BACKBONE ENTERPRISE LTD.,,RAJKOT-GUJARAT vs. THE DY. COMMR. INCOME TAX, CEN. CIRCLE-II,, RAJKOT-GUJARAT

आदेश/ORDER PER BENCH:-

I.T.A Nos. 127 & 148/Rjt/2015 A.Y. 2009-10 Page No 2 Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd.

These are the two appeals filed by the assessee and the revenue against the order of the ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad in Appeal no. CIT(A)-11/463-R/CC.2/2014-15 vide order dated 19/01/2015 passed for the assessment year 2009-10.

“1. On the fact and circumstance of the case, the Ld. CIT(A) has erred in allowing deduction u/s 80IA(4) of the Act in respect of project No. 7 to 14 by treating the assessee as a "Developer" of infrastructure projects instead of "Work Contractor" as treated by the A.O.

“1. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in upholding the validity of order passed u/s 153A r.w.s. 143(3) of the Act.

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Sr. No. of Project Name of Project Amt. of deduction referred by CIT claimed u/s 80IA (Appeals) (in Rs.)

1 GKA Km 42 to 248 NH - 8 1,574,744 NHAI ROAD

2 Maliya - pipaliya - Hajnali 585,596 Road

3 Morbi Maliya rural p-2 Road 480,076

4 Morbi Maliya Package-5 81,441 Road

5 Morbi - Tankara KP/RAJ/P-3 465,347 Road

6 Rajkot - Morbi Road - 2 557,414

Total 37,44,618

The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal.”

We shall first take up the Department’s appeal.

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of contracts carried out with Government and Semi-Government Bodies. During the course of assessment, the AO denied the claim of 80-IA(4) of the Act to the assessee on ground that the assessee is “contractor” and is not a “developer” within the meaning of 80-IA(1) of the Act and hence is not eligible for deduction respect of receipts from contracts carried out with Government and Semi-Government Bodies. The AO held that the assessee had carried out “works contract” in respect of each of the projects for which it had claimed deduction under section 80-IA(4) of the Act. The assessee has not been able to establish as to how it made investment in the project in addition to the fact that he has acted purely as a “works contractor”. Accordingly, the AO denied deduction under section 80-IA(4) of the Act in respect of all the projects carried out by the assessee during the year under consideration. While denying the claim of the assessee, the AO made the following observations:

“8. The claim of the assessee for deduction under section 80IA(4) of the Act has been considered in view of the facts and circumstances of the case as discussed above and the provisions of Act as applicable for the year under consideration. There is no ambiguity about the fact that the deduction under section 80IA(4) is available to a developer of the infrastructural facilities as provided within the meaning of the said section and not the contractors who simply executes work as per work contract received from either Central Govt. or State Govt. or any other agency. On this issue it would be pertinent to refer to the decision in the case of Asstt. CIT v. Indwel Linings (P.) Ltd. [2009] 122 TTJ (Chennai) 137 where in it was held that Where assessee took contract work of cement lining for water supply project of Gujarat Water Supply and Sewerage Board (Gujarat Government undertaking), it being a contractor and not developer, was not entitled to deduction under section 80IA. In this case the Hon. IT AT had discussed the distinction between a 'Contractor ' and ' developer'

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which is extremely relevant in deciding the issue in the present case. The Hon. Tribunal observed that 'Contractor ' and ' developer' are two different terms. As per the Oxford Advanced Learner's Dictionary, 'developer' is a person or company that designs and creates new projects, whereas 'contractor' is a person or company that has a contract to do work or provides services or goods to another. The benefit of section 80-IA is available only to the developer. It is the condition precedent for the availability of the benefit of this section that the undertaking or enterprise must derive its income from carrying on the business of developing any infrastructure facility. The prescription of section 80-IA shall not apply to a person who executes work contracts entered into with an undertaking or enterprise. Thus, in a case where a person who makes investment and himself executes development works and carries out civil works, will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into a contract with another person for executing works contract will not be eligible for the tax benefit under section 80-IA. 9. Hence, it is evident that the Explanation, below sub section (13) of section 80IA, as inserted by the Finance Act, 2009 with retrospective effect from 01.04.2000, has only clarified it that the deduction is not available to business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by an enterprise referred to in sub-section (1), The argument as to whether a contractor is a 'developer' within the meaning of the above provision of the Act has only been put to rest by providing an explicit clarification which leaves no scope for any ambiguity as regard the issue that the 'contractors' are not 'developers' within the meaning of sub-section (1) of section 80IA and hence, they are not eligible for deduction in respect of their business income from executing work orders as per contract with either Central Govt. or State Govt. or any other agency. The explanation does not in any manner provide for restricting or altering the meaning of the said provision. Rather, the position which was earlier apparent on a careful look of the provisions of sub-section (4) has now been made available even at the cursory look through the Explanation by clarifying the hitherto intention of the legislature that no person executing the works contract shall be eligible for deduction

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u/s. 80IA, even if it is an enterprise or undertaking as referred to in sub-section (1). The language of this Explanation makes it crystal clear that the benefit under sub-section (4) cannot be provided to a business referred to in sub-section (4) which is in the nature of works contract awarded by any person including the Central or State Government and executed by the undertaking or enterprise referred to in subsection (1). From the memorandum explaining the rationale behind the substitution of Explanation it can be easily seen that the legislature clarified its intention beyond any doubt that the deduction cannot be allowed in relation to a business which is in the nature of works contract.

