ACIT., CIRCLE-8(1), HYDERABAD vs. NCC HES JV, HYDERABAD

O R D E R PER LALIET KUMAR, J.M :

These appeals filed by the Revenue are directed against the common order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 09.05.2024for A.Ys. 2017-18, 2018-19 and 2020-21, respectively. Since facts are identical and issues are common, for the sake of convenience, all the appeals filed by the Revenue are being disposed of, by this consolidated order, by taking A.Y. 2017-18 as lead appeal.

“1. Both on the fact and in the circumstance of the case, the ld.CIT(A) is not justified in deleting disallowance of Rs. 11,56,60,835/- made u/s 80IA(13). 2. Whether CIT(A) is justified in not considering the contract as a work contract?

3 NCC HES JV, Madhapur

“5.13 I will now first proceed to deal with the financial involvement, risk factors and the liability involved in the project undertaken by the assessee for construction and development of infrastructure projects. As per the contract all the risk and responsibilities were borne by the appellant. Bank guarantee is to be provided by the appellant and in case of delay in competition of any individual milestone, the appellant was liable to pay liquidation damages to the Government. There was no fixed payment to be paid to the appellant. Payments were to be paid to the appellant upon completion of work on milestone basis and after certification of work completed. There was no fixed tenure in which payment was to be received by the appellant upon submission of the invoice. From each bill, the retention money was withheld, to be paid only after competition of entire project to cover up for damage if any occurred to Government. Hence, from the perusal of agreement made by the appellant with the Government of Telangana for the execution of the irrigation project, it is clear that assessee has to arrange necessary finance for the execution of project and has to take possession of the site and get access to the site and settle all the disputes. Site inspection is the duty of the contractor. The material procurement and all other responsibilities are that of the assessee. Materials were to be procured by the appellant on its own and were not provided by the Government. No payment was to be received by the appellant on account of procurement of any supplies. No mobilization advance of any kind was provided to the appellant by the Government to execute the given project. It is also the duty of the assessee to attend to any works like any diversion of stream, vagus and drains during the process of development. The power supply as well as the temporary diversions, if any, with regard to the highways and the bridges also be the responsibility of the appellant. And most importantly assessee has to undertake maintenance of the project for the specified period.

5 NCC HES JV, Madhapur 5.14 So far as safety measures are concerned, the terms also stipulated that the assessee has to arrange the personnel, qualified engineers and Technicians. Appellant also has to undertake the risk of providing insurance against the workmen compensation for labours and also responsible for safety of all the concerned. The assessee has to provide drinking water, proper sanitation, drainage, rest rooms etc. as stipulated in different clauses of the TD. Thus, it appears that in order to fulfill the criteria for successful bidder in the tender awarded for developing, operating and maintaining the irrigation project, appellant needs to take all necessary measures for safety of traffic during construction. Needless to mention that in the event the assessee defaults in working or violates any contractual obligation, it shall be liable to penalty in terms of lien of Government over the plant, machinery and equipments and forfeiture of security deposits etc. 5.15 I have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as to claim the impugned deduction. The details mentioned therein further support the case of the assessee that the assessee is working as “developer” of infrastructure project awarded by the statutory bodies. 5.16 From the above, it is seen that the appellant has to undertake the entire execution of work from getting possession of the project up to handing over of the site after completion of the defect liability period. The appellant has therefore undertaken project observing entrepreneurial and all other risks relating to the project. This is not a project wherein material and other things are provided by the Government and what is expected from the appellant is to only undertake civil work. Such work would tantamount to works contracts wherein entire risk belongs to that of Contractor (i.e. Government) and not that of Contractee (i.e. Appellant). The project of the appellant is in contrary to that of work contracts. In this project material procurement is responsibility of the appellant. Neither mobilization advance is provided to the appellant nor is any payment made towards the material supply. The appellant is entitled to revenue on completion on pre-decided milestones and upon submission of certification thereof from the Government.

6 NCC HES JV, Madhapur 5.17 In the light of the above discussion and perusal of various clauses of Tender documents and case laws relied upon by the appellant, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s 80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee, it can safely be concluded that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) of the Act. Therefore, after verification of terms of contracts and risks undertaken by the appellant, it is observed that the appellant is “Developer” and work undertaken by the appellant is that of Development and not a works contract. 5.18 The AO in the assessment order has stated that deduction claimed u/s 80IA is denied because the appellant does not own any fixed asset in order to be engaged in carrying on the business of developing an infrastructure facility. Also, the appellant has sub contracted the project. The appellant in connection to the same has submitted that appellant is a JV and its members do possesses necessary machinery and fixed assets to carry out the project. Further, it has also mentioned that had there been no fixed assets with the members of the JV, the project would have not been awarded by the Government. With regards to sub-contracting appellant has submitted that there is no bar in the section prohibiting the same and no deduction is claimed by such sub contractor. The above submission of the appellant is perused and found to be acceptable. There are no conditions laid down in the section with regards to fixed assets and sub contracting for allowing deduction. It has also been submitted by the appellant that neither sub-contractor nor any member of the Joint Venture 7 NCC HES JV, Madhapur has claimed deduction u/s 80IA of the Act. Also, Hon’ble tribunal while deciding in the case of Bhooratnam Constructions Co. Pvt Ltd in & 271/HYD/2011, dated 07-09-2012, relied upon by the AO in the assessment order, has set aside the matter to the file of the concerned AO for verification of the terms of contracts. No decision is taken by the Hon’ble ITAT while deciding this case. It is also evident from the above referred case that terms of each contracts need to be verified to decide upon the allowability of the claim made u/s 80IA. 5.19 Therefore, in view of the discussion made in detail in the preceding paras, the issue of claim of deduction made by the appellant u/s 80IA(4) of the Act is allowed and accordingly, appellant is entitled for the claim of deduction u/s 80IA amounting to Rs. 11,56,60,835/-. Thus, Ground No. 2 and 3 of the appeal raised by the appellant are allowed.5.

5.1 Feeling aggrieved with the order of ld.CIT(A), Revenue is now in appeal before us.

8 NCC HES JV, Madhapur “…..The assessee’s claim is that its case falls under section 80IA(4)(i) and therefore the project of formation of Venkatadri Reservoir Bund qualifies as “infrastructure facility project” thereby entitling it for the deduction u/s 80IA(4). Explanation below sub-section (4) defines ‘infrastructure facility as— (1) a road, including toll road, a bridge or a rail system; (2) a highway project including housing or other activities being an integral part of the highway project; (3) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (4) a port, airport, inland waterway or inland port or navigational channel in the sea. Assessee’s work is ‘Formation of Venkatadri Reservoir Bund’ and does not fall in any of the above definitions. Obviously, the business of the company is in the nature of a works contract awarded by the State Government to which the exception provided in Explanation below sub-section (13) applies. It is also pertinent to note here that the company does not own any fixed asset in order to be engaged in carrying on the business of developing an infrastructure facility. In this context, the decision of Hon’ble ITAT in Bhooratnam Construction Co. Pvt. Ltd. in & 271 / Hyd / 2011, dated 07.09.2012 is borne in mind wherein it was held: “……. The Assessing Officer has to see whether the assessee carried on contract for sale or contract for sale and the applicability of Explanation below Section 80IA(13) of the Act. The Assessing Officer is directed to examine the terms of contract including the nature of obligations to be discharged by the assessee while executing the contract. For claiming deduction u/s 80IA(4) the assessee shall satisfy the two conditions viz (1) investment in eligible projects and (2) execution of project by itself. If the assessee satisfies the above conditions and the above Explanation if not applicable then only the assessee is entitled for deduction u/s 80IA(4) of the Act…..” As stated, the business of assessee is clearly “execution of work contract” as construction of reservoir bund cannot be an infrastructure facility and therefore Explanation below sub-section (13) of Section 80IA clearly applies. Moreover, the execution of project is not by itself and was given for execution on sub-contract to BGR Mining & Infra Ltd. Therefore, the deduction claimed u/s 80IA is denied.”

9 NCC HES JV, Madhapur 7.1. The Ld.DR further submitted that the Tribunal in the case of M/s. NEC NCC MAYTAS-JV, Hyderabad Vs. DCIT in for A.Y. 2006-07 had decided an identical issue against the assessee and given a finding against the assessee. The findings of the Tribunal vide paragraphs 8 to 17 of the paper book were brought to our notice, which reads as under :

“8. We have heard the foregoing rival submissions qua the instant issue of section 80IA deduction. The assessee has admittedly claimed the same taking itself as the developer by court that a corresponding commercial project firm of "infrastructural facility" as per section 80IA(4) Expln.( c ) covering "a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system" only. Our attention has been invited to the corresponding project's architectural design (supra). The assessee has thereafter pleaded that it has undertaken the business risk not only in the development of the said lift channel forming part of the irrigation project which has turned barren uneven tracks of land to a canal but also it had deployed all of the corresponding plant and machinery, labour force followed by retention money's project thereby satisfying all the conditions of development of infrastructure facility. All these assessee's arguments fail to evoke our concurrence for the reasons given hereunder. 9.1 The assessee's first and foremost plea that we ought to adopt liberal interpretation while considering section 80IA(4) claim in the light of relevant facts in the instant case deserves to reject. Suffice to say, such a course of liberal interpretation is no more available while dealing with the Income Tax Act's provisions as per honourable apex court's recent constitutional bench's decision in Commissioner of Customs (Import) Vs. Dilip Kumar and Co. (2018) 9 SCC 1 settling the law that a fiscal statute as well as an exemption clause incorporated therein ought to be construed in stricter parlance only. Their lordships make it clear that benefit of doubt in case of taxing provision goes to the tax payer and vice versa in an instance of an exemption provision. The assessee's first argument is rejected therefore.

10 NCC HES JV, Madhapur

10. We next examine the merits of the assessee's claim in light of section 80IA(4) r.w. Explanation ( c ) thereof. This is for the reason that the legislature has reintroduced the Explanation; formerly inserted by the Finance Act, 2007 w.e.f. 1.4.2007 that "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise as the case may be," followed by its substitution by the Finance Act, 2009 w.e.f. 1.4.2000 that "for the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub- section (4) which is in the nature of a works contract awarded by any person (including the central or state government) and executed by the undertaking or enterprise referred in sub-section (1)."

11. Learned CIT-DR at this stage quoted Katira Constructions Limited Vs. Union of India and Others (2013) 352 ITR 513 (Guj) upholding vires of the latter explanation that the same is purely explanatory in nature than amending the existing provision and therefore, the question of it being levying any tax with retrospective effect would not rise. It is thus explicitly clear that their lordships have held this latter explanation in the nature of a plain and simple one; neither adding nor subtracting anything to the earlier explanation, inserted vide Finance Acts, 2009 and 2007; respectively. Learned CIT-DR further sought to pin point the fact that the latter explanation inserted vide Finance Act, 2009 w.e.f. ;1.4.2000 has rather covered a work contract as not entitled for the impugned deduction despite the fact that the concerned assessee satisfied all other conditions in sub-section (4) of section 80IA of the Act. We find force in Revenue's instant argument as the Finance Act, 2009 substitutes the earlier explanation that the same would not cover a works contract for the purpose of providing deduction qua industrial undertaking or enterprise engaged in infrastructure development, etc.

