ACIT, CIRCLE-12(2), KOLKATA, KOLKATA vs. M/S. SIMPLEX INFRASTRUCTURE LTD., KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Accountant Member & Sri S.S. Godara, Judicial Member)

ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd…….............................................................……………………..Appellant 27, Shakespeare Sarani Kolkata – 700 017 [PAN : AAECS 0765 R] Vs. Addl. Commissioner of Income Tax, Range-12 Kolkata……...............................…….…..Respondent

ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13

Addl. Commissioner of Income Tax, Range-12(2) Kolkata……...........................……….…..Appellant Vs. M/s. Simplex Infrastructures Ltd…….............................................................………….………..Respondent 27, Shakespeare Sarani Kolkata – 700 017 [PAN : AAECS 0765 R] Appearances by: Shri S.K. Tulsiyan, FCA, appeared on behalf of the assessee. Shri A.K. Nayak, CIT Sr. D/R, appearing on behalf of the Revenue. Date of concluding the hearing : January 31st, 2019 Date of pronouncing the order : March 1st, 2019 ORDER Per J. Sudhakar Reddy, AM :-

These are two cross appeals filed by the assessee and the revenue directed against the common orders of the ld. Commissioner of Income Tax (Appeals)-18 (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), for the Assessment Years 2011-12 & 2012-13

2 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd 2. The assessee is a company and is engaged in the business of civil contractors as well as in development of infrastructure. It is engaged in various infrastructural projects such as construction of flyovers, sewerage projects etc. It filed its return of income for the Assessment Year 2011-12 on 28/11/2011, declaring total income of Rs.74,73,80,890/-. Later it filed a revised return of income on 30/03/2013, declaring the same income. The Assessing Officer completed assessment u/s 143(3) of the Act on 30/03/2014 interalia making disallowances on account of (a) bogus purchases and bogus sub-contract expenses, (b) deduction u/s 80-IA(4) of the Act, (c) disallowance u/s 14A r.w.r. 8D and (d) disallowance of employee’s contribution towards ESI & PF. Aggrieved the assessee carried the matter in appeal. The ld. CIT(A) deleted all the disallowance made by the Assessing Officer, except disallowance on account of bogus purchases/sub-contract expenses.

3 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd decision making at the project implementation level, as there are numerous projects being carried out by the assessee company all over the country. It is argued that the top management has put standard operating procedures in place for all expenses in various projects and these systems are followed. It was submitted that the above parties were issued purchase orders, supplier invoices were given, tax invoices were raised, delivery challans were produced and payments were made after approval of the bills through banking channels. Copy of these documents were produced before the Assessing Officer and also placed before us at pages 1 to 53 of the paper book.

The ld. Counsel for the assessee referred to a letter dt. 14/03/2014 which is at pages 101 to 105 of the paper book and submitted that the assessee has explained the entire process of standard operating procedure to the revenue. Ledger copies recevied from all these parties were filed, along with bills received from them and copies of the order of the site engineers certifying work executed. It was argued that the Assessing Officer made the addition for the sole reason that the notice u/s 133(6) of the Act, were issued to these parties to verify the genuineness and only M/s Purnima Constructions, M/s. Nikhil Enterprises and M/s. Brytex Industries did not respond as the notices and the same got returned unserved. The assessee thereafter furnished the correct addresses of these parties and notices were served and complied with by the parties except in the case of M/s. Nikhil Enterprises. In the case of M/s. Nikhil Enterprises, it was pleaded that after the lapse of two years, the whereabouts are not known about that party and the assessee has not control over it. As regards all other parties, they have responded to the notice u/s 133(6) of the Act and have confirmed the transactions.

6.1. On the statements recorded by the Assessing Officer from the five parties, the ld. Counsel for the assessee submits that wrong inferences were drawn based on certain discrepancies in the statements. Even otherwise, it was submitted that no opportunity for cross-examination of the parties was given to the assessee. He listed out the reasons cited out by the Assessing Officer for the above disallowances and controverted the same point wise. He submitted that simply because these parties were found to provide

4 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd accommodation entries to M/s. Soma Enterprises and M/s. Navyuga Engineering, which are third party infrastructure companies, it cannot be stated that similar bogus accommodation entries were given to the assessee. He relied on a number of case-law and prayed that the disallowance be deleted.

The ld. D/R, on the other hand, disputed the contentions of the ld. Counsel for the assessee and submitted that the Assessing Officer as well as the ld. CIT(A) have given very detailed reasons as to why the purchases in question and the labour payments in question were treated as bogus. He submitted that the Assessing Officer has not made the disallowance merely on the basis of information sent by the investigation wing. He pointed out that the activities of these persons were flagged by FIU (Financial Intelligence Unit) and during the course of search in M/s. Arya Group, one Shri Promod Kumar Singh, admitted that he has given bogus entries through his proprietary concerns. He submitted that the same was corroborated with the Maharashtra Sales Tax Department, which had declared these parties as hawala operators. He further pointed out that search and seizure operation was conducted by the department on the premises of other infrastructure companies i.e., M/s. Soma Enterprises and M/s. Navyuga Engineering and the directors of both these concerns have confirmed that they have taken accommodation entries from these operators. The ld. CIT D/R, further submitted that none of these persons had prior experience of supply of material and labour. The bank accounts got closed within a short period. It was further submitted prior to getting work from the assessee, these parties were not filing their returns. He prayed that the order of the ld. CIT(A) has to be upheld on the facts and circumstances of the case.

Sl.No. Reasons stated by the Ld. A.O. for Reply of the Assessee Company treating the Purchases to be bogus

5 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd 1 Secret Transaction Report (STR) In this connection it is submitted that the sis parties received from Finance Intelligence from whom the assessee had purchased materials Unit (FIU) by Unit-IX, Mumbai that and labour acted in concert cannot be a reason to the six parties from whom the assessee hold the purchases from them as bogus. In this had made purchases acted in concert regard it is submitted that the assessee on and that the bank accounts of all the requirement of materials and labour at its various parties existed in the same bank i.e. construction sites placed orders through purchase ICICI Bank, Bandra Kurla Complex orders (purchase orders are enclosed at pages 1-53 Branch, Mumbai and all of them were of the paperbook) and the six parties provided having high value frequent deposits required materials and labour at the construction from the assessee. Thereafter, there sites, pursuant to which their payments were made were multiple cash withdrawals and by the assessee through proper banking channels transfer of funds by these six parties to (copy of bank statements are enclosed at pages 1- the parties namely Siddhi Vinayak 04, 11-12, 23-24, 32-36, 44 of the paperbook). Steel, Asian Steel Corporation, Suraj Thus there were high value frequent deposits made Tube Corporation, Chanchal Tube by the assessee in the accounts of those six parties Corporation, Rollex Construction, for providing material and labour regularly at its Unique Construction, Star construction sites. Construction, Insha Construction, Jayant Construction, Chandan Enterprises, J K Steels pursuant to Further it needs to be noted that whether these six deposits received by them from the parties acted in concert with each other in order to assessee. supply materials and labour to the assessee or for any other purpose, is not the assessee’s lookout. As long as the assessee got delivery of the required materials and labour from the said parties and made their due payments for providing the same, the assessee’s obligation towards those parties ended. Thereafter no liability can be fastened on the assessee in consequence to any action of those six parties. It is common knowledge that in any business if a seller/supplier has shortage of a particular material at a particular time then they procure it from other known suppliers/sellers and supply to the buyer.

Therefore, the allegation that they acted in concert to supply material and labour to the assessee has no relevance.

Further, the fact that the bank accounts of those six parties were situated in a common branch of the same bank cannot be a reason to suspect the assessee’s genuine purchases since the assessee made purchases from the said six parties and in return made payments to them by depositing the funds at their bank accounts, as per the bank account details provided by the said six parties.

6 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd Thereafter it was not the assessee’s duty to find out if and whether the parties from whom it has been making purchases were acting in concert or their bank accounts are located in a common branch of the same bank or to who else they were transferring the funds since the assessee’s obligation towards those six parties ended with making their due payments for providing materials and labour to it. Anyhow, it is not surprising if businesses located in one area of a city have bank accounts in a common bank located in that area.

2 In case of search in one Arya Goup, a In this regard it is submitted that whatever was person named Sri Pramod Kumar possible on the part of the assessee to prove the Singh’s statement was recorded who genuineness of the transactions and payments made happened to be the proprietor of the to the six parties was done by the assessee company. first four concerns to whom the six It also needs to be noted both the assessee and the parties (from whom the assessee had suppliers of the assessee company co-operated with made purchases) transferred funds i.e. the Department. Merely on the basis of a third party Siddhi Vinayak Steel, Asian Steel statement who has nothing to do with the business Corporation, Suraj Tube of the assessee. A.O. drew inference that the Corporation, Chanchal Tube transactions with the said parties are bogus and in Corporation. In the said statement, the genuine. person admitted of providing accommodation/bogus bills wherein money received by him from parties in garb of purchases were returned back to them after deducting his commission.