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applicable for the year under consideration, it is evident that the assessee is not eligible for deduction out of its business income under the provisions of the said section and hence, the deduction claimed by the assessee in the return of income under section 80IA(4) of the Act is to be disallowed and added back to the total income of the assessee for the assessment year under consideration. Hence, the deduction claimed by the assessee company u/s.80IA(4) amounting to Rs. 10,55,85,316/- is hereby disallowed and withdrawn and added back to the taxable income of the assessee company.”

Sr. No. Particulars

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The Ld. Departmental Representative submitted that Ld. CIT(A) has erred in facts and in law in allowing relief to the assessee since post amendment all “works contracts” have been excluded from within the scope of eligibility of deduction u/s 80-IA(4) of the Act. The assessee is a works contractor and hence not eligible to claim deduction u/s 80-IA(4) of the Act.

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

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

80-IA. 4) This section applies to— (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :—

(a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) 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:

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

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

The Memorandum to the Finance Bill 2009 reads as under (effective from 01-04-2000):

Further, with a view to preventing the misuse of the tax holiday under section 80-IA of the Income-tax Act, it is proposed to amend the Explanation to the said section to clarify that nothing contained in the said section shall apply in relation to a business referred to in sub-section (4) of the said section which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by an undertaking or enterprise referred to in sub-section (1) thereof. This amendment will take effect retrospectively from 1st April, 2000 and will, accordingly, apply in relation to assessment year 2000-2001 and subsequent years.

Further, the Memorandum to the Finance Bill 2007 is also reproduced below to throw useful light on the intent behind introducing the above provisions (effective from 01-04-2000):

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Clarification regarding developer with reference to infrastructure facility, industrial park, etc. for the purposes of section 80-IA Section 80-IA, inter-alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, Industrial Parks and Special Economic Zones. The tax benefit was introduced for the reason that industrial modernization requires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into a contract with another person [i.e., undertaking or enterprise referred to in section 80-IA] for executing works contract, will not be eligible for the tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-2001 and subsequent years.

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

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

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"contractor" is not essentially contradictory to the term "developer". On the other hand, rather s. 80- IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being a developer.

6.3 As stated above, the intent of the Statute even post Amendment vide Finance and 2009 is not, in our view, to completely deny benefit of deduction under section 80-IA(4) of the Act to all “works contracts/work- contractors ” because that would be defeating the very purpose for which section 80-IA(4) of the Act was introduced viz. to boost industrial modernization through expansion and improvement in infrastructure by encouraging private sector participation by way of investment in development of the infrastructure sector. The memorandum to the Finance Bill 2007 specifically provides that the purpose of the tax benefit has been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely “execute” the “civil construction work” or “any other works contract”. Therefore, the provisions should not be read in manner that all “works contracts” have been ousted from the scope of benefit under section 80- IA(4) of the Act (because that would be defeating the very purpose for which section 80-IA(4) of the Act was introduced), but the benefit is sought to be denied only to persons who merely “execute” works contract. Therefore, in cases where a person makes the investment and himself executes the development work i.e., carries out the civil construction work,

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benefit under section 80-IA(4) of the Act would be available. Therefore, a co-joint reading of all the provisions reproduced above, read with the memorandum, points to the fact that the benefit under section 80-IA(4) of the Act continues to be available to works contractor/civil contractor engaged in “development” of the project by making the investment and himself executing the development work and is only sought to be denied to those class of persons engaged merely in “execution” of works contract/ civil construction work.

6.4 Now, in the absence of any definition of “works contractor” with reference to section 80-IA(4) of the Act, the issue for consideration is what class of cases would fall under the definition of “mere execution” of works contract and hence not eligible for benefits under section 80-IA(4) of the Act and which cases would fall under the category of “development activities” done by a civil/ works contractor and hence eligible for benefits under section 80-IA(4) of the Act. The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs. ACIT (2012) 51 SOT 0207 (Hyd) (URO) held that whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee.

6.5 Therefore, in our view, in order to decide whether the project undertaken is in capacity of a “developer” or “work contractor” has to be analysed on its own set of facts for each individual project. Various factors have to be seen whether the contract qualifies as “development contract” or

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mere “works contract” for example to enumerate a few factors firstly, there must come into existence some “new infrastructure facility” to be able to avail the beneficial provisions u/s 80-IA(4) of the Act. Mere repair/ maintenance/ upgradation/ restoration etc. would not be by itself sufficient to avail the benefits of provisions of 80-IA(4) of the Act, irrespective of scale of operations or other attendant conditions imposed on the works contractor. Second, how are the funds being mobilised by the contractor i.e. if the government gives any mobilisation advanced to the contractor then what are the conditions attached to granting of this mobilisation advance i.e. whether the contractor is required to give certain security deposit/bank guarantee against the same. In sum and substance, whether any financial risk is being undertaken by the contractors. Thirdly whether the agreement is for carrying out any specific work being part of the project or it is for development of the facility as a whole, Fourthly, whether the contractor is required to bring his own manpower and material and expertise to the job or whether the materials and designs etc are provided by the Government. Whether the assessee has deployed its own plant and machinery towards execution of the project or is it a mere supplier of manpower Fifth,, whether the responsibility of the contractor ends with handing over the project or whether the responsibility in relation to the project continues even post the handing over the project i.e. whether the contractor is required to undertake the maintenance of the infrastructure for a period of 12 months or more after handing over of the project to the Government, Sixth, if during the period of construction any damage is incurred and whether the contractor shall be responsible for the same i.e. whether the assessee has to furnish a security deposit to the Employer and indemnify the employer of any losses/damage

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caused to any property/life in course of execution of works Seventh, whether the contractor was responsible for the correction of defects arising in the works at its own cost and responsibility.