12. There is yet another equally important aspect which requires our apt adjudication at this stage i.e. of the clinching legislative expression in the latter explanation "nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the central or the state government)". We note that honourable apex court yet another larger bench decision in Kartar Singh Bhadana Vs. Hari Singh Nalwa & Ors Civil Appeal No.6931 of 2000 decided on 27.03.2001 had an occasion to deal with the expression "works" used in section 9-A of the Representation of People Act, 1951. Hon'ble court therein went by the shorter Oxford English Dictionary's meaning that "work means a 11 NCC HES JV, Madhapur structure or apparatus of some kind; an architectural or engineering structure, a building edifice. When it was used in the plural, that is, as works, it meant architectural or engineering operations, a fortified building, a defensive structure, fortification or any of the several parts of such structures". Their lordships also took note of honourable jurisdictional high court's judgment in B. Laxmikantha Rao Vs. D Chinna Mallaiah AIR 1979 AP 132 whilst adopting the dictionary meaning of "work" in foregoing terms. We further quote Raghunath Rai Baraza Vs. PNB (2007) 135 Company cases 163 (SC) that it is the cardinal rule of interpretation that words used by the legislature are to be understood in their natural, ordinary or popular sense or constructed as per their grammatical meaning unless such a construction lead to some absurdity or there is something in the context or in the object of the statute to the contrary.

13. We go by the foregoing observations of their lordships and observe that the stages I & II of the Bhima Lift Irrigation project undertaken by the assessee containing " all the civil works like canal approach to the tunnel, tunnel, surge pool pump house, delivery mains manufacturing, testing, inspection, packing, supply, erection and commissioning of electro mechanical and hydro mechanical equipment" indeed formed an architectural as well as engineering structure and therefore, amounts to an execution of a "works contract awarded by the state government" through its irrigation development only and covered u/s. 80IA Explanation incorporated in the Act by the Finance Act, 2009 w.e.f. 1.4.2000. Learned CIT-DR at this stage invited our attention to page 18 in assessee's Paper Book II Part 1 that it had purely executed "works contract" only in view of the fact that the irrigation department had issued it mobilization advances on multiple occasions from time to time. He next took us to agreement clause 3.15 containing "contract price and payment" making it evident that the assessee had to be paid on "fixed lump sum monthly basis" only. And further that the assessee was entitled to get "fixed lump sum monthly instalment payments provided value of the work executed is more than or equal to the fixed lump sum monthly instalment as indicated in the agreement." The said agreement stipulated advance payments to the assessee qua supply of goods at the site. All these facts sufficiently indicate that the assessee, assuming that not accepting that it is the developer u/s. 80IA(4) of the Act, executed a works contract only under Explanation to section 80IA of the Act and therefore, not entitled for the impugned deduction.

14. The assessee next made a very strong endeavour to place reliance on a catena of case law (supra) including CIT Vs. ABG Heavy Industries 12 NCC HES JV, Madhapur Limited (2010) 322ITR 323 (Bom). We find that neither of these decisions deals with the interplay between the section 80IA(4) Vs. 80IA Explanation involving execution of works contract as is the factual position before us. The said case law distinguished, therefore.

15. Mr. Afzal's last argument seeks to buttress the point that such a strict interpretation employed in dealing with an instance of development of an infrastructure project would tantamount to closing the deduction chapter altogether and more particularly, when this assessee has borne all risks and responsibilities of the lift irrigation project by paying reduction money and performance guarantee(s) as well. We hold that this last argument also fails to cut any ice since the assessee has merely performed a works contract and its retention money or the so called performance guarantee only gave an assurance to the irrigation development that it had carried out the corresponding construction etc. as per the specified design norms than involving any business risk. We accordingly hold the view of our independent appreciation of facts as well as assessment findings that the assessee is a contractor having executed works contract only.

16. We also deem it appropriate to quote Adam Smith's 'The Wealth of Nations' (published in 1776 and called as the founding work on modern economics) that " It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

17. Nevertheless, the same connotation applies in the facts of the instant case. It is clear that the assesseehas first of all been paid mobilization advances by the state government's department on periodic basis, and, then only it executed the corresponding lift irrigation project works contract followed by its yet another claim of section 80IA of the Act deduction (supra). We are afraid that such a liberal interpretation would amount to going against the stricter interpretation principle in view of honourable apex court decision (supra). We accordingly conclude both the learned lower authorities have rightly disallowed assessee's 80IA deduction claim involving varying sum(s) (supra) in their respective orders. The same stands confirmed. These assessee's appeals are dismissed therefore.”

13 NCC HES JV, Madhapur

The assessee is a Joint Venture of NCC Limited and HES Infra Private Limited. Both are Indian companies. It is engaged in development of infrastructure facility. The assessee during the financial years under consideration has undertaken the formation of Venkatadri Reservoir Bund" under "Palamuru Ranga Reddy Lift Irrigation Scheme" awarded by the Government of Telangana.

2. During the years under consideration the assessee filed returns of income admitting the following incomes: 1. Asst. year 2017-18 2.Asst. year 2018-19 3.Asst. year 2020-21 While admitting the income, it claimed deduction u/ s 801A(4) of the I.T. Act as the income was derived from development of infrastructure project undertaken by the appellant. 3.The Assessing Officer converted the case to scrutiny and issued notice. In the said notice, the Assessing Officer required the assessee to state the reasons as to why deduction u/ s 801A claimed should not be rejected. The assessee filed detailed written submissions which is extracted between pages 2 and 9 of the assessment order and a copy of the same is submitted. It is submitted that — a) the manner in which the amendments have taken place to the provisions of Sec.801A and the history of the said provisions clearly show that any company or consortium of companies which have developed infrastructure project would become entitled for deduction u/ s 801A of the Act. The assesseeis a consortium of companies and have undertaken the development of the project; Therefore, it becomes entitled for deduction .

14 NCC HES JV, Madhapur b)It was also submitted that the irrigation projects are included within the meaning of infrastructure projects by frie Finance Act 2000 w.e.f.01.04.2001. According to the amended provision, the water supply projects, water treatment system and irrigation project; sanitary and swewage system are to be considered as infrastructure facilities. c) As submitted earlier, the assesseeundertook the "formation of Venkatadri Reservoir Bund" under "Palamuru Ranga Reddy Lift Irrigation Scheme" awarded by the Government of Telangana. Therefore, is a consortium of companies which undertook the development of infrastructure facilities based on an ageement entered into with Government.

4. Therefore, the claim for deduction u/ s 801A was made. The Assessing Officer, having considered the submissions made before him, held that the assessee is not entitled for deduction u/ s 801A of the I.T.Act. The Assessing Officer considered the submissions and disallowed the claim made. 5.The Assessing Officer is of the view that the "formation of Venkatadri Reservoir Bund" under "Palamuru Ranga Reddy Lift Irrigation Scheme" does not fall in any of the definitions of infrastructure projects. In this regard, the assessee is submitting a copy of the agreement between the Government of Telangana and the JV. The head shows that the work executed is: "PALAMURU - RANGA REDDY LIFT IRRIGATION SCHEME". (Package No. 9): Formation of Venkatadri Reservoir bund from Km 0. 000 to Km 6.900 at Vattem (village) (V), BijinepPaZli Mandal, Mahabubnagar District". The PaZamuru — Rengareddy Lift Irrigation scheme envisages to irrigate an ayacut of 10, 00, 000 acres in dought prone upland areas of Mahabubnagar dist. (7, 00, 000 ac), Rangareddy dist. (2, 70,000 ac) and Nalgonda dist (30, 000ac) and to meet drinking water requirement to enroute villages and Hyderabad city and industrial use by lifting flood water from foreshore of Srisailgm Reservoir. The Government vid G.o. Ms.No.105, 1 & CAD (Projects-I) Department, dated 10.06.2015 have accorded administrative approval to the project for Rs.35,200 crores The Scheme consists of 5 stages lifting from foreshore of Srisailam Prject to K.P.LaxmidevipalZy Reservoir. The water is drawn from foreshore of 15 NCC HES JV, Madhapur SrisaiZam and Lifted to fill the Anjanagiri Reservoir under lift !. Then the water is drawnfromfoshore ofanjanagiri reservoir and lifted to fill the Yedula Reservoir under lift Il. There after the water is drawn frm foreshore of Yedula Reservoir and lifted to fill Vattan Reservoir and Kurumurthyraya REservoir and lifted to fill the Udandapur Reservoir under lift IV. Finally the water is drawn from foreshore of Udandapur Reservoir and lifted to fill the K.P. Laxmidevipatli Reservoir under lift V.

6. It can be seen from the above that the work of formation of Reservoir bund is development of lift irrigation scheme from Krn 0.000 to Km 6.900 Kms.

7. The assessee in this regard is submitting a copy of the order of the Hon'ble iTAT in the case of Sushee Hitech Constructions Private Limited for the assessment years 2005-06 to 2007-08. In the said order, the Hon 'ble ITAT mentions the following projects and held that they are all development of infrastructure facilities: a) AMRP Nalgonda Earth work excavation and formation of embankment from Ian 135.125 to Ian 136.1550 leading channel to Musi reservoir including excavation of Transmission and diversion channel in 134.000 to km 135.000 of AMRP. b) SRSP FFC Earth work excavation and forming embankrnent of Kakatiya main canal km 336.00 to 337.00 8.The ITAT held that the above mentioned projects are eligible for deduction u/s 801A (4) of the Act.

9. The project undertaken by the assessee is similar to the above mentioned project. Therefore, it is not correct to mention that the activity carried on by the assessee does not quality as infrastructure project.

16 NCC HES JV, Madhapur

11. The Palamuru — Rangareddy Lift Irrigation scheme envisages to irrigate an ayacut of acres in drought prone upland areas of Mahabubnagar dist. ac), Rangareddy dist. (2,70,000 ac.) and Nalgonda dist (30,000 ac) and to meet drinWng water requirement to enroute villages and Hyderabad city and industrial use by lifting flood water from foreshore of Srisailam Reservoir.

12. The Government vide G.O. Ms.No. 105, I &CAD (Projects-I) Department, dated 10.06.2015 have accorded administrative approval to the project for Rs.35,200 crores.

17 NCC HES JV, Madhapur i)Wherever ramps are to be provided, it shall be the duty of the assessee j) The monsoon drains are to be provided by the assessee; K) The assessee has to provide all the safety measures. l) The assessee has to take possession of the site and get access to the site and settle all the disputes. The entire works has to be got completed with assessee's own funds, men and material. m) The assessee has to undertake maintenance of the project for the specified period.

15. As the assessee is undertaking the work from the time of acquisition of land till completion of defect liability period it is only a development.

16. The Assessing officer referred to the decision of the Hon'ble ITAT in the case of Bhooratnam Construction Company Pvt. Ltd., dated 7.9.2012. In the said decisions the matter was sent back to the Assessing Officer for verification. It is submitted that all the requirements of a Developer are fulfilled by the assessee. The requirements are mentioned in the decisions of the Jurisdictional ITAT, Hyderabad the case of (1) Sushee Hi Tech Constructions Pvt. Ltd., Hyderabad and KMC Constructions Limited, Hyderabad.

17. All such requirements and conditions have been fulfilled in the case of the assessee as mentioned above. The assessee is submitting a copy of the agreement for perusal.

18. The Assessing officer is of the view that the assessee does not possess plant and machinery of its own. In this regard it is humbly submitted that the constituents of the Joint Venture possess substantial fixed assets, a list of which is annexed to these submissions. 19.In view of the above, it is not correct to mention that the assessee not possess the required plant and machinery. The assessee in fact has undertaken the entrepreneurial risk and other risks involved in the entire work as mentioned in the agreement. It employed its own funds.

21. The assessee by all means fulfilled all the conditions mentioned in the provisions of Sec.801A(4) of the I.T. Act. a) The work undertaken by the assessee was allotted by the Government; b) The work undertaken is the development of infrastructure; c) The work was executed on its own risk d) It only sought the help of another company i.e. BGR Mining and Infra Ltd. e) All the risks and responsibilities are that of the appellant.

