ASTT. COMMISIONER OF INCOME TAX, LUCKNOW vs. M/S APCO INFRATECH PVT. LTD., LUCKNOW

This appeal has been filed by the Revenue against the order of the ld. CIT(A)-3, Lucknow dated 10.11.2016 for the assessment year 2014-15. The assessee has also filed Cross Objection. The grounds of appeal taken by the Revenue are as under:

C.O. No.19/lkw/2017 Page 2 of 27 1. On the facts and in the circumstances of the case the CIT(A) has erred in deleting the addition of Rs.4,66,10,927/- u/s 80-1A of I.T. Act by ignoring the facts that assessee did not file Audit Report in form 10CCB separately for all projects and also did not claim to in the original return as required by the Income Tax Act, 1961.

C.O. No.19/lkw/2017 Page 3 of 27 5. On the facts and in the circumstances of the case the CIT(A) has erred in deleting the addition of Rs.7,50,000/- which was not before him.

by the assessee in the Cross Objection are as under:

1. Because on the facts and in the circumstances of the case the Ld. Commissioner of Income Tax(Appeals) -3, Lucknow has grossly erred in sustaining the addition of Rs.7,79,000/- representing unmaterialized transactions, for which there is no corroborative evidence available with the Department.

2. Because on the facts and in the circumstances of the case the Ld. Commissioner of Income Tax(Appeals) -3, Lucknow has grossly erred in sustaining the addition of Rs.7,79,000/- since the Assessee has disputed the conduct of such transaction and such assertion has not been controverted or rebutted by the Revenue with any material or evidence.

3. Because on the facts and in the circumstances of the case the Ld. Commissioner of Income Tax(Appeals) -3, Lucknow has grossly erred in sustaining the addition of Rs.3,30,126/ towards prior period expenses, which items of expenditure are liable to be allowed in computing the Real income of the assessee, as the obligation to spend and the corresponding C.O. No.19/lkw/2017 Page 4 of 27 right to receive the money by the recipient arose in the instant year. Further for the A.Y. 2013-14, similar items of expenses have already been allowed by the CIT(A).

C.O. No.19/lkw/2017 Page 6 of 27 5. Aggrieved, assessee preferred appeal before the ld. CIT(A), who partly allowed the appeal of the assessee. The Revenue is in further appeal before this Tribunal against the deletion of disallowance of claim of deduction of Rs.4,68,60,927/- under section 80IA of the Act.

SITEWISE SUMMARY FOR THE ASSESSMENT YEAR 2014-15 SITE PROJECT DATE OF DATE OF TURNOVER CLIENT NATURE OF WORK NAME COST(INR COMMENC COMPLETIO DURING NAME CRORES EMENT N 2014-15 KACH 804,313,167 26/06/2013 25/06/2015 51,567,712 Construct Widening & WA ion Strengthening of Division Varanasi, Adalpur, 2.LNV Chunar, Kachwo(S.H-74) Mirzapur Road km 11.00-45.500 JEEVN 1,512,566,250 21/06/2013 20/06/2015 41,072,462 PWD, UP Widening & ATHPU Strengthening of R Jeevnathpur- Kanchanpur- Sikandarpur-Chakiya- Naugarh-Madhupur (SH- 97)

BABTP 1,510,359,700 23/11/2013 21/11/2015 24,755,400 PWD, Widening & UR Varanasi Strengthening of Existing Two Lone to four lane of Bhadohi-Kapsethi Babatpur state highway in District of Bhadohi & Varanasi DUMA 747,663,302 24/01/2013 23/07/2014 446,588,930 PWD, Construction and RIAGA U.P. Strengthening of NJ Dumariyagan)-Dhebrus stote highways no. 76 from km 0.000-42.000 in the district of Siddarthnagar.