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

Department's appeal

Contract No. 7: Sabli Dam work:

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7.1 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations:

“11.6 The contract at Sr.No.7 was entered between the Govt. of Gujarat, Narmada Water -- sources, Water Supply Kalpsar Department and the appellant for construction of earthen dam, in Sabli with spillway masonry, spillway bridge and head regulator. Construction was to be made of the earthen dam in a length of 4235 mt. having maximum height, construction of remaining Ogee shaped gated Masonry Spillway in length of 125.00 mt. in river gorge portion, construction of Head Regulator, Channel 3100 mt. on left bank, other ancillary work of relevant items like R.C.C. Spillway Bridge for all the above types of works. The work to be performed included all general works, preparatory to the construction of road and all other related works. The work also included work of any kind necessary for the due and satisfactory construction completion and maintenance of the work to the intent and meanings of the drawings and these specification and further drawings and orders that may be issued by the engineer from time to time.

The scope of work also included compliance by the contractor with all general condition of contract, whether specifically mentioned or not in the various clauses of these specifications, all materials, apparatus, plans, equipment, tools, fuel, watering, strutting, timbering, transport, offices, stores, workshop, staff, labour and provision of proper and sufficient protective work, diversions, temporarily fencing and lighting. It would also include safety of workers, first-aid equipments, suitable accommodation to staff- and workman with adequate sanitary arrangement, the effecting and maintenance of all insurance, the payment of all wages, salaries, fees, royalties, duties, or other charges arising out of the erection of the work and the regular clearance of rubbish, reinstatement and cleaning up of the site as may be required on completion of works, safety of the public and protection of the works and adjoining land.

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The contractor should ensure that all actions are taken to built in quality insurance in the planning and execution of the work. The quality insurance should cover all stages of work, such as setting out, section of materials, section of construction method, selection of equipment and plant, deployment of personnel and supervisory staff, quality control, testing etc. The work of building in quality insurance shall be deemed to be covered in this scope of the work.

The cost of contract was of 10,20,09,748/- and it was to be completed within a period of 18 months. The Contractor had to give 12 months free maintenance guarantee period from the certified date of taking over. During this period the contractor was to repair damaged portion of any portion of the project. The terms and conditions of the contract were similar to those as mentioned in the Entracts entered between a developer and the government or its agencies for developing by infrastructure facility for public utility. After having regard to the terms and conditions of ~e agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s.80IA (4) (i) of the Act. Accordingly, the same is allowed.”

7.2 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has been engaged in development of “Infrastructure facility” and taken the responsibility of complete handholding of the project and also additional maintenance after 12 months post completion of project.

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7.3 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of project number 7.

Contract No. 8: JIDC Jhagadia Road:

7.4 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations:

“11.7 The contract at Sr.No.8 was entered between the Gujarat, Industrial Development Corporation and the appellant for construction of infrastructure providing like roads, water supply, drainage, street light and transport bay etc. at Jhagadia Mega Estate on line. The work site is located at Jhagadia Industrial Estate of GIDC, in Jhagadia Tal. Jhagadia Dist. Bharuch at an average distance of 25 km from Bharuch city. The work to be carried out under the contract shall consist of the various items as generally described in the tender documents as well as in the bill of quantities furnished in the tender documents.

The work to be performed shall include all general works, preparatory to the construction of road and all other related works. The work shall also include work of any kind necessary for the due and satisfactory construction completion and maintenance of the work to the intent and meanings of the drawings and these specification and further drawings and orders that may be issued by the engineer from time to time. The scope of work shall include compliance by the contractor with all general condition of contract, whether specifically mentioned or not in the various clauses of these specifications, all materials, apparatus, plans, equipment, tools fuel watering, strutting, timbering, transport, offices, stores, workshop, staff, labour and provision of proper and sufficient protective work, diversions, temporarily fencing and lighting. It shall also include. Safety or workers, first-aid equipments, suitable accommodation staff and

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workman with adequate sanitary arrangement, the effecting and maintenance of all insurance, the payment of all wages, salaries, fees, royalties, duties, or other charges arising out of the erection of the work and the regular clearance of rubbish, reinstatement and cleaning up of the site as may be required on completion of works, safety of the public and protection of the works and adjoining land.

The contractor shall ensure that all actions are taken to built in quality insurance in the planning and execution of the work. The quality insurance shall cover all stages of work, such as setting out, section of materials, section of construction method, selection of equipment and plant, deployment of personnel and supervisory staff, quality control, testing etc. The work of building in quality insurance shall be deemed to be covered in this scope the work. Contractor had to give for five years free maintenance guarantee period from the certified date of taking over. During this period contractor was to repair the damaged portion of any portion of road and B.T. surface of road including pot holes. The cost of contract was of Rs. 923842489/-. The project was to be completed within a period of 18 months.

The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance thereof. Therefore, the assessee was eligible for claim of deduction u/s. 80IA (4) (i) of the Act. Accordingly, the same is allowed.”

7.5 In addition to the observations made by Ld. CIT(Appeals), we have also perused terms of the contract/agreement and it would be useful to produce some of the terms, which would throw useful light on the additional responsibility of being undertaken by the assessee.