22. Therefore, it cannot be said that the assessee is not entitled for deduction u/ s 801A(4) of the I.T Act. 23.On an appeal filed before the CIT (Appeals), the learned CIT (Appeals) observed that the project executed by the assessee is an eligible infrastructure facility project and is entitled for deduction u/s 801A of the I.T. Act. The relevant para of the order of learned CIT (Appeals) is extracted hereunder: "5.4 At this juncture, therefore, deliberation is required on the main issue as to whether the assessee is entitled to the deduction claimed under section 801A(4) of the Act i.e. such irrigation project undertaken by the appellant during the year under consideration is an eligible project to claim deduction under section 801A. Explanation to section 801A(4) is reproduced below to verify the eligibility of the given project: "Explanation. —For the purposes of this clause, "infrastructure facility" means— (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; 19 NCC HES JV, Madhapur (d) a port, airport, inland waterway, inland port or navigational channel in the sea;" 5.5 From the perusal of assessment order, it also transpires that AO has not given any cogent reasoning as to how he has concluded that the project undertaken by the appellant i.e. Formation of Resewoir Bund" does not fall under the definition of "infrastructure facility" when irrigation project is specifically covered under sub-clause (c) of the above explanation:- a water supply project, water treatment system, irrigation project, sanitation and sewerage system and solid waste management system. The nature of project and explanation to section 801A(4) attest that the project executed by the appellant is an eligible project to claim deduction u/s. 801A. Therefore, in absence of any reasoning recorded by the AO in the assessment order and based on facts of the case as well as provisions of section 801A(4), I am of the view that the project executed by the appellant is an eligible infrastructure facility project to be eligible for claiming deduction under Section 801A. 5.6 Next important aspect is on ascertaining the project to be eligible is to verify whether the appellant has fulfilled all the criteria specified under section 801A to be eligible to claim the deduction under the said section. The relevant Section 801A(4) of the Act is reproduced as under: "(4) This section applies to— (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :— (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) déveloping, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:" 5.7. The appellant is into developing the infrastructure facility. The appellant is a joint venture of two Indian companies namely NCC Limited and HES Infra Private Limited. The appellant has entered into an 20 NCC HES JV, Madhapur agreement with Government of Telangana for development of Infrastructure facility. Therefore, the appellant has fulfilled all the conditions stated in section. Section 801A(4) in pertaining to an enterprise carrying out business of developing of an infrastructure facility. 5.8 Now, it is important to examine the main issue as to whether business carried out by the appellant is that of nature of work contract or that of development and whether the assessee is entitled to the deduction claimed under section 801A(4) of the Act even after the Explanation inserted after subsection 13 of section 801A of the Act by the Finance (No. 2) Act 2009 w. e. f. 14-2000. The Explanation reads as follows: " Explanation. —For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in subsection (4) which is in the nature of a works contract awarded by any person (including the Central or State Government)and executed by the undertaking or enterprise referred to h' sub section(l)" The above explanation has denied the benefit of deduction under section 80/A(4) of the Act to a person who executes a project which is in the nature of works contract. In that view of the matter, the first and foremost condition imposed upon an assessee is to establish that he worked not as 'work contractor', but as a 'developer'. 5.9. AO has summarily rejected the claim of the appellant without any reasoning found in the assessment order that business of assessee falls within the exclusion as per explanation to section 801A(13): "Obviously, the business of the company is in the nature of a work contact awarded by the State Government to which the exception provided in Explanation below sub-section (13) applies" The AO has not pointed out any terms of the agreement which shows that project undertaken by the appellant is in nature of works contract and not development. There are several decisions from various tribunal that in order to determine whether work carried out is in nature of works contracts or development, it is essential to look at the terms of contract to verify that whether the assessee has undertaken the entrepreneurial and other risks in relation to a given project or has taken only business risk. Appellant has relied upon following decisions wherein same principles are laid down: 1. Hon'ble Hyderabad ITAT in case of Sushee Hi Tech Constructions Pvt. Ltd. v DCIT [20131 33 taxmann.com 236; 21 NCC HES JV, Madhapur

2. Hon'ble Hyderabad Tribunal in case of KMC Construction Limited [2012] 21 taxmann.com 138; 3. Hon'ble Calcutta Tribunal in the case of ACIT vs. Ho Hup Simplex IV [2018192 taxmann.com 106 (Kolkata - Trib.) Appellant has also placed reliance on the decision passed by Hon'ble Jurisdictional ITA T Hyderabad in case of one of its members i.e. NCC Limited, which are mentioned below: (i) Nagarjuna Construction Company Limited vs ACIT bearing ITAT No. 141/Hyd/2007 & Others dated 27-08-2012 (For A Y 2001-02, 2002-03, 2003-04 and 2004-05) and 1023/Hyd/2010 & Others dated 23-10-2013 (For A Y 2005-06, 2006-07 & 2007-08). The aforesaid decision is also followed by the Hon'ble jurisdictional ITA T Hyderabad in recent case of Nagarjuna Construction Co. Ltd. (NCCL) vs. DCIT [20241 159 taxmann.com 538 5.10 In that view of the above judicial pronouncements and provision of law, the first and foremost condition imposed upon an assessee is to establish that it worked not as 'work contractor', but as a 'developer'. A 'contractor' is a person who undertakes work on a contract basis. He does not assume risks and responsibilities like that of a developer. He merely carries out the work as has been instructed to him by the principal. Moreover, in case of such work the contractor gets fixed amount of revenue for executing such work and is not entitled to any share of profit from revenue generated by the developer/land owner. In other words, the developer acts as a principal whereas the contractor acts as an agent in performing the functions as required by the developer. The developers, in true sense, are the persons who are carrying out the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility whereas the contractors are those persons who merely execute part of these functions on behalf of developer and do not own any risks and responsibilities of the work. In such cases, the contractors may not be eligiblefor the deduction under section 801A of the Act as they are not developing any infrastructure facility but only providing assistance to the actual developer. 5.11 In view of the above, in order to ascertain whether a project or work is assigned on development basis or contract basis only the tenns and conditions of the agreement needs to be considered. Only on the basis of the terms and conditions and the scope, ambit and nature of the contract 22 NCC HES JV, Madhapur assigned it could be ascertained whether it is a "work contract" or a "development contract". The right and obligations of the assessee in the projects implemented by the assessee on behalf of the Government entities is also required to be examined. It is therefore important to analyze the facts of the present case to find out whether the appellant assessee is acting as a "Developer or "Contractor". 5.12 The terns of contracts are summarized by the appellant in its submission dated 04-052024, as per the agreement uploaded by the appellant is as under: "a) The work undertaken by the appellant was allotted by the Government and the work has to be executed at the risk of appellant. The appellant has to take possession of the site and get access to the site and settle all the disputes.

6. The power supply is also the responsibility of the assessee 7. The temporary diversions, if any, with regard to the highways and the bridges also be the responsibility of the appellant.

8. Wherever ramps are to be provided, it shall be the duty of the assessee.

9. The monsoon drains are to be provided by the assessee; 10. The assessee has to provide all the safety measures.

11. The assessee has to undertake maintenance of the project for the specified period.

12. All the risk and responsibilities were that of the appellant; 13. There was no fixed payment to be Abid-to the appellant as per the contract. Lumpsum payment were to be paid to the appellant upon completion of work on milestone basis and after certification of work 23 NCC HES JV, Madhapur completed. There was no fixed tenure in which payment was to be received by the appellant upon submission of the invoice; 14.From each bill, the retention money was withhold, to be paid only after competition of entire project to cover up for damage if any occurred to Government. 15.Bank guarantee is to be provided by the appellant; 16.In case of delay in competition of any individual milestone, the appellant was liable to pay liquidation damages to the Government. 17. 5.13 1 will now first proceed to deal with the financial involvement, risk factors and the liability involved in the project undertaken by the assessee for construction and development of infrastructure projects. As per the contract all the risk and responsibilities were borne by the appellant. Bank guarantee is to be provided by the appellant and in case of delay in competition of any individual milestone, the appellant was liable to pay liquidation damages to the Government. There was no fixed payment to be paid to the appellant. Payments were to be paid to the appellant upon completion of work on milestone basis and after certification of work completed. There was no fixed tenure in which payment was to be received by the appellant upon submission of the invoice. From each bill, the retention money was withheld, to be paid only after competition of entire project to cover up for damage if any occurred to Government. Hence, from the perusal of agreement made by the appellant with the Government of Telangana for the execution of the irrigation project, it is clear that assessee has to arrange necessary finance for the execution of project and has-to take possession of the site and get access to the site and settle all the disputes. Site inspection is the duty of the contractor. The material procurement and all other responsibilities are that of the assessee. Materials were to be procured by the appellant on its own and were not provided by the Government. No payment was to be received by the appellant on account ofprocurement of any supplies. No mobilization advance of any kind was provided to the appellant by the Government to execute the given project. It is also the duty of the assessee to attend to any works like any diversion of stream, vagus and drains during the process of development. The power supply as well as the temporary diversions, if any, with regard to the highways and the bridges also be the responsibility of the appellant. And most importantly assessee has to undertake maintenance of the project for the specified period. 5.14 Sofar as safety measures are concerned, the terms also stipulated that the assessee has to arrange the personnel, qualified engineers and 24 NCC HES JV, Madhapur Technicians. Appellant also has to undertake the risk of providing insurance against the workmen compensation for labours and also responsible for safety of all the concerned. The assessee has to provide drinking water, proper sanitation, drainage, rest rooms etc. as stipulated in different clauses of the TD. Thus, it appears that in order to fulfill the criteria for successful bidder in the tender awarded for developing, operating and maintaining the irrigation project, appellant needs to take all necessary measures for safety of traffic during construction. Needless to mention that in the event the assessee defaults in working or violates any contractual obligation, it shall be liable to penalty in terms of lien of Government over the plant, machinery and equipments and forfeiture of security deposits etc. 5.15 I have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 801A(4) of the Act so as to claim the impugned deduction. The details mentioned therein further support the case of the assessee that the assessee is working as "developer" of infrastructure project awarded by the statutory bodies. 5.16 From the above, it is seen that the appellant has to undertake the entire execution of work from getting possession of the project up to handing over of the site after completion of the defect liability period. The appellant has therefore undertaken project observing entrepreneurial and all other risks relating to the project. This is not a project wherein material and other things are provided by the Government and what is expected from the appellant is to only undertake civil work. Such work would tantamount to works contracts wherein entire risk belongs to that of Contractor (i.e. Government) and not that of Contractee (i.e. Appellant). The project of the appellant is in contrary to that of work contracts. In this project material procurement is responsibility of the appellant. Neither mobilization advance is provided to the appellant nor is any payment made towards the material supply. The appellant is entitled to revenue on completion on pre-decided milestones and upon submission of certification therefrom the Government. 5.17 In the light of the above discussion and perusal of various clauses of Tender documents and case laws relied upon by the appellant, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for 25 NCC HES JV, Madhapur execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s 801A(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee, it can safely be concluded that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 801A(4) of the Act. Therefore, after verification of terms of contracts and risks undertaken by the appellant, it is observed that the appellant is "Developer" and work undertaken by the appellant is that of Development and not a works contract. 5.18. The AO in the assessment order has stated that deduction claimed u/s 801A is denied because the appellant does not own any fixed asset in order to be engaged in carrying on the business of developing an infrastructure facility. Also, the appellant has sub contracted the project. The appellant in connection to the same has submitted that appellant is a JV and its members do possesses necessary machinery and fixed assets to carry out the project. Further, it has also mentioned that had there been no fixed assets with the members of the JV, the project would have not been awarded by the Government. With regards to sub- contracting appellant has submitted that there is no bar in the section prohibiting the same and no deduction is claimed by such sub contractor. The above submission of the appellant is perused and found to be acceptable. There are no conditions laid down in the section with regards to fixed assets and sub contracting for allowing deduction. It has also been submitted by the appellant that neither sub-contractor nor any member of the Joint Venture has claimed deduction u/s 801A of the Act. Also, Hon'ble tribunal while deciding in the case of Bhooratnam Constructions Co.Pvt Ltd in & 271/HYD/2011, dated 07- 09-2012, relied upon by the AO in the assessment order, has set aside the matter to the file of the concerned Assessing Officer for verification of the terms of contracts. No decision is taken by the Hon'ble ITAT while deciding this case. It is also evident from the above referred case that terms of each contracts need to be verified to decide upon the allowability of the claim made u/s 801A.

