DCIT, CIRCLE-12(2), KOLKATA, KOLKATA vs. M/S. SIMPLEX INFRASTRUCTURES LTD., KOLKATA

Per J. Sudhakar Reddy :- Both these appeals are filed by the Revenue, directed against separate

orders of the ld. Commissioner of Income Tax (Appeals)-XIX, (‘ld. CIT(A)’),

passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 20/10/2014 for the

Assessment Year 2005-06 & dt. 21/10/2014 for the Assessment Year 2010-11.

Assessment Year 2005-06, dt. 30/11/2007 and for Assessment Year 2006-07

dt. 07/12/2007. As the issues arising in both these appeals are similar, for the

2 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd sake convenience they are heard together and disposed off by way of this

common order.

both these assessment years. After perusing the affidavit filed by the Revenue

explaining the delay, we condone the delay and admit these appeal.

The assessee is a company and is engaged in the business of Ground

Engineering, Civil & Structural works, building of power plants, construction of

roads and highways etc. and trading in goods. For the Assessment Year 2005-

06, the assessee filed its return of income on 30/10/2005, declaring ‘Nil’

income, wherein a deduction has been claimed u/s 80-IA of the Act. For the

Assessment Year 2006-07, the assessee declared total income of

Rs.28,57,87,330/-, after claiming deduction of Rs.12,29,72,673/-. The

Assessing Officer, for the Assessment Year 2005-06, partly allowed the claim of

the assesse for deduction u/s 80-IA of the Act and for Assessment Year 2006-

07, the entire claim of deduction made by the assessee u/s 80-IA of the Act,

was disallowed. Aggrieved, the Revenue carried the matter in appeal.

that the issue is covered in favour of the assessee by following the order of his

predecessor in the assessee’s own case for the Assessment Year 2010-11, in

Appeal No. 850/II/12(2)/09-10, dt. 18/09/2013 and Appeal No. 173J/XII/R-

3 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 12/13-14, dt. 21/07/2014, for the Assessment Year 2007-08 and 2010-11,

respectively.

Assessment Year 2005-06 1. “That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the disallowance of deduction of Rs.14,30,22,241/- u/s. 80IA based on the Appellate Order for the A.Y. 2007-08 whereas on the same issue the Dept. has filed appeal before Hon’ble High Court for several years.”

Assessment Year 2006-07 1. “That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the disallowance of deduction of Rs.12,29,72,674/- u/s. 80IA based on the Appellate Order for the A.Y. 2007-08 whereas on the same issue the Dept. has filed appeal before Hon’ble High Court for several years. 2. That on the facts and in the circumstances of the case and as per law Ld. CIT(A) erred in deleting the disallowance of Rs.6,41,53,757/- made against the claim of retention money on foreign project, without taking into account the contention of the A.O. that the assessee did not following any consistent policy year by year for claiming relief u/s 91.”

2006-07, has in detail specified as to why no deduction u/s 80IA(4) of the Act,

can be granted on the following projects taken up by the assessee. These

projects are:-

4 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd • Development of Bus Terminal Complex for Karnataka State transport Corporation at Bangalore. • Development of launchpad for GS LV Mark III facilities of Satish Dhawan Space Centre SHAR at Sriharikota, Andhra Pradesh. • Development of a turbine building, emergency power supply building, cable and pipe tunnel etc. for Kundankulam Nuclear Power Project. • Development of a Jetty at the Naval Base at Visakhapatnam.

CIT(A) and submitted that the Ld. CIT(A) has not given any reason, whatsoever

for reversing the findings of the assessing officer. He pointed out that the ld.

CIT(A), has simply extracted the submissions made by the assessee, and

thereafter stated that he is accepting the same. He argued that this is not is

speaking order, and hence the same cannot be upheld.

8.1. Coming to each of these projects, he submitted that a launchpad built for

GS LV Mark III facilities of Satish Dhawan Space Centre SHAR at Sriharikota,

Andhra Pradesh, cannot be considered as an airport and the assessee was

trying to expand the definition of the term ‘airport’ by importing the meanings

from various dictionaries and claiming deductions. He submitted that

launchpad cannot be considered as an airport.

8.2. On the issue of development of a Jetty at the Naval Base at

Visakhapatnam, he argued that this is the defence facility and cannot be

considered as an infrastructural facility as defined in the explanation to sub

Section 4 of Section 80IA of the Act.

