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Facts
The assessee, SMC Infrastructure Pvt. Ltd., claimed a deduction of Rs. 11,44,35,101/- under section 80IA(4) for the assessment year 2018-19. The Assessing Officer (AO) disallowed this deduction, holding that the assessee was a contractor and not a developer of infrastructure facilities, and also that separate books of accounts for eligible projects were not maintained. The CIT(A) upheld the AO's decision. The assessee appealed to the ITAT, arguing that its work involved planning, designing, and maintaining infrastructure, thus qualifying it as a developer.
Held
The Tribunal held that the assessee was eligible for the deduction under section 80IA(4). It was established that the assessee's activities, including planning, designing, and maintaining infrastructure, qualified it as a developer. Furthermore, the Tribunal referred to various judicial pronouncements and CBDT circulars which supported a liberal interpretation of the section, allowing developers who undertake entrepreneurial investment risk to claim the deduction. The Tribunal also noted that ITAT had previously decided similar issues in favor of the assessee.
Key Issues
Whether the assessee, engaged in infrastructure development projects, qualifies as a 'developer' for the purpose of claiming deduction under Section 80IA(4), and whether the disallowance by the revenue authorities on grounds of not maintaining separate books and not being a developer is justified.
Sections Cited
80IA(4)
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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI AMARJIT SINGH & SHRI SANDEEP SINGH KARHAIL
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “G”, MUMBAI
BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER
ITA No.3497/Mum/2024 Assessment Year: 2018-19
SMC Infrastructure Pvt. Ltd. DCIT, Central Circle-2, Thane. Floor-3, Plot-4, K.K. Chambers, Purushottamdas Thakurdas, Vs. Nest to Siddharth College, Mumbai-400001.
PAN: AACCS 3437 L (Appellant) (Respondent) Present for: Assessee by : Shri Rajiv Khandelwal Revenue by : Shri Kishor Dhule, CIT/DR & Shri Bhangepatil Pushkaraj Ramesh, Sr. DR
Date of Hearing : 17.10.2024 Date of Pronouncement : 04.12.2024
O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: This appeal of the assessee for the assessment year 2018-19 is directed against the order dated 28.06.2024 passed by the ld. Commissioner of Income-tax (Appeal), Pune-11. The assessee has raised the following grounds of appeal:
“1. The Commissioner of Income-tax (Appeals), Pune-11 (hereinafter referred to as the CIT(A) erred in upholding the action of the Deputy Commissioner of Income-tax, Central Circle-2, Thane (hereinafter referred to as the assessing officer) in upholding the disallowance of deduction of Rs. 11,44,35,101/- under section 80IA(4) of the Act on the ground that (a) the appellants have not maintained separate books of account for each eligible project undertaken by them and (b) no separate Form 10CCB is filed for each project undertaken by the appellants.
2 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 The appellants contend that on the facts and circumstances of the case and in law, the CIT(A) ought not to have sustained the impugned disallowance of deduction of Rs. 11,44,35,101/- inasmuch as the CIT(A) has not appreciated the facts of the case in its entirety and hence, the deduction ought to be allowed. The appellants crave leave to add to alter or amend the aforestated ground of appeal.” 2. Fact in brief is that return of income declaring total income at Rs. 31,71,48,190/- was filed on 30.11.2018. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 31.09.2019. During the course of assessment proceedings, on perusal of the return of income, the assessing officer noticed that assessee has claimed deduction of Rs. 11,44,35,102/- u/s 80IA(4) of the Act. The assessing officer has issued show-cause notice dated 01.12.2020 as reproduced at page no. 224 of the assessment order asking the assessee to substantiate the claim of deduction u/s 80IA(4) of the Act. The assessing officer has also referred in the show-cause notice that ITAT, Mumbai has decided the issue in favour of the assessee for the A.Y. 2001-02, 2006-07, 2007-08, 2008-09 and 2009-10 for which the department has filed appeal before the Hon’ble High Court on the issue of deduction u/s 80IA(4) of the Act. The assessing officer has stated that assessee has merely executed a works contract and assessee is not a developer of an infrastructural facility as envisaged in Section 80IA of the Act. The assessee submitted that in works contract agreements there were clauses in the agreement like planning, designing, providing and laying, automation etc. carried out at the various stages of development of infrastructure facility. It was also submitted that
3 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 after development of a particular infra facility the assessee as a developer also need to maintain it for defect liability period and provide guarantee to Principal about hassle free working and operation of the system. The relevant extract of the submission of the assessee made before the AO is reproduced as under:
“Even after this amendment we submit to you that is not merely a contractor but is a developer of infrastructure facility. We have already submitted to your good office the list of infrastructure works in respect of which we have taken the deduction as well as some copies of Works Contracts entered into with the Government. In all such agreements there are clauses which discuss about various stages of development which are like planning, designing, providing and laying, automation etc. After development of a particular infra facility we as a developer also need to maintain it for defect liability period and provide guarantee to Principal about hassle free working and operation of the system. also need to provide bank guarantee as security to the respective department and insurance also. Finally, we need to hand over the operational system to the respective department after operating it for defect liability period.
