of total income and order V and the computation of total income and order V and the computation of total income and order passed u/s 245D (4) dated 19.03.2015 passed u/s 245D (4) dated 19.03.2015.
We noticed that assessee ha We noticed that assessee has already already claimed deduction u/s 80IA of the Act in its returns filed u/s deduction u/s 80IA of the Act in its returns filed u/s deduction u/s 80IA of the Act in its returns filed u/s 153A of the Act and had filed 153A of the Act and had filed applications before ITSC before ITSC
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7 u/s 245D of the Act for A.Y: u/s 245D of the Act for A.Y: 2006-07 to 2012 07 to 2012-13. The said applications were disposed off by ITSC vide its order said applications were disposed off by ITSC vide its order said applications were disposed off by ITSC vide its order dated 19.03.2015. dated 19.03.2015.
Before Hon’ble ITSC, assessee had contended its Before Hon’ble ITSC, assessee had contended its Before Hon’ble ITSC, assessee had contended its eligibility for claiming the deduction u/s eligibility for claiming the deduction u/s 80IA(4)(i) 80IA(4)(i) of the Act, to which Ld. CIT in his report under Rule 9 raised to which Ld. CIT in his report under Rule 9 raised to which Ld. CIT in his report under Rule 9 raised the objections vis the objections vis-à-vis merits of the claim, which are vis merits of the claim, which are identical to the grounds raised in identical to the grounds raised in the present appeal the present appeal by the department. T the department. Therefore in this way the grounds raised herefore in this way the grounds raised in the present appeal are in the present appeal are identical to the objections identical to the objections raised by the department before ITSC and the same are raised by the department before ITSC and the same are raised by the department before ITSC and the same are reproduced herein below: reproduced herein below:
iv. It is stated that there is difference t is stated that there is difference between developing an between developing an infrastructure facility and executing a works contrast. The infrastructure facility and executing a works contrast. The infrastructure facility and executing a works contrast. The explanation introduced in 2007 w.e.f. 01.04.2000 clarifies explanation introduced in 2007 w.e.f. 01.04.2000 clarifies explanation introduced in 2007 w.e.f. 01.04.2000 clarifies that the deduction is not available in the case of execution of that the deduction is not available in the case of execution of that the deduction is not available in the case of execution of works contract'. Since the applicant was only a works works contract'. Since the applicant was only a wo works contract'. Since the applicant was only a wo contractor and not a developer, the impugned condition is not contractor and not a developer, the impugned condition is not contractor and not a developer, the impugned condition is not fulfilled. v. As per the CBDT circular, deduction is to the Highway v. As per the CBDT circular, deduction is to the Highway v. As per the CBDT circular, deduction is to the Highway projects. Even in respect of the Highway projects, it is projects. Even in respect of the Highway projects, it is projects. Even in respect of the Highway projects, it is allowable for new roads or creation of new lanes by widening allowable for new roads or creation of new lanes by widening allowable for new roads or creation of new lanes by widening of the existing roads. Relaying of the existing roads are not he existing roads. Relaying of the existing roads are not he existing roads. Relaying of the existing roads are not covered in the scheme. The applicants have not proved that covered in the scheme. The applicants have not proved that covered in the scheme. The applicants have not proved that they satisfy this condition. they satisfy this condition.
Hence in this scenario it has become in this scenario it has become more important more important to evaluate the the the orders orders orders of of of ITSC ITSC ITSC wherein wherein wherein identical identical identical objections were raised by the department and Hon’ble tions were raised by the department and Hon’ble tions were raised by the department and Hon’ble ITSC dealt with the same after thoroughly examining the ITSC dealt with the same after thoroughly examining the ITSC dealt with the same after thoroughly examining the factual as well as legal propositions. factual as well as legal propositions.
We noticed the assessee in order to meet out the We noticed the assessee in order to meet out the We noticed the assessee in order to meet out the objections of the department had filed documentary objections of the department had filed documentary objections of the department had filed documentary evidences before ITSC and raised the contentions which before ITSC and raised the contentions which before ITSC and raised the contentions which are recorded by ITSC in its order in para are recorded by ITSC in its order in para No. 35.3 and the 35.3 and the same is reproduced below: same is reproduced below:
(i) The applicants have first analyzed the history of the (i) The applicants have first analyzed the history of the (i) The applicants have first analyzed the history of the provisions of section 801A and stated that in the present provisions of section 801A and stated that in the present provisions of section 801A and stated that in the present form, the assessee need not be engaged in all the three assessee need not be engaged in all the three assessee need not be engaged in all the three activities of developing, maintaining and operating the activities of developing, maintaining and operating the activities of developing, maintaining and operating the infrastructure. It is enough if it is infrastructure. It is enough if it is carrying on the business of either developing or maintaining carrying on the business of either developing or maintaining carrying on the business of either developing or maintaining and operating or developing, maintaining; and operating the and operating or developing, maintaining; and operatin and operating or developing, maintaining; and operatin infrastructure facility' infrastructure facility' (ii) The applicants have then dealt with the meaning of ' (ii) The applicants have then dealt with the meaning of ' (ii) The applicants have then dealt with the meaning of ' infrastructure facility' infrastructure facility' as envisaged in the Explanation of as envisaged in the Explanation of the Section and highlighted that it will include 'a rood the Section and highlighted that it will include 'a rood the Section and highlighted that it will include 'a rood including toll rood', a bridge or a rail system' including toll rood', a bridge or a rail system' and 'a highway and 'a highway project including housing or other activities being an integral project including housing or other activities being an integral project including housing or other activities being an integral part of the highway project" part of the highway project"
(iii) They have then dealt with the (iii) They have then dealt with the Dictionary meaning of Dictionary meaning of the word 'develop the word 'develop’' and stated that it includes 'act of making ' and stated that it includes 'act of making some area of land or water some area of land or water more profitable or useful/ or more profitable or useful/ or 'cause to grow, to elaborate or expand in detail', 'cause to grow, to elaborate or expand in detail', (iv) The applicants have then relied upon the CBDT Circular (iv) The applicants have then relied upon the CBDT Circular (iv) The applicants have then relied upon the CBDT Circular no 3 of 2008 dated 12.3.2008 according to which " where a no 3 of 2008 dated 12.3.2008 according to which " where a no 3 of 2008 dated 12.3.2008 according to which " where a person makes the investment and himself executes the person makes the investment and himself executes the person makes the investment and himself executes the development work 'i.e. carries out the civil construction work, development work 'i.e. carries out the civil construction work, development work 'i.e. carries out the civil construction work, he will be eligible for tax benefit under sec 80IA'. In contrast he will be eligible for tax benefit under sec 80IA'. In contrast he will be eligible for tax benefit under sec 80IA'. In contrast to this, a person who enters into a contract with another to this, a person who enters into a contract with another to this, a person who enters into a contract with another person including Govt or on undertaking or enterprise referred person including Govt or on undertaking or enterprise referred person including Govt or on undertaking or enterprise referred to in section 801A for executing the works contract, will not section 801A for executing the works contract, will not section 801A for executing the works contract, will not be eligible for the tax benefit u/s 801A" be eligible for the tax benefit u/s 801A"
Further in order Further in order to support that assessee was support that assessee was ‘developer’, it was argued that assessee being the it was argued that assessee being the it was argued that assessee being the I.T.A. No. 4942/Mum/2024 I.T.A. No. 4942/Mum/2024 I.T.A. No. 9 company has met out the basic requirement for claiming company has met out the basic requirement for claiming company has met out the basic requirement for claiming deduction and the and the activities of construction of construction of the road and ‘widening of the roads widening of the roads’ have been clarified to be have been clarified to be ‘infrastructure facility infrastructure facility’. For the deduction u/s. 80 or the deduction u/s. 80-IA as per Circular No.4 OF 2010 Dt. 18th May, 2010 Circular No.4 OF 2010 Dt. 18th May, 2010. It Circular No.4 OF 2010 Dt. 18th May, 2010 was also contended that the was also contended that the deduction has not been deduction has not been claimed on the entire turnover claimed on the entire turnover, but the deduction has but the deduction has been claimed only with reference to those contracts been claimed only with reference to those contracts been claimed only with reference to those contracts wherein wherein they they can can be be called called developers developers of the infrastructure facility. infrastructure facility. It was vehemently argued that It was vehemently argued that conditions as to the purch as to the purchase of material, taking over ase of material, taking over and handing over of sites, risk of contract' expertise and and handing over of sites, risk of contract' expertise and and handing over of sites, risk of contract' expertise and skills as laid down in the case of skills as laid down in the case of Koya & Co (2012) 21 Koya & Co (2012) 21 Taxmann.com 35 (Hyd.) Taxmann.com 35 (Hyd.) are satisfied by the are satisfied by the assessee and inthis regard our attention was dwawn to the copies and inthis regard our attention was dwawn to the c and inthis regard our attention was dwawn to the c of extracts of few contacts of extracts of few contacts as were filed as illustrations. as illustrations.
