SENBO ENGINEERING LIMITED,KOLKATA vs. DCIT, CIR-11, KOLKATA. , KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No.1377/KOL/2023 Assessment Years: 2007-08 Senbo Engineering Limited, Deputy Commissioner of 87, Lenin Sarani, Vs Income Tax, Circle-11, Kolkata - 700013 Kolkata - 700013 (PAN: AADCS6138B) (Appellant) (Respondent)

Present for: Appellant by : Shri S. Bhattacharya, AR Respondent by : Shri Rakesh Kumar Das, CIT, DR Date of Hearing : 12.06.2024 Date of Pronouncement : 09.09.2024 O R D E R PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2007-08, dated 17.10.2023, which has been passed against the assessment order u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 10.12.2009. 1. This appeal was instituted in pursuance of CIT (Appeals)'s previous order dated 24.2.2016 having been set aside and restored to CIT (Appeals) by the Income Tax Appellate Tribunal ("Tribunal" in short), vide its order dated 31.8.2017 in ITA no. 1159/Kol/2013 for AY 2009-10 and 990, 991, 992, 993, 994 and 995/2016 for AYs 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09

2 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 respectively with the direction to consider all documents and particulars including remand report and rejoinder afresh.

3.1. CASE HISTORY: Subsequently, Revenue filed an appeal before the Tribunal against the abovementioned appellate order. The Tribunal, vide its order dated 25- 07-2014 (combined Order for AYs 2006-07, 2007-08, 2005-06, 2008-09 and 2004- 05), observed that the CIT (Appeals) in relation to the appeal for the AY 2006-07, had violated the provisions of sub-sections (1) and (2) of section 250 of the Act by not serving notice to the AO as a result of which natural justice was denied to the Revenue. On the basis of the above observation, the Tribunal held that the order passed by CIT (Appeals) for AY 2006-07 was in violation of princi- ples of natural justice and the Tribunal set aside the matter to the file of the CIT (Appeals) with the direction to give the AO proper and sufficient opportunity of being heard and to decide the issue afresh in accordance with law. The Tribunal further observed that since the CIT (Appeals) for the first time had allowed the claim of the appellant u/s 80-IA in AY 2006-07 and in subsequent AY 2007-08 allowed the claim following the order for AY 2006-07, it was setting aside the order of CIT (Appeals) for the AY 2007- 08 also and restoring the issue involved to the file of the CIT (Appeals) with the direction that the CIT (Appeals) would re- decide the appeal for AY 2007-08 afresh after deciding the appeal for AY 2006- 07. The restored appeal for AY 2007-08 was disposed by CIT (A) vide order dated 24/02/2016. Revenue challenged the order and the Tribunal, vide order dated 31/08/2017, held that since the said appellate order had been passed by simply relying on the earlier order without making any discussion and without consider- ing remand report and rejoinder of assessee, the said appellate order was set aside and remitted back to CIT(Appeals) for deciding afresh. It is on the basis of the abovementioned order dated 31/08/2017 of the Tribunal that the present ap- peal came into existence. 4. TRIBUNAL'S DIRECTION: In its order dated 31.8.2017, the Tribunal said, "13. As per the direction of the Tribunal given by its order dated 21.07.2014, op- portunity was given by the Id. CIT(Appeals) to the Assessing Officer in the second round and availing the same, the Assessing Officer submitted a remand report putting forth the case of the Revenue on the issue relating to the assessee's claim for deduction under section 80IA. As already noted, the said remand report was confronted by the Id. CIT(Appeals) to the assessee and in response thereto, a re- joinder in writing was also filed by the assessee offering its explanation on the issues raised by the Assessing Officer in the remand report. Although the points raised by the Assessing Officer in the remand report as well as the explanation offered by the assessee in the rejoinder are duly extracted by the Id. CIT(Appeals)

3 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 in his impugned order passed for A.Y. 2006-07, a perusal of the operative portion of the said order shows that he has neither discussed nor considered the same, inasmuch as, no comment whatsoever has been made by him either on the remand report submitted by the Assessing Officer or even on the rejoinder filed by the assessee. He has simply held that the issue relating to the assessee's claim for deduction under section 80IA was already considered and decided in favour of the assessee by his Id. predecessor vide his order dated 30.10.2009 passed in the first round and after extracting the relevant portion of the said order, he allowed the claim of the assessee for deduction under section 80IA by simply following the same. As already noted by us, the said order of the Id. CIT (Appeals) dated 30.10.2009 passed in the first round was set aside by the Tribunal on the ground of violation of principles of natural justice after having found that no opportunity of being heard was given by the Id. CIT(Appeals) to the Assessing Officer and the matter was accordingly remitted back to the Id. CIT(Ap- peals) for deciding the same afresh in accordance with law after giving the As- sessing Officer proper and sufficient opportunity of being heard. In these facts and circumstances of the case, when the opportunity given to him by the Id. CIT(Ap- peals) in the second round as per the direction of the Tribunal was availed by the Assessing Officer by submitting a remand report putting forth the case of the Rev- enue on the issue and the rejoinder was also filed by the assessee in response to the said remand report, we are of the view that the action of the ld. CIT (Appeals) in allowing the claim of the assessee for deduction under section 80IA by simply relying on the order of the ld. CIT (Appeals) dated 30.10.2009 passed by his predecessor in the first round, which was set aside by the Tribunal and without applying his mind to the issues raised by the Assessing Officer in the remand report and without making any discussion whatsoever thereon is totally untenable as the same has not only ignored the clear direction given by the Tribunal but has also de- feated the very purpose for which the matter was remitted back to the Tribunal by the ld. CIT (Appeals). We, therefore, set aside the impugned orders of the ld. CIT (Appeals) for A.Y. 2004-05 to 2008-09 as well as that of 2009-10 and remit the matter back to the ld. CIT (Appeals) for deciding the same afresh after taking into consideration the entire material avail- able on record including the remand report submitted by the Assessing Officer and the rejoinder filed by the assessee. The Revenue's appeals on this issue for all the years under consideration are accordingly treated as allowed for statistical purposes. (emphasis supplied)

4 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 “1. That the Ld. Commissioner of Income-tax (Appeals), NFAC, was wrong in holding that the appellant was allegedly not eligible to deduction u/s 80-IA of the Income-tax Act, 1961. 2. That without prejudice to the contention raised in Ground No.1 above, the Ld. Commissioner of Income-tax (Appeals), NFAC, was wrong in holding that the Delhi Metro Rail Corporation Ltd. (DMRC) was allegedly not a Statutory body and thus he erred in stating that the appellant was allegedly not eligible for deduction u/s 80-IA. 3. That without prejudice to the contention raised in Ground No.1 above, the Ld. Commissioner of Income-tax (Appeals), NFAC, failed to appreciate that the Certificate issued by Hooghly River Bridge Commissioner (HRBC) and Delhi Metro Rail Corporation Ltd. (DMRC) had allegedly not certified that the appellant had been entrusted with conceptualising the concerned Infrastructure Projects. 4. That without prejudice to the contention raised in Ground No.1 above, the Ld. Commissioner of Income-tax (Appeals), NFAC, was wrong in not appreciating that the financing the concerned Projects had been made by the appellant. 5. That without prejudice to the contentions raised in Grounds Nos.1 to 4 above, the Ld. Commissioner of Income-tax (Appeals), NFAC, erred in considering the appellant allegedly as a Contractor only and not a Developer and thus he was wrong in holding that the appellant was allegedly not eligible for deduction u/s 80-IA. 6. That the appellant craves leave to add, alter or withdraw any ground or grounds of appeal at or before the hearing of the Appeal.”