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7). Performance Rs. 3,45,33,600=00 (5%) Guarantee The Contactor shall give (For free performance guarantee in form of maintenance unequivocal bank guarantee amount guarantee period of 5 for 5% of Estimated cost put to tender years as per Para 1 Rs. 6906.70 Lacs. The performance of Special condition) guarantee shall be deposited fifteen days prior to date of expiry of defect liability period and shall be valid upto 5 years from the date of completion of work. (i.e. 5 years period shall be inclusive of one year of Defects Liability Period). After submission of performance guarantee, performance bond shall become refundable.

8). Defect liability period 12 Months from the date of completion of work. 9). Free Maintenance 5 Years from the date of completion guarantee period of work. under special condition No. 1 & 8 & Clause No. 17/A of form B-2

10). Time limit for 18 Months including monsoon. completion of work from the date of written order to commence

Free Maintenance Guarantee Period The contractor shall have to give five years free maintenance guarantee period from the date or actual completion of work. During

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this period contractor shall have to repair the damaged portion of WMM, CD works, SWD & asphalting or any work done etc. by him at his risk and cost as per direction of the Engineer-in-charge. The requirement and nature of repair work will be decided by Engineer- in-charge and will be binding to contractor.

1.2 Free Maintenance works for WMM, ashfhalt road CD works & SWD during the free maintenance guarantee period as described under Para 1.1, contractor shall be responsible for maintaining the roads including its components in best or" condition by routine maintenance w:rk and / or special repairs,- as may be required, from time to time, for keeping the road surface perfect riding condition, with required camber and gradient and action shall be taken for repairing of all the pot holes, depressions, cuts in riding surface, as well as in the side shoulders of the road & C.D. works, S.W.D. work so that the crust as well as other components of the work does not get damaged due to any reasons whatsoever.

1.21 During the free maintenance guarantee period, contractor shall have to repair the damage portion of B.T. surface of road at his risk and cost as per direction of the Engineer-in-charge, where ever, roughness value of B.T. surface during the maintenance period of 5 years is above 3500 Meter, the agency will have to provide renewal coating overlay as per requirement of that portion in full width of B. f. surface for relevant length as directed by the Engineer- in- charge. The roughness value of B.T. surface shall be measured by roughometer or suitable means as approved by the Engineer -in- charge and said test shall be carried only through GERI or any other agency as approved by the Corporation. The entire cost of testing shall be borne by the agency. Agency will perform such test periodically (minimum once in a year) during-the guarantee period or as directed by the Engineer-in-charge.

Performance Bond / Bank Guarantee of Nationalized Bank:

The contractor shall have to execute the Performance Bond / Bank Guarantee of Nationalized schedule bank amounting to Rs 3,45,33,600.00 Rs. Three Crorer Fourty Five Lacs Thirty Three Thousand Six hundred Only (5% of estimated cost put to tender) in.

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the given format attached herewith or in the format as approved by the Corporation and shall be for validity period of 5 years with effect from the date of work order. The banker shall confirm this every year. N.S.C/F.D/S.S.N.N.L. shall also be acceptable in favour of Executive Engineer.

The performance Bond / B.C. or N.S.C. / F.D. / S.S.N.N.L. shall become refundable as per clause No. 1.”

7.6 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance after 5 years post completion of project.

7.7 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of project number 8.

Contract number 9 Tapi River, Kathor PKG-6 Irrigation:

7.8 In this case, Ld. CIT(Appeals) while allowing the relief to the assessee, made the following observations:

“11.8 The contract at Sr. No. 9 was an agreement entered between the Govt. of Gujarat and the appellant for providing protection and strengthening of existing flood" protection earthen embankment on the bank of river Tapti River Kathor PKG-6 Irrigation. The work included restoration, raising and strengthening of existing flood protection earthen embankment on the bank of river Tapi, Rander-

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Kathor-Amboli falling under the jurisdiction of Surat Canal Division, Surat in Surat city limit. The tender covered protection of earthen embankment by gabions filled with rubble above layer of geofabric filter and sand-gravel bags as directed by Engineer-in- Charge. The main items executed in the tender were earth work in embankment, Geofabric filter, Compaction of earthwork and Rock fill wire gabion. The work was executed in the length of 1050 mtr. with qty. of earthwork of 77389m3, geofabric filter of 32871 m2, gabions of (1.5x1.0x0.6 mt.) in 32871 nos., Rope Gabion (1.5x1.0x0.6 mtr) and gabion (4.0x1.0x1.0 mtr.) in 263 nos. This work was to be completed according to a time bound programe. The cost of the contract was of Rs.10,88,54,285/- The project was to be completed within a period of 15 months and maintenance period was for a period of 12 months after completion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing infrastructure facility for public utility. After having regard to the terms and conditions of agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s.80IA (4) (i) of the Act. Accordingly, the same is allowed.”

7.9 From the reading of the contention of the Ld. CIT(Appeals) order, the work included primarily restoration, raising and strengthening of existing flood protection earthern embankment on the bank of river Tapi. The tender covered protection of earthern embankment by gabions filled with the rubble above layer of geo-fabric filter and sand gravel bags as directed by engineer- in charge. From the terms of the contract, primarily the work seems to involve restoration/upgradation/strengthening/maintenance of “existing” flood protection earthern embankment on the bank of river Tapi. The scope

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of work, in our view does not involve “development” of an infrastructure facility, as envisaged within the meaning of section 80-IA (4) of the Act. The work primarily has upgraded/strengthened the existing projects, but no development of infrastructural facility, in our view has taken place. Although, the assessee has undertaken responsibility of maintenance of the safer. 12 months after completion of the project, however, looking into the totality of facts, we are of the considered view that the assessee is not eligible for deduction under section 80-IA (4) of the Act. The ITAT Bangalore in the case of GMR Tambaram Tindivanam Expressways Ltd v DCIT in I.T.A Nos.545 & 546/Bang/2018, held that a clear distinction can be made between widening an existing road by constructing additional lanes as part of the highway project vis-à-vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act.