SMC's case squarely falls under this explanation since has itself invested its man, money, materials and machines for executing these projects of infrastructures. Thus it is certainly entitled to the deduction u/s 80IA(4).
The term 'developer' can include a contractor for the purpose of deduction u/s. 801A (M/s. Om Metals Infra Projects Ltd. V/s. CIT, MANU/IJ/0018/2008 [ITAT Jaipur]).
Thus, mere reference of a word 'contractor in a work order/ agreement with various Government departments or or bodies will not change the position it is indeed an entity that is developing this infrastructure facility.
In case of M/s. MYTAS-NCC (JV) ITA No.1292/Hyd./2010 & ITA No.1875/HYD/2011 it has been clarified that the company is a developer if the scope of works includes designing and manufacturing, construction, mobilization of laborers technical expertise, supervision, coordination and control, financial involvement and defect correction and liability period and such contracts cannot be called as a simple works contract.
4 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 In the case of GVPR Engineers Ltd. v. ACIT, 51 SOT 207 (Hyd) (URO) wherein the Tribunal held that deduction u/s. 801A is available to developers who undertake entrepreneurial investment risk and not for the contractors, who undertake only business risk.
Therefore, if the contracts involve design, development, operation & maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract, to deny the deduction under section 801A. In our case also scope includes all these things.
In case of M/s. Koya and Co. Construction Pvt. Ltd. ITA No. 1843/Hyd/2012 it is clarified that every contractor may not be a developer but every developer developing infrastructure facility on behalf of the government is a contractor. The word contractor used to denote a person entering into agreement with the Government or Government undertakings. Such an agreement is a contract and for the purpose of the agreement a person may be called as contractor as he entered into a Contract. Therefore, the contractor and the developer cannot be viewed differently. Similarly, it is also mentioned that the deduction u/s 801A of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors who undertakes only business risk.
In respect of Explanation so inserted by Finance Act No. 2 of 2009, clarifies that mere works contractor would not be eligible for deductions u/s. 80 IA of the Act. But, certainly, the explanation cannot be read to do away with the eligibility of developer. The term contractor is not essentially contradictory to the term 'developer'. A person, who enters into a contract with another person, will be a contractor, no doubt; the having entered into an agreement with various Government departments is obviously a contractor, but does not derogate from being a developer as well. Section 80 IA (4) itself provides that assessee should develop the infrastructure facility as per agreement with Central Govt., State Govt. or a Local authority. So, entering into a lawful agreement & thereby becoming a contractor should, in no way, be a bar to the one being a developer.
Applicability of Hon'ble Bombay High Court's decision in M/s ABG Heavy Industries Ltd to our case:
Now we will discuss the decision of Hon'ble Bombay High Court ABG Heavy Industries. While discussing whether this deduction will be
5 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 available to concerns that only operate a part of infrastructure facility the Hon'ble Bombay High Court has considered the CBDT circulars right from 14-08-1995. The Hon'ble court has studied all the circulars in this effect issued by CBDT and put light on the fact that how these circulars were liberalized step by step so as to widen the horizons for claiming deduction made available under the section 80IA.