5 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 to section 80-IB, which has been inserted by the Finance act, 2007 w.r.e.f. 01.04.2000 and held that the Explanation was squarely applicable to the assessee and as against the claim of the assessee that it was a developer, the Ld. AO held the assessee to be a contractor and, therefore, denied the claim of deduction under section 80-IA, which was claimed in AY 2004-05 for the first time and was denied by the then AO and the matter was pending before the Ld. CIT(A). The Ld. AO also considered the case of M/s B T Patil & Sons Belgaum Construction Pvt. Ltd. v ACIT, Circle 2, Kolhapur 2009 TIOL 692-ITAT Mumbai LB - in ITA No. 1408 and 1409/PN/2003, wherein the Larger Bench has held that a contractor is not eligible for such benefit. It also held that this had been made clear by Explanation to Section 80-IB inserted by the Finance Act, 2007 w.r.e.f. 01.04.2000. Several other disallowances were also made and the income was computed at Rs.6,21,42,200/- after disallowing the claim of deduction under section 80-IA. Aggrieved with the assessment order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A) who held that the appellant did not fulfil the required conditions of section 80-IA and consequently was not eligible to get the deduction and the appeal was dismissed. Aggrieved with the order of the Ld. CIT(A), which is the 3rd order of the Ld. CIT(A), the assessee has filed this appeal before us. 5. We have heard the rival contentions and also gone through the documents and paper book filed before us. While the assessee claims that the deduction under section 80-IA should be allowed, the Ld. DR relied upon the order of the Ld. CIT(A) and stated that since the assessee was a contractor, the deduction should not be allowed. 6. Before deciding the issue, it would be appropriate at this stage to refer to the order of the Ld. AO, who had required the assessee to justify the claim for deduction u/s 80-IA. The submission of the assessee made

6 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 during the course of the assessment proceeding has been summarised as under by the Ld. AO: (a) That the assessee has been carrying on the business of developing and maintaining flyovers and metro railway which fall under the category of infrastructure facility under explanation to section 80- IA(4)(i); (b) That it carried on developmental works in pursuance of agreement entered into with prescribed authority of the central government; (c) That the works carried on can in no way be compared to that of a contractor who carries out the work allotted to it whereas the assessee does development of infrastructure work; (d) That a detailed note had been given in the form of a paper book for AY 2006-2007 which was relied upon; (e) That the assessee did not simply execute works contract but did a thorough developmental work and therefore explanation to section 80-IA does not apply to it; (f) That from AY 200(2)-03 section 80-IA(4)(i) had been amended to allow deduction u/s 80-IA to a business of developing any infrastructure facility and therefore the intention of the Government was to allow deduction; (g) That Land would always belong to the government and only when person other than government undertakes the development work the said person is eligible for deduction (h) That in assessee's case the Government authority i.e. DMRC after all procedural formalities had decided to engage the assessee for developmental work and therefore it is eligible for deduction u/s 80- IA.

7 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 6.1 The views and submissions of the assessee were carefully analysed by the Ld. AO. However, he has mentioned in the assessment order that the assessee is a company engaged in the business of Contractor for Civil work for different organisations as per contract awarded to the company on the basis of tender. The assessee company earned income on account of contract and as per the Tax Audit Report of assessee company and the return filed, the nature of Business of the assessee company was High Technology Construction work. To examine whether the assessee is eligible for section 80-IA deduction, he analysed the provisions of the section to see whether the assessee was eligible for the deduction. The relevant extract from the assessment order is as under: As per the Income Tax Act, Deduction under section-80-IA is available only to the following business carried on by an Industrial undertaking: (a) Provision of Infrastructure Facility (b) Telecommunication services. (c) Industrial Park or SEZ. (d) Power generation. The Enterprise must carry on the business of: (a) Developing. (b) Maintaining and operating. (c) Developing, maintaining and operating any Infrastructure Facility. Infrastructure Facility means: (a) A Road, a bridge or a rail system. (b) A Highway Project, (c) A Watersupply Project etc. (d) A Port, Airport etc. The enterprise carrying on the business of developing maintaining and operating any infrastructure facility which fulfills all the following conditions: (1) The Enterprise is owned by a company registered in India. (2) The Enterprise has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for developing. maintaining and operating a new infrastructure facility. In case of an enterprise carrying on the business of developing or operating and maintaining or Developing, Operating & maintaining an infrastructure facility, the audit report in Form No.-10CCB shall be accompanied by a copy of the agreement of the enterprise with the Central Government or the State Government or the local authority for carrying on the business of Developing etc. viz. the infrastructure

8 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 facility. In any other case, the audit report in Form-10CCB shall be accompanied by a copy of the agreement, approval or permission as the case may be, to carry on the activity signed or issued by the Central government or the State Government or the Local authority for carrying on the eligible business - Notification No.240/2002 dated 06.09.02. Further under B-O-L-T scheme of India Railways Concession u/s. 80IA is applicable only to an Infrastructure Facility meant for Development of Rail System. From the aforesaid provision of Sec.80IA of 1.T. Act, the conditions required for exemption vis-à-vis assessee's situation/suitability is examined point wise as under: 1. The enterprise is required to be carrying on the business of developing a road, a bridge, or a rail system. It is revealed from the assessee-company's submission that the assessee is not developing any road, bridge, rail system, so the assessee has not fulfilled the condition. 2. The enterprise has entered into an agreement with Central or Statement (State) Government or Local authority for development of infrastructure facility It is revealed that no such agreement was entered into with central or state government or any local authority, so assessee has not fulfilled the condition. Agreement was with Delhi Metro Rail Corporation Ltd. Needless to mention, these concerns are not Central or State Government. Further, these are not local authorities since section 10(20) of the Income Tax Act has clearly defined local authorities as- (i) Panchayat (ii) Municipality (iii) Municipal Committee and District Board (iv) Cantonment Board

Delhi Metro Rail Corporation not being any of the above, the condition is certainly not fulfilled. Here it is also pertinent to mention that Section 10(20) is included in Chapter III which deals with incomes which do not form part of total income and discusses that income chargeable under various heads shall be excluded from the income of the local authority. The assessee or the A/R have given no details or documentary evidences as to whether and how the concerns fall in this category. Moreover, it is abundantly clear that Delhi Metro Rail Corporation are not Panchayat, Municipality, Municipal Committee and District Board or Cantonment Board. Therefore, no agreement with Central or State Government or Local authority for development of infrastructure facility and therefore deduction cannot be given Audit Report u/s.10CCB along with copy of Agreement with Central/State Government or Local Authority, Approval letter/permission etc. for carrying on business filed with return of Income. Audit Report u/s. 10CCB was not filed along with original return of Income, and was filed during the course of assessment proceedings. However more importantly, no agreement with Govt/Local authority, permission/approval letter was included, so assessee did not fulfill this condition.

9 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 So, all the condition required for claiming deduction u/s.80IA was absent and thereby assessee is not entitled to claim deduction u/s.80IA It is also very clear from records and documents submitted that the assessee was awarded contract job for part civil construction of their project for which assessee received contractor's payment after deducting T.D.S. from time to time. Therefore, the assessee is not engaged in development, Maintenance, Operation etc. as are pre-requisite conditions of Infrastructure Project eligible for deduction under section- 80IA, nor has entered into agreement with Government or Local Authority for development of infrastructure facility. The assessee was simply awarded a civil construction job as a contractor. Assessee had also submitted that the details submitted for AY 2006-07 should be considered along with documents in the form of bound book that it is a developer for the Instant assessment year too. The submission was also considered. What is pertinent however is that what assessee has submitted is that it has arranged infrastructure, designed, developed, erected, created all facilities etc but has omitted the most important point-that it has done all these as a contractor as these were purely contractual in nature. Moreover, the consideration is defined and through the contract and the profit (or loss) is from the execution of contract and not from business. Therefore, it is certainly not eligible for deduction u/s 80IA on this account also apart from other reasons. What is also extremely important is that Explanation to Section 80IB has been inserted by the Finance Act, 2007 w.r.e.f from 1.4.2000 which reads as follows "For, the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be" This explanation is squarely applicable to the assessee and is applicable with retrospective effect from 1.4.2000. The assessee has stated that it is not covered by the explanation since according to it, it is a developer, but as has been analysed in detail, assessee is a contractor and therefore the Explanation is squarely applicable to it. Without prejudice to the above analysis, it is pertinent to mention that in AY 2004- 2005, the assessee claimed 80IA deduction for the 1st time which was denied by the Assessing Officer and the matter is pending before the Ld CIT(A). For AY 2006- 07 too, while CIT(A) has considered the issue in assessee's favour, the Department is considering filing appeal before Hon'ble ITAT. Therefore the same view is to be taken this year too. Accordingly, without prejudice to analysis for this year, to maintain the judicial consistency this year too deduction u/s 80IA is disallowed. Here it may be mentioned that the issue whether such an assessee is eligible for deduction u/s 80IA was also examined by the Mumbai ITAT Larger Bench in the case of M/s BT Patil and Sons Belgaum Construction Pvt Ltd vs ACIT Circle 2 Kolhapur vide 2009 TIOL 692-ITAT Mumbai LB-ITA No 1408 and 1409/PN/2003 and the Larger Bench held that a contractor is not eligible for such benefit. It also held that this had been made clear by Explanation to Section 80IB which has been inserted by the Finance Act, 2007 w.r.e.f. 1.4.2000. The ratio of this case is applicable to assessee company. In view of aforesaid arguements, it is very clear that assessee company filed inaccurate particulars for claiming deduction u/s.80IA. As the provision of section- 80IA are not satisfied, the claim of deduction u/s 80IA is rejected. This denial also