7.10. Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 9 as mentioned above. Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 9.

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Contract number 10: Tapi River Varivav PKG-3 Irrigation:

7.11 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations:

“11.9 The contract at Sr.No.10 was entered between the Govt. of Gujarat and the appellant for Irrigation of Tapi River Varivav PKG- 3. The work consisted of restoration, raising, providing protection and strengthening of existing flood protection earthen embankment on the bank of river Tapi, at Vill. Varivav under the jurisdiction of Surat Canal Division, Surat. The tender covered protection of earthen embankment by gabions filled with rubble above layer of geofabric filter and sand-gravel bags as directed by Engineer-in- Charge. The main items executed in the tender were earth work in embankment, Geofabric filter, Compaction of earthwork and Rock fill wire gabion. The work was executed in the length of 3710 mtr. with qty. of earthwork-246428m3, geofabric filter-105806m2, gabions (1.5x1.0x0.6 mt.)-62096 nos., Rope Gabion(1.5x1.0x0.6mtr) and gabion (4.0x1.0x1.0 mtr.)-928 nos.The restoration, raising, strengthening and providing protection to earthen embankment of the existing flood protection works, on bank of river Tapi at village Varivav was carried with earth work, geo fabric filter, rock filled gabion 1.5 mt. x 1.00 mt. x 0.6 mt., 4.0 mt. x 1.0 mt. x 1.0 mt. and rope gabion 1.5 mt. x 1.0 mt. 0.6 mt. The cost of contract was of Rs. 23,56,57,149/- The project was to be completed within a period of 15 months and maintenance period was for a period of 12 months after completion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with

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guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s.80IA(4) (i) of the Act. Accordingly, the same is allowed.”

7.12 From a perusal of the contention of the order passed by Ld. CIT(Appeals), the scope and contents of contract number 10 and contract number 8 mentioned above are similar. Accordingly, observations in respect of contract number 9 would apply to contract number 10 as well. Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 10 as mentioned above.

7.13 Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 10.

Contract Number 11: Bharuch 4- Lane Road:

7.14 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations:

“11.10 The contract at Sr. No. 11 was between Gujarat State Road Development Corporation Ltd. and the appellant for construction of additional 2-Lane of Bharuch- Dane] and to make Bharuch-Dahej (SH-6) as 4 Lane Road. The terms and conditions of the agreement included complete work including all ancillary works on turnkey basis and the project was handed over to the state agency after its execution with warranty period of twelve months from the date of its completion.

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The cost of the contract was of Rs. 103,08, 38,493/-. The project was to be completed within a period of 15 months and maintenance period was for a period of 12 months after completion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered by the government or by its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee is eligible for claim of deduction u/s.80IA(4) (i) of the Act. Accordingly, the same is allowed.”

7.15 In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose.

7.16 Accordingly, we are of the view that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 11 as mentioned above.

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7.17 Accordingly, we are of the view that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 11.

Contract number 12: GIDC Chemical Zone:

7.18 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations:

“11.11 The contract at Sr. No. 12 was between the Gujarat State Road Development Corporation Ltd. and the appellant for construction of roads in GIDC Chemical Zone Dahej. The contract was for construction of roads including SWD, Street light, providing water supply distribution network system and providing treated effluent collection network system for chemical zone at Dahej. It was construction of four lane asphalt road in chemical sector at Dahej in a length of about 3250 mtrs, with provision of a center verge 1 mtr. wide for dividing the traffic moving in opposite directions, pucca sides shoulders of 1.5 mtrs. width were to be constructed on either side of roads for allowing facility of pedestrian traffic/two wheelers to move on the pucca side shoulder duly segregated from the heavy traffic in the main lane, pucca portion of side shoulder could also be used for road widening in future, construction of two lane asphalt road in length of about 800 mtrs. This portion of road was also proposed to have a pucca side shoulder of 1 mtr wide segregated from the trafficable lane for slow moving and pedestrian traffic and for use of widening in future, construction of RCC storm water drains on both sides of the roads for effective surface run off from the chemical zone away from the chemical zone through a outfall RCC storm water drain, so as to prevent the water logging in the area and keeping the road structure safe for long life and utility. Necessary support was provided for crossing the storm water drain run of to flow the carriage way through RCC box culvert at an appropriate location and care was also taken for providing service duct on one side of the road

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and facility of crossing the service pipeline, cables, water supply lines, existing chemical pipeline, gas pipeline and other pipeline was to be laid in future under the traffic lane for crossing without any road portion to be excavated. Such facility was to be provided by encased RCC pipe under carriageway, construction of water supply network in the chemical sector to feed water to each and every industry to the required standard of the industrial needs through a network of D1 pipeline K-7 grade in a length of about 7250 mtrs. The diameter pipeline proposed to laid varies from 150 mm. dia to 400 mm dia., effluent collection system for conveyance of industrial effluent from individual industries to the final pumping station constructed by GIDC through the system of HOPE pipeline (6 kg. grade) of varying diameter from 160 to 800 dia in a length of about 8 kms. The conveyance pipe line is technically planned and designed with 2 nos. of lifting station at different location, as shown in the drawings with the documents provision is also made in developing the road by cost effective, efficient road lighting for the traffic to move safely at night. Necessary safety boards, safety road markings and glow shine road dividers were to be installed on the 4 lane and 2 lane carriageway system.

