I.T.O WD - 8(4),KOLKATA, KOLKATA vs. M/S SPML INFRA LTD, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri M. Balaganesh, AM & Shri Partha Sarathi Chaudhury, JM]

I.T.A No.2286/Kol/2013 Assessment Year: 2005-06 & I.T.A No.2287/Kol/2013 Assessment Year: 2007-08 & I.T.A No.2288/Kol/2013 Assessment Year: 2008-09 & I.T.A No.2289/Kol/2013 Assessment Year: 2010-11

Income-tax Officer, Wd-8(4), Kolkata. Vs. M/s. SPML Infra Ltd. (PAN: AADCS2469K) (Appellant) (Respondent) & I.T.A No.2035/Kol/2013 Assessment Year: 2008-09 & I.T.A No.2036/Kol/2013 Assessment Year: 2010-11

M/s. SPML Infra Ltd. Vs. Deputy Commissioner of Income-tax, Central Circle-XXVIII, Kolkata. (Appellant) (Respondent)

Date of hearing: 03.02.2017 Date of pronouncement: 08.03.2017

For the Assessee: Shri Ravi Tulsiyan, FCA For the Revenue: Shri Arup Kr. Sinha, CIT

ORDER Per Bench: The appeals in ITA No. 2286 & 2287/K/2013 by revenue are arising out of separate orders of CIT(A), Central-1, Kolkata vide appeal No. 350&444/CC-XXVIII/CIT(A)C- 1/12-13 both dated 15.05.2013 and 21.05.2013 respectively. The appeals in ITA Nos. 2288 & 2289/K/2013 by revenue and Cross appeals in ITA Nos. 2035 & 2036/K/2013 by assessee are arising out of separate orders of CIT(A), Central-1, Kolkata vide appeal Nos. 223/CC-XXVIII/CIT(A)C-1/10-11 and 445/CC-XXVIII/CIT(A)C-1/12-13 both dated

2 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. 15.05.2013 and 22.05.2013 respectively.. All these appeals are taken up together and disposed off by this consolidated order for the sake of convenience. 2. ORDER PASSED BY LD CITA IN THE ERSTWHILE NAME OF THE ASSESSEE The revenue had raised the following ground of appeal before us for the Asst Years 2005- 06, 2007-08, 2008-09, 2010-11 :- a) That the order of the Ld. CIT(A) is bad in law as the same has been passed in the name of M/s Subhash Projects & Marketing Ltd , while the name of the assessee has changed to M/s SPML Infra Ltd w.e.f. 12.04.2010.

With regard to this ground, we find that the ld CITA had passed the appellate orders in the in the name of M/s SPML Infra Ltd by duly mentioning within brackets ‘Erstwhile M/s Subhash Projects & Marketing Ltd’. Hence the Ground No. 1 raised by the revenue is dismissed for the Asst Year 2005-06, 2007-08 , 2008-09 & 2010-11 is dismissed.

3 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. nature of works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in section 80IA(1) of the Act. The ld AO concluded that the assessee is nothing but a works contractor and projects were awarded by Central or State Government or Local Body by giving the details of projects as under:-

Name of the Projects Project Awarded by

Jodhpur Project It is a water supply project from Rajiv Gandhi Lift Canal Project in Jodhpur

Kathora Project Executive Engineer, Narmada Development Division No. 20, Mandleshwar (MP)

O & M Bangalore Karnataka Urban Water Supply and Drainage Board, A Local Authority

Accordingly deduction u/s 80IA (4) of the Act was denied to the assessee.

3.2. The assessee agitated the disallowance of deduction u/s 80IA (4) of the Act by referring to provisions of section 80IA(4) of the Act by stating that :

This section applies to - (i) any 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 enterprises 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

4 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. 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 . Explanation – For the purposes of this clause, “infrastructure facility” means – (a) a road including toll road, a bridge or a rail system ; (b) a highway project including housing or other activites being an integral part of the highway project ; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system ; (d) a port, airport, inland waterway , inland port or navigational channel in the sea; (ii) to (vi) ----------------------------------------------------

3.2.1. The assessee tried to explain the legislative intent behind the extension of tax holiday to the infrastructure industry u/s 80IA of the Act. In the 1980’s and in early 1990’s , infrastructure like roads, bridges, water works etc were being done by the Government departments like PWD, Irrigation Department etc departmentally. The experience had been that the infrastructure developed departmentally had poor quality, used to take much more time than as originally scheduled , which in turn would result in cost escalation i.e the government would end up spending much more than originally planned for the poor quality infrastructure being done departmentally. In the early 1990’s , the Government wanted to involve the private sector for development of infrastructure projects but very few assessee in the private sector were forthcoming to take on such projects as there were serious issues of delay in land acquisition, public interest litigations and problems in getting environment clearances. Therefore, in order to encourage private sector participation, tax holiday u/s 80IA of the Act was extended to infrastructure industry and consequently sub-section (4A) was introduced and inserted by the Finance Act 1995 with effect from 1.4.1996. Since then the legislative scheme has been liberalized progressively in the interest of aiding the growth of infrastructure.

3.2.2. It was further explained that in the background of the legislative intent behind insertion of sub-section (4) as discussed above, if the explanation is interpreted in a way that income from infrastructure development work undertaken under any contract with any person including the Central or State Government is not eligible for deduction u/s 80IA of the Act, then the basic intention behind extension of said benefit will get defeated and section 80IA(4) of the Act would become redundant. The same will negate the grant of

5 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. benefit to infrastructure industries u/s 80IA(4) of the Act pursuant to which an existence of agreement with Government authorities is essential for availing the tax holiday. On one hand, the main enactment mandates existence of an agreement with Government and on other hand the Explanation (as interpreted by the ld AO) denies the benefit to the assessee if he undertakes infrastructure work under a contract / agreement. Thus the interpretation of the Explanation adopted by the ld AO is clearly contradictory to and has the effect of negating the main enactment. The assessee also placed reliance on the decision of the Hon’ble Apex Court in the case of S Sundaram Pillai vs V.R.Pittabiraman reported in AIR 1985 SC 582 and stated that an Explanation cannot interfere with or change the main enactment when the main enactment is clear and unambiguous. In the instant case, the main enactment i.e sub-section (4) is clearly in harmony with the intention of the legislature and hence the Explanation cannot be interpreted in a way to interfere with functioning of the main enactment and take away the benefit granted to the assessee in the main enactment.

3.2.3. The assessee tried to explain the meaning of the term ‘works contract’ as used in the Explanation inserted vide Finance Act 2009 Section 80IA of the Act 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 Oxford Dictionary, a works contract is a contract which involves effort or in other words labour of the contractor. Further as per the Black Law’s 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 Black Law’s Dictionary also, a works contract is a labour contract under which the contractor merely employs his labour as per the directions of the contractee. The assessee also placed reliance on the definition of ‘work’ in section 194C of the Act which is as under :-

(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;

6 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of the 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 of the Act 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’. The assessee also placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs Glenmark Pharmaceuticals Limited reported in 319 ITR 199 (Bom) in this regard.

Based on the aforesaid pleadings, the assessee argued 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.

3.2.4. The assessee further pleaded by drawing the attention to the memorandum explaining the provisions in the Finance Bill 2007 reported in (2007) 289 ITR (St.) 292 at page 312, which reads as under :- “Section 80IA , inter alia, provides for a ten year 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 for encouraging private sector participation by way of investment in developemtn of the infrastructure sector and not for 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 80IA shall not apply to a person who executes a works contract entered into with the undertaking

7 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. 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 80IA. In contrast to this, a person who enters into a contract with another person (i.e. undertaking or enterprise referred to in section 80IA) for executing works contract, will not be eligible for tax benefit under section 80IA.

This amendment will take retrospective effect from April 1, 2000 and will accordingly apply in relation to the assessment year 2000-01 and subsequent years.”

It was pleaded that the Explanatory Memorandum clearly lays out that purpose of extending tax benefit u/s 80IA of the Act was to encourage investments from the private sector and hence works contract, i.e contracts involving merely labour (or mere execution of construction without making investments) are outside the purview of the provisions of section 80IA of the Act.

Thus it was pleaded that the term ‘works contract’ used in Explanation to Section 80IA(13) of the Act means a contract of developing infrastructure by merely employing labour and making no investments.

Reliance in this regard was also placed on the co-ordinate bench of Hyderabad Tribunal in the case of M/s GVPR Engineers Ltd vs ACIT in ITA No. 347 /Hyd/ 2008 dated 29.2.2012 wherein it was held that the deduction u/s 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Reliance was also placed on the co-ordinate bench of Chennai Tribuanl in the case of R.R.Constructions, Chennai vs DIT in ITA No. 2061 (Mad) of 2010 dated 3.10.2011 wherein it was held that the assessee makes investment and himself executes the development work and carries out civil works , he is eligible for tax benefit u/s 80IA of the Act. The assessee also placed reliance on the decision of the co- ordinate bench of Mumbai Tribunal in the case of ACIT vs Pratibha Industries Ltd in ITA Nos. 2197 to 2199/Mum/2008 ; ITA Nos. 2200 to 2202/Mum/2008 dated 19.12.2012, wherein it was held that:

8 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. “Section 80IA(4) allows deduction to ‘any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility’. The Explanation provides that it shall not apply to “business which is in the nature of a works contract”. Whether an assessee is a developer or works contractor depends on the nature of the work undertaken by the assessee. The word ‘contractor’ is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer is a contractor. Contracts involving design, development, operating and maintenance, financial involvement, and defect correction and liability period cannot be called as simple works contract. A case where in an undeveloped area, infrastructure is developed and handed over to the Government cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. If the contract is composite, it will have to be segregated so as to allow deduction on the parts that involve design, development, operating and maintenance , financial involvement etc and to deny on those which are pure works contracts. On facts, the assessee had made substantial investments in fixed assets and was exposed to various kinds of risks. It was not a mere contractor. It is enough if the assessee is a developer. It need not also maintain and operate the infrastructure facility.”

3.2.5. The assessee also placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT vs ABG Heavy Industries Ltd reported in 322 ITR 323 (Bom) wherein it was observed that : “Parliament amended the provisions of section 80IA 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 realization of the factor a developer may not possess the wherewithal, expertise or resources to operate a facility, once constructed. Parliament eventually stepped in to clarify that it was not invariably necessary for a developer to operate and maintain the facility . Parliament when it amended the law was obviously aware of the administrative practice resulting in the circulars of the Central Board of Direct Taxes. The fact that in such a scheme , an enterprise would not operate the facility itself was not regarded as being a statutory bar to the entitlement to a deduction under section 80IA of the Act.”

9 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. 3.2.6. The assessee pleaded that even if an assessee is merely developing the infrastructural facility without operating and maintaining the same, it is entitled to deduction u/s 80IA of the Act. Further condition (b) laid out in section 80IA(4) of the Act mandates the existence of an agreement with the Government. Moreover, if section 80IA of the act 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 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. Simply because the assessee is receiving money from the Government does not mean that the assessee is not a developer.

3.3. Based on these principles and pleadings, the assessee submitted that it was not merely a 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. Further , it even obtained all statutory clearances required in connection with the works. The assessee was provided with the site alone and by putting its own inputs (not labour alone) it converted the site into an infrastructure facility. It was further stated that it is not a case, where the assessee is a works contract simplicitor, where the Government authority has provided the assessee with the entire set up i.e plant and machinery, materials, statutory clearances and the infrastructure needed to support construction and all the assessee had to employ was labour to carry out construction. Instead, the assessee had provided an entire enterprise which was needed to convert the site given by the Government into an infrastructure facility. It was further pleaded that the aforesaid activities undertaken by the assessee involved substantial amount of risk. Like any other entrepreneur , who employs his materials, plant,

10 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

machinery , labour, etc. in a project and undertakes risk, the assessee was also exposed to substantial amount of risk by virtue of engaging his establishment in the infrastructure projects. In addition, the assessee was exposed to risk of non-completion of work within time, any damage caused to the works, site etc., increase in prices of materials, labour etc., beyond what the Government had agreed to compensate as per the agreements.

3.4. The assessee discussed each of the contracts undertaken by it during the various assessment years for which deduction u/s 80IA (4) of the Act was claimed as under :-

ASST YEAR 2005-06 (ITA NO. 2286/KOL/2013) I. Kathora Project: Rs. 1,38,47,865/- The agreement for the aforesaid project is enclosed as Annexure I of the paper book. The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material and Plant: The assessee was to provide at his own cost materials, plant, tools, appliances etc required for proper execution of the work. Further the assessee was to make his own arrangements for the transportation of all materials. (ii) Labour: The assessee was to employ labour and pay wages to them. Further it was to employ technical person The labour amenities provided by the assessee are as below : Huts Sanitary facilities Drinking water Bathing and washing Waste disposal Medical facilities Further, the assessee was to follow safety code as specified on page 41. (iii) Inspection and Testing: The assessee was to provide all the facilities, labour and material necessary for the safe and convenient inspection and testing of material and workmanship. (iv) Power and water: The assessee was to make his own arrangement for supply of water, lights and power to his works and labour. (v) Haul roads: Necessary haul roads to work spot, borrow areas and water sources was to be satisfactorily constructed and maintained by the assessee. (vi) Royalty: All the quarry fees, octroi duties, royalty etc. was to be paid by the assessee. B. Jodhpur Project: Rs. 9,81,86,947/- The agreement for the aforesaid project is enclosed as Annexure II of the paper book. The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor:

11 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

(i) Drawings and design: The assessee was responsible for the design of the work under the contract and was also responsible for accuracy of the said designs. The assessee was to carry out preparatory works such as Topographic survey, soil investigations, geo-technical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. It was to submit the detailed design and the execution drawings such as site plans, general arrangement drawings, L-sections, plans, architectural, structural drawings and all working drawings, for approval. (ii) Materials: All the material required for the work was to be provided by the assessee. (iii) Labour: The assessee was required to employ staff for execution of work. (iv) Plant: The assessee was to arrange and supply at its own cost all material, plant, tools, appliances, implements, ladders, cordage, tackle, scaffolding and temporary works required for proper execution of the work. (v) Cost of Inspection and testing: For all equipment and material required for the execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, electricity, fuel, consumables labour, materials to carry out efficient testing of equipment, material and other parts of works. (vi) Water and Electricity: The cost of all water connections necessary for the execution of the work and the cost of water consumed and hire charges of meters and the cost of electricity consumed in connection with the execution of work was to be paid by the assessee. (vii) Site office, staff quarters etc.: The assessee was to have an office near the site and a clerk for service of communication notices. Further, all the expenses in connection with purchase or construction or maintenance of site office, staff quarters was to be borne by the assessee. (viii) Royalties and taxes: The assessee was to pay all royalties, octroi and other taxes and duties in respect of materials consumed on public work. (ix) Insurance: The assessee was to take accident insurance and third party insurance.The responsibility of timely payment of premiums was that of the assessee. (x) Quality assurance system: The assessee was to institute a quality assurance system to demonstrate compliance with requirements of the contract. (xi) Rights of way and facilities: The assessee was to bear all costs and charges for special/temporary rights of way which may be required for the work. (xii) Security of the site: The assessee was to provide adequate manpower and means for the security of the material, work-in-progress etc. It was responsible for keeping unauthorised persons off the site. From the perusal of the terms and conditions of the agreements (above), it is clear that it is not a case where the assessee was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the

12 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

material and other requisites from the client and all he has to do is employ labour. The assessee in the given case was to procure raw material, make arrangements for power, water, plant machinery etc., and conduct all the other activities needed for construction. Hence in the light of the discussion the assessee is entitled to deduction u/s 80-IA of the Act.