From above table it is crystal clear, these projects were awarded by UP PWD (State Government) to assessee for infrastructure development and nature of work is also mention against each work carried by assessee relating to infrastructure facility. Assessee while claiming deduction u/s 801A had fulfilled all the parameters / conditions, which are defined in relevant section. The relevant provision of Section 801A (4)(i) also be produced for ready reference. This section applies to- C.O. No.19/lkw/2017 Page 8 of 27 (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 fulfills 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.

[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 [inland port or navigational channel in the sea]]. The Central Board of Direct taxes vide circular No. 4/2010 dated 18.05.2014 has clarified widen of existing road as infrastructure facility is covered by section 801A 4(1). The relevant circular is reproduced hereunder Section 80 IA (4) (i) provides for a deduction to an undertaking engaged in developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility subject to satisfaction of the conditions laid down in the section. The Explanation to section 80-IA (4)

C.O. No.19/lkw/2017 Page 9 of 27 (1) states that for the purpose of this clause, infrastructure facility means inter alia: (a) A road including toll road, a bridge or a rail system. (b) A highway project including housing or other activities being an integral part of the highway project. The issue has been examined by the board. It has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing road would not be classifiable as a new infrastructure facility for this purpose. That business activities in four above said projects are duly covered by scope of work defined u/s 80 IA (4) of the I.T. Act and clarified vide Circular 4/2010 stated above. The Assessing officer had disallowed the claim of assesssee on following footings- The Assessing officer had stated reason for disallowing the claim of assesse u/s 80 IA(4). That assessee had not claimed such deduction u/s 80-IA(4) at the time of filing original return but claimed in revised return. In this regard it is relevant to mention that Assessee had furnished original return vide. Acknowledgement no. 426756641281114 on 28/11/2014 which was in due time as per section 139(1) of the I.T. Act 1961, as assesse had entered in specified domestic transaction so the due date for filing of return was 30th November 2014. The said return was revised on 21/03/2016 vide. Acknowledgement no. 100339521210316 on 21/03/2016 as per provision section 139(5) of the IT. Act 1961. The revised return was filed within specified time so it replaces the original return as held by Hon'ble High court (All) in the case of Dhampur sugar Mills Ltd. The reliance is also placed on recent judgment of Hon'ble ITAT (All) Lucknow Bench in the case of Vijay infrastructure Ltd. where it has been categorically held "that where time was available for revising the return of income to revise the return originally filed u/s 139 (1) as in A. Y. 2009- 10 or to file the return u/s 139 (1) as in A. Y. 2010-11, the C.O. No.19/lkw/2017 Page 10 of 27 return filed u/s 153A should be considered as a return filed u/s 139 (1) and hence all claim raised in these returns should be decided on merit but where the time available to file revised return has elapsed before search as in A.Y. 2007- 08 and 2008-09, the new claim raised in the return filed u/s 153A is not acceptable." That Assessing officer has also objected that assesse has not furnished Audit report in form no. 10CCB for each project separately. In this regard it is relevant to mention that during the course of assessment proceeding assessee has submitted separate Audited financial statement for each projects namely- 1. KACHWA-Widening & Strengthening of Varanasi, Adalpur, Chunor, Kochwa (S.H.-74) Road km. 11.00-45.500 2. JEEVNATHNPUR-Widening & Strengthening of Jeevnathpur-Kanchanpur-Sikandarpur-Chakiya-Naugarh- Madhupur (SH-97) 3. BABATPUR-Widening & Strengthening of Existing Two Lane to four lane of Bhadohi-Kapsethi-Babatpur state highway in District of Bhadohi & Varanasi 4. DUMARIYAGANJ-Construction and Strengthening of Dumariyaganj Dhebrua state highways no. 76 from km 0.000-42.000 in the district of Siddarthnagar However while uploading the audit report, due to technical reasons each and every audit report separately could not be uploaded. Therefore assesse requested his auditor to consolidate all audit report of above said 4 projects and upload the same in form no. 10CCB. Assesse has also produced separate records of each and every project before assessing officer however no defect was pointed out in submission/accounts of assessee. Therefore from the above it is crystal clear that Assessing officer was disallowing the claim of the assesse could not point out any defect on facts of the case. Assessing officer has raised only technical/ legal reasons while disallowing the claim.