3 Further, the Maharashtra Sales Tax In this regard it is submitted the assessee would like Department declared the four parties to submit that the four parties namely Siddhi i.e. Siddhi Vinayak Steel, Asian Steel Vinayak Steel, Asian Steel Corporation, Suraj Tube Corporation, Suraj Tube Corporation, Corporation, Chanchal Tube Corporation, being Chanchal Tube Corporation to be declared Hawala by the Maharashtra Sales Tax Hawala parties. Department cannot be a basis for declaring the assessee’s purchases as bogus since the purchases were not made by the assessee from these four parties. Moreover, though it does not effect or concern the assessee in any way, it would like to submit that the fact that these parties were declared as Hawala Parties is an observation/declaration of a third party, i.e. the Maharashtra Sales Tax Department, which cannot be the sole basis for holding any transactions as bogus. 4 In case of search in one Soma In this regard it is submitted that the assessee made Enterprises and Navyuga payments to the six parties for supply of materials Engineering of Hyderabad, both the and sub contract of labour provided at its various

7 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd concerns admitted to taking sites. All the payments for such purchases were accommodation entries from the six backed by relevant documents. The said two parties parties, from whom the assessee having admitted to taking accommodation entries purchased labour and materials during from the said six parties is altogether a separate the relevant A.Y. transaction, distinct from that of the assessee with the said six parties. Thereafter, if the said suppliers and sub-contractors were also engaged in providing accommodation bills to some other parties, it cannot have a binding on the genuine purchase made by the assessee company from the said six parties. 5 Some discreet enquiries conducted by In this respect, the assessee would like to firstly Investigation Wing of Mumbai revealed reiterate that it is not concerned with where the that addresses of the six parties with parties, from whom it had made purchases, were whom assessee had transacted were situated. The assessee’s only concern was whether located in chawl/residential premises on placement of order for materials and labour and had no genuine business carried before the said six parties, the same were supplied as out from those premises per its requirements. The six parties had supplied materials and labour as per the assessee’s requirements at its construction sites properly and the assessee made payments for the same. Furthermore nothing prevents a person from carrying on a business from an office located in a chawl. A number of businesses are carried out from such locations and simply because they are located in chawls cannot lead to a conclusion that they are non-existent. Furthermore, no such report or basis for such report was ever supplied to the assessee and therefore simply a bald statement of the Ld. AO cannot be the basis for drawing adverse inference. 6. All the bank accounts of the six parties In this regard the assessee submitted that it is not were opened in a common branch of the assessee’s responsibility/obligation to the same bank, i.e. ICICI Bank at investigate as to where and why the bank accounts Bandra Kurla Complex, Mumbai and of its suppliers are situated or for what other have been used by the said six parties purposes the bank accounts have been used by the for receiving funds from the assessee suppliers (apart from receiving payments from the and other parties who have taken assessee). The assessee while placing orders with the accommodation bills. It was further six parties for supply of materials and labour observed by the Ld. AO that the contracts were provided with their respective bank accounts were opened from addresses accounts for the purpose of making payment. located in Kurla (West) which are in Thereafter, the assessee was not concerned about close vicinity to one another. how and for what other purpose the six parties were using their bank accounts. Also, even for the sake of argument if it is accepted that the said six parties were providing accommodation entries and hence received payments from several parties, it cannot be said that the deposits received by them from the assessee for labour contract and supply of materials were bogus as the said purchases are backed by relevant documents.

8 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd

Further the fact that the accounts of the six parties were opened from addresses located in Kurla (West), which are in close vicinity to one another cannot be a basis to doubt the purchases made by the assessee. Though, it is not the assessee’s lookout as to in which branch of a particular bank, its suppliers’ and contractors’ bank accounts rested but still the assessee would like to submit that the bank where the bank accounts of the six parties existed was ICICI Bank, Bandra Kurla Complex, Mumbai and their addresses indicate that they were situated in Kurla (West) Mumbai which substantiates the fact that the bank accounts were opened by the six parties in a bank close to their location which is logical and rather supports a positive reason for opening the bank account in the same bank.

7 That the six parties, apart from In this regard it is submitted that the assessee made receiving funds from the assessee have payments to the six parties for supply of materials also received funds from Soma and sub contract of labour provided at its various Enterprises and Navyuga Engineering sites. All the payments for such purchases were of Hyderabad, who again have backed by relevant documents. The said two parties admitted to taking accommodation having admitted to taking accommodation entries entries from the said six parties. from the said six parties is altogether a separate transaction, distinct from that of the assessee with the said six parties. Thereafter, if the said suppliers and sub-contractors were also engaged in providing accommodation bills to some other parties, it cannot have a binding on the genuine purchase made by the assessee company from the said six parties 8 That a common modus operandi was In this regard, the assessee would like to submit that followed by the six parties in case of assessee is/was not aware of how funds received by handling funds received from the the six parties from their clients were handled. assessee, Soma Enterprises and Infact, the assessee was not supposed to be aware of Navyuga Engineering wherein cheques how funds received by its suppliers from itself or were issued by the assessee, Soma some other parties were handled. It was supposed to Enterprises and Navyuga Engineering make payments in return of supply of materials and to one of the said six parties (Nikhil labour, which it had accomplished successfully. Enterprises) and thereafter Nikhil Thereafter, the assessee was under no obligation to Enterprises withdrew cash below keep knowledge/track about the further treatment Rs.10,00,000 and transferred the or movement of those payments made by it. balance to Jayant Construction who again transferred the balance fund to Purnima Construction, Brytex Further, although it does not affect the assessee’s Industries, Alfi Builders and purchases in any way but still the assessee would Contractors. Thus, funds received from like to mention that the proprietors of the five the clients had been routed through a concerns (out of the six), in their statements given web of bank accounts belonging to the

9 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd six parties and the parties mentioned u/s 131 of the Income tax act, 1961 (enclosed at above i.e. (Siddhi Vinayak Steel, Asian pages 106 to 150 of the paper book) have Steel Corporation and the rest) and at mentioned that they knew each other and the trailing end cash had been transferred funds to each other sometimes on withdrawn by the assessee. temporary basis because of mutual relations and also hired labour from each other when required, in return of due payment. They would also take supply of labour from other parties to supply to the assessee or other clients in return of due payment to them. Thus payment by the said parties to each other or other parties can be because of any of the said reasons. It definitely does not imply or prove that the assessee had been transferring funds to the six parties for routing the same through a web of bank accounts and receive the funds back again by inflating expenses in the garb of purchases especially, when its purchases are backed by documentary details.

The proprietors in their statements In this regard, the assessee would like to submit that 9 given u/s 131 of the Income Tax Act, cash for making payments at far off places like 1961 stated that they had supplied Surat, Gwalior, Imphal, Uttar Pradesh, Gujarat, labourers at the assessee’s various Ranchi, Chandigarh and various sites in project sites located at far off places Maharashtra, Kudankulam in Tamil Nadu is not like Surat, Gwalior, Imphal, Uttar difficult to be carried by the said proprietors or their Pradesh, Gujarat, Ranchi, Chandigarh employees from Mumbai by train since Mumbai is and various sites in Maharashtra, one of the prime metropolitan cities and the Kudankulam in Tamil Nadu etc and business hub of India and thus is very well connected that cash for paying these labourers at by train routes to far off places all over the country. various sites were carried personally by the proprietors by train or bus daily and that the same is not feasible It must be noted that the Ld. AO as per the considering the geographical location statements of the five parties, has made a common of these places as it is unlikely how observation regarding carrying of cash to the huge cash would get transferred to abovementioned locations. Herein, it needs to be such far-flung off places all over the clarified that it was not the assessee’s case that one country. person personally carried cash from Mumbai to all the above mentioned locations at the same time (as pointed out by the Ld. AO, which is apparently impossible). As and when projects at the respective sites (mentioned above) were in process, the proprietor whose concern had undertaken supply of labour or material at the concerned site, carried cash to the said site. Projects were not going on at all the abovementioned places at the same time wherein one party out of the six parties had undertaken the job of supplying labour/material and thus would not be able to cope up. Thus, as and when work was in progress at any of the above mentioned project sites, the concerned party (out of

10 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd the six parties) in charge of supplying materials/labour carried cash to the respective site. Therefore cash was not required to be carried to all the above mentioned places at the same time by one single person which definitely is not feasible.

Above all, it is not the assessee’s liability as to how cash payment is transferred to labourers working at the project sites by the said suppliers/subcontractors as long as the assessee’s requirement of materials/labour at its project site is supplied and the assessee makes due payment in return. Therefore, observation by the Ld. AO on this account cannot be a basis to fasten liability on the assessee of having made bogus purchases.

