ITO, WD-33(4), KOLKATA, KOLKATA vs M/S. SIMPLEX SOMDATT BUILDERS, KOLKATA

Income Tax Appellate Tribunal, : ‘C’ BENCH, KOLKATA

Before: Shri J. Sudhakar Reddy & Shri S.S.Viswanethra Ravi

For Appellant: Shri Ravi Tulsiyan, FCA, ld. Sr.DR

For Respondent: Shri Saurabh Kumar, Addl.CIT, ld.Sr.DR, Shri Ravi Tulsiyan, FCA, ld. Sr.DR

Shri S.S.Viswanethra Ravi, JM:

Both the above appeals by the Revenue are against the separate orders dt. 06-12-2013 of the CIT-A, XIX, Kolkata for the A.Ys 2008-09 and 2010-11.

It is noted that the facts involved and issues raised in both the appeals are common and identical, therefore, with the consent of both parties, we proceed to hear the appeals together and pass a consolidated order.

The only issue is to be decided as to whether the CIT-A justified in deleting the impugned additions made by the AO on account of denying the claim of benefit of deduction u/s. 80IA of the Act in the facts and circumstances of the case.

At the outset, the ld.AR submits that the issue involved in both the appeals in respect of challenging the impugned orders of the CIT-A by the revenue in deleting the addition made on account of

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claim of deduction u/s. 80IA of the Act is covered in favour of assessee and against the revenue by the order dt. 18-06-2013 of the Co-ordinate Bench, ITAT ‘B‘ Bench, Kolkata in ITA Nos. 1684 & 1685/Kol/2011 for the A.Y 2007-08 in assessee’s own case, copy of this order is on record and referred to para 13 of the said order.

On the other hand, the ld. DR relied on the orders of the AO in making such addition.

Heard the rival parties and perused the record. On perusal of record, we find that the assessee is engaged in civil construction and claimed deduction of Rs.3,93,55,077/- u/s. 80IA of the Act in the return of income. The AO denied the said claim of benefit of deduction and as such added the same to the total income of assessee by an order dt. 26-04-2010 passed u/s. 143(3) of the Act. The CIT-A by placing reliance on an earlier order dt. 18-06-2013 of the Co-ordinate Bench, ITAT, Kolkata in assessee’s own case for the A.Y 2007-08 in ITA Nos.1684 & 1685/Kol/20011 held that the assessee is entitled to get benefit of deduction u/s. 80IA of the Act. Accordingly, the CIT- A directed the AO to grant the assessee the benefit of deduction u/s. 80IA of the Act as claimed. Relevant portion of order dt. 18-06-2013 in assessee’s case supra is reproduced herein below for better understanding:- 11. We have considered the rival submissions. Admittedly, a perusal of the agreement entered into between the assessee and the Govt of Andhra Pradesh Irrigation & CAD Department shows that the assessee has taken EPC/Turnkey contract of the flood flow canal project from SRSP. The name of the contract has been extracted earlier in this order. The scope of the work is also extracted above. Admittedly, the assessee has taken a turnkey contract from the Irrigation Department, Govt. of Andhra Pradesh. The turnkey contract is in respect of the irrigation project. Irrigation project is an infrastructure facility within the scope of Explanation to section 80IA(4) of the Act. The provisions of section 80IA(4) is to be controlled by the Explanation to section 80IA, which has been substituted by the Finance (No.2) Act, 2009 with retrospective effect from 1-4-2-2000. This Explanation is found after sub-section (13) of section 80IA. The said Explanation attempts to control the provisions of sub-section 4. More so, it says that nothing contained in section 80IA would apply in relation to the business referred to sub-section (4), which is in the nature of works contract. A works contract is not defined in section 80IA. Now, what would come into consideration is whether the substituted Explanation after sub- clause (13) changed the nature of the meaning of ‘infrastructure facility’ provided in the Explanation to section 80IA(4). Admittedly, the Explanation to section 80IA(4) gives the meaning the term ‘infrastructure facility’. The substituted explanation after sub clause (13) brings in the nature of work as a works contract. The provisions of section 194C, which deals with TDS in respect of payment to contractors for carrying out any work in the Explanation thereto as explained the term ‘work’ to be an inclusive definition, but has provided an exclusion to be

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‘does not include manufacturing or supplying of a product. according to requirement or specification of the customer by using materials purchased from a person, other than such customer’. Thus, with this in mind, a perusal of the turnkey contract agreement entered into by the assessee with the Irrigation Department, Govt of A.P clearly shows that the construction of all the structures of the whole canal system is to be as per approved design, drawings, specifications of the department etc. The survey is to be done as per investigation and designing criteria of the Irrigation Department. This is also as per article 11.1 of the agreement. The assessee is to procure the materials independently and those materials are to confirm to the specifications provided. The assessee is also to make its arrangements for storage of the materials. This is as per article 107 of the agreement. Thus, admittedly the work done by the assessee falls in the exclusion provided to the meaning of the work given in the Explanation to section 194C of the Act. Once it falls outside the meaning of term ‘work’ for the purpose of section 194C, the question that arises is can it be said that the assessee is doing the work contract as provided in the substituted Explanation in section 80IA after sub clause (13)?, The answer would be emphatic no.

