ACIT., CENTRAL CIRCLE-2(2), HYDERABAD vs. M/S KMC CONSTRUCTIONS LTD, HYDERABAD

M/s KMC Constructions Ltd.
M/s KMC Constructions Ltd.
M/s KMC Constructions Ltd.
M/s KMC Constructions Ltd.
M/s KMC Constructions Ltd.
M/s KMC Constructions Ltd.

Section 80IA as made available (in its amended form) on the statute vide the Finance (No.2) Act, 2009 w.r.e.f 01.04.2000 squarely applied, and that CBDT Circular No. 4/2010 clarified that a works contractor was not eligible for claiming deduction under Section 80IA of the Act. It was further urged that as the departmental appeals are pending before the Hon’ble High Court against the earlier orders of the Tribunal, therefore, the Assessing Officer had rightly disallowed the claim of the assessee company for deduction under Section 80IA of the Act to keep the issue alive.
11. Per Contra, Shri. S. Rama Rao, the learned Authorized
Representative for the assessee company (for short, “AR”), on the other hand relied on the order of the CIT(A) and the consistent decisions of the Tribunal in assessee’s own case. The Ld. AR submitted that the assessee company undertakes projects as a developer, assumes entrepreneurial risks, invests substantial funds, and performs development and maintenance responsibilities, therefore, its claim for deduction under Section 80IA(4) was in order.
It was contended by him that the pendency of the departmental
M/s KMC Constructions Ltd.

appeals before the Hon’ble High Court cannot dilute the binding nature of the Tribunal orders, and that judicial discipline requires lower authorities to follow the appellate orders unless the same are reversed or stayed by the higher courts. The Ld. AR to buttress his aforesaid contention had relied upon the judgment of the Hon’ble
Supreme Court in Union of India v. Kamlakshi Finance Corporation
Ltd., AIR 1992 SC 711. 12. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
13. We find that the controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not the claim of the assessee company for deduction under Section 80IA(4)(i) of the profits derived from its projects involving roads, bridges, highways, urban development, and related works is in order. We find that the issue in dispute has been consistently decided by the Tribunal in M/s KMC Constructions Ltd.

favour of the assessee company in its own case for the preceding years. The Coordinate Bench in its orders, viz. (i). AYs 2000-01 to 2007-08, dated 16.03.2012 (ITA Nos. 84/Hyd/2010 & Ors.); (ii). AYs
2008-09 & 2009-10, dated 28.10.2013 (ITA Nos. 1247 &
1248/Hyd/2012); (iii). AYs 2003-04 to 2010-11, dated 02.04.2014
(ITA Nos. 1627 to 1634/Hyd/2013); (iii). AY 2011-12, dated
11.01.2014 (ITA No. 1734/Hyd/2016); and (iv). AYs 2012-13 to 2017-18, dated 25.08.2023 (ITA Nos 33/Hyd/2017 & Ors.), has held that the assessee company is a developer and entitled to deduction under section 80IA(4) of the Act. We deem it apposite to cull out the observations recorded by the Tribunal in its latest consolidated order for AYs 2012-13 to 2017-18, dated 25.08.2023 in ITA Nos
33//Hyd/2017 & Ors. titled as Dy. CIT-2(1), Hyderabad Vs. M/s
KMC Constructions Limited, dated 25/08/2023, wherein it had followed its earlier view in the revenues appeal in the assessee’s own case in ITA No. 996/Hyd/2023, dated 16/03/3012 for AY 2002-
03, and had held as under:
“11. Now issue relates to allowance of deduction under section 80-IA of the Act for all the assessment years under consideration. Both the M/s KMC Constructions Ltd.

counsel concede that this issue was covered by the findings of the Tribunal in assessee’s own case for the earlier assessment years.
Learned Assessing Officer, however, recorded that the assessee did not fulfil the essential conditions to be a developer like investment, entrepreneurial risk and using of facility – and, therefore, the assessee is only a work contractor. According to the learned Assessing Officer, since the Revenue preferred appeals and those are pending before the Hon'ble
High Court, to maintain consistency in the stand of the Revenue, deduction under section 80-IA of the Act, was not to be allowed.
12. Learned CIT(A), however, followed the CBDT Circular No.
4/2010, dated 18/05/2010 in F.No. 178/14/2010-ITA.1 and also the view taken by the Tribunal in assessee’s own case for assessment years
2001-02 to 200708 and held that in view of the facts and issue being identical with the earlier assessment years, deduction under section 80-
IA of the Act has to be allowed. Insofar as this fact is concerned, absolutely there is no dispute.
13. Learned DR vehemently contends that the department did not accept the view taken by the Tribunal in the earlier assessment years and appeals are pending before the Hon'ble High Court and, therefore, the view taken by the Tribunal for the earlier assessment years cannot be taken as a precedent binding the subsequent Benches; whereas the learned AR contended that the Tribunal by order dated 16/03/2012 in ITA
No. 996/Hyd/2003 elaborately discussed the facts and decided the issue in favour of the assessee and since there is no change in the factual matrix, the facts do not permit a different view. Learned AR submits that as on the date, there is a precedent in the findings of the Tribunal in assessee’s own case un-disturbed and, therefore, the same may be followed.
14. We considered this issue. Facts of this year are identical to the facts of the earlier assessment years. Vide paragraph Nos. 44 to 55 of its order, a Co-ordinate Bench of the Tribunal in ITA No. 996/Hyd/2003
(supra), discussed the facts at length in the light of the case law available on this issue and reached to a conclusion that even where the assessee had caried out the development of infrastructure work in consortium or jointly with any other agency and not as a sub-contractor still the assessee is entitled for deduction under section 80-IA of the Act. This finding holds good as on the date.
M/s KMC Constructions Ltd.