In addition to the above, the assessee was even responsible for operations and maintenance of the infrastructure facility, in the following cases: Jodhpur Project: The project had an operation and maintenance period of 5 years. Kathora project.”

ASST YEAR 2007-08 (ITA NO. 2287/KOL/2013 ) I. Bannahalli Hundi Lift Irrigation Scheme: Rs. 58,92,474/- The agreement between the assessee and Cauvery Neeravari Nigam Ltd. for the aforesaid project has been enclosed at pages 242 to 340 of the paper book. The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The contractor was responsible to arrange at his own expense all the material required for work ( with the exception of some special materials) (ii) Labour: In addition to labour, the assessee was required to hire technical staff at his cost. It was required to provide medical aid to workmen. (iii) Plant: The assessee was required to supply at his own cost, plant, tools, appliances, implements, ladders, etc. required for proper execution of the work. (iv) Necessary fencing and lights: The assessee was to provide all the necessary fencing and lights required to protect the public from accident. (v) Quarry fees, royalty etc. :All the quarry fees, royalties, octroi, dues levied by the state Government was to be paid by the contractor. II. Honganur Lift Irrigation Scheme: Rs. 2,01,781/- The agreement between the assessee and Cauvery Neeravari igam Ltd. for the aforesaid project has been enclosed at pages 341 to 370 of the paper book. The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The responsibility of procuring safe storage and safe transportation and usage of all materials including cement, steel, explosives (and license thereof) was that of the assessee. (ii) Labour: In addition to labour, the assessee was required to hire technical staff at his cost. Further, it was required to provide the following labour amenities: - It was required to provide medical aid to workmen.

13 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. - It was required to provide all the safety equipment and first aid apparatus for use of the persons employed on site. - Labour camps and arrangement of water and power for the same - Rest shed, creches and drinking water arrangements on the work spot - Further, the land required for quarters on work spot was to be arranged by the contractor. (iii) Office etc. on site: The responsibility for constructing a site office was that of the contactor (iv) Plant: The assessee was required to supply at his own cost, plant, tools, appliances, implements, ladders, etc. required for proper execution of the work. (v) Necessary fencing and lights: The assessee was to provide all the necessary fencing and lights required to protect the public from accident. (vi) Power and water: The power and water required for his camps as well as the work was to be arranged by the assessee. (vii) Clearing the site: The area to be occupied for work was to be cleared off all vegetations by the assessee, for which it was not entitled to any extra payment (viii) Access Roads: All haulage roads, access roads to work spots, quarry roads etc. and all diversion roads found necessary during construction was to be formed and maintained by the assessee. III. Sonthi Project: Rs. 5,78,862 The agreement between the assessee and Krishna BhagyaJala Nigam Limited for the aforesaid project had been enclosed as Annexure I of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and designs of temporary works: The assessee was responsible for the drawing and design of temporary works. It was required to submit the said drawings to the Engineers and obtain his approval before starting such work. (ii) Materials required for the Project: The contractor was responsible for procurement of required quantity of pipes, special machinery, electrical items etc. (iii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees. (iv) Plant:All tools and plants required for the work was to supplied by the contractor at its own cost. (v) Power & water: The contractor was required to make its own arrangement for electricity required at site and make its own arrangement of water. (vi) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the necessary surveys.

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(vii) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (viii) Royalty: The contractor was to pay all fees, royalties, octroi dues levied by the State Government or any other local body. IV. Taraka Lift Irrigation scheme: Rs. 3,66,176/- The agreement between the assessee and Cauvery Neeravari Nigam Ltd. for the aforesaid project had been enclosed as Annexure II of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The responsibility of procuring safe storage and safe transportation and usage of all materials including cement, steel, explosives (and license thereof) was that of the assessee. (ii) Labour: In addition to labour, the assessee was required to hire technical staff at his cost. Further, it was required to provide the following labour amenities: • It was required to provide medical aid to workmen. • It was required to provide all the safety equipment and first aid apparatus for use of the persons employed on site. • Labour camps and arrangement of water and power for the same. • Rest shed, creches and drinking water arrangements on the work spot • Further, the land required for quarters on work spot was to be arranged by the contractor. (iii) Office etc. on site:The responsibility for constructing a site office was that of the contactor (iv) Plant: The assessee was required to supply at his own cost, plant, tools, appliances, implements, ladders, etc. required for proper execution of the work. (v) Necessary fencing and lights: The assessee was to provide all the necessary fencing and lights required to protect the public from accident. (vi) Quarry fees, royalty etc. :All the quarry fees, royalties, octroi, dues levied by the state Government was to be paid by the contractor. (vii) Power and water: The power and water required for his camps as well as the work was to be arranged by the assessee. (viii) Clearing the site: The area to be occupied for work was to be cleared off all vegetations by the assessee, for which it was not entitled to any extra payment. (ix) Access Roads: All haulage roads, access roads to work spots, quarry roads etc. and all diversion roads found necessary during construction was to be formed and maintained by the assessee. V. Urbani Lift Irrigation Scheme: Rs. 1,82,11,272/- The agreement between the assessee and Kamataka Neeravari Nigam Limited for the aforesaid project had been enclosed as Annexure V of the paper book, submitted before the

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Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and designs: The assessee was responsible for the drawing and design of temporary works. It was required to submit the said drawings to the Engineers and obtain his approval before starting such work. (ii) Materials required for the Project: The contractor was responsible for procurement of required quantity of pipes, special machinery, electrical items etc. (iii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees. (iv) Plant:All tools and plants required for the work was to supplied by the contractor at its own cost. (v) Power & water: The contractor was required to make its own arrangement for electricity required at site and make its own arrangement of water. (vi) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the surveys required for execution of the work. (vii) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (viii) Royalty : The contractor was to pay all fees, royalties, octroi dues levied by the State Government or any other local body VI. Shri Rameshwara Lift Irrigation Scheme: Rs. 4,40,12,894/- The agreement between the assessee and Kamataka Neeravari Nigam Limited for the aforesaid project had been enclosed as Annexure VI of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and designs for temporary works: The assessee was responsible for the drawing and design of temporary works. It was required to submit the said drawings to the Engineers and obtain his approval before starting such work. (ii) Materials required for the Project: The contractor was responsible for procurement of required quantity of pipes, special machinery, electrical items etc. (iii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees. (iv) Plant:All tools and plants required for the work was to supplied by the contractor at its own cost.

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(v) Power & water: The contractor was required' to make its own arrangement for electricity required at site and make its own arrangement of water. (vi) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the surveys required for execution of the work. (vii) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (viii)Royalty: The contractor was to pay all fees, royalties, octroi dues levied by the State Government or any other local body. VII. Singatalur Lift Irrigation Scheme: Rs. 47,56,796/- The agreement between the assessee and Kamataka Neeravari Nigam Limited for the aforesaid project had been enclosed as Annexure VII of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and designs for temporary works: The assessee was responsible for the drawing and design of temporary works. It was required to submit the said drawings to the Engineers and obtain his approval before starting such work. (ii) Materials required for the Project: The contractor was responsible for procurement of required quantity of pipes, special machinery, electrical items etc. (iii) Labour: In addition to making payments to labourers and technical staff the assessee was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees. (iv) Plant: All tools and plants required for the work was to supplied by the contractor at its own cost. (v) Power & water: The contractor was required to make its own arrangement for electricity required at site and make its own arrangement of water. (vi) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the surveys required for execution of the work. (vii) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (viii) Watching and lighting: The contractor was to provide, at its own expense, sufficient lighting and watching VIII. Ramganjmandi Pachpahar Water Supply Project: Rs. 3,11,61,671/- The agreement between the assessee and Public Health Engineering department (PHED), Government of Rajasthan, for the aforesaid project had been enclosed as Annexure VIII of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Design and drawings: The assessee was required to submit the detailed designs and drawings such as site plans, L-section, general arrangement drawings, plans, architectural structural drawings and workings drawings of all civil, mechanical and electrical engineering works. Further the assessee was responsible for the

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correctness, accuracy of all designs and for safety & soundness of all structures constructed under till contract. (ii) Materials: The assessee was required to provide all the material required for the work. (iii) Labour: The assessee was required to employ skilled and experienced persons in all activities. Further it was to employ labour in sufficient number to maintain the required rate of progress. (iv) Plant: The assessee was required to make his own arrangement og plant tools, appliances required for proper execution of the work. (v) Power & water: The cost of all water connections necessary for the execution of work, the cost of water consumed, hire charges of meters and the cost of electricity consumed in connection with the execution of the work, was to paid by the assessee. (vi) Site office, staff quarters godown etc: For the execution of the work, the assessee was to construct, at its own cost, site office, godowns, staff quarters etc on site (vii) Safety and security: The assessee was to comply with all applicable safety regulations and take care of the safety of all the persons on the site. The assessee was further responsible for site's security, i.e for keeping unauthorised persons off the site offices, campus. To meet this end, it was required to recruit adequate manpower. (viii) Taxes and Royalty: Royalty or other tax on materials payable to the Government was to be paid by the assessee. (ix) Inspection and Testing: Cost of inspection of equipment and material was to be borne by the assessee. Further the assessee was to provide all apparatus, assistance, documents and other information, electricity, equipment fuel, consumable stores, labour, materials and qualified and experienced staff necessary to carry. out the testing procedures efficiently. IX. Santaldih Thermal Power Project, West Bengal: Rs.7,00,72,693/- The agreement between the assessee and The West Bengal Power Development Corporation Ltd., for the aforesaid project had been enclosed as Annexure IX of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings: The assessee was responsible for developing detailed drawings to adopt equipment and materials to be supplied to the requirements indicated in the specification. Further, it was responsible for and was to pay for any alterations of work due to discrepancies in the drawings. (ii) Materials: The assessee was responsible for arrangement of materials required for the work. Further, the assessee was required to establish on site testing facilities and was required to conduct tests, at its own cost, as specified. (iii) Labour: The assessee was required to make arrangements for labour required for the work. It was responsible for payment of wages and was required to observe that hours and conditions of labour are not unfavourable.

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In addition to the above, the assessee was to deploy engineers and supervisory personnel required for work. Further it was responsible for providing accommodation and daily transport to its labour and other personnel. (iv) Erection/Construction tools, Tackles and Machinery: The assessee was to provide all construction/erection machinery, tools, tackles and scaffolding required for work. (v) Insurance: The assessee was required to arrange, at its own cost, all Insurance pertinent to the work. (vi) Site office: The assessee had the responsibility of site office construction and approach rods as required. Further it was to bear all expenses for special and temporary way leaves required in connection with access to the site. (vii) Others: • Any open/covered storage required for the protection and storage of goods construction materials and machinery was to be constructed by the assessee at his own cost. • Watch and ward • Postage, telephone and telegraph expenses • Cleaning up the site • The assessee was to take all the safety precautions during the erection/construction work. • Provision of sanitary convenience in the site office, stores and for the use of workmen at the site and at labour colony. • Lights, guards, fencing and watching X. Kerala Meenad Projects: Rs. 21,85,398/-: The agreement between the assessee and Kerala Water Authority, for the aforesaid project had been enclosed as Annexure X of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i)Attention is firstly invited to Clause 8 (page 6) (General Obligations) of the agreement extracts of which has been produced below: "8.1 The contractor shall, with due care and diligence, design (to the extent provided for by the contract), execute and complete the works and remedy any defects therein in accordance with the provisions of the Contract. The contractor shall provide all superintendence, labour, materials, Plant, Contractor's equipment and all the other things, whether of a temporary or permanent nature, required in and for such design, execution, completion and remedying of any defects, so far as the necessity for providing the same is specified in or is reasonably to be inferred from the Contract" From the above it is clear that the assessee was not merely providing labour under the contract. In addition to labour it was required to make all arrangements including materials, equipment, superintendence and any other thing required for completion of the work. (ii) Submission of programme and estimation of cash flows: Under clause 14.1 (page no. 8) the assessee was required to submit a detailed programme for the execution of the works. Further, under clause 14.3, it was required to provide the Engineer a detailed cash flow

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estimate in quarterly periods. As per clause 14.4, submission of the programme and its approval by the Engineer, did not relieve the assessee of its duties and responsibilities (iii) Superintendence: The assessee was to provide all necessary superintendence during the execution of works. (clause 15.1 on page 8) (iv) Labour: Under clause 34.1 (page 15), the assessee was required to make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. (v) Testing of materials and plant: In addition to provision of specified plant and material, the assessee was required to provide assistance, labour, electricity, fuels, stores, apparatus and instruments as are normally required for examining, measuring and testing any materials or plants. (clause 36.1, page 15). The cost of making the test was to be borne by the assessee (clause 36.2 and 36.3) (vi) Safety, Security and Protection of the Environment: Under clause 19 .1 (b) (page 9) the assessee was required to provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. Further under para (c), it was to take all the steps to protect the environment. (vii)Royalty: The assessee was required to pay all tonnage and other royalties, rent and other payments or compensation, if any, for getting stone, sand, gravel, clay or other materials required for the work (clause 28.2, page 13) (viii) Improvement of roads etc.: Under clause 30.2 (page 14), the assessee was responsible for paying the cost of strengthening any bridges or improving any road communicating with or on the routes to the site to facilitate the movement of equipment and other temporary works. XI. Kerala Puttuvam Project: Rs. 21,13,123/- The agreement between the assessee and Kerala Water Authority, for the aforesaid project had been enclosed as Annexure X of the paper book, before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i)Attention is firstly invited to Clause 8(page 6) (General Obligations) of the agreement extracts of which has been produced below: "8.1 The contractor shall, with due care and diligence, design (to the extent provided for by the contract), execute and complete the works and remedy any defects therein in accordance with the provisions of the Contract. The contractor shall provide all superintendence, labour, materials, Plant, Contractor's equipment and all the other things, whether of a temporary or permanent nature, required in and for such design, execution, completion and remedying of any defects, so far as the necessity for providing the same is specified in or is reasonably to be inferred from the Contract" From the above it is clear that the assessee was not merely providing labour under the contract. In addition to labour it was required to make all arrangements including materials, equipment, superintendence and any other thing required for completion of the work. (ii) Submission of programme and estimation of cash flows: Under clause 14.1 (page no. 8) the assessee was required to submit a detailed programme for the execution of the works.

