GMR TAMBARAM TINDIVANAM EXPRESSWAYS LIMITED ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3(1)(2), BANGALORE

PER BENCH : These are four appeals in all, two by the assessee and the other two by the Revenue filed against the separate orders of the

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 2

CIT (A) -3, Bengaluru, dt.23.01.2018, for the assessment years 2013-14 and 2014-15 respectively.

A Common grounds raised by the assessee in ITA no 545 & 546/Bang/2018 for both the assessment years, but for change in figures of disallowance are as under:

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 3

2.1 The Government of India has by notification no S.O. 92 dated December 19th 1988 entrusted NHAI with the stretch of National Highway from km 28/0 to km 121/00 in Tambaram Tindivanam Section on NH-45 in the State of Tamil Nadu. NHAI in discharge of its functions, envisaged under section 16 of the NHAI Act was keen to implement the aforesaid stretch of NH-45, a Project envisaging strengthening of the existing 4 lanes from km. 28/0 to km 67/0 and widening thereof to the existing 2 lane from km 67/0 to km 121/0 to 4 lane dual carriageway, with private sector participation on Build, Operate and Transfer (BOT) basis.

2.2 NHAI carried out extensive project development work in connection with the project including engineering studies, assessment of feasibility and preparation of a detailed project report. Accordingly, NHAI invited competitive proposals from eligible persons for implementing the project and in response thereto NHAI received proposals from several persons including GMR Consortium for implementing the project. NHAI, after evaluating the proposals, accepted the proposal submitted by GMR Consortium and issued Letter of acceptance dated August 16th 2001 (LOA) to the Consortium.

2.3 In accordance with the terms of proposals submitted by GMR Consortium, the Consortium was required to incorporate a separate entity to develop and implement the project. Accordingly, the GMR Consortium incorporated the assessee company (i.e. Concessionaire) on August 27, 2001 as a Special Purpose Vehicle (SPV) to implement, operate and maintain the project and NHAI has agreed to grant) the Concessionaires, the Concession. Accordingly,

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 4

the assessee has entered into a Concession agreement dated October 9th 2001 with NINA! to comply with the terms of the Concession Agreement.

2.4 As mentioned in Article 2 of the Concession agreement "Grant of Concession" set forth .the 'scope of work to be undertaken by the assessee was as under under:

`Subject to and in accordance with the terms and condition set forth in this Agreement, NHAI hereby grants aid authorises the Concessionaire to investigate, study, design, engineer, procure, finance, construct, operate and maintain the project / project facilities and to exercise and /or enjoy the rights, powers, benefits, privileges, authorisations and entitlements as set forth in this Agreement (`the Concession')'

2.5. Further, the Concession agreement define the term "Project", "Project Site", "Project facilities" "Concession Period" and Schedule D as under:

"Project" means design, financing, construction, operations and maintenance of the project facilities in accordance with the provisions of this agreement.

"Project Site" commences from Tambaram south of existing ROB at km 28.00, traverses generally in south west direction and ends at km 121.0 near Tindivanam an NH-45. The width of the existing Right of Way (ROW) comprised in the project site is given in Table B-1 to the Concession Agreement.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 5

Further the NHAI has acquired additional land to have land width of 20m from the existing paved shoulder edge on right side from km 67.00 to km 111.00 and on left side from km 111.00 to km 121.00

The project site shall also include additional land if any, handed over by NHAI to accommodate any of the project facility.

"Project Facilities" means collectively the facilities set out in Schedule 'D' to the Concession Agreement to be designed, constructed, built, installed, erected or provided by the Concessionaire on the project site in accordance with the design requirements and construction requirements.

"The facility to be procured, constructed, built, installed, erected or provided by the concessionaire in the project facility shall be those set out in Detailed Project Report (DPR) and Schedule — D to the Concession agreement.

