2017 (6) TMI 385 - AT - Income Tax

Tribunal confirms developer status for deduction under Section 80IA, dismisses Revenue's appeals.

Assistant Commissioner of Income-tax, Circle-33, Kolkata Versus M/s. Simplex Meinhardt Joint Venture

The Tribunal upheld the CIT-A's decision to allow the deduction under Section 80IA, determining that the assessee was a developer and not a works ... Eligibility to deduction u/s. 80IA - AO considering the status of assessee as a ‘works contractor’ disallowed the deduction - whether the assessee is a developer or a works contractor - Held that:- We find that the assessee stood successful in getting the bid for detailed survey, drawing, design and execution of sewerage project on turn-key basis for Zones-II,III,IV and V project at Jabalpur. The assessee JV was awarded the said project work by the Municipal Commissioner, Jabalpur. Thereby the assessee is a developer for the reason that the assessee involved in preparation survey, drawing, design and execution of sewerage project work. We find that the assessee made investments and development of infrastructure to support the various contract works. The assessee is also responsible in all respects for the procurement of labours, machinery, equipments, goods, materials for the said project work. The assessee is also responsible for the payment and supply of labour, water and electric charges usage for the project. The assessee is responsible for making the payments of labours and for supply of various items related to the said project. See CIT Vs. ABG Heavy Industries Limited [2010 (2) TMI 108 - BOMBAY HIGH COURT ] On perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor and was a developer and hence Explanation to section 80IA(13) does not apply. - Decided in favour of assessee. Issues Involved:1. Whether the CIT-A was justified in allowing the claim of deduction under Section 80IA of the Income Tax Act for the assessment years 2011-12 and 2012-13.Issue-wise Detailed Analysis:1. Justification of CIT-A in Allowing Deduction under Section 80IA:Background:The appeals by the Revenue were against the orders passed by the Commissioner of Income Tax (Appeals) for the assessment years 2011-12 and 2012-13. The core issue was whether the CIT-A was justified in allowing the deduction claims of Rs. 43,85,379/- for AY 2011-12 and Rs. 47,79,138/- for AY 2012-13 under Section 80IA of the Income Tax Act.Arguments by the Assessee:The assessee's representative argued that the issues were covered by an earlier order dated 18-06-2013 of the Kolkata Tribunal in the assessee’s own case for AY 2007-08, where the Tribunal directed the Assessing Officer to grant the benefit of deduction under Section 80IA.Arguments by the Revenue:The Revenue’s representative submitted that an appeal against the said order was pending before the Hon’ble High Court of Calcutta. However, no evidence was provided to show that the High Court had admitted the appeal or passed any order contrary to the Tribunal’s decision.Tribunal’s Findings:The Tribunal considered the submissions and proceeded to hear the appeal on merits based on the available material. The brief facts revealed that the assessee, a Joint Venture (JV), was awarded a project by the Municipal Corporation, Jabalpur, for the detailed survey, drawing, design, and execution of a sewerage project. The assessee claimed deductions under Section 80IA for the net profit derived from this project.Assessment by AO:The Assessing Officer (AO) disallowed the deduction, treating the assessee as a ‘works contractor’ based on the Explanation to Section 80IA, which was substituted by the Finance Act 2009 with retrospective effect from 1-4-2000.CIT-A’s Decision:The CIT-A, after considering the submissions, held that the assessee was a developer, not a works contractor, and allowed the deduction under Section 80IA. The CIT-A followed the earlier orders of the Kolkata Tribunal and CIT-A for previous assessment years.Tribunal’s Analysis:The Tribunal analyzed whether the assessee was a developer or a works contractor. It found that the assessee was involved in the detailed survey, drawing, design, and execution of the sewerage project, making investments, and developing infrastructure. The Tribunal referred to the Bombay High Court’s decision in CIT Vs. ABG Heavy Industries Limited, which clarified that fulfilling any of the activities—developing, operating, or maintaining the facility—made the assessee eligible for the deduction.Reference to Previous Cases:The Tribunal referred to several cases, including M/s. GVPR Engineers Ltd Vs. ACIT and ARSS Infrastructure Projects Ltd Vs. ACIT, which supported the view that the assessee was a developer and not merely a works contractor. The Tribunal emphasized that the nature of the work and the terms of the agreement indicated that the assessee was responsible for the development of the infrastructure facility and not just executing a works contract.Conclusion:The Tribunal concluded that the CIT-A was justified in directing the AO to allow the deduction under Section 80IA. It upheld the CIT-A’s order and dismissed the appeals by the Revenue for both assessment years 2011-12 and 2012-13.Final Order:The Tribunal pronounced the order in the open Court on 21-04-2017, dismissing both appeals by the Revenue.Summary:The Tribunal upheld the CIT-A’s decision to allow the deduction under Section 80IA, concluding that the assessee was a developer and not a works contractor. The appeals by the Revenue for the assessment years 2011-12 and 2012-13 were dismissed.