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Further, under clause 14.3, it was required to-provide the Engineer a detailed cash flow estimate in quarterly periods. As per clause 14.4, submission of the programme and its approval by the Engineer, did not relieve the assessee of its duties and responsibilities (iii) Superintendence: The assessee was to provide all necessary superintendence during the execution of works. (clause 15.1 on page 8) (iv) Labour: Under clause 34.1 (page 15), the assessee was required to make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. (v) Testing of materials and plant: In addition to provision of specified plant and material, the assessee was required to provide assistance, labour, electricity, fuels, stores, apparatus and instruments as are normally required for examining, measuring and testing any materials or plants. (clause 36.1, page 15). The cost of making the test was to be borne by the assessee (clause 36.2 and 36.3) (vi) Safety, Security and Protection of the Environment: Under clause 19.1 (b) (page 9) the assessee was required to provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. Further under para (c), it was to take all the steps to protect the environment. (vii)Royalty: The assessee was required to pay all tonnage and other royalties, rent and other payments or compensation, if any, for getting stone, sand, gravel, clay or other materials required for the work (clause 28.2, page 13) (viii) Improvement of roads etc.: Under clause 30.2 (page 14), the assessee was responsible for paying the cost of strengthening any bridges or improving any road communicating with or on the routes to the site to facilitate the movement of equipment and other temporary works. XII. SripadaSagar Project: Rs. 1,20,89,179/- The agreement between the assessee and Government of Andhra Pradesh (Irrigation & CAD Department), for the aforesaid project had been enclosed as Annexure XI of the paper book before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Attention is firstly invited to page 294, para 4.1 (General Obligations) of the agreement. A perusal of the same shall clarify that the assessee was required to provide all labour including supervision thereof. In addition, it was to provide materials, construction equipment and all the other things (whether of a temporary or a permanent nature) required for the completion of the work. (ii) Labour: The assessee was to make its own arrangement for the engagement of staff and labour, local or otherwise, and for their payment, housing, feeding and transport. (page 308 & 309, para 6.1) (iv) Electricity, water & gas: The assessee was to make its own arrangements for electricity, water and gas. As per Para 4.1.3 on page 295 the assessee was to install Diesel Generating Sets and operate the same for its requirement of power.

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Further as per para 4.1.5 and 4.1.6 it was to arrange water and gas for its work site and camps/colonies. (iv) Provision and maintenance of roads: The assessee was responsible for further upgradation and maintenance of all internal roads and provision of additional roads as necessary without additional cost to the Government. (para 4.1.1 on page 295). Further it was responsible for construction and maintenance of additional access roads for the purpose of transporting all materials. (para 4.1.7) (v) Licences, permits, consents etc. The assessee was responsible for obtaining all permits for carrying out its obligations. (para 4.1.8 on page 295). Further it was to bear all costs and charges for special and temporary rights-of-way which may be required. (para 4.13 on page 301) (vi) Safety and security:The assessee was responsible for safety of all its operations and methods of construction. Further, it was to arrange adequate security for its personnel (and their families), property, work-in-progress etc. (para 4.1.2 on page 294) (vii) Superintendence: The assessee was to provide necessary superintendence throughout the design and execution of the works. (para 6.8 on page 310) (viii) Testing: The assessee was to provide all apparatus, assistance, electricity, fuel, consumables, instruments, labour, materials as are necessary to carry out efficient tests of plant, materials and other parts of works. (para 7.4 on page 312) (ix) Remedial work: Despite the above, the assessee was to carry out any remedial work if instructed so by the contractee. (page 313, para 7.6) (x) Royalties: The assessee was to pay all royalties, rent~ and other payments for obtaining and disposal of materials. (page 314, para 7.8) XIII. Jodhpur Project: Rs. 1,20,18,807/- The agreement for the aforesaid project had been enclosed as Annexure XII of the paper book before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and design: The assessee was responsible for the design of the work under the contract and was also responsible for accuracy of the said designs. (pg. 51, para 9.1) The assessee was to carry out preparatory works such as Topographic survey, soil investigations, geo-technical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. It was to submit the detailed design and the execution drawings such as site plans, general arrangement drawings, L-sections, plans, architectural, structural drawings and all working drawings, for approval. (para 9.2) (ii) Materials: All the material required for the work was to be provided by the assessee. i) Labour: The assessee was required to employ staff for execution of work. (ii) Plant:The assessee was to arrange and supply at its own cost all material, plant, tools, appliances, implements, ladders, cordage, tackle, scaffolding and temporary works required for proper execution of the work.

22 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. (v) Cost of Inspection and testing: For all equipment and material required for the execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, electricity, fuel, consumables labour, materials to carry out efficient testing of equipment, material and other parts of works. (vi) Water and Electricity: The cost of all water connections necessary for the execution of the work and the cost of water consumed and hire charges of meters and the cost of electricity consumed in connection with the execution of work was to be paid by the assessee. (vii) Site office, staff quarters etc.: The assessee was to have an office near the site and a clerk for service of communication notices. Further, all the expenses in connection with purchase or construction or maintenance of site office, staff quarters was to be borne by the assessee. (viii) Royalties and taxes: The assessee was to pay all royalties, octroi and other taxes and duties in respect of materials consumed on public work. (ix) Insurance: The assessee was to take accident insurance and third party insurance. The responsibility of timely payment of premiums was that of the assessee. (x) Quality assurance system: The assessee was to institute a quality assurance system to demonstrate compliance with requirements of the contract. (xi) Rights of way and facilities: The assessee was to bear all costs and charges for special/temporary rights of way which may be required for the work. (xii) Security of the site: The assessee was to provide adequate manpower and means for the security of the material, work-in-progress etc. It was responsible for keeping unauthorised persons off the site. XIV. SawaiMadhopur Project: Rs. 3,46,96,151/- The agreement for the aforesaid project had been enclosed as Annexure XIII of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and design: The assessee was responsible for the design of the works and the accuracy of such designs. It was required to carry out the preparatory works such as topographic survey, soil investigations, geotechnical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. (ii) Materials: The assessee was responsible for arrangement of all materials required for proper execution of work. (iii) Labour: The assessee was responsible for paying wages to labourers on the work. Further, the assessee was required to engage technical staff as per clause 39 on page 56. It was even required to hire supervisory staff like contract managers, senior managers etc. on the site so as to ensure the work quality.

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(iv) Plant: The assessee was required to arrange and supply at its own cost, all plants, tools, appliances, implements, ladders, cordage etc. required for proper execution of work. (v) Power and water: The assessee was to bear the cost of all water connections necessary for execution of work and the cost of water consumed. Further it was to bear the hire charges of meters and cost of electricity consumed in the execution of the work. (vi) Construction on site: The assessee was required to provide and upkeep the following facilities • An office building at 5 locations of floor area not less than 50 square meter each, with provision of toilets and pantry. The building was to be equipped with furniture, electricity, telephone, air cooler, fan, computer, printer etc. • In addition to above, suitable temporary offices along the site of pipe laying works • Offices were to be maintained by the assessee and were to be removed on completion of work. (vii) Safety and Security: The assessee was responsible for the safety of all persons on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion. It was further responsible for keeping unauthorised persons off the site, offices, campus etc. (viii) Cost of inspection and testing: For all equipments and materials required for execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, estimates, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. (ix) Others: • The assessee was to institute a quality assurance system to demonstrate compliance with requirements of the contract. • The assessee was to bear all costs and charges for special and/or temporary rights of way, which he may require, including those for access to the site • Royalties, quarry fees, octroi and other taxes in respect of materials actually consumed on public work was to be borne by the assessee XV. Benihala LIS Project: Rs. 54,45,962/- The agreement for the aforesaid project had been enclosed as Annexure XIV of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Design and drawings: The assessee was responsible for drawings and designs for temporary works. (ii) Material: The assessee was responsible for procurement of required quantity of materials like pipes, specials, machinery, electrical items etc

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(iii) Labour:The assessee was responsible for the engagement of all staff and labour and also for their payment, housing, feeding and transport. The assessee was to take adequate measures to ensure their safety. The assessee was responsible for and was to bear all expenses of providing medical aid to workmen on the site. Further it was to provide all necessary personal safety equipment, first aid apparatus for the use of persons employed on the site (iv) Plant: All tools and plants required for the work including sheet piles and timber for shoring and strutting, pump sets etc. was to be supplied by the assessee at its own cost (v) Water and Electricity: The assessee was to make its own arrangement for the fresh water required for manufacturing of the pipes, construction of civil works and testing of pipelines as well as potable water required for his factory and labour camps. Further he was to make its arrangements for the electrical energy required at the site. (vi) Survey stations: The assessee was to, at his own expense, provide and maintain survey stations required to carry out surveys, measurements etc. in connection with works (vii) Other infrastructural facilities: • The assessee was to erect and maintain in a good condition temporary fences and gates along the boundaries. • Provision of septic tank/pit latrines at the construction site/camps • Provision of creches for working women labour • Drinking water • Provision and maintenance of clean sanitary facilities on the site for use of its employees. • Watching and lighting (page 61, para 15) (viii) Royalty etc.: All quarry fees, royalties and octroi dues levied by the State Government or any local body or authority and ground rent was to be paid by the assessee. (ix) Temporary diversion of roads: The assessee was to make at its own cost all necessary provision for the temporary diversion of roads, cart-tracks, footpaths, drains, water courses, channels etc. It was to pay customary vehicle license and permit fees for use of public roads. From the perusal of the terms and conditions of all the agreements (above), it is clear that it is not a case where the assessee was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requisites from the client and all he has to do is employ labour. The assessee in the given case was to procure raw material, make arrangements for power, water, plant machinery etc., and conduct all the other activities needed for construction.

In addition to the above, the assessee was even responsible for operations and maintenance of the infrastructure facility, in the following cases: • Sonthi Project (Annexure 1)- Scope of work on page 12 includes operating the system for 2 years.

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• Taraka LIS (Annexure 11): As per para 6.2.13 on page 185, the assessee was required to maintain the facility for a period of 12 months. Its liability was limited to replacement of defective parts that may develop in the equipment from faulty design, materials or workmanship. • Bannahallihundi LIS: Schedule B, showing items of work to be carried out, includes operation & maintenance for 3 years. • Honganur LIS: As per para 6.2.13 on page 185, the assessee was required to maintain the facility for a period of 12 months. Its liability was limited to replacement of defective parts that may develop in the equipment from faulty design, materials or workmanship. • Urbani LIS (annexure V): As per para 21 on page 135, the assessee was responsible for proper operation of the installations during 2 years maintenance period. • Rameshwara LIS (annexure VI): As per para 20 on page 147, the assessee was responsible for proper operation of the installations during 2 years maintenance period. • Singatalur LIS (Annexure VII): Scope of work on page 8 includes operating the system for 2 years. • Ramganjmandi (annexure VIII): Scope of work on page la includes operating and maintenance period of five years. • Kerala Puttuvam and Meenad Projects • Sripadsagar Project (annexure XI): Scope of work includes operation and maintenance of the project for 2 years • Jodhpur Project (annexure XII): The project had an operation and maintenance period of 5 years. • SawaiMadhopur Project (annexure XIII):Particulars of work on page 6 includes maintenance & operation for 5 years. • Benihala LIS (annexure XIV): As per para 21 on page 125, the assessee was responsible for proper operation of the installations during 2 years maintenance period.”

ASST YEAR 2008-09 (ITA NO. 2288/KOL/2013 ) Sonthi Project: Rs. 1,25,31,427/- The following conditions in the agreement between the assessee and Krishna Bhagya Jala Nigam Limited clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and designs of temporary works: The assessee was responsible for the drawing and design of temporary works. It was required to submit the said drawings to the Engineers and obtain his approval before starting such work (ii) Materials required for the Project: The contractor was responsible for procurement of required quantity of pipes, special machinery, electrical items etc. (iii) Labour: The contractor was required to make its own arrangement for the

26 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees (iv) Plant: All tools and plants required for the work was to be supplied by the contractor at its own cost. (v) Power & water: The contractor was required to make its own arrangement for electricity required at site and make its own arrangement of water. (vi) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the necessary surveys. (vii) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (viii) Royalty: The contractor was to pay all fees, royalties, octroi dues levied by the State Government or any other local II. Taraka Lift Irrigation scheme: Rs. 1,60,662/- The agreement between the assessee and Cauvery Neeravari Nigam Ltd. for the aforesaid project is enclosed as Annexure II. The following conditions in the agreement between the assessee and Cauvery Neeravari Nigam Ltd. clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The responsibility of procuring safe storage and safe transportation and usage of all materials including cement, steel, explosives (and license thereof) was that of the assessee. (ii) Labour: In addition to labour, the assessee was required to hire technical staff at his cost. Further, it was required to provide the following labour amenities: • It was required to provide medical aid to workmen. • It was required to provide all the safety equipment and first aid apparatus for use of the persons employed on site • Labour camps and arrangement of water and power for the same • Rest shed, creches and drinking water arrangements on the work spot • Further, the land required for quarters on work spot was to be arranged by the contractor.

(iii) Office etc. on site: The responsibility for constructing a site office was that of the contactor (iv) Plant: The assessee was required to supply at his own cost, plant, tools, appliances, implements, ladders, etc. required for proper execution of the work. (v) Necessary fencing and lights: The assessee was to provide all the necessary fencing and lights required to protect the public from accident.

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(vi) Quarry fees, royalty etc. : All the quarry fees, royalties, octroi, dues levied by the state Government was to be paid by the contractor. (vii) Power and water: The power and water required for his camps as well as the work was to be arranged by the assessee. (viii) Clearing the site: The area to be occupied for work was to be cleared off all vegetations by the assessee, for which it was not entitled to any extra payment. (ix) Access Roads: All haulage roads, access roads to work spots, quarry roads etc. and all diversion roads found necessary during construction was to be formed and maintained by the assessee III. Madhepura Project: Rs. 77,18,533/- The agreement for the aforesaid project had been enclosed as Annexure III of tile paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The assessee was required to procure cement, steel, bitumen etc. needed for execution of the work (ii) Labour: The assessee was to employ technical staff and provide all the necessary superintendence during the execution of the work. (iii) Site office: The assessee was to construct and provide a site office for the contractee with the following amenities • Sanitary, water supply installations and fittings • Watch & ward • Electrical and water connection • Waste disposal • Furniture and office equipment (iv) Field Laboratory: The assessee was to arrange and provide an adequately equipped laboratory with the necessary manpower. Further it was required to maintain the same IV. Usmanpur Project: Rs. 61,865/- The agreement for the aforesaid project had been enclosed as Annexure IV of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Design Obligations: The assessee was to carry out and be responsible for the design of the work. (ii) Staff & Labour: The assessee was to make its own arrangement for the engagement of all staff and labour, local or otherwise, and for their payment, housing, feeding and transport.

