ASST CIT CEN CIR 25, MUMBAI vs. PATEL ENGINEERING LTD, MUMBAI

आयकर अपीऱीय अधिकरण, म ुंबई न्यायपीठ ‘सी’, म ुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL “C”, BENCH MUMBAI सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं श्री अभयजित ससिंह, न्ममयमक सदस्म BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM आमकय अऩीर सिं./ITA No.6605/Mum/2013 (नििाारण वषा / Assessment Year :2005-06) ACIT, CC-25, Mumbai Vs. M/s Patel Engineering Ltd., S.V.Road, Gogeshwari (W), Mumbai-400102 स्थममी रेखम सिं./ िीआइआय सिं./ PAN/GIR No. : AAACP 2567 L (अऩीरमथी /Appellant) (प्रत्मथी / Respondent) .. AND Cross Objection No.09/Mum/2015 (नििाारण वषा / Assessment Year :2005-06) M/s Patel Engineering Vs. ACIT, CC-25, Mumbai Ltd., S.V.Road, Gogeshwari (W), Mumbai-400102 स्थममी रेखम सिं./ िीआइआय सिं./ PAN/GIR No. : AAACP 2567 L (अऩीरमथी /Appellant) (प्रत्मथी / Respondent) .. यमिस्र् की ओर से /Revenue by : Shri Deepkant Prasad यनधमवरयती की ओर से /Assessee by : Shri Mayur Kisnadwala सुनर्मई की तमयीख / Date of Hearing : 30/09/2015 घोषणम की तमयीख/Date of Pronouncement 18/11/2015 आदेश / O R D E R PER R.C.SHARMA (A.M): The revenue has filed an appeal whereas the assessee has filed cross objection against the order of CIT(A), Mumbai, for the assessment years 2005-06, in the matter of order passed u/s.143(3) of the I.T.Act. The revenue in its appeal has taken the following grounds :-

2 ITA No.6605/13 & CO No.9/15 1. "On the facts and in the circumstances of the case and in Law, the Ld. CIT(A) erred in allowing assessee's claim for deduction under section 80IA(4) of Rs.21,74,92,283/- out of total disallowance of Rs.23,34,38,103/- made by the assessing Officer." 2. "On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in holding that the assessee is the developer in projects viz. Koyna Project, Udhampur Project, Srisailam Weir Work Project, Ghatghar Dam Project, Kalwakurthy Lift Irrigation Project, Jogeshwari Vikhroli Link Road Project, Santacruz Chembur Link Road Project within the meaning of provisions of sec. 80IA(4) and is therefore entitled for deduction u/s 80lA in respect of profits and gains arising out of development of these projects." 3. "On the facts and circumstances of the case in Law, the Ld. CIT(A)'s has erred in holding that the assessee is a developer whereas the assessee is only a contractor of the Govt. of Maharashtra/Govt. of India/Govt. of Andhra Pradesh/Andhra Pradesh Power General Corporation/MMRDA etc. for executing the work of part of the project as per terms and conditions of the agreement." 4. "On the facts and circumstance of the case and in Law, the Ld. CIT(A)'s has erred in deleting the disallowance of Rs.88,69,937/- made by the Assessing Officer u/s 14A." The assessee in its cross objection has taken the following grounds :- 1. On the facts and circumstances of the case and in Law, the Learned CIT(A) erred in confirming the order of the A.O. that the assessee is not entitled to claim for deduction u/s 80IA(4) in respect of the Teesta Lower dam Project. 2. On the facts and circumstances of the case and in Law, the Learned CIT (A) erred in directing the A.O to tax the income of the LGE&C - Pate I JV on substantive basis. 3. On the facts and circumstances of the case and in Law, the Learned CIT(A) erred in confirming the action of A.O in attributing certain expenses incurred by the assessee to the projects eligible for deduction u/s 80 IA(4). 4. On the facts and circumstances of the case and in Law, the Learned CIT(A) erred in not directing the A.O to grant credit of T.D.S as claimed by the assessee 5. On the facts and circumstances of the case and in Law, the Learned CIT(A) erred in holding that the ground regarding disallowance u/s 14A while computing book profit u/s 115 JB is infructuous.

3 ITA No.6605/13 & CO No.9/15 6. On the facts and circumstances of the .case and in Law, the Learned CIT(A) erred in holding that the levy of interest u/s 234B consequential in nature. 2. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a public limited company engaged in the business of Civil Engineering projects such as tunnels, water supply projects, irrigation projects, hydel power projects, dams, bridges, rail projects etc. The assessee filed its return of income declaring total income of Rs.3,33,24,319/-. The book profit under Section 115JB of the Act was Rs.34,79,81,723/- and as the tax payable on the book profits was more than that of total income, therefore, the assessee paid tax on the book profits. Thereafter the income of the assessee was subjected to scrutiny and on completion of assessment u/s.143(3), the AO made the following disallowances and determined the total income at Rs.27,57,84,740/- :- i) Disallowance of deduction claimed u/s.80IA; ii) Disallowance u/s.14A; iii) Protective assessment of income from Joint Venture LGE & C-Patel JV; iv) Reduction of claim u/s.80IA(4); v) Reduction u/s.80IB(10); vi0 TDS Credit on advances received; vii) Computation of income u/s.115JB; viii) Interest u/s.234B; ix) Interest u/s.234D; and x) Initiation of Penalty proceedings u/s.271(1)(c) 3. The A.O has analyzed the various Agreements entered into and arrived at a finding that the assessee is merely a contractor as is referred to in all its Agreements with the various authorities. The A.O has pointed out that the Finance Act 2007 has amended section 80IA(4) retrospectively from A.Y 2000-2001, by inserting Explanation wherein it

4 ITA No.6605/13 & CO No.9/15 has been declared that nothing contained in the said section shall apply to a person who executes the works contract entered into with the undertaking or enterprise, as the case may be. The A.O has held that the assessee is only a contractor and that even in the earlier years the deduction claimed has been denied for the reason that the deduction is available only to a Developer. The A.O has referred to the orders of the CIT(A) for A.Y 2003-04 and 2004-05 where the disallowance as made has been upheld. In short, the A.O had denied deduction on the ground that the claim of deduction. under s. 80IA is available only to a Developer and not to a works contractor. The AO has further stated that in view of the fact that all the projects for which deduction is claimed have been discussed in earlier years are similar in nature and also in view of the Explanation inserted by the Finance Act 2007, the reasons for disallowing the deduction claimed under s. 80IA(4) in the earlier assessment years is followed and accordingly the claim for the current year in a sum of Rs. 23.34 crores is also disallowed. The AO further observed that the assessee is a mere works contractor while the owners and the developers were the respective authorities as mentioned in paragraph 6. According to the A.O these authorities supplied funds, drawings and specifications to the contractor who had been assured of the payment. Moreover, some of the works carried out forms a mere part of the whole project. Further, in the case of Teesta Lower Dam Project, a view was taken that the appellant does not fulfill the conditions laid down in section 80IA(4)(i)(b) which requires that an assessee must· enter into an agreement with the

5 ITA No.6605/13 & CO No.9/15 Central Govt. or State Govt. or Local Authority or any Statutory; Body. The A.O has further concluded that consequent to the insertion of Explanation to section 80IA(4) by the Finance Act, 2007 retrospectively from A.Y 2000-2001, the assessee has been held to be a 'works contractor' and not a 'developer' in A.Y 2003-04 and 2004-05 and since there is no change in the facts and circumstance for the captioned year, the claim made cannot be accepted. 4. By the impugned order, the CIT(A) partly allowed some of the disallowances, against which the revenue is in appeal and upheld some of the disallowances so made by the AO, against which the assessee is in cross objection before us. 5. The findings of CIT(A) with regard to allowing claim of deduction u/s 80IA(4), in respect of all projects expect Teesta Dam Project as under :- “6.5 1 have considered the order of the A.O, the submissions of the appellant and the details/ documents furnished as per the paper books kept on record. I have also perused the copies of the Agreements of the various projects. At the outset it is to be decided, whether to he eligible for deduction under s. 801A(4) the appellant should be the owner of the infrastructure facility. It is seen that the High Court of Bombay in the case of ABG Heavy Industries Ltd., (322 ITR 323 (Born)) has dealt with the very same issue and has held that the conditions provided for ownership of the enterprise and not the infrastructure facility. It is held: As noted earlier, sub-cl. (4A) of S. 80-IA of the Act as it originally stood, stated that the section applied to an enterprise carrying on the business of developing, maintaining and operating any infrastructure facility, which fulfils certain conditions. With effect from 1st April, 2000, by the Finance Act of 1999, certain changes were brought about. Sec. 80-IA and s. 80-IB were substituted for s. 80-IA. Subs. (9) of s. 80-IA of the Act provided that the section shall apply to any enterprise carrying on the business of (i) developing, (ii) maintaining and operating, or (iii) developing, maintaining and operating an infrastructure facility which fulfils -certain conditions The conditions provided for the ownership of the enterprise by a company or by a consortium of companies, registered in India and stipulated a requirement of on agreement with the Central and State

6 ITA No.6605/13 & CO No.9/15 Governments, a local authority or any other statutory body; the agreement being required to envisage the transfer of the facility after the period stipulated in the agreement. Subsequently, the requirement for the transfer of the facility to the Central or State Governments, or as the case may be, to the local authority or a statutory body came to be deleted. Sub-cl. (c) of cl. (i) of sub-s. (4) stipulated that the enterprise must have started operating. and maintaining the infrastructural facility on or often 1st April 1995. By the Finance Oct of 2007 the word 'or' came to be introduced after the word developing, to clarify in effect that the agreement between the enterprise and the authority of the Central or State Government or, as the case may be, a local authority or a statutory body may provide for ) developing, or (11) maintaining and operating, or (iii) developing, maintaining and operating a new infrastructure facility. 6.6 Another objection is that the Govt/Authority for whom the work was carried out by the appellant, supplied funds and assured the payment for the work done. A perusal of the contract documents shows that the projects executed by the assessee were highly technical and specialized and involved huge risk. The assessee has also deployed people, plant and machinery, technical expertise know-how and financial resources. The appellant has furnished the relevant documents and details pertaining to the various projects in the paper book, Volume II. Reference to pages 250 to 257 of the said paper book indicate huge resource mobilization and financial and technical involvement of the appellant and on page 258 to 260 are the details of the bank guarantee given, machineries and man-power committed and the working capital committed on each of the project. It is apparent from the paper book that all sums received till the final completion certificate was issued on completion of the defect liability period, are considered interim payments. It is observed that in the case of ABG Heavy Industries Ltd., case also, where the assessee was held to be eligible for deduction under s. 80IA(4) by the Bombay High Court, the authority therein (J1\IPT) had contracted to make assured payments as stated in paragraph 5 of the said order. Further the view held by the A.0 regarding assured payments and advance received was considered by the ITAT in appellant's own case for the A.Y 2000-01 reported in 94 ITD 411(Mum) and it has been held in paragraph 46 of the order as Under:- "46. _ We have noticed above that the amendment brought in by the- Finance Act, 1999 was with the sole intention/ purpose of providing deduction under section 80-IA to the person, who only develops or who only maintains and operates an infrastructure facility. If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. When the Legislature has provided that the income of the developer f the infrastructure project would be eligible for deduction, it presupposes that there can be income to develop, i.e. to the person who is carrying on the activity of only developing infrastructure facility. Obvious as it is, a developer would have income only if is paid for development of infrastructure facility, for the simple reason that he is not having the right/ authorization to operate the infrastructure facility and to collect toll therefrom, has no other source of recoupment of his cost of development. Considered as such, we note that the business activity of the nature of "BT" (build and transfer) also falls within

7 ITA No.6605/13 & CO No.9/15 eligible construction activity that is actively eligible for deduction under section 8 0 - I A i n a s m u c h a s m o r e " d e v e l o p m e n t " a s s u c h a n d unassociated/ unaccompanied with 'operate' and 'maintenance' also falls within such business activity as is eligible for deduction under section 80-IA. In the case of such a construction activity, which does not involve the 'operate' aspect, the question of an assessee engaged in such activity (of 'BT' carrying on only `development) to recover his costs of construction of his own from the infrastructure project/ facility itself does not arise, and so for the recoupment of the costs, the same have to be paid whether through running bills or otherwise; and considering the largeness/ hugeness of the total financial investment involved, some advance if paid at some point of time, will not, in our view, change the basic nature/ feature of the assessee's business activity. . Therefore, merely because the present assessee was paid by the Government for - development work, it cannot be denied deduction under section 8-IA(4) of the Act. The illustration of the artist, given by the assessee's counsel during the course of his arguments, is aptly illustrative and befitting. If an artist is asked to paint a beautiful picture and for such painting, payment is made by another person, the creator of the painting will be the artist and not the person who paid for it. We have also noted that the national water policy document furnished by the assessee, on p. 225 of its paper book-1, indicates the purpose of private sector participation. It states that private sector participation may help in introducing innovative ideas, generating financial resources and introduction and introducing corporate management and improving service efficiency and accountability to users. It is revealed from record and has also not been disputed by the Revenue that both the projects executed by the assessee were highly technical and specialized, as also extremely tricky and did involve huge risks as well. It is also revealed from record that for executing such project, the assessee has deployed people, plant and machinery, technical expertise, know- how and the financial resources as has also been the specific contention of the learned Authorised Representative of assessee as noted by us above. 6.7 The A.0 has held that the Govt./Authority had laid down the specifications of the contract, which would mean that the assessee is 'contractor' and not a 'developer' which would disentitle it from claiming deduction under s. 80IA(4). In this regard it may be stated that one of the conditions for eligibility of deduction under s. 80IA(4) as per the provisions of the section is that the assessee has to enter into an agreement with Govt./authority to develop, or operate and maintain, or develop, operate and maintain an infrastructure facility. In this regard it is to be stated that if the Govt. /authority Wants to develop a particular infrastructure facility, it is but natural that the location of developmental and various other specifications will be laid down by the Govt., for eg. if a dam is to be constructed its location, size, height etc., would certainly be decided by the Govt. In the case of ABG Heavy Industry also the assessee therein deployed cranes, as per specifications at the container handling terminal of JI\IPT. Similarly, in the case of ACIT vs. Bharat Udyog Ltd. (2008) 24 SOT 412(Mum) and in the appellant's own case for the AX 2000-2001 in paragraph 47 it was held merely because, in the agreement for development of infrastructure facility, assessee is referred to as contractor or because some basic specifications are laid -down, it does not detract the assessee from the position of being the developer of infrastructure facility.

8 ITA No.6605/13 & CO No.9/15 6.8 Another issue raised-bv the A.0 is whether the deduction is available only to contractors who develop the entire infrastructure facility and not only a part thereof. This issue, as well as the earlier deliberated issue have now been decided in a recent decision of the Pune Tribunal in B.T. Patil & Sons Belgaum Construction Ltd. where as per order dated 28.02.2013 (reported in 34 Taxmann.com 97 (Pune) in ITA No. 1408 & 1409/PN/2003 for A.Y 2000-01 and 2001-02, wherein following the jurisdictional High Court in ABG Heavy Industries it has been held in paragraph 7 86 8 as under: 7 ...................... In order to be eligible for deduction the assessee should develop the infrastructure facility as a whole and not in a particular part of it. We find that Hon'ble Bombay High Court in the case of ABG Heavy Industries has observed as under: "The assessee did not have to develop the entire project in order to qualify for a deduction under s. 80IA. The parliament did not legislate a condition impossible of compliance. 8. In the case of ABG Heavy Industries (supra), the assessee therein had not developed the entire port but was only the supplier of cranes at the loading and loading 'terminal at the said JNPT port. Thus, assessee was not required to execute the entire project as observed by the Third Member. Another significant word used here is "owned" which indicates that the infrastructure facility should be owned by a company so as to be entitled to deduction under this section. The work done by the assessee is riot owned by it, it does not satisfy sub clause (a) of section 80IA(4)(i). The infrastructure facility should be owned by the assessee is not correct interpretation. It is evident from section itself as clarified by the jurisdictional High Court in ABG Heavy Industries (supra) inter alia held that the assessee has shouldered out Investment & technical risk in respect of the work executed and it is liable for liquidated -damages it is failed to fulfill the obligation laid down in the agreement. The liability which has been assumed by the assessee under terms of the contract are obligations involving the development of an infrastructure facility. The assessee has also in its employment technically and administratively qualified team of persons and therefore it is not correct to say that assessee is merely a contractor and not a developer. The assessee is eligible for benefit u/s. 80-IA even if part of the infrastructural Project work is executed.