"Concession Period" means the period of Concession specified in Article 2.2, as applicable. As per Article 2.2 to the concession period "The Concession hereby granted is for a period of 17 Years 6 months commencing from the Commencement Date and ending with 8th November, 2019 ('the Concession Period") during which the Concessionaire is authorised to implement the Project and to operate Project Facility in accordance with the provisions hereof'.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 6

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 7

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 8

2.6. Further, as per Article 5 of the Concession Agreement 'Concessionaire's Obligation' where the Concessionaire was required to fulfill certain obligation before the start of the construction of project and during the concession period which was for a period of 17 years and 6 months. These are broadly summarised as under:

Performance Security (i)

(ii) Financial Arrangement

(iii) Drawings

(iv) Project Implementation and Construction Works

(v) Operation and Maintenance

(vi) Insurance

(vii) Shareholding, and,

(viii) General Obligations

2.7 The Concession granted to the appellant company is for a period of 17 years and 6 months commencing from the commencement date (i.e. May 9th 2002) and ending on November 8th 2019 during which the appellant company is required to implement the Project and to operate and maintain the Project Facilities in accordance with the provisions of Concession agreement.

2.8 Ld AR had submitted that the assessee had incurred an amount of Rs. 361.95 Crores for the implementation of the project / project facilities in terms of the Concession agreement with NHAI. The aforesaid cost of the project was financed as per details below :-

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 9

Amount (Rs. in Source of Fund Crore) Equity Capital 1.00 Preference Capital 106.70 Debt in the form of loan from banks 254.25 TOTAL 361.95 2.9 Besides, the appellant is also required to operate and maintain the project for period of 15 years from the date of achieving the commercial operation.

2.10 The ld AR submitted that in lieu of implementation, operation and maintenance of the project and project facilities by the appellant company, NHAI is required to pay semi Annuity of Rs. 41.856 Cr on half yearly basis on each annuity date i.e. May and November as detailed in Schedule-J to the Concession agreement. The amount of annuity payment shall get reduced in the event of non-availability of highway for the default of concessionaire in terms of the Concession Agreement.

2.11. The ld AR submitted, the assessee has been formed as a Special Purpose Vehicle (SPV) to specifically implement, design, develop, operate and maintain the stretch from km 28/0 to km 121/0 on NH-45 on Build, Operate and Transfer (BOT) basis. The infrastructure project, awarded by NHAI on BOT basis falls under the definition of infrastructure facility as per the provision of section 80IA of the Income Tax Act, 1961 and is eligible for deduction @ 100% of the profit earned from the business of development, operation and maintenance of Tambaram-Tindivanam section of NH-45 in the State of Tamil Nadu. The assessee has been allowed deduction u/s 801A from AY 2007-08 onwards and for AY 2013-14 and 2014-15 the assessee appellant claimed deduction as per details given below:-

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 10

SI Particulars AY 2013-14 AY 2014-15 No 1 Profit from the business of Rs. Rs. 11,29,02,768 10,56,77,828 Development, Operation and maintenance ofTuni-Anakapalli Section of NH-5 in the State of Andhra Pradesh Amount of deduction claimed 2 Rs. 10,56,77,828 Rs. 11,29,02,768 u/s.80IA

2.12.1 However, the AO on completion of the assessment allowed only 50% of the claim made u/s 80IA by the appellant in the return of income as per details given below:-

SI Particulars AY 2013-14 AY 2014-15 No 1 Claim u/s 801A allowed Rs. 5,28,38,914 Rs. 5,64,51,384 By the assessing officer

3 The ld AR submitted that the assessee entered into a Concession Agreement with National Highways Authority of India in October, 2001. For the purposes of Article 2, 2.1 of the agreement, the assessee drawn our attention to the definition of a. Annuity b. Concession period c. Concession d. Consortium

The assessee also drew our attention to the letter dt.16.08.2001 where the details of the work awarded to the assessee are mentioned in Schedule B, to the following effect :

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 11

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 12

The above clearly shows that simply relaying of an existing road would not be classifiable as a new infrastructure facility for the purpose of section 80-The strengthening of existing road is nothing but relaying of existing road and hence in view of same, the assessee would not be eligible for deduction under section 80-IA with respect

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 13

to strengthening of existing road which is nothing but a works contract. The income derived from works contract is not eligible for deduction u/s. 80-IA as held in the following decisions: Chennai ITAT in the case of ACIT v Indwell Lianings Pvt. Ltd. (i) Appeal No. : ITA Nos. 1631 & 1632 (Mds.)/2007. Delhi ITAT in the case of Shristi Infrastructure Development (ii) Corporation Ltd. (33 SOT 407).. Hyderabad ITAT in the case of M/s. Koya And Company (iii) Construction Ltd vs, ITO in ITA No 417/Hydi/2013 for AY 2008-09 and ITA Nio.418/Hyd/2013 for AY 2009-10 Mumbai ITAT in the case of Smc Infrastructure P. Ltd, Thane (iv) vs ACIT in ITA No 678 & 679/Mum/2010 for AY 2006-07 Biotech Medicals (P) Ltd., 121 'TTJ 858 (v) B.T.Patil & Sons Belgaum vs. ACIT 126 TTJ 577 (Mum) (vi) (vii) Ahmedabad ITAT in the case of Modern Construction Co (P.) Ltd vs DCIT (42 Taxmann.com 172) (Ahd-Trib) (viii) Hyderabad ITAT in the case of KMC Constructions Ltd vs. ACIT (21 Taxmann.com 138) (Hyd-Trib)