10 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 attracts initiation of penalty provisions u/s 271(1)(c) for concealment of income and filing inaccurate particulars of income. 7. Before the Ld. CIT(A), the assessee submitted as under in the Statement of Facts filed with the appeal memo: The appellant has been in the business of carrying out High Technology Construction Activities. In pursuance of agreements entered into with the Government of India, certain State Governments and Local Authorities/Statutory Bodies formed by the respective Governments, the appellant developed a number of Infrastructure projects such as the Metro Railway in Kolkata as well as in Delhi, several Flyovers in Kolkata, etc. The Metro Railway projects have been taken up and completed by the appellant as per agreements entered into with the Metro Railway Corporation, statutorily established by the Government of India. The Flyovers/Bridges have been developed as per the agreements entered into with the State Governments and or the Local Authorities/Statutory Bodies formed by the respective State Governments. For the Assessment Year 2007-08 the appellant's Gross Total Income was computed at Rs.6,18,17,507. The appellant was entitled to deduction u/s 80-IA in relation to its two Infrastructure projects, viz., Gariahat Flyover and Delhi Metro Railway. The appellant in its Return claimed deduction u/s 80-IA for an aggregate sum of Rs. 6,18,17,507 whereby the total income became NIL. However, as per the computation u/s 115JB, the MAT payable came to Rs.65,88,190. As the TDS had been for Rs. 1,65,08,496 and advance Taxes of Rs. 20,50,000 had been paid, a sum of Rs.1,19,70,306 was shown as Refundable to the appellant, in the Return. All the Infrastructure projects had to be carried out on the basis of the agreements/contracts entered into with the Statutory Bodies. In each of the Infrastructure projects the appellant had the responsibility of designing and implementing the entire works towards the construction thereof. These works comprised of designing, conceptualizing, constructing, commissioning and thereafter releasing the concerned Infrastructure facilities for the public use. Under no circumstance, the works carried on by the appellant could be compared with the works carried on by a contractor in relation to a works contract where only works allotted as per the plan given by the concerned contractee, was required to be carried out by a contractor. In the case of the appellant, the entire matter of developing the Infrastructure facility was handed over to the appellant by the governments and/or the prescribed authorities. For the purpose of official documents the assigned developmental works may have been referred to as "contract" but that does not mean that it is for execution of any work contract as per the direction of the concerned contractee. The responsibility in relation to the Infrastructure facility, viz., Metro Railway and/or Flyover, had been with the appellant from the commencement of the concerned project. The works involved development of those Infrastructure facilities which were highly technical in nature and in the process such development had to pass through various phases. During the assessment proceeding the appellant submitted necessary details as regards its claim for deduction u/s 80-IA. A detailed Note along with various supporting documents evidencing the nature of works carried out by the appellant in developing Infrastructure facilities, was furnished by the appellant before the Assessing Officer for properly appreciating the appellant's involvement as a developer of Infrastructure facilities. However, the Assessing Officer did not

11 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 properly consider the detailed particulars and explanations furnished before him by the appellant in the matter of its claim for deduction u/s 80-1A. The Assessing Officer did not appreciate the fact that all these developmental works had been carried out by the appellant in pursuance agreements entered into with the Local Authorities and Statutory Bodies. In regard to "local authorities" the Assessing Officer considered the definition of the term "local authority" as given in section 10(20) without appreciating the fact that such definition had been exclusively for the purpose of section 10(20) and such definition would not hold good for any other provision of the Income-tax Act, 1961. The Assessing Officer held that according to him the appellant was allegedly only a contractor for execution of Work Contract and as per the Explanation to section 80-IA the appellant would allegedly not be entitled to deduction u/s 80-IA. On the basis of his above observation the Assessing Officer rejected the appellant's claim of deduction u/s 80-IA. During the assessment proceeding the appellant brought to the notice of the Assessing Officer that for the immediate preceding Assessment Year 2006-07, in the appeal, CIT(A)-XII vide his Appellate order dated 30-10-09, had held that in relation to the Infrastructure Facilities projects of Flyovers at Calcutta and Metro Railway at Delhi, the appellant should be considered as a Developer and accordingly the appellant was entitled to a deduction w's 80-IA in respect of the profits derived from the said activities. The CIT(A) had directed the Assessing Officer to allow the appellant's claim for deduction u/s 80-IA for the Assessment Year 2006-07. The Assessing Officer mentioned that since the Department was considering filing of an Appeal before the Hon'ble ITAT, the same view of disallowance of the appellant's claim for deduction u/s 80-IA for the Assessment Year 2006-07, was to be taken for the Assessment Year 2007-08. The Assessing Officer went on to state that to maintain judicial consistency for the Assessment Year 2007-08, claim for deduction u/s 80-IA, was being disallowed. The Assessing Officer, in his Assessment Order for the Assessment Year 2007-08, referred to a decision taken by the Mumbai ITAT's larger Bench in the case of M/s BT Patil & Sons Belgaum Construction Pvt. Ltd. v. ACIT, Circle-2, Kolhapur vide 2009 TIOL 692-ITAT Mumbai LB-ITA No.1408 and 1409/PN/2003 wherein the larger Bench had held that a contractor was not eligible for benefit, viz., deduction u/s 80-IA. The Assessing Officer held that the ratio of the above-referred case was applicable to the appellant. The Assessing Officer, however, did not consider that the facts of the above-referred case as well as the applicable provisions of the Act were distinguishable in the appellant's case. In the Tax Audit Report certain expenses aggregating to Rs.2,69,434 had been shown as "Prior Period Expenses" which had actually been settled during the previous year relevant for the Assessment Year 2007-08. The Assessing Officer held that in view of the appellant maintaining Mercantile system of accounting the above-referred aggregate sum of Rs. 2,69,434 was being added back. In view of the rejection of the appellant's claim for deduction u/s 80-IA of Rs.6,18,17,507 and the disallowance of the above-referred sum of Rs.2,69,434 and a further disallowance of Rs.55,256 u/s 40(a)(ia), there appeared a total income of Rs.6,21,42,197 while as per the Return the Total Income had been Nil. The Assessing Officer computed the tax/interest payable by the appellant at Rs 31,36,906 which was inclusive of Rs. 7,78,338/-.

12 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 7.1 The Ld. CIT(A) considered the provisions of section 80-IA, as it was in 2007-08 by the Finance Act, 2006, the conditions required to be fulfilled, legislative intention etc. He has also discussed the facts as claimed by the assessee and as noted by the Ld. AO. He also considered the remand report dated 10.11.2014 of the Assessing Officer, the rejoinder to the remand report filed by the assessee, the discussion on the appellant’s claim of eligibility and the basis of law and facts, whether the agreement was with the government or local authority or statutory body, the status of DMRC, whether the assessee was engaged in the activities of section 80-IA, analysed what is a “works contract” and after analysis he concluded in Para 23.6 that thus the assessee’s business was of works contract. He also considered a few examples of projects of “development, maintain and operate” from the website of the Ministry of Road Transport & Highways and concluded that the claim of the appellant about development, maintain and operate was wrong. According to him, it could not be said that the infrastructure project was developed with the assessee’s own investment and thus, was not a case of development, maintain and operate. One sample document called "Concession 5/250/2023-24/105713882111 agreement" for the Pimplagaon-Dhule highway widening project (SI. 3 of above list), illustrating what is actually "development, maintain and operate" has also been mentioned para 24.1 of the order of the Ld. CIT(A). He also analysed the conditions which were not fulfilled and the audit report in Form 10CCB (Rule 18BBB) was filed in the assessment stage only and not filed with the return and the agreement was never filed. On the basis of the discussion, since the conditions were not fulfilled and since estoppel and res judicata did not apply to the Direct Tax proceedings, he concluded that the appellant did not fulfil conditions of section 80-IA and consequently was not able to get the deduction and the appeal was dismissed.