The cost of the contract was of Rs.31,51,40,326/-. The project was to be completed within a period of 11 months and free maintenance period was for a period of 60 months after completion of the project.

The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s.80lA (4) (i) of the Act. Accordingly, the same is allowed.”

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7.19 In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose.

7.20 Accordingly, we are of the view that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 12 as mentioned above.

7.21 Accordingly, we are of the view that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 12.

Contract number 13: GIDC SEZ Dahej Road:

7.22 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations:

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“11.12 The contract at Sr.No.13 was between the Gujarat State Road Development Corporation Ltd. and the appellant for construction of additional two lanes between Bharuch and Dahej Road in SEZ-l, at GIDC, Dahej. The works included up-gradation about 7.50 kms of existing roads in GIDC Dahej estate including the following works. Developing existing 2 Lane road C-C1 to C7 by widening form 6.70 mt. width to 7.00 met width, strengthening the same leading to a 7.00 met. wide concrete pavement carriage way developing a new 2 lane road with concrete carriage way C-C1 to C7 besides existing ids to have a 4 lane concrete carriage way. Providing a 5 met. wide central verge, within 4 lane carriage way, bound by R.C.C. kerb wall with due provision in between to facilitate vehicles to change lanes at locations defined in working drawing, providing 2 met wide cycle track / foot path on either side of 4 lane concrete carriage way with necessary R.C.C. guard stones and on either side of both the cycle track / foot path to separate heavy traffic and pedestrians and the two wheeled light traffic. Developing a new 4 lane concrete carriage way in portion C7 to C8 including central verge and cycle track / foot path as specified under para 1b (i) 1b (ii) above. Construction of R.C.C. storm water drain on both sides of 4 lane road concrete carriage C- C1 to C8 for effective disposal of the surface water run off for preventing the damage in the road structure as well as adding to the aestheticism in all adverse situations. Necessary support is provided in crossing the S.VV.D. runoff to flow under the carriage way through R.C.C. box culverts at appropriate locations. Care has been taken to provide facility of un hindered maintenance and inspection of existing services of water supply lines, chemical and gas pipe lines, cables without affecting the movement of heavy industrial and light traffic at any time to come. Provisions are also made for encasing R.C.C. pipes for crossing the carriage way, for the need of providing new services of any type to industries from main lines on one side to another side. Provision is also made in developing the road by cost effective, efficient road lighting for the traffic to move safely at night. Necessary safety boards, safety road marking and glow road dividers are also proposed to be installed in the 4 lane carriage way system. The roads within the planned ROW as provided in the DD plan for proposed up gradation, widening strengthening of existing carriage way for vehicles of 40 T capacities with about 12 MSA as traffic potential. The cost of the contract was of Rs. 7,16,94,222/-. The project was to be

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completed within a period of 12 months and free maintenance was for a period of 60 months after completion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s. 80IA (4) (i) of the Act. Accordingly, the same is allowed.”

7.23 In addition to the observations made by Ld. CIT(Appeals), we have also perused terms of the contract/agreement and it would be useful to produce some of the terms, which would throw useful light on the additional responsibility of being undertaken by the assessee.

“23.0 SECURITY DEPOSIT 23.1 Initial Security Deposit shall be in the form of DD/FDR of Nationalized Banks / Scheduled banks UTI, ICICI, HDFC, IDBI banks & NSC or SSNNL bonds etc. equivalent to 2.5% of the estimated cost put to tender and 2.5% of the estimated cost shall be deducted from the running account bills as security deposit & 5% in form of performance bond of any Scheduled banks / UTI, ICICI, HDFC, IDBI banks & NSC or SSNNL bonds etc. so as to make total Security Deposit not more than 10% of the estimated cost. 23.2 Earnest Money paid by the successful tenderer will be returned after furnishing the Initial Security Deposit or adjusted against the Initial Security Deposit at the discretion of the Owner.

42.0 RESPONSIBILITY OF CONTRACTOR

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All expenses towards Mobilisation at site and demobilization including bringing in equipment, work force, materials, dismantling the equipment, clearing the site etc. shall be deemed to be including in the prices quoted and no separate payment on account of such expenses shall be entertained.

Contractor shall be solely responsible for making available for executing the work, all requisite construction equipment, special aids, cranes, tools trackless and testing be equipment and appliances, such construction equipment etc. shall be subject to examination by owner and approval for the some being in first class operating condition. Any discrepancies, repaired or the equipment replaced, altogether, by the contractor. Owner shall not in any way be responsible for providing any such equipment, machinery, tools and tackles etc.

Preparing approaches and working area for the movement and operation of the equipment, leveling the areas for assembly and erection shall also be the responsibility of the contractor, the contractor shall acquaint himself with access availability, facilities such as railway siding, local labour etc, to provide suitable allowances in his quotation. The contractor may have to build temporary access road to aid his own work which shall also be taken care while quoting for work.

Contractor shall not use any, materials issued by owner for installation purposes for laying temporary' lines, erection aids etc. misuse of materials will be seriously viewed and deductions at penal rates will be made from the contractor's bills for such quantities that are missed. Contractor shall arrange and steel scaffolding materials wherever scaffolding is required for execution of works.”

7.24 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has taken the responsibility of

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complete handholding of the project and also additional maintenance after 60 months post completion of project. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5- 2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose.

7.25 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 13 mentioned above.