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 14

applicability of certain judgments, had decided the issue with respect to a) With respect to the strengthening of carriageway from 28 km to 67 kms, the CIT (A) had disallowed the claim of the assessee on the ground that strengthening of the existing lane would not come within the definition of creating new infrastructure and for that purposes CIT(A) relied upon the circular of the CBDT and held order passed by AO disallowing u/s.80IA in relation to the income from the activity of strengthening of the existing carriageway was correct. b) strengthening and widening of the existing two lane to four from 67 kms to 121 kms to be an infrastructure within the meaning of infrastructure u/s.80IA and had hence allowed the claim of the assessee .

However as the assessee has not given the details of the income which arose to it in respect of strengthening , repair and improvement of existing lane from 28 to 67 kms, the CIT (A) had pro-rata reduced 50% disallowance made by AO to 25% of the income. The particulars of claim allowed and disallowed by the CIT(A) are under:

SI Particulars AY 2013-14 AY 2014-15 No 1 Claim u/s 80IA allowed by the Rs. 2,64,19,457 Rs. 2,82,25,692 CIT(A) 2 Claim u/s 80IA disallowed by the Rs. 2,64,19,457 Rs. 2,82,25,692 CIT(A)

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 15

06 Now the assessee is in appeal with regard to the disallowance of deduction u/s.80IA pertaining to the income arising to the activity of strengthening of the existing four-lane and also for reduction of deduction from 50%to 25% of 80IA claim , whereas Revenue is in appeal before us in respect of treatment given by the CIT(A) treating the development done by the assessee as infrastructure .

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 16

08 The Ld. AR has made following arguments: 1. Deduction u/s 801A is to be allowed to an assessee carrying on business of developing of roads or infrastructure facility who have entered into a

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 17

valid contract with the Government or Government agency for developing, operating and maintaining any infrastructure facility, 2. Deduction u/s 80IA is available to entities who are (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, 3. Deduction u/s 80IA is to be allowed when assessee had developed a road project and transferred the same for the purpose of operation and maintaining to third party, 4. Deduction u/s 8-IA is to be allowed to the assessee, as the assessee is a developer and not a works contractor when it has procured raw material, make arrangement for power, water, plant & machinery etc. and conducted all other activity needed for construction and has invested huge funds in the project for developing, operating and maintaining any infrastructure facility, 5. Work involving strengthening, improving and widening of existing road is to be considered as new infrastructure facility eligible for deduction under section 80-IA, 6. If the assessee is engaged in the business of construction / development of infrastructure facility, claim u/s 80IA cannot be rejected on the ground that assessee is a contractor and not a developer, 7. Expansion or extension of an existing unit, would not disentitle assessee to claim deduction under section 80-IA/80-1B where it develops, operate and maintain an infrastructure facility, 8. It will be deemed to be new infrastructure facility if the life of the existing infrastructure facility is increased for sufficiently long period by incurring huge expenditure, 9. A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally, 10. Deduction u/s 801A is to be allowed during current year if, allowed in earlier assessment years. In other words, principle of consistency needs to be followed. Reliance is placed on Bangalore ITAT decision in ITA No 1132 & 1133/Bang/2018. 11. The strengthening of the existing four lanes is required to be treated as a development of infrastructure activity in terms of various terms and conditions of the contract ; 12. The assessee under the agreement in respect of four-lane is not only required to strengthen the lanes so as to make it compatible to combat the heavy flow of traffic but also to build-up the service lane for the discharging of obligation under the agreement.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 18

The Ld. AR relied upon the following judgment :

09 On the basis of the above it was submitted that in all the above judgments it was the consistent view taken by the Hon’ble High Courts and the Tribunals that the strengthening and widening