5 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 8.3. On the development of a bus terminal complex for Karnataka State

Transport Corporation at Bangalore, he submitted that only if the assessee was

executing a highway project, then only as a part of this project of development

of the bus terminal complex can be considered as an infrastructure. He

submitted that as the bus terminal complex is a standalone project, it does not

fall within the ken to section 80IA(4) of the Act.

8.4. Coming to the development of turbine building, he supported the order

of the Assessing Officer.

8.5. The ld. DR, made a submission for the Assessment Year 2006-07, that

benefit under section 80IA(4) of the Act, can be claimed only where there is

public private participation in development of an infrastructural facility and

the fund of the project is brought in by the private participation. He argued that

in cases where no such finding is brought in by the private party, then, the

benefit of this section cannot be claimed.

The Assessing Officer for the Assessment Year 2006-07, rejected the

claim of deduction under section 80IA of the Act, on the above stated reason.

He relied on the order of the Assessing Officer and submitted that it is clear

that the assessee was required to merely execute the project as per the

directions of the developer and is not at all concerned about the financial

viability or financial requirements of the project.

of the ld. First Appellate Authority and submitted that the issue is squarely

6 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd covered in favour of the assessee and against the revenue by the decision of the

‘B’ Bench of the Kolkata Tribunal in the assessee’s own case for the earlier

Assessment Year in ITA No. 1840/Kol/2014 for the Assessment Year 2010-11,

order dt. 30/06/2017. He relied on the decision of the Hon’ble Bombay High

Court in the case of Commissioner of Income Tax vs. ABG Heavy Industries

Limited [322 ITR 323]. For the Assessment Year 2005-06. On the issue of

whether launchpad is an airport or not, he relied on the submissions made

before the ld. CIT(A), which is extracted at page 13 & 14 of his order. The sum

and substance of the submissions is that, port is a point/place, from where the

landing and take off takes place into air by airborne vehicles from the ground.

He submits that base or platform from which a rocket is launched is also an

airport.

9.1. On the issue of development of Jetty at the Naval Base at Visakhapatnam,

he relied on the submissions made before the ld. CIT(A) and submitted that the

Jetty is nothing but a structure which projects into a body of water built from a

shore for use by ships. Hence, he submits that this was properly considered by

the ld. CIT(A), who has granted relief appropriately.

9.2. On the development of Bus Terminal Complex of Karnataka State

Transport Corporation at Bangalore, he submitted that CBDT has notified that

even multilevel computerised car parking is an infrastructural facility. He

submitted it is an error on the part of the revenue to argue that a bus terminal

7 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd complex would be an infrastructural facility only if the highway construction is

also executed by the assessee.

9.3. On the works undertaken for Kundankulam Nuclear Power Project,

submitted that the assessee has not pressed for deduction on the profits

earned on this project.

9.4. For the Assessment Year 2006-07, he submitted that the issue is no

more res integra , as the AO has himself granted deduction on various projects

undertaken by the assessee for the Assessment Year 2005-06 and as the

Jurisdictional Tribunal for the earlier Assessment Years, upheld the claim of

the assessee. On a query from the Bench, as to whether each and every

infrastructural project has been examined by the Assessing Officer, he drew the

attention of the Bench to pages 2 to 4 of the Assessment Order, and submitted

that the Assessing Officer has not given any finding against the assessee on this

issue. As regards Assessment Year 2005-06, he contended that each of the

project and the nature of work was examined by the Assessing Officer and no

adverse inference was drawn that this is not an infrastructural facility. He

referred to the grounds of disallowance and submitted that this is covered in

favour of the assessee.

Assessing Officer for considering the submissions of both sides and passing is

speaking order.

8 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 11. Rival contentions heard. On careful consideration of the papers on

record, case law cited and the orders of the Authorities below, we hold as

follows:-

u/s 80IA(4) of the Act on 13 projects. The Assessing Officer granted deduction

on nine projects and in the case of for other projects, was of the opinion that

these projects do not fall within the Ken of explanation to section 80IA(4) of

the Act. He has given reasons for coming to such conclusions at pages 13 to 17

of his order. The claim of the assessee on these is as follows:-

I. Development of launch Pad for GSLV Mark III facilities of Satish Dhawan Space Centre SHAR at Sriharikota

9.3.1 The above projects were in regard to the development of Launch pad for GSLV Mark III facilities of Satish Dhawan Space Centre SHAR at Sriharikota, Andhra Pradesh. Launch Pad facility for GSLV Mark III is an airport as covered in the definition of 'infrastructure facility' as covered by Explanation (c) to sub- section (4). The contracts for the project were entered into with the Department of Space vide contracts dated 30th May, 2000 and 16th December, 2003 on account of which the assessee was entitled to receive amounts of Rs.5,39,50,000/- and Rs.67,16,00,000/-. The assessee started work on the development of the projects from the Assessment Years 2001-02 and 2004-05. Therefore, these projects satisfy the conditions as laid down in clause (b) since the project has been started on the basis of agreements with Department of Space, government of India i.e.

