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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI P.K. BANSAL & SHRI AMARJIT SINGH
PER AMARJIT SINGH, J.M.
The Revenue has filed the above mentioned appeals against
different orders passed by the learned Commissioner (Appeals)-I,
Nagpur, relevant to assessment year2007-08, 2009-10 and 2010-11.
ITA NO.526/Nag./2014 – A.Y. 2007-08
The assessee has raised the following grounds:-
“1. On the facts and circumstances of the case, the CIT(Appeals) erred in not appreciating the facts brought out by the AO in the assessment order which established that the projects completed by the assessee for MESDCL are works contract and not contract for sale;
On the facts and circumstances of the case, the CIT(Appeals) erred in allowing the deduction u/s.80IA(4) of the Act in not
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appreciating that the ratio of the judgment of the ITAT Mumbai Bench in the case of M/s. India Hume Pipe Co., Ltd. in ITA No.5172/Mum/2008 dt. 29-07-2011 for A.Y.2004-05 wherein the decision in the case of State of A.P. v/s Kone Elevators India Pvt. Ltd. 3SCC 389(2005) relied upon by the CIT(Appeals) for granting relief to the assessee was also discussed, is squarely applicable to the facts of the case.”
Brief facts of the case are that the assessee filed return of income on 26th October 2006, declaring gross income to the tune of `
20,53,014 and shown his net income to the tune of ` 5,68,210, after
claiming Chapter-VIA deduction of ` 14,84,804, which includes
deduction of ` 13,86,740 under section 80IA of the Income Tax Act,
1961 (for short “the Act”). The assessee has also shown agricultural
income to the tune of ` 1,38,680. The return of income was processed
on 28th January 2008. Thereafter, the case was re-opened after
issuance of notice under section 148 of the Act on the following
reasons:-
“The assessment for A.Y. 2008–09
"The assessment for AY 2008-09 was subject matter of the assessment u/s 143(3) of the Income-tax tax Act, 1961. On the basis of details filed during the course of assessment proceedings for this year, it is observed that the assessee has claimed to be engaged in the development of infrastructural facilities on behalf of MSEDCL. However, it is further noticed that the assessee is executing the work as a contractor as per the works contract entered into with MSEDCL from time to time. Even the deduction u/s 194C of the I.T. Act, is done by the MSEDCL in respect of the payments made to the assessee on whose behalf the assessee has executed the contracts and done the installation of the infrastructural facilities.
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As per the explanation to Section 80IA inserted by Finance Act, 2007 and Finance, Act, 2009 with retrospective effect from 01/04/2010, deduction u/s 80IA(4) is not available to the undertaking which is engaged in the infrastructural development in the course of section of the works contract. Thus, it is found that the assessee has erroneously claimed deduction u/s 80IA(4) of the I.T. Act, 1961.
For the above proposition, I also rely upon the Mumbai ITAT judgment in the case of the Indian Hume Pipe Co. Ltd., in ITA No.5172/Mum/2008 dated 29/07/2011 wherein the Hon'ble ITAT is similar circumstances has held that deduction u/s 80IA(4) is not available to a person executing the works contract.
For the above reasons, I have reason to believe that the income chargeable to tax of Rs.13,86,740/- has escaped assessment due to incorrect claim of deduction u/s 80IA(4) by the assessee."
Thereafter, the deduction under section 80IA(4) of the Act of ` 4.
13,86,740, was disallowed and the income of the assessee was
assessed to the tune of ` 19,54,950. Feeling aggrieved, the assessee
filed on appeal before the learned Commissioner (Appeals) who
allowed the claim of the assessee under section 80IA(4) of the Act.
Against the said order, the Revenue has filed the present appeal
before us.
ISSUE NO.1 AND 2
The above issues are inter-connected, therefore, are being taken
up together for adjudication. In fact, the Revenue has challenged the
deletion of addition of ` 13,86,740 by the learned Commissioner
(Appeals) treating the work of the assessee as contract of sale under
section 80A(4) of the Act. Before going further, we deem it fit to
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reproduce the finding of the learned Commissioner (Appeals) on these
issues.