13 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 8. Before us as well, similar arguments as made before the Ld. CIT(A) and the Ld. AO were advanced. It was claimed that the assessee was a developer and not a contractor, it had taken substantial risks and had also invested in the project of Metro Rail of DMRC and the flyovers of HRBC, both of which were claimed to be Local Authorities and since it fulfilled all the conditions, the deduction u/s 80-IA should be allowed. At the conclusion of the hearing, submissions were filed which are as under: “BEFORE THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL, 'C' BENCH, KOLKATA In the matter of: SENBO ENGINEERING LTD. 87, Lenin Sarani, Kolkata 700013 ..... Appellant AND In the matter of: Income-tax Appeal No. ITA 1377/Kol/2023 relating to Assessment Year 2007-08 SUBMISSIONS The appellant has been engaged in the business of Development of Infrastructure facilities, viz., Flyovers (Bridges) and Metro Railway (Railway System). In pursu- ance of Agreements entered into between the appellant and the prescribed Gov- ernment authorities being Local Authorities, viz., HRBC and DMRC, during the Financial Year 2006-07 (relevant for the Assessment Year 2007-08) the appellant developed Infrastructure projects being Flyovers in Kolkata and Metro Railway in Delhi. On the basis of the desire of the concerned Local Authorities the appellant was required to give its own ideas supported by highly technical diagrams/plans as regards the viability of the development of a Flyover and/or Metro Railway at the places owned by the Government. It was only after several sets of discussions held between the appellant and the Local Authorities that the decisions were fi- nally taken for the development of Flyover at Kolkata and Metro Railway at Delhi. The entire process to be adopted for carrying out the developmental works, had been planned by the appellant and after thorough examination thereof and nec- essary sanctioning by the Local Authorities, the appellant could proceed with the construction of flyovers as well as the metro railway. The appellant also submits that for designing and conceptualising the above-referred Infrastructure facilities the appellant had to arrange substantial funds of its own through borrowing or otherwise and all the related expenses were on the appellant's account. It had not been a case that the appellant's outgoings were being provided by the Local Au- thorities as would have happened in the case of a normal execution of a works contract. Any risk in relation to the designing and conceptualising the projects had been with the appellant and not with the Local Authorities, viz., HRBC and DMRC. In each of the Infrastructure projects the appellant had the responsibility of de- signing and implementing the entire works towards the construction thereof. These works comprised of designing, conceptualizing, constructing, commission- ing and thereafter releasing the concerned Infrastructure facilities for the public use. Under no circumstance, the works carried on by the appellant could be com- pared with the works carried on by a contractor in relation to a works contract where only works allotted as per the plan given by the concerned contractee, was

14 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 required to be carried out by a contractor. In the case of the appellant, the entire matter of developing the Infrastructure facility was handed over to the appellant by the governments and/or the Local Authorities. For the purpose of official docu- ments the assigned developmental works may have been referred to as "contract" but that does not mean that it is for execution of any work contract as per the direction of the concerned contractee. The responsibility in relation to the Infra- structure facility, viz., Flyover and/or Metro Railway, had been with the appellant from the commencement of the concerned project. The works involved development of those Infrastructure facilities which were highly technical in nature and in the process such development had to pass through various phases. It may be noted that the Flyovers (Bridges) and Metro Railway (Railway system) are included in the definition of "Infrastructure facility as given in Section 80- IA(4)(a). Hence, it is submitted that the appellant has been engaged in developing Infrastructure facilities as per the provisions of Section 80-IA of the Income-tax Act, 1961. During the assessment proceeding the appellant submitted necessary details as regards its claim for deduction u/s 80-IA. A detailed Note along with various sup- porting documents evidencing the nature of works carried out by the appellant in developing Infrastructure facilities, was furnished by the appellant before the As- sessing Officer for properly appreciating the appellant's involvement as a devel- oper of Infrastructure facilities. However, the Assessing Officer did not properly consider the detailed particulars and explanations furnished before him by the appellant in the matter of its claim for deduction u/s 80-IA. The Assessing Officer did not appreciate the fact that all these developmental works had been carried out by the appellant in pursuance of Agreements entered into with the local au- thorities and/or statutory bodies. In regard to "local authorities" the Assessing Officer considered the definition of the term "local authority" as given in section 10(20A) without appreciating the fact that such definition had been exclusively for the purpose of section 10(20A) and such definition would not hold good for any other provision of the Income-tax Act, 1961. The Assessing Officer held that ac- cording to him the appellant was allegedly only a contractor and as per the Ex- planation to section 80-IA the appellant would allegedly not be entitled to deduc- tion u/s 80-IA. On the basis of his above observation the Assessing Officer re- jected the appellant's claim of deduction u/s 80-IA. The appellant submits that DMRC is a joint venture of the Government of India and the Government of Delhi which information is readily available from the let- terhead of DMRC. The appellant submits that DMRC being a joint venture of two Governments, i.e., Government of India and the Government of Delhi, should be considered as an entity representing both the said Governments and, accordingly, any agreement entered into by the appellant with DMRC should be considered as an agreement entered into with those two Governments. As regards HRBC, the appellant submits that HRBC had been formed in accord- ance with section 3 of the Hooghly River Bridge Act, 1969 and was entrusted with the duty of carrying out the provisions of the said Act subject to such conditions and limitations as the Government of West Bengal may think fit to impose. From the Preamble of the above- mentioned Act, viz., the Hooghly River Bridge Act, 1969, it appears that the said Act provides for the construction, maintenance and control of Bridges across the River Hooghly within the Port of Calcutta (now re- named as Kolkata). Hence, it is clear that HRBC is a Local authority having been

15 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 entrusted by the Government of West Bengal to carry out certain specific activities on behalf of the Government of West Bengal. Accordingly, the appellant submits that there should not have arisen any doubt in the Assessing Officer's mind as to whether HRBC is to be considered as a "Local authority" or not for the purpose of allowing deduction u/s 80-IA. Hence, the appellant submits that the agreement entered into by the appellant with HRBC should be considered as an agreement entered into with a Local authority. The appellant further submits that HRBC hav- ing been formed under a specific statute, viz., the Hooghly River Bridge Act, 1969, it should also be considered as a statutory body as mentioned in section 80- IA(4)(i)(b). Starting from the commencement, i.e., Designing till the completion of the Infra- structure Facilities Development Projects the entire financing of the projects were met by the appellant from its own sources and/or borrowings. It was only on the basis of completion of phase-wise developments that the relevant Local Authori- ties made payments to the appellant. The entire Technical expertise required for the designing, conceptualising and planning of the Infrastructure Facilities projects, had to be arranged by the appel- lant at its own cost. In relation to DMRC Railway Projects it had been required of the appellant to incur the necessary expenses towards the development out of its own fund at the first instance and only after completing substantial portion of the project, the appellant could raise progressive bills on DMRC. From these facts it would be clear that the entire risk for this project towards development of Infrastructure facility, had to be borne by the appellant on its own. It was only after the progress of the devel- opment to a particular extent, the appellant could raise bills on DMRC. The rele- vant details of incurring expenses and raising of the Bills had earlier been pro- duced before the Assessing Officer, but those were not considered by the As- sessing Officer while examining the eligibility of the appellant to deduction u/s 80-IA. The details of incurring of expenditure and raising of bills in relation to DMRC project of Infrastructure development (Metro Railway) are enclosed in the Paper Book for ready reference. The appellant further submits that the authorities of the DMRC certified that the appellant had been entrusted with the work of design, drawing and construction towards the development of Metro Railway Project in Delhi. The appellant submits that the above- mentioned Certificate clearly indicated that the appellant had not been appointed just for execution of any Works Contract towards the development of the Infrastructure facilities but it had been entrusted with the entire work of the development of the Infrastructure facilities towards Metro Railway in Delhi. A copy of the above-mentioned Certificate has been included in the Paper Book (Page 240), In relation to HRBC Flyover Projects it had been required of the appellant to incur the necessary expenses towards the development out of its own fund at the first instance and only after completing substantial portion of the projects, the appel- lant could raise progressive bills on HRBC. From these facts it would be clear that the entire risk for these projects towards development of Infrastructure facilities, had to be borne by the appellant on its own. It was only after the progress of the development to a particular extent the appellant could raise bills on HRBC. The relevant details of incurring expenses and raising of the Bills had earlier been

