2018 (12) TMI 806 - AT - Income Tax

Tribunal upholds deduction for infrastructure activities under section 80IA

The Tribunal upheld the CIT-A's decision to grant the deduction under section 80IA to the assessee for A.Ys 2008-09 and 2010-11, dismissing the Revenue's ... Denying the claim of benefit of deduction u/s. 80IA - assessee is not doing the development work but is only doing the contract - Held that:- The assessee is doing the activity of development of an infrastructure facility as provided under section 80IA(4). The project is a Turnkey project and it cannot form nor have a character of a works contract. Works contract would be applicable to the repairs and maintenance of an existing project. Works contract cannot be in relation to the development of a new project. One of the arguments raised by the learned Sr.DR that the intention of the substitution of the Explanation after sub clause (13) of section 80IA was to deny, the benefit of deduction u/s. 80IA(4) in respect of works contract, but to provide the deduction to such undertakings, which is doing the business of building, operating and Transfer (BOT) and building owning, operating and transfer BOOT as also PPP contracts does not hold water in so far as an irrigation project can never function under BOT or BOOT or PPP . In the circumstances, we are of the view that the assessee’s claim is not hit by the substituted Explanation as provided after sub clause(13) of section 80IA.. The issue raised that assessee is not doing the development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges thereof. Development encompasses within itself contract work. The agreement between the assessee and the customer being the government is for the development of the infrastructure facility being roads and rail systems and bridges by participating in the tenders. Under these circumstances, granting the assessee the benefit of deduction u/s. 801A(4) to be confirmed - Decided in favour of assessee. Issues:- Whether the CIT-A justified in deleting the additions made by the AO on account of denying the claim of benefit of deduction u/s. 80IA of the Act in the facts and circumstances of the case.Analysis:Issue 1: Deduction u/s. 80IA of the Act- The appeals by the Revenue challenged the CIT-A's orders regarding the deduction u/s. 80IA for A.Ys 2008-09 and 2010-11.- The AO denied the deduction claimed by the assessee under section 80IA, adding the amount to the total income.- The CIT-A, relying on a Co-ordinate Bench order, held that the assessee was entitled to the deduction.- The CIT-A directed the AO to grant the deduction as claimed under section 80IA.- The Co-ordinate Bench's order highlighted that the assessee's activities fell outside the meaning of a works contract and were related to infrastructure development, hence eligible for the deduction.- The order emphasized that the nature of the project, being a turnkey project, did not align with a works contract, supporting the assessee's claim for deduction.- The order also clarified that the explanation to section 80IA(4) specified infrastructure facilities, including roads, bridges, and rail systems, which the assessee was developing.- The order concluded that the AO should grant the deduction under section 80IA to the assessee as claimed.- The Tribunal found the CIT-A's decision justifiable and upheld the orders, dismissing the Revenue's appeals.This comprehensive analysis of the judgment highlights the key issues involved, the arguments presented by both parties, the legal interpretation of relevant provisions, and the final decision rendered by the Tribunal.