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 19

of existing road would come within the purview of the laying down of infrastructure and hence the assessee is entitled to the benefit u/s.80IA of the Act. It was unanimously held by the courts in the above judicial precedents that if the assessee is maintaining and operating the existing infrastructure then deduction u/s.80IA is available. It was further contended by the ld. AR was that if the assessee is required to maintain the work of cementing, strengthening and laying down the road, then also the assessee is entitled to the deduction u/s.80IA. Our attention was also drawn to the order passed by the AO in the previous year, wherein the AO has held that the assessee is entitled to the deduction u/s.80IA on strengthening of the four lane from 28 kms to 67 kms. On the principle of consistency, Following the principle of consistency the assessee is entitled to the relief from this Tribunal.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 20

the assessee on maintenance and laying down of the service road for the purpose of claiming the benefit of section 80IA is unfounded because the service roads cannot be equated with the main lane. The maintenance of existing main lane from 28 to 68 kms was the essential purpose of the agreement for which the contract was given by NHAI to the assessee and therefore the benefit cannot be given to the assessee.

11.1 We have heard the rival submissions and perused the record as also the case laws cited by both the parties. Before we deal with the factual aspect of the matter, it is relevant to keep in mind the purposes of introduction of Section 80IA in the statute book. In our understanding the purpose of introduction of Section 80IA to the statute book was to encourage and accelerate the development of new infrastructure in the country. With that objective in mind, the legislature thought it appropriate to give the deduction to such undertaking which are involved in development and creation of the infrastructure. Section 80IA(4) provides circumstances when this section shall be applicable . 11.2 From the reading of 80IA(4)(i)(b) it is amply clear that, if an enterprise has entered into agreement with central government, state government or local authority, for developing, operating and maintaining of a new infrastructure, then said assessee would be entitled for deduction u/s.80IA of the Act. The infrastructure facilities is defined in Explanation to Section 80IA(4), as under :

Explanation For the purposes of this clause, “infrastructure facility” means—

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 21

(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 ; (d) a port, airport, inland waterway, inland port or navigational channel in the sea ;

With respect to other stretch of infrastructure, there is no quarrel that the assessee has laid down the new infrastructure pursuant to the agreement entered between the assessee and NHAI, the assessing officer has granted the benefit of 50% of deduction , only on the premise, that the assessee had laid down the new

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 22

infrastructure from 67 km to 121 km . Even otherwise , this issue of laying down of the additional lanes along with the integration and assimilation of the existing 2 lanes is no more res- integra, as it accommodated by the board in its circular mentioned by the assessing officer and the appellate authority.

Further If we examine the facts of the present case, it is clear 13. from page 115 onwards that the work undertaken by the assessee were in the nature of operating and maintaining of the existing roads. For the purposes of clarify we are reproducing herein the scope of work which is as under :

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 23

From perusal of the above it is clear that the assessee is 14. operating and maintaining the already existing road for which the assessee is entitled to annuity along with the annuity for developing, maintaining and operating the other part of the road.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 24

With regard to the argument of the assessee that the service 15. lane was developed by the assessee pursuant to the agreement we have considered opinion definition of service road and main lane as mentioned in Schedule D to agreement, are different and laying down of the service lane cannot be entitled the assessee to claim the benefit of laying down of the new infrastructure. we do not find that the benefit of maintenance and creation of service road can be given to the assessee.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 25

vis-a-vis, improving, maintaining, refurbishing the existing road. Circular No.4 of 2010 of the CBDT only provides the scope of section 80IA to include within its ambit the widening of the existing road, but the road which exists or the infrastructure which is existing cannot form part of the development of the infrastructure because the infrastructure which is already developed is incapable of being developed again. Hence the assessee is not entitled to any relief pertain to disallowance relating to existing four lanes 28 km to 67kms.