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It was to provide and maintain all necessary accommodation and welfare facilities for its personnel. Further it was to take all reasonable precautions to maintain health and safety of its personnel. It was to provide the' necessary superintendence to plan, arrange, direct, manage, inspect and test the work. (iii) Plant & Materials: The assessee was to carry out the manufacture of plant, the production of materials required for the work. (iv) Electricity: The assessee was to arrange the electricity/power connection of required capacity for carrying out the works. Further it was to make necessary arrangements for diesel generators so that the progress of awarded contract is not adversely affected due to failure/non-availability of electricity/power. (v) Site office: The assessee was to provide a site office with all the necessary furniture, "telephone facility, display boards etc. for use by the Engineer and the Supervisory staff (vi) Safety & security: The assessee was to take care of the safety of all persons entitled to be on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion The assessee was even responsible for the security of site and for keeping unauthorised persons off the site. (vii) Rights of Way: The assessee was to bear all costs and charges for special and/or temporary rights-of-way which may be required for access to the site (viii) Testing: It was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, instruments, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently V. Wazirabad Projects: Rs. 6,90,243/- The agreement for the aforesaid project had been enclosed as Annexure I of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Design Obligations: The assessee was to carry out and be responsible for the design of the work. (ii) Staff & Labour: The assessee was to make its own arrangement for the engagement of all staff and labour, local or otherwise, and for their payment, housing, feeding and transport. It was to provide and maintain all necessary accommodation and welfare facilities for its personnel. Further it was to take all reasonable precautions to maintain health and safety of its personnel. It was to provide the necessary superintendence to plan, arrange, direct, manage, inspect and test the work. (iii) Plant & Materials: The assessee was to carry out the manufacture of plant, the production of materials required for the work.

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(iv) Electricity and water: For construction purposes and for site office, the assessee was to arrange and provide at its own cost electric connection of suitable load from Electric Supply Agency and was also to keep generators as standby arrangement. The water required for construction was to be arranged by the assessee at its own cost. (v) Site office: The assessee was to provide a site office with AC cabins, meeting room with pantry and toilet facilities. In addition to the above, it was to bear running expenses of the site office and was to provide four wheel drive AC vehicle with driver. (vi) Safety & security: The assessee was to take care of the safety of all persons entitled to be on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion The assessee was even responsible for the security of site and for keeping unauthorised persons off the site. (vii) Rights of Way: The assessee was to bear all costs and charges for special and/or temporary rights-of-way which may be required for access to the site (viii) Inspecton & Testing: The assessee was to make all necessary arrangements for to and fro travels of Engineers for pre-delivery inspection in India and abroad. It was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, instruments, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. VI. Gwalior Projects: Rs. 86,49,856/- The agreement for the aforesaid project had been enclosed as Annexure V of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Materials & Equipment: see bills of quantities enclosed in the annexure. (ii) Labour: The assessee was pay wages to labourers engaged by it in the execution of the work. In addition it was to provide and maintain, at its own expense, in a clean and sanitary condition, living accommodations for those employed by it on the project. Further it was to provide the following: • Safety and accident prevention officer • Protective clothing and footwear • First aid facilities • Supply of drinking water and sanitation (i) Power: The assessee was to make its own arrangement of power supply for the labour camp and for the work site.

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(ii) Water: The assessee was to make its own arrangement for water required for construction and other purposes. (iii) Site office: The assessee was to establish a temporary office. The office was to include tables, chairs, almirah etc. (iv) Field Laboratory: The assessee was to arrange and provide a fully furnished and adequately equipped laboratory. Further it was required to maintain the same. VII. Honganur Lift Irrigation Scheme: Rs. 4,55,033/- The agreement between the assessee and Cauvery Neeravari igam Ltd. for the aforesaid project had been enclosed as Annexure VIII of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The responsibility of procuring safe storage and safe transportation and usage of all materials including cement, steel, explosives (and license thereof) was that of the assessee. (ii) Labour: In addition to labour, the assessee was required to hire technical staff at his cost. Further, it was required to provide the following labour amenities: • It was required to provide medical aid to workmen. (clause 30 on page 53). • It was required to provide all the safety equipment and first aid apparatus for use of the persons employed on site. • Labour camps and arrangement of water and power for the same • Rest shed, creches and drinking water arrangements on the work spot • Further, the land required for quarters on work spot was to be arranged by the contractor. (v) Necessary fencing and lights: The assessee was to provide all the necessary fencing and lights required to protect the public from accident. (iii) Office etc. on site: The responsibility for constructing a site office was that of the contactor (iv) Plant: The assessee was required to supply at his own cost, plant, tools, appliances, implements, ladders, etc. required for proper execution of the work. (v) Power and water: The power and water required for his camps as well as the work was to be arranged by the assessee. vi) Clearing the site: The area to be occupied for work was to be cleared off all vegetations by the assessee, for which it was not entitled to any extra payment. (viii) Access Roads: All haulage roads, access roads to work spots, quarry roads etc. and all diversion roads found necessary during construction was to be formed and maintained by the assessee VIII. Bannahalli Hundi Lift Irrigation Scheme: Rs. 30,81,722/-

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The agreement between the assessee and Cauvery Neeravari Nigam Ltd. for the aforesaid project had been enclosed as Annexure IX of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The contractor was responsible to arrange at his own expense all the material required for work (with the exception of some special materials) (ii) Labour: In addition to labour, the assessee was required to hire technical staff at his cost. It was required to provide medical aid to workmen. Further, it was required to provide all the safety equipment and first aid apparatus for use of the persons employed on site. (iii) Plant: The assessee was required to supply at his own cost, plant, tools, appliances, implements, ladders, etc. required for proper execution of the work. (iv) Necessary fencing and lights: The assessee was to provide all the necessary fencing and lights required to protect the public from accident (v) Quarry fees, royalty etc. : All the quarry fees, royalties, octroi, dues levied by the state Government was to be paid by the contractor. IX. Kerala Puttuvam Project: Rs. 3,25,19,848/- & Kerala Meenad Project: 5,63,07,469/- The agreement between the assessee and Kerala Water Authority, for the aforesaid project had been enclosed as Annexure XI of paper book for AY 2009-10, submitted before the LD. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Attention is firstly invited to Clause 8 (page 6) (General Obligations) of the agreement extracts of which has been produced below: "8.1 The contractor shall, with due care and diligence, design (to the extent provided for by the contract), execute and complete the works and remedy any defects therein in accordance with the provisions of the Contract. The contractor shall provide all superintendence, labour, materials, Plant, Contractor's equipment and all the other things, whether of a temporary or permanent nature, required in and for such design, execution, completion and remedying of any defects, so far as the necessity for providing the same is specified in or is reasonably to be inferred from the Contract" From the above it is clear that the assessee was not merely providing labour under the contract. In addition to labour it was required to make all arrangements including materials, equipment, superintendence and any other thing required for completion of the work. (ii) Submission of programme and estimation of cash flows: Under clause 14.1 the assessee was required to submit a detailed programme for the execution of the works. Further, under clause 14.3, it was required to provide the Engineer a detailed cash flow estimate in quarterly periods. As per clause 14.4, submission of the programme and its approval by the Engineer, did not relieve the assessee of its duties and responsibilities . (iii) Superintendence: The assessee was to provide all necessary superintendence during the execution of works.

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(iv) Labour: Under clause 34.1 (page 15), the assessee was required to make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. (v) Testing of materials and plant: In addition to provision of specified plant and material, the assessee was required to provide assistance, labour, electricity, fuels, stores, apparatus and instruments as are nonnall required for examining, measuring and testing any materials or plants. The cost of making the test was to be borne by the assessee (vi) Safety, Security and Protection of the Environment: Under clause 19 .1 (b) (page 9) the assessee was required to provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. Further under para (c), it was to take all the steps to protect the environment. (vii) Royalty: The assessee was required to pay all tonnage and other royalties, rent and other payments or compensation, if any, for getting stone, sand, gravel, clay or other materials required for the work (i) Improvement of roads etc.: Under clause 30.2 (page 14), the assessee was responsible for paying the cost of strengthening any bridges or improving any road communicating with or on the routes to the site to facilitate the movement of equipment and other temporary works. X. Jamui Projects: Rs. 91,61,240/- The agreement for the aforesaid project had been enclosed as Annexure XII of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The assessee was required to procure cement, steel, bitumen etc. needed for execution of the work (ii) Labour: The assessee was to employ technical staff and provide all the necessary superintendence during the execution of the work (iii) Site office: The assessee was to construct and provide a site office for the contractee with the following amenities • Sanitary, water supply installations and fittings • Watch & ward • Electrical and water connection • Waste disposal • Furniture and office equipment (iv) Field Laboratory: The assessee was to arrange and provide an adequately equipped laboratory with the necessary manpower. Further it was required to maintain the same. XI. Jawai Pali Project: Rs. 7,13,53,353/- The agreement for the aforesaid project had been enclosed as Annexure XlII of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the

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agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and design: The assessee was responsible for the design of the work under the contract and was also responsible for accuracy of the said designs. The assessee was to carry out preparatory works such as Topographic survey, soil investigations, geo-technical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. It was to submit the detailed design and the execution drawings such as site plans, general arrangement drawings, L-sections, plans, architectural, structural drawings and all working drawings, for approval. (ii) Materials: All the material required for the work was to be provided by the assessee. (iii) Labour: The assessee was to pay wages to its labour. In addition it was to hire supervisory stafflike Project Manger and Senior Engineer. (iv) Plant: The assessee was to arrange and supply at its own cost all material, plant, tools, appliances, implements, ladders, cordage, tackle, scaffolding and temporary works required for proper execution of the work. (v) Cost of Inspection and testing: For all equipment and material required for the execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, electricity, fuel, consumables labour, materials to carry out efficient testing of equipment, material and other parts of works. (vi) Water and Electricity: The cost of all water connections necessary for the execution of the work and the cost of water consumed and hire charges of meters and the cost of electricity consumed in connection with the execution of work was to be paid by the assessee. (vii) Site office, staff quarters etc.: The assessee was to establish an office (equipped with facilities) for the Engineer-in-charge. Further it was to have its own office near the site and a clerk for service of communication notices. Further, all the expenses in connection with purchase or construction or maintenance of site office, staff quarters was to be borne by the assessee. (viii) Royalties and taxes: The assessee was to pay all royalties, octroi and other taxes and duties in respect of materials consumed on public work. (ix) Risk: The work and all materials, machines, tools and plant, scaffolding, temporary buildings and other things connected therewith, were at the risk of the assessee. (x) Rights of way and facilities: The assessee was to bear all costs and charges for special/temporary rights of way which may be required for the work. (xi) Safety & Security: The assessee was to provide adequate manpower and means for the security of the material, work-in-progress etc. It was responsible for keeping unauthorised persons off the site.

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Further it was to provide fencing, lighting, guarding and watching of the works and was responsible for the safety of all persons on the site. XII. Bisalpur Jaipur Projects, Pk -2: Rs. 39,56,286/- The agreement for the aforesaid project had been enclosed as Annexure XV of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Attention is firstly invited to Clause 8 (page 39) (General Obligations) of the agreement extracts of which has been produced below: "8.1 The contractor shall, with due care and diligence, design (to the extent provided for by the contract), execute and complete the works and remedy any defects therein in accordance with the provisions of the Contract. The contractor shall provide all superintendence, labour, materials, Plant, Contractor's equipment and all the other things, whether of a temporary or permanent nature, required in and for such design, execution, completion and remedying of any defects, so far as the necessity for providing the same is specified in or is reasonably to be inferred from the Contract" From the above it is clear that the assessee was not merely providing labour under the contract. In addition to labour it was required to make all arrangements including materials, equipment, superintendence and any other thing required for completion of the work. (ii) Submission of programme and estimation of cash flows: Under clause 14.1 the assessee was required to submit a detailed programme for the execution of the works. Further, under clause 14.3, it was required to provide the Engineer a detailed cash flow estimate in quarterly periods. As per clause 14.4, submission of the programme and its approval by the Engineer, did not relieve the assessee of its duties and responsibilities (iii) Superintendence: The assessee was to provide all necessary superintendence during the execution of works. (iv) Labour: Under clause 34.1 (page 48), the assessee was required to make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. (v) Testing of materials and plant: In addition to provision of specified plant and material, the assessee was required to provide assistance, labour, electricity, fuels, stores, apparatus and instruments as are normally required for examining, measuring and testing any materials or plants. The cost of making the test was to be borne by the assessee vi) Safety, Security and Protection of the Environment: Under clause 19 .1 (b) the assessee was required to provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. Further under para (c), it was to take all the steps to protect the environment. (vii) Royalty: The assessee was required to pay all tonnage and other royalties, rent and other payments or compensation, if any, for getting stone, sand, gravel, clay or other materials required for the work

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(viii) Improvement of roads etc.: Under clause 30.2, the assessee was responsible for paying the cost of strengthening any bridges or improving any road communicating with or on the routes to the site to facilitate the movement of equipment and other temporary works. XIII. Bisalpur Jaipur Projects - PK-4: Rs. 1,71,014/- The agreement for the aforesaid project had been enclosed as Annexure XVI of paper book for AY 2009-10, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Design of works: The assessee was to carry out and be responsible for the design of the works (ii) Plant and Materials: The assessee was responsible for procurement, transport, receiving, unloading and safe keeping of all Plant, Materials, Contractor's Equipment and other things required for the completion of the works. (iii) Labour: The assessee was to make its own arrangements for the engagement of all staff and labour, local or otherwise, and for their payment, housing, feeding and transport. Further it was to provide and maintain all necessary accommodation and welfare activities for his staff and labour. It was to take precautions to ensure health and safety of its staff. (iv) Testing: The assessee was to provide all documents and information necessary for testing and such assistance, labour, materials, electricity, fuel, stores, apparatus and instruments that are necessary to carry out the tests efficiently. (v) Superintendence: The assessee was to provide all the necessary superintendence during the design and execution of the Works. (vi) Security: The assessee was responsible for the security of the site and for keeping the unauthorised persons off the site. (vii) Rights of way: The assessee was to bear all costs and charges for special or temporary rights-of-way required by him for access to the site XlV. Jodhpur Project: Rs. 23,14,711/- The agreement for the aforesaid project had been enclosed as Annexure I of paper book for AY 2006-07, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and design: The assessee was responsible for the design of the work under the contract and was also responsible for accuracy of the said designs. The assessee was to carry out preparatory works such as Topographic survey, soil investigations, geo-technical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. It was to submit the detailed design and the execution drawings such as site plans, general arrangement drawings,· L-sections, plans, architectural, structural drawings and all working drawings, for approval. (ii) Materials: All the material required for the work was to be provided by the assessee.