C.O. No.19/lkw/2017 Page 11 of 27 In this regard it is reiterated that objections of Assessing officer were only on assumption, without interpretation of law and against facts of the case. Further reliance is also placed on recent judgment of Hon'ble ITAT (All) Lucknow bench in the case of Vijay infrastructure Ltd where it was held "that a categorical finding has been given by CIT (A) that the assessee company is not a mere work contractor but has developed the road from existing 2 lane to 4 lane and while doing so, the assessee company has also made substantial investment by itself and also executed the development works and carried out civil-works on its own by using its own material and expertise and no material consumed in the roads and bridges were provided by the NHAI and UP PWD. This is also noted by CIT(A) that the maintenance of the existing facility during the period of development also was of the assessee company and so also was the risk during this period to maintain the infrastructure and after the completion of development of road and its handing over to the Government, the risk period of the assessee company was of 12 months for maintenance of the road. As per explanation below sub section (4) of section 80IA, infrastructure facility includes a road including toll road, bridge or a rail system. This is not in dispute that the assessee has widened the road and therefore, activity of the assessee falls within the definition of infrastructure. The CIT(A) has also referred to several judicial pronouncements as per which it was held that there is no requirement that the assessee should have been the owner of the infrastructure facility. The facts in the case of Koya & Co. (Supra) are identical. In that case, the relevant paras of the Tribunal Order are Para No. 21 to 28 and the same are reproduced below for ready reference:

“We find that the decision relied on by the learned counsel for the assessee in the case of CIT vs. Laxmi civil Engineering works (supra) squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction under section 801A of the Act after considering C.O. No.19/lkw/2017 Page 12 of 27 the Judgment of the Mumbai High Court in the case of ABG Heavy Engineering [supra). The case of ABG is not the pure developer whereas, in the present case, the assessee is the pure developer. We also find that Section 80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 801A of the Act, which ultimately culminated into Amendment under section 801A of the Act, in the Finance Act 2001, to give effect to the aforesaid circulars issued by the CBDT. We also find that, to avoid misuse of the aforesaid amendment, an Explanation was inserted in Section 80IA of the Act, in the Finance Act-2007 and 2009, to clarify that mere works contract would not be eligible for deductions under section 801A of the Act. But, certainly, the Explanation cannot be read to do away with the eligibility of the developer; otherwise, the parliament would have simply reversed the Amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only mere works contact or subcontract as distinct from the developer. This is clear from the express intension of the parliament while introducing the Explanation. The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before us that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and C.O. No.19/lkw/2017 Page 13 of 27 financial resources. Further, the order of Tribunal in the case of B. T. Patil cited supra is prior to amendment to sec 801A(4), after the amendment the section 801A(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to amendment the "or" between three activities was not there, after the amendment "or" has been inserted w.e.f. 1-4-2002 by Finance Act 2001. Therefore, in our considered view, the assessee should not be denied the deduction under section 801A of the Act if the contracts involves design, development, operating & maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s 801A of Act. In our opinion the contracts which contain above features to be segregated on this deduction u/s. 80-1A has to be granted and the other agreements which are pure works contracts hit by the explanation section 801A(13), those work are not entitle for deduction u/s 801A of the Act. The profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. It is needless to say that similar view has been taken by the Chennai Bench of the Tribunal and deduction u/s. 801A was granted in the case of M/s. Chettinad Lignite Transport Services (P) Ltd., in order dated 27th July, 2007 for the assessment year 2004-05. Later in ITA No. 1179/Mds/08 vide order dated 26th February, 2010 the Tribunal has taken the same view by inter-alia holding as follows: Moreover, the reasons for introducing the Explanation were clarified as providing a tax benefit because modernization requires a massive expansion and qualitative improvement in infrastructures like expressways, highways, airports, ports and rapid urban C.O. No.19/lkw/2017 Page 14 of 27 rail transport systems. For that purpose, 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 work contract has been encouraged by giving tax benefits. Thus the provisions of section 801A shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the section but where a person makes the investment and himself executes the development work, he carries out the civil construction work, he will be eligible for the tax benefit under section 801A." The above order was followed in subsequent assessment years 2007-2008 & 2008-09 in & 1313/Mds/2011 vide order dated 18.11.2011 in the case of the same assessee. Further in the case of R.R. Constructions, the Chennai Bench of Tribunal in Ι.Τ.Α. Νο. 2061/Mds/2010 for assessment year 2007-08 vide order dated 3.10.2011 held as follows: Being so, we are inclined to partly allow the ground relating to claiming of deduction u/s. 801A. From the above Para of this tribunal order, it comes out that if the contracts involves design, development, operating & maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under s. 80IA and profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be accepted as development and cannot be said to be contract simplicitor to apply the explanation. In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in development of road and is not a mere contractor as he had deployed his own capital, used his own management and expertise in maintenance and had to bear the risk and defect correction. These findings of CIT (A) could not C.O. No.19/lkw/2017 Page 15 of 27 be controverted by learned DR of the revenue and therefore, this tribunal order rendered in the case of Koya & Co. (Supra) is squarely applicable because the facts are similar. In the order of CIT (A), he has followed this tribunal order and various other judicial pronouncements as noted by him in his order, as reproduced above. Considering this factual and legal position, we find no infirmity that the order of CIT (A) on this aspect that in the facts of the present case, it cannot be said that the assessee company was mere a contractor and not a developer. Therefore, on issue No. 3, we find no infirmity in the order of CIT(A). This issue is decided in favour of the assessee."