26 NCC HES JV, Madhapur 5.19. Therefore, in view of the discussion made in detail in the preceding paras, the issue of claim of deduction made by the appellant u/s 801A(4) of the Act is allowed and accordingly, appellant is entitled for the claim of deduction u/s 801A amounting to Rs. 11,56,60,835/-. Thus, Ground No. 2 and 3 of the appeal raised by the appellant are allowed"

24. The said order is followed for the other assessment years. The present appeal is against the order of the learned CIT (Appeals). The assessee humbly submits that all the requirements to term the assessee as a developer of infrastructure facility are fulfilled and, therefore, the Assessing Officer is not justified in rejecting the claim and the learned CIT (Appeals) is justified in allowing the same. In view of the above explanations it is humbly submitted that the assessee is a developer. It fulfilled all the criteria fixed by the various benches of the Hon'ble ITAT for being eligible for deduction u/s 801A of the I.T. Act. The assessee, therefore, prays the Hon'ble ITAT to kindly dismiss the appeals filed by the Revenue.

“…..The assessee’s claim is that its case falls under section 80IA(4)(i) and therefore the project of formation of Venkatadri Reservoir Bund qualifies as “infrastructure facility project” thereby entitling it for the deduction u/s 80IA(4). Explanation below sub-section (4) defines ‘infrastructure facility as— 27 NCC HES JV, Madhapur (1) a road, including toll road, a bridge or a rail system; (2) a highway project including housing or other activities being an integral part of the highway project; (3) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (4) a port, airport, inland waterway or inland port or navigational channel in the sea.”

10. We found that Clause (3) of Sub-Section (4) of 80IA of the Act includes infrastructure facilities such as a water supply project, water treatment system, irrigation project, sanitation and sewerage system or sold waste management system. In the present case, the assessee had constructed the reservoir as per an award granted by the Superintending Engineer, I & CAD, Mahabubnagar, Telangana. The scope of work under the contract is detailed on page 41 of the paper book, capturing the general conditions mentioned in the contract agreement, as noted by the LD.CIT(A) on page 17 of his order. The relevant portion at page 17 of the order of LD.CIT(A) reads as under :

……At page No.41 of the contract agreement, it is mentioned that a) the appellant has to provide drawings. b) In so far as the personnel, and qualified engineers are concerned, the assessee has to make available full-time Engineer and Technicians. c) The contractor has to undertake the risk of providing insurance against the workmen compensation; d) Site inspection is the duty of the contractor; e) The material procurement and all other responsibilities are that of the assessee. f) The contractor has to execute the work. If any diversion of stream, Vagus, and drains during the process of development, it shall be the duty of the assessee to attend to such works. g) The power supply is also the responsibility of the assessee.

28 NCC HES JV, Madhapur h) The temporary diversions, if any, with regard to the highways and the bridges also be the responsibility of the appellant. i) Wherever ramps are to be provided, it shall be the duty of the assessee. j) The monsoon drains are to be provided by the assessee; k) The assessee has to provide all the safety measures. l) The assessee has to take possession of the site and get access to the site and settle all the disputes. The entire works have to be got completed with assessee's own funds, men, and material. m) The assessee has to undertake maintenance of the project for the specified period.

“13. We go by the foregoing observations of their lordships and observe that the stages I & II of the Bhima Lift Irrigation project undertaken by the assessee containing " all the civil works like canal approach to the tunnel, tunnel, surge pool pump house, delivery mains manufacturing, testing, inspection, packing, supply, erection and commissioning of electro mechanical and hydro mechanical equipment" indeed formed an architectural as well as engineering structure and therefore, 29 NCC HES JV, Madhapur amounts to an execution of a "works contract awarded by the state government" through its irrigation development only and covered u/s. 80IA Explanation incorporated in the Act by the Finance Act, 2009 w.e.f. 1.4.2000. Learned CIT-DR at this stage invited our attention to page 18 in assessee's Paper Book II Part 1 that it had purely executed "works contract" only in view of the fact that the irrigation department had issued it mobilization advances on multiple occasions from time to time. He next took us to agreement clause 3.15 containing "contract price and payment" making it evident that the assessee had to be paid on "fixed lump sum monthly basis" only. And further that the assessee was entitled to get "fixed lump sum monthly instalment payments provided value of the work executed is more than or equal to the fixed lump sum monthly instalment as indicated in the agreement." The said agreement stipulated advance payments to the assessee qua supply of goods at the site. All these facts sufficiently indicate that the assessee, assuming that not accepting that it is the developer u/s. 80IA(4) of the Act, executed a works contract only under Explanation to section 80IA of the Act and therefore, not entitled for the impugned deduction.”

13. Now coming to the submissions made by the Ld.DR at the time of arguments that the co-ordinate Bench of the Tribunal in the case of M/s. NEC NCC MAYTAS-JV (supra), has held that only developers are entitled to Section 80IA benefits and not mere the contractors. In this regard, it is essential to note down that the LD.CIT(A) in the order has brought the scope of work, which is 30 NCC HES JV, Madhapur mentioned hereinabove and furthermore, if we look into the nature of work, risk and award, which is available in paper book, it is clear that ---- - The assessee is fully responsible for execution and completion of work. - The assessee has to create a fresh infrastructure at site. - The assessee is required to employ the required Key Personnel to carry out the functions in the schedule after approval from the incharge. - The assessee has to engage technical personnel on full time basis. - The assessee has to bear all risks of loss or damage to physical property and of personal injury and death arising on account of performance of the Contract shall be the responsibility of the Contractor. - It is the responsibility of the assessee for arranging the land for borrowing area rests with the contractor. - The contractor shall construct and commission the work in accordance with the specifications and drawings. - The contractor at his cost shall forma temporary diversion wherever necessary. - The work of diversion arrangement should be carefully planned and prepared by the contractor. - The contractor has to arrange for bailing out water, protection to the work in progress and the portions of works 31 NCC HES JV, Madhapur already completed and safety measures for men and material. - Contractor shall be responsible for safety of all activities on Site. - The contractor shall make his own arrangement for obtaining power from Electricity Department. - The contractor is paid for the quantity of the work done at the schedule rate in the Bill of Quantities for each item. - The weightage for different components taken together including those included in the price adjustment should not exceed 100% and the weightage for the above shall be verified during each quarter and also at the final bill stage. - The retention money shall be retained by the officers of Supdt. Engineer which would be at 7.5% of the bill amount. - Clause 47 deals with mobilization advance is not part of the contract. - The assessee at his own cost shall remedy loss or damage to the Works or material to the Works between the start date and the end of the defects correction periods if the loss or damage arises from the Contractor’s acts or omissions. - At page 64 of the paper book, it was mentioned that the contractor has to make his own arrangements for water required for the work and to the colonies and work sites. - The contractor will have to make his own arrangements to lay and maintain the necessary distribution lines and wiring for the cam at his own cost. is to maintain and construct 32 NCC HES JV, Madhapur additional rate in addition to the existing rate if required for carrying out the functions. - The Contractor shall make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. - The Contractor shall take necessary precautions for safety of the workers and preserving their health while working in such jobs, which require special protection and precautions. - The assessee has to arrange for the bank guarantee. - The assessee has taken the invoice from ICICI Lormbard for the project at its own cost at page 129 of the paper book.

-left intentionally- 33 NCC HES JV, Madhapur 34 NCC HES JV, Madhapur

“14. After thoroughly examining the submissions of both the Departmental Representative (DR) and the Authorized Representative (AR), as well as noting the judicial precedents presented, including Katira Construction Ltd. v. ACIT, M.S. Khurana Engineering Ltd. v. ACIT, and Montecarlo Ltd. v. Principal CIT, we are tasked with determining whether the assessee qualifies for the deduction under Section 80IA(4) of the Act. The primary point of contention is whether the assessee acted as a "developer" within the meaning of the section, thus eligible for the deduction, or merely as a "contractor," which would disqualify it from this benefit. Both the Departmental Representative (DR) and the Authorized Representative (AR) presented judicial precedents, including Katira Construction Ltd. v. ACIT (supra), M.S. Khurana Engineering Ltd. v. ACIT, and the Hon'ble Gujarat High Court's decision in the case of Montecarlo Ltd. v. Principal CIT (supra). A thorough analysis of these cases is necessary to assess the responsibilities, risks, and controls borne by the assessee, especially in light of the jurisdictional precedent set by Montecarlo Ltd., which aligns closely with the principles established in Katira Construction Ltd. 14.1. In Katira Construction Ltd., the Co-ordinate Bench delineated specific criteria to determine the eligibility for deduction under Section 80IA(4) of the Act, which are particularly relevant in distinguishing a developer from a contractor. We evaluate the assessee's operations in the Madhya Pradesh State Highway (MPSH) as a lead project against these criteria and analyze them with respect to Montecarlo Ltd., where similar principles were applied. 14.2. Full Responsibility for Execution and Completion (Clause 13.1(a) in Katira): According to Katira, a developer must assume comprehensive responsibility for the project, encompassing all stages from inception through completion. In Montecarlo Ltd., the Co-ordinate Bench and the Hon'ble Gujarat High Court emphasized that the developer's role includes end-to-end responsibility, requiring the entity to manage and execute work beyond construction. Here, the assessee's responsibilities in the MPSH project extended to all aspects of project design, execution, and handover, mirroring the obligations seen in Montecarlo Ltd., where the court upheld that an entity with such overarching responsibilities qualifies as a developer.