The Hon'ble Bombay High Court observed that Section 80-IA was an instrument of legislative policy conceived with a view to provide an impetus to private sector participation in the infrastructural projects. Consistent with the legislative object of encouraging private sector participation in the development of infrastructure, section 80-1A was enacted. Contemporaneously, with the provisions made by the Parliament in section 80-IA, explanatory circulars issued in an administrative capacity by the CBDT held the field. These circulars gave expression to the scope and ambit of the concession that was provided by section 80- IA. On 14-8-1995, Circular No. 717 was issued by the CBDT which amplified both, the rationale for the introduction of section 80-IA and the nature and ambit of the concession that was provided by the provision. The circular clarified that the benefit of a deduction was available to an enterprise, which developed, maintained and operated any new infrastructure facility, such as a Port on a Build, Operate and Transfer (BOT) basis, or a Build, Own, Operate and Transfer (BOOT) basis 'or similar other basis', where there was an ultimate transfer of the facility to a Government or a public authority. [Para 11]
On 3-1-1996, Circular No. 733 was issued by the CBDT. The circular dealt with the question, as to whether section 80-IA would be applicable to the Build, Own, Lease and Transfer (BOLT) Scheme of the Indian Railways for the development of the railway system. Answering the issue in the affirmative, the circular clarified that the concession would be applicable only to an infrastructure facility meant for development of the railway system and not to any other infrastructure facility including rolling stocks. [Para 12]
Subsequently, on 23-6-2000, Circular No. 793 was issued by the CBDT. The importance of the circular lies in the fact that the CBDT noted that it was in receipt of representations seeking a clarification on whether structures at Ports for storage, loading and unloading, etc., would fall within the definition of a Port, inter alia, for the purposes of section 80-IA. The CBDT clarified that such structures would be included in the definition of a 'Port' for the purposes of section 80-IA, subject to the
6 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 fulfillment of the conditions that the Port Authority must issue a certificate that the structures form a part of the Port; that such structures had been built either under a BOT or BOLT Scheme; and that there was an agreement for the transfer of the structure to the authority after the fulfillment of the stipulated period. The circular, therefore, clearly postulated a concession being given in respect of a particular facility at a Port, namely, a facility involving storage, loading and unloading. [Para 13]
By the subsequent Circular No. 10 of 2005, dated 16-12-2005, it was clarified that the conditions that were spelt out in the earlier circular dated 23-6-2000 would continue to operate in respect of the assessment years prior to and culminating with the assessment year 2001-02. With effect from the assessment year 2002-03, all that was necessary was a certificate issued by the Port Authority that the structure in question formed a part of the Port. Hence, the evolution of section 80-IA would show a progressive liberalization of the legislative scheme, in the interests of aiding the growth of infrastructure. The administrative circulars issued by the CBDT in Implementation of section 80-1A similarly liberalized the scheme consistent with the Act. [Para 14]
In the background of the evolution of the law, the contention of the revenue, that the assessee was not engaged in developing the facility at all; and that under the contract entered into between the assessee and the JNPT all that the assessee was required to carry out was to supply and install cranes at the Port, could not be accepted. The expression 'development' has not been artificially defined for the purposes of section 80-IA and must, therefore, receive its ordinary and natural meaning. Under the terms of the contract between the assessee and the JNPT, the assessee undertook an obligation for supplying, installing, testing, commissioning and maintenance of container handling equipment's, namely, the cranes in question. The JNPT had a dedicated container handling terminal. The only activity at the terminal consisted of the loading, unloading and storage of the containers. Under the contract, the assessee was obligated to provide the equipment in question in an operable condition. The contract envisaged two different options; the first being one under which the assessee would carry out operation and maintenance of the equipment while the second consisted of an option to the JNPT to carry out operations. The terms of the contract, however, made it clear that it was the obligation of the assessee to make the equipment available for operation for a stipulated minimum number of days during the year and made the assessee liable to liquidated
7 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 damages in the event it was not possible to make equipment available. [Para 16]
In the instant case, the obligations assumed by the assessee under the terms of the contract were obligations involving the development of an infrastructure facility. Section 80-IA essentially contemplated a deduction in a situation where an enterprise carried on the business of developing, maintaining and operating an infrastructure facility. A Port was defined to be included within the purview of the expression 'infrastructure facility'. The obligations, which the assessee assumed under the terms of the contract, were not merely for supplying and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which