“10. We have heard both parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the appellant has executed several development projects as enumerated in the assessment order and among the works, some projects were directly awarded to the appellant as main developer/
builder, while some projects were awarded to the JVs/Consortium, but executed by assessee company, as constituent partner of the said JV in proportion to their share. It is also not in dispute that the appellant has satisfied all the conditions except clause (b) of Section 80IA(4), as noted by the Assessing Officer. In other words, the AO accepted the fact that the projects executed by the appellant, including those projects which were awarded to JVs/Consortiums, but executed by the assessee are infrastructure projects, as defined under Section 80IA(4) of the Act and thus, on being satisfied with the relevant provisions therein, the assessee is eligible for deduction under Section 80IA(4) of the Act. The only dispute is with regard to not satisfying clause (b) of Section 80IA(4)(1), which states that in order to claim deduction under Section 80IA(4) of the Act, the enterprises shall enter into an agreement with the Central government or State Government or local authority or any authority for developing, operating and maintaining or developing, operating and maintaining a new infrastructure facility. The appellant claims that it has satisfied clause (a) of Section 80IA(4) of the Act, because as a constituent partner of JV /Consortia, it has signed agreement with relevant Central or State Government or local authority for development of infrastructure project. Further, as per clause (a) of Section 80IA(4) of the Act, in order to claim deduction under Section 80IA(4), the enterprise should be owned by a company registered in India or by a consortium of such companies. Further, Clause (a) makes it clear that a company registered in India, or a consortium of such company registered in India should be owned the undertaking and Clause (b) states that such entity should be entered into agreement with the relevant authorities. Going by the above provisions, in our considered view, the assessee being one of the constituent partners of JV/Consortia has signed the agreement with the Central or State Government or local government for development of infrastructure project. Therefore, in our considered view, once the appellant, being a constituent partner JV / Consortia has entered into an agreement with relevant authorities, then it is as good as the appellant has entered into agreement in its individual capacity for development of infrastructure project. This fact has been further strengthened by the relevant JV / Consortium agreement between the JV partners, wherein it has been clearly specified that this JV/ Consortia has been constituted for the purpose of preparing or submitting qualification document and joint bid for the project. The said agreement further states
M/s KMC Constructions Ltd.

that in the event of the contract being awarded to the JV/Consortium, being the members of the said JV / Consortium, the development works as contemplated by the above contract shall be executed as per the development and scope of works, but for no other purposes. We further noted that the JV / Consortia agreement between members clearly specify the scope of undertaking, its exclusivity, role and responsibility of the JV partners and risk to be undertaken by each of the JV partners.
Further, immediately after JV / Consortium, the same has been informed to relevant authorities and also the plan of action has been submitted to the principles for execution of development projects. Further, in few cases, the appellant, being the constituent partner of the JV has directly submitted bills to the authorities and the principles has directly paid to appellant, instead of JV / Consortia, after deducting the TDS applicable as per law in the name of the appellant. From the above, it is undisputedly clear that although the JV/Consortium is a separate entity for the purpose of assessment, but all other activities, including designing, development, and maintenance of the project are undertaken by the assessee.
Therefore, we are of the considered view that once the assessee, being a constituent partner of the JV/Consortium, has executed the project and also undertaken relevant risks, including financial risks, the assessee becomes a developer of the infrastructure project and also as a constituent partner of the JV/Consortium, satisfied the condition of entering into an agreement with relevant Central or State government or any authority as specified in clause (b) of Section 80IA(4)(1) of the Act.
This is further fortified by the provisions of Section 80IA(4) of the Act and as per the proviso, the deduction is allowed to a successor entity in case one enterprise developed such infrastructure facility and after development, transfer such infrastructure facility to another Enterprise for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with agreement with the Central / State
Government or local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period.
Going by the above provisions, when the law itself allowed the benefit to successor entity in case of transfer, then there is no reason as to why such deduction shall not be allowed to constituent partner JV /
Consortium, more particularly, when the facts of said JVs / Consortium clearly established the fact that the appellant has carried out all the activities, including design and development of project and maintaining of said project.
M/s KMC Constructions Ltd.