10 The Ld. AO alleged that the assessee In this regard, the assessee would like to submit that being a company with a turnover it having a professional system of hiring labour exceeding Rs.5,500 Crore, would have a contractors and suppliers of material for quality completely professional system of construction does not cease to exist if such hiring labour contractors and suppliers suppliers/labour contractors are individuals. There of material for quality construction are no set of rules/guidelines to determine the and would not appoint labour professional system of hiring labour contractors or contractors who are individuals suppliers of materials which the assessee did not located only in Mumbai for the purpose abide by. Further, the assessee would like to invite of supplying at its various sites, all over your goodself’s attention to the fact that the country. Government companies like SAIL, Rourkela Steel Plant and Bhilai Steel Plant had given sub contract of labour to one of these individuals, Shri Habibullah Umarati Sayed of Nova Construction which is evident from the statement given by him u/s 131 of the Income Tax Act, 1961 (enclosed at pages 106 to 114 of the paper book). Thus, government companies entrusting the said parties with labour contract and material supply assignments further corroborate the fact that the assessee having given labour contracts and supply of materials to individuals was not acting unprofessionally.

11 The Ld. AO pointed out that as per the In this regard, the assessee would like to submit that bank statements of the said six parties, payments were made by the assessee to the cash withdrawals had taken place at suppliers/labour contractors as and when their end either on the same day or requirement for materials and labour arose at its following day on receipt of high value various construction sites and the same were cheques from the assessee or Soma provided by the suppliers/labour contractors. Enterprises or Navyuga Engineering Thereafter, when the payments made by the which does not correspond to the fact assessee to the suppliers/labour contractors were

11 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd that if a labourer at Shillong is withdrawn by them and in what frequency or the required to be paid, then what was the amount of such withdrawal each time is unknown to necessity to withdraw cash on the same the assessee and also not the assessee’s lookout. or next day by routing funds received Further, how the money received by the six parties from the assessee through various bank as payment for supply of materials and labour were accounts. It only implied that the withdrawn and carried off to a concerned site was assessee needed to inflate expenses, not the assessee’s concern. instead of making payments for business purpose.

12 The Ld. AO further raised suspicion In this regard, once again the assessee would like to regarding the necessity of the six submit that post payment made by it to the labour parties to withdraw cash on the same contractors and material suppliers for supply of day when the funds were transferred labour and material at its construction sites, it was by the assessee and that comprising of not the assessee’s concern or duty to keep a track as amounts below Rs.10,00,000/- and not to the amount of money withdrawn by the said Rs.10,00,000/- or above. contractors and suppliers. The said contractors and suppliers having withdrawn amounts below Rs.10,00,000/- thus, does not concern the assessee in any way since post payment it is their money and when and how such money is to be withdrawn and its further utilization is not the assessee’s domain. It is also not clear as to what was the reason of the benchmarking of Rs.10 lakhs by the Ld. AO since under Income Tax Act, no such benchmarking prevails. 13 The Ld. AO held that the said six parties In response to the above observation of the Ld. AO, knew each other and the high the assessee would like to submit that materials and frequencies of cheque movement labour were supplied by each of the six parties to the amongst themselves through their assessee, individually, as and when requirement respective bank accounts prove that arose and payments were also made by the assessee they were acting in concert to provide to them individually. Therefore, the six parties accommodation entries to the assessee knowing each other or there being high frequencies for inflating its expenses. of cheque movement among themselves does not have a bearing on the purchases made by the assessee from each of them and the subsequent payments made to each of them, individually.

14 The Ld. AO has also alleged that the In this regard the assessee would like to submit that proprietor of Purnima Construction if genuineness of ‘labour charge and wages’ in case stated that he would produce the books of Purnima Construction has been doubted by the of account at a later date and has concerned Assessing Officer while framing his failed to do so but has submitted copy Assessment Order, the same would give rise to a of the Assessment Order passed in his liability in Purnima Construction’s case and not the case for A.Y. 2010-11 in which the assessee’s. The assessee had not made any payment Assessing Officer had doubted the of labour wages but has made payment of labour genuineness of ‘labour charge and sub contract expenses. The wage payment was Purnima Construction’s obligation and not the

12 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd wages’. assessee’s. Further, without prejudice to the above, the assessee would like to submit that genuineness of ‘labour charge and wages’ were doubted in Purnima Construction’s case for the A.Y. 2010-11 and the assessee’s case concerns A.Y. 2011-12.

15 The Ld. AO has also alleged that on In this regard the assessee submitted that doubts verification of Supreme Construction’s raised by the Ld. AO in connection to the Assessment Assessment Order, he found that the Order of Supreme Construction and the statement concerned Assessing Officer had given by its proprietor or the activities conducted by alleged month-wise utilization of cash, it cannot be linked to the purchase of labour and party wise deduction of TDS in materials made by the assessee from Supreme response to which the proprietor Construction. Whether and how the proprietor of explained that since all payments were Supreme Construction paid wages, how and when it made in cash on daily basis and employed labourers, how many among them were labourers were not working permanent etc does not have any nexus with the continuously for him, therefore no TDS assessee giving sub contract of labour to Supreme was deducted in respect of those Construction and making payment to it for the payments. same. The said activities does not concern the payments made by the assessee for giving sub contract of labour to Supreme Construction in any way.

Further, without prejudice to the above, the assessee would like to submit that the Ld. AO has raised a doubt regarding contradiction in Supreme Construction’s proprietor’s statement regarding payment of labour wages in the F.Y. 2009-10 whereas the instant case of the appeal is concerning the A.Y. 2011-12. Hence, the same cannot be linked with the assessee’s purchases made in the relevant A.Y. The relevant documents supporting such purchase from Supreme Construction is enclosed at pages 11 to 22 of the paper book.

13 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd name ‘Brytex Industries’ and in alleging the assessee’s genuine purchases as bogus. materials under the name ‘Insha Construction’ (another of his proprietorship concerns) and that he Thereafter, the assessee would like to submit that made purchases in cash and through the assessee is not concerned with how Brytex cheque from the other five parties out Industries’s proprietor paid its labourers, whether in of the six parties and also from the cash or through cheque, The assessee is only concerns namely, Siddhi Vinayak Steel, concerned with the supply of materials from Brytex Asian Steel Corporation, Suraj Tube Industries in the relevant A.Y. which it has received Corporation, Chanchal Tube and made payments for the same. Post that, how Corporation, Rollex Construction, payments were made by the proprietor of Brytex Unique Construction, Star Industries to labourers or how he arranged for Construction, Insha Construction, materials and labour for supplying to his clients Jayant Construction, Chandan (including the assessee) is not the assessee’s lookout. Enterprises, J K Steels.

Sl.No. observations of the Ld. CIT Reply of the Assessee Company 1. On a perusal of the statements of the five

14 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd persons following point emerges:   Although they got orders from big and Assessee company had produced all the established companies, but they were evidences to prove the genuineness of not selected through any tenders. the transactions with the six parties. The Ld. CIT had not denied the fact that the said six companies got orders from big and established companies. It is not the Ld. A’O’s concern, how the said six companies were selected for the supply of labour and material. Therefore, doubting the genuineness of the transactions on the basis of the same, is totally based on suspicion and surmises.

  All of them claimed to have started In this regards it needs to be noted that business arounf F.Y. 2008-09 and filed all the six persons are contractors. They returns of income only upto A.Y. 2011- supply labour, material and many other 12. Businesses of all these persons had services to various established and big closed down and they had closed their companies. They keep shifting their bank account in the ICICI Bank. work places according to the requirements of the work undertaken by them. Likewise in the case of the assessee company, since the site was located in Mumbai, they shifted all their work force to Mumbai and opened bank accounts in Mumbai and started their business in Mumbai. After the completion of the work in Mumbai they will close down their business and bank accounts opened in Mumbai and will shift to any other place as per their work requirement. If they get work orders from any other place in India they will shift to that particular place, start their business and open bank accounts at that place itself. Hence, treating the purchases and supply of labour from the said six parties as bogus by the Ld. CIT based on the aforesaid reason is not acceptable and is completely wrong.  All of them were conducting business from chawls/residential areas and  In this regard the assessee would like to employed very few persons. They submit that it is not concerned with

15 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd claimed to have travelled to far away where the parties from whom it had places by train on several occasions made purchases were situated. The carrying cash for payments to assessee’s only concern was whether on labourers working at construction placement of order for materials and sites , but none of them had kept the labour the same were supplied as per its train tickets. If they were involved in requirements. As regards claiming of genuine business activities they could expenditure on account of travelling have claimed travelling expenses on expenses by the said six parties, it is the basis of these train tickets or other submitted that the assessee is not supporting documents. concerned whether they have claimed travelling expenses as business expenditure or not. It is a part of the assessment proceedings of the six parties and the Ld. A.O. should examine the same in their assessment and the same should not be linked with the assessee’s claiming of genuine purchases and labour expenses in its books of accounts. Hence the allegations put forthwith by the Ld. CIT on the basis of the statements of the five parties are baseless and is devoid of any merit. 2. Assessee’s contention that Ld. A.O. treated The assessee’s case is backed by documentary assessee’s purchase from six parties as bogus evidences with regard to purchases made from on the basis of information accumulated by Brytex Industries, Nikhil Enterprises, Supreme him in case of third parties, is not correct. A.O. Construction, Purnima Construction and Nova has applied his mind to the facts gathered, Construction like bank statement, purchase recorded statements of the suppliers, pointed order, item supplier’s invoice, tax invoice, out discrepancies in their statements and has delivery challan (specimen copies enclosed at established that these parties were not pages 01 to 53 of paper book (complete capable of providing any services/materials. details submitted before AO at the time of In the process of establishing that the six assessment) and statements of the parties parties were not involved in any genuine recorded by the Ld. AO himself under section business transactions, A.O. has also pointed 131 of the Act confirming the said transactions. out the dubious nature of activities which None of the documents submitted before the Ld. these parties indulged in while dealing with AO at the time of assessment proceedings in others and information in respect of those support of the assessee’s purchases made from activities collected through various sources. It Brytex Industries and Nikhil Enterprises were is not on the basis of third party information disproved by the Ld. AO. Genuine transactions of A.O. has reached a conclusion in assessee’s the assessee company with the said six parties case. cannot be doubted simply because these parties were giving accommodation entries to other parties. The Ld. A.O. has not brought any concrete material on record to prove that the