16.1 Now we will discuss the decision cited by the assessee. In The first judgment relied upon by the assessee was Kotarki Construction P. Ltd (supra). In this regard, the Ld. AR submitted that the relaying of roads and maintenance of roads would fall within the four corners of Section 80IA. The findings of the Hon’ble jurisdictional High Court in para 18 and 19 have been reproduced elsewhere in this order. If we look into the facts which are mentioned in para 7 of the judgment, wherein it is stated as under : It is further stated by the Executive Engineer PWD, Bidar that out of the total work of Rs.1,94,93,022/- work to the extent of Rs.4,88,236/- pertains to repairs and the work relating to the construction of road is Rs.1,90,04,786/-. If the above facts are read along with the finding recorded by the Hon’ble High Court in para 18 and 19, it is clear that the work of improvement of road, relaying, repair of roads etc., have been excluded while computing the deduction u/s.80IA(4) of the Act. In

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 26

the present case, the first claim as discussed herein above was in respect of repair of road, relaying of road and improvement of road and therefore the action of the lower authorities is in conformity with the law laid down by the Hon’ble jurisdictional High Court. In our understanding, the judgment relied upon by the assessee is in fact against the assessee.

16.2 The next judgment relied upon by the Ar was ACIT v. Ho Hup Simplex JV (92 taxmann.com 106) of the Kolkata Tribunal of the Tribunal. The facts of the said decision are not applicable to the facts of the present case as, the dispute in the decision was pertaining to whether the assessee who was awarded the work of contract to construct the road and was procuring the raw material and make arrangements for water, power and machinery, was entitled to deduction u/s.80IA or not. In that context, the coordinate bench had held that the assessee was entitled to the benefit of Section 80IA of the Act, as it developed the new infrastructure. In the present case, the dispute is whether the assessee has developed, maintained and operated a new infrastructure or not as we have noticed herein above, the assessee here has not created any new infrastructure rather had only improved and maintained the existing infrastructure for the stretch 28 to 67 kms of the said highway. Therefore the assessee is not entitled to the benefit of section 80IA(4). Hence this decision is not applicable. 16.3 The next decision relied upon by the assessee is in the matter of Rohan & Rajdeep Infrastructure v. ACIT of ITAT, Pune [ITA.1214/PN/2010]. The facts of this case also are different as

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 27

that was a case of widening of road and levelling and integrating of the existing road thereafter. Para 8 of the above decision shows that the case was pertaining to increasing the height of the road and widening by one meter vide shoulders by using Dalmera Kankar in 50 cm thickness In the present case, the first stretch of 28 to 67 kms do not involved widening of road, but strengthening of the existing infrastructure. Hence this decision is not applicable to the case on hand before us. 16.4 The next decision relied upon by the assessee is ACIT v. Rajahmundry Expressway Ltd [ITA No.2798/Del/2011, dtt.07.07.2015]. This decision also pertains to development of project and widening of road. The Tribunal relied upon the CBDT circular and held the action of the CIT (A) as correct. However, in the present case, there is no widening of the road. Hence, it is not applicable. 16.5 The assessee also relied upon the decision of the Tribunal in the matter of Vijay Infrastructure Ltd v. ACIT (ITA.254/LKW/2015, dt.30.10.2015], where in para 14.2, the facts were mentioned, as under : 14.2 From the above Para of this tribunal order, it comes out that if the contracts involves design, development, operating & maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under s. 80IA and profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be accepted as development and cannot be said to be contract simplicitor to apply the explanation. In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 28

development of road and is not a mere contractor as he had deployed his own capital, used his own management and expertise in maintenance and had to bear the risk and defect correction. These findings of CIT (A) could not be controverted by learned DR of the revenue and therefore, this tribunal order rendered in the case of Koya & Co. (Supra) is squarely applicable because the facts are similar. In the order of CIT (A), he has followed this tribunal order and various other judicial pronouncements as noted by him in his order, as reproduced above. Considering this factual and legal position, we find no infirmity that the order of CIT (A) on this aspect that in the facts of the present case, it cannot be said that the assessee company was mere a contractor and not a developer. Therefore, on issue No. 3, we find no infirmity in the order of CIT(A). This issue is decided in favour of the assessee. From a perusal of the above it is clear that the dispute in the said case was in respect to whether a developer of infrastructure is entitled to the benefit of Section 80IA or not. However, the facts in the present case are different and hence this decision is not applicable. 16.6 Another decision referred by the assessee was in the matter of Adhunik Infrastructure P. Ltd, [ITA.1281/Kol/2015, dt.23.05.2018], in para 9.4, the Tribunal has discussed the various decisions and came to the conclusion that a developer is entitled to the benefit of section 80IA. In the present case, the facts in dispute before us pertains to whether a developer who has maintained and operated an existing infrastructure is entitled to benefit of section 80IA(4) or not. As the assessee here has not laid down or created a new infrastructure, from 28 to 67 km of the Highway, therefore the assessee is not entitled to the benefit of section 80IA. 16.7 One other decision relied upon by the assessee is in the matter of UP State Bridge Corporation Ltd v. DCIT [62