6.9 Another question is to be decided is whether the appellant, as a contractor is engaged in the development of infrastructural facilities as defined in the Explanation to mean

(a) A road including toll road, bridge or a rail system, (b) a highway project including housing or other activities being an integral part of the highway project; and (c) water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system (d) a port, airport, inland water way [inland port or

9 ITA No.6605/13 & CO No.9/15 navigational channel in the sea]

6.10 On a perusal of the contract documents it is seen that the Koyna, Srisailam, Ghatghar, Kalwakurty and Teesta Projects are Water Supply/Irrigation Projects as specified in clause (c) above. The Jogeshwari Vikhroli Link Road ( JVLR) consists of constructing permanent residential tenant for project affected households. (PAP) at the junction of the Western Express High and is hence is a highway project. The Santacruz-Chembur Link Road project is for widening of existing carriageway, completion of Slip road for LBS flyover, and improvement of surrounding road junctions, development sub- structure for LBS flyover and completion of super structure of flyover. In this regard attention is drawn to the circular issued by the CBDT in circular no. 4/2010 it has been stated as under:- "It has been decided that widening of an existing road by constructing additional lanes as a part of highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 801A(4)(i) Hence it is a Road Project covered in clause (a) above. 6.11 Another question to be decided is whether an Enterprise carrying on the business of developing alone is entitled for deduction under s. 80IA(4) without operating and maintaining or developing, operating and maintaining an infrastructure facility. To decide this question it is necessary to analyze the section over the years after it was first introduced Section 80IA of the Act as it was originally enacted, provided that where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hostel or operation of a ship or developing, maintain and operating any infrastructure facility, amongst others, there shall, in accordance with and subject to the provisions of the section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentages specified in sub-section (5) and for such number of assessment years as specified in sub-section (6). Sub-section (4A) was introduced and inserted by the Finance Act, 1995 with effect from April 1, 1996. Sub-section (4A) stipulated that the section would apply to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfills certain conditions. Sub-section (12) of section 80IA of the Act contains a statutory dictionary defining the terms used in the provision. Clause (ca) was substituted by the Finance Act of 1996, with effect from April 1, 1997 to define an infrastructure facility to mean (i) a road, highway, bridge, airport, port, rail system or any other public facility of a similar nature as may be notified by the Board in the Official Gazette; and (ii) a water supply project, irrigation project, sanitation and sewerage system. Consistent with the legislative object of encouraging private sector participation in the development of infrastructure, section 80IA was enacted. Contemporaneously with the provisions which were made by Parliament in section 80IA of the Act, explanatory circulars issued in administrative capacity of Central Board of Direct Taxes held the field. These circulars gave expression to the scope and ambit of the concession that was provided by section 80IA of the Act. On August 14, 1995, Circular 717 (1995) 215 ITR (St.) 7091) was issued by the Central Board of Direct Taxes. The circular thus amplified both the rationale for the introduction of section 80IA of the Act and the nature

10 ITA No.6605/13 & CO No.9/15 and ambit of the concession that was provided by the provision. The circular clarified that the benefit of a deduction was available to an enterprise, which developed, maintained and operated any new infrastructure facility, such as inter alia a Port on a Build, Operate and Transfer (BOT) basis, or a Build Own, Operate and Transfer (BOOT) 'or similar other basis, where there was an ultimate transfer of the facility to a Government or a Public Authority. The circular also clarified the view of the Board that the tax holiday would be in respect of the income derived from the use of the infrastructure facilities development of such enterprises. The infrastructure facility had to become operational on or after 1-4-1995. The provisions of Section 80IA(4) of the Act was introduced afresh by the Finance Act, 1999 and the provisions under section 801A(4A) of the Act were deleted from the Act. The deduction available for any enterprises earlier under section 801A(4A) are now made available under Section 80IA(4) itself. The subsequent amendment to this section was by Finance Act 2001 w.e.f.1.04.2002. Thus the evolution of section 80IA would show that originally the deduction was allowed to an Enterprise which carries on business of developing, maintaining and operating the infrastructure facility subject to fulfillment of conditions as per sub-clause (a), (b) and (c) of clause (i) of subsection 4A, which means that all the three activities have to be cumulatively carried out by an Enterprise. Subsequent amendments as discussed above have done away with the condition of the operation and the maintenance of the new infrastructure facility developed. The intention of the Parliament is now clear that after developing the infrastructure the enterprise need not necessarily maintain and operate the facility to claim the deduction. Even a Developer is eligible for deduction under this section.

6.12 The next issue to be decided is the pertinent question whether the appellant is a Developer or a contractor. The A.0 has held that the appellant is a "contractor' simplicitor and not a 'developer' In order to decide this question it is necessary to peruse Agreements alongwith all the documents forming part thereof containing the scope and nature of work entered into between the appellant and govt./authority. The appellant has furnished a copy of the documents and the same are compiled in paper book volume II pages 250 to 501. The full tender documents have also been submitted for perusal. On an analysis of the various Agreements entered into with regard to the 8 contracts, the following salient features emerge:- a. The Govt./authority handed over possession of the work site to the assessee. b. It was the responsibility of the assessee to take care of the Works and to do all acts till it developed the infrastructure project and then h a n d e d t h e d e v e lo p e d in f r a s t r u c t ur e f a c ili t y o v e r t o t h e Government/Authority. c. Thereafter the Assessee had to undertake maintenance of the said infrastructure facility for a period ranging from 12 months to 24 months till the defect rectification period is over. d. The contractor was fully responsible for the adequacy, stability and safety of all site operations and decide on the program and the methods of construction. e. The Contractor is liable to remove/repair improper work and material at its own cost. f. The bidders who participate in the bid should have adequate

11 ITA No.6605/13 & CO No.9/15 experience financial capacity and technical capability to undertake the contract. They should have key equipments and key technical personnel to carry out the work, which cannot be removed/shifted/transferred from the work site till the development of the infrastructure facility is complete. g. In all the Water Supply and irrigation projects and the Rail project the Contractor takes geological risk, h. The Contractor has to furnish 'As Built" drawings for every component of work undertaken at its cost to the Employer after the completion of the works, i. The assessee has to insure the Temporary works, permanent works, Constructional plant, equipments, etc. and also take third party insurance. j. The assessee has to give performance security, Bank guarantees and Retention money deducted becomes payable to the Contractor only after the defect liability period is over. k. The Contractor is liable to indemnify the Employer towards damage to equipments or property, or lives or persons or properties of others and against losses to the employur for breaches that might be committed by the Contractor. 1. All payments received, till the entire work is complete and certificate of Final completion is issued, are interim payments. m. The Contractor is liable to pay liquidated damages for delays in execution/ completion of the projects. Reference to pages 250-257 of the paper book would indicate huge Resource mobilization and financial involvement of the Appellant and on pages 258-260 are the details of Bank guarantees given, machineries and nialipower committed and the working capital committed on each of the project on which deduction u/s. 801A(4) is claimed. Copies of Agreement have been submitted by the appellant and the same have been place on record. A brief summary of the Agreement is as shown hereunder: 1) Koyna Project

EXTENSION OF HEAD RACE TUNNEL (HRT) FOR WATER SUPPLY AND IRRIGATION IN KOYNA PROJECT (Government of Maharashtra - Irrigation Department)  The construction of extension of Head Race Tunnel (HRT) is undertaken in order to have optimum utilization of Koyna storage for irrigation on Eastward side and to have a lake tap. This would make available additional 15.28 TMC of water for Eastward irrigation without affecting the generation of KHEP State IV (Page 9). The work includes construction of Intake Structure Shafts, Air vent shafts of Additional Surge Gallery, Additional Surge Gallery, HRT, Construc3tion Shaft No. 1 and 2, Intake Tunnels and Under Water Lake Tapping to facilitate Water Supply and Irrigation (Page 10,11,12).  About 35% length of HRT is passing below the reservoir and hence under water lake tapping has to be carried out for which the technology was available only with the Contractor in the whole of Asia. (Page 448)

12 ITA No.6605/13 & CO No.9/15  The consideration for development work was quoted by the Contractor on the basis of generally observed lake levels on various dates, which could vary. No claim on account of variation in these levels was to be entertained. (Page 13).  "Contractor" means M/ s. Patel Engineering Ltd., S. V. Road, Jogeshwari (W), Patel Estate, Mumbai. (Page 22).  "Employer" means the Government of Maharashtra. (Page 22).  "Works" shall include both permanent works and temporary works. Work or Works shall mean and include plant and materials to be provided and work to be done by Contractor under contract, including all the preliminary and ancillary works necessary for the fulfillment of the various items under the contract. (Page 22)  It is the responsibility of the Contractor to satisfy himself regarding the nature and location of the works in general and local conditions and particularly those having a bearing on transport, handling and storage of materials, disposal of spoils, availability of labour, weather conditions, river stages etc. (Page 85)  The Contractor took geological risk. (Page 14)  The Contractor is given possession of the site from the date of commencement of the development work to the completion of the Defect Liability Period (Page 43); as against the undeveloped site handed over by the Government to the Contractor, the Contractor hands back the Developed Infrastructure facility to the Government. (page 44)  The Contractor has to construct and maintain all access and approach roads in the labour colony areci at its own cost. (Page 86)  Additional roads as required by the Contractor for completion of work has to be constructed by the Contractor at its own cost (Page 90)  From the commencement of the work until the completion of the whole of the work, the Contractor shall take full responsibility for the care of the Works. (Page 31)  The Contractor was fully responsible for the-adequacy, stability and safety of all site operations and methods of construction. (Page 27)  It is the responsibility of the Contractor to promptly bring to notice of the Engineer any error or discrepancy in the contract documents. (Page 25)  The Contractor has to inform the Engineer of any error, omission, fault and other defect in the design of or specifications of the work. (Page 27)  The Contractor has to submit general layout of plan of construction, plant and equipment and drawings or prints showing the location of major plants. (Page 26)  The Contractor has to furnish a. program showing the order of procedure in which he proposes to carry out the works within the prescribed time limit; however, such submission shall not relieve the Contractor of any of his duties or responsibilities under the contract. (Page 29)  The Contractor is obliged to appoint only such technical assistants as are skilled and experienced and semi-skilled and unskilled labour as necessary. (Page 30)  The Contractor was solely responsible for the acts, defaults and negligence of any sub-contractor, agents etc. (Page 24)  The Contractor is responsible for the true and proper setting out of the

13 ITA No.6605/13 & CO No.9/15 works. (Page 30)  The Contractor will insure the Temporary Works, Permanent Works, constructional plant, equipments etc. and shall also take third party insurance from the date of commencement of work till the defect liability period is over. (Page 32, 33, 34)  The Contractor is responsible to give all notices to authorities in relation to the execution of works as may be required under various statutes. (Page 35)  The Contractor will ensure that the execution of work will not inconvenience the public or cause disruption of traffic. (Page 36)  The Contractor is liable to remove/ repair of improper work and material at its own cost. (Page 41, 45) - • The Contractor shall bear all costs and charges for -constructing roads to access the site. (Page 43))  The work is treated as completed only when a Certificate of Final Completion in respect of all Works is issued. (Page 44)  The contract shall be considered as completed only on issuance of Maintenance certificate by the employer. (Page 58)  It is the responsibility of the Contractor to provide, at its own expenses, all tools, plant and equipments required for the execution of work and timely mobilization thereof (Page 48)  All construction plant, temporary works etc., when brought to the site will not be allowed to be removed till the work is completed. (Page 48) Alignment of HRT is tentative and may change in the final layout. No claims can be made by the Contractor in the event of any modification in respect of alignment of curves, section etc. (Page 342) • The Contractor has to give a Performance Security which would be returned after a period of 15 months from the date of completion of the work. (Page 19) • Further Retention Money was to be deducted to form an additional security deposit and this amount would also be returned after a period of 15 month from the date of completion of the work. (Pages 19 and 20) • The Contractor is liable to indemnify the Employer against all losses and claims in respect of injuries or damage to any person or property. (Page 34) • The Contractor is liable to indemnify the Employer against all penalties and liabilities for breach of any applicable statute (Page 35) • The Contractor is liable to indemnify the Employer against infringement of any patent or any trade mark rights (Page 36) • All payments received, till the entire work is complete and certificate of Final Completion is issued, are interim payments. (Page 53) • The Contractor is entitled to advance to cover cost of mobilizing the site against Bank guarantee, which advance will be recovered from the interim. payments. (Page 56) • The Contractor is not entitled to any compensation for the delay in payment made to it. (Page 58) • The other financial and Technical details of the project are given on pages 8, 147-148, 250 and 238-260 of the paper book.

2) Udhampur Project GOVERNMENT OF INDIA - NOTHERN RAILWAY CONSTRUCTION OF

14 ITA No.6605/13 & CO No.9/15 TUNNEL NO. 1 AT KATRA - UDHAMPUR SECTION

• The Contract is for construction of of single Line Broad Gauge Tunnel No. I including cut and cover having a length of 3.14 km. between Udhampir and Katra in Udhampur-Srinagar-Baramullo Rail link project (Page 4), which is a "Rail Project".  The scope of work comprises of the following i. Earthwork in cutting all kinds of soils/ rocks at approaches of tunnels including disposal of surplus spoils and all lead and lift etc. ii. Construction of Tunnel No. 1 including cut and covers, trolley refuges, man refuges, shafts (if required) and all other ancillary works as per approved drawings. iii. Slope stabilization as per site requirement. iv. Any other incidental/ ancillary works connected with construction, of tunnel as ordered by the engineer-in-charge. (Page 61)  Railway/ Employer is the President of India acting through Northern Railway Administration.  Contractor is Patel Engineering Company J.td, S.V. Road, P.B. 8357, Jogeshwari (W), Mumbai 400 102.  Only companies having adequate experience/ capacity and reputation in the construction of tunnels would prequalify for submission of tender. (Page 30, 141, 142, 144)  It is the responsibility of the tenderer to visit the site of work and ascertain for itself the conditions of work, namely the approach roads, accessibility, nature _of soil/ rock, availability of material, electric power, water for work and drinking purposes etc. i.e. it should familarise itself fully with the conditions obtaining at site (Page 10, 46) and has to give a declaration to that effect. (Page 140)  It is not entitled to make any claims on account of variation in the strata of the rock (Page 63) and takes all geological risks. (Page 80)  It has to develop the undeveloped site handed over to it by the Employer and is in its possession till the work is completed and "taken over" by Railways. (Page 48)  it is responsible for sufficiency and accuracy of the bench mark, central line pegs and reference points set out by him. (Page 72) It is a/ responsible for the accuracy of the alignment, grades levels etc. (Page/ It is responsible for providing adequate lighting in the tunnel, ventilation etc. (Page 74 and 75) • It takes risk of poisonous gases and dust omission in the atmosphere while drilling tunnel. (Page 75) • It is solely responsible for the safety of the site from the date of commencement of work till the date of handing over" the developed site. (Page 78) • It is liable to remove all defects/ damaged work at its own cost. (Page 123- 124) • The Development of tunnel is to be completed in 30 months. (Page 6) The Defect Liability Period is 6 months. (Page 44) • It has to decide on the method proposed by it for construction of the

15 ITA No.6605/13 & CO No.9/15 tunnel including details of all related activities, list of machineries to be deployed, progress plan etc. (Page 31-A) • It will submit the Methods and program for the work to be carried out. (Page 47) • It has to "set out" the whole of the work and also amend any errors which may arise therein. (Page 49) • It shall make its own arrangement for service roads, paths etc. for carrying their tools, plant, labour and material to the site and if need be construct additional roads ut its oula cost. (Page 53, 55, 63) • It is agreed that the rates quoted by the Contractor are inclusive of ai elements of cost and nothing extra will be paid. (Page 20) • The drawing for the works prepared by the railways are for generai guidance only and may he suitably modified during the execution of the work according to the circumstances without making the railways liable for any claims on account of such changes. (Page 46) • It has to execute the work in close consultation with the Engineer to ensure that other works being executed in the same area by other contractors can progress concurrently. (Page 47) It is prohibited from making any claims for idle labour and/or idle machinery etc. (Page 56) The initial security money .furnished is converted into Retention money (Page 20)  It shall at all times keep the Railway administration indemnified against all penalties that may be imposed for infringements of statutes. (Page 43)  The security deposit given is liable for forfeiture and will be refunded only after the Engineer certifies that work has been entirely completed within the stipulated time and maintained for a period of 6 months from the date of completion and that no defects have been noted. (Page 44)  It is liable to pay liquidated damages if the work undertaken by it is not as per specification. (Page 49)  The progressive payments made by the Employer would be interim payments liable for adjustments. (Page 69)  Failure of the contractor to draw the Engineer's attention for provision of temporary supports for underground excavated section resulting in loss will be borne by the Contractor. (Page 88)  It is entitled to mobilization advance against irrevocable Bank Guarantee; such advance will carry interest ia 18°). (Page 135)  Similarly, it is entitled to advance against security of machinery and equipment brought to site against another Bank Guarantee; such advance also would bear interest Caj 18% p.a. (Page 136)  The other financial and Technical details of the project are given on pages 8, 147-148, 252 and 258-260 of the paper book.