9 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd Central Government and satisfies clause (c) since it commenced in the AY 2001-02 and 2004-05 i.e. after 1st April, 1995. 9.3.2 The A.G. observed that in Form 10CCB the said facility was termed as 'Industrial Park' which is not identified as infrastructure facility u/s 80lA, whereas in the submission made, the same was treated as an Airport and hence the claim regarding nature of infrastructure facility was contradictory. He further alleged that Launch Pad is not an Airport. He, therefore, held that the profit from the above project is not allowable as deduction u/s 801A of the Act. 9.3.3 In this respect, attention is drawn to the meaning of the words 'Airport' and 'Launch Pad': Airport means a complex from where air going vehicles take off from the ground. The Collins Essential English Dictionary defines 'Airport' as:” a landing and taking-off areas for civil aircraft, with facilities for aircraft maintenance and passenger arrival and departure Airport has also been defined as an airfield equipped with control tower and hangars as well as accommodations for passengers and cargo. The American Heritage Dictionary of the English Language defines ‘Launch Pad’ as: i: The base or platform from which a rocket or space vehicle is Iaunched. ii: A foundation or starting point. The Collins Essential English Dictionary defines 'Launch Pad' as : A platform from which a spacecraft, rocket, or missile is launched

10 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd

9.3.4 Please note that a Heliport is an airport for helicopters. Similarly, a Launch pad is nothing but an airport for space crafts, rocket or missiles. In common parlance, the word airport means a platform from where air-going vehicle takes off in air from the ground. Merely, because a launch pad does not have passenger and cargo terminals, it cannot be said that launch pad is outside the purview of the meaning of airport. The essence of both airport and launch pad is same viz, both are a base from where air going vehicles take off in the air and they should be considered in view of the same only. A launch pad will not cease to be an airport merely because it is earmarked for rockets and missiles and does not contain passenger and cargo terminals. A launch pad would be an airport notwithstanding its exclusive use by space crafts and rockets as long as such launch pad is used as a platform from where air going vehicles take off from the ground. "

II. Development of a Jetty at the naval base at Vishakapatnam

9.4.1 This project was in regard to the development of a Jetty at the Naval Base at Vishakapatnam. Jetty at a port is an infrastructure facility as covered by Explanation (c) to sub- section (4). The agreement for development of the project was entered on 16.9.2003 with the Navy i.e. central Government whereby the assessee was entitled to receive Rs. 32,01,88,000 for the development of the project. The assessee started work on the development of the project from A. Y. 2004-05. Therefore the

11 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd project satisfies the conditions as laid in clause (b) since the project has started on the basis of an agreement with the Central Government and satisfies clause (c) since it has commenced in the A.Y. 2004-05 i.e. after 1st April, 1995. The said facility has been termed as 'Jetty ' in Form 10CCB. According to the A.O. as per the explanation there is no mention of 'Jetty' as an infrastructure facility. The same cannot be included under the head 'port' as the jetty was developed at a 'Naval Base' rather than port. Therefore it does not qualify as infrastructure facility as envisaged in the Explanation. 9.4.2. In this respect, attention is drawn to the meanings of 'jetty' and 'port': Jetty means 1. A structure, such as a pier, that project into a body of water to influence the current or tide or to protect a harbour or shoreline from storms or erosion. 2. A wharf. Collins Essential Dictionary defines jetty as 1. a landing pier or dock 2. a structure built from a shore out into the water to protect a harbour As per Thesaurus, jetty means a protective structure of stone or concrete; extends from shore into the water to prevent a beach from washing away Kernermn English Learner’s Dictionary defines jetty as a small pier for use as a landing-place 1. A port is a. A place on a waterway with facilities for loading and unloading ships.