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(v) Labour: The assessee was required to employ staff for execution of work. (vi) Plant: The assessee was to arrange and supply at its own cost all material, plant, tools, appliances, implements, ladders, cordage, tackle, scaffolding and temporary works required for proper execution of the work. (v) Cost of Inspection and testing: For all equipment and material required for the execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, electricity, fuel, consumables labour, materials to carry out efficient testing of equipment, material and other parts of works. (vi) Water and Electricity: The cost of all water connections necessary for the execution of the work and the cost of water consumed and hire charges of meters and the cost of electricity consumed in connection with the execution of work was to be paid by the assessee. (vii) Site office, staff quarters etc.: The assessee was to have an office near the site and a clerk for service of communication notices. Further, all the expenses in connection with purchase or construction or maintenance of site office, staff quarters was to be borne by the assessee. (viii) Royalties and taxes: The assessee was to pay all royalties, octroi and other taxes and duties in respect of materials consumed on public work. (ix) Insurance: The assessee was to take accident insurance and third party insurance. The responsibility of timely payment of premiums was that of the assessee. (x) Quality assurance system: The assessee was to institute a quality assurance system to demonstrate compliance with requirements of the contract. (xi) Rights of way and facilities: The assessee was to bear all costs and charges for special/temporary rights of way which may be required for the work. (xii) Security of the site: The assessee was to provide adequate manpower and means for the security of the material, work-in-progress etc. It was responsible for keeping unauthorised persons off the site. From the perusal of the terms and conditions of all the agreements (above), it is clear that it is not a case where the assessee was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requisites from the client and all he has to do is employ labour. The assessee in the given case was to procure raw material, make arrangements for power, water, plant machinery etc., and conduct all the other activities needed for construction. In addition to the above, the assessee was even responsible for operations and maintenance of the infrastructure facility, in the following cases: • Sonthi Project Scope of work on page 12 includes operating the system for 2 years.

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• Taraka LIS: As per para 6.2.13 on page 185, the assessee was required to maintain the facility for a period of 12 months. Its liability was limited to replacement of defective parts that may develop in the equipment from faulty design, materials or workmanship. • Madhepura Project • Usmanpur Project (Annexure IV): Scope of work on pages 2-3 includes operation and maintenance. • Wazirabad Project (annexure-I of paper book for AY 2009-10): Scope of work on page 144 includes watch & ward, patrolling and maintenance of pipe line and other appurtenances etc. for a period of 12 months. • Gwalior Project (annexure V of paper book for AY 2009-10): see page 74 • Honganur LIS (annexure-VIII of paper book for AY 2009-10): As per para 6.2.13 on page 185, the assessee was required to maintain the facility for a period of 12 months. Its liability was limited to replacement of defective parts that may develop in the equipment from faulty design, materials or workmanship. • Bannahallihundi LIS (Annexure-IX of paper book for AY 2009-10): Schedule B, showing items of work to be carried out, SI. No. 18 (page 78) includes operation & maintenance for 3 years. • Kerala Puttuvam & Meenad Project • Jamui Project (annexure XII of paper book for AY 2009-10): O&M of 1 year • Jawai Pali Project (annexure XIII of paper book for AY 2009-10)- Scope of work on page 3 includes Operations and maintenance. The 0 & M period was 5 years. • Bisalpur Jaipur Project- Pk-2 (annexure XV of paper book for AY 2009-10): Description of work on page 1 includes operation and maintenance for two years. • Bisalpur Jaipur Project- Pk 4 (annexure XVI of paper book for AY 2009-10): Description of work on page 1 includes operation and maintenance for two years. • Jodhpur Project (annexure I of paper book for AY 2006-07): The project had an operation and maintenance period of 5 years.”

ASST YEAR 2010-11 (ITA NO. 2289/KOL/2013 ) “Rithala Project: Rs.12,26,26,493/- The following conditions in the agreement between the assessee and Delhi Jal Board clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The assessee was, at its own expense, to provide all materials required for the execution of the work. Further it was to supply samples of the said materials to the Engineer-in-charge for his approval. (ii) Labour: The assessee was to pay wages to labour hired by it for execution of the work. In addition to the above, it was to provide the following amenities:

38 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

• all the facilities in connection with the safety of labour • As per clause 19H at page 211 of the Paper Book, the assessee was to provide huts (camps) for his workmen. • Water for the use of labour • Arrangements for disposal of excreta • Drainage In addition to the above the assessee was to employ technical staff and employees. It was to provide all the necessary superintendence during the execution of the work. (iii) Tools and Plants: The assessee was to provide at his own cost all materials, tools and plants required for execution of the work (iv) Site office: The assessee was to construct at his own expense a temporary site office and was also to provide the necessary furniture (v) Electricity: The assessee was to arrange at his own cost power connection required for the work. Further it was to make necessary arrangements of its diesel generator so that the same can be used in the event of non-availability of power. (vi) Water: The assessee was to make its own arrangements for water required for the work. II. Usmanpur Project: Rs. 1,76,19,323/- The following conditions in the agreement for the aforesaid project between the assessee and Delhi Jal Board clearly establish that the assessee was a developer and not a mere works contractor: (i) Design Obligations: The assessee was to carry out and be responsible for the design of the work. (ii) Staff & Labour: The assessee was to make its own arrangement for the engagement of all staff and labour, local or otherwise, and for their payment, housing, feeding and transport. It was to provide and maintain all necessary accommodation and welfare facilities for its personnel. Further it was to take all reasonable precautions to maintain health and safety of its personnel. It was to provide the necessary superintendence to plan, arrange, direct, manage, inspect and test the work. (iii) Plant & Materials: The assessee was to carry out the manufacture of plant, the production of materials required for the work. (iv) Electricity: The assessee was to arrange the electricity/power connection of required capacity for carrying out the works .Further it was to make necessary arrangements for diesel generators so that the progress of awarded contract is not adversely affected due to failure/non-availability of electricity/power.

39 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

(v) Site office: The assessee was to provide a site office with all the necessary furniture, telephone facility, display boards etc. for use by the Engineer and the Supervisory staff. (vi) Safety & security: The assessee was to take care of the safety of all persons entitled to be on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion The assessee was even responsible for the security of site and for keeping unauthorised persons off the site. (vii) Rights of Way: The assessee was to bear all costs and charges for special and/or temporary rights-of-way which may be required for access to the site (viii) Testing: It was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumab1es, instruments, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. III. JawaiPali Projects: Rs. 14,87,60,590/- The agreement for the aforesaid project had been enclosed as Annexure I of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and design: The assessee was responsible for the design of the work under the contract and was also responsible for accuracy of the said designs. The assessee was to carry out preparatory works such as Topographic survey, soil investigations, geo-technical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. It was to submit the detailed design and the execution drawings such as site plans, general arrangement drawings, L-sections, plans, architectural, structural drawings and all working drawings, for approval. (ii) Materials: All the material required for the work was to be provided by the assessee. (iii) Labour: The assessee was to pay wages to its labour. In addition it was to hire supervisory stafflike Project Manger and Senior Engineer. (i) Plant: The assessee was to arrange and supply at its own cost all material, plant, tools, appliances, implements, ladders, cordage, tackle, scaffolding and temporary works required for proper execution of the work. (v) Cost of Inspection and testing: For all equipment and material required for the execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, electricity, fuel, consumables labour, materials to carry out efficient testing of equipment, material and other parts of works. (vi) Water and Electricity: The cost of all water connections necessary for the execution of the work and the cost of water consumed and hire charges of meters and the cost of electricity consumed in connection with the execution of work was to be paid by the assessee.

40 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

(vii) Site office, staff quarters etc.: The assessee was to establish an office (equipped with facilities) for the Engineer-in-charge. Further it was to have its own office near the site and a clerk for service of communication notices. Further, all the expenses in connection with purchase or construction or maintenance of site office, staff quarters was to be borne by the assessee. (viii) Royalties and taxes: The assessee was to pay all royalties, octroi and other taxes and duties in respect of materials consumed on public work. (ix) Risk: The work and all materials, machines, tools and plant, scaffolding, temporary buildings and other things connected therewith, were at the risk of the assessee. (x) Rights of way and facilities: The assessee was to bear all costs and charges for special/temporary rights of way which may be required for the work. (xi) Safety &Security: The assessee was to provide adequate manpower and means for the security of the material, work-in-progress etc. It was responsible for keeping unauthorised persons off the site. Further it was to provide fencing, lighting, guarding and watching of the works and was responsible for the safety of all persons on the site. IV. Wazirabad Projects: Rs. 11,79,01,966/- The agreement for the aforesaid project had been enclosed as Annexure II of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Design Obligations: The assessee was to carry out and be responsible for the design of the work. (ii) Staff & Labour: The assessee was to make its own arrangement for the engagement of all staff and labour, local or otherwise, and for their payment, housing, feeding and transport. It was to provide and maintain all necessary accommodation and welfare facilities for its personnel. Further it was to take all reasonable precautions to maintain health and safety of its personnel. It was to provide the necessary superintendence to plan, arrange, direct, manage, inspect and test the work. (iii) Plant & Materials: The assessee was to carry out the manufacture of plant, the production of materials required for the work. iv) Electricity and water: For construction purposes and for site office, the assessee was to arrange and provide at its own cost electric connection of suitable load from Electric Supply Agency and was also to keep generators as standby arrangement. The water required for construction was to be arranged by the assessee at its own cost. (v) Site office: The assessee was to provide a site office with AC cabins, meeting room with pantry and toilet facilities.

41 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

In addition to the above, it was to bear running expenses of the site office and was to provide four wheel drive AC vehicle with driver. (vi) Safety & security: The assessee was to take care of the safety of all persons entitled to be on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion The assessee was even responsible for the security of site and for keeping unauthorised persons off the site. (vii) Rights of Way: The assessee was to bear all costs and charges for special and/or temporary rights-of-way which may be required for access to the site (viii) Inspection & Testing: The assessee was to make all necessary arrangements for to and fro travels of Engineers for pre-delivery inspection in India and abroad. It was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, instruments, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. V. Chennai Corporation - MC Road: Rs. 8,75,717/-, Villivakkam Project: Rs. 16,70,124/- &Kathivakkam Project: Rs. 13,34,658/- The agreement for the aforesaid project had been enclosed as Annexure IV of the paper book submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Materials: The assessee was required to furnish all materials required for proper execution of the work. Further, the cost of all acceptance testing (which includes sampling, inspection, testing, records and documentation) was to be borne by the assessee. (ii) Plant: The tendered price included the cost of provision and installation of plant & appliances required for the performance of all the operations. The assessee was required to furnish, maintain and operate at its expense all tools, plants and equipments. (iii) Temporary structures : As per para 7-2-8 on page 15, the assessee was to erect weather-proof sheds for keeping the materials under cover. Further, it was to provide and maintain temporary fences, guards etc. necessary for the execution of contract work. Further, it was to erect sufficient latrines for the use of work people and was to keep the same clean and disinfected. (iv) Water and Lighting: The assessee was to pay all fees and provide water and light as required. It was to pay all the charges for its use at work and by the workmen. (v) Safety code: For safety of its workmen it was to follow the safety code as laid out in pages 30-32. (vi) Diversion roads: The assessee was to make its own arrangements for forming and maintaining diversion roads for traffic during the execution of work. VI. Jamui Projects: Rs. 4,54,36,481/-

42 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

The agreement for the aforesaid project had been enclosed as Annexure V of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The assessee was required to procure cement, steel, bitumen etc. needed for execution of the work (ii) Labour: The assessee was to employ technical staff and provide all the necessary superintendence during the execution of the work. (iii) Site office: The assessee was to construct and provide a site office for the contractee with the following amenities • Sanitary, water supply installations and fittings • Watch & ward • Electrical and water connection • Waste disposal • Furniture and office equipment (iv) Field Laboratory: The assessee was to arrange and provide an adequately equipped laboratory with the necessary manpower. Further it was required to maintain the same. VII. RangarajaPuram Project Rs.6,24,151/- The agreement for the aforesaid project had been enclosed as Annexure I of the paper book mined before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and no~ a mere works contractor: (i) Materials: The assessee was required to furnish all materials required for proper execution of the work. Further, the cost of all acceptance testing (which includes sampling, inspection, testing, records and documentation) was to be borne by the assessee. (ii) Plant: The tendered price included the cost of provision and installation of plant & appliances required for the performance of all the operations. The assessee was required to furnish, maintain and operate at its expense all tools, plants and equipments. (iii) Temporary structures: As per para 7-2-8 on page 8, the assessee was to erect weather- proof sheds for keeping the materials under cover. Further, it was to provide and maintain temporary fences, guards etc. necessary for the execution of contract work. Further, it was to erect sufficient latrines for the use of work people and was to keep the same clean and disinfected. (iv) Water and Lighting: The assessee was to pay all fees and provide water and light as required. It was to pay all the charges for its use at work and by the workmen. (v) Safety code: For safety of its workmen it was to follow the safety code as laid out in pages 22-24. VIII. Kilpauk Water supply Project: Rs. 31,26,816/-

43 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

The agreement for the aforesaid project had been enclosed as Annexure VIII of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Materials required for the Project: The contractor was responsible for procurement of required quantity of material like pipes, special machinery, electrical items etc. (ii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees (iii) Plant: All tools and plants required for the work was to supplied by the contractor at its own cost. (iv) Power & Water: The contractor was required to make its own arrangement for electricity required at site and make its own arrangement of water. (v) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the surveys required for execution of the work. (vi) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (vii) Watching and lighting: (viii) Temporary diversion of roads, customary vehicle license and permit fees: The assessee was to pay customary vehicles license and permit fees for use of public roads. Further, it was to make at its own cost, all the necessary provision for temporary diversion of roads, cart-tracks, footpaths, drains, water courses, channels etc. IX. T.K. Hally Project: Rs. 5,89,29,563/- The agreement for the aforesaid project had been enclosed as Annexure IX of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: Attention in this regard is invited to the general conditions section 2, part-I of the annexure on page 38, which says that the general conditions shall be those forming Part-I of the Conditions of the Contract and prepared by the "Federation Internationale des Ingenieurs- Conseils (FIDIC) "The said conditions have been discussed in Annexure VII. Some of the said conditions have been discussed below (Refer annexure VII): (i) Design Obligations: The assessee was to carry out and be responsible for the design of the work. (ii) Staff & Labour: The assessee was to make its own arrangement for the engagement of all staff and labour, local or otherwise, and for their payment, housing, feeding and transport. It was to provide and maintain all necessary accommodation and welfare facilities for its personnel. Further it was to take all reasonable precautions to maintain health and safety of its personnel.

