Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI G.S. PANNU & SHRI AMARJIT SINGH
O R D E R PER G.S. PANNU, AM :
The captioned are five appeals, four appeals by the Revenue and one cross-objection by the assessee involving a common issue pertaining to 2 7314/M/2014 & CO No. 93/M/2016 M/s. Bharat Udyog Ltd. Assessment Years 2004-05, 2007-08, 2008-09 & 2009-10 and, therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
In all the appeals, the substantive common dispute relates to assessee’s claim for deduction u/s 80IA(4) of the Act. The assessee before us is engaged in multiple activities, one of which was of government contracting for infrastructure development. In relation to such activity, it claimed deduction u/s 80IA(4) of the Act on the ground that it was to be understood as a developer of infrastructural facilities. However, the stand of the Assessing Officer was that the assessee only acted as a contractor inasmuch as it had taken contracts from government agencies to construct roads and was thus not a developer for the purpose of u/s 80IA(4) of the Act. In support of its stand, the Assessing Officer also referred to the Explanation inserted under Sec. 80IA of the Act by the Finance (No. 2) Act, 2009 with retrospective effect from 01.04.2000 which stated that Sec. 80IA(4) of the Act shall not cover a business which is in the nature of a ‘works contract’ executed by the undertaking or enterprise claiming deduction u/s 80IA of the Act. The stand of the assessee before the assessing authority was that it was an enterprise engaged in development of roads, which was an infrastructure facility within the meaning of Explanation (a) to Sub-section (4) of Sec. 80IA of the Act. The Assessing Officer did not agree with the stand of the assessee and denied the deduction claimed u/s 80IA(4) of the Act altogether. When the matter travelled before the CIT(A), assessee put forth varied submissions both on facts and on points of law.
3 7314/M/2014 & CO No. 93/M/2016 M/s. Bharat Udyog Ltd.
Insofar as Assessment Years 2004-05, 2008-09 and 2009-10 are concerned, the CIT(A) has passed a common order dated 26.10.2015 partly allowing the claim of assessee for deduction u/s 80IA(4) of the Act. In paras 1 to 7 of his order, the CIT(A) has discussed various material submitted by the assessee before him, which inter-alia included material which was not earlier before the Assessing Officer. In para 4.2 of his order, the CIT(A) notes that all the material was forwarded to the Assessing Officer and it is further stated that no comments were received from the Assessing Officer. In any case, the CIT(A) has perused the scope of work carried out by the assessee and has come to conclusion that part of the receipts have been earned for development of infrastructure facilities. The CIT(A) also noted that in assessee’s own case for Assessment Years 2005-06 and 2006-07, the Tribunal vide its order in ITA nos.437/Mum/2009 & 1014/Mum/2010 dated 13.10.2014 dealt with a similar controversy and held that assessee was to be understood as a developer for the purpose of Sec. 80IA(4) of the Act. The Tribunal in its order dated 13.10.2014 (supra) referred to its earlier decision in Assessment Years 2002-03 and 2003-04 in the case of assessee itself in coming to such a decision. Based on the proposition laid down by the Tribunal in assessee’s own case, CIT(A) has examined the scope of contracts executed by the assessee and allowed partial relief in relation to projects involving construction of new roads. Against such a decision, Revenue is in appeal before us.
The ld. DR has reiterated the Grounds raised by the Revenue, which are common in the three years, and read as under :-
4 7314/M/2014 & CO No. 93/M/2016 M/s. Bharat Udyog Ltd. “1. On the facts and circumstances of the case in law, the Ld. CIT(A) erred in allowing the claim for deduction u/s 80IA(4) to the Contractor, who has taken contract to Construct roads and no a ‘Developer’ within the meaning of Section 80IA(4) of the I.T. Act.
2. On the facts and circumstances of the case in law, the Ld. CIT(A) erred in allowing deduction u/s 80IA(4) of the I.T. Act on the profit derived by the contractor in executing the project for State Government.”
