Infrastructure developer status supports section 80-IA relief, while delayed provident fund contributions remain disallowable.
Revision under section 263 was held unsustainable where the Assessing Officer had examined the contract terms and adopted one of two plausible views that the assessee acted as a developer of infrastructure, not a mere works contractor; the assessee therefore succeeded on the revision issue. On the same reasoning, deduction under section 80-IA was held allowable for later years because the agreements involved development, commissioning and maintenance of infrastructure with entrepreneurial risk, so the Revenue failed. The business-loss claim was remanded for fresh verification of supporting evidence. Employees' contribution to provident fund, paid after the prescribed due date, remained disallowable because the statutory condition for deduction was not met.
Issues: (i) Whether revision under section 263 could be sustained on the footing that the Assessing Officer wrongly allowed deduction under section 80-IA by treating the assessee as a developer rather than a works contractor; (ii) Whether the assessee was entitled to deduction under section 80-IA for profits from the infrastructure projects for later assessment years on the same reasoning; (iii) Whether the disallowance of business loss should be restored to the Assessing Officer for verification; (iv) Whether delayed payment of employees' contribution to provident fund was allowable.
Issue (i): Whether revision under section 263 could be sustained on the footing that the Assessing Officer wrongly allowed deduction under section 80-IA by treating the assessee as a developer rather than a works contractor.
Analysis: The assessment records showed enquiry into the nature of the contracts, the scope of work, and the assessee's role in designing, constructing, commissioning, testing, operating and maintaining water treatment infrastructure. The order was passed before the retrospective Explanation introduced by the Finance (No. 2) Act, 2009, and the Tribunal applied the settled principle that revision under section 263 is not justified where the Assessing Officer adopts one of two plausible views after enquiry. The contracts and surrounding facts indicated development of infrastructure facility and not a mere works contract.
Conclusion: The revisionary order under section 263 was not sustainable and the assessee succeeded on this issue.
Issue (ii): Whether the assessee was entitled to deduction under section 80-IA for profits from the infrastructure projects for later assessment years on the same reasoning.
Analysis: The agreements required the assessee to undertake designing, civil and mechanical construction, commissioning, trial run, testing, training and maintenance, with deployment of its own technical and financial resources and assumption of project risk. The Tribunal applied the statutory framework of section 80-IA(4) and followed the view that an enterprise carrying on development of infrastructure facility is eligible, even if the arrangement is structured as a contract, so long as it is not a mere works contract. The assessee's activities were found to be those of a developer.
Conclusion: Deduction under section 80-IA was allowable and the Revenue's appeals failed on this issue.
Issue (iii): Whether the disallowance of business loss should be restored to the Assessing Officer for verification.
Analysis: The Tribunal accepted that the claim arose from a business transaction connected with execution of the project, but the factual basis for final loss and absence of recovery had not been adequately proved before the lower authorities. Since the Revenue did not object to further verification, the matter was sent back for examination of supporting evidence after giving opportunity of hearing.
Conclusion: The issue was remanded to the Assessing Officer for fresh verification.
Issue (iv): Whether delayed payment of employees' contribution to provident fund was allowable.
Analysis: The Tribunal followed the jurisdictional High Court's interpretation of sections 2(24)(x) and 36(1)(va) that employees' contribution is deductible only if deposited within the prescribed due date. Since the contribution was paid after the due date, the statutory condition for deduction was not satisfied.
Conclusion: The disallowance was upheld against the assessee.
Final Conclusion: The assessee obtained relief on the revision under section 263 and the deduction under section 80-IA, failed on the provident fund issue, and obtained a remand only for verification of the business-loss claim.
Ratio Decidendi: Revision under section 263 cannot be sustained where the Assessing Officer, after enquiry, adopts one of two plausible views on eligibility for deduction, and a contract involving development and maintenance of infrastructure with entrepreneurial risk is not to be treated as a mere works contract for section 80-IA purposes.
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