44 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

It was to provide the necessary superintendence to plan, arrange, direct, manage, inspect and test the work. (iii) Plant & Materials: The assessee was to carry out the manufacture of plant, the production of materials required for the work. (iv) Safetu & security: The assessee was to take care of the safety of all persons entitled to be om the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion. The assessee was even responsible for the security of site and for keeping unauthorised persons off the site. (v) Rights of Way: The assessee was to bear all costs and charges for special and/or temporary rights-of-way which may be required for access to the site (vi) Testing: It was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, instruments, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. Some of the particular conditions of the contract as discussed in Annexure IX, have been discussed: (vii) Electricity & water: The assessee was responsible for provision of all power, water and other services required for construction and sectional testing. X. NBCC Faridabad Project: Rs. 42,42,000/- The agreement for the aforesaid project had been enclosed as Annexure X of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Material: The assessee was to provide, at his own expense, all the material required including Cement & Steel for the works. (ii) Labour: In addition to hiring labour, the assessee was to employ technical staff at his cost. Further it was to construct labour huts and maintain good sanitary conditions in the huts. The land required for the huts was to arranged by the assessee (iii) Site office: The assessee was to construct at his own cost, suitable furnished office at site equipped with basic facilities like telephone, fax, internet etc. The land required for the office was to be arranged by the assessee. (iv) Watching & lighting: The assessee was to provide necessary barriers, lights, watchmen etc. at his own cost. (v) Tools and plants: The assessee was to provide all the tools and plant required for the works. (vi) Water and Electricity: The assessee was to make his own arrangement for water & power for construction and other purposes at his own cost. It was also to make standby arrangement for water and electricity to ensure uninterrupted supply. (vii) Testing: The assessee was to set up and maintain at his own cost, a field testing laboratory for all day to day tests. All the equipment and personnel required for the testing was to be provided by the assessee, which was to fully service the site laboratory.

45 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

Further, all the testing charges (for tests conducted on the site laboratory or outside) were to be borne by the assessee XI. Pokharan Project: Rs. 8,61,21,207/- The agreement for the aforesaid project had been enclosed as Annexure XI of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and design: The assessee was responsible for the design of the works and the accuracy of such designs. It was required to carry out the preparatory works such as topographic survey, soil investigations, geotechnical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. (ii) Materials: The assessee was responsible for arrangement of all materials required for proper execution of work. (iii) Labour: The assessee was responsible for paying wages to labourers on the work. Further, the assessee was required to engage technical staff as per clause 39 on page 82. It was even required to hire supervisory staff like project managers, senior engineers etc. on the site so as to ensure the work quality (iv) Plant: The assessee was required to arrange and supply at its own cost, all plants, tools, appliances, implements, ladders, cordage etc. required for proper execution of work. (v) Power and water: The assessee was to bear the cost of all water connections necessary for execution of work and the cost of water consumed. Further it was to bear the hire charges of meters and cost of electricity consumed in the execution of the work. (vi) Construction on site: The assessee was required to provide and upkeep the following facilities. An office for engineer-in-charge, with facilities like office furniture, telephone, air cooler. fan computer etc. at 3 locations • In addition to above, suitable temporary offices along the site of pipe laying works • Offices were to be maintained by the assessee and were to be removed on completion of work. • In addition to the above it was to establish its own office near the site. • It was to construct, yard, godown, staff quarters etc. for which land was to be provided by PHED. (vii) Safety and Security: The assessee was responsible for the safety of all persons on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion. It was further responsible for keeping unauthorised persons off the site, offices, campus etc.

46 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

(viii) Cost of inspection and testing: For all equipments and materials required for execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, estimates, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. (ix) Others: • The assessee was to bear all costs and charges for special and/or temporary rights of way, which he may require, including those for access to the site • Royalties, quarry fees, octroi and other taxes in respect of materials actually consumed on public work was to be borne by the assessee • Further, as per clause 43A on page 83, the work and all the materials, machines, tools and plant, scaffolding, temporary buildings and other things connected therewith was at the risk of the assessee until the work is delivered to the Engineer-in charge. XII. Triplicane Project: Rs. 36,75,545/- The agreement for the aforesaid project had been enclosed as Annexure XII of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Materials required for the Project: The contractor was responsible for procurement of quantity of material like pipes, special machinery, electrical items etc. (ii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees (iii) Plant: All tools and plants required for the work was to supplied by the contractor at its own cost. (iv) Power & water: The contractor was required to make its own arrangement for electricity required at siteand make its own arrangement of water. (v) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the surveys required for execution of the work. (vi) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (vii) Watching and lighting: (viii) Temporary diversion of roads, customary vehicle license and permit fees: The assessee was to pay customary vehicles license and permit fees for use of public roads. Further, it was to make at its own cost, all the necessary provision for temporary diversion of roads, cart-tracks, footpaths, drains, water courses, channels etc. XIII. K.K. Nagar Project: Rs. 2,48,793/-

47 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

The agreement for the aforesaid project had been enclosed as Annexure XIII of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) . Materials required for the Project: The contractor was responsible for procurement of required quantity of material like pipes, special machinery, electrical items etc. (ii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees (iii) Plant: All tools and plants required for the work was to supplied by the contractor at its iv) Power & water: The contractor was required to make its own arrangement for electricity required at siteand make its own arrangement of water. (v) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the surveys required for execution of the work. (vi) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (vii) Watching and lighting: (viii) Temporary diversion of roads, customary vehicle license and permit fees: The assessee was to pay customary vehicles license and permit fees for use of public roads. Further, it was to make at its own cost, all the necessary provision for temporary diversion of roads, cart-tracks, footpaths, drains, water courses, channels etc. XIV. Annaponga Project: Rs. 92,31,950/- The agreement for the aforesaid project had been enclosed as Annexure XIV of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Materials required for the Project: The contractor was responsible for procurement of required quantity of material like pipes, special machinery, electrical items etc. annexure (ii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen agreement and maintain adequate sanitary facilities for the employees (iii) Plant: All tools and plants required for the work was to supplied by the contractor at its own cost. (iv) Power & water: The contractor was required to make its own arrangement for electricity required at siteand make its own arrangement of water. (v) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the surveys required for execution of the work.

48 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. (vi) Temporary fencing: The contractor was required, at his own expense, to erect and fences and gates along the boundaries. (vii) Watching and lighting: (viii) Temporary diversion of roads, customary vehicle license and permit fees: The assessee was to pay customary vehicles license and permit fees for use of public roads. Further, it was to make at its own cost, all the necessary provision for temporary diversion of roads, cart-tracks, footpaths, drains, water courses, channels etc. XV. R. K. Puram Project: Rs. 47,38,444/- The agreement for the aforesaid project had been enclosed as Annexure XV of the paper book, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Materials: The assessee was to provide, at his own expense, all material required for the work. Further, it was to submit the samples of material for testing, at his risk and cost. (ii) Labour: The assessee was responsible for the payments due to the labourers employed for work. Further, it was to provide the following labour amenities • Labour camps • Water supply • Arrangement for disposal of excreta • Drainage • Sanitation In addition to labour, the assessee was to hire technical staff and employees to provide necessary superintendence (iii) Plant & machinery: The assessee was to arrange at its own cost all the plant & machinery required for the work. (iv) Water: the assessee was to make his own arrangements of water required for work. (v) Electricity: The charges pertaining to electric supply including installation of temporary connection, including the cost of making electric sub-station if needed, laying cables wherever necessary upto the meter from the BSES Pole and from meter up to actual consumption point, and the cost of electricity was to be borne by the assessee. XVI. Mira Bhayandar project: Rs. 17,67,69,134/- The agreement for the aforesaid project had been enclosed as Annexure XVI of the paper book, submitted before the Ld.CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: At the outset, it is submitted that Part-I of the Conditions of the Contract prepared by the "Federation Internationale des Ingenieurs- Conseils (FIDIC) "constitutethe general conditions for the aforesaid project. The said conditions have been discussed in Annexure VII. Some of the said conditions have been discussed below:

49 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

(i) Staff & Labour: The assessee was to make its own arrangement for the engagement of all staff and labour, local or otherwise, and for their payment, housing, feeding and transport. It was to provide and maintain all necessary accommodation and welfare facilities for its personnel. Further it was to take all reasonable precautions to maintain health and safety of its personnel. It was to provide the necessary superintendence to plan, arrange, direct, manage, inspect and test the work. (ii) Plant & Materials: The assessee was to carry out the manufacture of plant, the production of materials required for the work. (iii) Safety & security: The assessee was to take care of the safety of all persons entitled to be on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion The assessee was even responsible for the security of site and for keeping unauthorised persons off the site. (iv) Rights of Way: The assessee was to bear all costs and charges for special and/or temporary rights-of-way which may be required for access to the site (v) Testing: It was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, instruments, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. (vi) Electricity& water: The assessee was responsible for provision of all power, water and other services required for work. Some of the particular conditions of the contract as discussed in Annexure XVI have been discussed: (vii)Design: The assessee was to carry out and be responsible for the design of the Works, including any site surveys, subsoil investigations, materials testing, and all the other things necessary for proper planning and design. XVII. SawaiMadhopur Project: Rs. 1,14,41,000/- The agreement for the aforesaid project had been enclosed as Annexure XIII of paper book for AY 2007-08, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and design: The assessee was responsible for the design of the works and the accuracy of such designs. It was required to carry out the preparatory works such as topographic survey, soil investigations, geotechnical investigations etc. to prepare the plans, L-sections, designs, working drawings etc. (ii) Materials: The assessee was responsible for arrangement of all materials required for proper execution of work.

50 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

(iii) Labour: The assessee was responsible for paying wages to labourers on the work. Further, the assessee was required to engage technical staff as per clause 39 on page 56. It was even required to hire supervisory staff like contract managers, senior managers etc. on the site so as to ensure the work quality. (iv) Plant: The assessee was required to arrange and supply at its own cost, all plants, tools, appliances, implements, ladders, cordage etc. required for proper execution of work. (v) Power and water: The assessee was to bear the cost of all water connections necessary for execution of work and the cost of water consumed. Further it was to bear the hire charges of meters and cost of electricity consumed in the execution of the work. (vi) Construction on site: The assessee was required to provide and upkeep the following facilities An office building at 5 locations of floor area not less than 50 square meter each, with provision of toilets and pantry. The building was to be equipped with furniture, electricity, telephone, air cooler, fan, computer, printer etc. In addition to above, suitable temporary offices along the site of pipe laying works Offices were to be maintained by the assessee and were to be removed on completion of work. (vii) Safety and Security: The assessee was responsible for the safety of all persons on the site. It was to provide necessary fencing, lighting, guarding and watching of the works until completion. It was further responsible for keeping unauthorised persons off the site, offices, campus etc. (viii) Cost of inspection and testing: For all equipments and materials required for execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. Further, the assessee was to provide all apparatus, assistance, documents and other information, electricity, equipment, fuel, consumables, estimates, labour, materials, and suitably qualified and experienced staff necessary to carry out the tests efficiently. (ix) Others: • The assessee was to institute a quality assurance system to demonstrate compliance with requirements of the contract. • The assessee was to bear all costs and charges for special and/or temporary rights of way, which he may require, including those for access to the site • Royalties, quarry fees, octroi and other taxes in respect of materials actually consumed on public work was to be borne by the assessee XVIII. Kerala Meenad Project: Rs. 2,25,71,172 & Kerala Puttuvam Project: Rs. 3,21,33,655 /- The agreement between the assessee and Kerala Water Authority, for the aforesaid projects had been enclosed as Annexure X of paper book for AY 2007-08 submitted before

51 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd.

the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i)Attention is firstly invited to Clause 8(page 6) (General Obligations) of the agreement extracts of which has been produced below: "8.1 The contractor shall, with due care and diligence, design (to the extent provided for by the contract), execute and complete the works and remedy any defects therein in accordance with the provisions of the Contract. The contractor shall provide all superintendence, labour, materials, Plant, Contractor's equipment and all the other things, whether of a temporary or permanent nature, required in and for such design, execution, completion and remedying of any defects, so far as the necessity for providing the same is specified in or is reasonably to be inferred from the Contract" From the above it is clear that the assessee was not merely providing labour under the contract. In addition to labour it was required to make all arrangements including materials, equipment, superintendence and any other thing required for completion of the work. (ii) Submission of programme and estimation of cash flows: Under clause 14.1 (page no. 8) the assessee was required to submit a detailed programme for the execution of the works. Further under clause 14.3, it was required to provide the Engineer a detailed cash flow estimate quarterly periods. As per clause 14.4, submission of the programme and its approval by the Engineer, did not relieve the assessee of its duties and responsibilities (iii) Superintendence: The assessee was to provide all necessary superintendence during the execution of works. (iv) Labour: Under clause 34.1 (page 15), the assessee was required to make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. (v) Testing of materials and plant: In addition to provision of specified plan! and material, the assessee was required to provide assistance, labour, electricity, fuels, stores, apparatus and instruments as are normally required for examining, measuring and testing any materials or plants. (clause 36.1, page 15). The cost of making the test was to be borne by the assessee (clause 36.2 and 36.3) (vi) Safety, Security and Protection of the Environment: Under clause 19.1 (b) (page 9) the assessee was required to provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. Further under para (c), it was to take all the steps to protect the environment. (vii)Royalty: The assessee was required to pay all tonnage and other royalties, rent and other payments or compensation, if any, for getting stone, sand, gravel, clay or other materials required for the work (clause 28.2, page 13) (viii) Improvement of roads etc.: Under clause 30.2 (page 14), the assessee was responsible for paying the cost of strengthening any bridges or improving any road communicating with or on the routes to the site to facilitate the movement of equipment and other temporary works.

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XIX. Sonthi Project: Rs. 1,38,57,817/- The agreement between the assessee and Krishna BhagyaJala Nigam Limited for the aforesaid project had been enclosed as Annexure I of paper book for AY 2007-08, submitted before the Ld. CIT(A). The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: (i) Drawings and designs of temporary works: The assessee was responsible for the drawing and design of temporary works. It was required to submit the said drawings to the Engineers and obtain his approval before starting such work. (ii) Materials required for the Project: The contractor was responsible for procurement of required quantity of pipes, special machinery, electrical items etc. (iii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. Further he was to take adequate provisions for the safety of the workmen and maintain adequate sanitary facilities for the employees (iv)Plant:All tools and plants required for the work was to supplied by the contractor at its own cost (v) Power & water: The contractor was required to make its own arrangement for electricity required at siteand make its own arrangement of water. (vi) Survey stations: the contractor was required to provide and maintain at its own expense, survey stations. He was further required to conduct all the necessary surveys. (vii) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (viii) Royalty: The contractor was to pay all fees, royalties, octroi dues levied by the State Government or any other local body 4.2 From the perusal of the terms and conditions of all the agreements (above), it is clear that it is not a case where the assessee was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requisites from the client and all he has to do is employ labour. The assessee in the given case was to procure raw material, make arrangements for power, water, plant machinery etc., and conduct all the other activities needed for construction. 4.3 Hence in the light of the discussion in paras 2 and 3 the assessee is entitled to deduction U/S 80-IA of the Act. 5.1 In addition to the above, the assessee was even responsible for operations and maintenance of the infrastructure facility, in the following cases:

In addition to the above, the assessee was even responsible for operations and maintenance of the infrastructure facility, in the following cases: • JawaiPali Project (annexure I) -Scope of work on page 1 includes Operations and maintenance. The 0 & M period was 5 years.