cranes were to vest in the JNPT free of cost. The assessee did not have to develop the entire Port in order to qualify for a deduction under section 80-IA. The Parliament did not legislate a condition impossible of compliance. A Port is defined to be an infrastructure facility and the circular of the CBDT clarified that a structure for loading, unloading, storage, etc., at a Port would qualify for deduction under section 80-IA. The condition of a certificate from the Port Authority was fulfilled and the JNPT certified that the facility provided by the assessee was an integral part of the Port. The assessee developed the facility on a BOLT basis under the contract with the JNPT. On the fulfillment of the lease of ten years, there was a vesting in the JNPT free of cost. [Para 17]
The court further observed that:
This was perhaps a practical realization of the fact that a developer may not possess the wherewithal, expertise or resources to operate a facility, once constructed. The Parliament eventually stepped in to clarify that it was not invariably necessary for a developer to operate and maintain the facility. The Parliament when it amended the law was obviously aware of the administrative practice resulting in the circulars of the CBDT. 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. The Court could not be unmindful in the instant case of the underlying objects and reasons for a grant of deduction to an enterprise engaged in the development of an infrastructure facility. The provision was intended to give an incentive to investment for infrastructural growth in the country. In Bajaj Tempo v. CIT [1992] 196 ITR 188/62 Taxman 480, the Supreme Court emphasized
8 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. In the instant case, the administrative circulars issued by the CBDT proceeded on that basis by adopting a liberal view of the scope and ambit of the provisions of section 80-IA. The Tribunal having only followed these provisions, there was no just reason to interfere in the Court's appellate jurisdiction. [Para 21]
The Hon'ble Bombay High Court has specifically observed that due to the circular no. 10 of 2005 issued on 16-12-2005 the condition of projects to be only completed under BOT/BOOT was deleted. The court observes
On 16-12-2005, Circular No. 10 of 2005 was issued by the CBDT. The circular made a reference to the earlier circular dated 23-6-2000 and clarified that the definition of the expression 'Port' for the purposes of section 80-IA of the Act so as to include structures at Ports for storage, loading and unloading etc., subject to the fulfillment of the conditions already noted earlier, would apply to the assessment year 2001-02 and any earlier assessment year. However, from assessment year 2002-03 onwards, the condition requiring that the structure should have been completed under a BOT or BOLT Scheme and that there should be an agreement for transfer of the facility to the Competent Authority on the expiry of the stipulated period was deleted. In other words, the conditions which were prescribed by CBDT's Circular dated 23-6-2000 were liberalized by the subsequent circular dated 16-12-2005. By the subsequent circular it was clarified that the conditions that were spelt out in the earlier circular dated 23-6-2000 would continue to operate in respect of assessment years prior to and culminating with assessment year 2001-02. With effect from assessment year 2002-03 all that was necessary was a certificate issued by the Port Authority that the structure in question forms a part of the Port. Hence, the evolution of section 80-IA would show a progressive liberalization of the legislative scheme, in the interests of aiding the growth of infrastructure. The administrative circulars issued by CBDT in implementation of section 80-IA similarly liberalized the Scheme, consistent with the Act.
Therefore, as per the said decision of the Hon'ble Bombay High Court appellant who only develops infrastructural facility (even as a contractor) but does not have an occasion to operate and maintain is also eligible for claim of deduction u/s 80 IA (4) of the Act. The Hon'ble High Court has been pleased to observe that qua such a person the condition stated in sub section (c) of section 80 IA (4)(i) has to be read harmoniously with the
9 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 main provision under which deduction is available to appellant, who develops; or operates and maintain; or develops, maintains and operates an infrastructural facility. In other words, a developer who only develops (i.e. contracts) an infrastructural facility is not envisaged to operate and maintain such facility cannot be accepted to fulfill the condition in clause (c) of sec. 80 IA (4) since it would be impossibility. Thus, your appellant feels that it's case directly fits into the frame work of this decision. Therefore, 's case fits into the four corners of framework provided by this decision and should get benefit of clarity provided by this landmark judgment.
In case of drinking water pipeline projects; all these infra projects are owned by Government Authorities like various municipal corporations, Maharashtra Jal Pradhikaran and such other Government Bodies. Government collects water charges from end users for use of water. No such rights were given by any Government body to any private participant. In such case, a person executing water pipeline project cannot be remunerated by BOT/BOOT basis project. Therefore, as already mentioned in ABG case it is not essential to operate the facility developed by private participant to claim deduction u/s 801A (4). But for his efforts of planning, designing to taking guarantee of the successful execution of the scheme he needs to be remunerated for it and that's why payment of bills by owner of facility i.e. Government Department should not be considered as bar for claiming deduction of section 801A (4).
