M/S MKC INFRASTRUCTURE LTD.,,ANJAR vs. THE ASSTT. COMMR. INCOME TAX, CIRCLE,, GANDHIDHAM

आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-

Page No 2 M/s. MKC Infrastructure Ltd. vs. ACIT

2. The assessee has taken the following grounds of appeal:-

“1.0 The grounds of appeal mentioned hereunder are without prejudice to one another. 2.0 The learned Commissioner of Income-tax (Appeal)-3, Rajkot [hereinafter referred to as the CIT(A)] erred on facts as also in law in confirming the disallowances of claim of deduction of ? 1,04,08,7397- u/s.80IA(4) of the Income- tax Act, 1961 [hereinafter referred as to the "Act"] made by the Assessing Officer on the alleged ground that the appellant is not eligible for deduction u/s.80IA(4) as the appellant failed to fulfill the condition specified u/s.80IA(4) of the Act. The order passed by the Id. CIT(A) is totally unjustified on facts as also in law and claim of deduction u/s.80IA(4) may kindly be directed to be allowed.

3. Your Honor’s appellant craves leave to add, amend, alter or withdraw any or more grounds of appeal on or before the hearing of appeal.”

3. The brief facts of the case are that the assessee is engaged in the business of infrastructure project development & civil construction. It filed return of income for the year under consideration declaring total income at � 1,20,47,190/- and claimed deduction of � 1,04,08,739/- u/s 80IA(4) of the Act. During the assessment proceedings, the AO denied the claim of the assessee u/s 80IA(4) of the Act on ground that the assessee is not a Developer but is a Contractor and therefore not eligible for deduction u/s 80IA(4) of the Act. The AO further alleged that the assessee has not maintained separate accounts for each infrastructure facilities and hence assessee failed to fulfill the conditions prescribed u/s 80IA(4) of the Act and therefore he rejected the claim of deduction of � 1,04,08,739/- and added the same to the returned income of the assessee. While passing the order, the AO made the following observations:

Page No 3 M/s. MKC Infrastructure Ltd. vs. ACIT

“In light of above facts & discussion, I disallow the deduction u/s 80IA claimed by assessee j on all of the grounds given below (which were all necessary together): a) Assessee has not constructed or developed any infrastructure facility nor begins to operate any infrastructure facility, thus period for 80IA not started in light of 80IA(2); in fact except one no project is completed by the assessee during the year. b) Assessee" has-accepted that it does not have few of the agreement with government authorities. c) As assessee has not constructed nor started operating and maintaining infrastructure facility, thus not eligible in light of 80IA(4)(i)(c). d) Assessee has not submitted separate form 10CCB for each infrastructure facility. e) Assessee has not attached the desired agreement with 10CCB, thus it was incomplete in light of rule 18BBB(3) & action point 4, below 80IA. f) From the facts appearing from tender documents, it has been ascertained that assessee is merely a contractor for work, thus covered under explanation below 80IA(13).”

“5.2 I have carefully considered the contention of the appellant and the assessment order. I fully agree with the findings of the A,O. on this matter. However, it is seen that this issue has been decided by the Hon'ble Gujarat High Court in the case of Katira Construction Ltd. vs. Union of India (2013) 352 ITR 5 13. .................................................................................................................................... .................................................................................................................................... 5.3 In this landmark decision, the Hon'ble Gujarat High Court has laid down the following principles:-