12 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd b. The waterfront district of a city. 2. A place along a coast that gives ships and boats protection from storms and rough water’ a harbour. 9.4.3 From the above definitions, it is seen that a port is a harbour and a jetty is a structure that projects into a body of water to protect a harbor or shoreline from storms or erosion. Thus, it cannot be denied that a jetty is a part of port. 9.4.4 It is not the case of the A.O. that the jetty is not a port. The contention of the AO. is that the jetty cannot be included under the head 'port' as it was developed at a 'naval Base' rather than a port. A bare perusal of the definition of infrastructure facility as envisaged in Section 801A(4) would show that the word 'port' is included therein without any further conditions in regard to its location. In this respect please note that a 'port' is an infrastructure facility irrespective of its location. The location of the jetty at a naval base would not disentitle the same from being a ‘port’ which in itself is an infrastructure facility notwithstanding its location. Hence, the denial of deduction u/s 80IA in respect of the said development project by the A.O. on the plea that jetty is located at a ‘naval base’ is not justified.

III. Development of Bus Terminal Complex for Karnataka State Transport Coporation 9.5.1 The project was in regard to the development of Modern satellite Bus Terminal Complex for Karnataka State Transport Corporation at Bangalore. The said facility has been termed as ‘Road Bus Terminus; in Form 10CCB. 9.5.2 According to the A.O., in the said infrastructure facility cannot be included under the head ‘road’ as Bus Terminal is not a road or its extension. Similarly, it also cannot be included under the head ‘highway project’ nor does it form the integral part of any highway project which the assessee has developed. In this

13 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd respect, the A.O. has also referred to circular no 7/2002 dated 26.8.2002 wherein the definition as given in the explanation introduced w.e.f 1.4.2002 excludes any other public facility of a similar nature as may be notified by the' Board in this behalf in the Official Gazette. The A.O. further stated that the said facility would have been covered under the definition of infrastructure facility before the amendment as per old explanation to section 80IA(4). However, as per amended definition, the assessee's project does not lie in any of the categories. 9.5.3 In this respect the assessee wants to submit as under: The Modern satellite Bus Terminal Complex for Karnataka State Transport Corporation has been constructed at Mysore Chrome Tanning Company land, Mysore Road, Byataranapura, Bangalore. The Bangalore-Mysore Highway is known as Mysore road in the city area of Bangalore. The satellite bus terminal of the Karnataka State Road Transport Corporation (KSRTC) on Mysore Road it is the first of the four satellite terminals planned in the city's peripheral areas. It will also reduce the load on the Kempe Gowda Bus Station by handling about 2,250 long- distance and city bus services. The Bangalore Metropolitan Transport Corporation (BMTC) buses will have space for operating its services from within the terminal. By stopping many inter-State buses such as those 99in9 towards Kerala at Mysore Road, traffic congestion will also be reduced within the city. For South- bound passengers to places such as Mysore, Madikeri and Kerala, it will become easy because shuttle bus services are also to be operated from the suburbs. The project is no doubt a part of a highway project and falls within the purview of clause (b) of the Explanation to sub-section (4) of section 80lA of the Act. The contention of the Assessing Officer that it cannot be included under the head 'highway project' nor does it form the integral part of any highway project which the assessee has developed, thus cannot be accepted, 9.5.4 Further, the A.O. has also stated that the said infrastructure facility cannot be included under the head 'road' as Bus Terminal is not a road or its extension.

14 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd In this respect attention is drawn to the notification dated 13.7.2000 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes wherein the following was stated: 'In exercise of the powers conferred by the Explanation C (i) of section 10(23G) and explanation (a) to sub-section 4(i) of section 80IA of the Income, Tax Act, 1961, the Central Board of Direct Taxes hereby notifies Multilevel Computerized Car parking as infrastructure facility.' The above notification has considered multilevel computerized car parking as infrastructure facility for the purpose of Explanation (a) to sub-section 4(i) of section 80lA of the Income Tax Act, 1961 car parking is a safe and sheltered area earmarked for parking of vehicles. Similarly, a bus terminal is a station for buses where buses halt. It is a protected area where buses arrive, halt and depart. It is akin to a car parking and therefore, contradictory view cannot be taken in ascertaining whether bus terminal is an infrastructure facility or not for the purpose of Explanation (a) to sub-section 4(i) of section 80IA. The AO's contentions that a bus terminal is not a road or its extension cannot be accepted in the light of the above notification. Copy of the said notification is enclosed herewith for ready reference and records.”