In case of all above works our scope as mentioned above starts from designing of water supply system which Includes survey of the area for geographical features, making drawing for such system, getting confirmations for these drawings from consultants appointed by the Government Departments. Once the designs are final, we need to arrange for man, money, material, machinery on site and execute the project as per design. We also need to provide guarantees, get insurance policies etc. as well as take responsibility of work done till the end of guarantee period.
It is also pertinent to know that Hon'ble Commissioner of Appeals and Hon'ble ITAT Mumbai have already upheld our claim of deduction u/s 801A(4) for various assessment years.
In respect of your query regarding whether the infrastructure developed by us is new facility or merely improvement in existing facility:
10 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 SMC is mainly operating in the area of designing and laying long distance water supply projects for various authorities. We have also done projects for flyovers and road works.
Many a times, the Government Authority issues tenders starting with names such as improvement in water supply system etc. But this does not mean that we are doing work of mere repairing the system with changing pipes or valves in between. Our scope; in all such works include; all above things right from drawing designing to execution and taking guarantee of flawless running of system of guarantee period etc. The words "improvement" in the tender documents only suggest that existing outdated system is going to be replaced by new infrastructure system with greater capacity, efficiency and longer life of at least 25 to 30 years.
In respect of your query regarding Joint Venture (JV) projects executed by SMC, we would like to mention the following:
In some cases, SMC also bids for tenders with some other Corporates working the same nature of business. The SMC is a member of JV to whom such work orders are issued which is in respect of development of infrastructure works mostly long-distance water pipeline or construction roads, flyovers etc.
In all cases, where SMC has claimed the deduction of section 801A (4), the total work is undertaken by the SMC on back-to-back basis. The risks and rewards in relation to that work are transferred in totality to the SMC. The JV neither incurs any expenses for completion of work nor retains any profit out of such back-to-back transfer of work to JV member.
In such circumstances, the relationship between JV and the SMC is not of Principal and sub-contractor. In fact, the JV itself doesn't have any separate identity. It's just an arrangement for getting and executing work in JV members.
Even the Hon'ble CBDT also recognizes this fact and has already clarified via circular no 7/2016 dated 07th March, 2016 that in cases where the work is executed by one of the members of JV, the taxation should be done of that member of JV. The copy the circular is attached herewith for your kind perusal.
11 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 The Hon'ble CBDT has clarified that where the roles and responsibilities of individual JV members are fixed in between the JV members then the taxation should not be done in the hands of the JV but it should be done in the hands of JV.
This, we sincerely believe that SMC fulfills all the conditions of section 80IA(4) and should get the deduction of profits earned in respect of execution of infrastructure projects by it.”
However, the AO has not agreed with the submission of the assessee for the following reasons:
“7. Considering the facts of the case, material available on record and reply of the assessee, the following facts emerged:
* The deduction u/s 80IA (4) is allowable to a developer of Infrastructural facility. However, in this case, the assessee is a contractor and not a developer as required u/s 801A (4).
* The assessee himself admits that it has certain projects which are eligible for deduction u/s 801A (4) and also has certain projects which are not eligible for deduction u/s 801A (4).
* The assessee does not maintain separate set of books of accounts for projects which are eligible for deduction u/s 801A(4) and projects which are not eligible for deduction u/s 801A(4).
* It is also pertinent to mention here that from the list of work orders submitted by the assessee, it is seen that most of the work orders received by the assessee were related to the infrastructural projects awarded by local authorities like Municipal Corporation etc. The assessee had responded to the tenders floated by the local authorities and the contracts were executed as per the work order issued by them.
* The department is in appeal before the Hon'ble High Court on the issue of deduction/s 801A of the Income Tax Act for A.Y. 2001-02, 2006-07, 2007-08, 2008-09 & 2009-10.
* The assessee is in appeal before the Hon'ble High Court on the issue of deduction u/s 801A of the Income Tax Act for the A.Ys 2002-03 to 2005- 06 It is pertinent to mention here that for the A.Yrs 2002-03, 2003-04 and 2004-05 Hon'ble ITAT has decided the issue of deduction u/s 80IA of the IT Act in favour of the revenue and assessee has filed appeal before
12 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19
Hon'ble High Court against the order of Hon'ble ITAT. In the same case, for the A.Y. 2001-02, 2006-07 and 2007-08 & 2009-10 Hon'ble ITAT has decided the issue of deduction u/s 801A in favour of the assessee, wherein revenue has filed appeal before Hon'ble High Court, Mumbai.