36 NCC HES JV, Madhapur 14.3. Operational Autonomy and Approval Requirements (Clause 13.1(a) in Katira): Katira states that developers may require limited government approvals without negating their status as developers. In Montecarlo Ltd., the Hon'ble Gujarat High Court reinforced this, noting that operational autonomy within government contracts does not disqualify an entity from developer status. The assessee here maintained autonomy, bearing control over all phases of execution, despite needing certain government approvals. This autonomy, coupled with significant managerial duties, aligns with both Katira and Montecarlo Ltd., supporting the developer classification. 14.4. Development of Pre-Existing Infrastructure (Clause 13.1(b) in Katira): The Katira decision highlights that developers often redevelop or upgrade existing facilities. Similarly, in Montecarlo Ltd., the Co-ordinate Bench allowed deduction under Section 80IA(4) of the Act for rehabilitation work that transformed infrastructure. The MPSH project's scope of work entailed rehabilitating an existing highway, thereby transforming it into a new infrastructure facility--consistent with the development activities recognized in Montecarlo Ltd.. 14.5. Employment and Management of Skilled Workforce (Clause 13.1(c) in Katira): Both Katira and Montecarlo Ltd. emphasize that developers must recruit and manage skilled personnel. In this case, the assessee engaged project managers, engineers, and other skilled professionals, taking responsibility for all manpower requirements. This mirrors the approach upheld in Montecarlo Ltd., where the Co-ordinate Bench observed that managing personnel indicated significant managerial control-- characteristics of a developer. 14.6. Technical Know-How and Expertise (Clause 13.1(d) in Katira): The Katira and Montecarlo Ltd. decisions both require that developers possess technical expertise, deploying skills essential to infrastructure development. The assessee's experience in similar projects and its use of technical knowledge in the MPSH project aligns well with the standards set in these decisions, showing that it actively contributed specialized expertise to the project. 14.7. Financial Responsibility and Risk Bearing (Clause 13.1(e) in Katira): As outlined in both Katira and Montecarlo Ltd., developers assume entrepreneurial and financial risks. The assessee here arranged financing independently, managed delays, and assumed liability for project risks, including property damage. The Gujarat High Court in Montecarlo Ltd. explicitly noted that a developer's financial risk-taking is central to eligibility under Section 80IA(4). By assuming such risks, the 37 NCC HES JV, Madhapur assessee demonstrates alignment with the financial responsibilities defined for developers. 14.8. Supply and Testing of Materials (Clause 13.1(f) in Katira): In Katira and similarly in Montecarlo Ltd., developers are expected to source quality materials independently, without reliance on government supply. The assessee complied with quality standards under Clause 36.1 of the Scope of Work, sourcing materials and overseeing quality control, much like the operations in Montecarlo Ltd., where the Co-ordinate bench observed material procurement as an indicator of developer status. 14.9. Provision and Use of Machinery (Clause 13.1(g) in Katira): Katira and Montecarlo Ltd. require developers to supply necessary equipment. The assessee in this case used its machinery, including specialized equipment, fulfilling the developer's responsibility of machinery provision. This approach resonates with Montecarlo Ltd., where similar machinery use supported the court's conclusion in favour of developer status. 14.10. Insurance and Comprehensive Risk Coverage (Clause 13.1(h) in Katira): The Katira guidelines mandate insurance and risk management, as supported by Montecarlo Ltd., where the court noted that developers must bear all project risks. The assessee's insurance coverage throughout the project meets this requirement, reinforcing its role as a developer. 14.11. Liability for Quality and Defects (Clause 13.1(i) in Katira): Katira and Montecarlo Ltd. indicate that developers bear responsibility for defects within the liability period. Here, the assessee was accountable for quality assurance, mirroring the obligations in Montecarlo Ltd. and further supporting the claim to developer status. 14.12. Timely Completion and Liquidated Damages (Clause 13.1(j) in Katira): As both Katira and Montecarlo Ltd. decisions emphasize, developers bear risks for delays. The assessee in the MPSH project faced penalties for untimely completion, demonstrating adherence to the responsibilities outlined in these decisions. 14.13. Public Safety and Environmental Standards (Clause 13.1(k) and 13.1(l) in Katira): Both Katira and Montecarlo Ltd. mandate safety and environmental compliance, which the assessee fulfilled through extensive safety protocols and environmental protections, aligning with the standards expected of a developer.

15. The DR relied on two key decisions: M.S. Khurana Engineering Ltd. v. ACIT and NEC NCC Maytas JV. However, these decisions are distinguishable from the present case, and neither restricts the applicability of Section 80IA(4) of the Act in light of the jurisdictional 38 NCC HES JV, Madhapur precedent established in Montecarlo Ltd. v. Principal CIT, which adopts a broader interpretation in favour of infrastructure development. In Co- ordinate Bench restored the matter to the CIT(A) due to incomplete consideration of facts by the CIT(A), who had not fully analyzed the roles and risks undertaken by the assessee. The CIT(A) had classified the assessee as a contractor without examining its managerial responsibilities, financial risks, or control over project execution, leading the Co-ordinate Bench to require a re-evaluation. Unlike Khurana Engineering, the CIT(A) in the present case conducted a comprehensive review of the assessee's obligations, financial risks, and control, confirming that the assessee met the developer criteria under Section 80IA(4) of the Act. The Hyderabad bench in NEC NCC Maytas JV held that the JV performed a works contract, with the government directing the scope, funding, and progress. The Co-ordinate Bench found that the JV operated under strict government control, received lump-sum payments and mobilization advances, and bore minimal financial and operational risks, disqualifying it from Section 80IA(4) of the Act as a developer. In contrast, the present assessee bears substantial entrepreneurial and financial risks, including performance guarantees, liquidated damages, and retention money, assuming the obligations and risks typically associated with a developer. The decisions in M.S. Khurana Engineering Ltd. and NEC NCC Maytas JV are not applicable in this case due to their factual and procedural distinctions, as well as the jurisdictional clarification in Montecarlo Ltd. that supports a broader interpretation of developer status under Section 80IA(4) of the Act. The present assessee's comprehensive control, significant financial risk, and managerial responsibilities align with the characteristics of a developer as outlined in Montecarlo Ltd., rendering the DR's reliance on these cases misplaced.

16. We have perused the order of CIT(A) in detail. The CIT(A)'s order provides an in-depth examination of the eligibility criteria for deductions under Section 80IA(4) of the Act, specifically analyzing whether the assessee qualifies as a "developer" rather than merely a "contractor." The CIT(A) applied several interpretative principles, statutory provisions, and relevant judicial precedents to arrive at its decision. The CIT(A) thoroughly examined the definitions of "developer" and "contractor" and clarified that merely executing a construction contract does not automatically disqualify an entity from claiming deductions under Section 80IA(4) of the Act. The order emphasized that the legislative intent behind Section 80IA of the Act was to incentivize infrastructure development, and, thus, the term "developer" should be interpreted broadly. This includes entities undertaking significant public infrastructure projects, such as the assessee's work on roads and drainage systems. The CIT(A) held that the assessee's active involvement in infrastructure projects aligned with the statutory objective of creating new facilities benefiting the public, 39 NCC HES JV, Madhapur confirming its status as a developer. The CIT(A) highlighted that the assessee bore significant financial and operational risks, including providing performance guarantees, facing potential liquidated damages for delays, and being liable for retention money. These elements evidenced the assessee's entrepreneurial risk, a hallmark of developer activities under Section 80IA. The CIT(A) referenced the legislative history and amendments to Section 80IA of the Act, particularly the Finance Act of 2000, which progressively liberalized the section to encourage private sector participation in infrastructure. Notably, this amendment clarified that "developing," "operating and maintaining," or any combination of these functions qualifies for deductions. The CIT(A) found that this liberalization intended to include entities like the assessee, whose activities contribute directly to public infrastructure creation. Emphasizing the entrepreneurial and operational risks borne by the assessee, the CIT(A) concluded that the assessee's responsibilities aligned more closely with those of a developer rather than a contractor. The assessee's involvement in project outcomes, liability for delays, and management of quality control processes indicated that it functioned as an independent developer under Section 80IA of the Act. Additionally, the CIT(A) cited M/s. Tarmat Bel (JV) vs. ITO (Rajkot Bench) and Om Metals Infra Projects Ltd. vs. CIT (Jaipur Bench), which held that contractors managing substantial project responsibilities qualify as developers eligible for Section 80IA of the Act deductions. These judicial precedents reinforced the CIT(A)'s position, supporting the assessee's developer status. 16.1. After perusing the CIT(A)'s comprehensive analysis, we find that the CIT(A) rightly interpreted the assessee's role as a developer under Section 80IA(4) of the Act. The CIT(A)'s reliance on Circular No. 4/2010, along with precedents from rulings of various Benches of the Tribunal and Hon'ble Supreme Court guidance, provides a robust legal basis to affirm the developer status of the assessee. 16.2 The financial statements of the assessee, spanning Assessment Years (AYs) 2007-08 to 2015-16, provide a comprehensive view of the business's financial and operational profile, reflecting the nature, scope, and risk involved in its activities. The financial parameters across these years serve as indicators of the business's state of affairs, highlighting the responsibilities, risk assumptions, and commitments undertaken by the assessee in infrastructure projects. Analyzing these parameters aids in understanding the overall risk profile of the assessee and substantively differentiating a developer from a contractor. The following tabulated financial parameters across AYs 2007-08 to 2011-12 (to the extent comparable data is available in the paper book) underscore the risk elements characteristic of the assessee:-

40 NCC HES JV, Madhapur ……. 16.3. The financial parameters above reflect the overall business risk associated with the business of the assessee. Given the characteristics of a developer, the business risk profile illustrates the following critical points:- Financial and Leverage Risk: • The company's debt-to-equity ratio, peaking at 0.96 in 2009, demonstrates substantial leverage, indicative of a developer taking on significant financial obligations to fund long-term projects. This high leverage level aligns with the financial risk a developer assumes, as developers typically engage in substantial upfront investment and long project cycles. The subsequent decrease in leverage suggests strategic risk management, reinforcing the financial commitment typical of developers. Operational Risk: • Low profit margins, fluctuating between 2.83% and 3.25%, highlight the cost-intensive nature of infrastructure projects and the narrow margins within which developers operate. The company's low profitability indicates a commitment to long-term project sustainability rather than short-term gains, consistent with a developer's operational profile. • The inconsistency in inventory turnover and high receivables suggest challenges typical of developers, who often face delayed payments linked to project milestones and demand cycles. This delay in cash inflows impacts liquidity but is an inherent risk in large-scale infrastructure development projects. Liquidity Risk: • Moderate liquidity risk is evident from the current ratio trends and fluctuating cash balances. As a developer, the company's liquidity is impacted by the cyclical nature of project payments, reflecting the working capital constraints associated with extended project timelines and staggered cash flows. • The rising receivables turnover time, declining cash balances, and high current liabilities also indicate reliance on project completions and customer payments, a common characteristic of developers with substantial liquidity requirements. Market and Profitability Risk: • The company's primary income is derived from contract receipts i.e the projects, which are contingent on project completion and client certification. This dependency exposes the company to market and client- 41 NCC HES JV, Madhapur related risks, such as changes in demand, government policies, and competitive pressures in the infrastructure sector. • Low profitability margins further suggest sensitivity to cost fluctuations and competitive pricing pressures, which is common among developers in a highly competitive sector. 16.4. We have also noted the off-balance sheet items of liabilities i.e. Contingent liabilities and observe that there's a significant increase in contingent liabilities, especially in guarantees for joint ventures and disputed tax and royalty demands, which indicate growing exposure to financial and operational risks. 16.5. From a business risk and reward perspective, contingent liabilities are critical considerations for a developer aiming to maximize returns and maintain financial stability. Bank guarantees represent a significant cash flow risk; if invoked, they could strain liquidity, disrupt project timelines, and delay revenue recognition, ultimately affecting project profitability. Similarly, guarantees provided to subsidiaries expose the developer to financial risk if a subsidiary encounters difficulties, creating unplanned liabilities that can reduce overall project profitability and erode return on investment. Joint venture guarantees add an additional layer of risk by tying the developer's financial health to that of its partners; any default or underperformance by a joint venture partner could disrupt project financing and jeopardize the project's timeline, impacting expected returns. 16.6. Based on the financial parameters and business risk elements, it is apparent that the assessee operates as a developer rather than merely a contractor. The risk profile--characterized by substantial leverage, operational responsibility, liquidity constraints, and market dependency- - supports the classification of the assessee as a developer under Section 80IA of the Act. By assuming extensive financial, operational, and market risks, the assessee aligns with the statutory definition of a developer, undertaking comprehensive responsibilities in infrastructure creation. 16.7. The financial statements serve as indicators of the business's nature, scope, and the substantive responsibilities borne by the assessee, which collectively affirm that the assessee's activities qualify under the broader framework of infrastructure development as envisaged under Section 80IA of the Act. This analysis will provide the foundation for determining eligibility and distinguishing the assessee's role in alignment with legislative intent, statutory provisions, and relevant judicial precedents, ultimately supporting the assessee's position for developer status.