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 29

taxman.com 61] of Lucknow Tribunal, wherein the Tribunal has recorded that the principle of consistency is required to be followed. At this stage, if we look into the decision of the Tribunal in the case of DCIT v. M/s. GMR Tuni – Anakapalli Expressway P. Ltd [ITA.1132 & 1133/Bang/2018, dt.10.08.2018, copy of which was filed along with the written submission, we find that the Tribunal has not discussed the facts of the present case and had merely followed the decision passed in the earlier order where the facts in that case were of widening the two lane carriage way into four lane and thus the assessee was found to be eligible for the benefit u/s.80IA of the Act. 16.8 The submission of the assessee that the principle of consistency is required to be followed. In our view the principle of consistency is merely a guiding factor to decide the issue in the absence of higher wisdom available in the form of binding decision of the superior court. In the present case, as mentioned herein above, the Hon’ble jurisdictional High Court in the matter of Kotarki Constructions (P.) Ltd.(supra) in paras 18 and 19 held as under : 18. The said Explanation as explained in the Memorandum of Finance Bill 2007 as quoted above, clearly lays down the guidelines when it says, " in contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA", intended to deny the benefit of such deduction only to the sub-contractors, who were executing such works contracts on behalf of the principal contractors and pure and simple they being the sub- contractors, naturally, the double deduction in the hands of principal contractors and sub- contractors could not have

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 30

been allowed by the Legislature u/S.80-IA(4) of the Act and that is why the said Explanation restricting the deduction of Section 80-IA(4) of the Act only to the principal works contractor of development of infrastructure facility which included laying of additional lanes by road widening as clarified by CBDT, could not have been denied such deduction on the anvil of the said Explanation as submitted by the learned Counsel for the Revenue. The said contention therefore is liable to be rejected and is hereby rejected. 19. The original assessment order passed in the present case u/S.143(3) of the Act clearly shows the complete and meticulous application of mind by the Assessing Authority to all the relevant facts, Certificates issued by the Executive Engineers and nature of work undertaken by the petitioner- assessee and the works like improvement of roads, re-laying of the roads, repair of the roads etc., have been excluded while computing the Deduction u/S.80-IA(4) of the Act. Therefore, the deduction allowed to the extent of 68.75% only for the works which fell within the four corners of Section 80-IA(4) of the Act could not have been disallowed or intended to be disallowed by resort to Section 147/148 of the Act under the garb of subsequent Assessment order passed for the subsequent A.Y.2013-14, which also prima facie indicates that the Assessing Authority has been swayed by the words "improvement, repairs and widening (sic !) of already existing roads". While the widening of the roads is intended to be included within the ambit of "infrastructure facility" by the CBDT, the Assessing Authority intends to deny the said claim under the sway of the word "works contracts" as employed in the Explanation inserted by the Finance Act, 2007. Such sweeping and general words before being used to invoke the reassessment powers u/S. 147/148 of the Act, the Assessing Authority has to record the detailed reasons with the relevant facts existing on record within the parameters of Section 147 of the Act, which would clearly disentitle the assessee from being given that deduction or would render the earlier allowing of such deduction by the original Assessing Authority ex-facie illegal.

The Hon’ble jurisdictional High Court had succinctly held that if the claim of the assessee falls within section 80IA, then the assessee

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 31

is entitled to deduction. However in the said case the AO had denied the repair and maintenance expenditure from the purview of section 80IA and therefore the Hon’ble High Court has held that relaying and strengthening of the existing infrastructure would not fall within 80IA.

16.9. In view of the above, once there is a binding judgment of the Hon’ble jurisdictional High Court, operating in the field and applicable to the facts of the case, there is no purpose of perpetuating the error committed by the AO / CIT (A) in earlier years. Accordingly we do not agree with the contention of the assessee that following the principle of consistency the claim of the assessee is required to be allowed. In the result ground no 1&2 of assessee appeal are dismissed.