* As per the list of eligible projects u/s 801A in respect of industrial undertaking enterprises engaged in the infrastructure developments, the assessee submitted the projects undertaken in earlier years remains incomplete and work thereof carried out during the year under consideration, the following further facts related to work contract found which are discussed as under:
Sl. Name of the authority Description of work Amount Remark No. involved 1 Sr. no. 9 Engineer Improvement & augmentation of 56,69,759 It is not infrastructure Executive Materan water supply scheme of new development Improvement jackwell & pump house repairs to activity rather work Maharashtra Jeevan ralling of charliottle lake, Outlet order itself shows Pradhikaran, Works channels, Tunnels, Engine House, improvement and division, New Panvel Modification to existing WTP augmentation of Construction of sump & Pump existing Water supply house, Lowering. Laying & joining scheme. Hence of 250mm dia DIK-9, rising Main, assessee is ineligible providing & constructing WTP for deduction u/s (capacity 2.50 MLD), Distribution 801A (4) system DI & CL. Providing, Erecting & Commissioning Pumping Machinery & Miscellaneous work Tal Kajat
2 Executive Engineer Providing, lowering, laying, 1,36,36,316 It is not new Aurangabad jointing, hydraulic testing of 1400 infrastructure Mahangar Palika mm diameter mild steel gravity development activity main from nakashatra wadi MBR rather work order itself to railway station and providing, shows it is repair of testing of MS and DI transmission existing water supply mains in the loweing, laing scheme. Hence, jointing and hydraulic corporation assessee is ineligible area for deduction u/s 80IA(4).
3 Project Manager, Providing & laying, jointing 4,04,99,963 It is not new JNNUHM (Water testing & commissioning of infrastructure distribution system) distribution system development activity Bhopal Municipal rather work order itself Corp. Bhopal shows it is repair and construction of existing scheme. Hence assessee is ineligible for deduction u/s 80IA(4).
4 The Chief Officer Strengthening & asphaltic 89,24,901 It is not new Mahad Municipal treatment to road from from ch 0.00 infrastructure Council Mahad Shivmandir to Ambedkar high km to ch development activity school in Birwadi village 1810m rather itself shows strengthening of
13 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19
existing scheme. Hence assessee is ineligible for deduction u/s 80IA(4)
5 Executing Engineer, Thane comples WSS replacement 5,94,73,039 Its not new MIDC Division No of existing old damaged 1590 mm infrastructure dia North feeder m.s. pipe line development activity section between Mahape circle to rather work order itself Mulund (ch 3200 to 12130 m) shows replacement of existing old damaged scheme. Hence assessee is ineligible for deduction u/s 80IA(4)
6 Commissioner Mira Providing lowering, laying, 65,42,56,791 It is not new Bhayender Municipal jointing testing & commissioning infrastructure Corporation 1590 mm dia (OD) 10 mm thick development activity pure water rising main from but the work order Saket to patalipad including itself shows repair and crossing of national highway MGP improvement of pipeling at various locations by existing contract. trenches method (jacking & Hence assessee is pushing method) etc. ineligible for deduction u/s 80IA(4)
7 Executive Engineer Additional ambemath water 1,55,61,161 It is not new MIPWW ambemath supply scheme disallowance infrastructure Thane development activity but the work order itself shows repair and improvement of existing contract. Hence assessee is ineligible for deduction u/s 80IA(4)
8 Executive Engineer, Improvement to Talmavale gudhe 1,35,77,148 It is not new PWD Satara Kalgaon Adhawadi MDR 58 (MDR infrastructure 54 as per RDP 2001-2021) km development activity 13500 (Actual length km 18/00 to but the work order 20/00, 22/00 to 23/900 and itself shows repair and 25/100 to 33/800 = 12.60 km improvement of Tal. Patan dist Satar (b) existing contract. improvement to Nisare Hence assessee is Maruti/Maidan baule gudhe ineligible for deduction Kalgaon dhangarwadi u/s 80IA(4) bhurbhushi/Yegaon to S.H. 144 rd MDR 54 km 23/900 to 15/100, 25/300
It is further found that work contract was originally allotted in the name of SMC JV, which was formed by M/s: SMC Infrastructure Pvt. Ltd. It is pertinent to mention that, after including the turnover of the that JV in the SMC Infrastructure Private Limited, the deduction u/s. 80 IA(4) is claimed by SMC Infrastructure Private Limited. It is notable that the originally work contract was allotted to the JV formed by SMC Infrastructure