42 NCC HES JV, Madhapur 16.8. Furthermore, in line with the Hon'ble Gujarat High Court's decision in the case of Montecarlo Ltd. v. Principal CIT, we note that Section 80IA(4) of the Act should be interpreted liberally to support the infrastructure development mandate. Montecarlo Ltd. affirmed that an entity operating under a government contract does not lose developer status if it assumes the independent roles and responsibilities associated with developing infrastructure. The assessee's case here mirrors Montecarlo Ltd., where the Hon'ble Gujarat High Court upheld deductions for infrastructure developers who mobilized resources, bore risks, and undertook comprehensive JMC Projects (India) Ltd. vs. DCIT-ACIT (By assessee and Revenue) Asst. Years : 2007-08 to 2015- 16 development duties. Given the binding nature of this jurisdictional precedent, we respectfully follow Montecarlo Ltd., concurring with the CIT(A) that the assessee qualifies as a developer entitled to deductions under Section 80IA(4) of the Act. 16.9. In view of the above, we find that the CIT(A) rightly allowed the assessee's claim under Section 80IA(4) of the Act based on its function as a developer in infrastructure projects. The CIT(A)'s reliance on statutory interpretation, judicial precedents, and CBDT guidance provides a sound basis for affirming the assessee's eligibility for the deduction. 16.10. Accordingly, the Revenue's appeals on the s relating to deduction u/s. 80IA of the Act are dismissed, and the orders of the CIT(A) granting the assessee deductions under Section 80IA(4) of the Act are upheld. 16.11. Under the s related to 80IA of the Act, the assessee contended that the CIT(A) erred in not directing the AO to allow the deduction under Section 80IA of the Act based on the "total income of the eligible business as finally computed and assessed by the AO," which includes adjustments arising from additions or disallowances made during assessment. 16.12. The AR argued that under Section 80IA of the Act, the deduction should be computed based on the final income of the eligible undertaking after all adjustments, additions, and disallowances are made by the AO. The AR also contended that this interpretation aligns with the legislative intent of providing deductions based on the "total income" as assessed, rather than on the income computed prior to adjustments. Under Section 80IA(1) of the Act, the deduction is allowed in respect of "profits and gains derived from the eligible business." Section 80IA(5) of the Act further stipulates that for computing the deduction, the eligible business is treated as the "only source of income," and income 43 NCC HES JV, Madhapur attributable to the eligible undertaking should be calculated in isolation. However, judicial interpretations have clarified that the term "total income" for deduction purposes is often based on the final assessed income, reflecting the eligible business's actual income post-assessment adjustments. 16.14. Upon examining the provisions and judicial precedents, we agree with the assessee's interpretation that Section 80IA of the Act deductions should apply to the total income of the eligible unit as assessed by the AO, including any additions or disallowances made during the assessment process. The legislative intent of Section 80IA of the Act is to incentivize infrastructure development and industrial growth by providing deductions on income attributable to eligible undertakings. This objective is best achieved by allowing deductions on the income computed as per the final assessment, which captures the true profits of the eligible business. The CIT(A) should have directed the AO to allow the deduction under Section 80IA based on the final assessed income of the eligible undertaking, after considering all additions or disallowances. Accordingly, the AO is directed to recompute the Section 80IA deduction on the final assessed income of the eligible industrial undertaking. This ensures that the deduction accurately reflects the undertaking's profits, consistent with statutory provisions and judicial interpretations.

17. The assessee's respective grounds in for AY 2012-13 are allowed.”

16.1. Similarly, if you examine the various stipulations given in the present case, it is clear that the assessee, by assuming essentially extensive financial and market risks, qualifies as a developer, undertaking comprehensive responsibility in infrastructure creation.

17. We further find that, although, CBDT Circular was neither relied upon by the Revenue at that time of argument nor by the Assessing Officer, it is essential to mention that in the present case, there is no mobilization advance as mentioned in the contract. Furthermore, as the contract pertains to the creation of an agricultural / irrigation facility, there is no mechanism for the assessee to recover the cost of creation of infrastructure facility, as the same is peculiar to the BOOT model. The BOOT model is typically applicable to the projects such as airports, highways, cand tunnel construction. However, in the present case, the assessee cannot recover the cost of the infrastructure facility such as dam, pond, bund etc., except through reimbursement from the statutory body, namely, the Superintending Engineer, I & CAD, Mahabubnagar, Telangana State. Therefore, the parameters which are applicable to BOOT Projects can’t be applied mutatis mutandis to the creation of irrigation and agricultural projects, as the freedom to charge in a particular manner cannot be extended 45 NCC HES JV, Madhapur to the developer of such irrigational infrastructure facilities. However, the same is not true with respect to the projects such as highways, tunnels, airports or metro stations, because the cost incurred by the developer can always be factored into the usage charges. However, in agricultural infrastructure, identifying and recovering costs from the end user is difficult. To merely categorize this as a work contract would be a fallacy, as all the risks, rewards, and responsibilities lie with the assessee engaged in the creation of the infrastructure facility. For these reasons, reliance on the decision in the case of JMC Projects (India) Ltd., (supra) is warranted in the facts of the present case.

18. It is useful to mention here that the co-ordinate Bench of the Tribunal in the case of M/s. NEC NCC MAYTAS-JV (supra) has relied upon the decision of Hon'ble Gujarat High Court in the case of Katira Construction Ltd Vs. ACIT. However, the decision in Katira Construction Ltd. (supra) had been discussed in the case of JMC Projects (India) Ltd., (supra), wherein the scope of Katira construction Limited, M.S. Khurana Engineering Ltd., and Montecarlo Ltd. was examined. The Hon'ble Gujrat High Court, in a subsequent decision in Montecarlo Ltd. Vs. PCIT (supra) has held that the scope and application of section 80IA is much broader than what was interpreted in Katira Construction Ltd. and M.S. Khurana Engineering Ltd. (supra).

46 NCC HES JV, Madhapur

“3.6. The Tribunal, considering the above analysis carried out by the CIT (Appeals) held as under : "16. In the instant facts we have to firstly see whether the assessee is engaged in "development" for any "new infrastructural facility" or is engaged only in carrying out repair works or other incidental works, not amounting to development of a new infrastructural facility. In order to be eligible for claim of deduction under Section 80- IA(4) of the Act and to qualify as a "developer" ", the assessee should be engaged in "development" of a new infrastructural facility and mere "repairs and maintenance" or "upkeep" от "revamp" work of existing facility and other incidental works would not qualify for deduction under Section 47 NCC HES JV, Madhapur 80- undefined IA(4) of the Act, being primarily in the nature of "works contract" only. Once the essential threshold of assessee being engaged in "development" of a "new infrastructural facility" is satisfied, as a subsequent step, we need to analyze whether the "other conditions" for qualifying as a "developer" are satisfied ie. the assessee has taken the necessary financial and entrepreneurial risk associated with development of a new project, so as to qualify as a "developer".

17. In this case, we observe that the assessee entered into contract a contract for construction of new domestic arrival block at Sardar Vallabhbhai Patel International Airport, Ahmedabad (refer Pages 144 145 of Paper Book and Pages 27,28-30 of CIT (Appeals) order). It is observed that Ld. CIT(A) at Page 28 of his order observed that the assessee was awarded a contract for full-fledged development undefined of an Airport along-with all facilities like AC, flight information display system, full electrification etc. Therefore, evidently the contract has not been awarded to the assessee for carrying out any repairs, maintenance or upkeep etc. of existing airport facility, but the assessee has been awarded contract for bringing into existence a new infrastructural facility in place being new domestic arrival block at Sardar Vallabhbhai Patel International Airport. Accordingly, the assessee in our view is has been entrusted the responsibility of bringing into existence and "new infrastructure facility" being a new domestic arrival block at Sardar Vallabhbhai Patel International Airport.

18. The next issue for consideration is whether the assessee has undertaken the necessary financial and entrepreneurial risk so as to qualify as a "developer" , or is it a case that the undefined assessee is merely acting on the directions of AAI wherein complete responsibility for finance, man-power, scope of work, penalty provisions etc. are to be borne by AAI and assessee is only working at the behest and under the control and directions of AAI. In this case, we observe that the assessee has furnished bank guarantee to AAI (refer Pages 51-61 of the Paper Book), the assessee has furnished detailed program and CPM work diagram to AAI for its approval (refer Pages 51-61 of the Paper Book), the assessee has prepared and submitted electrical layout drawing for site office (refer Pages 69-70 of Paper Book), the assessee has prepared various other designs like curtain glazing wall (refer Pages 72-98 of Paper Book), honey comb panels designs (refer Pages 99-103 of Paper Book), design for air handling unit Duct & Pipe (refer Pages 104-124 of the Paper Book) etc. Further, the assessee has also undertaken to provide all materials for the project at it's own undefined expenses (other than those which are supplied by AAI) (refer Pages 131 and 06 of Paper Book). The assessee has also undertaken to indemnify AAI employees against action for claim or proceedings relating to infringement or use of any patent or design etc.

48 NCC HES JV, Madhapur (refer Pages 132 of Paper Book). Accordingly, looking into the facts of the instant case, it is observed that the assessee has undertaken to bring into existence a new infrastructure facility being new domestic arrival block at Sardar Vallabhbhai Patel International Airport, Ahmedabad and further the assessee is also undertaken various financial and entrepreneurial risks required to be borne by a "Developer" of a project viz. providing bank guarantee to AAI, procurement of certain materials by the assessee at it's own cost during the construction phase, preparation of various architectural designs relating to the project for approval of AAI etc. which all support the fact that the assessee undefined is in the instant facts is a "developer" within the meaning of Section 80-IA of the Act and is eligible for claim of deduction under Section 80-IA(4) of the Act. We observe that Ld. CIT(A) undertook a detailed analysis of the scope of work undertaken by the assessee and the various risks and responsibilities undertaken by the assessee and then came to conclusion that assessee qualifies as a "developer" and is eligible to claim of deduction under Section 80-IA(4) of the Act. Accordingly, we find no infirmity in the order of CIT(Appeals) so as to call for any interference."

4. In view of the above concurrent findings of fact arrived at by the CIT (Appeals) and the Tribunal, it cannot be said that the respondent- assessee is not a developer as it is found that the assessee was awarded a contract for full-fledged development of an undefined Airport which is evidently not for any repairs or maintenance or upkeep or revamp of the existing Airport facilities but the assessee was entrusted with the work contract of developing a new infrastructure facility at Sardar Vallabhbhai Patel International Airport and the assesse was supposed to undertake necessary financial and entrepreneurial risk so as to qualify as a developer. Hence, we are of the opinion that no question of law much less any substantial question of law would arise from the impugned order passed by the Tribunal. The Appeal therefore, being devoid of any merit is accordingly dismissed.”