In order to further further substantiate in his explanation substantiate in his explanation as to how assessee assessee was a developer, in this regard was a developer, in this regard assessee assessee assessee filed filed filed certificate certificate certificate from from from the the the Pune Pune Pune Municipal Municipal Municipal Corporation regarding the cont Corporation regarding the contracts and also some other racts and also some other contracts. It was further submitted that even before . It was further submitted that even before . It was further submitted that even before Hon’ble ITSE, the assessee had explained as to how it Hon’ble ITSE, the assessee had explained as to how Hon’ble ITSE, the assessee had explained as to how was developer and detailed detailed explanation explanation was was also also furnished furnished furnished for for for the the ambiguities the ambiguities ambiguities pointed out pointed out pointed out by by by the the the department in the contracts. The explanation of the department in the contracts. The explanation of the department in the contracts. The explanation of the assesee is contained in the paper book at page No. 107 to assesee is contained in the paper book at page No. 107 to assesee is contained in the paper book at page No. 107 to 112 at para 35.4 to 3 at para 35.4 to 36.1 and the same is reproduced and the same is reproduced below:
35.4 In the course of hearing on 06.02.2015, the Department the course of hearing on 06.02.2015, the Department the course of hearing on 06.02.2015, the Department reiterated, its stand as to the first three legal deficiencies in reiterated, its stand as to the first three legal deficiencies in reiterated, its stand as to the first three legal deficiencies in the case of the applicants summarized in para 35.2 above. In the case of the applicants summarized in para 35.2 above. In the case of the applicants summarized in para 35.2 above. In respect of the remaining two conditions mentioned therein, respect of the remaining two conditions mentioned therein, respect of the remaining two conditions mentioned therein, the department ex the department expressed its desire that the applicants pressed its desire that the applicants should prove with reference to the individual contracts that should prove with reference to the individual contracts that should prove with reference to the individual contracts that their activities were that of a Developer and not of a works their activities were that of a Developer and not of a works their activities were that of a Developer and not of a works contractor. The Bench theri asked the applicants to furnish contractor. The Bench theri asked the applicants to furnish contractor. The Bench theri asked the applicants to furnish the details of the individual contr the details of the individual contracts and show that they acts and show that they fulfill the requirements of being a Developer. fulfill the requirements of being a Developer.
35.5 At the time of hearing on 23.02.2015, the learned AR 35.5 At the time of hearing on 23.02.2015, the learned AR 35.5 At the time of hearing on 23.02.2015, the learned AR first claborated his stand with regard to the legal issues first claborated his stand with regard to the legal issues first claborated his stand with regard to the legal issues relating to the allowability of the deduction under Section relating to the allowability of the deduction under Section relating to the allowability of the deduction under Section 801A (i) first time claimed in the returns filed under Section first time claimed in the returns filed under Section first time claimed in the returns filed under Section 153A on the book 153A on the book-profits and (ii) claimed in the returns filed profits and (ii) claimed in the returns filed under Section 153A on the additional income computed with under Section 153A on the additional income computed with under Section 153A on the additional income computed with reference to the seized papers. He dealt at length with the reference to the seized papers. He dealt at length with the reference to the seized papers. He dealt at length with the various decisions of various decisions of the ITAT, as mentioned above. the ITAT, as mentioned above.
He then explained as to how the impugned contracts should He then explained as to how the impugned contracts should He then explained as to how the impugned contracts should be treated as development be treated as development - contract as distinct from the contract as distinct from the works-contract. He filed certificates from the Pune Municipal contract. He filed certificates from the Pune Municipal contract. He filed certificates from the Pune Municipal Corporation regarding 11 (The contracts/ The certificates Corporation regarding 11 (The contracts/ The Corporation regarding 11 (The contracts/ The mention the contract amount and nature of work. They also mention the contract amount and nature of work. They also mention the contract amount and nature of work. They also mention that the works pertained to the road widening, which mention that the works pertained to the road widening, mention that the works pertained to the road widening, is part of the Highway Road Project and Infrastructure is part of the Highway Road Project and Infrastructure is part of the Highway Road Project and Infrastructure Development; that the Construction material was not supplied Development; that the Construction material was not supplied Development; that the Construction material was not supplied by the Corporation; that the defect liability period is for orporation; that the defect liability period is for orporation; that the defect liability period is for 60/30 months and that the Company employed its own 60/30 months and that the Company employed its own 60/30 months and that the Company employed its own Machinery and Technical Staff for execution of the work. With Machinery and Technical Staff for execution of the work. With Machinery and Technical Staff for execution of the work. With reference to the other contracts, the learned AR relied upon reference to the other contracts, the learned AR relied upon reference to the other contracts, the learned AR relied upon the contract documents. As an the contract documents. As an illustration, the learned AR illustration, the learned AR referred to page 51 of the Paper Book filed on 06.02.2015, referred to page 51 of the Paper Book filed on 06.02.2015, referred to page 51 of the Paper Book filed on 06.02.2015, wherein the extracts from the contract relating to the work of wherein the extracts from the contract relating to the work of wherein the extracts from the contract relating to the work of " widening to two lane in Km.0 to 50 of Widrafnagar " widening to two lane in Km.0 to 50 of Widrafnagar " widening to two lane in Km.0 to 50 of Widrafnagar Janakpur Balangi Road (SH Janakpur Balangi Road (SH-3)" in Chhattisgarh are giv 3)" in Chhattisgarh are given. The defect liability period is mentioned as 36 months which The defect liability period is mentioned as 36 months which The defect liability period is mentioned as 36 months which means that for that much period after the execution of the means that for that much period after the execution of the means that for that much period after the execution of the contract, the risk remained with the applicants. The contract contract, the risk remained with the applicants. The contract contract, the risk remained with the applicants. The contract mentions the minimum deployment of 1 Civil Engineer of 10 mentions the minimum deployment of 1 Civil Engineer of 10 mentions the minimum deployment of 1 Civil Engineer of 10 years' experience, 1 Civil Engineer of 3 years' experience, and ence, 1 Civil Engineer of 3 years' experience, and ence, 1 Civil Engineer of 3 years' experience, and 3 3 3 Mechanical Mechanical Mechanical Engineers/Diploma Engineers/Diploma Engineers/Diploma holders holders holders of of of specified specified specified experience. It also gives a list of 15 plant and Machinery to experience. It also gives a list of 15 plant and Machinery to experience. It also gives a list of 15 plant and Machinery to be deployed on the work along with their maximum age. Para be deployed on the work along with their maximum age. Para be deployed on the work along with their maximum age. Para 21 gives the details of the poss 21 gives the details of the possession of the site. This proves ession of the site. This proves the use of expertise and technical skills of the applicants in the use of expertise and technical skills of the applicants in the use of expertise and technical skills of the applicants in the execution of the contracts. the execution of the contracts.