Page No 4 M/s. MKC Infrastructure Ltd. vs. ACIT

4. The legislature by way of impugned amendment has distinguished between the cases of developing/operating and maintaining/developing, operating and maintaining any infrastructure facility from the works contract awarded by any person, be it the central or state government, executed by the undertaking or enterprise seeking such an exemption. There is an intrinsic difference between developing and infrastructure facility and executing a works contract. 5.4 In the present case, it is an undisputed fact that the appellant has awarded works contract by the State Government. The appellant's contention that because of the investment made and the cumulative nature of work carried out by him, he is a developer and hence entitled for deduction u/s. 80IA(4), has no force in light of the principles laid down by the Hon'ble Gujarat High Court in the case of Katira Construction (supra). In view of the findings of the Hon'ble Jurisdictional High Court, it is held that the appellant is not entitled for deduction u/s.80IA(4). It is also necessary to mention that this decision was subsequent to the decision of the Hon'ble ITAT, Rajkot Bench or the decision of the CIT(A)-II, Rajkot relied upon by the appellant. Therefore, in light of this decision, the findings given in the earlier decisions stand negated. This ground of appeal is thus dismissed. 6.0 Ground No.4 is regarding charging of interest u/s.234A. 234B. 234C & 234D of the I.T. Act. Since the charging of interest is consequential in nature, therefore, no interference is called for. 7.0 Last ground of appeal is regarding initiation of penalty proceedings u/s. 271(1)(c) of the I.T. Act. In view of the facts that the proceedings have not crystallized no interference on this point is called for. 8.0 In the result, the appeal is dismissed.”

5.1 However, before we analyse the order of Ld. CIT(Appeals) in respect of each individual projects, it would be useful to go through the relevant statutory provisions and law on the subject in light of various judicial precedents to have a better understanding of the precise scope of the deduction u/s 80-IA(4) . The relevant extracts of the section are reproduced below.

5.2 Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.

80-IA. 4) 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)

Page No 6 M/s. MKC Infrastructure Ltd. vs. ACIT 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:

The above provision has been further clarified by way of explanation under sub-section (13) of section 80-IA(4) of the Act, with retrospective effect from 01-04-2000, which reads as under:

Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1)

The Memorandum to the Finance Bill2009 explaining the above provision reads as under Further, with a view to preventing the misuse of the tax holiday under section 80-IA of the Income-tax Act, it is proposed to amend the Explanation to the said section to clarify that nothing contained in the said section shall apply in relation to a business referred to in sub-section (4) of the said section which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by an undertaking or enterprise referred to in sub-section (1) thereof. This amendment will take Page No 7 M/s. MKC Infrastructure Ltd. vs. ACIT effect retrospectively from 1st April, 2000 and will, accordingly, apply in relation to assessment year 2000-2001 and subsequent years.

Further, the Memorandum to the Finance Bill 2007is also reproduced below to throw useful light on the intent behind introducing the above provisions (effective from 01-04-2000): Clarification regarding developer with reference to infrastructure facility, 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 requires a massive 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 development 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 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 [i.e., undertaking or Page No 8 M/s. MKC Infrastructure Ltd. vs. ACIT 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, accordingly, apply in relation to the assessment year 2000-2001 and subsequent years.

5.3 A reading of the various Statutory provisions read with the Memorandum brings out the following salient features of claim of deduction under section 80-IA(4) of the Act:

Firstly, purpose of introduction of beneficial provisions under section 80- IA(4) of the Act is for encouraging private sector participation. Secondly, only investment in development of the infrastructure sector is eligible for deduction under section 80-IA(4) of the Act and benefit is not available for the persons who merely “executes” the “civil construction work” or “any other works contract”. Thirdly, 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(4) of the Act. Fourth, the Income Tax Act does not define what would constitute as “works contract/works contractor” (as opposed to section 194C of the Act, where the word “contractor” finds a specific definition). However, from the language of the Statute read with the Memorandum the Finance Bill, benefit is sought to be denied only to persons who merely “executive” works contract, but in cases where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, benefit under section 80-IA(4) of the Act would be available. Fifth, apparently there is no conflict between the term “works contractor” and Page No 9 M/s. MKC Infrastructure Ltd. vs. ACIT “developer” and in case a person/assessee carries out activity the nature of “civil construction” work by making the investment and himself executing the development work, then such person would be eligible for benefit under section 80-IA(4) of the Act. Notably, the ITAT Calcutta in the case of DCIT v. Simplex infrastructure Ltd (2017) 49 CCH 88, held that 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”.