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• Wazirabad Project (annexure-II): Scope of work includes watch & ward, patrolling and maintenance of pipe line and other appurtenances etc. for a period of 12 months. • Rithala Project (annexure Ill): Scope of work on page 1 includes operations and maintenance for a period of 5 years • Chennai Corporation (annexure IV):The assessee was to maintain the work executed by it for a specified period. • Jamui Project (Annexure V): O&M of 1 year. • Rangajapuram Project (annexure VI): As per para 4-11 on page 1, the assessee was to maintain the works for a specified period. • Usmanpur Project (Annexure VII): Scope of work on pages 2-3 includes operation and maintenance • T.K.Hally Project (Annexure IX): 0& M of 1 year • Pokharan Project (Annexure-XI): Scope of work include operation and maintenance of 5 years • Annaponga Project (Annexure XIV): • Mira Bhayandar Project (annexure XVI): Scope of work on page 7 includes operation and maintenance. V · Sonthi Project (Annexure-I)- Scope of work on page 12 includes operating the system for 2 years. • Kerala Puttuvam and Meenad Projects • SawaiMadhopur Project (annexure XIII):Particulars of work on page 6 includes maintenance & operation for 5 years.”

Based on these submissions, the assessee pleaded that it was a developer and not a mere works contractor and hence was outside the purview of Explanation to Section 80IA(13) of the Act. Further in addition to developing the infrastructure facility, the assessee was even operating and maintaining the same. Accordingly it was pleaded even after the amendment in Finance Act 2009 , the assessee is entitled to deduction u/s 80IA of the Act.

3.5. The ld CITA for detailed reasoning given by him in the appellate order for the Asst Year 2009-10 dated 18.3.2013 after due appreciation of the facts and submissions of the assessee held that the assessee is a developer and had fulfilled all the requirements for claiming deduction u/s 80IA of the Act and therefore is eligible for deduction under the said section. Aggrieved, the revenue is in appeal before us.

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55 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. pointed out by the ld DR. He further stated that the issue under dispute is squarely covered by the order of this tribunal in assessee’s own case for the Asst Years 2006-07 and 2009-10 in ITA Nos. 1291-1292/Kol/2013 dated 24.8.2016 . Apart from this, he also placed reliance on plethora of case laws on the impugned subject which are part of the paper book comprising of compilation of case laws submitted by him.

(B) Further as per the Black Law’s 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 Black Law’s Dictionary also, a works contract is a labour contract under which the contractor merely employs his labour as per the directions of the contractee.

(C) We find that the term ‘work’ is defined in section 194C of the Act as under :-

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(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; (c) manufacturing or supplying a product according to the requirement or specification of the 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 of the Act 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’.

(D) The Hon’ble Supreme Court in the case of Associated Cement Co. Ltd vs CIT reported in 201 ITR 435 (SC) had interpreted the term ‘work’ as below:- No ambiguity is found in the language employed in section 194C(1 ). On plain reading of said section, what is contained in the sub-section, admits of the following formulations: (1) A contract may be entered into between the contractor and any of the organisations specified in the sub-section. (2) Contract in formulation could not only be for carrying out any work but also for supply of labour for carrying out any work. (3) Any person responsible for paying any sum to a contractor in pursuance of the contract in formulations 1 and 2, could credit that sum to his account or make its payment to him in any other manner. (4) But when the person referred to in formulation 3 either credits the sum referred to therein to the account of or pays it to the contractor, he shall deduct out of that sum an amount equal to two per cent as income-tax on income comprised therein. Thus, when the percentage amount required to be deducted under the subsection as income-tax is on the sum credited to the account of or paid to a contractor in pursuance of a contract for carrying out a work or supplying labour for carrying out a work of any of the organisations specified therein, there is nothing in the sub-section on the basis of which it could be held that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to 'works contract' as was argued on behalf of the assessee. There is no reason to curtail or to cut down the meaning of 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

57 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. Legislature that the 'work' in sub-section is not intended to be confined or restricted to works contract. 'Work' envisaged in section 194C(1 ), therefore, has a wide import and covers any work which one or the other of the organisation specified in the sub-section can get carried out through a contractor under a contract and further it includes obtaining by way of such organisations supply of labour under a contract with a contractor for carrying out its work which should have fallen outside the 'work' but for its specific inclusion in the subsection.

The issue before the Hon’ble Supreme Court was whether the term ‘work’ used in section 194C of the Act needs to be restricted to ‘works contract’. The Apex Court laid out that the term ‘work’ used in section 194C of the Act need not be restricted to ‘works contract’ because the subsection 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, it could be safely concluded that the 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.

(E) It would be pertinent to get into the memorandum explaining the provisions in the Finance Bill 2007 reported in (2007) 289 ITR (St.) 292 at page 312, which reads as under :- “Section 80IA , inter alia, provides for a ten year 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 for encouraging private sector participation by way of investment in developemtn of the infrastructure sector and not for 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 80IA 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 80IA. In

58 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. contrast to this, a person who enters into a contract with another person (i.e. undertaking or enterprise referred to in section 80IA) for executing works contract, will not be eligible for tax benefit under section 80IA.

This amendment will take retrospective effect from April 1, 2000 and will accordingly apply in relation to the assessment year 2000-01 and subsequent years.”

It was pleaded that the Explanatory Memorandum clearly lays out that purpose of extending tax benefit u/s 80IA of the Act was to encourage investments from the private sector and hence works contract, i.e contracts involving merely labour (or mere execution of construction without making investments) are outside the purview of the provisions of section 80IA of the Act. Thus the term ‘works contract’ used in Explanation to Section 80IA(13) of the Act means a contract of developing infrastructure by merely employing labour and making no investments.

(F) We find that the provisions of section 80IA(4) of the Act are very clear as under :- “This section applies to - (i) any 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 ; ………………………………………… ………………………………………….”

Thus with effect from 1.4.2002, an enterprise is eligible for deduction u/s 80IA of the Act if, subject to other conditions, it carries on either of the business of developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility. There was no necessity that the same enterprise should carry on all the three activities of developing, operating and maintaining the new infrastructure facility as was required prior to the amendment with effect from 1.4.2002. Further, with effect from 1.4.2002, in sub-clause (b) , the condition of transfer of infrastructure facility to the Central or State Government or a local authority or any other statutory body, as the case

59 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. may be, within the period stipulated in the agreement, was also done away . This means prior to 1.4.2002, the agreements / contracts awarded to an enterprise for development of a new infrastructure facility are to be executed under the BOLT scheme i.e Build, Own, Lease and Transfer, because as per the provisions, all the three activities of development, maintenance and operation had to be carried on by the same enterprise. However, from Asst Year 2002-03 onwards there was no such condition and to make itself being eligible for deduction u/s 80IA of the Act, the enterprise could carry on any one of the activity i.e either to develop or , operate and maintain or, develop, operate and maintain. Thus it could be seen that the provisions were liberalized for the purpose of eligibility of claiming deduction thereon taking into account the practical aspects of the huge investments involved , wherewithal for resources and expertise in all fields, risks existing for a substantial period of time etc.

(G) The ld AO held that the assessee entered into an agreement for execution of works relating to civil works, construction, erection, installation, improvement, modification, repair of any immovable or movable property for cash / deferred payment and therefore, all the works executed by the assessee falls under works contract. Further he observed that the contracts / agreements, the assessee has been denoted as a ‘contractor’. However, on going through the nature of business activites carried on by the assessee, on examination of agreements / contracts entered into vis a vis the financial statements of the assessee, we are of the opinion that the ld AO was not justified in disallowing the deduction u/s 80IA of the Act by holding that the assessee has merely acted as a contractor and executed the works contract. If the view taken by the ld AO is to be accepted, then we are afraid that , no enterprise which entered into an agreement with the Government for only development of new infrastructure facility would be eligible for deduction u/s 80IA of the Act because in all such agreements, the enterprise is referred to as ‘contractor’ and in almost all the infrastructure development activities, the civil work, construction, fabrication, erection, installation, repair and commissioning etc are involved. The enterprise has to receive the payment from the Government for the work of development because with such an enterprise there is no other source to recover its investment made in executing the work of development of infrastructure project awarded to it. We find on

60 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. going through the provisions of section 80IA(4) of the Act with effect from 1.4.2002, it appears that the legislature intends to provide the benefit of the incentive to such enterprises also who only develop the new infrastructure facility . If the view taken by the ld AO on the basis of meaning of ‘works contract’ as per Central Sales Tax Act or The West Bengal Value Added Tax Act is accepted, then the very purpose of legislature to extend incentive for development of infrastructure will be frustrated. From the perusal of the various agreements / contracts entered into by the assessee and from the perusal of various activities carried out by the assessee in each of the projects as detailed above for various asst years, it could be safely concluded that - (i) the assessee had carried out set of activities to develop the infrastructure project; (ii) the assessee had used its technical expertise , technical and other skilled and non- skilled manpower and its plant and machineries to execute the projects; (iii) the assessee had invested huge funds out of its own as well as borrowed monies for execution of the projects as could be evident from the balance sheet of the assessee , thereby proving the investment risk undertaken by the assessee

(H) The word ‘developer’ means a person who makes things happen. In the present case, it is the assessee who has by mobilizing and synthesizing people, plans, technical expertise , supervision, co-ordination and control etc developed and created the infrastructure facility. The term ‘contractor’ is not essentially contradictory to the term ‘developer’. On the contrary, the section 80IA(4) itself provides that the assessee should develop the infrastructure facility as per the agreement with the Government. Every agreement entered into is a contract. The word ‘contractor’ is used to denote the person who enters into such contract. Hence a person who enters into a contract for development of infrastructure facility is a contractor. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. We find that the assessee in the instant case had not acted as a sub-contractor. It had itself developed the infrastructure facilities as per the agreements with the Government. It is not in dispute that the assessee had not claimed any deduction on any income pertaining to sub-contract work undertaken from the enterprises referred to in section 80IA(4) of the Act. We find that the CBDT Circular No. 3 of 2008 dated 12.3.2008 relied upon by the ld

61 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. DR clarifies that an assessee who executes the development work and carries out civil construction work is a developer. The Board is also of the view that those persons working for others are the works contractors and not the developers. In the case assesseem it undertook the work of development and therefore it is a developer and not a works contractor even according to the circular issued by the Board. With regard to the adoption of meaning of ‘works contract; as per the Central Sales Tax Act or The West Bengal Value Added Tax Act, the ld CITA had stated that it is a settled legal position that that ordinarily the meaning or definition of a word used in one statute cannot per se be imported into another as has been held by the Hon’ble Supreme Court in the case of Union of India vs R.C.Jain reported in (1981) 2 SCC 308 . Therefore, the meaning of the word ‘works contract; imported by the ld AO from other legislation be the State enactment, cannot be automatically applied in the present context. It is in everybody’s knowledge that a contractor merely carries on work with the material supplied by the contractee and the knowledge supplied by the contractee. Further, in a works contract, the risk is undertaken by the contractee and in the case of a development contract, the contractor undertakes the risks involved. Factually, in the case of the assessee company, on perusal of agreements / contracts, it is observed that it was allotted a premises and the possession of the premises was handed over to the assessee. It was asked by the Government to develop the said area into an infrastructure facility. All the activities necessary in the process of development and the losses suffered in the process, the material to be used including the expertise shall be of the assessee. The maintenance of the facility during the period of development and for certain duration after the development also shall be of the assessee. Therefore, the assessee is a developer of infrastructure facility of the nature provided in Explanation to section 80IA(4) of the Act and not a mere works contractor.

(I) We find support from the CBDT Circular No. 4 of 2010 dated 18.5.2010 which was issued after the introduction of the Explanation by the Finance Act 2009 . It says :- "References have been received by the Board as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80IA(4)(i) of the Income Tax Act, 1961. Section 80IA(4)(i) provides for a deduction to an undertaking engaged in developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility subject to satisfaction of the conditions laid down in the section. The Explanation to

62 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. sub-section 80IA(4)(i) states that for the purpose of this clause, infrastructure facility means interaIia:- (a) a road including toll road, a bridge or a rail system; (b)a highway project including housing or other activities being an integral part of the highway project, The issue has been examined by the Board, It has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80IA(4)(i). However, simply relaying an existing road would not be classifiable as a new infrastructure facility for this purpose."

Thus it could be seen from the Circular of the Board issued after the substitution of Explanation by the Finance Act 2009, that if an enterprise entered into a contract with the Government for the widening of an existing road by constructing the additional lanes, it would be regarded as development of new infrastructure facility within the meaning of provisions of section 80IA(4)(i) of the Act, and such an enterprise would be eligible for deduction u/s 80IA of the Act. It means such a contract is to be treated as a development contract and not the works contract. The Board has also clarified that simply relaying an existing road would not be classifiable as a new infrastructure facility for this purpose. Rightly, because simply a contract for relaying of an existing road is works contract, as no new infrastructure facility is developed in that case and in such a situation, the enterprise would not be entitled for deduction u/s 80IA of the Act. In the case of the assessee company,in all the projects , new infrastructure facility came into existence, which fact has not been disputed by the revenue before us.