35.6 In the course of hearing on 23.02.2015, the department 35.6 In the course of hearing on 23.02.2015, the department 35.6 In the course of hearing on 23.02.2015, the department first reiterated its stand that the deduction cannot be allowed first reiterated its stand that the deduction cannot be allowed first reiterated its stand that the deduction cannot be allowed either in respect r in respect of the book profits or the in the case of of the book profits or the in the case of Charchit Agrawal vs ACIT (129 TTJ438) and Home Tex Vs. Charchit Agrawal vs ACIT (129 TTJ438) and Home Tex Vs. Charchit Agrawal vs ACIT (129 TTJ438) and Home Tex Vs. CIT(2012) 20 Taxman.com 729 were filed and elaborated. CIT(2012) 20 Taxman.com 729 were filed and elaborated. CIT(2012) 20 Taxman.com 729 were filed and elaborated. Thereafter, the CIT(DR) proceeded to state that in the Thereafter, the CIT(DR) proceeded to state that in the Thereafter, the CIT(DR) proceeded to state that in the Assessment Assessment Year Year 2011 2011-12, M/S Patil Construction onstruction & & Infrastructure P Ltd took over the running business of road Infrastructure P Ltd took over the running business of road Infrastructure P Ltd took over the running business of road contracts from the proprietary concern, M/S Patil Construction contracts from the proprietary concern, M/S Patil Construction contracts from the proprietary concern, M/S Patil Construction and, as per the notes on accounts, the receipts from the and, as per the notes on accounts, the receipts from the and, as per the notes on accounts, the receipts from the ongoing contracts of the said proprietary Concern were shown ongoing contracts of the said proprietary Concern were shown ongoing contracts of the said proprietary Concern were shown by the Company in its receipts. It was further pointed out that y the Company in its receipts. It was further pointed out that y the Company in its receipts. It was further pointed out that the additional income on which the two applicants have the additional income on which the two applicants have the additional income on which the two applicants have claimed the deduction, it cannot be said to have been derived claimed the deduction, it cannot be said to have been derived claimed the deduction, it cannot be said to have been derived from from from the the the development development development of of of infrastructure, infrastructure, infrastructure, because because because the the the additional income has be additional income has been arrived at by allocating the peak en arrived at by allocating the peak in the ratio of the turnover. The A.O., who was present during in the ratio of the turnover. The A.O., who was present during in the ratio of the turnover. The A.O., who was present during the hearing, then pointed out some specific ambiguities in the hearing, then pointed out some specific ambiguities in the hearing, then pointed out some specific ambiguities in respect of the following contracts: respect of the following contracts: a) 'Improvement of road from Gulbarga Railway Station to join a) 'Improvement of road from Gulbarga Railway Station to join a) 'Improvement of road from Gulbarga Railway Station to join Ring Road":
It is not clear whether it is new road or old road. It is not clear whether it is new road or old road. b) 'Widening of lane of Widraf Nagar Janakpur Balangi Road b) 'Widening of lane of Widraf Nagar Janakpur Balangi Road b) 'Widening of lane of Widraf Nagar Janakpur Balangi Road (SH-3) Chhattisgarh: 3) Chhattisgarh:
Contract does not give name of Patil Group Company. Contract does not give name of Patil Group Company. Contract does not give name of Patil Group Company. c) 'Improvement of c) 'Improvement of It is not clear whether it is new road o It is not clear whether it is new road or old road. Financial r old road. Financial details not given. details not given. d) Widening of two lane and improvement,NH Division d) Widening of two lane and improvement,NH Division d) Widening of two lane and improvement,NH Division Chaibasa:
Only letter asking to proceed with the work (and not all Only letter asking to proceed with the work (and not all Only letter asking to proceed with the work (and not all papers) is submitted It is not clear why the Contract was papers) is submitted It is not clear why the Contract was papers) is submitted It is not clear why the Contract was given to M/S Patil construction in Sep given to M/S Patil construction in Sept 2010 even though its t 2010 even though its business had already been taken over by the company w.e.f. business had already been taken over by the company w.e.f. business had already been taken over by the company w.e.f. 01.04.2010. e) Widening e) e) Widening Widening to to to intermediate intermediate intermediate lane lane and lane and and improvement improvement improvement to to to Bejurapalli- Parsewadi Parsewadi -Moybinpetta- Venkatpur Venkatpur- Deolmari- Aheri-Allapalli Road(SH Allapalli Road(SH-25): PWD Nagpur:
Only letter dated 01.01.2011 asking to proceed with the work dated 01.01.2011 asking to proceed with the work dated 01.01.2011 asking to proceed with the work (and not all papers) is submitted. It is not known as to how (and not all papers) is submitted. It is not known as to how (and not all papers) is submitted. It is not known as to how much work is done during three months ending 31.03.2011. much work is done during three months ending 31.03.2011. much work is done during three months ending 31.03.2011. f) Projects done by PMC: f) Projects done by PMC:
The eleven certificates filed by the applicants describe the The eleven certificates filed by the applicants describe the The eleven certificates filed by the applicants describe the work as "improvement of roads". "improvement of roads".
35.7 In the reply, it was stated that 35.7 In the reply, it was stated that i. No deduction has been claimed on the work done by M/S i. No deduction has been claimed on the work done by M/S i. No deduction has been claimed on the work done by M/S Patil Construction. Since the original bid was made by M/S Patil Construction. Since the original bid was made by M/S Patil Construction. Since the original bid was made by M/S Patil Construction, the contracts were awarded and cheques Patil Construction, the contracts were awarded and cheques Patil Construction, the contracts were awarded and cheques were received were received in that name. The note in accounts is merely in that name. The note in accounts is merely given to clarify it. given to clarify it. ii. It has been mentioned in the SOF that receipts of the three ii. It has been mentioned in the SOF that receipts of the three ii. It has been mentioned in the SOF that receipts of the three main entities were from the road contract awarded by the main entities were from the road contract awarded by the main entities were from the road contract awarded by the Govt. Agencies and that peak of 'MB Patil Govt. Agencies and that peak of 'MB Patil-BB Patil' a/c was BB Patil' a/c was formed on account of bogus billing account of bogus billing resorted by the three main resorted by the three main entities, which Deaves no doubt that impugned additional entities, which Deaves no doubt that impugned additional entities, which Deaves no doubt that impugned additional income was out of the development of infrastructure facilities. income was out of the development of infrastructure facilities. income was out of the development of infrastructure facilities.
35.8 In respect of the deficiencies in the information supplied 35.8 In respect of the deficiencies in the information supplied 35.8 In respect of the deficiencies in the information supplied for the individual for the individual contracts, it has been further clarified that: contracts, it has been further clarified that: a)The applicants have filed a certificate from the concerned a)The applicants have filed a certificate from the concerned a)The applicants have filed a certificate from the concerned Govt. agencies certifying that the contract was for road Govt. agencies certifying that the contract was for road Govt. agencies certifying that the contract was for road widening and was a part of the National Highway Project and widening and was a part of the National Highway Project and widening and was a part of the National Highway Project and no materials were supplied to no materials were supplied to the contractor and the liability the contractor and the liability period was for 18 months. period was for 18 months. b) The applicants have filed a certificate from the concerned b) The applicants have filed a certificate from the concerned b) The applicants have filed a certificate from the concerned Govt. agencies certifying that the contract was for road Govt. agencies certifying that the contract was for road Govt. agencies certifying that the contract was for road widening and was a part of the National Highway project and widening and was a part of the National Highway project and widening and was a part of the National Highway project and no materials were no materials were supplied to the contractor and the liability supplied to the contractor and the liability period was for 18 months and the contract was in the name period was for 18 months and the contract was in the name period was for 18 months and the contract was in the name of the applicant. of the applicant. c)The applicants vide their reply dated 06.02.2015 have given c)The applicants vide their reply dated 06.02.2015 have given c)The applicants vide their reply dated 06.02.2015 have given details of the contract and as mentioned in clause 9(A) of the details of the contract and as mentioned in clause 9(A) of the details of the contract and as mentioned in clause 9(A) of the Contract Document, the work consists of 'widening of existing ocument, the work consists of 'widening of existing ocument, the work consists of 'widening of existing carriageways and strengthening including camber correction; carriageways and strengthening including camber correction; carriageways and strengthening including camber correction; construction of new road/ parallel service lane". Further construction of new road/ parallel service lane". Further construction of new road/ parallel service lane". Further details of the work will be clear from the drawings attached. details of the work will be clear from the drawings attached. details of the work will be clear from the drawings attached. The bid amount of Rs.62. The bid amount of Rs.62.38 Crores is the value of the contract 38 Crores is the value of the contract given which is the agreed amount of the work given. All the given which is the agreed amount of the work given. All the given which is the agreed amount of the work given. All the details are being filed in the certificate from the concerned details are being filed in the certificate from the concerned details are being filed in the certificate from the concerned Govt. Agencies as required including the defect liability period Govt. Agencies as required including the defect liability period Govt. Agencies as required including the defect liability period of the contract. of the contract. d) The applicants have submitted that the bid was made by ants have submitted that the bid was made by ants have submitted that the bid was made by Patil Construction much before 01.04.2010, the date w.e.f the Patil Construction much before 01.04.2010, the date w.e.f the Patil Construction much before 01.04.2010, the date w.e.f the firm was converted into a company so the name of the firm is converted into a company so the name of the firm is converted into a company so the name of the firm is mentioned on the letter filed. A certificate with respect to the mentioned on the letter filed. A certificate with respect to the mentioned on the letter filed. A certificate with respect to the work done and other cri work done and other criterion as required for the claim of terion as required for the claim of deduction under Section 801A(4) have been filed. deduction under Section 801A(4) have been filed. e) Only nominal turnover of Rs.1,73,40462/ e) Only nominal turnover of Rs.1,73,40462/- has been shown has been shown in the books up to 31.03.2011 as against the contract value of in the books up to 31.03.2011 as against the contract value of in the books up to 31.03.2011 as against the contract value of Rs.24.49 Crores and profit of Rs.7,95,669/ Rs.24.49 Crores and profit of Rs.7,95,669/- was c was claimed as deduction under Section 801A(4). deduction under Section 801A(4).
In the lower portion of the certificates it is clearly mentioned In the lower portion of the certificates it is clearly mentioned In the lower portion of the certificates it is clearly mentioned that the work consists of widening of roads. that the work consists of widening of roads.