5.4 As stated above, the intent of the Statute even post Amendment vide Finance and 2009 is not, in our view, to completely deny benefit of deduction under section 80-IA(4) of the Act to all “works contracts/work- contractors ” because that would amount to defeating the very purpose for which section 80-IA(4) of the Act was introduced viz. to boost industrial modernization through expansion and improvement in infrastructure by encouraging private sector participation by way of investment in development of the infrastructure sector. The memorandum to the Finance Bill 2007 specifically provides that the purpose of the tax benefit has been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely “execute” the “civil construction work” or “any other works contract”. Therefore, the provisions cannot, in our view, be read in manner that all “works contracts” have been ousted from the scope of benefit under section Page No 10 M/s. MKC Infrastructure Ltd. vs. ACIT 80-IA(4) of the Act (because that would be defeating the very purpose for which section 80-IA(4) of the Act was introduced), but the benefit is sought to be denied only to persons who merely “execute” works contract. Therefore, in cases where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, benefit under section 80-IA(4) of the Act would be available. Therefore, a co-joint reading of all the provisions reproduced above, read with the memorandum, points to the fact that the benefit under section 80-IA(4) of the Act continues to be available to works “contractor/civil contractor” engaged in “development” of the project by making the investment and himself executing the development work and is only sought to be denied to those class of persons engaged merely in “execution” of works contract/ civil construction work.

5.5 Now, in the absence of any definition of “works contractor” with reference to section 80-IA(4) of the Act, the issue for consideration is what class of cases would fall under the definition of “mere execution” of works contract and hence not eligible for benefits under section 80-IA(4) of the Act which cases would fall under the category of “development activities” done by a civil/ works contractor and hence eligible for benefits under section 80- IA(4) of the Act. The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs. ACIT (2012) 51 SOT 0207 (Hyd) (URO) held that 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.

Page No 11 M/s. MKC Infrastructure Ltd. vs. ACIT 5.6 Therefore, in our view, in order to decide whether the project undertaken is in capacity of a “developer” or “work contractor” has to be analysed on its own set of facts for each individual project. Various factors have to be seen whether the contract qualifies as “development contract” or mere “works contract” for example to enumerate a few factors firstly, there must come into existence some “new infrastructure facility” to be able to avail the beneficial provisions u/s 80-IA(4) of the Act. Mere repair/ maintenance/ upgradation/ restoration etc. would not be by itself sufficient to avail the benefits of provisions of 80-IA(4) of the Act, irrespective of scale of operations or other attendant conditions imposed on the works contractor. Second, how are the funds being mobilised by the contractor i.e. if the government gives any mobilisation advanced to the contractor then what are the conditions attached to granting of this mobilisation advance i.e. whether the contractor is required to give certain security deposit/bank guarantee against the same. In sum and substance, whether any financial risk is being undertaken by the contractors. Thirdly whether the agreement is for carrying out any specific work being part of the project or it is for development of the facility as a whole, Fourthly, whether the contractor is required to bring his own manpower and material and expertise to the job or whether the materials and designs etc are provided by the Government. Whether the assessee has deployed its own plant and machinery towards execution of the project or is it a mere supplier of manpower Fifth,, whether the responsibility of the contractor ends with handing over the project or whether the responsibility in relation to the project continues even post the handing over the project i.e. whether the contractor is required to undertake the maintenance of the infrastructure for a period of 12 months or more after Page No 12 M/s. MKC Infrastructure Ltd. vs. ACIT handing over of the project to the Government, Sixth, if during the period of construction any damage is incurred and whether the contractor shall be responsible for the same i.e. whether the assessee has 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 Seventh, whether the contractor was responsible for the correction of defects arising in the works at its own cost and responsibility.

5.7 To sum up, (i) first to see any new infrastructural facility has been put in place (and not mere repairs/ restoration/ upgradation/ strengthening etc. is done of the existing facility) (ii) In addition to works contract, the assessee undertakes addition responsibilities and risks attached to the project being undertaken, both financial risk as well as undertaking responsibility towards various other obligations attached towards successful completion and handling over the project including post completion performance guarantee, then he would, in our considered view, be eligible to deduction u/s 80-IA(4) of the Act.