16 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd transactions entered into by the assessee company with the said six parties is ingenuine and are bogus transactions. 3. Case laws relied by the assessee company are not relevant to the facts of its case: i. Ratio of CIT Vs. Daulatram i. In the case of the assessee company, the Ld. Rawatmal is not applicable to the A.O. has jumped to the conclusion and held assessee’s case as there is direct nexus that the purchases and labour expenses between the facts and the conclusion claimed by the assessee company is bogus reached by the A.O. based on the information gathered from outside agencies. The Ld. A.O. has not brought on record any concrete material to prove that the contract for the purchases and supply of labour entered with the said six parties is ingenuine. The assessee company had produced all the necessary evidences to prove the genuineness of the transactions of the assessee company with the said six parties. The Ld. A.O. as well as the Ld. CIT has not doubted any documents placed on record. Transactions are backed by proper evidence. The conclusion drawn by the Ld. A.O. as well as the Ld. CIT(A) is totally based on surmises and conjectures. There is no direct connection between the facts of the assessee company and the conclusion drawn by the Ld. A.O. that the purchases are bogus. In this light it is submitted that until and unless there is a direct nexus between the conclusion drawn by the Ld. A.O. and the facts of the case, addition cannot be made merely on surmises and conjectures. ii. ii. Assessee’s case is distinguishable from Ramesh Kumar and Co. vs. ACIT as in the present case, A.O. has found out the trail of cash withdrawal which is happening either on the same date or on the next day and two levels of entry givers involved in completing the transactions. Cash withdrawal is kept below Rs. 10 lakhs iii. Ratio of decision of the following

17 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd cases relied by the assessee company is not applicable because of the following reasons: a. ITO vs. Permanand reported in [2007] 107 TTJ 395 (ITAT jodh) b. DCIT vs. Sri Rajev G. Kalathil C.O. No. 06/Mum 2014 c. ACIT vs. Tarala R Shah in ITA No. 5295/Mum/2013 Reason: The Ld. A.O. has not solely relied on information supplied by Sales Tax Department. It is just one of the circumstantial evidences. A.O. has mentioned discrepancies in statement, searches in other group and confessional statement of one of the entry givers before arriving at the conclusion. 4. Assessee submits that once the payments were In this regard the assessee submits that the cash made to the six parties, it was not its has been withdrawn by the six parties from responsibility to keep watch as to how their bank accounts for the purpose of making payments are made to the labourers. These payments to their labours on a daily basis and parties have claimed that they withdrew cash the same has been accepted by the proprietors from their bank accounts in Mumbai and of all five concerns as shall be evident from the carried the cash physically to work sites. This statements enclosed at pages 106-150 of the claim does not appear genuine as the banks paperbook. The said proprietors have also are providing facility of “anywhere banking” stated that labour payments could not be made to its customers. This means a bank customer in cheque as most of them neither had any bank can withdraw cash from any branch of the account or were permanent in nature. As bank in India. When this facility exists, no regards carrying of cash physically to work prudent person would take the risk of sites, they stated that since they did not have physically carrying cash by train or bus. knowledge about banking at sites which are at Besides these persons did not furnish proof of Bihar and other places of India where site work journey by train, which established that their was in progress, they personally carried cash to contentions are not correct. sites to avoid risk. Further as regards furnishing of evidence of journey by train by the said six persons, it is submitted that it is not the assessee’s lookout whether they furnished proof regarding travelling tickets or not. This does not in any way affect the genuine purchase of materials and labour by the assessee from the said six parties.

18 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd

Thus, from the above, it stands clear that the allegations raised by the Ld. CIT were already been answered clearly by the proprietors of the six concerns in their statements recorded u/s 131 of the Act during the course of survey proceedings. The Ld. A.O. as well as the Ld. CIT have neither placed any material on record to doubt the genuineness of the transactions nor had given proper opportunity to the assessee to cross examine the statements given by the proprietors of the said six concerns. Under this situation, merely on the basis of surmises and conjectures, the genuineness of the transactions entered into by the assessee company with the said six concerns cannot be doubted. 5. Assessee is a well established and a very In this connection the assessee submits that the reputed company. Keeping in mind its brand assessee company having a professional system name, it is an important issue whom it does of hiring labour contractors and suppliers of business with. Any rational/prudent business materials for quality management does not man of the stature of assessee would not give cease to exist if such suppliers/labour business to some person who has no contractors are individuals. There are no set of experience. Further business should not be rules/guidelines to determine the professional given on reference of inconsequential persons system of hiring contractors or suppliers of like scrap dealers. These parties did not even materials which the assessee company did not have bank account when they were shortlisted abide by. for doing work. These persons were not filing any return of income. Any rational/prudent Further it needs to be noted that it is usual business man of the stature of assessee would trend of the contractors to shift their business not associate with such parties in the normal place after the completion of the work at that course of business, unless there are ulterior particular place. As a result of the same, they motives. These people have no experience and close their bank accounts and all the business no infrastructure to execute the work give to set up required for the running of their business. them. Besides their dealings with others have Similarly by this logic, all the six parties after been proved to be only Hawala in nature. completion of their work closed their bank There is no doubt about the professional accounts and closed their business premises. nature of assessee’s activities. That is why its They will open a new bank account with all the dealings with the six persons, under the necessary infrastructure required for the circumstances mentioned does not appear to running of the business. be genuine. Further the assessee once again would like One of the parties has claimed to have reiterate that Government companies like SAIL, received contract from SAIL and other public Roukela Steel Plant and Bhilai Steel Plant had sector companies. However, no evidence was given sub-contract of labour to one of these produced in this regard. individuals, Shri Habibullah Umarati Sayad of Nova Construction which is evident from the statement given by him u/s 131 of the Income

19 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd Tax Act, 1961 (enclosed at pages 106-114 of the paperbook). Thus Government companies entrusting the said parties with labour contract and material supply assignments further corroborate the fact that the assessee company having given labour contracts and supply of materials to individuals was not acting unprofessionally. Further having dealings with other been proved to be only Hawala in nature does not affect the genuineness of the transaction of the assessee company with the six concerns. As regards the allegation of the Ld. CIT(A) that assessee company did not produce any evidence regarding contract entered into between SAIL (PSU) and Nova Construction, it is submitted that it is the personal property of the concern (Nova Construction) and not of the assessee company. Assessee company has nothing to do with the said evidence. It is on the part of the Department to extract the said evidence from Nova Construction and not from the assessee as the said document does not belong to the assessee company. Thus on the basis of the above it is submitted that the allegations of the Ld. CIT(A) that the transactions with the said parties is in genuine is completely wrong and baseless.

9.1. The ITAT Mumbai Bench of the Tribunal in the case of Hiralal Chunnilal Jain vs. ITO, ITA No. 4547/Mum/2014, held as follows:-

“5.We have heard the rival submissions and perused the material before us. We find that the AO had received information from the investigation wing of STD, Maharashtra that the assessee was one of the beneficiaries of accommodation entries, that Shiv Sagar the supplier of the goods was one of the entities who had admitted to have bogus bills, that the assessee had asked for cross examination of the supplier but same was not given, that the AO had not supplied the copy of the statements of Shiv Sagar to the assessee, that in the books of accounts of the assessee all the purchases and sales were recorded, that payments were made through banking channels, that the AO had made addition of entire purchases u/s.69 of the Act, that the FAA had reduced it to 20%. It is a fact that the AO had not

20 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd rejected the sales of the assessee and the assessee was maintaining the quantative details and stock register. In our opinion, once the sales are accepted as genuine or not doubted the AO cannot reject the entire purchase. In the case of Nikunj Eximp (supra)the Hon'ble Bombay High Court has held if sales were not doubted by the AO and copies of bank statement showing entries of payment through account payee cheques to the suppliers, copies of invoices for purchases and a stock statement, i.e. stock reconciliation statement are filed 4547/14,2545/14 &1275/14, Hiralal CJ purchased could not be rejected. In the case of Rajeev Kalathil (supra) the Tribunal has held as under: "2.4. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done." In the present case also the AO had made the addition on the basis of information received from the Sales tax department, but, he did not make any independent inquiry. He did not follow the principles of natural justice before making the addition. The FAA had reduced the addition to 20%,but he has not given any justification except stating that same was done to plug the probable leakage revenue. Considering the peculiar facts and circumstances of the case, we are reversing the order of the FAA.” 9.2. Similar ratios were laid down by the Hon’ble Jurisdictional High Court in the following cases:

 CIT vs. Emarald Commercial Ltd. [2001] 250 ITR 539 (Cal)  CIT vs. Carbo Industrial Holdings Ltd. [2000] 244 ITR 422 (Cal)

The Hon’ble Punjab and Haryana High Court in the following cases has also laid down similar propositions of law:-

 CIT vs. Faqir Chaman Lal reported in 262 ITR 295 (P&H)  CIT vs. Ram Narain Goel reported in 224 ITR 180 (P&H)

21 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd the procedure and documentation was not correct . The entire disallowance is made on suspicion and probabilities. These cannot take the place of evidence. Under these circumstances, applying the propositions of law laid down in the above referred case- law, we uphold the contentions of the assessee and delete the addition made herein.