DECISION We have carefully considered the submissions made by the We have carefully considered the submissions made by the We have carefully considered the submissions made by the CIT(DR) and the learned AR of the CIT(DR) and the learned AR of the applicants on the above applicants on the above issue. We have also taken note of the various decisions relied issue. We have also taken note of the various decisions relied issue. We have also taken note of the various decisions relied upon by both the parties in respect of the allowability or upon by both the parties in respect of the allowability or upon by both the parties in respect of the allowability or otherwise of the deduction under Section 801A of the Act. The otherwise of the deduction under Section 801A of the Act. The otherwise of the deduction under Section 801A of the Act. The statutory provisions, the circulars issued by t statutory provisions, the circulars issued by the CBDT and he CBDT and the the the legal legal legal issues issues issues arising arising arising from from from the the the various various various judicial judicial judicial pronouncements have also been examined with reference to pronouncements have also been examined with reference to pronouncements have also been examined with reference to the factual aspects of the contracts carried out by the the factual aspects of the contracts carried out by the the factual aspects of the contracts carried out by the applicants, in respect of which the deduction under Section applicants, in respect of which the deduction under Section applicants, in respect of which the deduction under Section 801A has been claime 801A has been claimed. We are of the considered opinion that d. We are of the considered opinion that the the the applicants applicants applicants have have have satisfactorily satisfactorily satisfactorily established established established the the the admissibility of the above deduction on the facts of the cases. admissibility of the above deduction on the facts of the cases. admissibility of the above deduction on the facts of the cases. We would also like to observe that the department's reliance also like to observe that the department's reliance also like to observe that the department's reliance upon the decision of the Hon'ble Suprem upon the decision of the Hon'ble Supreme Court in the case of e Court in the case of Sun Engineering is apparently misplaced, as the above Sun Engineering is apparently misplaced, as the above Sun Engineering is apparently misplaced, as the above judgement was rendered in the context of Section 147/148 of judgement was rendered in the context of Section 147/148 of judgement was rendered in the context of Section 147/148 of the Act and it cannot be applied to the provisions contained the Act and it cannot be applied to the provisions contained the Act and it cannot be applied to the provisions contained under Section 153A of the Act, as reproduced hereunder:- under Section 153A of the Act, as reproduced hereunder: under Section 153A of the Act, as reproduced hereunder:
"153A.
[(1)] Notwithstanding anything contained in section 139, [(1)] Notwithstanding anything contained in section 139, [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section section 147, section 148, section 149, section 151 and section section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under 153, in the case of a person where a search is initiated under 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any section 132 or books of account, other documents or any section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31 day requisitioned under section 132A after the 31 day requisitioned under section 132A after the 31 day of May, 2003, the Assessing Officer shall of May, 2003, the Assessing Officer shall- (a) Issue notice to such person requiring him to furnish within (a) Issue notice to such person requiring him to furnish within (a) Issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of such period, as may be specified in the notice, the return of such period, as may be specified in the notice, the return of income in respect of each assessment income in respect of each assessment year falling within six year falling within six assessment years referred to in clause (b), in the prescribed assessment years referred to in clause (b), in the prescribed assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth form and verified in the prescribed manner and setting forth form and verified in the prescribed manner and setting forth such such such other other other particulars particulars particulars as as as maybe maybe maybe prescribed prescribed prescribed and and and the the the provisions of this Act shall, so far as may be, apply provisions of this Act shall, so far as may be, apply provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be rdingly as if such return were a return required to be rdingly as if such return were a return required to be furnished under section 139; furnished under section 139; (b) Assess or reassess the total income of six assessment (b) Assess or reassess the total income of six assessment (b) Assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to years immediately preceding the assessment year relevant to years immediately preceding the assessment year relevant to the previous year in which such search is conducted or the previous year in which such search is conducted or the previous year in which such search is conducted or requisition is made:" requisition is made:"
36.1 It is very clear from a bare reading of the above It is very clear from a bare reading of the above It is very clear from a bare reading of the above provisions that the return of income filed in response to the that the return of income filed in response to the that the return of income filed in response to the notice issued u/s 153A is required to be treated as a return notice issued u/s 153A is required to be treated as a return notice issued u/s 153A is required to be treated as a return filed u/s 139 of the Act. It is altogether a fresh return, filed u/s 139 of the Act. It is altogether a fresh retu filed u/s 139 of the Act. It is altogether a fresh retu requiring assessment or reassessment of the total income, as requiring assessment or reassessment of the total income, as requiring assessment or reassessment of the total income, as the case may be. The assessee is entitled to make a fresh the case may be. The assessee is entitled to make a fresh the case may be. The assessee is entitled to make a fresh claim in the said return, which might not have been claimed claim in the said return, which might not have been claimed claim in the said return, which might not have been claimed in the original return filed u/s 139 of the Act. Similarly, the in the original return filed u/s 139 of the Act. Similarly, the in the original return filed u/s 139 of the Act. Similarly, the A.O. is also entitled to reexamine the issues and make a lso entitled to reexamine the issues and make a lso entitled to reexamine the issues and make a reassessment in respect of such return. However, the reassessment in respect of such return. However, the reassessment in respect of such return. However, the assessee is required to comply with the necessary conditions, assessee is required to comply with the necessary conditions, assessee is required to comply with the necessary conditions, wherever laid down, in support of its claim. In the present wherever laid down, in support of its claim. In the present wherever laid down, in support of its claim. In the present cases, there has been no such fai cases, there has been no such failure on the part of the lure on the part of the applicants. Further, the assessee is also entitled to make an applicants. Further, the assessee is also entitled to make an applicants. Further, the assessee is also entitled to make an enhanced claim for such deduction, in respect of the enhanced claim for such deduction, in respect of the enhanced claim for such deduction, in respect of the undisclosed income shown in the return filed u/s 153A undisclosed income shown in the return filed u/s 153A undisclosed income shown in the return filed u/s 153A and/or the additional income offered/computed in respect of and/or the additional income offered/computed in respect of and/or the additional income offered/computed in respect of the settlement application filed. It has been submitted by the settlement application filed. It has been submitted by the settlement application filed. It has been submitted by the learned AR that the applicants have made claim for deduction learned AR that the applicants have made claim for deduction learned AR that the applicants have made claim for deduction u/s 801A of the Act in respect of the eligible contracts only. u/s 801A of the Act in respect of the eligible contracts only. u/s 801A of the Act in respect of the eligible contracts only. Further, it has been clarified that the above claim has not Further, it has been clarified that the above claim has not Further, it has been clarified that the above claim has not been made in respect of the works contract, which are prima respect of the works contract, which are prima- respect of the works contract, which are prima facie not eligible for the same. Under the circumstances, we facie not eligible for the same. Under the circumstances, we facie not eligible for the same. Under the circumstances, we hold that the applicants are entitled to claim deduction u/s hold that the applicants are entitled to claim deduction u/s hold that the applicants are entitled to claim deduction u/s 801A of the Act for the years under settlement, wherever 801A of the Act for the years under settlement, wherever 801A of the Act for the years under settlement, wherever applicable. Accordingly, the applicable. Accordingly, the above issue gets settled above issue gets settled
From the above order we can safely conclude From the above order we can safely conclude that From the above order we can safely conclude the assessee was a developer and in this regard we have assessee was a developer and in this regard we have assessee was a developer and in this regard we have evaluated the certificates certificates which mentioned the contract mentioned the contract amount and nature of the work and that the works amount and nature of the work and that the works amount and nature of the work and that the works ‘pertained to the pertained to the road widening’ which is part of the which is part of the Highway Road Project and Infrastructure Development. Highway Road Project and Infrastructure Development. Highway Road Project and Infrastructure Development. The Construction material he Construction material was not supplied by the was not supplied by the Corporation (Govt. Body) but was that of the assessee, Corporation (Govt. Body) but was that of the assessee Corporation (Govt. Body) but was that of the assessee that the defect liability period is for 60/30 months and that the defect liability period is for 60/30 months and that the defect liability period is for 60/30 months and that the Company Company Company (assessee) (assessee) (assessee) employed employed employed its its its own own own Machinery and Technical Staff for execution of the Machinery and Technical Staff for execution of the Machinery and Technical Staff for execution of the work.
I.T.A. No. 4940/Mum/2024 I.T.A. No. 4942/Mum/2024 I.T.A. No.