5.8 Now having discussed the legal background, we shall come to the facts of the case in hand. Before us, during the course of hearing, the counsel for the assessee placed on record a table showing details of various projects undertaken by the assessee during the year under consideration and the respective income earned from the above projects, which is eligible for deduction u/s 80-IA(4) of the Act. The table giving list of projects undertaken by the assessee during the year under consideration is reproduced below for reference:

Page No 13 M/s. MKC Infrastructure Ltd. vs. ACIT Sr. No. Name of Project/Work 1 Executive Engineer Gandhinagar (Gandhinagar 1 2 3 & 4 Road) 2 Executive Engineer Gandhinagar (Gandhinagar G' ROAD) 3 Executive Engineer R & B Division Bhuj (Mandvi-Ghadhsisa Road) 4 M.P.R.R.D.A. P.I.U. No. 1 Pac.19114 5 M.P.R.R.D.A. P.I.U. No. 1 Pac.1943 6 M.P.R.R.D.A. P.I.U. No. 1 Pac.1951 -A 7 M.P.R.R.D.A. P.I.U. No. 1 Pac,1958 8 M.P.R.R.D.A. P.I.U. No. 1 Package 1974 9 Executive Engineer R & B Division Bhuj (Raper-Dholavira Road) 10 NBCC (Package XXV) 11 Executive Engineer R & B Division Bhuj (Deshalpar - Siracha Road) 12 Executive Engineer R & B Division Bhuj (Fategadh-Shivgadh Road) 13 Executive Engineer PIU Division Bhuj (Mundra PKG-3) 14 Executive Engineer Kutch Panchayat Division Bhuj (Akri -T humbadi Road)

Page No 14 M/s. MKC Infrastructure Ltd. vs. ACIT 5.9 Now, we shall discuss the scope of work being undertaken for each individual project and see whether the revenues from such project are eligible for deduction u/s 80-IA(4) of the Act.

Project 1: Executive Engineer Gandhinagar : 1, 2, 3 and 4 Road:

As per the terms of agreement, we observe that this is a project undertaken for converting a three lane highway road into a four lane road. In addition, the assessee deposited earnest money and also security deposit in respect of the said project (page 34 of the paper book). Further, the terms of contract contained a specific clause for liquidated damages in case of delay in part of the assessee completing the project within stipulated time. Further, clause 17A provide for the defect liability period of three years from the certified date of completion of work and also provides that 5% of the amount of each running bill shall be held and released after the free maintenance guarantee period of three years is over. Further, the contract covers various liabilities in respect to the assessee for any damage done in or outside of work.

In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified 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 Page No 15 M/s. MKC Infrastructure Ltd. vs. ACIT purpose of section 80-IA(4)(i). However, simply relaying or repairing of an existing Road would not be classifiable as a new infrastructure facility for this purpose. In the instant facts, looking into the fact that the project involved four laning of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project is eligible for deduction u/s 80-IA(4) of the Act.

Project 2: Executive Engineer Gandhinagar :‘G” Road:

As per the terms of agreement, we observe that this is a project undertaken for converting existing highway road into a four lane road.

Project 3: Executive Engineer R&B Division Bhuj As per the terms of agreement, we observe that this is a project undertaken for converting existing single lane highway road into a two lane highway road.

In respect of projects 2 and 3 above, since the scope of work involves expansion of the existing roads from 3 to 4 lane (for project 2) and from 1 to 2 lane highway (for project 3), we are of the considered view that the assessee in respect of the projects 2 and 3 has brought into effect a new infrastructure facility. As per the terms of agreement, we observe that this is a project undertaken for converting existing highway road into a four lane road, our observations with respect to project 1 would apply to projects 2 and 3 as well and accordingly in view of the above observations, we are of Page No 16 M/s. MKC Infrastructure Ltd. vs. ACIT the considered view that the assessee is eligible for claim of deduction /s 80- IA(4) of the Act in respect of projects 2 and 3.

Project 4: MPRRDA P.I.U. No. 1 Pac 19114 The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years. Further, as per the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project. Looking into the totality of facts of the instant project, we are of the considered view that the assessee has brought in place a new infrastructure facility as envisaged /s 80-IA(4) of the Act and further in view of the terms and conditions highlighted above, the assessee is eligible for claim of deduction /s 80-IA(4) of the Act in respect of revenue is earned from project 4 above.