12.

This is because the assessee is doing the activity of development of an infrastructure facility as provided under section 80IA(4). The project is a Turnkey project and it cannot form nor have a character of a works contract. Works contract would be applicable to the repairs and maintenance of an existing project. Works contract cannot be in relation to the development of a new project. One of the arguments raised by the learned Sr.DR that the intention of the substitution of the Explanation after sub clause (13) of section 80IA was to deny, the benefit of deduction u/s. 80IA(4) in respect of works contract, but to provide the deduction to such undertakings, which is doing the business of building, operating and Transfer (BOT) and building owning, operating and transfer BOOT as also PPP contracts does not hold water in so far as an irrigation project can never function under BOT or BOOT or PPP . In the circumstances, we are of the view that the assessee’s claim is not hit by the substituted Explanation as provided after sub clause(13) of section 80IA.. Here, we may mention that this view finds support from the decision of the co-ordinate of the tribunal, [ITAT, Hyderabad Bench, Hyderabad in the case of GVPR Engineers Ltd & Ors (refer to supra). We may mention here that our view also finds support from the decision of the co-ordinate bench of this tribunal, ITAT Cuttack Bench, Cuttack in the case of ARSS Infrastructure Projects Ltd Vs. ACIT, Circle-2 (1), Bhubaneswar in ITA Nos. 142, 143/CTK/2010 & 483,484/CTK/2011 dated 13-06-2013, wherein one of us was a party and in which case it has been held as under :-

10.

Now coming to the merits of the deduction u/s. 801A(4) of the Act. A perusal of the provisions of section 801A(4) of the Act shows that in the explanation ‘infrastructure facility’ has been specified to mean a road including a toll road, a bridge or a rail system. Admittedly, the assessee is doing the business of development of railway tracks and bridges thereof as also roads. If, we are to accept the contention of the Ld. CIT that the provisions of section 801A(4) of the Act after the substitution of the explanation to section 8OIA of the Act was introduced was only for the purpose of giving the benefit to BUT contracts then, the explanation to section 801A(4) of the Act becomes otiose. This is as explanation to section 801A(4) of the Act specifically provides for the road to include a toll road, a bridge or a rail system. BUT contract in respect of the railway system can never exist. Further, a perusal of the provisions of section 801A of the Act shows that the term ‘works contract’ is not defined in the said section. However, the terms ‘works’ and ‘contract’ is defined in the provisions of section 194C of the Act. If a particular word or term is not defined in the specific section then, one could go to other sections in the said Act where the definition would be available to draw a meaning to the said terms. In the provisions of section 194C of the Act, work has been given an inclusive definition but in the subsequent portion it has excluded the manufacturing or supplying a product according to requirement or specification of a customer by using material purchased from a person other than such customer. As has been specified by the Ld. AR, the assessee is doing contract work but that work is according to the requirement and specification of the customer and the same has been done by using materials purchase from third parties other than the customers. Thus, though the assessee is doing a works contract the same would not fall within the meaning of the word ‘works contract’ for the purpose of the Act due to the exclusion provided in the meaning of ‘work’ in section 194C of the Act. The issue raised by the Ld. CIT that the assessee is not doing the development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges thereof. Development encompasses within itself contract work. The agreement between the assessee and the customer being the government is for the development of the infrastructure facility being roads and rail systems and bridges by participating in the tenders. Under these circumstances, we are of the view that the AO was right in law in granting the assessee the benefit of deduction u/s. 801A(4) of the Act.

13.

In the circumstances, the Assessing Officer is directed to grant the assessee the benefit of deduction u/s. 80IA of the Act as claimed.

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In view of above, we find that the CIT-A was justified in directing the same the AO to allow deduction U/Sec. 80IA as claimed. We find no infirmity in the impugned orders of the CIT-A and it is upheld. The grounds raised by the revenue in both the appeals are dismissed.

In the result, the appeals filed by the revenue are dismissed. Order pronounced in the open court on 15-06-2018

Sd/- Sd/- J. Sudhakar Reddy S.S. Viswanethra Ravi Accountant Member Judicial Member

Dated : 15-06-2018 **PP(Sr.P.S.) Copy of the order forwarded to: 1. Applicant/Department : The ITO, Ward 33(4), 10B Middleton Row, 3rd Floor, Kolkata- 700 071. 2 Respondent/Assessee: M/s. Simplex Somdatt Builders JV, Simplex House, 27 Shakespeare Sarani, Kolkata- 700 017. 3. The CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order Sr.P.S,H.O.O, ITAT.Kol

ITO, WD-33(4), KOLKATA, KOLKATA vs. M/S. SIMPLEX SOMDATT BUILDERS, KOLKATA