12.1. The ld. CIT(A) followed the proposition of law laid down by the ITAT Kolkata Bench’s decision in the assessee’s own case for the Assessment Year 2007-08. At para 3.3.2, page 25 to 37, he held as follows:-

“3.3.2. I have considered the facts of the case and the submission of the assessee. Perusal of the ITAT order for assmt. Year 2007-08 shows that Hon’ble ITAT, Kolkata have upheld the order of the Ld. CIT(Appeal)-XII, mentioning as under: 3.1 The aforesaid projects were awarded by Central / State Government /Local Authority / Statutory Body on turnkey basis. The Assessing Officer, during the course of assessment proceedings observed that assessee is acting as a contractor. Accordingly, AO opined that assessee is executing the projects as works contractor within the meaning of Explanation to Sec. 80IA of the Act. On question by the AO for the non-deduction of deduction under section 80IA of the Act, the assessee submitted that the writ petition has been filed challenging explanation to Section 80IA of the Act in the Hon'ble jurisdictional High Court and further requested not to consider the effect of the explanation to Section 80IA of the Act till the disposal of writ petition. However, the AO observed that no further details was submitted by the assessee Hence, AO disallowed the deduction claim u/s 80-IA(4) for an amount of ₹15,98,85,0511/- and added to the total income of assessee. 4. Aggrieved, assessee preferred an appeal before the Ld CIT(A) who has allowed the deduction under section 80-IA of the Act by observing as under:- "Now, keeping in view the scheme of the tax holiday under sec. 80-Ia and the provisions of the Act, the details furnished in respect of the work carried out by the appellant company during the year under consideration have been perused. The nature of work executed, including work relating to ports, air-ports, highway ad

22 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd municipal corporation, all coming in the category of infrastructure facility from the perusal of the terms and conditions of all the agreements, it is abundantly clear that it is not a case where the appellant was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requisites from the client and all he has to do is employ labour. The appellant in the given case was to procure raw material, make arrangements for power, water, plant & machinery, obtain statutory clearances etc., and conduct all the other activities needed for construction to bring into existence an infrastructure facility. Further it was exposed to various risks like risk of damage of property, risk of accidents etc. therefore, having regard to the fact, and emerging legal position, in my view, the Assessing Officer was not justified in holding that the appellant company was merely executing works contract and therefore it was not entitled for the tax holiday benefit under section 80-IA(4) of the Act. It my also be noted here that in the case of Patel Engineering Ltd. V. CIT [2004] 84 TTJ (Mum) 646, the Mumbai Bench of the Tribunal has held that the enterprise must carry on the business of (a) developing, or (b) maintaining and operating or (c) developing, maintaining and operating any infrastructure facility. It is not necessary that the entire infrastructure project is to be developed by one enterprise. In another case of CIT v. Bharat Udyog Ld. [2008] 24 SOT 412 (Mum), it has been held that if an assessee is engaged in developing infrastructure facility (i.e road) but not engaged in "operating and maintaining" said facility, it can claim the benefits of deduction under section 80- IA. The ratio laid down in the reported cases are squarely applicable to the facts of the appellant''s case and hence the appellant being a developer of infrastructure facility discussed above is entitled for deduction under sec. 80-I of the Act. It is also observed that there Hon'ble jurisdictional ITAT 'B' Bench, Kolkata in the cases of M/s Simplex Som Datta Builders J.V. vs. ITO Ward 33(4), Kolkata in Appeal No. 1684/Kol/2011 for AY 2007-08 and in the case of M/s Simplex Subhas J.V. vs. ITO Ward 33(4) Kolkata in Appeal No.1685/Kol/2011 for AY 2007-08, respectively vide their order dated 18.06.2013, held in para 11 & 12 of the order while deciding on the issue having identical set of facts of the cases that the assessee were entitled to get the benefit deduction u/s. 80IA of the Act as claimed them. In the light of the above discussion and findings, perusing the facts of the case and respectfully following the principles laid down in various judicial pronouncements relied upon by the appellant on the issue as discussed above, it is held that the appellant company is engaged in development of infrastructure projects. Therefore, the appellant had acted as developer of the infrastructure facilities and has not acted merely as a work contractor, hence, it was entitled to get deduction under sec. 80-IA(4) of the Act as claimed by the appellant. The Assessing Officer is, thus, directed to allow the same accordingly. Hence, these grounds of appeal of the appellant are allowed."

23 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd Being aggrieved by this, Revenue has come up in appeal before us on the following grounds of appeal. 5. Before us both the parties relied in the order authorities below as favourable to them. 6. We have heard rival contentions and perused the materials available on record. At the outset we find that the instant issue is already covered in favour of assessee in its own case by the order of Hon'ble Kolkata Tribunal in ITA No 2168/Kol/2013 vide order dated 08.02.2017. The relevant extract of the order is reproduced below : "6. We have heard rival contentions and perused the materials available on record. From the foregoing discussion we find that the provisions of Section 80-IA of the Act applies to the 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) developing, 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. Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, 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 during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. 6.1 From the above it is clear in order to avail deduction u/s 80-IA all the following conditions should be satisfied: (i) The assessee is a company or a consortium of companies; (ii) There exists an agreement with the Central Government, State Government, Local authority or any other statutory body and

24 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd (iii) Pursuant to the agreement specified in point (ii) the company engages itself in any of the following activities: (a) Development of infrastructure facility (b) Operation and maintenance of infrastructure facility (c) Development, operation and maintenance of infrastructure facility 6.2 Now the assessee in the given case is a company which, pursuant to agreements with various Government bodies, engaged itself in the development of infrastructure facility as defined in the Explanation to sub section 4 of section 80- IA . These set of facts have not been disputed by the AO. The Ld. AO disallowed the claim on the ground that the assessee has challenged the provisions of explanation to section 80IA of the Act to the Hon'ble High Court and the Court has restrained to enforce the demand that may be raised in pursuance to the explanation to section 80IA of the Act. There is no direction to keep the assessment proceedings under abeyance. The AO treated the assessee as a mere works contractor conducting mere civil construction and hence as per the explanation to section 80- IA(13), the deduction is not available to him. However on examination of the records we find that the assessee has withdrawn the appeal filed before the Hon'ble High Court. At this juncture attention in this regard is firstly invited to the provisions of the Explanation of Section 80-IA of the Act as produced below: "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 to in sub- section (1). " From a plain reading of the above it is clear that deduction u/s 80-IA does not apply to works contract. Now the relevant question arises before us for adjudication is that what constitutes a works contract. Section 80-IA nowhere defines the term "works contract", hence the natural meaning of the word shall apply. As per the Oxford dictionary the term "work" means application of effort to a purpose or use of energy. Thus going by the dictionary meaning we may say that a works contract is a contract which involves effort or in other words labour of the contractor. Further as per the Black's Law Dictionary, the term "work" means labour or in other words physical and mental exertion to attain an end esp. as controlled by and for the benefit of the employer. Thus as per Blacks's Law also a works contract is a labour contract under which the contractor merely employs his labour as per the directions of the contractee. Further, attention is invited to relevant extracts of section 194C of the IT Act: "(iv) "work" shall include- (a) Advertising;