Project 5: MPRRDA P.I.U. No. 1 Pac 1943:

The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years. Further, the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project. Looking into the totality of facts of the instant project, we are of the considered view that the assessee has brought in place a new infrastructure facility as envisaged /s 80-IA(4) of the Act and further in view of the terms and conditions highlighted above, the assessee is eligible for claim of Page No 17 M/s. MKC Infrastructure Ltd. vs. ACIT deduction /s 80-IA(4) of the Act in respect of revenue is earned from project 5 above.

Project 6: MPRRDA P.I.U. No. 1 Pac 1951-A:

The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years. Further, the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project. Looking into the totality of facts of the instant project, we are of the considered view that the assessee has brought in place a new infrastructure facility as envisaged /s 80-IA(4) of the Act and further in view of the terms and conditions highlighted above, the assessee is eligible for claim of deduction /s 80-IA(4) of the Act in respect of revenue is earned from project 6 above.

Project 7: MPRRDA P.I.U. No. 1 Pac 1958:

The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years. Further, the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project. Looking into the totality of facts of the instant project, we are of the considered view that the assessee has brought in place a new infrastructure facility as envisaged /s 80-IA(4) of the Act and further in view of the terms and conditions highlighted above, the assessee is eligible for claim of Page No 18 M/s. MKC Infrastructure Ltd. vs. ACIT deduction /s 80-IA(4) of the Act in respect of revenue is earned from project 7 above.

Project 8: MPRRDA P.I.U. No. 1 Pac 1974:

The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years. Further, the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project. Looking into the totality of facts of the instant project, we are of the considered view that the assessee has brought in place a new infrastructure facility as envisaged /s 80-IA(4) of the Act and further in view of the terms and conditions highlighted above, the assessee is eligible for claim of deduction /s 80-IA(4) of the Act in respect of revenue is earned from project 8 above.

Project 9: R&B Division Bhuj (Raper Dhovalia Road):

As per the terms of agreement, we observe that this is a project undertaken for converting a single lane highway road into a two lane highway road. In addition, the assessee deposited Reserve amount and also performance bond money in respect of the said project (page 213 of the paper book). Further, the terms of contract contained a specific clause for liquidated damages in case of delay in part of the assessee completing the project within stipulated time (page 219 of Paper-Book). Further, Relevant clause 17A provides for the defect liability period of one year from the certified date of completion Page No 19 M/s. MKC Infrastructure Ltd. vs. ACIT of work. Further, the contract covers various liabilities in respect to the assessee for any damage done in or outside of work.

In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income- tax Act, 1961. Vide the above Circular, CBDT clarified 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 80-IA(4). However, simply relaying or repairing of an existing Road would not be classifiable as a new infrastructure facility for this purpose. In the instant facts, looking into the fact that the project involved four laning of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project No. 9is eligible for deduction u/s 80-IA(4) of the Act.

Project 10: NBCC (Package XXVV):

The scope of work in respect of project number 10 is construction of link road from Lakhpat to BP-1175 at Rann of Kutch, Gujarat for the length of 24.840 km. As per the terms contract, the assessee was liable to mobilise all assessee planned/machinery and equipment as required for the successful and timely completion of work (page 263 of paper book). Further, the assessee was required performance Bank guarantee equivalent to 5% of the contract value (page 263 of the paper book). In addition, the assessee was Page No 20 M/s. MKC Infrastructure Ltd. vs. ACIT also required to get security deposit/retention money from each earning bill equivalent to 5% of the value of each running bill (page 275 of paper book). Further, as per the terms of the contract the responsibility of mobilisation of men, material and machinery was included in the price and no separate payment on this account was able to the assessee in respect of this project.

In the instant facts, looking into the fact that the project involved construction of new road and coupled with the terms of contract, in our considered view, the revenue from this project is eligible for deduction u/s 80-IA(4) of the Act.