However, nothing has been brought out by the ld. DR to suggest that any of the factual findings arrived at by the CIT(A), which otherwise are in line with the precedents in assessee’s own case, require any interference from our side. It is also an admitted position between the parties that the precedents noted by the CIT(A) continue to hold the field and they have not been altered by any higher authority. Therefore, in this view of the matter, the appeals of the Revenue for Assessment Years 2004-05, 2008-09 and 2009-10 are dismissed.
Insofar as the appeal of Revenue for Assessment Year 2007-08 is concerned, the Ground raised in the appeal read as under :-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the re-assessment u/s 147 is bad in law.
Pertinently, in Assessment Year 2007-08, assessment was originally completed u/s 143(3) of the Act on 24.12.2009 where deduction claimed u/s 80IA(4) of the Act was allowed. Subsequently, the Assessing Officer reopened the assessment on the ground that certain income chargeable to tax had escaped assessment inasmuch as the deduction u/s 80IA(4) of the 5 7314/M/2014 & CO No. 93/M/2016 M/s. Bharat Udyog Ltd. Act was wrongly allowed because assessee was merely a contractor and not a developer for the purpose of Sec. 80IA(4) of the Act. Before the CIT(A), assessee challenged the initiation of proceedings under Sections 147/148 of the Act. The CIT(A) in para 3.4 of his order has extracted the reasons recorded by the Assessing Officer for reopening of the assessment and thereafter perused the original assessment. Based on his examination of the aforesaid, the CIT(A) records as under :-
“3.6 The above clearly reveals that the AO after examining the audited accounts along with tax audit report had completed the assessment without making any disallowance u/s 80IA. The AO had made a clear mention that the appellant is a government contractor for infrastructure development and after considering the submissions had completed the assessment. The AO had made addition for disallowance in respect of late payment of PF, donation and repairs & maintenance. The issue as to whether the appellant is a contractor or a developer is a point of litigation since A.Y 2002-03. The issue had travelled up to the ITAT, Mumbai and the benefit of deduction claimed u/s 80IA by the appellant was upheld by the Hon'ble ITAT. Keeping in mind the past history on this issue the AO had applied his mind and preferred not to disallow the claim of deduction u/s 80IA. In the reasons recorded the AO had mentioned that “subsequently it was noticed that assessee was a government contractor for making roads and was not developing/maintaining infrastructure facilities”. I don’t agree with this particular reasons recorded, the appellant being a Govt contractor is in the knowledge of the A.O, as the entire material with regard to claim of section 80IA was furnished by the appellant during the course of original assessment proceedings itself, therefore, nothing new had come to the notice of the AO subsequent to completion of assessment. Therefore, the basis for reopening itself has no foundation. Further it was also mentioned that the amount of deduction was not mentioned in clause 26 of Form 3CD and audit report in Form 10CCB was not furnished. Though in the original audit report filed no amount was claimed as deduction u/s 80IA, subsequently, a revised tax audit report was furnished before the AO. A copy of the revised tax audit report dated 31.10.2007
6 7314/M/2014 & CO No. 93/M/2016 M/s. Bharat Udyog Ltd. given by the Tax Auditor was furnished before the AO during the course of assessment proceedings. The AO was in knowledge of the revised audit report even during the course of scrutiny assessment proceedings. Therefore, no new material had come into possession of the AO after completing the assessment.”
Accordingly, the CIT(A) held that the reopening of assessment was based on untenable reasons and, therefore, he has held the initiation of proceedings under Sections 147/148 of the Act to be invalid in the eyes of law. Against such a decision, Revenue is in appeal before us.
Before us, the ld. DR has emphasized that the amendment made to Sec. 80IA of the Act by way of insertion of Explanation by Finance (No. 2) Act, 2009 with retrospective effect from 01.04.2000 prima facie supports the assertion of Assessing Officer that the claim of deduction u/s 80IA of the Act was wrongly allowed because assessee was executing government contracts as a contractor only.