Contract number 14: GIDC Dahej Road:

7.26 In this case, Ld. CIT(Appeals) while allowing the relief made the following observations:

“11.13 The contract at Sr. No. 14 was between the Gujarat State Road Development Corporation Ltd. and the appellant for providing infrastructure for DSL (Daheh SEZ Limited) at Dahej (Package-ll). The scope of work included construction of two lane and three lane concrete roads with paved site shoulders.

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The contractor was required to provide all material, labour, consumables, tools and tackles, equipments and machineries etc. to complete the entire work in all respect, as mentioned in Tender documents, the work shall include site cleanings, jungle, cutting, making temporary approach to site of work, laisoning and co- ordination with local people and local authorities for smooth working. However, acquiring permission shall be the responsibilities of co-developer, the contractor shall have to work within the permissible Right of Wav (ROW) only and any damage to private properties shall be full responsibility of the contractor including compensation. The contractor would co-operate with local people to maintain cordial working environment and take full care to minimize hassles to the local people while working.

The contractor should, upon the completion of works, hand over the site of works in neat and clean manner free of any debris out construction materials roads, RCC storm water drains with box culverts, street lights, water supply, effluent collection system. Any other works not specifically mentioned but required for completing the work, in all respect, was to be provided by the contractor without additional cost to the co-developer. Construction of RCC storm water drain on both sides of roads for effective surface run off from the Dahei SEZ Ltd through a outfall RCC Storm water drain so as to prevent water logging in the area and keeping the roads' structure safe for long life and utility. Necessary support was to be provided for crossing the storm water drain run of to flow under the carriage way through RCC box culvert at an appropriate location and care was also to be taken for providing facility of crossing the service pipeline, cables, water supply lines existing chemical pipeline, gas pipeline and other pipeline is to be laid in future under the traffic lane for crossing without any road portion to be excavated, construction of water supply network in the Dahej SEZ Ltd. to feed water to each and every industry to the required standard of the industrial needs through a network with Pipeline K-7 grade pipes. Effluent collection system for conveyance of industrial effluent from chemical industries to the local pumping stations constructed by GIDC, provision was also to be made in developing signs for the traffic to move safely at night including necessary safety boards, safety road markings and glow sinn road dividers. It was duty of the contractor to procure required

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for commencing and completing the works for infrastructure development for SEZ at Dahej, surveying and setting out of works and other pre-construction stage activities as required by RIPL/GIDC etc.

The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s. 80IA (4) (i) of the Act. Accordingly, the same is allowed.

The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s. 80IA(4)(i) of the Act. Accordingly, the same is allowed.

Thus, the grounds of appeal on the issue of claim of deduction u/s.80IA (4) of the I.T. Act were partly allowed.”

7.27 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 60 months post completion of project.

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7.28 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 14 mentioned above.

Now we shall take of the assessee’s appeal.

Assessee’s Appeal:

Contract No. 1: GKA Km2 to 248 NH-8 NHAI Road:

9.1 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations:

“11. The contract at Sr.No.1 was for periodic maintenance works comprising of bituminous concrete overlay on Gurgaon, Kotputli and

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Amer Section (km 42 to km. 248) in the state of Haryana and Rajasthan on NH-8.

This contract was entered between the National Highways Authority of India and the appellant. Terms and conditions of the agreement were examined. The contract was made for improving/resurfacing rural road in affected district of Rajkot. The work included providing and laying thick mix seal surface using stone chips, rolling and consolidation of WBM including sealing depression which occurred during the process with power roller, preparing the surface by brushes for removing caked mud etc. sweeping with brooms and finally fanning the surface with gunny bags to remove all loose dirt etc., water bound macadam surface (new), supplying and spreading of murrum for road-side shoulders including rolling and watering, providing anti laying thick bituminous macadam in one layer, fixing ordinary kilometer stones, indicator stones, guard stones and road sign boards of M.S plates and angle irons, including painting, lettering etc. complete with fixing in C.C. block with necessary excavation, pre-casting including necessary reinforcement, painting, lettering and fixing hector-meters etc..

The terms and conditions of the contracts were examined and it was observed the assessee did not develop any infrastructure facility but only rendered services of civil work in the form of repairing and maintenance of the existing road. As there was no development of any infrastructure facility, the assessee was not eligible for claim of deduction u/s. 80IA(4) of the I.T. Act. Accordingly, the action of the A.O. is confirmed.”

9.2 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. The ITAT Bangalore in the case of GMR Tambaram Tindivanam Expressways Ltd v DCIT in I.T.A Nos.545 & 546/Bang/2018, held that a clear distinction can be made between widening

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an existing road by constructing additional lanes as part of the highway project vis-à-vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act.

9.3 Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 1. Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA of the Act respect to Contract number 1.

Contract No. 2: Maliya- Pipaliya – HajnaliRoad:

9.4 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations:

“11.1 The contract at Sr.No.2 was for re-sufacing and strengthening of Malia -Pipaiia -Hajnali road by providing 75 mm thick BBM 37.50 mm this BSG 50 mm thick BM and 20 stick MSS (12 Finance Commission). This contract was entered between the Gujarat State Roads and Building Department and the appellant. Terms and conditions of the agreement were examined. The contract was made for improving/resurfacing rural road. The work included providing and laying thick mix seal surface using stone chips, rolling and consolidation of WBM including sealing depression, supplying and spreading of murrum for road-side shoulders

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including rolling and watering, providing and laying thick bituminous macadam in one layer, fixing ordinary kilometer stones, indicator stones, guard stones and road sign boards of M.S plates and angle irons, including painting, lettering etc. complete with fixing in C.C. block with necessary excavation, pre-casting including necessary reinforcement, painting, lettering and fixing hector-meters etc.