In the present case, as mentioned herein above, the facts are 17. entirely different. There was no expansion of two lane into four lane by the assessee for 28 kms to 67 kms and as such the benefit of the decision of the coordinate bench cannot be extended. Moreover, the assessee has not pointed out any facts before us which entitle the assessee to the benefit of Section 80IA for strengthening, repairing and maintaining the existing infrastructure from 28 to 67 kms. The CIT (A) has granted adhoc benefit of 25% to the assessee 18. and for that the assessee is in appeal before us. As we have held that the assessee is not entitled to the benefit u/s.80IA of the Act in respect of the first activity, viz., strengthening of existing road,. We may like to point out that National Highways Authority of India

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 32

(NHAI) at the time of fixing and inviting the bid must have made projections of amount spent by the assessee and on that basis only it must have arrived at the figure of granting the annuity of Rs.400 crores for every six months for the composite project. No bifurcation of the revenue earned by the assessee from the existing four Lane carriageway and from the other stretch of laying down and widening the existing 2 way carriage way to four lane was available with the lower authorities. The AO based on the adhoc working had disallowed to 50% of total revenue on the presumption that 50% of revenue belonged to the infrastructure which was already existing whereas e commissioner on appeal reduced it to 25% on the basis that only 25% of the total revenue belongs to the existing 4 lane infrastructure , feeling aggrieved the assessee is in appeal before us. On perusal of the orders passed by the lower authorities we’re 19. not able to comprehend the basis of arriving at the figure of 50% or 25% . There is no rational for the lower authorities to estimate the revenue in respect to the infrastructure already in place , specially under the circumstances when the records are available with the NHAI, which had granted the entity and contract of the assessee. In the result the working done by both the lower authorities were without any basis and was done on adhoc basis in our view both the authorities should have called the record from the NHAI and thereafter decided the matter. In the light of the above we deem it appropriate to remand the 20. matter to the CIT (A) with the following direction. With the

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 33

direction to call records from National Highways Authority of India pertaining to fixing of annuity and find out : a) What was the basis of fixing annuity with respect to strengthening of existing 4 lane and b) What was the basis for fixing the annuity for the second category namely laying down 4 lanes after widening the existing 2 lanes to 4 lanes as per the agreement 21. Based on the above exercise and reply if any received from the assessee , the Commissioner is to decide the deduction which the assessee is entitled in respect of widening of Road for the project 67 kms to 121 kms . However in respect of the annuity actually relatable to the first category namely maintenance and operation of existing four lane of 28 to 67 kms the assessee would not be entitled for any deduction Needless to say that the above said exercise shall be done by the CIT (A) after giving the notice and after examining the objection of the assessee. In the result ground no 3-4 of assessee are allowed for statistical purposes.

Ground no.2 of Revenue appeal in 1130 & 1131/Bang/2018 is as under : 2. The ld. CIT (A) erred in allowing the claim u/s.80IA when the contract work performed does not fall within the definition of new infrastructure facility u/s.80IA and is in contravention to not fall within

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 34

the definition of new infrastructure facility u/s.80IA and is in contravention to CGDT circular No.4/2010 dated 18.05.2010.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 35

strengthening of existing two lanes carriage way and has also undertaken the work of widening the same to four lane and integrating the same with the existing four lane high way. In the process of strengthening, widening of two lane to four lane, the assessee has performed various functions of the developer and for that purposes the assessee has laid bridges, structures, drainage, intersection, junction, main lane and has thus has completed the widening of two lane to four lane for the stretch of 67/0 to 121/0 kms. As per Schedule D to agreement, it is the obligation on the part of the assessee to widen, align and strengthen the lanes. Thus in our understanding the activity undertaken by the assessee comes within the purview of developing the new infrastructure. This issue had already been considered by the Hon’ble jurisdictional High Court in the matter of Kotarki Construction P. Ltd (supra), The relevant Para 18 and 19 of the order are reproduced elsewhere in this order.

ITA.545, 546, 1130 & 1131/Bang/2018 Page - 36

infrastructure would not fall within the realm of section 80IA no further adjudication is required in this regard . In the result that the revenue appeals are dismissed

In the result, appeal of the Revenue is dismissed and the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 26th day of November, 2018. Sd/- Sd/- (JASON P. BOAZ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Bengaluru Dated : 26.11.2018 MCN* Copy to: 1. The assessee 2. The Assessing Officer 3. The Commissioner of Income-tax 4. Commissioner of Income-tax(A) 5. DR 6. GF, ITAT, Bangalore By order Assistant Registrar Income Tax Appellate Tribunal, Bangalore.