16 20. With reference to the some other contracts, nce to the some other contracts, the nce to the some other contracts, assessee produced extracts from the contract relating to assessee produced extracts from the contract rela assessee produced extracts from the contract rela the work of "widening widening of two lane in Km.0 to 50 of two lane in Km.0 to 50 of Widrafınagar Widrafınagar Widrafınagar Janakpur Janakpur Janakpur Balangi Balangi Balangi Road Road Road (SH (SH-3)" (SH in Chhattisgarh. Even Even the t he defect defect liability liability period period is is mentioned as 36 months which means that for that much mentioned as 36 months which means that for that much mentioned as 36 months which means that for that much period after the execution of the contract the risk period after the execution of the contract the risk period after the execution of the contract the risk remained with the remained with the assessee. The contract mandated the The contract mandated the assessee for a minimum deployment of 1 Civil Engineer of assessee for a minimum deployment of 1 Civil Engineer of assessee for a minimum deployment of 1 Civil Engineer of 10 years' experience, 1 Civil Engineer of 3 years' 10 years' experience, 1 Civil Engineer of 3 years' 10 years' experience, 1 Civil Engineer of 3 years' experience, and 3 Mechanical Engineers/Diploma holders experience, and 3 Mechanical Engineers/Diploma holders experience, and 3 Mechanical Engineers/Diploma holders of specified experience. of specified experience. The contract further gave a list The contract further gave a list of 15 plant and Machinery to be deployed on the work plant and Machinery to be deployed on the work plant and Machinery to be deployed on the work along with their maximum age, which established that along with their maximum age, which established that along with their maximum age, which established that the assessee uses its own expertise and technical skills, the assessee uses its own expertise and technical skills, the assessee uses its own expertise and technical skills, in the execution of the contracts. in the execution of the contracts.
Even the objections of the department were dealt Even the objections of the department were dealt Even the objections of the department were dealt with by observing and referring to documents such as a with by observing and referring to documents such as a with by observing and referring to documents such as a certificate which was from the concern government certificate which was from the concern government certificate which was from the concern government agencies certifying agencies certifying that the contract was for road was for road widening and was a part of the National Highway Project widening and was a part of the National Highway Pro widening and was a part of the National Highway Pro and no materials were supplied to the contractor and the and no materials were supplied to the contractor and the and no materials were supplied to the contractor and the liability period was for 18 months. liability period was for 18 months. Drawings & other Drawings & other details which stated that the work consisted of widening details which stated that the work consisted of widening details which stated that the work consisted of widening of of of existing existing existing carriageways carriageways carriageways & & & strengthening strengthening strengthening including including including camber corrections, construction camber corrections, construction of new road/parallel of new road/parallel service lane.
The Hon’ble ITSC after detailed evaluation of all the The Hon’ble ITSC after detailed evaluation of all the The Hon’ble ITSC after detailed evaluation of all the facts have rendered the facts have rendered the decision which is reproduced which is reproduced below:
We have carefully considered the submissions made by the We have carefully considered the submissions made by the We have carefully considered the submissions made by the CIT(DR) and the learned AR of the applicants CIT(DR) and the learned AR of the applicants on the above on the above issue. We have also taken note of the various decisions issue. We have also taken note of the various decisions issue. We have also taken note of the various decisions relied upon by both the parties in respect of the allowability relied upon by both the parties in respect of the allowability relied upon by both the parties in respect of the allowability or otherwise of the deduction under Section 801A of the Act. or otherwise of the deduction under Section 801A of the Act. or otherwise of the deduction under Section 801A of the Act. The statutory provisions, the circulars issued by the CBDT The statutory provisions, the circulars issued by the CBDT The statutory provisions, the circulars issued by the CBDT and the legal issues arising from the various judicial the legal issues arising from the various judicial the legal issues arising from the various judicial pronouncements have also been examined with reference to pronouncements have also been examined with reference to pronouncements have also been examined with reference to the factual aspects of the contracts carried out by the the factual aspects of the contracts carried out by the the factual aspects of the contracts carried out by the applicants, in respect of which the deduction under Section applicants, in respect of which the deduction under Section applicants, in respect of which the deduction under Section 801A has been claimed. We are o 801A has been claimed. We are of the considered opinion f the considered opinion that the applicants have satisfactorily established the that the applicants have satisfactorily established the that the applicants have satisfactorily established the admissibility of the above deduction on the facts of the admissibility of the above deduction on the facts of the admissibility of the above deduction on the facts of the cases. We would cases. We would also like to observe that the department's also like to observe that the department's reliance upon the decision of the Hon'ble Supreme Court in reliance upon the decision of the Hon'ble Supreme Court in reliance upon the decision of the Hon'ble Supreme Court in the case of Sun Engineering is apparently misplaced, as the the case of Sun Engineering is apparently misplaced, as the the case of Sun Engineering is apparently misplaced, as the above judgement was rendered in the context of Section above judgement was rendered in the context of Section above judgement was rendered in the context of Section 147/148 of the Act and it cannot be applied to the provisions 147/148 of the Act and it cannot be applied to the provisions 147/148 of the Act and it cannot be applied to the provisions contained under Section 153A of the Act, as reproduced contained under Section 153A of the Act, as reproduced contained under Section 153A of the Act, as reproduced hereunder:-
"153A.
[(1)] Notwithstanding anything contained in section 139, [(1)] Notwithstanding anything contained in section 139, [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 147, section 148, section 149, section 151 and section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is section 153, in the case of a person where a search is section 153, in the case of a person where a search is initiated under section 132 or books of account, other initiated under section 132 or books of account, other initiated under section 132 or books of account, other documents or any assets are requis documents or any assets are requisitioned under section itioned under section 132A after the 31 day of May, 2003, the Assessing Officer 132A after the 31 day of May, 2003, the Assessing Officer 132A after the 31 day of May, 2003, the Assessing Officer shall-
(a) Issue notice to such person requiring him to furnish (a) Issue notice to such person requiring him to furnish (a) Issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the within such period, as may be specified in the notice, the within such period, as may be specified in the notice, the return of income in respect of each assessment year falling return of income in respect of each assessment year return of income in respect of each assessment year within six assessment years referred to in clause (b), in the within six assessment years referred to in clause (b), in the within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and prescribed form and verified in the prescribed manner and prescribed form and verified in the prescribed manner and setting forth such other particulars as maybe prescribed and setting forth such other particulars as maybe prescribed and setting forth such other particulars as maybe prescribed and the provisions of this Act shall, so far as may be, apply the provisions of this Act shall, so far as may be, apply the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be ly as if such return were a return required to be ly as if such return were a return required to be furnished under section 139; furnished under section 139;
(b) Assess or reassess the total income of six assessment (b) Assess or reassess the total income of six assessment (b) Assess or reassess the total income of six assessment years immediately preceding the assessment year relevant years immediately preceding the assessment year relevant years immediately preceding the assessment year relevant to the previous year in which such search is conducted or to the previous year in which such search is conducted or to the previous year in which such search is conducted or requisition is made:" uisition is made:"
36.1 It is very clear from a bare reading of the above It is very clear from a bare reading of the above It is very clear from a bare reading of the above provision that the return of income filed in response to the that the return of income filed in response to the that the return of income filed in response to the notice issued u/s 153A is required to be treated as a return notice issued u/s 153A is required to be treated as a return notice issued u/s 153A is required to be treated as a return filed u/s 139 of the Act. It is altogether a fresh return, filed u/s 139 of the Act. It is altogether a fresh return, filed u/s 139 of the Act. It is altogether a fresh return, requiring assessment or reassessment of the total income, as requiring assessment or reassessment of the total income, as requiring assessment or reassessment of the total income, as the case may be. The assessee is entitled to make a fresh the case may be. The assessee is entitled to make a fresh the case may be. The assessee is entitled to make a fresh claim in the said return, which might not have been claimed claim in the said return, which might not have been claimed claim in the said return, which might not have been claimed in the original return filed u/s 139 of the Act. Similarly, the in the original return filed u/s 139 of the Act. Similarly, the in the original return filed u/s 139 of the Act. Similarly, the A.O. is also entitled to reexamine the issues and make a entitled to reexamine the issues and make a reassessment in respect of such return. However, the reassessment in respect of such return. However, the reassessment in respect of such return. However, the assessee assessee assessee is is is required required required to to to comply comply comply with with with the the the necessary necessary necessary conditions, wherever laid down, in support of its claim. In conditions, wherever laid down, in support of its claim. In conditions, wherever laid down, in support of its claim. In the present cases, there has been no such failur the present cases, there has been no such failure on the part e on the part of the applicants. Further, the assessee is also entitled to of the applicants. Further, the assessee is also entitled to of the applicants. Further, the assessee is also entitled to make an enhanced claim for such deduction, in respect of make an enhanced claim for such deduction, in respect of make an enhanced claim for such deduction, in respect of the undisclosed income shown in the return filed u/s 153A the undisclosed income shown in the return filed u/s 153A the undisclosed income shown in the return filed u/s 153A and/or the additional income offered/computed in respect of and/or the additional income offered/computed in respect of and/or the additional income offered/computed in respect of the settlement application filed. It has been submitted by the ttlement application filed. It has been submitted by the ttlement application filed. It has been submitted by the learned AR that the applicants have made claim for learned AR that the applicants have made claim for learned AR that the applicants have made claim for deduction u/s 801A of the Act in respect of the eligible deduction u/s 801A of the Act in respect of the eligible deduction u/s 801A of the Act in respect of the eligible contracts only. Further, it has been clarified that the above contracts only. Further, it has been clarified that the above contracts only. Further, it has been clarified that the above claim has not been made in re claim has not been made in respect of the works contract, spect of the works contract, which are prima which are prima-facie not eligible for the same. Under the facie not eligible for the same. Under the circumstances, we hold that the applicants are entitled to circumstances, we hold that the applicants are entitled to circumstances, we hold that the applicants are entitled to claim deduction u/s 801A of the Act for the years under claim deduction u/s 801A of the Act for the years under claim deduction u/s 801A of the Act for the years under settlement, wherever applicable. Accordingly, the above settlement, wherever applicable. Accordingly, the abo settlement, wherever applicable. Accordingly, the abo issue gets settled. issue gets settled.