14 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 Private Limited, however, the deduction is claimed by the member of the JV I.e. SMC Infrastructure Private Limited. In view of the provisions of section 801A (4), the deduction can only be claimed by the entity to whom work contract is originally allotted. In view of the above discussion, facts of the case and provisions of Section 801A(4) of the Income Tax Act, the deduction of Rs. 11,44,35,101/- claimed by the assessee u/s 801A(4) of the Income Tax Act is hereby disallowed and added to the total income of the assessee for the year under consideration. Penalty proceedings u/s 270A is initiated for under reporting of income. (Addition -11,44,35,101/-) 4. During the course of appellate proceedings before us, the ld. Counsel submitted that assessee is a developer and claim of deduction u/s 80IA(4) is a recurring issue in appeal before the ITAT in the various years and the ITAT in the case of the assessee itself from the A.Y. 2001-02 and A.Y. 2007-08 to 2009-10 have decided the issue of allowability of deduction u/s 80IA(4) in favour of the assessee. On the observation of the ld. CIT(A) that Form No. 10CCB is to be filed for each project, the ld. Counsel submitted that more than one 10CCB Form cannot be uploaded in the portal and same has been only allowed after making changes in the system from 01.04.2024 to file more than one 10CCB Form. The ld. Counsel further submitted that in Form 10CCB Form filed by the assessee details of all the projects along with the initial year of the project etc. were provided. The ld. Counsel contended that information about all the projects were available in the Form 10CCB filed by the assessee therefore, the ld. CIT(A) is not justified in denying the claim of deduction u/s 80IA(4) of the Act. The ld. Counsel has also placed reliance on the judicial pronouncements in the following cases:
15 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 “1. CIT vs Micro Instruments Co. (2016) 75 taxmann.com 304 (Punjab & Haryana). 2. DCIT vs Arabian Exports Ltd. (2007) 16 SOT 61 (Mum) 3. CIT vs Bongaigaon Refinery and Petrochemical Ltd. (2012) 25 taxmann.com 230 (SC). 4. CIT vs G.M. Knitting Industries (P) Ltd. (2016) 71 taxmann.com 35 (SC) 5. ITO vs NCC (SMC)(JV) and SMC Units (JV) vs ITO vide ITA No. 4842/M/2006 for A.Y. 2004-05 and ITA No. 514/M/2009 for A.Y. 2005- 06 dated 20.06.2014. 6. ACIT vs SMC Infrastructure Pvt. Ltd. vide ITA No. 603/M/2021, ITA No. 1002/M/2021, ITA No. 1001/M/2021 and ITA No. 1000/M/2021 dated 26.10.2022.” 5. On the other hand, ld. DR submitted that assessee has not maintained the separate books of accounts as provided in section 80IA(5) of the Act. The ld. DR further submitted that assessee has not made compliance with the statutory provisions and supported the order of AO and CIT(A).
Heard both the sides and perused the material on record. As discussed the claim of deduction u/s 80IA(4) of the assessee was disallowed treating the assessee as merely a work contractor and not a developer of infrastructure facility.
Before us, the ld. Counsel submitted that assessee is not merely a contractor but a developer of various infrastructure facilities and he also submitted that assessee entered into agreement with the Govt. agencies for completion of various projects and the nature of work undertaken by the assessee includes planning, site-survey, designing the infrastructure facility, liasoning with land owners, trial runs, maintaining the
16 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 facility etc. The assessee also submitted that during the year it has undertaken the various projects including the project which was not on the nature of developing infrastructure facility but the assessee has claimed deduction u/s 80IA(4) only in cases in respect of those projects which were of the category of developing of infrastructure facilities. The assessee also explained that it has maintained the project-wise details of work executed and amount received of work executed for each project. The ld. Counsel also referred the decision of CIT vs Micro Instruments Co. (2016) 75 taxmann.com 304 (Punjab & Haryana), decision of ITAT Mumbai in the case of DCIT vs Arabion Exports Ltd. 109 TTJ 440 (Mumbai), DCIT vs Vodafone India Ltd. (2023) 152 taxmann.com 660 (Mumbai Trib.) on the proposition that maintaining of separate books of account is not a mandatory condition for claiming deduction under section 80IA. The ld. Counsel also referred the decision of CIT vs G.M. Knitting Industries (P) Ltd. (2016) 71 taxmann.com 35 (SC) on the issue that even though necessary certificate in Form 10CCB along with return of Income had not been filed but same was filed before final order of assessment made, assessee was entitled to claim deduction. In view of the submission of the assessee on the filing of Form 10CCB and non-maintenance of separate books of accounts for each project we consider that decision of the ld. CIT(A) is not justified after taking in the consideration the ratio of decision in the case law as cited supra in this order.