“9.0 On careful examination of the facts, it is seen that the appellant is a Contractor for electrical infrastructures. The appellant is engaged in the work of developing electrical distribution infrastructure facilities and electricity distribution by laying network of high tension electrical lines and low tension electrical-lines. The scope of work performed by the appellant is; Design, Shock–test, Testing & Commissioning of Sub– Transmission, New Transmission lines, new Sub-station equipments etc. The appellant was awarded the contract by MDEDCL pursuant to short listing of tender bids and after ascertaining the expertise in the field of Electrical Work. The Letter dated 27.06.2008 for Award of Contract states "This is to notify you that your bid dated 28.12.2007 and Let. Under Ref. No. 03 for the supply, transport, construction, erection, testing and commissioning of HT/LT Lines, Distribution Transformer Centres (DTC), Agricultural pumps energisation and other allied works, including a Five year guarantee (defects liability) period for works under the "Agricultural Pumps Energisation Project" on the single point responsibility "Full Turnkey" basis" under Bid Number SE/BHR/T/AG/07-08/T-35 for Works in Lakhandur S/Dn., in Bhandara Circle is modified as requested by you for the rate as quoted by you AT PAR, VAT (4% on material) and Service Tax (2% on Contract Value) extra but total Contract Value limited to Rs.150.00 Lakhs (Rs.One Hundread and Fifty Lakhs Only) inclusive of all Taxes as corrected and modified in accordance with the instructions to Bidders is hereby awarded to you with all other terms and conditions remain same."
9.1 The 'Turn-key Project work' executed by the appellant for MSEDCL carries a guarantee of 3-5 years period in respect of the whole project handed over to MSEDCL, on ownership basis, after payment of the full contract amount. Thus, the appellant has not done any service to the MSEDCL, except providing a completed project in which MSEDCL had no interest at any time, till it was transferred to MSEDCL on 'turn-key basis', being a project ready to use, The appellant has invested his own funds, therefore, the project work done by the appellant on ‘Turn-key basis' does not amount to Works Contract but amounts Sale. The appellant has also filed a copy of Sales Tax Return filed by him in respect of the turn–key project wherein the sale consideration is duly found reflected.
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9.2 Thus, after taking into consideration, the cumulative facts and circumstances in the light of guidelines laid down by the Hon'ble Supreme Court in the case of State of A.P. Vs. Kone Elevators India Pvt. Ltd., the projects completed by the appellant for MSEDCL on Turn-key basis' are held to be in the nature of contract of sale' and not as ‘Works Contract'. The claim of the appellant u/s 80IA(4), therefore is allowed. Hence, these grounds are allowed.”
On appraisal of the above said finding, we find that the learned
Commissioner (Appeals) has decided the matter of controversy in
favour of the assessee on the basis guideline laid down by the Hon’ble
Supreme Court in State of A.P. v/s Kone Elevators India Pvt. Ltd., 3
SCC 389 (2005). The nature of the work of assessee has duly been explained in the letter dated 27th June 2008, while awarding the
contract by MDEDCL. The assessee get the work in pursuance to short
listing of tender bids and after ascertaining the expertise in the field of
electrical work. The nature of work of the assessee has duly been
treated as contract of sale in view of the guidelines settled by the
Hon’ble Supreme Court in Kone Elevators India Pvt. Ltd. (supra). At
this stage also, the facts are same. No new law has been produced
before us to deviate from the findings of the learned Commissioner
(Appeals) on this issue. At this stage, we also noticed that the case of
the assessee for the assessment year 2008-09 has been decided in ITA no.115/Nag./2013 dated 28th August 2015, by the Tribunal,
Nagpur Bench, in which the claim of the assessee under section
80IA(4) has been allowed. In view of the said circumstances, we are of
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the view that the learned Commissioner (Appeals) has passed the
order judiciously and correctly which is not required to be interfered
with at this appellate stage. Hence, both the issues are decided in
favour of the assessee.
ISSUE NO.3
This issue is not required to be adjudicated
In the result, Revenue’s appeal is dismissed.
ITA no.266/Nag./2014 – A.Y. 2009-10
In this appeal, the Revenue has raised the following grounds:-
“1. On the facts and circumstances of the case CIT(A) erred in not appreciating the facts brought out by the AO in the assessment order which established that the projects completed by the assessee for MSEDCL are works contract and not contract for sale;
On the facts and circumstances of the case the CIT(A) erred in allowing the deduction u/s 80IA(4) of the Act in not appreciating that the ratio of the judgment of the ITAT Mumbai Bench in the case of M/s India Hume Pipe Col., Ltd. in ITA No.5172/Mum/2008 dt.209.07.2011 for A.Y.2004-05 wherein the decision in the case of State of A.P. Vs. Kone Elevators India Pvt. Ltd., 3SCC 389(2005) relied upon by the CIT(A) for granting relief to the assessee was also discussed is squarely applicable to the facts of the case
On the facts and circumstances of the case the CIT(A) erred in allowing deduction u/s 80IA(4) of the Act in taking no cognizance of the fact that the assessee has violated the provisions of Rule 18BBB of the I.T. Rules 1962 r.w.s. 80IA(7) of the I.T.Act, which indicates that the assessee has not complied with the conditions laid down in Rule 18BBB(2);
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On the facts and circumstances of the case the CIT(A) erred in allowing the cost of index as on 01.04.1981 at Rs.60,000/- without appreciating the fact that the assessee failed to substantiate his claim regarding the value of land as on 01.04.1981 without considering the ratio of the decisions in the case of Nund & Samonta Co. Pvt. Ltd. (78 ITR 268) and in the case of India Ltd. (303 ITR 271) (Madras High Court) wherein it is held that the reasonableness has to be proved by the assessee and not by the department.