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19 23. After having gone through the entire order of ITSC After having gone through the entire order of ITSC After having gone through the entire order of ITSC and after meticulously analyzing the facts, we also reach after meticulously analyzing the facts, we also reach after meticulously analyzing the facts, we also reach to the conclusion that the assessee to the conclusion that the assessee is a 'developer' 'developer' within the meaning of sec.80 within the meaning of sec.80-IA(4). As the assessee As the assessee has made investments for carrying out the ' made investments for carrying out the 'works works' and has not merely supplied labour. The assessee has entered not merely supplied labour. The assessee has entered not merely supplied labour. The assessee has entered into a contract with the Govt. Bodies, which is one of the into a contract with the Govt. Bodies, which is one of the into a contract with the Govt. Bodies, which is one of the conditions for claiming deduction u/s. 80 aiming deduction u/s. 80- IA(4) and in IA(4) and in this regard the Explanatory Memor Explanatory Memorandum to Finance andum to Finance Bill, 2007{(2007) 289 ITR (St.) 292 Bill, 2007{(2007) 289 ITR (St.) 292} states that the } states that the section intends to encourage private investment in section intends to encourage private investment in section intends to encourage private investment in developing infrastructure. The said memorandum also developing infrastructure. The said memorandum developing infrastructure. The said memorandum clarifies that only a person who enters into a contract clarifies that only a person who enters into a contract clarifies that only a person who enters into a contract with an eligible assessee u with an eligible assessee u/s. 80-IA to carry out work, is o carry out work, is ineligible that is not the that is not the facts of the present, therefore in facts of the present, therefore in our view the assessee is a our view the assessee is a ‘developer’ and not a and not a mere contractor for the purpose of Sec. 80IA(4) of the Act. For for the purpose of Sec. 80IA(4) of the Act. For for the purpose of Sec. 80IA(4) of the Act. For the above proposition we rely upon the the above proposition we rely upon the decision in decision in the case of Adhunik Infrastructure ITA/1281/Kol/2015 Adhunik Infrastructure ITA/1281/Kol/2015, Adhunik Infrastructure ITA/1281/Kol/2015 wherein it was held as under: wherein it was held as under:
9.3.2. Thus as per section 194C of the Act also, "works 9.3.2. Thus as per section 194C of the Act also, "works 9.3.2. Thus as per section 194C of the Act also, "works contract" does not include a contract wherein, the contractor contract" does not include a contract wherein, the contractor contract" does not include a contract wherein, the contractor in addition to employing labour, procures in addition to employing labour, procures material from a material from a third party. Thus, contracts involving mere labour of the third party. Thus, contracts involving mere labour of the third party. Thus, contracts involving mere labour of the contractor are included in the purview of "works contract". We contractor are included in the purview of "works contract". We contractor are included in the purview of "works contract". We find that the Hon'ble Supreme Court in case of Associated find that the Hon'ble Supreme Court in case of Associated find that the Hon'ble Supreme Court in case of Associated Cement Co. Ltd. vs. CIT reported in 201 ITR 435 while Cement Co. Ltd. vs. CIT reported in 201 ITR 435 while Cement Co. Ltd. vs. CIT reported in 201 ITR 435 while interpreting the term 'work' u/s 194C of the Act had held that reting the term 'work' u/s 194C of the Act had held that reting the term 'work' u/s 194C of the Act had held that words 'any work' in section 194C(1) of the Act means any words 'any work' in section 194C(1) of the Act means any words 'any work' in section 194C(1) of the Act means any work including supply of labour to carry out work and is not work including supply of labour to carry out work and is not work including supply of labour to carry out work and is not intended to be confined to or restricted to works contract, intended to be confined to or restricted to works contract, intended to be confined to or restricted to works contract, therefore, a person w therefore, a person who credits to the account of or pays to a ho credits to the account of or pays to a contractor any sum payable on behalf of organizations contractor any sum payable on behalf of organizations contractor any sum payable on behalf of organizations specified in section 194C(1) of the Act for carrying out any specified in section 194C(1) of the Act for carrying out any specified in section 194C(1) of the Act for carrying out any work (including supply of labour for carrying out any work) is work (including supply of labour for carrying out any work) is work (including supply of labour for carrying out any work) is liable to deduct income liable to deduct income-tax as required under that sub red under that sub- section. The words in the sub section. The words in the sub-section (1) of 194C of the Act section (1) of 194C of the Act `on income comprised therein' appearing immediately after the `on income comprised therein' appearing immediately after the `on income comprised therein' appearing immediately after the words `deduct an amount equal to two per cent of such sum words `deduct an amount equal to two per cent of such sum words `deduct an amount equal to two per cent of such sum as income-tax' from their purport, cannot be understood tax' from their purport, cannot be understood as tax' from their purport, cannot be understood the percentage amount deductible from the income of the the percentage amount deductible from the income of the the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to contractor out of the sum credited to his account or paid to contractor out of the sum credited to his account or paid to him in pursuance of the contract, but deduction is to be made him in pursuance of the contract, but deduction is to be made him in pursuance of the contract, but deduction is to be made out of payments out of payments made to the contractor. We see no reason to made to the contractor. We see no reason to curtail or to cut down the meaning of the plain words used in cut down the meaning of the plain words used in cut down the meaning of the plain words used in the section. "Any work" means any work and not a "works the section. "Any work" means any work and not a "works the section. "Any work" means any work and not a "works contract", which has a special connotation in the tax law. contract", which has a special connotation in the tax law. contract", which has a special connotation in the tax law. Indeed in the subsection, the "work" referred to therein Indeed in the subsection, the "work" referred to therein Indeed in the subsection, the "work" referred to therein expressly includes supply of labour expressly includes supply of labour to carry out a work. It is to carry out a work. It is a clear indication of the Legislature that the "work" in the a clear indication of the Legislature that the "work" in the a clear indication of the Legislature that the "work" in the sub-section is not intended to be confined to or restricted to section is not intended to be confined to or restricted to section is not intended to be confined to or restricted to "works contract". The issue before the Hon'ble Supreme Court "works contract". The issue before the Hon'ble Supreme Court "works contract". The issue before the Hon'ble Supreme Court in the aforesaid case was whether the term " in the aforesaid case was whether the term "work" used in work" used in section 194C needs to be restricted to "works contract". The section 194C needs to be restricted to "works contract". The section 194C needs to be restricted to "works contract". The Hon'ble Apex Court laid out that the term "work" used in Hon'ble Apex Court laid out that the term "work" used in Hon'ble Apex Court laid out that the term "work" used in section 194C need not be restricted to "works contracts" (i.e. section 194C need not be restricted to "works contracts" (i.e. section 194C need not be restricted to "works contracts" (i.e. labour contracts) because the subsection expressly includes labour contracts) because the subsection expressly includes labour contracts) because the subsection expressly includes supply of labour to carry out work. In other words, it is upply of labour to carry out work. In other words, it is upply of labour to carry out work. In other words, it is implied that works contract means supply of labour to carry implied that works contract means supply of labour to carry implied that works contract means supply of labour to carry out work. Thus from the above we may say that a works out work. Thus from the above we may say that a works out work. Thus from the above we may say that a works contract constitutes a contract under which the contractor is contract constitutes a contract under which the contractor is contract constitutes a contract under which the contractor is merely employing his ef merely employing his efforts or labour. Under such a contract, forts or labour. Under such a contract, the contractee provides the material and other requisites (a the contractee provides the material and other requisites (a the contractee provides the material and other requisites (a complete infrastructure) needed to carry out the desired work complete infrastructure) needed to carry out the desired work complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said to the contractor who by applying his labour to the said to the contractor who by applying his labour to the said material turns the material into a d material turns the material into a desired product. We find esired product. We find further that the memorandum explaining the provisions in the further that the memorandum explaining the provisions in the further that the memorandum explaining the provisions in the Finance Bill, 2007, reported in (2007) 289 ITR (St.) 292 at Finance Bill, 2007, reported in (2007) 289 ITR (St.) 292 at Finance Bill, 2007, reported in (2007) 289 ITR (St.) 292 at page 312 reads as under: page 312 reads as under:
Section 80-1A, inter alia, provides for a ten 1A, inter alia, provides for a ten-year tax benefit year tax benefit to an enterprise or a to an enterprise or an undertaking engaged in development of n undertaking engaged in development of infrastructure facilities, industrial parks and special economic infrastructure facilities, industrial parks and special economic infrastructure facilities, industrial parks and special economic zones. The tax benefit was introduced for the reason that zones. The tax benefit was introduced for the reason that zones. The tax benefit was introduced for the reason that industrial modernization requires a passive expansion of, and industrial modernization requires a passive expansion of, and industrial modernization requires a passive expansion of, and qualitative improvement in, inf qualitative improvement in, infrastructure (viz., expressways, rastructure (viz., expressways, highways, airports, ports and rapid urban rail transport highways, airports, ports and rapid urban rail transport highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of systems) which was lacking in our country. The purpose of systems) which was lacking in our country. The purpose of the tax benefit has all along been (or encouraging private the tax benefit has all along been (or encouraging private the tax benefit has all along been (or encouraging private sector participation by way of investment in development of sector participation by way of investment in devel sector participation by way of investment in devel the infrastructure sector and not for the persons who merely the infrastructure sector and not for the persons who merely the infrastructure sector and not for the persons who merely execute the civil construction work or any other works execute the civil construction work or any other works execute the civil construction work or any other works contract.