16 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 produced before the Assessing Officer, but those were not considered by the As- sessing Officer while examining the eligibility of the appellant to deduction u/s 80-IA. As regards the Infrastructure Development Projects relating to Park Street Flyover and Gariahat Flyover, the authorities of HRBC issued certificate certifying that design/development of detailed working drawings of the Flyovers had been en- trusted to the appellant and the appellant duly carried out the same. The appel- lant submits that the above-mentioned Certificate clearly indicated that the appel- lant had not been appointed just for execution of any Works Contract towards the development of the Infrastructure facilities but it had been entrusted with the en- tire work of the development of the Infrastructure facilities towards Flyovers at Park Street and Gariahat. A copy of the above- mentioned Certificate has been included in the Paper Book (pages 275 to 277). The requirement of section 80-IA(4)(i) is that the concerned enterprise must be car- rying on the business of Developing an Infrastructure Facility and it should be owned by an Indian Company. Further, the enterprise must have entered into an agreement with the Government or Local Authority/Statutory Body for Developing a new Infrastructure Facility. The appellant's different units were in the busi- nesses of Developing Infrastructure Facilities and those units were owned by the appellant which is an Indian Company. All the Infrastructure Facility Develop- ments were carried on and completed by the appellants' respective Units as per the Terms and Conditions contained in the relevant Agreements entered into by the appellant with DMRC and HRBC which were Joint venture of the Government of India and Government of Delhi and prescribed LocalAuthority respectively as explained hereinbefore. The main requirement was as to who had been develop- ing the Infrastructure facility. It was the appellant who through its different units had been carrying out the Development of Infrastructure facilities. The appellant submits that all essential elements for an agreement had been con- tained in Tender documents in relation to the development contracts entered into between the appellant on one side and HRBC or DMRC on the other side. Copies of such tender documents had been produced during the Assessment Proceedings for examination thereof. It would be clear from the aforesaid documents that the appellant had been entrusted with the developmental works as per the written agreements which in some cases had been in the form of tender documents. DMRC used to issue Letter of Acceptance (LOA) in duplicate and on signing thereof by the appellant such LoA became an agreement. A comprehensive note specifying the nature of works carried out by the appellant for the development of Flyovers and Metro Railway, had been given to the Assessing Officer during the assess- ment proceedings. The appellant submits that on going through the said notes it would be clear as to why the relevant documents were to be considered as "Con- tract for Developments" and not mere "Works Contracts". The appellant submits that as regards the development works of Metro Railway (DMRC) some particular works relating to electrification of the concerned stations had been assigned to certain contractors as per DMRC's choice. However, the designing of the entire project as well as the tunnelling and construction of the stations had been carried out by the appellant. In the cases of Flyovers at Kolkata the entire project covering all the aspects had been entrusted to the appellant. The appellant, in respect of all the above-referred developmental projects, had to guarantee the designs made by it and in the case of Metro Railway project such

17 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 guarantee is to remain for 120 years for Civil Engineering Structures and for 50 years for above ground building structures (Copy of Extract of Condition relating to the Guarantee for Design life is included in the Paper Book Page 262). So, a substantial Risk factor is always present in these developmental works. The appellant further submits that it was only from the Assessment Year 2002- 03 that the government had amended the provisions of section 80-IA(4)(i) to pro- vide that a business of developing any infrastructure facility would also qualify for deduction u/s 80-IA. The earlier requirement of maintenance/operation along with development, for being entitled to deduction, was changed. From this itself it becomes clear that what the government intended was to allow deduction to that person who just develops the Infrastructure facility. It has to be appreciated that the land on which the Infrastructure facilities, viz., Flyover(Bridge) and/or Metro Railway (Railway System) would be constructed, would always belong to the gov- ernment and, therefore, if the development work would be carried out by the gov- ernment itself there would be no meaning of allowing any deduction u/s 80- IA(1)/(4)(i). It is only in a case where a person other than the government under- takes the Developmental work that the said person becomes entitled for deduc- tion. Since the person engaged by the government or any of its authorities would earn its charges for development works and not through operation/maintenance of the concerned Infrastructure facility, the deduction u/s 80-IA would be in rela- tion to the said charges for development which would mainly comprise of charges for construction of the facilities. In the appellant's case the Local Authorities after all the procedural formalities, had decided to engage the appellant for develop- ment of the Infrastructure facilities, viz., Flyovers and Metro Railway and the busi- ness of development of Infrastructure facilities as carried on by the appellant would accordingly be entitled for deduction u/s 80-IA. The provisions of section 80-I(A) as had been effective for and up to the Assess- ment Year 1999-2000, had required the transfer of the 'Infrastructure facility' to the Government or the Local Authority/Statutory Body, as the case may be, within a specified period. So there had been the requirements firstly of ownership' and thereafter 'transfer of the Infrastructure facility. However, with effect from the As- sessment Year 2000-01 such conditions of ownership' and 'transfer of the Infra- structure Facility were withdrawn. Hence, in the appellant's case there had not been any requirement of ownership of the 'Infrastructure Facility' by the appellant and consequently question of 'transfer of the Infrastructure Facility could not arise. The appellant's case was not a case where only a part of a Development Project had been entrusted to a person for execution thereof. In respect of the Infrastruc- ture facilities, viz., Metro Railway (Delhi) as well as Flyovers (Kolkata) the appel- lant had been responsible for Designing, Conceptualising, Planning, Developing, Constructing, Commissioning and thereafter releasing the Infrastructure Facilities for the public use. Accordingly, it may kindly be appreciated that the appellant's case was not that of a mere contractor who works according to the planning made by the contractee, but the appellant's business was for developing the concerned Infrastructure Facilities. As already submitted earlier the appellant's business not being in the nature of a mere execution of works contract, cannot be said to be covered under the Expla- nation to section 80-IA. Therefore, the appellant submits that it should have been allowed deduction u/s 80-IA.

18 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08

The appellant further submits that during the Appeal proceedings before the Ld. CIT(Appeals), NFAC, the appellant had submitted with evidences that the nature of the activities carried on by the appellant had been development of Infrastruc- ture facilities. However, the Ld. CIT(Appeals) did not appreciate properly the na- ture of activities carried on by the appellant and he formed a wrong opinion as- suming the appellant to be a mere Contractor. The appellant submits that if the Ld. CIT(Appeals) would have properly appreciated the submissions made by the appellant then he would have concluded that the activities carried on by the ap- pellant had not been a mere Work Contract but had been of the nature of devel- opment of Infrastructure facilities. The issues relating to the Fund employment, Technical expertise, designing, conceptualising, development of the Infrastructure facilities, burden of risk on the appellant in the matter of the development of In- frastructure facilities, were not properly look into by the Ld. CIT(Appeals). Further the Ld. CIT(Appeals) did not look into the references made to the decisions taken by the Jurisdictional Hon'ble ITAT, Kolkata as well as by the Hon'ble ITAT, Hy- derabad where under the circumstances similar to the appellant's case the Hon'ble ITATs had held that the concerned assessees should be treated as devel- oper and thus those assessees were eligible for deduction u/s 80-IA. Copies of the following Orders of the Hon'ble ITATs have been included in the Paper Book (on cases referred to):- (1) ACIT, Cir.12(2), Kolkata v. Simplex Infrastructure Ltd. (ITA No.01/Kol/2020) - Order dated 10/03/2021 (Paper Book Page 102); (2) ITO, Ward 1(2), Hyderabad v. Ayyappa Infra Projects Pvt. Ltd. (ITA No.1323/Hyd/2018) - Order dated 14/11/2018 (Paper Book page 114); (3) DCIT, Central Circle-XXVIII v. SPML Infra Ltd. (ITA No.1291-1292/Kol-2013) - Order dated 24/08/2016 (Paper Book Page 64); The appellant also refers to the decision of the Hon'ble Gujarat High Court in the case of the Principal Commissioner of Income-tax (Central), Ahmedabad v. Monti- carlo Construction Co. Ltd. in respect of which the Order was passed on 19/12/2023. A copy of the above-referred Order is enclosed for ready reference. The appellant submits that the issues of this Appeal have been more or less sim- ilar to the case of the appellant. In this case the Hon'ble High Court after deliber- ating in details held that the concerned assessee had entered into a Development of Infrastructure facilities Agreement and not a Works Contract. The appellant submits that this decision may kindly be considered in relation to the claim of the appellant that it should be considered as a Developer of Infrastructure facilities and thus eligible for deduction u/s 80-IA. The appellant submits that on the basis of the above facts, submissions and the decisions of the Hon'ble ITATs and the Hon'ble Gujarat High Court, it may kindly be held that the appellant should be considered as a Developer of Infrastructure facilities and consequently the appellant was eligible for Deduction u/s 80-IA of the Income-tax Act, 1961 in the Assessment Year 2007-08. SANJAY BHATTACHARYA Authorised Representative SENBO ENGINEERING LTD. (Appellant)”