12.1. As the ld. CIT(A), has not passed a speaking order, we are of the

considered opinion that the issue should be restored to the file of the Assessing

Officer to consider these submissions of the assessee on the above issue and de

novo, adjudicate the matter.

deduction of the assessee, u/s 80IA of the Act, on the above 3 projects, to the

file of the Assessing Officer, for fresh adjudication, in accordance with law. The

15 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd A.O. shall consider all the submissions of the assessee and pass a speaking

order.

13.1. The argument of the ld. DR, that deduction u/s 80IA(4) of the Act is

available only in PPP models, where the private parties bring in funds for

building of infrastructural facility and not otherwise, is not a ground on which

the Assessing Officer has made the disallowance in his order. This is not a

ground of appeal in the appeal also. In fact, the Assessing Officer has allowed

the claim of deduction u/s 80IA(4) of the Act, made the assessee on 9 projects.

Even otherwise, the issue is adjudicated in favour of the assessee by the Co-

ordinate Bench of the Tribunal in the assessee’s own case for Assessment Year

2010-11. Hence we dismiss this argument of the ld. D/R as devoid of merit.

purposes.

2006-07.

assessing officer on a claim of deduction u/s 80IA of the Act. The assessing

officer in his order, was of the view that the assessee is a contractor and not a

developer. At paragraph 1.46 and 1.47, he held as follows-

16 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd

own case for the earlier assessment year and granted relief. The order of the ld.

CIT(A), for the earlier assessment year 2007-08 & 2010-11 (supra) has been

upheld by the Kolkata ‘B’ Bench of the Tribunal in ITA No. 1840/Kol/2014 for

the Assessment Year 2010-11, order dt. 30/06/2017. The Tribunal in turn

followed on the decision of the assessee’s own case in ITA No.

2168/Kol/2013, Order dt. 08/02/2017. The ITAT at para 8 & 9 of this order

held as follows:-

17 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd “"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;

18 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd (ii) There exists an agreement with the Central Government, State Government, Local authority or any other statutory body and (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

19 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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; (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

20 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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 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:

21 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd "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:

22 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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 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

23 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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 entitled to deduction

24 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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

25 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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 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

26 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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

27 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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 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

28 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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- 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

29 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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

30 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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. 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

31 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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

32 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd completion of work. (i) That although the ownership of the site or the ownership over the land remains with the owner 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

33 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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 interpretation of the facts. Lastly, with regard to the project O&M, Bangalore (on which a deduction of Rs. 35,16,941/- 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. 35,16,941/- 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

34 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 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. ”

on this issue.

18.1. We find that the assessing officer, in this case has passed an order for

the impugned Assessment Year, seven days after passing the assessment order

for the Assessment Year 2005-06. The Assessing Officer had allowed the claim

for deduction of the assessee on 9 projects in that year. A similar disallowance

was not made for the Assessment Year 2005-06. No fault was found by the

Assessing Officer on any of the projects while noting down the details of each

of the seven projects undertaken by the assessee during the year. No adverse

inference has been drawn on any of these seven projects that they do not

qualify to be infrastructural facilities in terms of section 80 IA(4) of the Act.

Under these circumstances, we are of the considered opinion that the

submissions of the ld. DR, that the issue should be restored to the file of the

assessing officer for examining the eligibility of each project is devoid of merit.

Hence we reject the same

35 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd 20. Ground No. 2, is against the deletion of a disallowance by the ld. CIT(A)

of claim of retention money on foreign project.

20.1. The ld. CIT(A), relied upon the decision of the jurisdictional High Court

in the assessee’s own case and held that the right to receive retention money

has not accrued during the assessment year and hence, the same is not income,

subject to tax, during the year.

ld. CIT(A) and dismiss this ground of the Revenue.

for statistical purposes.

Appeal for the Assessment Year 2006-07 is dismissed.

Kolkata, the 25th day of October, 2017.

Sd/- Sd/- [N.V. Vasudevan] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 25.10.2017 {SC SPS}

36 I.T.A. No. 140/Kol/2015 Assessment Year: 2005-06 & I.T.A. No. 141/Kol/2015 Assessment Year: 2006-07 M/s. Simplex Infrastucture Ltd

Copy of the order forwarded to: 1. M/s. Simplex Infrastucture Ltd 27, Shakespeare Sarani Kolkata – 700 017