Accordingly, it is proposed to clarify that the provisions of Accordingly, it is proposed to clarify that the provisions of Accordingly, it is proposed to clarify that the provisions of section 80- IA shall not apply to a person who executes IA shall not apply to a person who executes a IA shall not apply to a person who executes works contract entered into with the undertaking or enterprise works contract entered into with the undertaking or enterprise works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person referred to in the said section. Thus, in a case where a person referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development makes the investment and himself executes the development makes the investment and himself executes the development work, i.e., carries out the civil construction work he will be carries out the civil construction work he will be carries out the civil construction work he will be eligible for tax benefit under section 80 le for tax benefit under section 80- IA of the Act. In IA of the Act. In contrast to this, a person erson who enters into a contract contrast to this, a person erson who enters into a contract contrast to this, a person erson who enters into a contract with another person (i.e., undertaking or enterprise referred with another person (i.e., undertaking or enterprise referred with another person (i.e., undertaking or enterprise referred to in section 80 to in section 80-IA) for executing works contract, will not be IA) for executing works contract, will not be eligible for tax benefit under section 80- IA.
This amendment will take retrospective effect from 1st April This amendment will take retrospective effect from 1st April This amendment will take retrospective effect from 1st April 2000 and will accordingly apply in relation to the assessment 2000 and will accordingly apply in relation to the assessment 2000 and will accordingly apply in relation to the assessment year 2000-01 and subsequent years. 01 and subsequent years.
The Explanatory Memorandum clearly lays out that purpose The Explanatory Memorandum clearly lays out that purpose The Explanatory Memorandum clearly lays out that purpose of extending tax benefit u/s 80 ding tax benefit u/s 80-IA was to encourage IA was to encourage investments from the private sector and hence work contracts, investments from the private sector and hence work contracts, investments from the private sector and hence work contracts, i.e. contracts involving merely labour (or mere execution of i.e. contracts involving merely labour (or mere execution of i.e. contracts involving merely labour (or mere execution of construction without making investments) are outside the construction without making investments) are outside the construction without making investments) are outside the purview of the provisions of sec purview of the provisions of section 80-1A. Thus, the term 1A. Thus, the term "works contract" used in Explanation to section 80-IA(13) "works contract" used in Explanation to section 80 "works contract" used in Explanation to section 80 means a contract of developing infrastructure by merely means a contract of developing infrastructure by merely means a contract of developing infrastructure by merely employing labour and making no investments. employing labour and making no investments.
The amended The amended provisions of section 80-IA of the Act IA of the Act clarify that to avail the deduction, the assessee could clarify that to avail the deduction, the assessee could clarify that to avail the deduction, the assessee could either (i) develop; or (i) develop; or (ii) operate and maintain ; or (ii) operate and maintain ; or (iii) develop, operate and maintain the facility. (iii) develop, operate and maintain the facility. (iii) develop, operate and maintain the facility.
Therefore, any one of the above activities would qualify any one of the above activities would qualify any one of the above activities would qualify for the deduction and it is not necessary to carry out all for the deduction and it is not necessary to carry out all for the deduction and it is not necessary to carry out all the activities and in this regard we rely upon the case of and in this regard we rely upon the case of and in this regard we rely upon the case of CIT v. ABG Heavy Industries Ltd 322 ITR 323 (Bom), CIT v. ABG Heavy Industries Ltd 322 ITR 323 (Bom) CIT v. ABG Heavy Industries Ltd 322 ITR 323 (Bom)
Section 80-IA of the Income IA of the Income-tax Act, 1961 Deduction Profit and 1961 Deduction Profit and gains from infrastructure undertakings gains from infrastructure undertakings- Assessment year Assessment year 1997-98 to 2000 98 to 2000-01 and 2005-06-Whether deduction under Whether deduction under section 80-IA is available to an enterprise which (i) develops; IA is available to an enterprise which (i) develops; IA is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and or (ii) operates and maintains; or (iii) develops, main or (ii) operates and maintains; or (iii) develops, main operates that infrastructure facility inasmuch as subsequent operates that infrastructure facility inasmuch as subsequent operates that infrastructure facility inasmuch as subsequent amendment to section 80 amendment to section 80-1A(4) has made it clear that three 1A(4) has made it clear that three conditions of development, operation and maintenance were conditions of development, operation and maintenance were conditions of development, operation and maintenance were not intended to be cumulative in nature Held, yes - Assessee not intended to be cumulative in nature Held, yes not intended to be cumulative in nature Held, yes was awarded a contract for leasing of container handling rded a contract for leasing of container handling rded a contract for leasing of container handling cranes at Jawaharlal Nehru Port Trust ('JNPT') in terms of cranes at Jawaharlal Nehru Port Trust ('JNPT') in terms of cranes at Jawaharlal Nehru Port Trust ('JNPT') in terms of policy of Government of India to encourage private sector policy of Government of India to encourage private sector policy of Government of India to encourage private sector participation in development of infrastructure Under contract, participation in development of infrastructure Under contract, participation in development of infrastructure Under contract, assessee was responsible f assessee was responsible for supplying, installation, testing, or supplying, installation, testing, commissioning commissioning commissioning and and and maintenance maintenance maintenance of of of cranes cranes cranes - Contract envisaged two different options, first being one under which envisaged two different options, first being one under which envisaged two different options, first being one under which assessee would carry out operation and maintenance of assessee would carry out operation and maintenance of assessee would carry out operation and maintenance of equipment, while second consisted of an option to JNPT to equipment, while second consisted of an option to JNP equipment, while second consisted of an option to JNP carry out operations and only maintenance was to be carried carry out operations and only maintenance was to be carried carry out operations and only maintenance was to be carried out by assessee out by assessee - Assessee assumed responsibility of making Assessee assumed responsibility of making equipment available for operation for a minimum number of equipment available for operation for a minimum number of equipment available for operation for a minimum number of days as stipulated in contract and would become liable to pay days as stipulated in contract and would become liable to pay days as stipulated in contract and would become liable to pay liquidated damages for non damages for non-availability of equipment after availability of equipment after commissioning commissioning - After expiry of lease period of ten years, After expiry of lease period of ten years, assessee was liable to hand over equipment to JNPT free of assessee was liable to hand over equipment to JNPT free of assessee was liable to hand over equipment to JNPT free of cost Whether, on facts, it could be said that assessee had cost Whether, on facts, it could be said that assessee had cost Whether, on facts, it could be said that assessee had carried on business of developi carried on business of developing, maintaining and operating ng, maintaining and operating
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23 an infrastructural facility so as to entitle it to a deduction an infrastructural facility so as to entitle it to a deduction an infrastructural facility so as to entitle it to a deduction under section 80-IA - Held, yes under section 80
With regard to regard to the AO's contention that an assessee AO's contention that an assessee ought to be performing cumulatively all the above three ought to be performing cumulatively all the above three ought to be performing cumulatively all the above three (3) functions in o (3) functions in order to claim the deduction, is rder to claim the deduction, is therefore erroneous and untenable. and untenable.