3) Srisailam Weir SRISAILAM LEFT BANK HYDRO ELECTRIC SCHEME- WEIR (DAM) PROJECT  The Agreement is for development of one Weir (Dam) across river Krishna is with APGENCO. Hence, it is a Water Supply and Irrigation project.  The Contractor is required to construct and maintain, at its own cost, the

16 ITA No.6605/13 & CO No.9/15 roads inside the work area, approach road or access roads, to transport machineries and material. The lay out, designs, constr uction and maintenance etc. is also the responsibility of the Contractor. (Page 126)

 The Contractor has to submit detailed design for the pipelines from the point of dragging to the disposal/ storage area (Page 148)  To be eligible, the Contractor is required to have experience of under water concreting, reinforced cement concrete, reinforcement steel supply and fabrication (Page 90) and have liquid assets should be at least Rs, 30 Crores. (Page 90)  The Contractor has to satisfy itself regarding the location of work, general and local site conditions etc. having a bearing on the work. (Page 127)  The Contractor is expected, at its own cost, to inspect the site of the proposed work, inspect quarries and the network of road and satisfy itself about the quality and availability of the material before tendering for the project. No additional compensation will be paid or, this account. (Page 103 and 110)  The Contractor shall make all enquiries regarding availability of materials, site conditions, soil conditions etc. at its own risk and cost. (Page 103)  The entire site will be "handed over" to the Contractor for developing the infrastructure facility, which will be "handed over" back to the Employer on completion of the DLP. (Page 102)  The Contractor will be responsible for the efficiency, stability and completion of the permanent works. (Page 112)  All risks on account of the work to be carried out will be on the Contractor. (Page 112)  The Work has to be completed in. two working sections (2009 and 2010),(Page 7)  The Defect Liability Period is 24 months from the date of completion. (Page 123)  The Contractor has to give its methodology and program of carrying out the work under the contract. (Page 126)  The Contractor is responsible for correct setting out of all works at its cost (Page 125)  The construction program for the work has to be prepared by the Contractor (Page 105)  The drawings or prints showing location of stores, buildings, staff housing facility, road ways, unloading facility and storage yards, etc. will need to be furnished by the Contractor. (Page 111)  The Contractor shall procure all material required for the work on its own (Page 104)  The Contractor has to appoint professionally qualified technical staff (Page 106) and engage competent and skilled workers. (Page 132)  Scaffolding and gang wars, material and equipments, etc. required for the execution has to be procured by the Contractor (Page 108)

17 ITA No.6605/13 & CO No.9/15  The Contractor has to provide, at its own cost, accommodation, drinking water supply, health and other arrangements for its staff (Page 109) . • The Contractor shall properly cover up and protect the work and plant and machinery during development of infrastructure facility. (Page 117)  All materials, tools and plant of the Contractor brought on the site shall be deemed to be in possession of APGENCO to be used for that purpose only and shall not be removed without prior written permission of the Employer. (Page 117)  Contractor has to provide, at its own cost, all temporary structures, cement godown, workshops, shelter etc. (Page 119)  The Contractor shall provide, at its expense, all templates, pillars, stakes, equipments, materials and labour for establishing the grid lines and pillars and shall be responsible for their maintenance during the whole period of construction. (Page 119)  The Contractor shall be responsible for the correctness of all measurements and level. (Page 120)  The Contractor has to commit sufficient plant, equipment and labour to ensure timely progress and completion of the work (Page 121)  All material required for the contract, necessary licenses, plant or machinery etc. has to be procured by the Contractor. (Page 124)

• The Contractor has to make arrangements and obtain permissions from authorities for transportation of equipments etc. on public roads/bridges (Page 126) • The Contractor has to make arrangements, at its own cost, for water supply and power. (Page 128) • The Contractor has to submit the list of plant, equipments and personnel to be committed at the construction site (Page 133) and is not allowed to remove any plant and other equipments without the prior approval of the Executive Engineer. (Page 134) • The Contractor is responsible for supply and installation of all temporary facilities at the construction site. (Page 137) • A field laboratory has to be established by the Contractor at the construction site. (Page 138) • The Contractor is entirely responsible for any damage or injury to persons/properties during the course of the work. (Page 126) • The earnest money deposit is liable to forfeiture. (Page 90) • At the time of entering into the Agreement, interest free security deposit equivalent needs to be given. Such security deposit will be released after the expiry of Defect Liability Period ("DLP") of 24 months, which commences from the date of completion of work (Page 102) • Interest fee retenrion money will be recovered from each bill, which will be released after the expiry of DLP of 24 months (Page 102) • No price variation due to escalation, of rates of materials, labour etc. will be allowed under any circumstances. (Page 104) • In case of delay in completion of work, Liquidated damages equivalent to 5% of the running bill amount is liable to be levied. (Page 106)

18 ITA No.6605/13 & CO No.9/15 • If, for any reason, the work gets dislocated due to site being not available for work, no compensation shall be paid to the Contractor. (Page 105) • If work is held up for want of construction drawings or due to any other reasons attributable to APGENCO, no compensation shall be payable (Page 106) • The Contractor has to indemnify APGENCO against claims. (Page 108) Earnest and/or ,security deposit/ retention money is liable to be forfeited in case of delay. (page 122)  The other financial and Technical details of the project are given on pages 8, 147-148, 252 and 258-260 of the paper book. 4) Ghatghar Dam GOVERNMENT OF MAHARASHTRA, IRRIGATION DEPARTMENT - GHATGHAR PUMPED STORAGE SCEHEME - DAMS / RESERVOIRS  The Agreement, for development of two dams/ reservoirs in Roller Compact Concrete (RCC), is with Government of Maharashtra, Irrigation Department, Koyna project,  The upper dam will lead and supply water with the help of approach channel, intake structure and inclined pressure shaft to the underground power house (Volume 1, Page 13) from where the tail race tunnel will supply water to the lower reservoir, from which the water supply is reverted to the upper Dam. Ultimately, the water will be used for irrigation. Hence, this is a Water Supply and an Irrigation project. (Volume 1, Page 13)  The Scheme involves supplying/ transferring of water; alternatively between the upper reservoir and lower reservoir with a vertical distance of more than 400 meters between. them. (Volume 1, Page 96)  The Contractor, at his own cost, will have to construct and maintain approaches to each element of work from the main roads. (Volume 1, Page 104)  The term "Contractor" means the person or persons, firm or company whose tender has been. accepted by the employer and includes the contractor's personnel representative, successors and permitted assigns. (Volume 1, Page 40).  The term "Employer" means the Government of Maharashtra (Volume 1, page 40).

 "Works" shall include both Permanent Works and Temporary Works. Work or Works shall mean and include plant and materials to be provided and work to be done by the contractor under contract, including all the preliminary and ancillary Works necessary for the fulfillment of the various items under the contract (Volume 1, page 40).  To be eligible for award of the contract, the Bidder has to provide evidence of eligibility and adequacy of finance and technical resources that

19 ITA No.6605/13 & CO No.9/15 can be allocated to the work, which would include detailed construction schedule, plant and machinery proposed to be committed to the contract work, furnishing fresh 1VIOU with foreign construction firm/ RCC construction design consultant, confirming the services which will be provided by them. (Volume 1, Page 16, 17)  The Bidder is required to visit and ex -amine the site of work and its surroundings to obtain, at its own responsibility, all information that may be necessary for executing the contract, Ignorance of site conditions will not entitle the Developer for additional compensation, extension of time for completion of work or any other claim. (Volume 1, page 17)  The Contractor has to draw his own conclusion on the geological report made available by the Government and the Government does not accept responsibility for any variation in the rock condition. (Volume 1, Page 99)  The possession of the undeveloped -site for-developing the infrastructure facility shall be handed over to the Contractor by the Government.. (Volume 1, Page 62) Possession of the developed infrastructure facility will be taken by the Government from the Contractor after Defect Liability Period is over and maintenance certificate is issued. (Volume 1, Page 81)  The Contractor shall take full responsibility for adequacy, stability and safety of all site operations and methods of construction. (Volume 1, Page 46)  The Contractor is responsible for the protection of the work for the safety and convenience of the public and others. (Volume 1, Page 49) • From the commencement till completion of the whole of the work, the Contractor shall take full responsibility for the care of the site. (Volume 1, Page 50) • It is the responsibility of the Contractor to promptly bring to the notice of the Engineer of the Government, any error or discrepancy in. the contract document. (Volume 1, Page 43) It is also the responsibility of the Contractor to promptly inform the Engineer of any error, omission, fault and other defect in the design or specifications for the works, which are discovered when reviewing the contract document or in the process of execution of the work. (Volume 1, Page 46) • The development of the project is to be completed within 36 calendar months. (Volume 1, Page 10) • The Defect Liability Period during which the Developer has to maintain the facility and acquaint the Government's personnel in the operation of - infrastructure facility is one year from the date of completion of the work. (Volume 1, Page 33 and 18) • Detailed method statement setting out cycle times, equipment and manpower allocation, qualification and experience of key personnel for administration and execution of contract - both on and off site need to be furnished at the bidding stage (Volume 1, Page 17) - • Based on the tentative drawings, the Contractor has to bid for the work, which offer will be valid for all the final designs and drawing incorporated for actual execution and the Contractor will have no claim for the details added later on. (Volume 1, Page 35)

20 ITA No.6605/13 & CO No.9/15 The Developer has to prepare necessary construction drawings (Volume 1, Page 47) • The Contractor has to submit to the Government, a general lay out plan of construction, plant and equipment and drawings or print showing location of major plant and other facilities which he proposes to put up at the site. (Volume 1, Page 44) • The selection of construction plant and equipments and their timely mobilization will be the responsibility of the Contractor. (Volume 1, Page 70) Such equipments and material once brought on site cannot be removed without the approval of the Government. (Volume 1, Page 71) The details of commitment of major equipments, plants, key personnel etc. are at (Volume 3, Pages 51 to 56)  It is the responsibility of the Contractor to search and make available the required land for establishing plants and for disposing excavated stuff (Volume 1, Page 123)  The Developer has to ensure that all work at site is insured, including taking of third party insurance in respect of injury to persons and damage to property. (Volume 1, Page 24, 52)  The Contractor will have to procure all material required for completing the contract (Volume 1, Page 22)  No claim will be entertained from the Developer fo r any idle time compensation. (Volume 23, page 33)  The Developer has to protect the work at his own expenses and will be liable for any damages arising to the personnel on. this ground. (Volume 1, Page 35)  The Developer will set up a material testing laboratory at site. (Volume 1, Page 37)  The Contractor is responsible for the true and proper setting-out of the - works (Volume 1, Page 49)  The Contractor shall make his own arrangements for water supply and dewatering arrangements (Volume 1, Page 50) and arrangement for housing, sanitation, electric power for construction purposes, etc. and may construct and maintain additional roads as required at his own expenses while the work of development is in progress. (Volume 1, Page 104-108)  The Contractor shall provide operation and maintenance manuals for all mechanical, electrical and specialty equipments and systems supplied by the Contractor (Volume 2, Page 10)  The Developer is liable to pay liquidated damages in case of failure to achieve the targeted time for completion of the work. (Volume 1, Page 33, 65)  A Bid security has to be furnished, which is free of interest (Volume 1, page 23)  The Performance security (Retention. money) has to be furnished, which is free of interest; this money will be released to the Contractor after the Defect Liability Period is over (Volume 1, page 10, 32)  The Bank guarantees worth Rs. 44.37 crores were issued in favour of the Government.  The equipment and machinery committed on this site development was Rs.

21 ITA No.6605/13 & CO No.9/15 44 crores of which machineries of Rs. 25 crores was specifically purchased for this work.  The Contractor shall be liable to indemnify the principal against damage to persons and properties (Volume 1, Page 51) and shall adopt every reasonable means to prevent highway/ bridges from being damaged. (Volume 1, Page 55)  All interim payment shall be regarded as payment by way of advance _ against the final payment only and not as payments for the work actually done and completed and shall not be considered as admission of due performance of the contract. (Volume 1, Page 76, 121) Work will be considered as complete only when the final payment certificate is issued. (Volume 1, Page 81) -I)„ 14% p.a. can be obtained by the Contractor  Interest bearing loan (.?_, against- the cost of mobilization (Volume 1, Page 79)  The other financial and Technical details of the project are given on pages 8, 147-148, 252 and 258-260 of the paper book. 5. Kalwakurtu Lift Irrigation Project K a l w a k u r t h y Li f t I r r i g a t i o n S c h e m e L i f t - 1 (Government of Andhra Pradesh)  The Contract Value is: For EPC Turnkey Development Contract - Rs. 480.99 crores For Operation and Maintenance of the Plant for three years - Rs. 14.20 Crores. (Page 699)

• Hence, the agreement comprises two components, development and then Operation and Maintenance for which separate and independent considerations are fixed. • The Agreement is for designing and execution of pumping station of Kaiwakurthy Lift Irrigation Scheme ("KLIP") comprising civil, electro mechanical, hydro mechanical, transmission lines and sub- station works etc., on EPC basis including operation and maintenance of pumping station for three years after successful completion of the project. (Page 83). • The Project envisages pumping of water between multiple reservoirs to facilitate irrigation of about 2,50,000 acres of land in Mahaboobnagar District of Andhra Pradesh. (Page 37 and 96). Hence, this is an Irrigation project. • The "Employer'/-Purchaser" shall mean the Project administrator and Superintending Engineer, J"/KLJ Circle-I, Maha boobri agar, Ma haboobriaga r District, Andhra Pradesh, India. 'Page 53) • The "Bidder" shall mean the Bidder whose tender shall be accepted by the Employer/ Purchaser and shall include the tenderer's legal personnel representatives, successors and assigns in the agreement; a bidder has been referred to as "Contractor". (Page 54) • The Contractor should have experience in execution, pumping station/hydro power station. (Page 104) • Qucilcation and eligibility of the bidder is based on organization and managerial capability, financial capacity, supervisory personnel, equipment qualification, experience and past performance, existing and expected commitments, project implementation experience etc. (Page 123 & 124)

22 ITA No.6605/13 & CO No.9/15 • The Contractor, at its own cost, has to visit and examine the site of work and its surrounding area and obtain for itself, at its own responsibility, all information necessary for entering into contract. (Page 105) • It has to collect all infdrmution on availability of existing infrastructure like road, construction power, telecommunication etc. and satisfy itself about it, prior to submission of the bid. (Page 111)  The geological investigations carried out by the Government of Andhra Pradesh though provided to the Contractor, but will not be binding on the department for accuracy of data. The bidder shall ascertain for itself the correctness of the data. (Page 66)  It is required to review topographical, hydrological, geological and meteorological data and other information provided in project profile of the bid document and satisfy itself about their adequacy. (Page 113)  It will be handed over the undeveloped site by the Government on which it has to develop the infrastructure facility, operate and maintain it for 5 years. Upon completion of the Operation and Maintenance period,acceptance test shall be carried out before the project is "Handed over" to the Employer. (Page 175)  Being a Turnkey Contract, the Contractor shall take full responsibility for - Designing, Engineering and Execution of the project. (Page 112), However, the preliminary designs, drawings of various components of the project are given by the employer in Volume II, III and IV of the bid) (113)  The designs and drawings submitted by the Contractor have to be approved by the Engineer of the employer. (Page 690)  It shall submit drawings, data and descriptive literature as required in the specifications to enable evaluation of the bid as to the soundness, reliability, serviceability and efficiency. (Page 102)  The development has to be completed in 46 months. (Page 708)  The Defect Liability Period is 12 months from the date of completion of the project. (Page 714)  It has to give a detailed construction program of executing the project, the technology and the methodology to be adopted by it. (Page 111)  It has to make its awn arrangement for accommodation of its staff at site during the Development period. However, during the Operation and Maintenance period, the quarters constructed by the Contractors will be provided, if available after accommodating Employer's staff. (Page 51)  The general terms and conditions of contract of BHEEMA Lift Irrigation Specification will apply to Kalwakurthy. (Page 53)  Necessary clearances from various departments and the Environment department are to be obtained by the Government of Andhra Pradesh. (Page 66)  Land acquisition for the site will be done by the Government of Andhra Pradesh. (Page 66)  It has to train 8 engineers, 6 electrical engineers and 2 mechanical engineers proposed by the Employer for a period of 32 man months, at its own cost. (Page 102)  It shall furnish details of special precautions and instructions to be followed for erection, testing and commissioning of the plant and will furnish all required drawings, documentation etc., as also the