19 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 6th June, 2024 9. We have gone through the submission made and also considered the counter arguments. As regards the basic issue whether the assessee was engaged in activities so as to enable it to avail the benefit of section 80-IA as a developer, the Ld. CIT(A) has analysed the same in his appeal order as under, with which we are in agreement: 18. WHETHER ASSESSEE WAS ENGAGED IN ACTIVITIES OF SECTION 80IA, namely, (i) Developing; OR (ii) Operating and maintaining; OR (iii) Developing, operating and maintaining any infrastructure facility, OR (iv) Works contract Infrastructure facility shall have to be only road including toll road, a bridge or a rail system. 19. As per assessment order, assessee claimed that it was developing and main- taining flyovers and Metro railway lines and it did development work in pursu- ance of agreement with government or statutory bodies. But AO wrote that from its submissions it is seen that assessee was NOT engaged in developing road, bridge, rail system. In the appellate proceeding before me, appellant has fur- nished certificates from two contract-awarding organizations, Delhi Metro Rail- way Corporation (DMRC) (joint venture of government of India and government of Delhi) and Hooghly River Bridge Commissioner (HRBC), a statutory organization under government of West Bengal. These certificates merely said that the as- sessee was 'entrusted with construction' and then 'constructed' flyovers and that they had necessary men and machines. No other activity like developing or main- taining or operating of the flyover is certified. As far as the certificates issued by HRBC are concerned, one work was done before 2002 and another before 2005 (it is written that the flyovers were opened for public use in 2002 and 2005 re- spectively). These do not prove anything about its work in FY 2006-07 and hence not relevant for deciding the issue before me. Similarly, one certificate of DMRC certify that work of design, drawing and construction' was done during 12.10.2007 to 15.7.2010. This is also not related to AY 2007-08. The other certif- icate was for work commenced on 23.11.2005 and completed on 31.7.2009. This was also for design and construction of underground station, tunnel and ramp of metro railway. No other activity like developing or maintaining or operating of the metro station rail system is certified. So, these certificates do not prove either of the claims of appellant, viz., that it developed and maintained and, that it did so under agreement with government/ local authorities. 20. In ACIT Vs. Koya Constructions Pvt Ltd, ITA nos. 417 and 418, the Hy- derabad Bench of Tribunal held, "It is true that where a person who makes infra- structure and himself executes development work and carries out civil work will be eligible for tax benefit u/s 80IA of the Act. In contrast to this, a person who enters into a contract with another person for executing works contract, will not be eligible for tax benefit u/s 80IA."

20 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 21. Assessee cited the order of Tribunal in DCIT vs. SPML Infra Ltd. But in that case, "From the perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor simpliciter and was a developer and hence Explanation to section 80- IA(13) does not apply to the assessee....in addition to developing the infrastructure facility, the assessee was even operating and maintaining the same (Para 9 of order). In the present case before me, appel- lant handed over the projects after completion of construction. It did not maintain or operate (like toll roads or bridges etc). Thus, the case is distinguished and not applicable. 22. Para 3.3.4 of CIT(A)'s order dated 30.6.2010 stated that assessee was given contract work which included 'designing, conceptualizing, developing, construct- ing, commissioning and releasing the infrastructural project like flyovers for public use'. This was actually what assessee claimed. Assessee's work was essentially designing in consultation with contract-awarding organization, constructing the projects and then handing over to contract-awarding organization. I do not find in the certificates issued by HRBC and DMRC that appellant did conceptualizing. The concept of a flyover or underpass or subway or tunnel was actually finalized by contractee organization and then only they floated the tender. The designing is done by assessee but not independently as the same is done as per instruction or desire of the contract awarding organization. The word 'developing' does not essentially mean assessee did anything more than what is conveyed by these three words and the words "releasing for public use' may not be exactly so be- cause it is normally the prerogative of owners of the project to decide when the bridge or road will be opened for public. No evidence has been produced ever before any authority to show that assessee either had the right to do or actually did the work of conceptualizing or commissioning or releasing the infrastructural project like flyovers for public use. In absence of such evidence, I think this is exaggerated claim. In Para 3.3.7 of his order, CIT (A) had said that it was works contract because assessee did work of designing and conceptualizing also. CIT (A) did not discuss with the help of any statute or case laws what is the definition of works contract and how the facts of the case fitted into it. Also, it is stated that after the designs etc are submitted, it is the contractee organization which decides whether to accept or reject such design. Assessee cannot do as it wished. In Para 3.3.9 CIT (A) said that entire financing is done by assessee. This is not correct because assessee spent the money and got reimbursement. The entire connota- tion and import of 'financing' for developing or developing and operating or devel- oping, operating and maintaining seems to have been misconstrued by the as- sessee as well as earlier CIT (Appeals). If we see a tender or agreement of BOT/BOOT projects, then it will be clear what 'financing' means. It actually means bringing in fund on its own for execution of the eligible business and not get any- thing from the government or local authority or statutory body. Because, that is why the section 80IA was introduced. I find that Para 2 of Explanatory Note to Finance Act, 2007 (Circular no. 3 dated 12.3.2008), reproduced supra, the pur- pose and objective was written as, "The tax benefit was introduced for the reason that industrial modernization re- quires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport sys- tems) 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 development of the infrastructure sector and not for the persons who merely exe- cute the civil construction work or any other works contract. The incentive has all

21 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 along been intended to benefit developers who undertake entrepreneurial and in- vestment risk and not contractors who only undertake business risk." It means, infrastructure facilities like road, bridge or railway system has to be developed, operated and maintained not with money of the government or local authority or statutory body because government cannot spend so much money and that is why it wanted private entrepreneurs to arrange fund and invest. If people like assessee makes a road or bridge or rail system taking reimbursement from gov- ernment, local authority or statutory body, the burden on government is not eased and, so, that is not the legislative intention. In my opinion, giving the benefit of 100% tax exemption u/s 80IA for executing construction on contract with financing from government through periodic reimbursements is not eligible for the deduction. In fact, that is why Explanation was inserted under sub-section (13) of section 80IA to convey the objective loud and clear. It is also said in the order that in all official documents, the assessee is termed as contractor and its work as contract. CIT (A)'s earlier order did not discuss citing any law or judgments of Supreme Court/ High Courts who are empowered to interpret law - when one is a developer and when works contractor. He has given his own inferences. Appellant has also made own self-serving statements to claim that it was a developer and not works contractor but without authority of any case law or statutory provision of law. Only the Supreme Court and High Courts can interpret law and only their inter- pretation is binding. Hence, I am unable to accept either the CIT(A)'s earlier orders or appellant's claim. 23. WORKS CONTRACT - In its submissions and, particularly, in the rejoinder, the appellant argued at length to claim that it was a developer and not a contractor and its business was not works contract. In doing so, appellant made a lot of assertions and declarations like, "...by a work contract it is understood that the relevant contractee asked the contractor to execute certain work as per the speci- fications or planning of the contractee and in such a case the concerned contractor does not have any role to play as regards the designing and/or making plans for implementation of the desired work. However, in a case where work relating to designing as well as conceptualising a development are entrusted to a person and the said person does the designing and thereafter submits a procedure which should be followed in implementing the desired project, the said work cannot be considered as mere work contract", as cited supra. But these were without citing any authority of statutes or case laws and hence, these are without merit. Hence, I do not accept these. The term, 'works contract' is not defined in the Act. Therefore, following the judgment of the Supreme Court in State of Orissa vs. The Ti- taghur Paper Mills Company Ltd, 1985 AIR 1293, 1985 SCR (3) 26 case, I search for the same in other available sources, viz., other statutes, case laws and dictionary. 23.1. First of all, Clause (119) of Section 2 of The Central Goods And Services Tax Act, 2017, defines "works contract' as "(119) "works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;" In the case of appellant, it is exactly the case. Appellant spends for service as well as goods and then transfers in lieu of consideration.