“18.Questions B and C relate to denial of exemption on ground referable to belated filing of return, that is to say, returns filed beyond the period stipulated under section 139(1) or section 139 (4), as the case may be, as well as section 142 (1) or section 148, as the case may be. There are no cases among these appeals where returns were not filed. There are cases 'where claims have been made along, with the returns and the returns were filed within time. Still further, there are cases where returns were filed belatedly, that is to say, beyond the period stipulated under subsection 1 or 4 of section 139; and, there are also returns filed after the period with reference to sections 142(1) and 148 of the I.T Act.

C.O. No.19/lkw/2017 Page 21 of 27 BABATPUR-Widening & Strengthening of Existing Two Lane to four lane of Bhadohi-Kapsethi-Babatpur state highway in District of Bhadohi & Varanasi, and (iv) DUMARIYAGANJ-Construction and Strengthening of Dumariyaganj Dhebrua state highways no. 76 from km 0.000-42.000 in the district of Siddarthnagar. All the four projects were awarded to the assessee by UPPWD for infrastructure development. All the relevant conditions for claim of deduction under section 80IA of the Act are fulfilled. The business activities of all the four projects are covered in the scope of work defined under section 80IA (4) of the Act and clarified vide CBDT’s Circular No.4/2010 where the assessee acted as a developer in these projects. Therefore, the Assessing Officer was not justified to reject the claim of the assessee for deduction under section 80IA of the Act. We, accordingly reject grounds No.1 & 2 taken by the Revenue.

C.O. No.19/lkw/2017 Page 22 of 27 In the present case the payment to the said party has been made through banking channel and these transactions are reflected in Books of accounts of appellant. Therefore, respectfully following the decision of Hon'ble Jurisdictional High Court the addition of Rs.1,21,707 is hereby deleted. Ground of appeal No. 4 is allowed.”

C.O. No.19/lkw/2017 Page 24 of 27 In the present case also the AO has disallowed expenses without pinpointing any specific defect in bill/voucher produced. Due to the reasons outlined above and the judgments of Hon'ble Jurisdictional ITAT as outlined above, the disallowances made by the AO cannot be sustained. In view of the above facts the adhoc disallowances of Rs.2,50,000/- and Rs.7,00,000/- made by the AO are hereby deleted as the undersigned does not find any justification in the disallowances made by the AO. In view of the above facts and discussion the ground of appeal

No. 5 is allowed.”