23 ITA No.6605/13 & CO No.9/15 time schedule for civil work. (Page 103)  It shall take, at its cost, transit cum storage cum erection, testing and commissioning insurance, as also insurance during the period of operation and maintenance. The Contractor will be liable to take third party insurance also. (Page 109 & 112)  The Bidder has to establish Quality assurance system. (Page 124)  The bidder shall guarantee satisfactory performance of .the plant. (Page 162)  Testing of equipments etc. is to be carried out at the cost of the Contractor. (Page 167)  On inspection of the work carried out by the Contractor, the Employer shall be at liberty to reject all or any material, plants or workmanship, which in his opinion is not in accordance with the contract or are, in is opinion, defective for any reason whatsoever. (Page 167)  All materials, tools, plant etc. brought on the site shall vest and be the property of the Employer to be used for the purpose of the work and shall not under any circumstances be remoued or taken away by the Contractor. (Page 168) It shall be entirely responsible for all losses, damage or depreciation to the plant until it is "Taken over". (Page 168)  It shall employ experienced personnel for Operation and Maintenance of the project. (Page 173)  It shall obtain and maintain Industrial All Risk Insurance for the project providing full coverage on replacement value basis during the period of Operation and Maintenance. (Page 174)  It has paid Earnest money deposit, which is liable to forfeiture. (Volume - Corrigendum)  There are penalties for delays beyond the stipulated date of completion of each unit of work. (Page 55)  The Employer will make 12% interest bearing recoverable advance payment against bank guarantee for an equivalent amount. (Page 56)  All progressive payments made are interim payments which shall be reviewed on quarterly basis. (Volume Page 60)  The Security deposit furnished by the Contractor is liable to forfeiture. (Volume 5)  No enhancement of prices for whatever reasons will be allowed once the contract is entered into. (Page 114)  It has to quote for the entire package on a single source responsibility basis. (Page 119)  It shall indemnify the Employer against all action, suits, claims, costs or expenses, damages or injury to any person or property on account of the negligence of the Contractor or is associates. (Page 169)  It shall replace/ redo any unsound or imperfect work at its own expenses. (Page 170) The other financial and Technical details of the project are given on pages 8, 147-148, 252 and 258-260 of the paper book. vi. Joaeshwari-Vikhroli Link Road (MUTP JVLR) MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY

24 ITA No.6605/13 & CO No.9/15 (MMRDA) CONSTRUCTION OF TENAMENTS FOR PROJECT AFFECTED HOUSHOLDS (PAH) AT JUNCTION OF JOGEHWARI VIKHROLI LINK ROAD AND WESTERN EXPRESS HIGHWAY, JOGESHWARI AX. 2005-06 • The project is for construction of permanent residential tenements for PAH at junction of JVLR and W.E. Highway under Murnbai Urban. Transport Project (MUTP), which is a defined infrastructure facility u/s. 80IA(4) being "Highway project" including housing or other activities being a integral part of the highway project. (Page 5) • The work includes construction and handing over of 1,032 residential tenements, 58 residential cam commercial tenements, 143 shops of various sizes as per specifications, 11 society of/ices, 11 Balwadis, 11 Welfare Centrse, 2 watchman cabins and compound wall as per the Slum Rehabilitation policy of the State Government. (Page 17) • Design, installation, adequacy and stability of formwork is the - responsibility of the Contractor. (Page 91) - • Internal lay out roads have to be developed by it. (Page 101) • It is the responsible to supply necessary equipments, installation, erection, - testing and commissioning of electric installation.. (Page 104) • It is the responsible to get the lift lay out plans with equipments on machine room approved from the concerned authorities and provide for Lifts. 'page 115? • It is the responsibility of the bidder to submit all required drawings for - statutory approval and obtain approval before starting the work. Page 115) • "Contractor" is a person or a corporate body whose bid to carry out the contract has been accepted by the employer. (Page 45) • "Employer" is a party who will employ the Contractor to carry out the Work. (Page 45) • Contractors should have pre qualified/ to be eligible to bid. (Page 22) • Pre bid qualification requires the contractor to demonstrate that it has major items of construction equipments and has qualified and experienced key site management and technical personnel, adequate financial capacity including working capital requirement. (Page 21)  Qualification criteria regarding key management personnel to be deputed for administration and execution of the contract is laid down (Page 36)  It is the bidders own responsibility to visit and examine the site of works and its surroundings and obtain all information that it considers necessary for entering into a contract for construction of works. (Page 23)  The entire work site will be in its possession from the date of commencement of works. (Page 49)  It is the responsible to obtain Commencement Certificate, Amended plan approval, if required and other statutory approvals from Local Authorities including Building Completion Certificate from the Competent Authority. Charges and deposits etc. for obtaining all the above approvals are to be paid by it. (Page 17)  It is the responsible to obtain Occupation Certificate and the Building Completion Certificate from the Competent Authority. (Page 17) and other certificates from various authorities as required by law and

25 ITA No.6605/13 & CO No.9/15 shall obtain electric supply for the tenements. (Page 56)  It is responsible to obtain amended approvals from SRA and other concerned authorities for any changes that are required. (Page 17)  It has to obtain certificate from MCGM and water connection at site after getting Occupation Certificate. (page 37)  It is responsible to obtain electrical supply and individual meters to tenements after getting Occupation Certificate. (Page 56)  The work has to be completed within 36 calendar months, failing which it is liable to pay liquidated damages. (Page 54)  Loss or damage to the Works or Materials to be incorporated in the Works on account of Contractor's acts or omissions between the Start Date and the end of the Defect Correction Period has to be remedied by the Contractor at its cost. (page 55)  It is responsible for protection of the Works and safety and convenience of the public and other. (Page 61)  It has to determine the installation sequence and time schedule to ensure that freshly concreted piles are not damaged due to installation of adjacent piles. (Page 86)  The Engineer reserves the right to reject any pile of deficient concrete strength. Such rejected piles has to be replaced by the Contractor at its own cost who shall also bear the additional cost of widening the pile caps resulting from the grouping of the piles as a result of replacement of piles. (Page 84)  The rejected pile shall be replaced or rectified with at the Contractor's risk and cost. (Page 87)  The Contractor, at its own cost, has to rectify any remedial measures required due to errors in piling. (page 87)  It has to decide the work method and schedule, including drawings and charts as necessary. (Page 20)  Temporary works are works designed, constructed, installed and removed by the contractor which are needed for construction and installation of the Work (Page 46)  It has to prepare specifications and drawings showing the proposed Temporary Works and is also responsible for the design of Temporary Works. (Page 48)  It is the -responsible to prepare program including Environment Management plan, showing the general methods, arrangements, order and timings for various activities. (Page 50)  It is responsible to provide "As Built" drawings and/or "Operating and Maintenance Manuals" failing which it would be liable to pay liquidated damages (Page 56)  The contractor will provide all equipments, tools and plant required for the Work. (page 88)  It has to employ key personnel to carry out functions as stated. (Page 47)  It will be responsible for the safety of all activities on the site from the date of commencement of work till the site is handed back by the Contractor to the Employer on completion of the Work. (Page 49)

 All risks of loss of or damage to physical property and of personal

26 ITA No.6605/13 & CO No.9/15 injury and damage which arise during and in consequence of the performance of the Contract is the responsibility of the Contractor. (Page 48)  It has to take insurance, including Third Party Insurance from the start date to the end by the Defect Liability Period for the loss or damage to the Works, plant and machinery, equipment, damage to property, personal injury or death. (page 48)  It has to construct and install the works in accordance with the specifications and drawings (Page 48)  It is the responsibility of the Contractor to draw the attention of the Engineer to specific likely future events or circumstances that may affect the work or cost of the project. Defects found are to be rectified by the Contractor free of cast during development of the infrastructure facility and upto the end of defect liability period. Any defect got -rectified by the Employer directly will have to be paid by the Contractor (Page 50 - 51)  All materials on site, plant, equipment, Temporary Works and Works are deemed to be the property of the Employer. (Page 57)  It has to make its own arrangement for labour, housing, transport etc. and comply with all labour regulations. (Page 58)  It remains responsible for any sub contracted work, even if it is with the permission of the Employer. (page 60)  It will comply with all rules and regulations of appropriate authorities while constructing temporary structures required for the Work. (Page 62)  It is the responsible to construct and connect the Sewer lines and connect them with the main line with proper permission from the competent authority. (Page 72)  The scope of work comprises of furnishing of materials, plant, labour, equipment, services for complete and proper installation of foundations and pile caps. (Page 82)  The performance security given has to be kept valid for a period upto 28 days from the date of expiry of the Defect Liability Period. (Page 55)  In case the Contractor fails to give an early warning, it would not be entitled to additional cost. (Page 53)  • There is a provision for retention money out of the progressive bills, which will be paid partly on completion of whole of the Work and the balance when Defect Liability Period is over (Page 54)  • Any advance paid by the employer to it shall be against an unconditional Rank Guarantee. (Page 55)  • All progressive payments received by the Contractor are interim payments till the Employer certifies the final payment that is due to the Contractor. (Page 56)  • The other financial and Technical details of the project are given on pages 8, 147-148, 252 and 258-260 of the paper book.  7. Teesta Lower Dam  NATIONAL HYDROELECTRIC POWER CORPORATION LTD. (NHPC)  (A Government of India Enterprise - wholly owned by

27 ITA No.6605/13 & CO No.9/15 Government of India) TEESTA LOWER DAM PROJECT  • The Agreement is for development of Diversion works, Barrage (Darn) & spillways, Intake, Penstocks, Tall channel, Pot head yard and other associated civil works for Water Supply to the surface power house including diverting and rd-dwertirig the river. (Page 7)  • The scope of work includes development of two access roads from NH-31A by the Contractor. (Page 13) These roads have to he maintained by the Contractor during the period of development. In addition to this, after construction of Barrage, one Permanent road and intermediate link access road and Bailey bridge has to be constructed by the Contractor. (Page 13)  • All drains, cross drainage works, culvert etc. have to be developed by the Contractor. (Page 14)  • It may have to build, if required, and maintain various haulage roads around the project site and quarry locations at its own cost. (Page 14)  "Contractor" shall mean Patel Engineering Ltd. having its registered office at Patel Estate, Jogeshwari (W), Mumbai 400 102 and its legal representatives, successors and permitted assignee. (Page 119)  "Owner" shall mean the National Hydroelectric Power Corporation Ltd. (A Government of India Enterprise), having its registered office at NHPC Office Complex, Sector - 33, Faridabad - 121 003 (Haryana) India and shall include its successors and assigns. (Page 11911)  "Site" shall mean the land and other places on, under, in or through which the Permanent Works or Temporary Works of the Contract are to be executed including any other lands or places which may be provided by the Owner for work space or for any other purpose, for the performance of the Contract. (Page 120)  Only bidders who have been pre-qualified by NHPC, i.e. having technical, financial and commercial capabilities, are eligible to submit the tender. (Page 7)  It is the responsibility of the bidder to examine the site of works and its surroundings and obtain for itself on its own responsibility, all information that may be necessary to enable it to decide entering into a contract. (Page 14)  The Contractor is responsible to make its own assessment regarding hydrological/ topographical/ geological conditions of the site. (Page 15)  The entire Water Supply work has to be completed within 48 months of the award of work. (Page 7)  The Defect Liability Period is 12 months from the date of completion of the project. (Page 145)  It has to decide on the construction program, methodology, equipment deployment and other miscellaneous issues (Page 10)  It shall take full responsibility for adequacy, stability and safety of all it,s operations, including site operations and methods of construction. (Page 127)

28 ITA No.6605/13 & CO No.9/15 It is fully responsible for the care of Works from the date of award of contract until the date of completion of Works and is also liable for any loss or damage to the works. (Page 121A) • It is responsible to transport construction material/ equipment to the construction site and, if need be, also construct additional access roads and widening of existing site roads at its own cost. (Page 14) • It is solely responsible for obtaining all permits, licenses, approvals and authorizations required under various laws and regulations. (Page 121) • It is solely responsible for quality, proper and expeditious execution and performance of the work and for due performance and observance of all the conditions of the contract. (Page 121) • It is responsible to insure the Works, materials, Contractor's plant and - machinery and the Temporary Works from the date of commencement of work till the Defect Liability Period is over, (Page 123) including third party insurance (Page 182) - It is responsible to maintain security at the site. (Page 127) • It has to make its own arrangements for the construction power and water. (Page 127) • It is the responsibility of the Contractor to ensure that no inconvenience is caused to the public. (Page 130) • It has to make his own arrangement in engagement of labour. (Page 131) • It undertakes that the plant, equipment, materials etc. forming part of the Permanent Work will be new. (Page 13) • It shall procure/ arrange all construction materials except cement, steel and explosives. (Page 134) • Materials, appliances, equipments and spares forming part of the Works shall become the property of the Owner on the issue of Certificate of Completion. (Page 156) • Selection of plant and equipments and the timely mobilization will be the responsibility of the contractor. (Page 157) • It shall be solely responsible for protection of environment during the work at the construction site. (Page 167)

 On the completion of the Works, the Contractor shall furnish "as constructed" drawings for every component of the work at its own cost to the Owner (Page 157)  It has to set up laboratory at site for material testing. (Page 176)  It has to design, furnish, set up, maintain and operate at the site all Temporary Works, Site installations and Contractor's equipment. (Page 270)  It shall be responsible for the safety around road related to the site.  It has to satisfy itself regarding data and the relevant drawings and in case of objection it has to inform the Owner immediately. (Page 285)  It shall be responsible for setting-out of the structures and slopes as shown on the construction drawing. (Page 303)  It is responsible for the timely and proper installation of the rock support and for checking and maintaining it until the final lining or the structure is placed. (Page 320)  The contracting equipment necessary for carrying out the work will be proposed by the Contractor. (Page 341)

29 ITA No.6605/13 & CO No.9/15  It shall be solely responsible for the adequate design, construction and maintenance of any and all form work and false work required in works. (Page 434) It is liable to rectify defect/ damage to the works during the Defect-  Liability Period which is 12 months from the date of completion of the work. (Page 145)  The bid security provided is liable for forfeiture. (Page 7)  The Contractor indemnifies the Owner against all claims for damage to property on account of fault/ negligence on the part of the Contractor till the Defect Liability Period is over. (Page 126)  It indemnifies the Owner in case of any infringement of any patent rights,design, trademark etc. (Page 129) Performance security has to be given, which will be released after a period of 15 months after the date of final completion of work. (Page 148  12% secured interest bearing advance for mobilization of works will be provide to the contractor against unconditional bank guarantee (Page 149)  Similarly 12% secured interest bearing advance against key construction equipment required for the works would be provided against unconditional Bank Guarantee (Page 150)  It is liable to pay liquidated damages if it fails to comply with the conditions of timely completion. Page 165)  The other financial and Technical details of the project are given on pages 8, 147-148, 252 and 258-260 of the paper book.  NHPC is owned by the Government of India as it owns the entire share capital of the corporation through his Excellency, the President of India. The Government of India provides Budgetary Support to the company to fulfill Its fund gap requirements. The Directors of the company are appointed by the Government and all the policy decisions are taken by the Government. viii. Santacruz Chembur Link Road MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY (MMRDA) ROAD NETWORK STRENGTHENING - SANTACRUZ CHEMBUR LINK ROAD (SCLR) _ MUMBAI URBAN TRANSPORT PROJECT (MUTP)  The work comprises of construction of 6 lane SCLR from Mithi River Bridge upto Amur Mahal. The length of project road under section I is 2.00 km. The work includes construction of 6 lane concrete road with 3.0 meters wide footpath on either side and central divider, construction of 527 meters long flyover along with 7.5 meters wide service roads & 3.0 meters footpath on either side, replacement of existing steel bridge with new one, road on Arnar Mahal side and construction of junctions at Amarmahal with EEH and S.G. Barve Marg and improvement on the surrounding road network. (Pages 26, 27)  Hence, it is a "Road Project"  The Contractor has to prepare traffic diversion plan at various stages of work, as required and has to maintain liaison with the traffic police/ authorities so as to ensure smooth flow of traffic at all stages of the work without causing inconvenience to the traffic. (Page 83)  It is responsible for supply of all traffic signal system

30 ITA No.6605/13 & CO No.9/15 equipments, its installation and testing and full maintenance during the defects liability period (Page 89) which is 12 months from the completion of the test on equipment. (Page 91)  It is fully responsible for design and installation to meet the requirements of the specification and provision of a fully working and effect traffic signal system. (Page 90)  It is responsible for the satisfactory quality, design and workmanship of the traffic control system. (Page 92)  It is responsible for shifting of utilities identified for relocation after prior approval of agencies in the shortest possible time to reduce inconvenience to the public. (Page 142)  It shall be responsible to co-ordinate with concerned authorities for shifting of utilities and removal of encroachments etc. and making the site unencumbered from the project construction area required for completion of work. (Page 158) No additional compensation is payable for the delay in shifting of utilities and removal of encroachments. (Page 158)  The "Contractor" is a person or corporate body whose Bid to carry out the Works has been accepted by the Employer. (Page 39)  The "Employer" is the party who will employ the Contractor to carry out the Works. (Page 39)  It has to satisfy himself regarding all aspects of site conditions and no claim will be entertained on the plea that the information supplied by the Employer is erroneous or insufficient. (Page 61)  It takes possession of the undeveloped site from the Employer to enable the development of the Works (Page 43), which is handed over back on completion of the development. (Page 43)  Detailed Method statement defining the methodology for construction, backed with proposals for construction equipment, planning and deployment, Bar chart regarding accepted progress and CPM analysis for a l l m a j o r a c t i v i t i e s , E n v i r o n m e n t m i t i g a t i o n p l a n a n d monitoring/implementation system and safety and traffic management at site was the responsibility of the Contractor. (Pages 15, 28)  The construction Program is to be formulated by the Contractor. (Page 3)  • The construction Methodology was to be finalized by the Contractor in consultation with the employer. (Pages 14, 275)  • It shall be responsible for the design of Temporary Works from the date of commencement of Works upto the date of handing over of the site \on duly completing the Works. (Page 43)  • It has to give O&M manuals and "As Built" drawings within 4 weeks of completion of whole or section of the work (Page 33). Delay in submission of above documents will result in levy of damages. (Page 34)  • The whole of the Works was to be completed in 24 months (Page 6).  • The Defect Liability Period is 12 months from the date of certification of the completion of the Works. (Page 29)