Before us, the ld. Counsel has also referred the decision of ITAT in the case of the assessee for A.Y. 2014-15 vide ITA No.
17 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 1003/M/2021 and decision for A.Y. 2015-16 to 2017-18 vide ITA No. 1002, 1001 & 1000/M/2021 wherein the similar issue on identical fact has been decided in favour of the assessee. The relevant extract of the decision of ITAT is reproduced as under:
“3.8. We find that the issue of eligibility to claim deduction u/s.80IA of the Act has been decided against the assessee for A.Yrs. 2002-03 to 2005-06 and since the time limit for filing Miscellaneous Application had lapsed for the assessee, the assessee could not get the benefit of deduction despite the fact of the order of this Tribunal in its favour for A.Y.2001-02, 2006- 07 and 2007-08 on this aspect in the order dated 31/10/2014 where in the issue of deduction u/s 80IA of the Act was decided in favour of the assessee by following the decision of the Hon’ble Jurisdictional High Court in the case of ABG Heavy Industries Pvt. Ltd., reported in 322 ITR 323. Similarly, for A.Y.2008-09, this Tribunal in assessee’s own case in ITA No.5503/Mum/2011 dated 14/11/2014 had decided the issue in favour of the assessee. Similarly, for A.Y.2009-10, this Tribunal in assessee’s own case in ITA Nos. 3500 and 4756/Mum/2015 dated 25/05/2017 had decided the issue in favour of the assessee. Thereafter, a search and seizure operation was carried out in the premises of the assessee and the assessee preferred to file an application before the Hon’ble Income Tax Settlement Commission (ITSC) and the ITSC vide its order u/s.245D (6B) r.w.s. 245D(4) of the Act dated 02/12/2016 decided the issue of eligibility of claim of deduction u/s.80IA of the Act in favour of the assessee for A.Ys. 2007-08 to 2013- 14. It is pertinent to note that in this order of Settlement Commission, two members decided in favour of the assessee and one member decided against the assessee. Hence, by majority view, the issue of claim of deduction u/s.80IA of the Act was ultimately decided in favour of the assessee.”
Further at para 3.10 to 3.13, the relevant extract of the decision of ITAT is reproduced as under:
“3.10. As stated earlier, all the aforesaid projects were duly examined by the Id. CIT(A) with all supporting documents and he had arrived at the conclusion that the assessee is only a developer. No contrary materials were brought on record with supporting evidences by the revenue to controvert this factual findings of the Id. CIT(A) before us.
18 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 3.11. In view of the above observations and respectfully following various orders of this Tribunal in assessee's own case and also the decision of the Hon'ble Jurisdictional High Court in the case of ABG Heavy Industries Pvt. Ltd., reported in 322 ITR 323, we do not find any infirmity in the order of the Id. CIT(A) granting relief to the assessee. 3.12. The decision rendered hereinabove for the A.Y. 2014-15 shall apply mutatis mutandis for A.Y.s 2015-16, 2016-17 and 2017-18 also in view of identical facts, except with variance in figures. 3.13. Hence, the grounds raised by the Revenue for all the Assessment Years are dismissed.” 10. We find that issue raised before the Tribunal in this year are similar to the preceding assessment year. It would not be appropriate for us to deviate from the view taken in earlier year without pointing out any material change in the facts and circumstances in subsequent year. Since identical issue was dealt with by the Tribunal in earlier years as discussed and cited (supra) in the assessee’s own cases, therefore, following the principle of consistency and the decisions of the ITAT we allow the grounds of appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 04.12.2024.
Sd/- Sd/- (SANDEEP SINGH KARHAIL) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 04.12.2024 Biswajit, Sr. P.S.
19 ITA No.3497/Mum/2024 SMC Infrastructure Pvt. Ltd. A.Y. 2018-19 Copy to:
The Appellant:
The Respondent:
The CIT,
The DR
//True Copy// [ By Order
Assistant Registrar ITAT, Mumbai Benches, Mumbai