25 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd (b) Broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) Carriage of goods or passengers by any mode of transport other than by railways; (d) Catering; (e) Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer." Thus as per section 194C also, "works contract" does not include a contract wherein the contractor in addition to employing labour, procures material from a third party. Thus, contracts involving mere labour of the contractor are included in the purview of "works contract". Further, attention is invited to the judgment of the Supreme Court in case of Associated Cement Co. Ltd. vs. CIT [201 ITR 435], wherein the Hon'ble Court while interpreting the term 'work' u/s 194C held that "Words `any work' in sub-s. (1) of s. 194C means any work including supply of labour to carry out work and is not intended to be confined to or restricted to works contract, therefore, a person who credits to the account of or pays to a contractor any sum payable on behalf of organizations specified in s. 194C(1) for carrying out any work (including supply of labour for carrying out any work) is liable to deduct income-tax as required under that sub-section. The words in the sub-sections (1) of 194C `on income comprised therein' appearing immediately after the words `deduct an amount equal to two per cent of such sum as income- tax' from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract, but deduction is to be made out of payments made to the contractor." 6.3 We see no reason to curtail or to cut down the meaning of the plain words used in the section. ''Any work" means any work and not a "works contract'', which has a special connotation in the tax law. Indeed in the sub- section the "work" referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of the Legislature that the "work" in the sub-section is not intended to be confined to or restricted to "works contract". The issue before the Supreme Court in the aforesaid case was whether the term "work" used in section 194C needs to be restricted to "works contract". The Apex Court laid out that the term "work" used in section 194C need not be restricted to "works contracts" (i.e. labour contracts) because the sub- section expressly includes supply of labour to carry out work. In other words, it is implied that works contract means supply of labour to carry out work. Thus from the above we may say that a works contract constitutes a contract under which the contractor is merely employing his efforts or labour. Under such a contract, the contractee provides the material and other requisites (a complete infrastructure) needed to carry out the desired work to the

26 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd contractor who by applying his labour to the said material turns the material into a desired product. Further, attention is invited to the memorandum explaining the provisions in the Finance Bill, 2007, reported in [2007] 289 ITR (St.) 292 at page 312, which reads as under: "Section 80-lA, inter alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, industrial parks and special economic zones. The tax benefit was introduced for the reason that industrial modernization requires a passive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been {or encouraging private sector participation by way of investment in development of the infrastructure sector and not {or the persons who merely execute the civil construction work or any other works contract." Accordingly, it is proposed to clarify that the provisions of section 80- IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work, i.e., carries out the civil construction work he will be eligible for tax benefit under section 80- IA of the Act. In contrast to this, a person who enters into a contract with another person (i.e., undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for tax benefit under section 80- IA. This amendment will take retrospective effect from 1st April 2000 and will accordingly apply in relation to the assessment year 2000-01 and subsequent years. The Explanatory Memorandum clearly lays out that purpose of extending tax benefit u/s 80-IA was to encourage investments from the private sector and hence work contracts, i.e. contracts involving merely labour (or mere execution of construction without making investments) are outside the purview of the provisions of section 80-1A. Thus, the term "works contract" used in Explanation to section 80-IA(l3) means a contract of developing infrastructure by merely employing labour and making no investments. We also find support from the following judgments: The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs. ACIT (2012) 32 CCH 0296 HydTrib (2012) 51 SOT 0207 (Hyd) (URO). The relevant extract of the order is reproduced as under : "The next question to be answered is whether the assessee is a developer or mere works contractor. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. The Government handed over the possession of the premises of projects to the assessee for the development of infrastructure

27 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18- 05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The department is not correct in holding that the assessee is a mere contractor of the work and not a developer." 6.4 It was also observed that "The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Similarly the Chennai Bench of Tribunal in case of R.R. Constructions, Chennai vs Department Of Income Tax 2013) 35 CCH 0547 Chen Trib (2015) 152 ITD 0625 (Chennai) held that "when the assessee makes investment and himself executes development work and carries out civil works he is eligible for tax benefit u/s 80IA of the Act. Accordingly, with the foregoing discussion, we hold that the assessee is

28 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd entitled to deduction u/s 80IA(4) of the Act, and therefore, we order to delete the addition made in this respect" Thus, the memorandum explaining the provisions in the Finance Bill, 2007, further strengthens the contention of the assessee that a works contract is a contract which involves mere labour of the contractor. However, if under a contract, the contractor employs his capital and enterprise in addition to labour, then the said contract does not constitute a works contract under the Explanation to section 80-IA(l3) and the contractor shall be eligible for deduction U/S 80-IA. Now coming to the facts of the case, it is submitted that the assessee was not mere works contractor, who had merely employed its labour under the projects from the various government authorities. The assessee was a developer. In addition to employing labour it made investments, it developed an enterprise/infrastructure to support the work under the various projects. In addition to labour, it deployed its machinery, materials and did all the things necessary (i.e. provided an enterprise) to support the construction work undertaken under the various projects. The assessee was provided with the site alone and by putting its own inputs (not labour alone) he converted the site into an infrastructural facility. 6.5 Further, ITAT (Hyderabad) in case of Siva Swathi Constructions Pvt. Ltd. vs DCIT, Circle-3(2) in ITA No.1008-09/Hyd/2013 for AYs 2009-10 & 2010-11 dated 25.10.2013 held that "The next reason given by the CIT(A) is with regard to non- financial participation by the assessee, as the assessee has got mobilization advance. The mobilization advance has not been given freely. It has been given only after the assessee furnished a bank guarantee, and the bank guarantee has been given by the bank only after getting enough security from the assessee, to protect itself from any risk on account of any default on the part of the assessee. The assessee has taken financial assistance from bank and paid huge interest of Rs. 2,87,10,943.00 for assessment year 2009-10 and of Rs. 9,35,78,373.00 for assessment year 2010-11, as seen from the Profit and Loss Account of the assessee for the relevant years ending on 31.3.2009 and 31.3.2010 respectively, copies of which are furnished by the assessee at pages 20 and 65 of the paper-book. Similarly, assessee has invested its own fund of Rs.5,55,00,000.00 for assessment year 2009-10 and of Rs. 7,86,75,710.00 for the assessment year 2010-11, as seen from the Balance Sheet of the assessee as on 31.3.2009 and 31.3.2010 respectively, copies of which are furnished by the assessee at pages 21 and 66 of the paper- book. In this view of the matter, the reason given by the CIT(A) on this aspect for denying deduction to the assessee under S.80-IA is also not valid. Thus in light of the aforesaid decision of the Tribunal Hyderabad Bench, the contention of the AO is not valid. Further, merely because the assessee was receiving payments from the Government in progress of work it cannot be said that the projects were financed by Government. In this regard it is pointed out that under sub-section 4 of section 80-IA, deduction is available to a developer, i.e. if, an assessee, merely develops the infrastructure facility without operating and maintaining the same, it is entitled to deduction. The Bombay High court in case of Commissioner of Income-tax v. ABG Heavy Industries Limited [322 ITR 323] observed that "Parliament amended the provisions of section 80-lA of the Act so as

29 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd to clarify that in order to avail of a deduction, the assessee could (i) develop ; or (ii) operate and maintain ; or (iii) develop, operate and maintain the facility. The condition as regards development, operation and maintenance of an infrastructure facility was contemporaneously construed by the authorities at all material times, to cover within its purview the development of an infrastructure facility under a scheme by which an enterprise would build, own, lease and eventually transfer the facility. " "This was perhaps a practical realisation of the fact a developer may not possess the wherewithal, expertise or resources to operate a facility, once constructed Parliament eventually stepped in to clarify that it was not invariably necessary for a developer to operate and maintain the facility. Parliament when it amended the law was obviously aware of the administrative practice resulting in the circulars of the Central Board of Direct Taxes. The fact that in such a scheme. An enterprise would not operate the facility itself was not regarded as being a statutory bar to the entitlement to a deduction under section 80-IA of the Act. " 6.6 From the above it is clear that even if an assessee is merely developing the infrastructural facility (without operating and maintaining the same), it is entitled to deduction u/s 80-1A. Further, condition (b) laid out in sub-section 4 of section 80-IA mandates the existence of an agreement with the Government. Moreover, if section 80-IA grants deduction on profits from the activity of development carried out in pursuance of an agreement with the Government it presupposes that assessee will earn some profits from mere development (without operating and maintaining) of the infrastructure facility. Now the relevant question that arises here is that how would an assessee engaged in mere developmental activity (and no operation) pursuant to an agreement with the Government earn profits ? The obvious answer is that the assessee will recover its cost of development from the Government otherwise the entire cost of development will be a loss in its hands. Thus, if deduction u/s 80-IA is denied on the ground that the assessee had received payments from Government, then an assessee who is only a "developer" (and not an operator) will never be entitled to deduction u/s 80-IA, which is clearly not the intention of legislature as discussed by the Bombay High Court in case of ABG Heavy Industries Ltd. Thus, merely because the assessee was paid by the Government for development work it cannot be denied deduction under section 80-IA(4). The contention of the assessee finds strength from the following judgments: The ITAT (Mumbai) in case of ACIT v. Bharat Udyog Ltd. (2009) 123 TTJ 0689 : (2009) 23 DTR 0433 : (2009) 118 ITD 0336 : (2008) 24 SOT 0412 "After the amendment effected by Finance Act, 1999 w.e.f. 1st April, 2000, the deduction under s. 80-IA(4) has become available to any enterprise carrying on the business of (i) developing, or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. Sub-cl. (c) of cl. (i) of s. 80- IA(4) is obviously applicable to an enterprise which is engaged in 'operating and maintaining' the infrastructure facility on or after 1st April, 1995. It is not applicable to the case of an enterprise which is engaged in mere 'development' of