31 ITA No.6605/13 & CO No.9/15  • From the date of commencement of work till the defect liability period is over, the Contractor has to insure the Works, plant, materials, equipments and other properties, employees and also take Third party insurance. (Page 29)  • It has to employ key personnel to carry out the functions of development of Works. (Page 41)  • All risks of loss or damage to vehicle, property and of personal injury and death which arise during and in consequence to the performance of the contract, except employer's risks, is the responsibility of the Contractor. (Page 42)  • It is the responsible to construct and install the Works. (page 42)  • It is the responsible to warn the Employer at the earliest opportunity of  specific likely future event or circumstances that may be adversely affect  quality of work, etc. (Page 45)  It has to rectify defects at its °Loa cost. (Page 45)  It takes the risk of bearing the loss on account of difference in the final quantity of work done as compared to the bill of quantities. (Page 46)  Loss or damage to the Works between the start date and the end of the defect liability period has to be remedied by the Contractor at its own cost. (Page 50)  The Employer shall issue a Defect Liability Certificate and certify the final payment due after adjusting all interim payments made during the progress of the Work. (Page 51)  All materials on the site, plant, equipment, Temporary works and Works are deemed to be the property of the Employer, if the contract is terminated because of the Contractor's default. (Page 52)  It will appoint its own staff and labour and comply with all labour regulations. (Page 54)  It is responsible to protect the environment on and off site and to avoid damage or nuisance to persons or to property of the public or others. (Page 57)  Time is essence of the contract and payment of liquidated damages will not relieve the Contractor from his obligation to complete the work or from any other Contractor's obligations and liability under the contract. (Page 58)  It has to set up afield laboratory for testing. (Page 160)  It is responsible for maintenance of the road from the date the work site is handed over till possession of the completed work is over. (Page 209)  The Performance Security and the Additional Security furnished by the Contractor were to remain valid upto a period of 28 days from the date of expiry of Defect Liability Period. (Page 14)  It is liable for liquidated damages for late submission of updated programs. (Page 29)

32 ITA No.6605/13 & CO No.9/15  There is a clause for retention money from progressive interim payments, which amount would be ultimately paid after the defect liability period is over. (Page 32, 49)  The Contractor is liable for liquidated damages [hr any delay in. completion_ of the whole of the works as also for each of the milestone. (Page 32)  The Contractor is eligible for mobilization advance against submission of unconditional Bank Guarantee. (Page 32)  The Contractor is also eligible for equipment advance after equipment is brought to site on submission of unconditional Bank Guarantee for an amount of advance. (Page 32)  The Contractor is eligible for Secured advance against material required for the Works which have been delivered at site. (Page 32)  All the above advances are recovered by way of percentage deductions from the interim payments certified by the Engineer under the Contract. (Page 33)  The performance security will be by way of unconditional Bank Guarantee. (Page 33)  Non compliance with certain key conditions would result in the breach of contract for which the Contractor is liable to pay damages @ 20% of the cost of incomplete work, (Page 34)  The payment of liquidated damages does not release the Contractor from its liabilities. (Page 49)  The other financial and Technical details of the project are given on pages 8, 147-148, 252 and 258-26C) of the paper-book. 6.13 From the above synopsis it is apparent that the bidders who participate in the bid should have adequate experience, financial capacity and technical capability to undertake the contract. They should have key equipments and key personnel to carry out the work and for the purpose of general planning, site management and plant operations, during the whole period of contract execution. The above clauses in the Bids do indicate that the Contractor who is bidding should be highly experienced and the entire responsibility and risk is vested with the contractor. The preparation of Bid which includes technical and financial aspects shows that a simple contractor would not be qualified to carry out such extensive operations. Various preconditions laid down in the clauses of the bids indicate that the contract to be awarded is not a simple contract for work, but it is towards development of infrastructure facility. 6.14 It has to be mentioned that section 80lA does not define the word "developer" "contractor" or the phrase "in the nature of works contract". As per the dictionary meaning (Chambers 21st Century Dictionary) 'contractor' means a person or a firm that undertakes work of contract specifically to connect with building, installations of equipments for transportation of goods. The word 'developer' as per the dictionary means "someone who builds on land or improves/increases the value of the building". As per the Concise Oxford Dictionary (9th edition) 'developer; has been defined to mean a) to construct new building on land; b) to convert land for-a. new purpose so as to use its resources more fully. The meaning of the word 'development" as per the aforesaid dictionary is the 'act of the developing or the process of being developed'. From the said definition it is apparent that the scope of work of 'developer' is wider than

33 ITA No.6605/13 & CO No.9/15 that of contractor in so far as, the 'contractor' undertakes only periphery and incidental works connected with building, installation of equipment or transportation of- goods, whereas the 'developer' is a person who builds on a land or improves or increases utility of a building or any other infrastructure facility by undertaking development of infrastructure facility. It is from the said perspective the phrase in the nature of works contracts' used in the Explanation of Finance Act 2009 is to be perceived with the reference to the actual terms of the contract as can be perceived from the synopsis of the work in pre paragraphs above, it can be observed that appellant is not executing the work as a simple contractor. The Govt. / authority in each of the case only monitors or oversees the execution of the work and never involves in execution of the actual work. Therefore, the Govt. authority cannot be called a developer. In Water supply, Irrigation, Road Rail system contract executed by the appellant after acquiring the contract it carries out geological and geotechnical investigation and other special test, establishes it own laboratory on the site and prepares drawings which are submitted to the Govt/authority. It is the responsibility of the appellant to do the soil testing, earth filling, makes its own arrangement for quarry, site office, installation of crusher, concrete plan etc. The appellant undertakes investments financial and technical risks and indemnifies any loss of life or property to the respective employer. The appellant only receives interim payments till the infrastructure is completely developed and handed over to the respective owners. The details regarding advance received by the employers can be observed on page 261 of the paper book; from the said detail it is observed that substantial amounts received are interest bearing. It is a duty of the appellant to rectify the defects in the completed work during the defect liability period which varies from 12 months to 24 months, during which period it is the duty of the appellant to rectify at its own cost, the defect if any, to the infrastructural facility developed. The appellant has to take insurance not only in the joint name of the employer but also third party insurance. The appellant is not to move any of the machinery, equipment from the site till the defect liability period is over. Thus, it can be observed that the appellant involves right from planning till completion of the project and carries out numerous activities which are not that of a contractor simplicitor. A perusal of each of the contract document would indicate that the Agreements are entered into not for a specific work but for the development of the infrastructure facility as a whole. The govt. / authority does not provide any material; the contract entered into by them is composite in nature and hence cannot be construed as simply works contract. Even after handing over the possession to the appellant, the appellant has to maintain infrastructure facility for 12 to 24 months in terms of the agreement. Hence it can be construed that the appellant creates a new infrastructure facility and hands over the same to the govt'; authority. On such facts the appellant can only be a Developer and not a contractor. In terms of provision of section 80lA (4) of the Act a person being a company has to enter into an agreement with Govt. or authority. Such an agreement is a contract and for the purpose of the agreement a person may be called a contractor as he has entered into an contract. In the context of the agreement entered in by the appellant in respect of itsvariou s projects, the word 'contractor' has been used to denote the person who enters into such contract. A person who enters into a contract for development of infrastructure facility is a contractor. In the facts of the case the contractor and 'developer' cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility for govt./authority is contractor. On the basis of the above discussion it is held that the appellant is not a contractor simplicitor

34 ITA No.6605/13 & CO No.9/15 but a developer. 6.15 As regards the above finding, support is drawn from the order of the Pune Tribunal in the case of B.T. Patil and Sons Belgaum Construction Pvt. Ltd., in the case reported in 34 Taxmann.com 97, pursuant to the directions of the Bombay High Court, wherein para 9 and 10 it was held: 9. It was found by the erstwhile judicial. Member that assessee fulfilled the conditions of being a developer as subsequently interpreted by the Hon'ble Bombay High Court. With regard to clarificatory amendment to sub-section (13) of section 80IA by Finance Act 2007 & 2009 whereby the assessee is not held eligible for deduction u/ s. 80IA(4). In this regard, we find that the amendment of 2007 debars the sub-contractor from availing benefits u/ s. 80IA (4). The amendment of 2009 is riot applicable in the case where the assessee executes the work by shouldering investment & technical risk by employing ream of technically & administratively qualified persons and it is liable for liquidated damages if failed to fulfill the obligation laid down in the agreement and also securing by Bank guarantee. As the assessee has fulfilled the said conditions is evident as discussed above. Practically, the opinion of the Third Member of the Hon'ble Tribunal has been overruled by the Hon'ble Bombay High Court that even a contractor is a developer and further interpretation of the amendments by Finance Act 2009 and the conditions to be fulfilled by an assessee to be termed as developer for the purpose of section 80IA has been followed by various Tribunals. 10. In view of the above, we find that law as interpreted by the Third Member of the Hon'ble Tribunal is no longer good law. More specifically in light of the observations made by the Hon'ble Bombay High Court in the case of ABG Heavy Industries Limited and while giving the effect as per provisions 255(4) of the Act the Hon'ble Tribunal clearly directed to consider the said decisions and allow the deduction u/ s. 80IA of the Act for all the projects undertaken by the assessee. Other judicial pronouncements which have considered the controversy regarding "developer" vs. "contractor" and held that the Explanation does not apply to Developer are • KCL BEL Tarmat JV v. ITO ITA 1112/RJT /2010 • Om Metal Infra-Projects Ltd. v. Addl.CIT ITA 911/JP/2010 • GVPR Engineers Ltd. v. ACIT 21 Taxrnann.com 25 (Hyd.) • . KMC Constructions Ltd. v. ACIT 21 Taxmann.com 138 (Hyd.) • ACIT v. Pratibha Industries Ltd. ITA 2197 to 2199/Mum/2007 • DCIT v. V.R.M. (India) Ltd. ITA 811/Del/2008 6.16 It may be stated that the deduction under s. 80IA(4) on the Koyna Project has been allowed to the appellant by the ITAT for A. Y 2000-01 on the basis that the appellant is a developer. However, for A.Y 2004-05, based on the insertion of Explanation by the Finance Act, 2007, my predecessor had held that the said contract was a works contract and hence not eligible for deduction. The Authorised Representative appearing on behalf of the appellant has now drawn my attention to para 9 of the decision of the ITAT in B. T. Patil and Sons Belgaum Constructions Pvt. Ltd., 34 Taxmann.com 97 (Pune), wherein it is held

35 ITA No.6605/13 & CO No.9/15 that "with regard to clarificatory amendment to sub-section (13) o] section 80lA by Finance Act 2007 & 2009 whereby the assessee is not held eligible for deduction under s. 8 OJA (4). In this regard, we find that the amendment of 2007 debars the sub-contractor from. availing benefits under s. BOJA(4). The amendment oJ 2009 is not applicable in the case where the assessee executes the work by shouldering investment and technical risk by employing team oJ technically and administratively qualified persons and its liable for liquidated damages if failed to fulfill the obligations laid down in the Agreement." As the appellant herein is admittedly not a subcontractor, effectively, the decision of my predecessor on this issue is not followed. Moreover, it is observed that after considering the clarificatory amendment by the Finance Act, 2007 and the Finance Act, 2009, the same Koyna Project, on which the appellant has claimed deduction under s.80IA(4) in the impugned assessment year, has been held to be eligible for deduction under the said section in B. T. Patil and Sons Belgaum Construction Pvt. Ltd. where in paras 11 and 12 of that order, it was held that :- 11. The assessee company has been included in as a sub contractor for all the other projects either the contracts are directly in the name of assessee company or in the name of joint venture enterprises. The assessee has undertaken the work on Back Agreement concept under sub contract form Patel Engineering Company Limited (hereinafter referred to as PEC) vide sub- contract Agreement dated 15.10.1992 for construction of Tunnel which supplies the water from River Koyna and makes it available to Power House. In fact the assessee and PEC had proposed a joint venture. to the releuant authorities for the Execution of the said project. As the project was being financed by World Bank the relevant authorities forwarded the proposal to World Bank. World Bank however did not accept" the proposal but they suggested that M/ s. Patel Engineering Company Ltd., may employ the assessee company as sub contractor. It was at the suggestion of World Bank that the assessee companies name was included as a sub contractor instead of forming of a joint venture. The project authorities including World Bank have approved and certified [he assessee as a sub- contractor for the above said work after thorough scrutiny and detail description of the Agreement entered into between the employer and PEC as sub contractor for Koyna Project Works by Project Authorities. In fact the Government of Maharashira has entered in Tripartite Agreement with the assessee company and PEs. Works completion certificate has been issued in favour of the assessee company for the execution of the Work. Power of Attorney is given by Prime Contractor to Sub Contractor and accepted and executed by Project Authorities. 12. The fact that the assessee has a tripartite agreement with the relevant authorities makes the assessee a party to the main contract work itself and which clearly shows that the assessee on their own right are contractors and not just sub contractors as normally understood. The assessee is the contractor vis-a-vis the portion allotted to them and not only subcontractors, i. e. direct party to the main agreement. The assessee has entered into a main agreement, in their own right, can claim the benefit of section 80lA. As the assessee being directly under contract to the concern for the work done and also directly dealing with the Government on whose behalf the assessee are doing the work, they can be

36 ITA No.6605/13 & CO No.9/15 considered as main contractors alongwith PEC and are not simply sub contractors vie-a-vis the work undertaken by them. As such the assessee is otherwise fulfilling all the conditions they are entitled to deduction under the provisions of section 80IA. In view of the legal position presently prevailing and respectfully following the decision of the Pune Tribunal in B. T. Patil and Sons Belgaum Constructions Put. Ltd., 34 Taxmann.Com99 (Pune) it is held that the appellant is eligible for deduction under s. 80IA(4) on the Koyna Project also. 6.17 As regards the deduction under s. SOIA on the Udhampur Rail Projects, it has been allowed 'to the appellant by the ITAT for A.Y 2001-02 and 2002-03 on the basis that appellant is a Developer. However, for A Y 2004-05, based on the insertion of Explanation by the Finance Act, 2007 and negating the submission of the appellant that the said amendment applies only to subcontractors and not to it as it was a developer, my predecessor held that the said contract was a works contract and hence not eligible for deduction. However, in the light of the legal position presently prevailing, especially in view of the decision in B.T. Patil and Sons Belgaum Constructions Pvt. Ltd. as discussed above, wherein it was held that the Explanation inserted by the Finance Act, 2007 applies only to subcontractors, the same is held not to apply to the appellant as it is a developer and also following other Tribunal decisions it is held that the appellant is eligible for deduction under s. SOIA(4) on the Udhampur project also. 6.18 As per section 80IA(4)(i), an enterprise which is engaged in developing any defined infrastructure facility is eligible for deduction when the conditions laid down therein are fulfilled. As per clause (a), it should be owned by a company registered in India or by a consortium of such companies etc. The word "owned" here does not mean that the infrastructure facility has to be owned by a company. The word "it" means "the enterprise". The condition is that the enterprise has to be owned by a company, Hence, this condition is fulfilled. The 2nd condition is that it has to enter into an agreement with Central Government or State Government or local authority or any other statutory body for developing or operating and maintaining or developing, operating arid maintaining a new infrastructure facility. In the present case, the appellant contends that in each of the case, it has entered into an agreement with the Government/Authority for developing a specified infrastructure facility. While the AO accepts that this condition is fulfilled in all the other projects, as regards the Teesta Lower Dam Project, he has held as under:- "The Teesta Lower Dam project is being developed by NHPC which is a company registered under the Companies Act, 1956. Clause 80IA(4)(i)(b) requires that the assessee must enter into an agreement with the Central Government or State Government or local authority or any other statutory body for (i) developing (ii) operating and maintaining or (iii) developing, operating and maintaining ,a new infrastructure facility: NHPC cannot be said to be Central Government or a State Government or a Local Authority or a Statutory Body. NHPC is a company registered under the Companies Act 1956 like the assessee company and, therefore, in the' case of Teesta Lower Dam project, deduction is not allowable. Moreover, the owner-contractor status of NHPC and the assessee respectively, i: clearly brought out in the agreement