22 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 23.2. Article 366 of the Constitution of India or any other article of the Constitution does not contain the definition of either 'Supply' or 'Works Contract'. However, by virtue of the powers granted by Article 246-A, the Parliament and the State Legis- latures, both, have defined 'Supply' and 'Works Contract' in their respective enact- ments. A new Clause No. 2 (i) was inserted in Madras General Sales Tax Act (Madras IX of 1939) and it defined the 'Works Contract' to mean any agreement for carrying out for cash, deferred payment or other valuable consideration the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property or the fitting out, improvement or repair of any movable property. 200 MEN 23.3. In The State of Andhra Pradesh v. The Guntur Tobacco Limited (1965) 16 STC 240 it was held "a contract for work in the execution of which goods are used may take one of the three forms. The contract may be for work to be done for remuneration and for supply of materials used in the execution of the work for the price; it may be a contract for work in which the use of materials is accessory or incidental to the execution of work or it may be a contract for work and use or supply of materials though not accessory to the execution of the contract is voluntary or gratuitous... In the last class there is no sale because though property passes it does not pass for a price. Whether a contract is of the first or the second class must depend upon the circumstances: if it is of the first, it is a composite contract for work and sale of goods; where it is of the second category, it is a contract for execution of work not involving sale of goods. The question in each case is one about the true agreement between the parties and the terms of the agreement must be deduced from a review of all the attendant circumstances." In the present case it is the first category (in bold). 23.4. In State of Karnataka v. Pro Lab (2015) 8 SCC 557, the Supreme Court said: '20. To sum up, it follows from the reading of the aforesaid judgement in Larsen and Toubro case that after insertion of clause (29-A) in Article 366, the works contract which was indivisible one by legal fiction, altered into a contract, which is permitted to be bifurcated into two: one for sale of goods and the other for ser- vices, thereby making goods component of the contract exigible to sales tax. Fur- ther, while going into this exercise of divisibility, dominant intention behind such a contract, namely, whether it was for 'sale of goods or for services, is rendered otiose or immaterial. It follows, as a sequitur, that by virtue of clause (29 - A) of Article 366, the State Legislature is now empowered to segregate the goods part of the works contract and impose sales tax thereupon. It may be noted that Sched- ule VII List II Entry 54 to the Constitution of India empowers the State Legislature to enact a law taxing sale of goods. Sales Tax, being subject matter of the State List, the State Legislature has the competency to legislate over the subject.’ The consistent view is that a person who is engaged in a 'works contract', does not own the asset and merely gets compensation for executing the contract. In the present case also, appellant did not own the asset and merely got compensation for executing the contract. 23.5. In Indianoil Skytanking Private Ltd. Vs. DCIT, ITA Nos.583/Bang/2019, 299 & 407/Bang/2020 (date of order 20.5.2022), similar question of works contract came up before the Tribunal's Bangalore Bench, It was held

23 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08

"14. The Government of India (Minister TOMENT of Civil Aviation (MOCA) and Ban- galore International Airport Limited ('BIAL) signed a concession agreement through which BIAL may grant service provider rights to any person for carrying out the activities of the development, design, financing, construction, commissioning, maintenance, operation and management of the Airport. Accordingly, BIAL awarded a contract to design, finance, construct and operate an Aviation Fuel facility at the Bangalore International Airport to the assessee by entering into a Service Provider Right Holder ('SPRH'). 15. The assessee company constructed the aviation fuel facility at Bangalore In- ternational Airport. The aviation fuel facility as mentioned in SPRH means the fuel farm, the feeder lines and the hydrant system required to be constructed, com- missioned, operated and maintained in accordance with the specifications agreed between the assessee and BIAL in its SPRH agreement. The assessee completed the construction of aviation fuel facility in April 2008 and the facility was put to use on 24 May 2008. It is also operating the aviation fuel facility at Bangalore International Airport. Since the assessee is engaged in the business of developing, operating and maintaining "infrastructure facility" as defined in Explanation to section 80-IA(4) of the Act, in the return, it claimed deduction under section 80- IA(1) read with section 80-IA(4). … 19. The assessee also enclosed Form no. 10CCB certifying deduction claimed un- der section 80-IA and copy of service provider right holder agreement (SPRH). … 39. The alternate argument of the Id DR was that as per Explanation below section 80 IA(13), section 80-IA(4) does not apply to a business which is in the nature of a "works contract". As assessee got rights under the SPRH from BIAL, assessee has performed a "works contract" and therefore is not entitled to section 80-IA benefit. Ld. DR cited following judgments for this proposition:- (1) Judgment of the Karnataka HC in Yojaka Marine Pvt Ltd (ITA 428-429 of 2012 dated April 22, 2013), and (II) ITAT LB decision in the case of BT Patil & Sons Belgaum Construc- tions (P) Ltd (2010) 35 SOT 171 (Mumbai ITAT). 40. As a counter argument, the Id AR submitted that :- (i) The nature of work done by the assessee in respect of the design, financing and developing the entire fuel farm facility contract. ( INCOME TAX DEPARTMEN can- not be said to be a works ii) As per Para 3 of the SPRH contract (page 201 of the Paper book), the assessee has been granted certain 'service provider rights' which involves the entire gamut of design, construction, testing, financing and commissioning of the fuel farm fa- cility on a Build Own Operate Transfer (BOOT) model. (iii) Clause 3.2.3 of the SPRH contract (page 202) also recognizes the fact that the assessee is acting as an Independent Contractor and not as an agent or partner of BIAL (iv) The aspect of having 'contractual rights' under the SPRH is different from exe- cuting a works contract for and on behalf of a principal.

24 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 (v) The assessee has made an investment of Rs 125 crores in the Infrastructure pertaining to the Fuel Farm (see page 19 of Paper book - Building and Plant & Machinery under "Fuel farm facility & Hydrant systems). This appears in the Bal- ance Sheet on the assets side. The assessee is the owner of the entire fuel farm facility. 41. The Id. AR, therefore, submitted that the assessee cannot be equated with a person who is engaged in a 'works contract', who does not own the asset and merely gets compensation for executing the contract. 42. The Id. AR further submitted that the assessee is incorporated with the main object of designing, financing, constructing and operating an aviation fuel facility and providing into-plane refueling services at the airports. He invited our attention to the various clauses of SPRH and Operating agreement viz., Clause 4 (page 15 & 17), Clause 10 (page 26), Clause 19 (page 34835) which show that the assessee has constructed the aviation fuel facility and is the owner of the aviation fuel fa- cility for the period of 20 years at the end of which period the same is required to be transferred to BIAL. The said facility is under Built Own Operate and Transfer (BOOT) Model and as per CBDT Circular No.717 dated 14 August 1995 the de- duction under section 80-IA is available in case of Built Operate Transfer (BOT) or Built Own Operate & Transfer (BOOT) projects. The Id. AR pointed out to the au- dited financial statements for the year ended 31 March 2015. Note no. 10 of the Audited Financial Statement provides details of the Tangible fixed assets of the assessee wherefrom it may be observed that the assessee has capitalized fuel farm facility and Hydrant system in the books of account since it is the owner of these assets. Therefore, the assessee satisfies the condition of owning the infra- structure facility as mentioned above and eligible to claim deduction under section 80-IA of the Act. 44. The Hon'ble Karnataka High Court in case of Menzies Aviation Bobba (Banga- lore) P. Ltd (supra) has held that: "11. The Appellate Authority has also taken note of the fact that SPRH agreement gives rights for design, construction, financing, testing, commissioning, management and operation of the facility for a total period of 20 years to the assessee and the concession is on built, operate and transfer basis. Therefore, it has been held that every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. 45. In view of the aforesaid discussion, we are of the considered view that the fuel farm facility built, owned, and operated [BOT] by the assessee falls within the meaning of 'airport' and hence it is an 'infrastructure facility' as per Explana- tion to section 80IA(4) of the Act. Assessee therein has not made any investment and the contract entered into was for repairs and maintenance only. However. in assessee's case, the Fuel Farm is operated under an agreement for 20 years un- der BOOT Model." The above excerpt shows what is actually the import and meaning of "develop- ment, maintain and operate" for section 80IA. 23.6. On the basis of features of works contract stated in statutes and case laws cited above, I hold that assessee's business was of works contract.

25 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 9.1 The assessee contends that it financed the projects out of its own funds and had taken substantial risks for the same. However, it is observed that the assessee had been granted the contracts for design, layout and construction etc. for the project of Metro Rail with the DMRC, and flyovers by HRBC, which required the approval of both the agencies. DMRC is a company incorporated under the Companies Act, 1956 as is evident from the Certificate of Incorporation dated 3rd May, 1995 issued by Addl. Registrar of Companies, NCT of Delhi & Haryana and is neither a State Govt., nor a Central Govt., nor a Local Authority and not even a Statutory Authority. Hence, the primary condition of agreement with such entity is not fulfilled and deduction u/s 80-IA cannot be availed for the work carried out with DMRC as per the agreements with them. The assessee had not developed the entire metro system and has itself conceded that part of the electrification was given to some other agency. The entire project was not financed by the assessee so as to be treated as a developer. 9.2 The assessee may be correct in stating that “Local Authority” defined under section 10(20) is for the exclusive purpose of section 10(20). Though the argument may appear correct, however if a term is not defined elsewhere, its definition as appearing at any other place in the statute can be relied upon. Section 10(20) defines a local authority, but it does not imply that a local authority as per the definition, which enjoys exempt income, will be defined differently if the term occurs at any other the place. Moreover, the Ld. CIT(A) has taken the definition as per the order of the Hon’ble Supreme Court and there does not appear any material difference between the definition as per section 10(20) and as is held by the Hon’ble Supreme Court, which has been referred to by the Ld. CIT(A). Hence, neither the DMRC nor the HRBC are Local Authorities. Although Hooghly River Bridge Commissioners is a statutory organisation under the Government of West Bengal, however as is evident from the document