18. We find that the ld. CIT(A) has deleted the ad hoc disallowances made by the Assessing Officer, relying on various decision of the Lucknow Bench of the Tribunal and after considering the facts and circumstances of the case. The ld. D.R. could not point out any error in the order of the ld. CIT(A), who has rightly deleted the ad hoc disallowances made by the Assessing Officer. Accordingly, we confirm the order of the ld. CIT(A) on these issues and reject grounds No.4 & 5 of the appeal of the Revenue.

19. Ground No.6 of the appeal of the Revenue relates to the deletion of addition of Rs.6,75,950/- made by the Assessing Officer under section 40(a)(ia) of the Act. The ld. CIT(A) deleted the said disallowance vide paras 14.1 to 14.3 of his order, observing as under: “14.1 Ground of appeal No. 6 (Disallowance of Rs.675950/- u/s 40(a)(ia)) AO noted that appellant had paid a sum of Rs.6,75,950/- under the head commission but TDS was not deducted u/s 194H of the Act. The AO disallowed this amount u/s 40(a)(ia) of the Act and added it to total income of the appellant.

C.O. No.19/lkw/2017 Page 25 of 27 14.2 The written submissions of the appellant on this issue are outlined in para 7 of this order. 14.3 During the course of appellate proceeding the ledger account and bills/vouchers for these expenses were produced. On examination of the same it is clear that these payments have been made to different persons and all these payments are petty payments. None of the payment exceeds Rs.5,000/- Thus, the appellant was not under legal obligation to deduct TDS on these payments. In view of these facts the provisions of section 40(a)(ia) cannot be invoked in respect of these payments. Thus, the disallowance of Rs.6,75,950/- made by the AO u/s 40(a)(ia) is hereby deleted. The ground of appeal

No. 6 is allowed.”

20. The observation of the ld. CIT(A) was that since the payments have been made by the assessee to different persons are petty payments and none of the payment exceeds Rs.5,000/-, the assessee was not under legal obligation to deduct TDS on these payments. We are of the view that the finding of the ld. CIT(A) is in right perspective and no interference is called for in the order of the ld. CIT(A) on this issue. We accordingly confirm the order of the ld. CIT(A) on this issue and reject ground No.6 of the Revenue’s appeal.

21. Accordingly, the appeal of the Department is dismissed.

22. So far as the Cross Objection of the assessee is concerned, during the course of physical hearing, the ld. counsel for the assessee submitted that assessee opted for Direct Tax Vivad se Vishwas Scheme (VSVS) in relation to its cross objection in Form No 1 and Form No 2. Pursuant thereto, a certificate in Form No 3 [Ack No 875481120231220] dated 23.12.2020 was issued to the assessee by the designated authority, i.e., Ld. PCIT, Lucknow-1, who accepting the VSVS was asked the assessee to discharge the tax liability under VSVS to the tune of C.O. No.19/lkw/2017 Page 26 of 27 Rs.5,12,370/- by 31.03.2021. As against the identified tax settlement, since the assessee has already paid tax of Rs.1,62,12,835/-, thus the excess payment of taxes resulted into refund of Rs.1,57,00,465/-. However, order of Full and Final Settlement of dispute is yet to be issued by the Revenue. The ld. counsel for the assessee has further contended that the assessee has written various letters to the Principal Commissioner of Income Tax (Central), Lucknow for issuance of Form No.5, certifying that the dispute has been resolved for assessment year 2014-15. The Ld. AR further argued that, since the assessee has already discharged the disputed tax in terms of form No 3 issued by the Ld. PCIT being the designated authority, there remains no reasons to continue the present dispute, hence both cross objection of the assessee deserves to be dismissed as withdrawn.

Sd/- Sd/- [G. D. PADAMAHSHALI] [SUBHASH MALGURIA] ACCOUNTANT MEMBER JUDICIAL MEMBER