37 ITA No.6605/13 & CO No.9/15 itself which does not leave any room for further interpretation as to whether the assessee is a contractor or not." 6.19 As regards the contention of the A.O regarding the owner contractor status above, it has already been held that the section does not require that the infrastructure facility has to be owned by the appellant. It has also been held that for all the projects, based on the investment, financial and technical risks undertaken by the contractor, the appellant is a developer of the respective infrastructure facilities. However, as regards the Teesta Lower Dam project, I concur with the view of the Assessing Officer that the appellant has not satisfied the condition laid down regarding entering of an agreement with Central Government or State Government or local authority or any other statutory body. 6.20 The NHPC (National Hydro Electric Power Corporation) is a Government of India enterprise but that does not make it the Government of India or State. Though the appellant may argue that it undertakes all the functions of the Central Government of India, it is not equivalent to being the State or Central Government. Such corporation fully owned by the Government, are only the arm of the Govt. and not the Government itself. 6.21 In view of the facts and legal position as enumerated in 'the above paragraph, the AO is directed to allow deduction on Koyna, Udhampur, Ghatghar, Kalwakurthy, .Jogeshwari- Vikhroli Link Road, Srisailam Weir and Santracruz-Chembur Link Road projects. The deduction in respect of Teesta Lower Dam is negated. 6.22 Ground 1 is allowed in part.” 6. Rival contentions have been heard and record perused. The Revenue has challenged the decision of the CIT(A) granting deduction u/s 80IA(4) holding the assessee to be a developer of the infrastructure facilities (projects) and also that deduction is available to the assessee even when it has developed only a part of the project. We found that the CIT(A) has elaborately dealt with the contention of the AO at page 5 & 9 of his appellate order, as reproduced above. The CIT(A) has gone through the terms and conditions of each and every contract and at page 19 para 6.6 of her order, the CIT(A) held that the contract documents show that the projects executed were highly technical and specialized and involved huge risk; the assessee has also deployed people, plant and machinery, technical expertise, knowhow and financial resources;

38 ITA No.6605/13 & CO No.9/15 moreover, all sums received till the final completion certificate is issued on completion of the defect liability period, are considered interim payments. While holding so the CIT(A) relied on the decisions of the Hon'ble Bombay High Court in ABG Heavy Industries Ltd. 322 ITR 323 (para 5 of that order), assessee's own case for AY 2000-01 reported in 94 ITD 411 (paras 46 and 47) and Bharat Udyog Ltd. 24 SOT 412 to hold that the assessee is a developer and not a contractor. 7. We had also gone through the tender document filed by the assessee which is placed on record, after analyzing the major clause of the agreement to determine the scope and nature of work undertaken, we found that assessee was a developer, therefore, eligible for claim of deduction u/s.80IA(4). After considering and deliberating on the meanings of the words "developer" and "contractor", scope of the work, responsibilities and risks undertaken by the assessee in each of the contracts on page 60 to 62 para 6.14 of her order, the CIT(A) recorded a finding to the effect that the assessee is not a contractor but a developer. In coming to the above finding, in para 6.15, the CIT{A} also considered the clarificatory amendment by way of Explanation below sub section (13) of section 80lA by the Finance Acts 2007 and 2009 and held, after considering various judicial pronouncements, that the amendment does not impact development contracts. On pages 63 to 66 paras 6.16 and 6.17, the ClT(A) noted that for the Koyna and Udhampur projects, the assessee has already been held to be a developer by the Hon'ble ITAT in its own case in the earlier years. Moreover, the Koyna project has also

39 ITA No.6605/13 & CO No.9/15 been held to be eligible for deduction in B.T. Patil& Sons Belgaum Construction Pvt. Ltd. After analyzing the terms of the contract, the CIT(A) reiterated that for all the projects, based on the investment, financial and technical risks undertaken by the contractor, the assessee is a developer of the respective projects. As regards the issue whether, to be eligible for deduction, the assessee has to develop the entire infrastructure facility and not only a part thereof, the CIT(A) relied on the CBDT circular no. 4/2010, the decisions of the ITAT in the assessee's own case, B.T. Patil& Sons Belgaum Construction Ltd. 34 Taxmann.com 97 and the Hon'ble Bombay High Court in ABG Heavy Industries Ltd. 8. We also found that the CIT(A) has dealt in great detail the scope of the work, risk and responsibilities undertaken by the assessee and after applying the proposition of law laid down in the following decisions arrived at the conclusion that assessee was a developer and not only a contractor :- i) Patel Engineering Ltd. v. OCIT 94 ITO 411; ii) B.T. Patil & Sons Belgaum Constructions (P.) Ltd. v. ACIT, 34 taxmann.com 97; iii) ACIT v. Patel KNR Joint Venture ITA 5230/M/2012; iv) CIT v. ABG Heavy Industries Ltd. 322 ITR 323; v) DClT v. V.R.M. (India) Ltd. ITA 811/Del/2008; vi) KCL BEL Tarmat JV v, ITO, ITA 111/Rjt/2010.

As regards the clarificatory Explanation inserted in section 80lA by the Finance Acts 2007 and 2009, we place our reliance on the following decisions:

40 ITA No.6605/13 & CO No.9/15 i) B.T. Patil& Sons Belgaum Constructions (P.) Ltd. v. ACIT 34 taxmann.com 97; ii) ACIT v. Pate I KNR Joint Venture ITA 5230/M/2012; iii) DClT v. V.R.M. (India) Ltd. ITA 811/Del/2008; iv) KCL BEL Tarmat JV v, ITO ITA 111/Rjt/2010; v) GVPR Engineers Ltd. v. ACIT 21 Taxmann.com 25 (Hyd); vi) KMC Constructions Ltd. v. ACIT 21 Taxmann.com 138 (Hyd). 9. With regard to contention of ld. CITDIR that assessee is a contractor, insofar as assessee has been mentioned as contractor in all the agreements, we rely on the following decisions :- i) In the assessee's own appeal for AY 2000-01, 94 ITD 411 (Mum); ii) ACIT v. Pratibha Industries 28 Taxmann.com 246 (Mum) ,wherein Mahalaxmi Construction Corpn. Ltd. v. Asstt. CIT in ITA 433/Pn/2007 has been relied upon; iii) ACIT v. Bharat Udyog Ltd. 24 SOT 412 (Mum) As regards the CIT DR's argument that the decision of the larger Bench in B.T. Patil & Sons Belgaum Construction Pvt. Ltd. 126 TTJ 577 (Mum) is still good law, we rely on the confirmatory order [reported in 34 Taxmann.com 97) (Pune)] passed by the Pune Bench. 10. In view of the above discussion, we uphold the action of CIT(A) for allowing claim of deduction u/s.80IA(4) in respect of all the projects. 11. Ground 2 is with regard to disallowance of a sum of Rs. 88,69,937/- under s.14A of the Income tax Act. 12. With regard to disallowance u/s.14A, it was observed by the A.O that assessee has invested funds in joint ventures, the income from which does not form part of the total income. The A.O was therefore of the view that the proportionate interest allocable to such funds on pro-rata basis has to be disallowed. The assessee objected to the said proposal stating that no capital amount has been invested in the joint venture and that with

41 ITA No.6605/13 & CO No.9/15 regard to the partnership firm only Rs.25,000/- has been contributed towards capital which is out of own funds. It was also stated before the A.O that as regards the debit balance outstanding with them, the same are not in the nature of investment in capital but mainly due to the company's share of profit and machinery hire charges lying with them, which is already reflected as income in the P&L A/c. Without prejudice, it was further stated before the A.O that the current account transactions are carried out from bank where sale proceeds of the assessee are deposited and also that the dues from J.Vs and Partnership firm on current-account are out of company's own fund and not out of borrowed funds. The A.O rejected the said contention of the appellant stating that from a summary of the current account it could be observed that funds have flown out of the current account on which the assessee had paid interest. In these circumstances, the A.O disallowed the proportionate interest on the current account applying the interest rate of 12.5% as charged by the bank on CC Account. Accordingly, a sum of Rs.88,69,937/- has been disallowed and added back to the total income. 13. Before the CIT(A), the assessee submitted that the addition is not warranted since the same has been made on the basis of presumptions, conjectures and surmises. It is stated that the during the course of assessment the A.O had called for details of the balances in various joint ventures/ partnership firm wherein the assessee is the member/partner. It was explained that the debit balances in various JV /firm as on 31.03.2005 are as under -

42 ITA No.6605/13 & CO No.9/15 • Pate I KNR JV Rs.9,01,67,275 • KNR Patel JV Rs. 7,49,10,863 • Patel Michigan JV Rs. 84,229 • AHCL PEL Rs. 6,03,90;870 14. By the impugned order, the CIT(A) deleted the disallowance made u/s.14A after observing as under :-

“7.3 I have considered the matter. From the facts of the case it is apparent that the amounts treated by the A.O as loans and advances outstanding are in fact debit balances i.e. amounts receivable by the appellant either on account of hire charges in respect of machineries leased to JV or the share of profit of the appellant from the JV /firm. It has been amply demonstrated by the appellant through the copies of the various ledger account in respect of the Head Office/Capital account placed at pages 372 to 446 of paper book/volume II that the debit balances with the various JV /firm are not on account or funds transfer by the appellant but solely on account of the appellant's income and share of profit generated from such JV /firm. When no funds whatsoever, borrowed or otherwise, have been invested in JVs/firms, the applicability of section 14A does not arise. When there is no expenditure incurred in relation to income not includable in the total income, the applicability of section 14A is not warranted. Hence I am unable to sustain the disallowance as made by the A.O under s. 14A of the Act. The disallowance on a sum of Rs. 88,69,937/- is deleted.

43 ITA No.6605/13 & CO No.9/15 Rs.7,49,10,863 as on 31.3.2005, comprise solely of machinery hire charges received / receivable of Rs.12,69,86,836 by the appellant from them and the share of profit of the assessee in the said JV aggregates to Rs.6,32,94,249; both, together, aggregating to Rs.19,02,81,084. Hence the debit balance in the said JV is not on account of funds invested by the assessee in such JV. In AHCL PEL, the debit balance of Rs.6,03,90,869, as on 31.3.2005, comprises of the share of profit of - the appellant in the firm for A.Y. 2004-05 of Rs.5,0 1,57,164. 16. The alternate contention of assessee was that the provisions of section 14A cannot be applied to the appellant since the share of profit received by the appellant from such integrated joint venture AOP is chargeable to tax in terms of provisions of section 167B r.w.s. 86 of the Act. A further without prejudice submission is that the company has substantial own funds by way of capital reserves aggregating Rs. 12,936 lacs which is more than 5.50 times of the balance in such JV / partnership firm. The sale proceeds of the appellant are deposited in the cash credit account and the debit balance are presumed to have been company's own funds and not from borrowed funds. The appellant relies on the following decisions:

• ACIT vs. Bombay Samachar Limited 74 ITR 723 (Born). • Wimco Seedlings Ltd. vs. OCIT 107 ITO 267 (Del.)

It was further pointed out that the facts of following decisions are distinguishable from the facts of the appellant's case:

44 ITA No.6605/13 & CO No.9/15 • ACIT v. Citicorp Finance (India) Ltd. 108 ITD 457 • Everplus Securities & Finance Ltd. v. DCIT 101 ITD 151 • DCIT v. SG Investments & industries Ltd. 89 ITD 44 17. We have considered rival contentions and found that a clear finding has been given by the CIT(A) to the effect that amount was receivable on account of hire charges on machinery from JV or on account of assessee’s share in the JV firm. The question of disallowance of interest u/s.14A arises only when the funds have been given to JV/sister concern income from which is not liable to tax. The detailed finding recorded by CIT(A) at para 7.3 has not been controverted, accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance made u/s.14A amounting to Rs.88,68,937/-. 18. The AO has also assessed the income of the AOP (LGE & C-Patel JV) as income of the assessee on protective basis. 19. By the impugned order the CIT(A) directed the AO to assess the same on substantive basis after observing as under :- “While passing the order of assessment the A.O has held that as the captioned JV was assessed as AOP and taxed at the maximum marginal rate, the same income cannot be taxed in hands of the appellant. However, as the issue regarding in whose hands such income is taxable is under dispute, the A.O has protectively assessed the share of income of the appellant in the captioned JV in the hands of the appellant. During the course of hearing the appellant brought to my notice that the Hon'ble Ahmedabad Tribunal in LGE & C-Patel JV vs. ACIT ITA 3178 to 3180/ Ahd./2007 (Page 450 to 496 of paper book) held that income is taxable in the hands of Patel Engineering and not in the hands of AOP. It is also pointed out that the matter did not attain finality as the Revenue has appealed before the Hon'ble High Court against the said order. Considering the said facts, it is held that it cannot be stated that there is no infirmity in the action of the A.O in bringing to tax the share of income from the said JV in the hands of the appellant albeit OR protective basis. However, presently the view taken by the Hon'ble Tribunal is that the income of AOP is assessable in the hands of the appellant. In the said view of the matter, the A.O is directed to bring the said sum La tax in the hands of the appellant on substantive basis. It is ordered accordingly.

45 ITA No.6605/13 & CO No.9/15 20. With regard to the cross objection filed by the assessee in ground No.2 for taxing income of LGE & C Patel JV, we found that assessee's share of income had already been taxed in the hands of the AOP, the AO assessed the assessee's share therein on a protective basis. The ClT(A) discussed this on pages 70-71 of her order and held that, on facts, such income should now be taxed in the hands of the assessee on substantive basis. 21. As per ld. AR though in the JV's case, the Ahmedabad Tribunal held that the income is taxable in the assessee's hand and not in the hands of the JV, the said decision has not attained finality and hence it should be continued to be taxed in the hands of the assessee on protective basis. 22. We have considered rival contentions and perused the record. The ITAT Ahmedabad Bench in the case of LGE & C-Patel JV, ITA Nos.3178 to 3180/Ahd/2007, has held that income is assessable in the hands of the assessee on substantive basis. Respectfully following order of the Tribunal, we do not find any infirmity in the order of CIT(A) for taxing assessee’s share of income in assessee’s hand on substantive basis rather than on protactive basis. Accordingly, we dismiss the ground of assessee. 23. While computing assessee’s income the A.O attributed certain expenses incurred by the assessee to the projects eligible for deduction under s.80IA(4). The A.O has stated, without prejudice to the stand earlier taken that the assessee is not eligible to claim deduction under

46 ITA No.6605/13 & CO No.9/15 s.80IA for the reasons as mentioned by him, there are certain expenses that have to be allocated to the different projects assuming that the claim is allowable. The A.O has pointed out that the expenditure incurred at the Panvel workshop, US office etc. being not profit centers but only support centers, the same have to be allocated to the profit centers in proportion to the turnover, which has not been done. The A.O therefore allocated the impugned expenditure to the different projects as shown herein under:

9.2 The appellant contends that no such reallocation of expenditure is called for since the activities of the US branch is to monitor the global trends in the infrastructure industry regarding technology etc. and that the Panvel Workshop is used for storing new machinery till they are dispatched to the sites and for repairs and services. It is pointed out that since the expenditure with regard to the US branch has no bearing/ nexus with eligible infrastructure project, it is not a cost center. The expenses incurred on the Panvel workshop has no bearing/ nexus with the eligible infrastructure project , it is not a cost center. In view of the above, it is requested that the allocation of such expenditure to the infrastructure projects be deleted.