20. We further find that in the case of ACIT Vs. Bothra Shipping Services (P.) Ltd. reported in [2024] 166 taxmann.com 608 (Calcutta), the Hon'ble Kolkata High Court has held as under :

49 NCC HES JV, Madhapur “6. The Hon'ble Supreme Court in Commissioner of Income Tax v. Container Corporation of India Limited [2018] 93 taxmann.com 31/255 Taxman 334/404 ITR 397 (SC) explained the object and scope of Section 80IA of the Act by observing that with the purpose of boosting the country's infrastructure specially the transport infrastructure, Finance Act, 1995 which came into effect April 01, 1996 brought an amendment to the provisions of Section 80IA of the Act. In the said decision, the Hon'ble Supreme Court upheld the views taken in the case of Commissioner of Income Tax v. A.L. Logistics Private Limited [2015] 55 taxmann.com 283/230 Taxman 194/374 ITR 609 (Madras). In the said decision, the Hon'ble Division Bench has held that the specific issue as to whether in the absence of a specific agreement with the Central/State Government, local authority or statutory body the assessee is entitled to claim the benefit under Section 80IA(4)(i) was considered and after analysing the terms and conditions of the agreement as well as the orders passed by the Government of India, it was held that the proposal of the said assessee was accepted by the Government on certain conditions which were duly complied with by the said assessee and therefore even if there may not be any specific agreement but the sequence of events clearly show that the assessee therein is providing container freight station facility in accordance with the conditions laid down by the Government and therefore there is no need to insists or the specific execution of agreements. In fact, the above finding rendered by the tribunal was affirmed by the court in the case of A.L. Logistics Private Limited (supra). We also note that the decision in the case of Ranjit Projects Private Limited (supra) has attained finality as the appeal filed by department before the Hon'ble Supreme Court in CIT v. Ranjit Projects (P.) Ltd. [Special Leave Petition (Civil) Diary No. 8895 of 2019, dated 8-4- 2019].

15. In Commissioner of Income Tax v. Continental Warehousing Corporation [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bombay) one of the substantial question which was considered was whether the tribunal erred in holding that the assessee therein was entitled to deduction under Section 80IA(4) which was contrary to the circular of the Central Board of Direct Taxes No. 10 of 2005. The said question was decided against the revenue and in favour of the assessee on the following lines:- 39. A perusal thereof would indicate as to how the Legislature had in mind deduction in respect of profits and gains from industrial undertakings or enterprises engaged in the infrastructure development etc. We are concerned with sub-section (4) and as it read at the relevant time. It says that this section applies to any enterprise carrying on the 50 NCC HES JV, Madhapur business of developing or operating and maintaining any infrastructure facility which fulfills all the conditions, namely, it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act, it has entered into an agreement with the Central Government or a local authority or any other statutory body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility and it has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. The explanation defines the infrastructure facility to mean, inter alia, a port, airport, inland waterway, inland port or navigational channel in the sea. The word "inland port" was always there in clause (d). What was there prior to its substitution by Finance Act of 2007 with effect from 1st April, 2008, were the words "or inland port". Now the word "or" is deleted, but the words are "inland port or navigational channel in the sea". Thus, an "inland port" was always within the contemplation of the Legislature and it is treated specifically as a infrastructural facility. Therefore, to that extent Mr. Dastur is right in his submission.

11. We have heard both parties, perused the material available on record and gone through the orders of the authorities below. We have also carefully considered the relevant case laws relied upon by the AO and LD.CIT(A) in support of their reasoning and also case laws relied upon by the assessee in support of their contentions. The AO disallowed deduction claimed under Section 80IA(4) towards profits derived from infrastructure project Pranahita Chevella Lift Irrigation Scheme, Link-IV, Package No. 10, on the ground that the appellant had not entered into any agreement with Central Government or State Government or local authority or any statutory body and which is a pre-condition for claiming deduction under the said provisions of the Act. It was the contention of the assessee before the AO that the appellant is a ‘developer’ of infrastructure facility, as defined under Section 80IA(4) of the Act, and the profit derived from the development of infrastructure facility, is eligible for deduction under Section 80IA(4) of the Act. In order to resolve the dispute, it is necessary for us to refer to the provisions of Section 80IA(4) of the Act, and conditions provided therein for claiming deduction towards profits derived from eligible project. The provisions of Section 80IA(4) of the Act, deal with deduction in respect of profits and gains from industrial undertaking or enterprise engaged in infrastructure development etc. Sub-section (4) of Section 80IA of the Act, deals with deduction towards 54 NCC HES JV, Madhapur profits derived by any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, which fulfills all the following conditions, namely... “(a) it should be owned by a company registered in India or by a consortium of such companies or [by an authority or a board or a corporation or any other body established or constituted under the central state Act, (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any statutory body for (i). developing or (i) Operating and maintaining or (ii). Developing, operating & maintaining, (c). It has started or starts operating and maintaining the infrastructure facility on or after the 1st Day of April 1995.

12. As per the said section, an “Enterprise” should be owned by a company registered in India or by a consortium of such companies. Further, it shall enter into agreement with the Central Government or a State Government or any local authority or any other statutory body for developing or, operating and maintaining or developing, operating and maintaining any infrastructure facility. Finally, it should start operating and maintaining the infrastructure facility on or after the 1st day of April of 1995. In other words, for claiming deduction under Section 80IA(4) of the Act, any enterprise engaged in the business of developing or, operating and maintaining or any developing, operating and maintaining any infrastructure facility and satisfy the above conditions can claim deduction towards profit derived from development of any infrastructure project. In the present case, there is no dispute with regard to satisfying the conditions of enterprise owned by a company registered in India or by a consortium of such companies. In fact, the appellant is owned by an Indian company. The only dispute is with regard to entering into an agreement with the Central Government or a State Government or any local authority or any other statutory body. In fact, the AO never disputed the fact that the Enterprise is owned by an Indian company and also satisfied the other conditions, however, disputed the condition of entering into an agreement with the Central Government or a State Government or any local authority or any other statutory body. According to the AO, the appellant has not satisfied the condition of entering into agreement with the Central Government or a State Government or any local authority or any other statutory body for developing infrastructure facility. In other words, the AO never disputed the fact that deduction claimed towards profit derived from development of infrastructure facility 55 NCC HES JV, Madhapur is eligible for claiming deduction under Section 80 IA(4) of the Act. According to the AO, the appellant is only a sub-contractor, who executed civil contract work for M/s. HCC, in terms of Work Order No.14020223 dated 22-03-2017. Therefore, the Assessing Officer rejected the claim of deduction under Section 80IA(4) of the Act.

13. We have given our thoughtful consideration to the reasons given by the AO and LD.CIT(A) to reject deduction under Section 80IA(4) of the Act, towards profits derived from development of infrastructure project in light of arguments advanced by the learned counsel for the assessee and we ourselves do not subscribe to the reasons given by the LD.CIT(A) for the simple reason that, there is no dispute with regard to the project developed by the assessee, which is an infrastructure facility, as defined under Section 80IA(4) of the Act. On perusal of the documents submitted by the assessee, it is seen that the project Pranahitha Chevella Lift Irrigation System, Link-4, Package No.10, on which the appellant has claimed deduction under Section 80 IA(4) of the Act, has been awarded by the Government of Andhra Pradesh, Irrigation and C.A.D Department to M/s.HCC-MEIL-BHEL(JV) in terms of Agreement dated 02-12-2008. As per the agreement between the JV and Government of Andhra Pradesh, the civil work is to be carried out by M/s.HCC and mechanical work of the project is to be carried out by M/s.MEIL and M/s.BHEL. The agreement between Government of Andhra Pradesh and JV provides for certain clauses, including sub-contracting certain portion of work to any other contractor, who fulfills eligibility criteria, as per the tender document floated by the Government of Andhra Pradesh for development of said infrastructure project, but the only condition for sub-contracting work to other contractor is, the person, who executing the works should have eligible criteria and work experience and further, the sub-contract should be approved by the developer of the project, i.e., Government of Andhra Pradesh, Irrigation and C.A.D. Department. In terms of agreement with Government of Andhra Pradesh, Irrigation and C.A.D. Department, one of the JV partners, M/s. HCC, in terms of Clause 43 of Agreement dated 02- 12-2008, sub-contracted entire civil work in the project on back-to-back basis to the appellant with all risks and rewards. Further, before entering into sub-contract work with the appellant, the Principal Contractor M/s.HCC has taken permission from the Government of Andhra Pradesh, Irrigation and C.A.D Department and the developer of the project has approved the appellant for executing the civil works. Therefore, it is necessary for us to examine the eligibility of the appellant to claim deduction under Section 80IA of the Act, in light of the infrastructure project developed by the Government of Andhra Pradesh, Irrigation and C.A.D. Department, the JV agreement between the constituent partners dated 02-12-2009, bid document for the Project Pranahitha Chevella Lift 56 NCC HES JV, Madhapur Irrigation Scheme, issued by the Government of Andhra Pradesh and the Work Order issued by M/s.HCC to the appellant company.

14. The project Pranahitha Chevella Lift Irrigation Scheme is a huge irrigation Scheme developed by the Government of Andhra Pradesh for lifting 88.24 TMC of water from Mid Manair to new reservoir at Ananthagiri Village, Illanthakunta Mandal, Karimnagar District by water conveyor system with all associated components to irrigate an ayacut of 30,000 acres. The total size of the contract value as per revised estimate was Rs.2715 crores. If you go by the type of infrastructure project undertaken by the JV partners and the size of the contract value, it is impossible for a single person to execute such a huge infrastructure facility, within a short time. Therefore, considering the nature and size of the infrastructure facility, the developer i.e., Government of Andhra Pradesh, Irrigation and C.A.D. Department itself has provided for sub- contracting up to 50% of the work to the other eligible contractors upon satisfying the eligibility criteria and having required experience and strength to carry out the development work, which is provided in Clause 43 of the Agreement between the JV and the Government of Andhra Pradesh. Further, M/s.HCC-MEIL-BHEL(JV) has sub-contracted the entire civil work to the appellant company, after considering the experience and strength of the appellant and also after obtaining necessary permission from the authorities, as required under the BID document. Since the condition of sub-contracting portion of work to other contractor is ingrained in the agreement between the JV and Government of Andhra Pradesh itself, in our considered view, the agreement between the appellant company and M/s.HCC for developing the project (civil works) is akin to agreement with the Central Government or a State Government or any local authority or any other statutory body. In our considered view, once the project is considered to be ‘eligible project’ in terms of provisions of Section 80IA(4) of the Act and there is a provision for sub-contracting portion of the work to the other contractor, as per clauses of the agreement between the parties, in our considered view, the agreement between the appellant company and one of the JV partners is as good as, the agreement between the authorities and the developer for developing the project and it goes back to the date of original agreement. Therefore, we are of the considered view that Assessing Officer, upon satisfying the fact that the profits derived from the project of development of infrastructure facility is eligible for claiming deduction under Section 80IA(4) of the Act, erred in disallowing the claim of the appellant only on the ground that the agreement between the appellant and M/s.HCC is not in terms of section 80IA(4) of the Act, and thus, in our considered view, reasons given by the Assessing Officer is incorrect and cannot be accepted.