30 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd infrastructure facility and not its 'operation' and 'maintenance'. Therefore, the question of 'operating and maintaining' of infrastructure facility by such enterprise before or after any cut off date cannot arise. However, if the contention of the Departmental Representative is accepted, it would obviously/understandably lead to manifestly absurd results. When the Act provides for deduction undisputedly for an enterprise who is only 'developing' the infrastructure facility, unaccompanied by 'operating and maintaining' thereof by such person, there cannot be any question of providing a condition for such an enterprise to start operating and maintaining the infrastructure facility on or after 1st April, 1995. Since the assessee is only a developer of the infrastructure project and it is not maintaining and operating the infrastructure facility, sub-cl. (c) of cl. (i) of sub-s. (4) of s. 80-IA is not applicable. The interpretation of Revenue is absurd also in view of the rationale of the provisions of s. 80-IA(4)(i). From the asst. yr. 2000-01, deduction is available if the assessee carries on the business of any one of the three types of activities. When an assessee is only developing an infrastructure facility project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person who develops the infrastructure facility project, realise its cost ? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee has paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation canvassed by the Revenue authorities is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under s. 80-IA(4), which is not the intention of the law. If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. When the legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction, it presupposes that there can be income to developer, i.e., to the person who is carrying on the activity of only developing infrastructure facility. Obvious as it is, a developer would have income only if he is paid for development of infrastructure facility, for the simple reason that he is not having the right/authorisation to operate the infrastructure facility and to collect toll therefrom, and has no other source of recoupment of his cost of development. Considered as such, the business activity of the nature of build and transfer also falls within eligible construction activity, that is, activity eligible for deduction under s. 80-IA inasmuch as mere 'development' as such and unassociated/ unaccompanied with 'operate' and 'maintenance' also falls within such business activity as is eligible for deduction under s. 80-IA. Therefore, merely because the present assessee was paid by the Government for development work, it cannot be denied deduction under s. 80-IA(4). A person who enters into a contract with another person will be a contractor no doubt; and the assessee having entered into an agreement with the Government agencies for development of the infrastructure projects, is obviously a contractor but that does not derogate the assessee from being a developer as well. The term "contractor" is not essentially contradictory to the term "developer". On the other hand, rather s. 80-

31 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being a developer. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a developer; nor will it debar the assessee from claiming deduction under s. 80-IA(4). Therefore, an assessee who is only engaged in the developing the infrastructural facility i.e., road and not engaged in the 'operating and maintaining' the said facility is entitled to the benefits of the deduction under s. 80-IA(4).--Patel Engineering Ltd. vs. Dy. CIT (2004) 84 TTJ (Mumbai) 646 followed. Provisions of sub-cl. (c) of cl. (i) of s. 80-IA(4) are inapplicable to the assessee which is engaged in mere developing of the infrastructure facility and, therefore, an assessee who is only engaged in developing the infrastructure facility and not in 'operating and maintaining' the said facility is entitled to the benefit of deduction under s. 80-IA(4); merely because assessee is referred to as 'contractor' in the agreement for development of infrastructure facility or some basic specifications are laid down, would not debar the assessee from claiming deduction under s. 80-IA(4)." If a person who only develops the infrastructure facility was not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he was not operating the infrastructure facility. Merely because the assessee was paid by the Government for development work it could not be denied deduction under section 80-IA(4). The Chennai Bench of Tribunal in case of R.R. Constructions, Chennai vs. Department of Income tax held that "When an assessee is only developing an infrastructure facility project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person, who develops the infrastructure facility project, realize its cost? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee had paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation done by the Assessing Officer is accepted, no enterprise carrying on the business of only developing he infrastructure facility would be entitled to deduction under section 80IA(4), which is not the intention of the law. An enterprise, which develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. The legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction. It presupposes that there can be income to developer i.e. to the person who is carrying on the activity of only development infrastructure facility. Ostensibly, a developer would have income only if he is paid for the development of infrastructure facility, for the simple reason that he is not having the right/authorization to operate the infrastructure facility and to collect toll there from, has no other source of recoupment of his cost of development.

32 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd The Indore Bench of the Tribunal in case of Sanee Infrastructure Pvt. Ltd. vs. ACIT [138 ITD 433] held that "As per our considered view, after amendment by the Finance Act, 2002 for claim of deduction u/s 80IA(4) infrastructure facility is only required to be developed and there is no condition that assessee should also operate the same. Thus, after amendment, when the assessee is not required to operate the facility, the payment for development of such infrastructure is required to be made by the Government only. "After amendment, when assessee undertakes to develop the infrastructure facility only, it is the Government who will make payment to assessee in respect of infrastructure facility developed by it in terms of agreement so entered with Government. Thus, we do not find any infringement of conditions {or claim of deduction" 6.7 Thus from the above, it is clear that the fact that the assessee had received payments from the Government in progress of its work has no bearing on eligibility of deduction u/s 80- IA. Further, the Revenue in all the grounds has contended that the contracts entered into by the assessee were merely 'construction contracts' since the assessee is not exposed to any entrepreneurial and investment risk. In this regard, the AO has observed that the assessee is executing the contract against predetermined revenue w.r.t the above, it is submitted that under the impugned contracts, the assessee was merely carrying out the civil construction work. It was responsible for overall development of the infrastructure facility. It was merely provided with the site which it had to develop into an infrastructural facility by deploying his resources i.e. material, plant & machinery, labour, supervisors etc. It was responsible for any damage/loss caused to any property or life in course of execution of the works. It was even responsible for remedying of the defects in the works at its cost. It was also required to operate and maintain the infrastructure facility. Hence, it cannot be said that the contract with the Government was to carry out mere civil construction. Attention in this regard is invited to the following: (i) The ITAT (Ahmedabad) in case of Sugam Construction (P) Ltd. vs. ITO [56 SOT 45] held that "It is also gathered (a) That a developer is a person who undertakes the responsibility to develop a project. (b) That a developer is therefore not a civil contractor simplicitor. (c) That if we apply the commercial aspect, then a developer has to execute both managerial as well as financial responsibility. (d) That the role of a developer, according to us, is larger than that of a contractor. (e) That when a person is acting as a developer, then he is under obligation to design the project, it is another aspect that such design has to be approved by the owner of the project, i. e. the Government in the present case. (f) That he has not only to execute the construction work in the capacity of a contractor but also he is assigned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it can be ascertained about the nature of the contract assigned that whether it is a "work contract" or a "development contract". (h) That in a development contract" responsibility is fully assigned to the developer for execution and completion of work. (i) That although the ownership of the site or the ownership over the land remains with the owner

33 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd but during the period of development agreement the developer exercise complete domain over the land or the project. That a developer is not expected to raise bills at every step of construction but he is expected to charge the cost of construction plus mark-up of his profit from the assignee of the contract. (k) That a developer is therefore expected to arrange finances and also to undertake risk. (I) That in contrast to the rights of a "contractor" a "developer" is authorized to raise funds either by private placement or by financial institutions on the basis of the project. These are few broad qualities of a developer through which the character of a developer can be defined. " (ii) ITAT(Hyderabad) in case of Koya and Co. Construction (P) Ltd. vs ACIT [51 SOT 203] held that "The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all long been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before the court that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources." Thus, the fact that the assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the assessee vide the agreements has clearly demonstrated the various risks undertaken by it. The assessee was to furnish a security deposit to the Employer and indemnify the employer of any losses/damage caused to any property/life in course of execution of works. Further, it was responsible for the correction of defects arising in the works at it cost. Thus, it cannot be said that the assessee had not undertaken any risk. The ITAT (Hyderabad] in case of Siva Swathi Construction (P) Ltd. (supra) held that "Further reason given by the ld. CIT(A) for denying deduction under S.80IA to the assessee is that the assessee has not undertaken any risks. The observations of the ld. CIT(A) in this behalf are also not valid and correct. It was clearly mentioned in the agreement that the assessee shall execute and furnish indemnity bond for a period of four years, indemnifying the Government against any loss or expenditure incurred, to repair any defect noticed due to faulty working done by the contractor or substandard material used by the contractor. Further, it is also mentioned in the contract agreement that the assessee shall not claim for any loss due to foreseen circumstances, including suspension of work due to cause. It is also provided that in the event of accident to people employed by the assessee resulting in compensation to be paid as per the Workmen's Compensation Act the same shall be paid by the contractor, viz. the assessee only. In view of the various specific clauses in the agreement fastening the risks to be undertaken by the assessee, discussed above, it cannot be said that the assessee has not undertaken any risk. 6.8 From the above, it is clear that the contention of the AO that the assessee had not undertaken any entrepreneurial and investment risk is an incorrect