47 ITA No.6605/13 & CO No.9/15 24. By the impugned order the CIT(A) confirmed the action of the AO after observing as under :- “9.3 I have carefully considered the matter. I am unable to concede to the contention of the appellant that the reallocation of expenses with reference to the USA branch and Panvel workshop is not called for since it has no bearing/ nexus with the eligible infrastructure project. As stated by the appellant himself the activity of USA branch is to monitor the emerging trends in the infrastructure industry while that of the Panvel workshop is with reference to storage of equipment and material. As stated by the A.O these are cost centers and certainly have to be allocated to the eligible units on a reasonable basis. These expenses have a bearing on the eligible infrastructure project in that it enables the industry to gauge the global market to update itself with reference to technology and also to store the heavy equipments when not put into use. Therefore the A.O was correct in apportioning the said expenses to the eligible units on the basis of turnover. The AO will apportion the said expenditure on the basis of turnover while computing the deduction under s. 80IA(4). The said ground is held against the appellant. 25. Rival contentions have been heard and record perused. From the record we found that while claiming deduction u/s.80IA(4), the assessee apportioned the head office expenses to the Section 80IA profits of each infrastructure facility and calculated the profits and gains derived therefrom after deducting HO expenses based on which the claim of deduction u/s.80IA(4) of Rs.23,34,38,103/- was made. As per the AO the Panvel workshop and the USA office expenses has to be allocated to 80IA(4) projects to arrive at the correct amount of the deduction u/s 80IA(4). Accordingly, he allocated, site wise, the expenses attributable to the Panvel workshop and the USA office at an aggregate amount of [1] 2,77,53,627 being column D in the table at page 17 of his order. Hence, he was of the view that, as in the earlier years, if the appellate authorities hold that the assessee is eligible for the said deduction, the deduction allowable should be Rs.20,56,84,476 (23,34,38,103 - 2,77,53,627) only. The CIT(A), on pages 71-73 para 9, upheld the view of the AO. The

48 ITA No.6605/13 & CO No.9/15 assessee is in further appeal before us against allocation of expenses and in reduction of 80IA deduction. 26. It was contended by ld. AR that such reallocation of expenses is not required with reference to the Panvel workshop and the USA office as it has no bearing / nexus with the eligible infrastructure projects; whereas the USA branch monitors the emerging trends in the construction industry, the Panvel workshop is used for storage and repairs of equipments. As per ld. AR for computing the "profits and gains of business derived from the eligible infrastructure facility (project), all expenses directly incurred on the project only need to be reduced to calculate its profits and gains. It is trite that "income" results when expenses are reduced from the revenues. The courts have held that the term "income derived from" is narrower than "income attributable to" and accordingly it is submitted that the expenses incurred at the USA branch and the Panvel workshop cannot be reduced while computing "income derived from" the project though such expenses may be attributable to the infrastructure facility. Reliance was placed on the decision of the coordinate bench of the Tribunal in DCW Ltd. v. Additional CIT 37 SOT 322 (Mum), wherein it was held that indirect expenses not directly relatable to the unit cannot but be ignored while computing income "derived from". Further reliance was placed on decision of the Hon'ble Apex Court in Liberty India v. (IT 317 ITR 218 (SC), wherein the Hon'ble Court explained that "the words "derived from" are narrower in connotation as compared to the words "attributable to”. In other words, by

49 ITA No.6605/13 & CO No.9/15 using the expression "derived from", Parliament intended to cover sources not beyond the first degree. 27. In view of the above, ld. AR contended that no reallocation of expenses is required. It was further submitted by ld. AR that on page 17, in column C, the AO has made errors in mentioning the profit amount in respect of certain projects; this is apparent from the fact that such profit stated in the column does not match with the project wise profits mentioned by him on page 2 of the assessment order and page 7 of the PB. The AO be directed to substitute the correct amounts of profits eligible for deduction u/s 80IA(4) in column C. 28. On the other hand, ld. DR relied on the order of lower authorities. 29. We have considered rival contentions and found that certain expenditure incurred by Panvel workshop and the USA office was attributed by the AO to the eligible units, consequently profit claimed as deduction was reduced. The contention of ld. AR was that these expenses were not directly incurred for earning the income which is liable to deduction u/s.80IA(4). However, it has not been brought on record by lower authorities to show that expenses incurred at Panvel workshop and USA office was incurred directly for assessee’s projects eligible for deduction u/s.80IA(4). Respectfully following the decision of coordinate bench directly on the issue reported at 37 SOT 322 and the decision of Hon’ble Supreme Court in case of Liberty India (supra), we do not find any merit for reducing the profit of eligible undertaking by these

50 ITA No.6605/13 & CO No.9/15 expenses. Accordingly, we direct the AO not to reduce the profit eligible for deduction u/s.80IA(4). We direct accordingly. 30. The AO did not allow credit of TDS in respect of advances received. 31. By the impugned order the CIT(A) confirmed the action of the AO after observing as under :-

11.1 On a consideration of this ground no relief can be afforded to the appellant since credit for TDS will be granted as and when the income is offered to tax. The appellant requires credit of Rs. 2,73,73,162/ - deducted from the advances received. It has been pointed out by the A.O that TDS on advance have regularly been disallowed in the earlier years and the appellant is on further appeal. Consistent with the stand taken in earlier years the A.O has not allowed credit with respect to the TDS on advances. However,. the A.O has himself agreed that the corresponding income for TDS advances amounting to Rs. 1,44,41,262/- has been offered as income during the current year. Hence to the said extent, appellant is eligible for grant of credit of TOS as per law. The A.O will grant credit, subject to the same not having been granted in the earlier years. 32. We have considered rival contentions and found that in terms of the contract agreement, the assessee receives advances / loans on which the payer deducts tax at source. Such loans and advances can broadly be classified as (i) Site Mobilisation loan granted to enable the assessee to mobilise the work site i.e. create access roads, mobilise men, equipments, establish and set up site office, etc., (ii) Machinery Mobilisation loan granted to enable the assessee to purchase machineries and equipments needed to carry out the subsequent work on the site and (iii) Advance against work and material given to the assessee to help it in procuring material and against the work in progress on the site. Whereas in the first two cases, it is a capital receipt in the nature of loan not connected to any work carried out by the contractor, the third one

51 ITA No.6605/13 & CO No.9/15 is an advance in the revenue field. ln all the above cases, the Principal uniformly deducts tax at source u/s 194C of the Act. From the record we found that the AO has discussed this on pages 18-21 of the assessment order and citing section 199 has disallowed credit of TDS of Rs.1,29,31,900/- as the advances pertaining thereto are not credited to the profit and loss account during the year. The CIT(A), on page 73-74 para 11 of her order, concurred with the view of the AO. As per terms of various contract agreements under which Site Mobilisation Loan and the Machinery Mobilisation Loan / advances, mostly on interest ranging from @ 12% to 18% p.a., have been granted against bank guarantee. In the balance sheet, such contractee advance mobilisation loan is reflected as loan funds under the head Contractee advances as a liability. Such loan can never be the income of the assessee, neither in present or in future; deduction of such loan advance from running bills is only a practical and convenient way to recover the loan. Such mobilisation loan being a capital receipt, there was no legal obligation on the part of the contractee to deduct tax at source u/s 194C. If tax has been deducted at source, the credit for such TDS has to be allowed in the year of deduction itself. In ACIT v. Peddu Srinivas Rao ITA 324/Vizag/2009 mobilisation advance was received and on identical facts it was held that credit for such TDS should be given in the year of deduction of TDS itself. This decision was followed in Zelan Projects Pvt. Ltd. v. DClT ITA 1361/Hyd/2013 fel::pB- lS~ee]. Similarly, in Arvind Murjani Brands (P.) Ltd.v. ITO 21 Taxmann.com 131 (Mum) E , it was held that where tax is deducted at

52 ITA No.6605/13 & CO No.9/15 source on an amount which is not at all chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in the year of receipt of amount, in which the tax was deducted at source. 33. In respect of advance against work and material, we found that the said advance is reflected as a reduction from construction work in progress, which itself is valued at contract rates i.e. selling price. In other words, the income pertaining to such advance is already impregnated in the work in progress offered for tax during the impugned year itself. The Tribunal in ACIT v.Patel KNR Joint Venture ITA 5230/Mum/2012, on identical facts, following Toyo Engineering Ltd., decided in favour of the assessee. Respectfully following the decision of the coordinate bench in the case of associate concern of the assessee vis-à-vis other decisions referred above, we direct the AO to allow the credit for TDS in year of deduction itself. We direct accordingly. 34. Next grievance of assessee is with regard to making adjustment of Rs.88,69,937/- to the book profit under s. 115JB on account of disallowance made under s.14A. 35. Since the disallowance made by AO u/s.14A had been deleted by us, the ground taken by the assessee has become infructuous, therefore the same is dismissed. 36. The ground raised with regard to levy of interest u/s.234B is consequential in nature.

53 ITA No.6605/13 & CO No.9/15 37. In Cross Objection, the assessee has taken a ground against denial of deduction u/s.80IA(4) in respect of NHPC project. The AO declined the deduction in respect of profit from NHPC on the plea that NHPC is a Government of India Enterprise but that does not make it a Government of India or State. 38. Ld. AR placed reliance on the decisions of the Hon'ble Apex Court in Som Prakash Rekhi v. UOI &Anr. 19B1, AIR 212 and Pradeep Kumar Biswas &Ors. v. Indian Institute of Chemical which have been referred to in the decision of the Hon'ble Pune Tribunal, in the context of section 80IA(4), in Kirloskar Brothers Limited v. DClT ITA 657/PN/2010 (CLPB 112 para 17). 39. We had carefully gone through the decision of Kirloskar Brothers Limited (supra), wherein the Tribunal has held as under :- “7. At the outset, we may refer to the relevant provisions of section 80IA of the Act, which have a bearing on the issue. Pertinently, the claim of the assessee has to be examined with reference to the provisions of section 80IA(4) of the Act as are applicable for the year under consideration. The relevant portion of section 80IA is reproduced hereinafter:- “80-IA. [(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years.] ………………… (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park [or develops] a special economic zone referred to in clause (iii) of sub- section (4)] or generates power or commences transmission or distribution of power [or undertakes substantial renovation and modernisation of the existing transmission or distribution lines] :

54 ITA No.6605/13 & CO No.9/15 [Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to clause (i) of subsection (4), the provisions of this sub-section shall have effect as if for the words “fifteen years”, the words “twenty years” had been substituted.] (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) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;] (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. [Explanation.—For the purposes of this clause, “infrastructure facility” means— (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway or inland port;]” 8. Pertinently, section 80IA(1) of the Act prescribes for a deduction with respect to the profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) of section 80IA of the Act. The claim of the assessee before us is that it has undertaken a business referred to in sub-section (4) of section 80IA of the Act while undertaking and executing the contract with SSNNL pertaining to the „Saurashtra Branch Canal Pumping Scheme‟. The eligible business for the present purpose is referred in clause (i) of sub-section (4) of section 80IA of the Act. The claim of the assessee is that it is carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating

55 ITA No.6605/13 & CO No.9/15 and maintaining the infrastructure facility referred to as „Saurashtra Branch Canal Pumping Scheme‟, and therefore such business qualifies to be an eligible business for the purposes of section 80IA(4) benefits. As per the assessee, the expression “infrastructure facility” has been defined in the Explanation below clause (i) of section 80IA(4) of the Act which, inter-alia, includes a water supply project, irrigation project, etc.. In this manner, assessee has sought to justify that the execution of the project pertaining to „Saurashtra Branch Canal Pumping Scheme‟ is a project which is within the domain of the expression “infrastructure facility” for the purposes of section 80IA(4) of the Act. 9. Further, clause (i) of sub-section (4) of section 80IA of the Act prescribes that the enterprise referred therein shall fulfill the conditions prescribed by way of sub-clauses (a), (b) and (c). In terms of sub-clause (a), it is provided that enterprise carrying on the eligible business should be 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. Sub- clause (b) provides that the enterprise carrying on the eligible business should have entered into an agreement with the Central Government or State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. Sub-clause (c) prescribes that the enterprise should start operating and maintaining the infrastructure facility on or after the 1st day of April, 1995. Ostensibly, the aforesaid three conditions are required to be fulfilled before an enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility is eligible for deduction u/s 80IA(1) of the Act. 10. Now, the first and the foremost objection taken by the Revenue is that the assessee does not fulfill the condition prescribed in sub-clause (b) of clause (i) to sub-section (4) of section 80IA of the Act. In terms of the said objection, the Revenue contends that assessee has entered into a works contract agreement with SSNNL which is not an entity specified in sub- clause (b) of section 80IA(4)(i) of the Act. According to the Revenue, SSNNL is not a Central Government or State Government or a local authority or any other statutory body, so as to be considered as an entity specified in sub-clause(b) of section 80IA(4)(i) of the Act. As per the Revenue, SSNNL is a company registered under the Companies Act, 1956 and does not fall within the prescription of sub-clause (b) of section 80IA(4)(i) of the Act. As per the Revenue, though the entire share capital in the said company is owned either by the Central or the State Government, yet it can only be called a „Government company‟ but it does not come within the purview of the entities specified in sub-clause (b) of clause (i) of section 80IA(4) of the Act. The Revenue has supported its plea by referring to the judgement of the Hon‟ble Supreme Court in the case of Steel Authority of India Ltd. vs. Shri Ambica Mills Ltd. & Ors., AIR 1998 SC 418. In terms of the said judgement, it is sought to be canvassed that although capital of SAIL was entirely owned by Government of India, but by virtue of its incorporation under the Companies Act, 1956 its personality was held to be distinct than that of the Government of India. Similarly, reliance has been placed on the judgement of the Hon‟ble Supreme Court in the case of Heavy Engineering Mazdoor Union vs. State of Bihar, AIR 1970 SC 82 for the proposition that in the absence of statutory provisions, a commercial corporation acting on its own behalf, though controlled wholly or partially by a Government department, will be

56 ITA No.6605/13 & CO No.9/15 ordinarily presumed not to be a servant or agent of the State. On the aforesaid basis, it is sought to be made out that assessee has not entered into an agreement with any statutory body or any other entity specified in sub-clause (b) of section 80IA(4)(i) of the Act for the purpose of executing the work relating to „Saurashtra Branch Canal Pumping Scheme‟; and, thus the mandatory condition prescribed in section 80IA (4)(i)(b) of the Act has not been complied with. 11. Per contra, the learned counsel for the assessee has vehemently reiterated the position of the assessee taken before the lower authorities to the effect that the contract with SSNNL fulfills the condition prescribed in section 80IA(4)(i)(b) of the Act. The arguments of the assessee are two-fold. Firstly, it has referred to the judgements of the Hon‟ble Supreme Court in the case of (i) Som Prakash Rekhi vs. Union of India & Anr., 1981 AIR 212; and, (ii) Pradeep Kumar Biswas & Ors. vs. Indian Institute of Chemical dated 06.04.2002, copies of which have been placed on record. On the basis of the aforesaid judgements, it is canvassed that an entity, like SSNNL, is liable to be considered as an instrumentality or an agency of the Government, and thus, it qualifies to an entity specified in section 80IA(4)(i) of the Act. Secondly, it is sought to be made out that having regard to the background and peculiar features of SSNNL, the said concern is executing Governmental functions and is not engaged in any commercial activities. A reference has also been made to the Memorandum and Articles of Association of SSNNL, placed in the Paper Book at pages 26-27 to say that SSNNL functions under the direction and control of Government of Gujarat and further that it was essentially carrying out functions, which are otherwise carried out by the Government, for example, rehabilitation and resettlement of population affected by acquisition of land for Sardar Sarovar project, constructing hydro power generating stations, flood control, irrigation and water supply, etc.. The learned counsel pointed out that all kinds of infrastructure facilities referred in section 80IA(4)(i) of the Act, like Railways, ports, dams, bridges, roads, etc. are always owned by the Government and cannot be owned by private owners. So however, for an efficient execution and handling of such infrastructure facilities, the governments form a Special Purpose Vehicle (SPV) in the form of separate entity registered under the Companies Act, 1956. It was, therefore, contended that even if such like entities are incorporated under the provisions of the Companies Act, 1956 still having regard to the functions performed, they have to be considered as mere extensions of the Government. By referring to the features of SSNNL, the learned counsel has sought to demonstrate that the tests laid down by the Hon‟ble Supreme Court in the case of Som Prakash Rekhi (supra) and Pradeep Kumar Biswas & Ors. (supra) are fulfilled and SSNNL is liable to be considered as a „statutory body‟ falling within the meaning of section 80IA(4)(i(b) of the Act. 12. Before we proceed further, it would be appropriate to briefly refer to the salient features and objects of SSNNL. In this regard, we have perused the Memorandum and Articles of Association of SSNNL, a company incorporated under the provisions of the Companies Act, 1956. The main object of the said company is to execute, operate and maintain the Sardar Sarovar project comprising of a dam across river Narmada in the Nandod Taluka of Bharuch district in the State of Gujarat; a canal system emanating from the reservoir called the Sardar Sarovar impounded by the construction of the said dam; power houses at the foot of the said dam and at the canal head and all other works incidental or ancillary to the said project, in accordance with the directions of the

57 ITA No.6605/13 & CO No.9/15 Government of Gujarat. The works relating to dam and power houses are to be carried out under supervision of the Sardar Sarovar Construction Advisory Committee set up by the Central Government pursuant to the decision of the Narmada Water Disputes Tribunal. The directions that may be issued by the Narmada Control Authority and the Review Committee appointed by the Central Government pursuant to the decision of the Narmada Water Disputes Tribunal are also required to be complied by SSNNL. 13. The other objects, inter-alia, include undertaking resettlement and rehabilitation of the population affected by the Sardar Sarovar project; toconstruct, operate and maintain hydro power generation stations along with canal system, transmission lines, etc.. The objects also include promoting schemes in the State of Gujarat for flood control in the Narmada river basin and schemes for irrigation and water supply in the State for utilization of water from Sardar Sarovar. In sum and substance, the objects to be pursued by SSNNL are pre-dominantly functions which are ordinarily performed by Government. 14. On this point, we may refer to the decision of the Ahmedabad Bench of the Tribunal in the case of JCIT vs. Sardar Sarovar Narmada Nigam Ltd., (2005) 93 ITD 321 (Ahd). Though the said decision has been rendered in a different context, but what is of relevance for us is the discussion made by the Bench which brings out the background and the manner in which SSNNL came to be incorporated by the Government of Gujarat. As per the discussion in the case of Sardar Sarovar Narmada Nigam Ltd. (supra) and the other material placed in the Paper Book, the following fact position emerges. 15. That in order to settle the dispute on distribution of the water of Narmada River, the Central Government had formed a Narmada Water Dispute Tribunal in 1969. In terms of the settlement arrived at by the Tribunal in 1979, the dam (i.e. Sardar Sarovar Dam) was to be constructed by the Government of Gujarat and the water was to be shared amongst the three States of Gujarat, Madhya Pradesh and Rajasthan. For erection of the dam, the Government of Gujarat set up a department called Narmada Development Department (NDD). NDD functioned as a Government Department and started erection work of the dam. In around 1988, the Government of Gujarat was advised that for efficient administration, execution and accountability the work may be carried out by a Nigam (i.e. a corporate body). Accordingly, the Government of Gujarat passed a resolution No. NMD/1073(86)33/(2)H dated 21.03.1988 which converted NDD into a fully owned Government company, namely, SSNNL. Accordingly, a corporate entity was incorporated by the Government of Gujarat under the provisions of the Companies Act, 1956 for execution of Sardar Sarovar project. Subsequently, the Government of Gujarat vide a resolution dated 31.08.1988 transferred the entire staff and officers working under the control of the Narmada Development Department to SSNNL. The Gujarat Government also transferred the assets of the Sardar Sarovar project to SSNNL vide a G.R. No. COR-1488-H dated 27th October, 1988. 16. The aforesaid background of the manner in which SSNNL came to be incorporated and read with the main objects contained in the Memorandum and Articles of Association of SSNNL, show that it was to work under the direct supervision and control of the Government of Gujarat. The other objects which we have enumerated above also show