The terms and conditions of the contracts revealed that the assessee did not develop any infrastructure facility but only rendered services of civil work in the form of repairing and maintenance of the existing road. As there was no development of any infrastructure facility, in my opinions, the assessee was not eligible for claim of deduction u/s.80IA (4) of the IT. Act. Accordingly, the action of the A.O. is confirmed.”

9.5 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose.

9.6 Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 2.

9.7 Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA(4) of the Act respect to Contract number 2.

I.T.A Nos. 127 & 148/Rjt/2015 A.Y. 2009-10 Page No 43 Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd.

Contract No. 3: Morbi Malaiya Rural P-2 Road:

9.8 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations:

“11.2 The contract at Sr.No.3 was entered between Gujarat State Roads and Building Department and the appellant for Improvement of Rural Roads under the scheme of Kishan Path Yojana (Package No. Kishan Path / P-2/Raj. Taluka, Morbi-Maliya district Rajkot. The terms and conditions of the contract work were examined and it was observed the assessee did not develop any infrastructure facility but only rendered services of civil .work-in the form of repairing and restoring of the the existing road. As there was no development of any infrastructure facility, in my considered opinion, the assessee was not eligible for claim of deduction u/s.80IA(4) of the I.T. Act. Therefore, the action of the A.O. was confirmed.”

9.9 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. In this case, it may be useful to refer to CIRCULAR No. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 3.

I.T.A Nos. 127 & 148/Rjt/2015 A.Y. 2009-10 Page No 44 Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd.

9.10 Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA(4) of the Act respect to Contract number 3.

Contract No. 4: Morbi Malaiya Package-5 ROAD:

9.11 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations:

“11.3 The contract at Sr.No.4 was entered between the Gujarat State Roads and Building Department and the appellant for Improvement of Rural Roads under Nabard R.I.D.F. 12/Raj/P-05 of Maliya and Morb Taluka, district Rajkot.

The contract was made for improving/resurfacing rural road. The work included providing and laying thick mix seal surface using stone chips, rolling and consolidation of WBM including sealing depression, supplying and spreading of murrum for road- side shoulders including rolling and watering, providing and laying thick bituminous macadam in one layer, fixing ordinary kilometer stones, indicator stones, guard stones and road sign roads of M.S plates and angle irons, including painting, lettering etc. complete with fixing in C.C. block with necessary excavation, pre-casting including necessary reinforcement, painting, lettering and fixing hector-meters etc.

The terms and conditions of the contract work were examined and it was observed the assessee did not develop any infrastructure facility but only rendered services of civil work in the form of repairing and restoring the existing road which was damaged in the in this district. As there was no development of any infrastructure facility, in my opinions, the assessee was not eligible for claim of deduction u/s. 80IA(4) of the I.T. Act. Therefore, the action of the A.O. is confirmed.”

I.T.A Nos. 127 & 148/Rjt/2015 A.Y. 2009-10 Page No 45 Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd.

9.12 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 4.

9.13 Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA(4) of the Act respect to Contract number 4.

Contract No. 5: Morbi- Tankara KP/RAJ/P-3 Road:

9.14 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations:

“11.4 The contract at Sr.No.5 was entered between Gujarat State Roads and Building Department and the appellant for improvement of rural roads under the scheme of Kishan Path Yojana Package No.KP/RJ/P-3 Tal. Morbi, Tankara, district Rajkot. The contract was for repairing of existing road of 4 km. between State Highway

I.T.A Nos. 127 & 148/Rjt/2015 A.Y. 2009-10 Page No 46 Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd.

and Jivapar and 5 km. from National Highway to Lakhadhipur approach road. The terms and conditions of the contract were analysed and it was revealed that the assessee did not develop any infrastructure facility but only rendered services of civil work in the form of repairing and restoring the existing road in the district 6f Rajkot. As there was no development of any infrastructure facility, in my opinion, the assessee was not eligible for claim of deduction u/s.80IA (4) of the I.T. Act. Therefore, the action of the A.O. is confirmed.”

9.15 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose.Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 5.

9.16 Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA(4) of the Act respect to Contract number 5.

Contract No. 6: Rajkot- Morbi Road-2:

I.T.A Nos. 127 & 148/Rjt/2015 A.Y. 2009-10 Page No 47 Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd.

9.17 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations:

“11.5 The contract at Sr.No.6 was entered between Gujarat State Roads and Building Department and the appellant for widening and strengthening of road joining to National Highway 8-A to Rajkot- Morbi road around Morbi City between Km.8/350 to 11/450. The project was to be completed within a period of 6 months and maintenance period was for a period of 36 months after completion of the construction.

The contract was for repairing and widening of existing road. The terms and conditions of the contract were examined and it was revealed that the assessee did not develop any infrastructure facility but only rendered services of civil work in the form of repairing and widening of the existing road in the district of Rajkot. As there was no development of any infrastructure facility, in my opinion, the assessee was not eligible for claim of deduction u/s.80IA (4) of the I.T. Act. Accordingly, the action of the A.O. is confirmed.”

9.18 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. Accordingly, in our

I.T.A Nos. 127 & 148/Rjt/2015 A.Y. 2009-10 Page No 48 Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd.

view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 6.

9.19 Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA(4) of the Act respect to Contract number 6.

Order pronounced in the open court on 28-09-2022

Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 28/09/2022 TRUE COPY आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,

Assistant Registrar, Income Tax Appellate Tribunal, Rajkot