(J) We find that our aforesaid findings are duly endorsed by the following decisions :- “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

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premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an undeveloped 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.” 8.3 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 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

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with the site alone and by putting its own inputs (not labour alone) he converted the site into an infrastructural facility. 8.4 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 nonfinancial participation by the assessee, as the assessee has got mobilization advance. The mobilization advance has not been given freely. It has been given only after the assessee furnished a bank guarantee, and the bank guarantee has been given by the bank only after getting enough security from the assessee, to protect itself from any risk on account of any default on the part of the assessee. The assessee has taken financial assistance from bank and paid huge interest of Rs. 2,87,10,943.00 for assessment year 2009-10 and of Rs. 9,35,78,373.00 for assessment year 2010-11, as seen from the Profit and Loss Account of the assessee for the relevant years ending on 31.3.2009 and 31.3.2010 respectively, copies of which are furnished by the assessee at pages 20 and 65 of the paper-book. Similarly, assessee has invested its own fund of Rs.5,55,00,000.00 for assessment year 2009-10 and of Rs. 7,86,75,710.00 for the assessment year 2010-11, as seen from the Balance Sheet of the assessee as on 31.3.2009 and 31.3.2010 respectively, copies of which are furnished by the assessee at pages 21 and 66 of the paper-book. In this view of the matter, the reason given by the CIT(A) on this aspect for denying deduction to the assessee under S.80-IA is also not valid. Thus in light of the aforesaid decision of the Tribunal Hyderabad Bench, the contention of the AO is not valid. Further, merely because the assessee was receiving payments from the Government in progress of work it cannot be said that the projects were financed by Government. In this regard it is pointed out that under sub-section 4 of section 80-IA, deduction is available to a developer, i.e. if, an assessee, merely develops the infrastructure facility without operating and maintaining the same, it is entitled to deduction. The Bombay High court in case of Commissioner of Income-tax v. ABG Heavy Industries Limited [322 ITR 323] observed that "Parliament amended the provisions of section 80-lA of the Act so as to clarify that in order to avail of a deduction, the assessee could (i) develop ; or (ii) operate and maintain ; or (iii) develop, operate and maintain the facility. The condition as regards development, operation and maintenance of an infrastructure facility was contemporaneously construed by the authorities at all material times, to cover within its purview the development of an infrastructure facility under a scheme by which an enterprise would build, own, lease and eventually transfer the facility. " "This was perhaps a practical realisation of the fact a developer may not possess the wherewithal, expertise or resources to operate a facility, once constructed Parliament eventually stepped in to clarify that it was not invariably necessary for a developer to operate and maintain the facility. Parliament when it amended the law was obviously aware of the administrative practice resulting in the circulars of the Central Board of Direct Taxes. The fact that in such a scheme. An enterprise would not operate the facility itself was not regarded as being a statutory bar to the entitlement to a deduction under section 80-IA of the Act. " 8.5 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

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from Government, then an assessee who is only a "developer" (and not an operator) will never be entitled to deduction u/s 80-IA, which is clearly not the intention of legislature as discussed by the Bombay High Court in case of ABG Heavy Industries Ltd. Thus, merely because the assessee was paid by the Government for development work it cannot be denied deduction under section 80-IA(4). The contention of the assessee finds strength from the following judgments: The ITAT (Mumbai) in case of ACIT v. Bharat Udyog Ltd. (2009) 123 TTJ 0689 : (2009) 23 DTR 0433 : (2009) 118 ITD 0336 : (2008) 24 SOT 0412 “After the amendment effected by Finance Act, 1999 w.e.f. 1st April, 2000, the deduction under s. 80-IA(4) has become available to any enterprise carrying on the business of (i) developing, or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. Sub-cl. (c) of cl. (i) of s. 80-IA(4) is obviously applicable to an enterprise which is engaged in ‘operating and maintaining’ the infrastructure facility on or after 1st April, 1995. It is not applicable to the case of an enterprise which is engaged in mere ‘development’ of infrastructure facility and not its ‘operation’ and ‘maintenance’. Therefore, the question of ‘operating and maintaining’ of infrastructure facility by such enterprise before or after any cut off date cannot arise. However, if the contention of the Departmental Representative is accepted, it would obviously/understandably lead to manifestly absurd results. When the Act provides for deduction undisputedly for an enterprise who is only ‘developing’ the infrastructure facility, unaccompanied by ‘operating and maintaining’ thereof by such person, there cannot be any question of providing a condition for such an enterprise to start operating and maintaining the infrastructure facility on or after 1st April, 1995. Since the assessee is only a developer of the infrastructure project and it is not maintaining and operating the infrastructure facility, sub-cl. (c) of cl. (i) of sub-s. (4) of s. 80-IA is not applicable. The interpretation of Revenue is absurd also in view of the rationale of the provisions of s. 80-IA(4)(i). From the asst. yr. 2000-01, deduction is available if the assessee carries on the business of any one of the three types of activities. When an assessee is only developing an infrastructure facility project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person who develops the infrastructure facility project, realise its cost ? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee has paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation canvassed by the Revenue authorities is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under s. 80-IA(4), which is not the intention of the law.” If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. When the legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction, it presupposes that there can be income to developer, i.e., to the person who is carrying on the activity of only developing infrastructure facility. Obvious as it is, a developer would have income only if he is paid for development of infrastructure facility, for the simple reason that he is not having the right/authorisation to operate the infrastructure facility and to collect toll therefrom, and has no other source of recoupment of his cost of development. Considered as such, the business activity of the nature of build and transfer also falls within eligible construction activity, that is, activity eligible for deduction under s. 80-IA inasmuch as mere ‘development’ as such and unassociated/ unaccompanied with ‘operate’ and ‘maintenance’ also falls within such business activity as is eligible for deduction under s. 80-IA. Therefore, merely because the present assessee was paid by the Government for development work, it cannot be denied deduction under s. 80-IA(4). A person who enters into a contract with another person will be a contractor no doubt; and the assessee having entered into an agreement with the Government agencies for development of

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

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developed by it in terms of agreement so entered with Government. Thus, we do not find any infringement of conditions {or claim of deduction" 8.6 Thus from the above, it is clear that the fact that the assessee had received payments from the Government in progress of its work has no bearing on eligibility of deduction u/s 80- IA. Further, the Revenue in all the grounds has contended that the contracts entered into by the assessee were merely 'construction contracts' since the assessee is not exposed to any entrepreneurial and investment risk. In this regard, the AO has observed that the assessee is executing the contract against predetermined revenue w.r.t the above, it is submitted that under the impugned contracts, the assessee was merely carrying out the civil construction work. It was responsible for overall development of the infrastructure facility. It was merely provided with the site which it had to develop into an infrastructural facility by deploying his resources i.e. material, plant & machinery, labour, supervisors etc. It was responsible for any damage/loss caused to any property or life in course of execution of the works. It was even responsible for remedying of the defects in the works at its cost. It was also required to operate and maintain the infrastructure facility. Hence, it cannot be said that the contract with the Government was to carry out mere civil construction. Attention in this regard is invited to the following: (i) The ITAT (Ahmedabad) in case of Sugam Construction (P) Ltd. vs. ITO [56 SOT 45] held that "It is also gathered (a) That a developer is a person who undertakes the responsibility to develop a project. (b) That a developer is therefore not a civil contractor simplicitor. (c) That if we apply the commercial ITA No.1291- 1292/Kol/2013 A.Ys 06-07 & 09-10 DCIT CC-XXVIII, Kol. v. M/S SPML Infra Ltd Page 29 aspect, then a developer has to execute both managerial as well as financial responsibility. (d) That the role of a developer, according to us, is larger than that of a contractor. (e) That when a person is acting as a developer, then he is under obligation to design the project, it is another aspect that such design has to be approved by the owner of the project, i. e. the Government in the present case. (f) That he has not only to execute the construction work in the capacity of a contractor but also he is assigned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it can be ascertained about the nature of the contract assigned that whether it is a "work contract" or a "development contract". (h) That in a development contract" responsibility is fully assigned to the developer for execution and completion of work. (i) That although the ownership of the site or the ownership over the land remains with the owner 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 ITA No.1291-1292/Kol/2013 A.Ys 06-07 & 09- 10 DCIT CC-XXVIII, Kol. v. M/S SPML Infra Ltd Page 30 undertakes only business

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risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before the court that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources. " Thus the fact that the assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the assessee vide the agreements has clearly demonstrated the various risks undertaken by it. The assessee was to furnish a security deposit to the Employer and indemnify the employer of any losses/damage caused to any property/life in course of execution of works. Further, it was responsible for the correction of defects arising in the works at it cost. Thus, it cannot be said that the assessee had not undertaken any risk. The ITAT (Hyderabad] in case of Siva Swathi Construction (P) Ltd. (supra) held that "Further reason given by the ld. CIT(A) for denying deduction under S.80IA to the assessee is that the assessee has not undertaken any risks. The observations of the ld. CIT(A) in this behalf are also not valid and correct. It was clearly mentioned in the agreement that the assessee shall execute and furnish indemnity bond for a period of four years, indemnifying the Government against any loss or expenditure incurred, to repair any defect noticed due to faulty working done by the contractor or substandard material used by the contractor. Further, it is also mentioned in the contract agreement that the assessee shall not claim for any loss due to foreseen circumstances, including suspension of work due to cause. It is also provided that in the event of accident to people employed by the assessee resulting in compensation to be paid as per the Workmen's Compensation Act the same shall be paid by the contractor, viz. the assessee only. In view of the various specific clauses in the agreement fastening the risks to be undertaken by the assessee, discussed above, it cannot be said that the assessee has not undertaken any risk. 8.7 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 ITA No.1291-1292/Kol/2013 A.Ys 06-07 & 09-10 DCIT CC-XXVIII, Kol. v. M/S SPML Infra Ltd Page 31 the facts. Lastly, with regard to the project O&M, Bangalore (on which a deduction of Rs. 35,16,9411- was claimed), it is submitted that it is an operation and maintenance project, to which Explanation to section 80-IA(13) does not apply. Explanation to section 80-IA(13) merely distinguishes between a developer and works contractor. It clarifies that a works contractor shall not be included in the category of 'developer' u/s 80-1A. Thus, the Explanation clearly does not apply to O&M projects. Hence, deduction of Rs. 35,16,9411- claimed for the aforesaid project u/s 80-IA cannot be denied by invoking the explanation to section 80-1A. 9. From the perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor simplicitor and was a developer and hence Explanation to section 80- IA(13) does not apply to the assessee. Further, in addition to developing the infrastructure facility, the assessee was even operating and maintaining the same. Thus, clearly the assessee is eligible for deduction u/s 80-1A. In our considered view do not find any reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of the Revenue is dismissed.”

(K) We also find that the issue under dispute is also covered in favour of the assessee by the order of this tribunal in assessee’s own case for the Asst Years 2006-07 and 2009-10 vide order dated 24.8.2016 except with variance in figures and variance in projects

69 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. undertaken by the assessee. For the sake of brevity, the operative portion thereon is not reproduced herein.

(L) In view of our aforesaid findings and respectfully following the judicial precedents relied upon hereinabove, we hold that the assessee is engaged in development of infrastructure projects and had acted as a developer of the infrastructure facilities and has not acted merely as a works contractor and therefore, it is eligible for deduction u /s 80IA of the Act. Hence we do not deem it fit and appropriate to interfere with the order of the ld CITA in this regard. Hence the grounds raised by the revenue in this regard for various assessment years supra are dismissed.

70 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. contentions of the assessee that it had sufficient own funds at its kitty to make the investments in the relevant years and accordingly no disallowance under Rule 8D(2)(ii) of the Rules is warranted. However, he sustained the disallowance made in the sums of Rs. 29,13,033/- and Rs. 31,33,520/- for the Asst Years 2008-09 and 2010-11 respectively under Rule 8D(2)(iii) of the Rules. Aggrieved, both the assessee as well as the revenue is in appeals before us.

7.1. The ld AR argued that only dividend bearing investments should be considered by the ld AO while making disallowance under Rule 8D(2)(iii) of the Rules . In support of this proposition, he placed reliance on the decision of the co-ordinate bench of this tribunal in the case of REI Agro Ltd vs DCIT in ITA No. 1331/Kol/2011 and ITA No. 1423/Kol/2011 dated 19.6.2013 for Asst Year 2008-09 . With regard to the revenue appeals on the deletion of disallowance under Rule 8D(2)(ii) of the Rules, he stated that the ld CITA had categorically stated that the assessee is flushed with own funds and only the own funds have been utilsied for making investments and accordingly no disallowance of proportionate interest on borrowed funds would arise thereon. In response to this, the ld DR vehemently relied on the order of the ld AO.

7.2. We have heard the rival submissions. We find that the ld CITA had given a categorical finding as to the availability of own funds with the assessee which has been used for making investments in shares of various companies and that no borrowed funds were utilized for the same. Hence there is no question of disallowance of proportionate interest by invoking Rule 8D(2)(ii) of the Rules. Reliance in this regard is placed on the following decisions :- (a) CIT vs Reliance Utilities and Power Ltd reported in (2009) 313 ITR 340 (Bom) (b) CIT vs HDFC Bank Ltd reported in (2014) 366 ITR 305 (Bom) (c ) CIT vs Torrent Power Ltd reported in (2014) 363 ITR 474 (Guj) (d) Kolkata Tribunal in the case of Hindustan Motors Ltd vs DCIT in ITA No. 171/Kol/2012

71 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. With regard to the other aspect of invoking disallowance contemplated under Rule 8D(2)(iii) of the Rules, we find lot of force in the arguments of the ld AR that only investments that had yielded exempt income should be reckoned for the purpose of working out the disallowance thereon. We find that the assessee had received dividends from the following shares :-

AY 08-09 AY 10-11

Subhash Pipes Ltd 12,43,618

Dividend from Units of PNB Mutual Fund 1,52,331

Dividend from Miscellaneous Quoted Investment (the investments Were sold by the assessee but not Transferred by the transferees in their Names from the assessee) 1,875 Delhi Waste Managementd Ltd 5,73,757 ------------------ ------------------- 13,97,824 5,73,757 ------------------ ------------------

We hold that only the aforesaid investments should be considered for each of the years for the purpose of making disallowance under Rule 8D(2)(iii) of the Rules. We draw support from the decision of the co-ordinate bench of this tribunal in the case of REI Agro Ltd vs DCIT in ITA No. 1331/Kol/2011 and ITA No. 1423/Kol/2011 dated 19.6.2013 for Asst Year 2008-09 in this regard, wherein it was held that :- 8.1. Thus , not all investments become the subject-matter of consideration when computing disallowance under section 14A read with rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8D(2)(iii), which is issue in the assessee’s appeal, is restored to the file of the AO for recomputation in line with the direction given above. No disallowance under section 14A read with rule 8D(2)(i) and (ii) can be made in this case.

Respectfully following the aforesaid decision, we restore this issue to the file of the ld AO to recomputed disallowance under section 14A read with Rule 8D(2)(iii) of the Rules by taking into account only those investments which yielded dividend income . Accordingly,

72 ITA Nos.2286-2289/K/2013 & 2035-2036/K/2013 M/s. SPML Infra Ltd. the grounds raised in this regard by the assessee are allowed for statistical purposes and the grounds raised by the revenue are dismissed. 8. In the result, to sum up ITA No. 2286/Kol/2013 – Asst Year 2005-06 – Revenue Appeal is dismissed ITA No. 2287/Kol/2013 – Asst Year 2007-08 – Revenue Appeal is dismissed ITA No. 2288/Kol/2013 – Asst Year 2008-09 – Revenue Appeal is dismissed ITA No. 2289/Kol/2013 – Asst Year 2010-11 – Revenue Appeal is dismissed ITA Nos. 2035 & 2036/Kol/2013 – Asst Years 2008-09 & 2010-11 – Assessee Appeals are allowed for statistical purposes

Order is pronounced in the open court on 08.03.2017 Sd/- Sd/- (Partha Sarathi Chaudhury) (M. Balaganesh) Judicial Member Accountant Member Dated : 8th March, 2017

Jd.(Sr.P.S.) Copy of the order forwarded to:

APPELLANT – DCIT, CC-XXVIII/ITO, Wd-8(4), Kolkata 1. 2 Respondent –M/s. M/s. SPML Infra Ltd., 22, Camac Street, Kolkata-700 016 3. The CIT(A), Kolkata 4. CIT, Kolkata. 5. DR, Kolkata Benches, Kolkata

/True Copy, By order,

Asstt. Registrar.