venture. No doubt the joint venture is an independent identity and has filed its return of income and was also assessed to tax but it did not offer any profit or income earned on this project/works awarded to it nor did he claim any exemption/deduction under s.
80-IA(4). These facts clearly indicates that the joint venture was only a de jure contractor but in fact the assessee was a de facto contractor. There is no dispute with regard to the fulfilment of other requisite conditions. The dispute was only raised that the contract was awarded only to the joint venture and not to the assessee and therefore assessee is not entitled for deduction. Joint venture and the consortium was formed only to obtain the contract from the Government body and they in fact did not execute the work awarded to it. In a joint venture agreement or a consortium agreement, it was agreed that the awarded work had to be executed by the joint venturers or parties to the agreement in an agreed manner. The work was Megha Engg. & Infrastructure Ltd.
awarded by the Andhra Pradesh Government and the KSHIP, a body of the State Government of Karnataka to the JV and consortium but the work was executed by the assessee and the other constituents. In case of joint venture agreement, 40 per cent works were executed by the assessee and in case of consortium, the 100 per cent work was executed by the assessee. Whatever bills were raised by the assessee for the work executed on JV and consortium, the joint venture and consortium in turn raised the further bill of the same amount to the Government. Whatever payment was received by the joint venture, it was accordingly transferred to their constituents. Therefore, the joint venture or the consortium was only a paper entity and has not executed in contract itself. They have also not offered any income out of the work executed by its constituents, nor did they claim any deductions under s. 80-IA(4). Therefore, in all practical purposes, the contract was awarded to the constituents of the joint venturers through joint venture and the work was executed by them. As per provisions of s. 80-IA(4), the benefit of deduction under this section is to be given only to the enterprise who carried on the classified business. Therefore, in the light of this legal proposition, the assessee is entitled for the deductions under s. 80 -IA(4) on the profit earned from the execution of the work awarded to JV and consortium." Respectfully following the above decision, we dismiss the ground raised by the revenue in this regard.”
12. A similar view has been taken by ITAT, Lucknow Bench in the case of PMC Constructions Co. P. Ltd Vs. DCIT (supra), wherein it has M/s KMC Constructions Ltd.

been held that the appellant is eligible for deduction under Section 80IA(4) in respect of the profits derived from the projects awarded to JV
/ Consortium but executed by the appellant. The decision of the ITAT
Lucknow Bench has been upheld by the Hon’ble Allahabad High Court.
The sum and substance of the ratios laid down by the various benches of the Tribunal is that when the appellant has satisfied all the conditions prescribed under Section 80IA(4) of the Act, but merely for the reason that the agreement is entered into by JV/Consortium, the deduction under Section 80IA(4) cannot be denied.
13. Coming back to case laws relied upon by the ld.DR for the Revenue. The ld. DR relied upon the decision of ITAT, Hyderabad Bench in the case of DCIT Vs. HES Infra Pvt. Ltd (supra), We have gone through the decision of ITAT, Hyderabad Bench in the above case, and we find that, the Tribunal has gone 20 ITA No.1499/Hyd/2019 on sole premise of interpretation of statutory provisions in light of the decision of Hon'ble Supreme Court in the case of Commissioner of Customs
(Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) and held that in case of a person claiming deduction under the provisions of Section 80IA(4), the onus is on the assessee to prove that the assessee has fulfilled all the parameters laid down by the statute for claiming deduction. Since the appellant has not entered into agreement with these
Government/statutory authorities, there is a violation as laid down by the statute and the assessee is not entitled to claim deduction. With due respect, we are unable to follow the decision relied upon by the ld. DR for the simple reason that, in the above case, the Tribunal has not discussed whether the appellant is otherwise eligible for deduction under Section 80IA(4) of the Act or not. Secondly, while deciding the issue, the Tribunal has not considered the decision of co-ordinate bench in appellant's own case for earlier years and other decisions rendered by the coordinate bench of the Tribunal. Further, the Hon'ble Supreme of 2012, after considering its earlier decision in case of Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) held that the 5-Judge Bench did not refer to line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. The Court further held that they cannot agree with Shri Gupta's contention that sub-silentio the line of judgments qua beneficial exemptions has been done away with by this 5-Judge Bench. It is well settled that a decision is only an authority for what it decides and not what it matters logically follow from it. This being the case, it is obvious that the beneficial purpose of exemption contained
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in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of those cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand should be eschewed. Going by the subsequent decision of the Hon’ble Supreme Court in the above case, it is undisputedly clear that exemption provisions should be interpreted liberally in order to achieve the objectives of the legislature and going by the above ratio, in our considered view, there is no dispute with regard to the fact in the present case, the appellant is engaged in the business of developing infrastructure project like irrigation project, water supply system, hydropower plants and roads and railway lines and the statute provides for specific exemption under section 80IA(4) of the Act in respect of infrastructure projects, in our considered view, going by the liberal interpretation of the statute, the assessee must be given the benefit of deduction, having been satisfied all the conditions, including the condition of entering into an agreement with the State Government or Central Government or with any local authority, as a constituent partner of the JV/Consortium, more particularly, except entering into agreement, all other activities were carried out by the assessee. Further, the earlier order of ITAT in assessee’s own case was dt.15.02.2019 and order of the Hon'ble Apex Court in Commissioner of Customs (Import), Mumbai
Vs. M/s. Dilip Kumar and Company (supra) is dated 31.07.2018. The Co-ordinate Bench of the ITAT had also taken note of the Judgment of the Hon'ble Apex Court in Commissioner of Customs (Import), Mumbai
Vs. M/s. Dilip Kumar and Company (supra) while adjudicating the issue of deduction u/s 80IA(4) of the Act. Therefore, in our considered view, the arguments of the learned counsel for the revenue in light of the order of ITAT in the case of DCIT Vs. HES Infra (P) Ltd., that the earlier order of the Tribunal in assessee’s own case, has not considered the Hon'ble
Apex Court’s decision in the case of Commissioner of Customs (Import),
Mumbai Vs. M/s. Dilip Kumar and Company (supra), is not correct.
Therefore, we prefer to follow the decision of ITAT, Hyderabad Bench in assessee’s own case, rather than the decision relied upon by the ld. D.R.
14. In this view of the matter and considering the facts and circumstances of the case, and also by following the case laws discussed herein above, we are of the considered view that the assessee is eligible for deduction under Section 80IA(4) of the Act towards profits derived from infrastructure project awarded to JV/Consortium, but executed by the appellant. The ld.CIT(A) after considering relevant facts, has rightly allowed the deduction under Section 80IA(4) of the Act. Thus, we are M/s KMC Constructions Ltd.