Per contra, the learned representative for the assessee has defended the action of the CIT(A) by placing reliance on the relevant discussion, which we have already extracted in the earlier part of this order. Apart therefrom, the learned representative referred to the judgment of the Hon'ble Gujarat High Court in the case of Classic Network Ltd. vs DCIT, [2014] 225 Taxman 174 (Gujarat)(MAG.) to point out that reopening of assessment u/s 148 of the Act in almost identical circumstances, based on the amendment by Finance (No. 2) Act, 2009 w.e.f. 01.04.2000 has been found to be untenable.
7 7314/M/2014 & CO No. 93/M/2016 M/s. Bharat Udyog Ltd.
We have carefully considered the rival submissions. Factually speaking, the CIT(A) notes that when the Assessing Officer initiated the proceedings u/s 148 of the Act, the issue whether assessee was to be understood as a ‘contractor’ or a ‘developer’ was a point of litigation since Assessment Year 2002-03. CIT(A) also notes that such issue had travelled to the Tribunal and assessee’s claim for benefit of deduction u/s 80IA of the Act was upheld by the Tribunal. The CIT(A) observed that keeping such past history in mind, the Assessing Officer had allowed the claim of deduction initially. The CIT(A) further notes that in the reasons recorded, the Assessing Officer merely records that assessee was a government contractor for making roads and was not developing/maintaining any new infrastructural facilities. The CIT(A) notes that the factum of assessee being a government contractor was already in the knowledge of the Assessing Officer because entire material relating to the claim of deduction u/s 80IA of the Act was available before him in the course of original assessment proceedings itself. The relevant discussion by the CIT(A) has been extracted by us in the earlier part of this order and which clearly brings out that there was no new tangible material which came in possession of the Assessing Officer for initiating proceedings under Sections 147/148 of the Act. So far as the reference made to the amendment made to the Finance (No. 2) Act, 2009 with retrospective effect from 01.04.2000 by way of insertion of Explanation to Sub-section (13) of Sec. 80IA of the Act, its relevance in the context of initiating proceedings under Sections 147/148 of the Act has been directly considered by the Hon'ble Gujarat High Court in the case of Classic Network Ltd. (supra). The Hon'ble High Court referred to the following discussion in its earlier judgment in the case of Parixit Industries (P.) Ltd. vs ACIT (OSD),
8 7314/M/2014 & CO No. 93/M/2016 M/s. Bharat Udyog Ltd. [2013] 352 ITR 349 to hold that the amended Explanation could not be of any help for reopening the assessment under Sections 147/148 of the Act :-
“25. It is now a settled law that if an explanation is added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Thus, it is not a case of introduction of new provision of law by retrospective operation. We have found that the petitioner had disclosed all the materials regarding its activities and there was no suppression of materials. In spite of such disclosure, the Assessing Officer gave benefit of the provision by considering the then Explanation which was substantially the same and thus, it could not be said that any income escaped assessment in accordance with the then law. We have already pointed out that the Assessing Officer has now given a second thought over the same materials and according to him, as the assessee is a contractor or supplier of irrigation products, it cannot be called a developer of any new infrastructural facility.
From the materials placed before him by the petitioner, the Assessing Officer earlier did not arrive at such conclusion and thus, the amended Explanation subsequently added cannot be of any help to him in arriving at the second opinion based on the alleged new law.”
Following the aforesaid, we approve the action of CIT(A) in invalidating the initiation of proceedings under Sections 147/148 of the Act. Thus, appeal of Revenue for Assessment Year 2007-08 is also dismissed.
Insofar as the cross-objection of the assessee for Assessment Year 2007-08 is concerned, the cross-objection is merely in support of the decision of the CIT(A). Since we have already dismissed the appeal of the Revenue for Assessment Year 2007-08, the cross-objection of the assessee is rendered infructuous and is dismissed as such.
Resultantly, the appeals of the Revenue as well as the Cross-objection of the assessee are dismissed.
Order pronounced in the open court on 19th September, 2018.