26 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 dated 20.04.2005 of the Vice Chairman, the flyover had been constructed under Calcutta Transport Infrastructure Development Project with the loan assistance from Japan bank for International Cooperation (JBIC) and was not financed by the assessee as is incorrectly being claimed. In fact, a perusal of the payment received shows that the assessee was periodically raising bills on part completion of the work and the payment was also being received throughout the year. Therefore, mere furnishing of performance guarantee, which is only a part of the total project cost and is also required from a contractor so as to ensure that the work is completed in time, does not justify the claim of the assessee that it had taken substantial financial risks. In fact, in the decision of Montecarlo Construction Ltd. (supra) relied upon by the assessee, the entire payment was claimed to be made by the appellant and the decision is distinguishable on facts as the issues noted in the case of the assessee are peculiar to the case of the assessee. The relevant extract from the order of the Ld. CIT(A) in this regard of non-fulfilling of the conditions required is as under: 29. Further, audit report in Form 10CCB (Rule 18BBB) was filed during assess- ment stage only and not filed with return and agreement was never filed. 30. On the basis of above discussion, I am of the opinion that out of the condi- tions mentioned in Para - 7 supra, the following are not fulfilled: Condition Comments Profit should be from eligible business, Not fulfilled (as I hold the assessee viz., developing/ developing and operat- did not do any of these). ing/ developing, operating and main- taining [Section 80IA(1)] Deduction to be allowed in any ten AYs lt constructed on contract and out of twenty years beginning from the handed over. year in which the undertaking/enter- prise 'develops and begins to operate' any infrastructure facility [Proviso to Section 80IA(2)] Eligible business is any undertaking/ Assessee did not do any of these. enterprise carrying on the business of developing OR operating and maintain- ing OR developing, operating and main- taining any infrastructure facility which

27 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 fulfils all of the following conditions, namely: (a) It is owned by a company registered No adverse finding in India/ consortium of such companies/ authority or board or corporation or any other body established or constituted under any central or state Act (a) It has entered into agreement with Not fulfilled the central/ state government or local authority or statutory body for develop- ing/ operating and maintaining/devel- oping, operating and maintaining any in- frastructure facility (b) it has started or starts operating and No adverse finding maintaining the infrastructure facility on or after the 1.4.1995 (c) If the infrastructure facility is trans- The flyovers and metro rail tunnels ferred to another undertaking or enter- etc were handed over to contractee prise after developing, it is the transferee organization after construction. For undertaking which will get the deduction this reason also, even if deduction for unexpired period. This and the words allowed in year of construction, the 'develops and begins to operate' in Pro- in subsequent years as the trans- viso to Section 80IA(2) indicate that if fa- feree, viz., HRBC of DMRC, as the cility is simply developed, deduction will case may be will be entitled to the not be for twenty years. It will have to be deduction. operated and maintained by developer or transferee and the operating/main- taining undertaking will get it for re- maining period. (d) Infrastructure facility shall have to be No adverse finding only road including toll road, a bridge or a rail system OR a highway project in- cluding housing or other activities being an integral part of the highway project OR a water supply project, water treat- ment system, irrigation project, sanita- tion and sewerage system or solid waste management system OR a port, airport, inland waterway or inland port [Section 80IA(4)] 1. Profit should not arise out of business For detailed discussion above, I in the nature of 'works contract' [Expla- hold that it was works contract nation below Section 80IA introduced by Finance Act, 2007, w.e.f. 1.4.2000] Profit of infrastructure facility will be cal- Nothing has been mentioned about culated as if the infrastructure facility is profit determined on the basis of the only business of the assessee [Sec- separate accounts by every under- tion 80IA(5)] taking Audit report in Form 10CCB as per Rule Not fulfilled 18BBB will have to be submitted with re- turn separately for each undertaking or enterprise accompanied by P&L account and Balance sheet of each undertaking

28 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 as if the undertaking or the enterprise were a distinct entity [Rule 18BBB (2) read with Section 80IA(7)]: In the case of an enterprise carrying do- Not fulfilled ing business of an infrastructure facility, the form shall be accompanied by a copy of the agreement of the enterprise with Central/ State Government or local au- thority [Rule 18BBB (3) read with Section 80IA(7)]. 31. Appellant argued that AO should have followed CIT (A)'s order in AY 2006- 07. In this context, it is settled law that estoppel and res judicata are not appli- cable in direct tax proceedings. 32. For the above reasons, I am of the opinion that appellant did not fulfil condi- tions of section 80IA and, consequently, not eligible to get the deduction.

9.3 Further, the Legislative Intention has also been spelt out in the order of the Ld. CIT(A) as under: 8. AMENDMENT W.E.F. 1.4.2000: Explanation below Section 80IA was intro- duced by Finance Act, 2007, w.e.f. 1.4.2000. It read, "Explanation -For the removal of doubts, it is hereby declared that nothing con- tained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1).” 9. LEGISLATIVE INTENTION: Memorandum of Finance Act, 2007, read, "Clarification regarding developer with reference to infrastructure facil- ity, industrial park, etc. for the purposes of section 80-IA Section 80-IA, inter-alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, Industrial Parks and Special Economic Zones. The tax benefit was introduced for the reason that industrial modernization re- quires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport sys- tems) 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 development of the infrastructure sector and not for the persons who merely exe- cute the civil construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertak- ing or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into a contract with another person [i.e.,

29 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April, 2000 and will, ac- cordingly, apply in relation to the assessment year 2000-2001 and subsequent years. [Clause 22]" 10. LEGISLATIVE INTENTION: Circular no. 3/2008 dated 12.3.2008, also ex- plained the amendment (Explanatory Notes to the Finance Act, 2007) "Clarification regarding developer with reference to infrastructure facil- ity, industrial park, etc. for the purposes of section 80-IA. 1. Section 80-IA provides for a ten-year tax benefit to an enterprise or an under- taking engaged in development or operation and maintenance or development, operation and maintenance of infrastructure facilities, providing telecommunica- tion service, generation or generation and distribution of power or development of an Industrial Parks or a Special Economic Zones. 2. The tax benefit was introduced for the reason that industrial modernization requires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport sys- tems) 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 development of the infrastructure sector and not for the persons who merely exe- cute the civil construction work or any other works contract. The incentive has all along been intended to benefit developers who undertake entrepreneurial and in- vestment risk and not contractors who only undertake business risk. 3. Accordingly, it has been clarified by inserting an explanation that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-1A) for executing works contract, will not be eligible for the tax benefit under section 80-IA. 4. Applicability- This amendment will take effect retrospectively from the 1st day of April, 2000 and will, accordingly, apply in relation to the assessment year 2000- 2001 and subsequent assessment years."

30 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08 development, operation and maintenance, & development, operation and maintenance were to enable a developer, who may not have the wherewithal to operate and maintain the infrastructure facility created but has the resources and the willingness to develop the infrastructure facility only with the operation and maintenance assigned to some other entity, so as to undertake entrepreneurial and investment risks for development of the infrastructure facility. The agreements, extracts of which have been filed with the paper book, also mention contracts and the assessee as a “contractor” was given the contract for the design, and completion of the work by both the agencies and for which periodic payments were received by the assessee. The arrangement is similar to that of a contract and a contractor is also required to furnish performance and other guarantees as a part of the contract on which tax has been deducted at source. Further, in the AY 2006-07, the Ld. CIT(A) did not consider the aspects noted by the Ld. AO in the impugned assessment year. Thus, viewed in totality, the claim of the assessee for deduction under section 80-IA(4) of the Act is not justified. 11. Hence, the grounds of appeal from Ground Nos. 1 to 5 are dismissed. Ground No. 6 is a general ground and does not require any separate adjudication. 12. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 9th September, 2024.

Sd/- Sd/- (Sanjay Garg) (Rakesh Mishra) Judicial Member Accountant Member

Dated: 9th September, 2024 AK, PS

31 ITA No. 1377 /Kol/2023 Senbo Engineering Limited AY: 2007-08

Copy to: 1. The Assessee 2. The Respondent. 3. CIT(A), NFAC, Delhi 4. The CIT, 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order

Assistant Registrar ITAT, Kolkata Benches, Kolkata