34 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd interpretation of the facts. Lastly, with regard to the project O&M, Bangalore (on which a deduction of Rs. 35,16,9411- was claimed), it is submitted that it is an operation and maintenance project, to which Explanation to section 80-IA(13) does not apply. Explanation to section 80- IA(13) merely distinguishes between a developer and works contractor. It clarifies that a works contractor shall not be included in the category of 'developer' u/s 80-1A. Thus, the Explanation clearly does not apply to O&M projects. Hence, deduction of Rs. 35,16,9411- claimed for the aforesaid project u/s 80-IA cannot be denied by invoking the explanation to section 80- 1A. 7. From the perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor simplicitor and was a developer and hence Explanation to section 80- IA(13) does not apply to the assessee. Further, in addition to developing the infrastructure facility, the assessee was even operating and maintaining the same. Thus, clearly the assessee is eligible for deduction u/s 80-1A. In our considered view do not find any reason to uphold the order of ld. CIT(A). Hence this ground of appeal of the Assessee is allowed. We also find that the facts of the case of the assessee are identical as that of the above case of the assessee's own case (supra). In the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. We uphold the same. Hence, this ground of Revenue's appeal is dismissed.” As Hon’ble ITAT in assessee’s own case in a recent decision has upheld its eligibility of claiming deduction u/s 80IA, respectfully following the decision of the Hon’ble ITAT, Kolkata, A.O. is directed to allow assessee’s claim of deduction of Rs.54,73,47,509/- u/s 80- IA.” 12.2. The ld. Counsel for the assessee relied upon the order of the Tribunal in the earlier assessment years and supported the order of the ld. CIT(A). The ld. CIT D/R, on the other hand, opposed the contentions of the ld. Counsel for the assessee and submitted that the assessee cannot claim deduction u/s 80-IA(4) of the Act. On a query from the Bench, though not leaving his ground he submitted that the issue was considered by the Tribunal in the earlier Assessment Years and that the issue was resolved in favour of the assessee.

In view of the above discussion, we respectfully follow the proposition of law laid down by the co-ordinate bench of the ITAT in the assessee’s own case on the very same issue and uphold the order of the ld. CIT(A) that the assessee is eligible for deduction u/s 80-IA of the Act. Further, we find from the impugned Assessment Year 2011-12, that

35 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd the assessee claimed deduction of Rs.54,73,47,509/- u/s 80-IA of the Act, in respect of the following projects:-

Sl.N Name of the projects Contract Deduction Remarks o. Number Claimed (Rs) 1. Public Works Department, New Delhi 2401 and 8,14,00,294 Already allowed by Hon’ble ITAT, 2407 Kolkata 2010-11 2. Delhi Metro Rail Corporation 2418 2,83,51,702 Already allowed by Hon’ble ITAT, Kolkata in A.Y. 2010-11 3. Kolkata Municipal Corporation 2067-68 1,05,01,342 Already allowed by Hon’ble ITAT, Kolkata in A.Y. 2010-11 4. Hyderabad Metropolitan Water 2303 4,88,12,831 Already allowed by Hon’ble ITAT, Supply and Sewerage Board Kolkata 2010-11 5. Mumbai Metropolitan Region 2304-2305 6,40,40,151 Already allowed by Hon’ble ITAT, Development Authority Kolkata in A.Y. 2010-11 6. Indore Municipal Corp. 2339 23,92,05,475 Already allowed by Hon’ble ITAT, Kolkata in A.Y. 2010-11 7. Kolkata Metro Rail Corporation Ltd 2452-2453 5,69,34,916 New Project 8. Bangalore Development Authority 2463 1,81,00,798 New Project Total 54,73,47,509

12.2.1. As can be seen from the above chart, the projects from Serial No. 1 to 2 have been considered as eligible projects for claim of deduction u/s 80-IA(4) by the Tribunal in the earlier Assessment Years. Only in the case of Kolkata Metro Rail Corporation at S. No. 7 and Bangalore Development Authority at S. No. 8, the projects were not considered earlier as to whether they are projects on which the assessee is eligible for deduction u/s 80-IA of the Act. On a query from the Bench, the assessee submitted that the details of the duties and responsibilities of the assessee company as a contractor have been place in the paper book. In our view, this needs to be examined by the Assessing Officer as the Assessing Officer has not considered the same. For the earlier Assessment Years 2011-12 & 2012-13, this Bench of the Tribunal under similar circumstances has restored four projects to the file of the Assessing Officer for examining whether they fall within the ken of exemption u/s 80-IA of the Act. These are as follows:-

36 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd a) Development of Bust Terminal Complex for Karnataka State transport Corporation at Bangalore b) Development of launch pad for GSLV Mark III facilities of Satish Dhawan Space Centre SHAR at Sriharikota, Andhra Pradesh c) Development of a turbine building, emergency power supply building, cable and pipe tunnel etc. for Kundankulam Nuclear Power Project. d) Development of a Jetty at the Naval Base at Visakhapatnam.

12.2.2. The Assessing Officer in an order passed u/s 143(3) r.w.s. 254 of the Act, dt. 21/11/2018 has accepted the contention of the assessee and granted deduction u/s 80- IA (4) of the Act, except a small portion of Rs.11,93,413/-. Consistent with the view of the Tribunal in the earlier Assessment Years, we set aside the issue of grand of deduction u/s 80-IA(4) of the Act, to the Assessing Officer, on the following projects:-

1) Kolkata Municipal Corporation 2) Bangalore Development Authority

As regards deduction claimed on all other six projects at S. No. 1 to 6 in the table above, we uphold the order of the ld. CIT(A).

14.1. The ld. CIT(A) applied the decision of the Hon’ble ITAT Kolkata in the case of REI Agro Ltd. vs. DCIT, CC-XXVII; ITA No. 1331/Kol/2011; which was upheld by the Hon’ble Jurisdictional High Court and directed the Assessing Officer to restrict the disallowance u/s 14A of the Act, to Rs.55,565/-. As the ld. CIT(A) has applied the decision of the Jurisdictional Tribunal, which was later upheld by the Hon’ble High Court we find no infirmity in the same. Ground No. 2 of the revenue is dismissed.

14.2. In the result, appeal of the assessee is allowed and the appeal of the revenue is allowed in part.

37 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd 15. We now take up assessee’s appeal for the Assessment Year 2012-13 in ITA No. 1573/Kol/2017.

a) Bogus purchase b) Deduction u/s 80-IA(4) of the Act c) Disallowance u/s 14A r.w.r. 8D d) Disallowance of employee’s contribution towards PF & ESI

This issue has been discussed in detail for the Assessment Year 2011-12. The facts, arguments and the conclusions of the Bench apply mutatis mutandis to this ground also. Consistent with the view taken therein, we allow this ground of the assessee. In the result, this appeal of the assessee is allowed.

38 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd 21. Ground No. 1 is against the deletion of disallowance made u/s 80-IA(4) of the Act. The projects on which deduction is claimed are as follows:-

Sl.N Name of the projects Contract Deduction Remarks o. Number Claimed (Rs) 1. National Highway Authority of India 2124 10,27,17,740 Already allowed by Hon’ble ITAT, Kolkata 2010-11 2. Indore Municipal Corp 2339 1,53,70,937 Already allowed by Hon’ble ITAT, Kolkata in A.Y. 2010-11 3. Bangalore Development Authority 2463 99,79,770 New Project started in A.Y. 2011- 12. Agreement enclosed at pages 80-140 with the paperbook of A.Y. 2011-12 4. Kolkata Municipal Corporation 2578 25,84,151 New Project [agreement enclosed at pages 1-97 of the paperbook] Total 13,06,52,598

21.1. As regards National Highway Authority of India and Indore Municipal Corporation, the deduction, in our view has been rightly allowed by the ld. CIT(A) as it has followed the order of the Tribunal in the assessee’s own case on the very same issue for the earlier Assessment Years. Consistent with the view taken based on the same issue for the Assessment Year 2011-12, we uphold the order of the ld. CIT(A) to the extent of these two projects.

24.1. We find that the ld. CIT(A) applied the decision of the Hon’ble ITAT Kolkata in the case of REI Agro Ltd. vs. DCIT, CC-XXVII; ITA No. 1331/Kol/2011; which was upheld

39 ITA No. 1572/Kol/2017 Assessment Year: 2011-12 ITA No. 1573/Kol/2017 Assessment Year: 2012-13 ITA No. 1764/Kol/2017 Assessment Year: 2011-12 ITA No. 1765/Kol/2017 Assessment Year: 2012-13 M/s. Simplex Infrastructures Ltd by the Hon’ble Jurisdictional High Court and directed the Assessing Officer to restrict the disallowance u/s 14A of the Act, to Rs.6,98,400/-. As the ld. CIT(A) has applied the decision of the Jurisdictional Tribunal, we find no infirmity in the same. Ground No. 2 of the revenue is dismissed.

Kolkata, the 1st day of March, 2019. Sd/- Sd/- [S.S. Godara] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 01.03.2019 {SC SPS} Copy of the order forwarded to: 1. M/s. Simplex Infrastructures Ltd 27, Shakespeare Sarani Kolkata – 700 017 2. Addl. Commissioner of Income Tax, Range-12(2) Kolkata 3. Addl. Commissioner of Income Tax, Range-12 Kolkata 4. DCIT, CC-3(4), Kolkata 5. CIT(A)- 6. CIT- , 7. CIT(DR), Kolkata Benches, Kolkata.