58 ITA No.6605/13 & CO No.9/15 that SSNNL is to be understood as a Special Purpose Vehicle (i.e. SPV) though which the Government of Gujarat is carrying out functions of a State. 17. At this point, we may refer to the judgement of the Hon‟ble Supreme Court in the case of Som Prakash Rekhi (supra). In the said case, dispute was between Burmah Shell, a company under the Companies Act, 1956, and one of its former employees. The company M/s Burmah Shell was acquired by Government of India and later it was known as Bharat Petroleum. A Writ Petition was filed by the employee against Bharat Petroleum. A preliminarily objection arose as to whether the Writ Petition was maintainable against M/s Bharat Petroleum as it was neither a statutory corporation and nor a Government department. The Court examined whether it was a State within the meaning of Article 12 of the Constitution of India. The Hon‟ble Supreme Court laid down certain tests in this context and the relevant portion of the Head notes of judgement is as under :- “2. Some of the tests laid down by this Court for deciding whether a body is State within the meaning of Article 12 are : (i) If the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of the Government. (ii) A finding of State financial supports plus an unusual degree of control over the management and policies might lead, one to characterize an operation as State action. (iii) The existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality. (iv) Whether the corporation enjoys monopoly status which is State conferred or State protected is a relevant factor. (v) If the functions of the corporation are important public functions and related to governmental functions it would be a relevant factor in classifying the corporation as instrumentality or agency of the Government (vi) If a department of Government is transferred to a corporation, it would be a strong factor supportive of the inference that it is an instrumentality of the State (vii) Where the chemistry of the corporate body answers the test of State if comes within the definition of Article (viii) Whether the legal person is a corporation created by a statute, as distinguished from under a statue is not an important criterion although it may be an indicium.” 18. As per the Hon‟ble Supreme Court, if the aforesaid tests are fulfilled by an entity, it would qualify to be understood as an instrumentality of State. As per the Hon‟ble Supreme Court, the aforesaid tests provide an aid to determine whether a particular body is a State within meaning of Article 12 of the Constitution of India. Emphasizing the import of the aforesaid tests, the Hon‟ble Supreme Court noted that true test is not how the legal entity in question was created but why it was created. The Hon‟ble Supreme Court also observed that all the tests may not be applicable or satisfied in a given case, but one will have to arrive at a conclusion based on the cumulative effect of the said tests. 19. The claim of the assessee before us is that SSNNL complies with all the tests laid down by the Hon‟ble Supreme Court in the case of Som Prakash Rekhi (supra). First test is whether the share capital of the

59 ITA No.6605/13 & CO No.9/15 corporation is held by the Government. In the present case, the entire share capital of SSNNL is admittedly owned and held by the Government of Gujarat. The second test is as to whether the State exercises unusual degree of control over the management and policies and financial support is received from the State. In our considered opinion, the said test is fulfilled in the case of SSNNL as per the detailed discussion made by the Ahmedabad Bench of the Tribunal in the case of Sardar Sarovar Narmada Nigam Ltd.. Moreover, the Memorandum of Association and Articles of Association of SSNNL clearly establish that the said concern is operating under superintendence and direction of the Government of Gujarat. It has also been pointed out before us that the Directors of the SSNNL are drawn from the officials of the Government of Gujarat. The next test is the existence of deep and pervasive State control. In this context, it emerges that the Board of Directors of SSNNL are appointed by the Gujarat Government and it consists of the Government employees of the rank of Secretary/Additional Secretaries. The next test is whether the corporation enjoys monopoly status which is otherwise conferred on a State. The objects to be pursued by the SSNNL, the powers conferred on it, as revealed by the Memorandum of Association clearly suggest that SSNNL is in the activity of executing, operating and maintaining the Sardar Sarovar project comprising of a dam across river Narmada, a canal system, the Sardar Sarovar power houses at the foot of the said dam, etc.. All these aspects clearly show that SSNNL is involved in carrying out State monopoly functions, like operation of Airports, Ports, Railways, etc.. The next test is whether the functions performed are important public functions related to governmental functions. In the case of SSNNL, it is quite obvious that apart from executing, operating and maintaining the Sardar Sarovar project it is also involved in promoting schemes in the State of Gujarat for flood control in the Narmada river, irrigation and water supply schemes for utilization of water from Sardar Sarovar. All these are essentially government functions and obligations, which are being performed by SSNNL. The next test is if a Department of a Government is transferred to a corporation. In this context, it is quite clear that the erstwhile Narmada Development Department consisting of its employees as well as the assets of Sardar Sarovar project were transferred enbloc by the Government of Gujarat to SSNNL. The next test is as to whether the chemistry of the concerned body answers the test of a State. In our view, the said test is also fulfilled in the face of the fact that the incorporation of SSNNL, its ownership, management, control as well as the powers have a unmistakable stamp of a Government. 20. In view of the aforesaid discussion, in our view, the tests laid down by the Hon‟ble Supreme Court in the case of Som Prakash Rekhi (supra) are fulfilled in the present case and it would be appropriate to deduce that SSNNL is an instrumentality or an agency of the State. Therefore, SSNNL is to be understood as an entity akin to those specified in sub-clause (b) of clause (i) to sub-section (4) of section 80IA of the Act. Therefore, the objection of the Revenue that SSNNL was a company incorporated under the provisions of the Companies Act, 1956 and is therefore outside the purview of section 80IA(4)(i) of the Act is unfounded. In-fact, the Hon‟ble Supreme Court in the case of Som Prakash Rekhi (supra) specifically observed that merely because an entity is created under a statute and not created by a statute is not an important criteria. The test relating to the purpose, State control and functions performed are more important and determinative of the issue. Such tests, in our view, are clearly applicable in the case of SSNNL, and it is to be understood as an entity specified in section 80IA(4)(i)(b) of the Act.

60 ITA No.6605/13 & CO No.9/15 21. The CIT(A) and the learned Departmental Representative appearing for the Revenue has relied on the judgement of the Hon‟ble Supreme Court in the case of Steel Authority of India Ltd. (supra) and that of Heavy Engineering Mazdoor Union (supra) to say that entities such like SSNNL cannot be considered as statutory bodies even though the entire share capital is owned by the Government of India. We have considered the said judgements and find that the ratio decided therein has no relevance to the issue in dispute before us. In the case of Steel Authority of India Ltd. (supra), dispute related to certain commercial transactions between a private company and SAIL and no issue arose as to whether Steel Authority of India Ltd. was special purpose vehicle carrying out State functions or not. It may also be important to note that Steel Authority of India Ltd. is in the business of sale and manufacturing of steel which perhaps cannot be looked upon as a State monopoly function as distinct from the activities of SSNNL, which is the subject-matter for consideration before us. 22. In the case of Heavy Engineering Mazdoor Union (supra) also the emphasis was again with respect to the functions of commercial corporation, though wholly owned by the Government. In the case before us, i.e. SSNNL, it is clear that SSNNL is not a commercial corporation, but it has been formed with the intent and purpose for carrying out essentially governmental functions which are otherwise a monopoly or an obligation of the Government. For all these reasons, the facts in the case before us are quite distinct from those in the cases of Steel Authority of India Ltd. (supra) and Heavy Engineering Mazdoor Union (supra). 23. In the light of the aforesaid discussion, in our view, SSNNL being a mere extended arm of the Government of Gujarat carrying out governmental functions can be understood as an entity qualifying for consideration u/s 80IA(4)(i)(b) of the Act. The objection of the Revenue in this context is thus rejected. 24. The second objection taken-up by the Revenue is that assessee was not a „developer‟ so as to be eligible for deduction u/s 80IA(4) of the Act. As per the Revenue, assessee was merely awarded a contract for execution of work by SSNNL. As per the Assessing Officer, assessee has executed a works contract and therefore, it was merely a „contractor‟. 25. On this aspect, it would be appropriate to refer to the scope of work carried out by the assessee. Notably, assessee was awarded the work of „Saurashtra Branch Canal Pumping Scheme‟ to be executed on turnkey basis. In the course of execution of the project, assessee was required to conceptualize, design, engineering, manufacture, erect, test and commission and also operate five pumping stations. It has also been pointed out by the assessee that the pumping scheme carried out one of the largest irrigation scheme, which irrigated about 5.4 lakh hectares of land and provided drinking water to 4620 towns and villages. It has also been pointed out by the assessee that it developed certain new technologies in the course of executing the project, namely, Siphon Technology, and the same was got patented also. The assessee also imported Concrete Volute Pump Technology for the project. The use of such technology ensured saving in energy bills. The assessee has also pointed out before the lower authorities that the import of technology and development of new technology done by assessee was without any mandate or requirements from SSNNL, but it was done by the assessee while executing its scope of work awarded by SSNNL. Detailed submissions have been made by the assessee before the lower authorities and the same is also placed in the Paper Book filed before us,

61 ITA No.6605/13 & CO No.9/15 including other material in the form of contract with SSNNL, communications with Government of Gujarat and SSNNL, etc. to justify that assessee was not merely acting as a contractor. 26. Having regard to the scope of work executed by the assessee, it is difficult to comprehended that assessee was merely acting as a contractor. In common parlance, a contractor is understood as a person who carries out the assigned work as per the directions given by the contractee. In the present case, the assessee has used own-developed technology and its own resources to conceptualize, design, erect, commission, test and operate the „Saurashtra Branch Canal Pumping Scheme‟. Therefore, in our view, assessee is to be understood as a „developer‟, and distinct from a „contractor‟ qua the impugned contract awarded by SSNNL. The Chennai Bench of the Tribunal in the case of ACIT vs. Indwel Lingins (P) Ltd., 122 TTJ 137 (Chennai) has noted that a developer is a person who designs and creates new projects whereas a contractor is a person who has a contract to do work. In the present case, as the scope of work shows, assessee did not merely carry out a contract to do work but was responsible for conceptualizing, designing, erecting, commissioning and operating the water pumping scheme. On the above aspect, the judgement of the Hon‟ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd., 322 ITR 323 (Bom), clearly supports the plea of the assessee of being a developer. In the case before the Hon‟ble High Court, assessee was awarded a contract by Jawaharlal Nehru Port Trust (JNPT) to supply, install, test, commission and maintain the container handling equipment, namely, the cranes. JNPT was owing the dedicated container handling terminal. The stand of the Revenue was that assessee was not a developer of the infrastructure facility but had only supplied and installed the container handling cranes at the JNPT port. Therefore, it was contended by the Revenue that assessee was not eligible for the benefits of section 80IA of the Act. The Hon‟ble High Court has negated the stand of the Revenue and held that the contract executed by the assessee for supply, installation, testing, commissioning and maintenance of container handling cranes at the JNPT terminal tantamounted to development of an infrastructure facility within the meaning of section 80IA of the Act. In our considered opinion, the said judgement of the Hon‟ble High Court clearly covers the case of the assessee of being a „developer‟ and not merely a „contractor‟ for the purposes of section 80IA(4) of the Act. 27. Remaining on this objection, it has also been asserted by the assessee before us that the scope of work assigned by the SSNNL was identical to the scope of work assigned by the Government of Andhra Pradesh to the assessee for its Godavari Lift Irrigation scheme. In so far as the profits relating to the project of Godavari Lift Irrigation scheme is concerned, the benefits of section 80IA has been allowed to the assessee and the assessee has not been treated as a „contractor‟. It has been pointed out that on account of the aforesaid, the stand of the Revenue in relation to the project executed for SSNNL is self-contradictory. 28. Before us, the aforesaid assertions of the assessee have not been assailed by the learned Departmental Representative. Be that as it may, in our view, having regard to the aforesaid discussion, assessee cannot be treated as a contractor for the work assigned by SSNNL and it is to be understood as a „developer‟ within the meaning of section 80IA(4) of the Act.

62 ITA No.6605/13 & CO No.9/15 29. Another objection taken by the Revenue is that assessee only constructed/developed the infrastructure facility but did not operate the same. This aspect of the controversy has been clearly answered by the Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd. (supra). Even an enterprise which is engaged only in development of an infrastructure facility has also been held to be eligible for section 80IA benefits. Therefore, the said objection of the Revenue is not justified. In any case, it has also been pointed out before us that assessee has operated the infrastructure facility for a period of two years. Be that as it may, we find no justification in the aforesaid objection, which is dismissed. 30. It is also a plea of the Revenue that the infrastructure facility is to be owned by the assessee for the purposes of claiming benefit u/s 80IA of the Act. In our view, the aforesaid objection of the Revenue is devoid of any statutory support from the provisions of section 80IA(4)(i) of the Act. The same is therefore rejected. 31. One of the objections of the Assessing Officer was that the entire investment in the infrastructure project has not been made by the assessee and that 80% of the project cost has been received from SSNNL. Therefore, according to the Revenue, assessee-company has not funded the project without any assistance from SSNNL. This objection of the Revenue, in our view, is quite misconceived because a developer would have income only if he is paid for development of the infrastructure facility. The Mumbai Bench of the Tribunal in the case of ACIT vs. Bharat Udyog Ltd., 118 ITD 336 (Mum) noted that the business activity of the nature „build and transfer‟ also falls within the eligible activities for deduction u/s 80IA of the Act. The Mumbai Bench of the Tribunal has made the aforesaid observations in the context of objection raised before it regarding the claim u/s 80IA of the Act on the ground that assessee was paid by the Government for the development work. The aforesaid objection was negated by the Tribunal and the claim of deduction was allowed u/s 80IA of the Act. Thus, we do not find any justification to deny the claim of deduction u/s 80IA(4) of the Act merely because the cost of the project executed by the assessee was not fully funded by the assessee itself. 32. In view of the aforesaid discussion, we therefore hold that assessee is eligible for the claim of deduction u/s 80IA of the Act amounting to Rs.40,02,10,981/- in respect of the profits derived from development of infrastructure facility for SSNNL. The order of the CIT(A) is set-aside and the Assessing Officer is directed to allow the deduction.”

63 ITA No.6605/13 & CO No.9/15 are managed subject to compliance of conditions stipulated in Department of Public Enterprises circulars. We also found that entire share capital of NHPC is owned by the President of India and is a Schedule "A" enterprise and is top ten companies in terms of investment. On incorporation, NHPC took over the execution of various projects from Central Hydroelectric Projects Control Board, a government authority. Resources are earmarked for NHPC in the budgetary allocations of the India budget, more particularly for Teesta Lower Dam project also. NHPC has signed a MOU whereby the commitments / assistance to be received by NHPC from the Government are enumerated. In the Ministry of Power, Government of India work allocation is made for NHPC, including in respect of Jammu & Kashmir; co-ordination, forwarding of returns to Prime Minister's office, Ministry of Home Affairs and other Departments, concerning power issues of J & K. in sum and substance, the objects to be pursued are ordinarily performed by Government Thus, assessee's contract with NHPC fulfills the condition prescribed in section 80IA(4)(i)(b) of the Act as it performs functions akin to state.

64 ITA No.6605/13 & CO No.9/15 all the conditions prescribed u/s.80IA(4)(1)(b) of the Act as it performs functions akin to estate. Accordingly, the AO is directed to allow deduction u/s.80IA(4) in respect of project awarded by NHPC. 42. In the result, appeal of revenue is dismissed, whereas cross objection of the assessee is allowed in part, in terms indicated hereinabove. Order pronounced in the open court on this 18/11/2015. Sd/- Sd/- (अभयजित ससिंह) (आय.सी.शभमव) (AMARJIT SINGH) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुिंफई Mumbai; ददनमिंक Dated 18/11/2015 प्र.कु.सभ/pkm, यन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीरमथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुिंफई / DR, ITAT, Mumbai 5. गमर्व पमईर / Guard file. 6. सत्ममवऩत प्रयत //True Copy// आदेशाि सार/ BY ORDER,

उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भुिंफई / ITAT, Mumbai