inclined to uphold the findings of ld.CIT(A) and reject the grounds taken by the Revenue.”
Also, it would be pertinent to point out that the view taken by the Tribunal in the case of DCIT Vs. Mega Engineering & Infrastructure
451/Hyd/2024, dated 27/11/2024. We, thus, respectfully follow the aforesaid orders of the Tribunal, and conclude that the projects executed by the assessee company through SPVs and JVs will also fall within the ambit of section 80IA(4) of the Act.
15. Apropos the revenue’s claim, that as the departmental appeals are pending before the Hon’ble High Court, therefore, the A.O has declined the claim of the assessee company for deduction under Section 80IA(4) of the Act, we find that the same is untenable. As held by the Hon’ble Supreme Court in Union of India v.
Kamlakshi Finance Corporation Ltd., AIR 1992 SC 711, orders of the appellate authorities are binding on subordinate authorities unless the same are either reversed or stayed. For the sake of clarity, the observations of the Hon’ble Apex Court on the case of M/s KMC Constructions Ltd.

UOI Vs. Kamlakshi Finance Corporation Ltd. (supra) are culled out as under:
“6. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual malafides but with the fact that the officers, in reaching in their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector
(Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate heirarchy.
It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his juri iction and the order of the Tribunal is binding upon the Assistant
Collectors and the Appellate Collectors who function under the juri iction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.”
Further, the Hon’ble Supreme Court in Radhasoami Satsang vs.
CIT (1992) 193 ITR 321 (SC) and CIT v. Excel Industries Ltd.
(2013) 358 ITR 295 (SC) has emphasized the principle of M/s KMC Constructions Ltd.

consistency in tax matters. In the present case, since the issue has already been settled in favour of the assessee company by the Tribunal in earlier years on identical facts, there is no reason for us to take a different view.
16. Before parting, we may herein observe that in respect of project no. 3 (out of 20 projects), the assessee company had itself withdrawn its claim for deduction under Section 80IA(4) of the Act, on the ground that it was undertaken through a partnership firm which is not eligible for claiming deduction under the said statutory provision, which disallowance of Rs. 33,55,998/- had thereafter been confirmed by the CIT(A).
17. In view of our aforesaid observations, we find no infirmity in the order of the CIT(A) and uphold the same. The Grounds of appeal
Nos. 1 & 2 are dismissed.
18. The Ground of appeal No. 3 being general is dismissed as not pressed.
M/s KMC Constructions Ltd.

आदेशकी Ůितिलिप अŤेिषत/ Copy of the order forwarded to:-

आदेशानुसार / BY ORDER

Sr. Private Secretary
ITAT, Hyderabad