In the case in hand, it appears that one of the In the case in hand, it appears that one of the In the case in hand, it appears that one of the reasons that prevailed upon the Ld. AO to hold the reasons that prevailed upon the Ld. AO to hold the reasons that prevailed upon the Ld. AO to hold the assessee as a mere contractor, is that the assessee had assessee as a mere contractor, is that the assessee had assessee as a mere contractor, is that the assessee had not conceived the idea of dev not conceived the idea of developing infrastructure but it eloping infrastructure but it was the Government which had conceived it and the was the Government which had conceived it and the was the Government which had conceived it and the assessee had merely carried out/executed the same. And assessee had merely carried out/executed the same. And assessee had merely carried out/executed the same. And hence, according to the AO, the assessee was mere hence, according to the AO, the assessee hence, according to the AO, the assessee contractor.
In this Regard it was d it was submitted that if an assessee is submitted that if an assessee is merely developing the infrastructural facility, it is merely developing the infrastructural facility, it is merely developing the infrastructural facility, it is entitled to deduction u/s 80 entitled to deduction u/s 80- 1A. Further, condition (b) of 1A. Further, condition (b) of section 80- IA(4) stipulates that an assessee enters into IA(4) stipulates that an assessee enters into IA(4) stipulates that an assessee enters into an agreement with the Government. Hence, if section 80- an agreement with the Government. Hence, if sectio an agreement with the Government. Hence, if sectio IA grants deduction on profits from the activity of IA grants deduction on profits from the activity of IA grants deduction on profits from the activity of development, carried out in pursuance of an agreement development, carried out in pursuance of an agreement development, carried out in pursuance of an agreement with the Government, it presupposes that assessee will with the Government, it presupposes that assessee will with the Government, it presupposes that assessee will earn profits from the amounts it is paid by the earn profits from the amounts it is paid by the earn profits from the amounts it is paid by the Govt/Govt. Bodies and it is such profits Govt/Govt. Bodies and it is such profits which would be which would be eligible for the deduction. eligible for the deduction.
And in case, And in case, deduction u/s 80-IA is declined on the IA is declined on the ground that the assessee had merely entered into an ground that the assessee had merely entered into an ground that the assessee had merely entered into an agreement with the Govt. and/or the assessee had agreement with the Govt. and/or the assessee had agreement with the Govt. and/or the assessee had received payments from Government, then in that received payments from Government, then received payments from Government, then eventuality an assessee who is only a " an assessee who is only a "developer developer" will never be entitled to deduction u/s 80 never be entitled to deduction u/s 80-IA. Therefore in our Therefore in our view, merely because the assessee was paid by the , merely because the assessee was paid by the , merely because the assessee was paid by the Government for development work, it cannot be denied Government for development work, it cannot be denied Government for development work, it cannot be denied deduction under section 80 deduction under section 80- IA(4) of the Act. ) of the Act. Similarly, an assessee cannot be declined the deduction on the an assessee cannot be declined the deduction on the an assessee cannot be declined the deduction on the ground that the assessee has not himself conceived the ground that the assessee has not himself conceived the ground that the assessee has not himself conceived the idea of infrastructure but has merely entered into a idea of infrastructure but has merely entered into a idea of infrastructure but has merely entered into a contract with the Govt.; entering into a contract with the contract with the Govt.; entering into a contract with the contract with the Govt.; entering into a contract with the Govt. is a sine qua non fo Govt. is a sine qua non for claiming the deduction u/s. deduction u/s. 80-IA(4) in this regard we rely upon IA(4) in this regard we rely upon the decision in the decision in the Adhunik Infrastructure ITA/1281/Kol/2015 (supra) Adhunik Infrastructure ITA/1281/Kol/2015 Adhunik Infrastructure ITA/1281/Kol/2015 and the same view ame view was also adopted by the Coordinate was also adopted by the Coordinate Bench of the Tribunal in the the case case of of Bhinmal Contractors Property Contractors Property & Land Developers P. Ltd. & Land Developers P. Ltd. [2018] 93 Taxmann.com 296 (Mum.) [2018] 93 Taxmann.com 296 (Mum.), even t even the recent decision of the Hon'ble Gujarat High Court in PCIT V/s. decision of the Hon'ble Gujarat High Court in decision of the Hon'ble Gujarat High Court in Montecarlo Montecarlo Montecarlo Construction Construction Construction Ltd. Ltd. Ltd. [2024] [2024] [2024] 161 161 161 Taxmann.com 222 (Guj.) Taxmann.com 222 (Guj.) also supports the case of the also supports the case of the assessee
Thus we are of the view Thus we are of the view that the facts, nature of the facts, nature of contracts, nature of works in the present years are ‘same contracts, nature of works in the present years are contracts, nature of works in the present years are I.T.A. No. 4942/Mum/2024 I.T.A. No. 4942/Mum/2024 I.T.A. No. 25 & identical’ to the facts before the to the facts before the Hon'ble ITSC Hon'ble ITSC. And the eligibility of the assessee to claim deduction u/s. 80- the eligibility of the assessee to claim deduction u/s. 80 the eligibility of the assessee to claim deduction u/s. 80 IA of the Act is IA of the Act is ‘squarely covered’ in favour of the in favour of the assessee, by the order of the Hon'ble ITSC in the assessee, by the order of the Hon'ble ITSC in the assessee, by the order of the Hon'ble ITSC in the assessee's own case. assessee's own case.
It is also imperative to mention imperative to mention here that the CIT(A) that the CIT(A) for A.Y 2018-19 has allowed the deduction under section 19 has allowed the deduction under section 19 has allowed the deduction under section 80IA of the Act for which the Department 80IA of the Act for which the Department had had preferred appeal before the Tribunal before the Tribunal which was dismissed on which was dismissed on technical issue.
Even before us Even before us the department has not the department has not brought anything on record to disturb the order of the Settlement anything on record to disturb the order of the Settlement anything on record to disturb the order of the Settlement Commission for the the prior years and the order of the CIT(A) prior years and the order of the CIT(A) for A.Y 2018-19 both allowing the claim of the assessee for both allowing the claim of the assessee for both allowing the claim of the assessee for claiming deduction under section 80IA of the Act and thus, claiming deduction under section 80IA of the Act and thus, claiming deduction under section 80IA of the Act and thus, in our view the intermediate assessment years, the intermediate assessment years, i.e., A.Y the intermediate assessment years, 2014-15, 2015-16 and 2017 16 and 2017-18, cannot be disturbed and cannot be disturbed and therefore the deduction under sect the deduction under section 80IA of the Act ion 80IA of the Act deserves deserves deserves to to to be be be allowed allowed allowed considering considering considering the the the facts facts facts and and and circumstances of the case circumstances of the case as narrated and discussed as narrated and discussed above.
No new facts or circumstances have been placed before No new facts or circumstances have been placed before No new facts or circumstances have been placed before us to rebut or controvert us to rebut or controvert the findings so recorded by the ld. the findings so recorded by the ld. CIT(A). Therefore, after evaluation the entire facts and Therefore, after evaluation the entire facts and Therefore, after evaluation the entire facts and circumstances of the present case, we umstances of the present case, we find no reason to find no reason to interfere into or to deviated from the well or to deviated from the well-reasoned findings reasoned findings so recorded by the ld. CIT(A). Therefore, the order of the ld. so recorded by the ld. CIT(A). Therefore, the order of the ld. so recorded by the ld. CIT(A). Therefore, the order of the ld. CIT(A) is upheld.
& 4944/Mum/2024, A.Y: 2015 s. 4942 & 4944/Mum/2024, A.Y: 2015-16 & s. 4942 & 4944/Mum/2024, A.Y: 2015 2017-18
As the facts and circumstances in these facts and circumstances in these appeals are ppeals are identical to identical to for the A.Y 2014 4 for the A.Y 2014-15 (except variance in figures) and (except variance in figures) and the decision rendered in ion rendered in above paragraph above paragraph would apply mutatis mutandis for these apply mutatis mutandis for these appeals also. Accordingly, appeals also. Accordingly, the grounds of appeal of the the grounds of appeal of the revenue are dismissed. revenue are dismissed.
In the result In the result, all the three appeals filed by the revenue s filed by the revenue are dismissed.
at Mumbai. Order pronounced in the Court on Order pronounced in the Court on 14th January, 2025 at Mumbai.