The facts of the case are quite similar to the facts of the case in
ITA no.526/Nag./2014 for the assessment year 2007–08. There is no
need to repeat the same.
ISSUE NO.1 TO 3
These issues are quite similar which has been raised by the
Revenue in ITA no.526/Nag./2014. Accordingly, these issues are
decided in favour of the assessee in view of the findings given while
deciding the issue in appeal in ITA no.526/Nag./2014.
ISSUE NO.4
Under this issue, the Revenue has challenged the disallowance of index cost of ` 60,000 as on 1st April 1981. In the relevant assessment
year, the assessee sold the plot of land for a sum of ` 4,60,001 after
claiming indexed cost of ` 3,49,000 and declared long term capital
gain of ` 1,10,810. The Assessing Officer raised the question about the
treating the market value adopted by the assessee to the tune of `
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60,000. The contention of the assessee is that the assessee has sold the ancestral house and there is no evidence of value as on 1st April
1981. The Assessing Officer was of the view that the value of the plot to the tune of ` 60,000 is on higher side as the assessee received the
sale consideration of ` 4,60,001, works out to 7.66 time more than the value adopted on 1st April 1981. According to the Assessing Officer,
the value ought to be taken 20 to 30 times more than the value as on 1st April 1981. The assessee was not having evidence, therefore, the Assessing Officer assessed the value of the land to the tune of ` 20,000 on estimation basis as on 1st April 1981 and accordingly
computed the long term capital gain. The learned Commissioner
(Appeals) deleted the valuation of land on estimation basis. On
appraisal of the findings of the learned Commissioner (Appeals), we
find that the Assessing Officer was not having any material to estimate the land value to the tune of ` 20,000 as on 1stApril 1981. No material
of any kind was produced before the learned Commissioner (Appeals)
by the Revenue and nothing was produced before us by the Revenue to justify the assessment of the value of land to the tune of ` 20,000 as on 1st April 1981. Since the Assessing Officer estimated the value of land to the tune of ` 20,000 as on 1st August 1981, without any
material, therefore, we are of the view that the learned Commissioner
(Appeals) has rightly deleted the addition raised by the Assessing
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Officer. The facts are not distinguishable at this stage also. On
appraisal of the findings of the learned Commissioner (Appeals), we
are of the view that the learned Commissioner (Appeals) has passed
the order judiciously and correctly which is not required to be
interfered with at this appellate this. This issue is decided in favour of
the assessee.
In the result, Revenue’s appeal is dismissed.
ITA NO.527/Nag./2014 – A.Y. 2010-11
In this appeal, the assessee has raised the following grounds:-
“1. On the facts and circumstances of the case, the CIT(Appeals) erred in not appreciating the facts brought out by the AO in the assessment order which established that the projects completed by the assessee for MESDCL are works contract and not contract for sale;
On the facts and circumstances of the case, the CIT(Appeals) erred in allowing the deduction u/s.80IA(4) of the Act in not appreciating that the ratio of the judgment of the ITAT Mumbai Bench in the case of M/s. India Hume Pipe Co., Ltd. in ITA No.5172/Mum/2008 dt. 29-07-2011 for A.Y.2004-05 wherein the decision in the case of State of A.P. v/s Kone Elevators India Pvt. Ltd. 3SCC 389(2005) relied upon by the CIT(Appeals) for granting relief to the assessee was also discussed, is squarely applicable to the facts of the case.”
The facts of the present appeal are same and quite similar with
the case in ITA no.266/Nag./2014. Issues no.1 and 2 raised in this
appeal are inter-connected which are in connection with the deletion of
deduction under section 80IA(4) of the Act. This issue is identical to
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the issue decided by us in the assessee’s appeal in ITA
No.226/Nag./2014, for the assessment year 2009–10. Therefore,
following the decision given therein, we decide the issue against the
Revenue. Consequently, the grounds raised by the Revenue are
hereby ordered to be dismissed.
In the result, all the Revenue’s appeals are hereby ordered to be
dismissed.
Order pronounced in the open Court on 30.06.2017
Sd/- Sd/- P.K. BANSAL AMARJIT SINGH VICE PRESIDENT JUDICIAL MEMBER
NAGPUR, DATED: 30.06.2017
Copy of the order forwarded to:
(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Dy./Asstt.Registrar) ITAT, Nagpur