57 NCC HES JV, Madhapur

15. Having said so, let us come back to the nature of work undertaken by the assessee. As we have said in earlier part of this order, the appellant has developed an infrastructure facility, in the nature of irrigation project, which satisfies the conditions for claiming deduction under Section 80IA(4) of the Act. Further, if you go by the scope of the project work, as defined in the BID document, it is a huge irrigation project for drawing 88.24 TMC water from Mid Manair Reservoir in 120 days with a static head of about 88 mtrs lift in single stage at Anantagiri Village and the project requires large-scale civil, mechanical, and electrical works. Therefore, going by the nature of the project and size, in our considered view, the appellant has undertaken all the entrepreneurial and investment risk that any developer would have undertaken. The appellant has also undertaken the risks of the project. There was no reduction in quantum or quality of risk undertaken by the appellant in whatsoever manner, as the project was undertaken from a JV partner on back-to-back basis. A look at the business profile of the appellant clearly demonstrates that entrepreneurial and investment risk undertaken by the appellant in this venture. For example, the appellant has undertaken the following activities including, investigation of land and deciding the location of facilities, project design associated risks, defect liability risk of 24 months after project completion, inherent risk of delayed payment, arbitration and litigation, and development work to be completed as per the agreement within time and as such, the assessee was faced with the risk of incurring heavy expenses of correction or redoing the work. Therefore, going by the nature of work and the work executed by the assessee, it is not less than to any developer, who develops a big infrastructure project like irrigation projects. Therefore, having noticed that the assessee has carried out development of infrastructure project, as defined under Section 80IA(4), upon satisfying the conditions of the BID document, in our considered view, the AO ought not to have rejected the claim of the appellant merely for the reason that the appellant has not entered into any direct agreement with the Central Government or a State Government or any local authority or any other statutory body. In our considered view, if you go by the provisions to Section 80IA(4) of the Act, it even allows deduction under Section 80IA(4) of the Act, to a successor entity, in case of transfer of project to other entity for operating and maintaining of infrastructure facility, and thus, in our considered view, the proviso does not require that there should be a direct agreement between the transferee enterprise and the specified authority for availing the benefit under Section 80IA of the Act, and this legal principle is supported by the decision of Hon'ble Madras High Court in the case of CIT Vs. Chettinad Lignite Transport Services (P.) Ltd (supra).

58 NCC HES JV, Madhapur

16. We further noted that the professed goal of the legislation of Section 80IA(4) as per explanatory memorandum to Finance Bill, 2001 is measures to accelerate economic development – liberalization of tax holiday provisions for infrastructure under the existing provisions of Section 80IA i.e., roads, highways, bridges, airports, ports etc., Therefore, the legislation has extended the scope of deduction under Section 80IA of the Act, keeping in view the capital intensive nature of big infrastructure projects like irrigation projects etc. The CBDT issued a Circular No.4 of 2010, dated 18.05.2010, which was issued after introduction of the explanation by the Finance Act 2009, and a reading of the Circular would indicate that the Board clearly mentioned that the widening of existing road is an infrastructure facility, and any enterprise carrying out the widening of an existing road would be eligible for deduction under Section 80IA(4) of the Act. This also shows that it was never in contemplation of Legislature to assign a literal and constricted meaning to development vis-à-vis a simple contract. Therefore, from the intention of the legislation and clarifications issued by the CBDT, it is absolutely clear that the sole motive of the provisions of Section 80IA of the Act, is to provide deduction towards profit derived by the enterprise from development of an infrastructure facility and further, by way of proviso to Section 80IA(4), the Legislature has provided deduction for remaining period to any enterprise, who succeeds the project by way of amalgamation or transfer, etc. Therefore, in our considered view, once the successor entity is eligible to claim deduction under Section 80IA, then there is no question of denying the said benefit to any enterprise, which is a joint partner of said infrastructure facility. Since the appellant is one of the partners of the development of irrigation project, in our considered view, the appellant is entitled for deduction under Section 80IA(4) of the Act.

17. The appellant has relied upon the decision of Hon'ble Madras High Court in the case of CIT Vs. Chettinad Lignite Transport Services (P.) Ltd (supra), wherein the Hon'ble High Court has considered an identical issue of deduction under Section 80IA(4) of the Act, in light of claim made by successor entity upon transfer of enterprise to other authority for operation and maintenance of infrastructure facility, and after considering the relevant facts and also provisions of Section 80IA(4) of the Act, held that even the sub-contractor is eligible for deduction as per the proviso of Section 80IA(4) of the Act, and there is no requirement of direct agreement between the specified authority and the transfer enterprise. The relevant findings of the Hon'ble High Court of Madras are as under :

59 NCC HES JV, Madhapur “8. From a reading of the aforesaid Provisos to Section 80IA (4), it is clear that the Legislature intended to extend the said bene fit under section 80IA of the Act to an enterprise involved in (i) developing or; (ii) operating and maintaining Or; (iii) developing, operating and maintaining any infrastructure facility. The term "infrastructure facility" has been defined in the Explanation and the same includes a toll road, a bridge or a rail system, a highway project, etc. These are, obviously, big infrastructure facilities for which the enterprise in question should enter into a contract with the Central Government or State Government or Local Authority. However, the Proviso intends to extend the benefit of the said deduction under Section 80IA of the Act even to a transferee or a contractor who is approved and recognised by the concerned authority and undertakes the work of the said development of infrastructure facility or only operating or maintaining the same. The Proviso to sub-section (4) stipulates that subject to the fulfillment of conditions, the transferee will be entitled to the said benefit as if the transfer in question had not taken place. It has been found by the Assessing Authority himself, the present assessee in Transport Services Private Limited under M/s. Chettinad, the present case that an Agreement dated 16.04.2002 captioned as Lignite Transport System with M/s. ST-CMS Electric Company Private Limited, had undertaken the work of developing the said railway sidings and was operating and maintaining the same. The only ground on which the Assessing Authority denied the said benefit was that the assessee himself did not enter into any such contract with the Railways or with the Central Government.

9. The learned Tribunal, however, in our opinion, rightly applied the Proviso to Section 80IA(4) of the Act and held that since the assessee was recognised as contractor for these railway sidings, which undoubtedly fell under the definition of "infrastructure facility," it was entitled to the said benefit under Section 80IA of the Act. The grounds on which the Assessing Authority denied the said benefit to the assessee ignoring the effect of Provisos to Section 80IA(4), therefore, could not be sustained. The Tribunal, in our opinion, has rightly held that the law does not require that there should be a direct agreement between the transferee enterprise and the specified authority availing the benefit under Section 80IA of the Act. There is no dispute before us that the assessee was duly recognised as transferee or assignee of the principal contractor M/s. ST-CMS Electric Company Private Limited and was duly so recognised by the Railways to operate and maintain the said railway sidings at Vadalur and Uthangal Mangalam Railway Stations. The findings of fact with regard to the said position recorded by the learned Tribunal are, therefore, unassailable and that clearly attracted the first Proviso to Section 80IA(4) of the Act. [Emphasis supplied].”

60 NCC HES JV, Madhapur

18. The assessee had also relied upon the decision of ITAT Hyderabad Bench, in the case of ACIT Vs. Megha Engineering & Infrastructure Ltd., in dated 25.09.2024, wherein the Coordinate Bench of the Tribunal has considered the deduction claimed under Section 80IA(4) of the Act, by a constituent partner of JV, in light of agreement between the JV and specified authority, and after considering the relevant provisions held that partner of JV is also eligible for deduction, if such deduction is not claimed by the JV. The Co-ordinate Bench of the Tribunal further held that in case of agreement with the specified authority, if the JV is entered into agreement with the specified authority, it is as good as the constituent partner is entered into agreement with the specified authority and further held that it satisfies the conditions provided under Section 80IA(4) of the Act. The relevant findings of the Tribunal are as under : “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.

61 NCC HES JV, Madhapur 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 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 62 NCC HES JV, Madhapur 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.

11. The appellant has relied upon the decision of Income Tax Appellate Tribunal, Hyderabad in assessee’s own case for assessment years 2010- 11 to 2015-16, in to 601/Hyd/2016 dt.15.02.2019. We find that the co-ordinate bench of ITAT for earlier years has considered very similar issues and by following the decision of Income Tax Appellate Tribunal, Visakhapatnam in the case of M/s. Transstory (India) Ltd. Vs. ITO (supra) has held that the assessee is entitled for deduction under section 80IA(4) of the Act on the profits earned from the execution of the projects awarded to JV / Consortium. The relevant findings of the Tribunal are as under. “9.2 With regard to other issue, i.e. contracts awarded to JVs and whether the assessee can claim the same as a constituent of the above JVs, the coordinate bench of ITAT, Visakhapatnam in the case of Transstory (India) Ltd. (supra) held that the constituents of JVs are eligible to claim deduction u/s 80IA. For the sake of clarity, we reproduce the findings of the Bench in the said case, as under: "Undisputedly the joint venture or the consortium was formed only to obtain the contract from the Government bodies. At the time of execution of the joint venture or the consortium, it has been made clear that work/project awarded to the joint venture would be executed by the joint venturers or the constituents. As per mutually agreed terms and conditions between them, it was also agreed that each party shall be responsible for the provisions of contract without limitation on resources required for the purpose of fulfilment of the scope and also solely responsible for the performance of its scope of work and shall bear all technical, commercial and facing risk involved in performing its scope of work. It was also agreed that none of the party shall assign its rights and obligations to any other party without written consent of other party. From a careful perusal of this joint venture agreement and the consortium agreement, it is evidently clear that the joint venture and the consortium was formed only with an object to bid contract. Once the project or 63 NCC HES JV, Madhapur contract is awarded to the joint venture or the consortium, it is to be executed by its constituents or the joint ventures in a ratio agreed upon by the parties. In the instant case in case of a joint venture agreement, the assessee was entitled to execute the 40 per cent of total work awarded by the Andhra Pradesh Government to the joint venture and in case of a consortium it was agreed that the entire work is to be executed by the assessee itself. Therefore for all practical purposes, it was the assessee who executed the work contract or the project awarded to the joint 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."

64 NCC HES JV, Madhapur 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 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.”

19. Coming back to the case laws relied upon by the ld.DR in the case of DCIT Vs. M/s.HES Infra Private Limited (supra). The co-ordinate Bench of the Tribunal by following the decision of Hon'ble Supreme Court in the case of Commissioner of Customs (Import) Vs. M/s. Dilip Kumar and Company and others (supra), rejected the claim of the appellant deduction under Section 80IA of the Act, for not satisfying the condition of entering into agreement with specified authority. We find that the Co- ordinate Bench of the Tribunal of ITAT in the case of ACIT Vs. Megha Engineering and Infrastructure Ltd, (supra) has considered the decision relied upon by the ld.DR in the case of DCIT Vs. M/s. HES Infra Pvt. Ltd. (supra) and upon giving reasons, distinguished the decision of the co- ordinate Bench of the Tribunal in the case of DCIT Vs. HES Infra Pvt. Ltd. (supra) and relevant findings of the Tribunal are as under : “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 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 65 NCC HES JV, Madhapur 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 co-ordinate bench of the Tribunal. Further, the Hon'ble Supreme Court, in a subsequent decision in the case of Government of Kerala and another Vs. Mother Superior Adoration Convent in Civil Appeal No.202 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 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 66 NCC HES JV, Madhapur 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. in the case of DCIT Vs. HES Infra Pvt. Ltd (supra).”

20. In this view of the matter, considering the facts and circumstances of the case, and also, by following the decision of Hon'ble Madras High Court in the case of CIT Vs. Chettinad Lignite Transport Services (P.) Ltd (supra) and the decision of ITAT in the case of ACIT Vs. Megha Engineering and Infrastructure Ltd., (supra), we are of the considered view that the appellant is entitled for deduction u/s 80IA(4) of the Act, towards profits derived from development of infrastructure facility. The LD.CIT(A) without appreciating the relevant facts, simply sustained the addition made by the Assessing Officer towards disallowance of deduction claimed under Section 80IA(4) of the Act. Thus, we set aside the order passed by the LD.CIT(A) and direct the AO to delete the addition made towards disallowance of deduction claimed under Section 80IA(4) of the Act.”

67 NCC HES JV, Madhapur and 689/Hyd/2024 for A.Ys.2018-19 and 2020-21