Project 11: Executive Engineer R&B Division Bhuj (Deshlapar- Siracha Road):

As per the terms of agreement, we observe that this is a project undertaken for widening and strengthening of the existing road. In addition, that the assessee deposited reserve money and also performance bond deposit in respect of the said project (page 330 of the paper book). Further, the terms of contract contained a specific clause for liquidated damages in case of delay in part of the assessee completing the project within stipulated time. Further, clause 17A provide for the defect liability period of one year from the certified date of completion of work. Further, the contract covers various liabilities in respect to the assessee for any damage done in or outside of work.

Page No 21 M/s. MKC Infrastructure Ltd. vs. ACIT In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income- tax Act, 1961. Vide the above Circular, CBDT clarified 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 80-IA(4). However, simply relaying or repairing of an existing Road would not be classifiable as a new infrastructure facility for this purpose. In the instant facts, looking into the fact that the project involved both widening and strengthening of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project is eligible for deduction u/s 80-IA(4) of the Act.

Project 12: Executive Engineer R&B Division Bhuj (Fatehgardh- ShivgadhRoad):

A perusal of the terms of the contract in respect of project 12 indicates that scope of work in this project is only restricted to strengthening of the existing roads. We note from the terms of contract that no new road has been brought into existence and further there is also no expansion/widening of the existing roads. Therefore, in respect of project number 12, we are of the considered view that the assessee has not brought into existence/developed any new “infrastructure facility” and hence he is not eligible for claim of deduction under section 80-IA(4) of the Act. As discussed above, in order to be eligible for claim of deductionunder section 80-IA(4) of the Act, the Page No 22 M/s. MKC Infrastructure Ltd. vs. ACIT primary condition which needs to be met is that the assessee should have developed/brought into existence of a new infrastructure facility. In our considered view, mere strengthening of the existing roads would not qualify as bringing into existence in a new infrastructure facility so as to be eligible for claim of deduction under section 80-IA(4) of the Act.

Accordingly, in our considered view, the assessee is not eligible for claim of deduction under section 80-IA(4) of the Act in respect of revenues from project number 12.

Project 13: Executive Engineer R&B Division Bhuj (Mundra PKG-3):

A perusal of the terms of the contract in respect of project 13 indicates that scope of work in this project is only restricted to “improvement” of the existing roads. We note from the terms of contract that no new road has been brought into existence and further there is also no expansion/widening of the existing roads. Therefore, in respect of project number 13, we are of the considered view that the assessee has not brought into existence/developed any new “infrastructure facility” and hence he is not eligible for claim of deduction under section 80-IA(4) of the Act. As discussed above, in order to be eligible for claim of deduction under section 80-IA(4) of the Act, the primary condition which needs to be met is that the assessee should have developed/brought into existence of a new infrastructure facility. In our considered view, mere strengthening / improvement of the existing roads would not qualify as bringing into existence in a new infrastructure facility so as to be eligible for claim of deduction under section 80-IA(4) of the Act.

Page No 23 M/s. MKC Infrastructure Ltd. vs. ACIT Accordingly, in our considered view, the assessee is not eligible for claim of deduction under section 80-IA(4) of the Act in respect of revenues from project number 13.

Project 14: Executive EngineerKutch Panchayat Division Bhuj (Akri- Thumbadi Road):

A perusal of the terms of the contract in respect of project 14 indicates that scope of work in this project is only restricted to “improvement” of the existing roads. We note from the terms of contract that no new road has been brought into existence and further there is also no expansion/widening of the existing roads. Therefore, in respect of project number 14, we are of the considered view that the assessee has not brought into existence/developed any new “infrastructure facility” and hence he is not eligible for claim of deduction under section 80-IA(4) of the Act. As discussed above, in order to be eligible for claim of deduction under section 80-IA(4) of the Act, the primary condition which needs to be met is that the assessee should have developed/brought into existence of a new infrastructure facility. In our considered view, mere strengthening / improvement of the existing roads would not qualify as bringing into existence in a new infrastructure facility so as to be eligible for claim of deduction under section 80-IA(4) of the Act.

5.10 Accordingly, in our considered view, the assessee is not eligible for claim of deduction under section 80-IA(4) of the Act in respect of revenues from project number 14.

Page No 24 M/s. MKC Infrastructure Ltd. vs. ACIT

Order pronounced in the open court on 13-01-2023