2024 (5) TMI 213 - AT - Income Tax

Assessee's Section 80IA(4)(i) deduction eligibility requires fresh examination to determine developer versus contractor status

ITAT Ahmedabad remanded the case back to CIT(A) for fresh adjudication regarding Section 80IA(4)(i) deduction eligibility. The assessee claimed developer ... Deduction u/s.80IA(4)(i) - assessee business is in the nature of work contract - as per AO assessee has entered into contract agreements as a ‘Contractor’ and earned income as ‘Contract receipts’ which income is not entitled for deduction - determination of role and responsibilities of the assessee in execution of the projects - CIT(A) deleted the disallowance of deduction - HELD THAT:- Assessee is claiming that it is a developer who has built roads, flyovers, Road over bridges(ROB), railway systems, water intake well etc. wherein a claim is made by the assessee that the new infrastructure facility was created, and we have also observed that the assessee total receipts are to the tune of Rs. 26.60 crores which is not substantial keeping in view the claim of the assessee having been involved in execution of new infrastructure facilities by way of bridges, roads, Road over bridges , flyovers , water intake well, etc. Thus, it is all the more necessary to analyse as to the role and responsibilities of the assessee in execution of these projects and other parameters as culled out above, in order to arrive at conclusive finding whether the assessee has created a new infrastructure facility as a Developer or have undertaken a contract work to execute work order as a Contractor. We could have decided the issue ourselves as these appeals are old appeal pending for almost 7-10 years, but the material filed before us vide paper books are not sufficient for us to decide the issue . Even evidences such as tender documents, agreements with the Government for executing the work, details of the work executed vis-à-vis creation of new infrastructure facility created, PERT chart, financial statements, Men, material and machines deployed by the assessee , the roles and responsibilities performed by the assessee, details of deployment of funds, details of statutory clearances obtained , penal provisions in the agreements etc. were all not provided in the paper book filed by the assessee. The brief summary of the project is submitted which is not sufficient to adjudicate this issue. Each and every project requires detailed and indepth analysis on several parameters as culled out above, before holding whether the assessee is a developer or contractor. Thus, it would be fit and appropriate in the interest of justice and fair play that the matter be restored back to the file of ld. CIT(A) for fresh adjudication of this issue after making detailed analysis of all the specific work executed by the assessee in which the assessee has claimed that it acted as developer and claimed to be eligible for deduction u/s 80IA(4). The appeal of the Revenue on this issue is allowed for statistical purposes Issues Involved:1. Disallowance of deduction u/s 80IA(4)(i) of the Act.2. Determination of whether the assessee is a 'Developer' or 'Contractor'.3. Compliance with the conditions stipulated u/s 80IA(4) of the Act.4. Non-furnishing of separate project-wise audit report in Form No. 10CCB.Summary of Judgment:Issue 1: Disallowance of deduction u/s 80IA(4)(i) of the ActThe AO disallowed the deduction claimed by the assessee u/s 80IA(4) on the grounds that the assessee was working as a 'Contractor' executing work contracts, not as a 'Developer'. The AO referred to the Explanation below Section 80IA(13), which excludes work contracts from the benefits of Section 80IA(4). The AO observed that the assessee executed work orders awarded by approval of tenders, and the income derived was from contract receipts, not eligible for deduction u/s 80IA(4).Issue 2: Determination of whether the assessee is a 'Developer' or 'Contractor'The CIT(A) allowed the appeal of the assessee, holding that the assessee was a 'Developer' and not a 'Contractor'. The CIT(A) examined various projects undertaken by the assessee, the terms of agreements, and judicial precedents. The CIT(A) noted that the assessee had undertaken substantial financial and entrepreneurial risks, provided machinery, and maintained the infrastructure projects, thus qualifying as a 'Developer'.Issue 3: Compliance with the conditions stipulated u/s 80IA(4) of the ActThe AO observed that the assessee did not furnish a separate project-wise audit report in Form No. 10CCB, as required under Rule 18BBB of the Income-tax Rules, 1962. The CIT(A) did not address this issue in detail. The Tribunal noted that detailed analysis of each project was necessary to determine compliance with the conditions stipulated u/s 80IA(4) and whether the assessee acted as a 'Developer'.Issue 4: Non-furnishing of separate project-wise audit report in Form No. 10CCBThe Tribunal observed that the CIT(A) did not discuss the non-furnishing of separate project-wise audit reports in Form No. 10CCB and the issue of projects initially awarded to the erstwhile partnership firm. The Tribunal emphasized the need for detailed analysis and specific findings for each project to determine eligibility for deduction u/s 80IA(4).Conclusion:The Tribunal restored the matter to the file of the CIT(A) for fresh adjudication, directing a detailed analysis of each project undertaken by the assessee. The CIT(A) was instructed to consider the objections raised by the AO and provide specific findings on whether the assessee acted as a 'Developer' and complied with the conditions stipulated u/s 80IA(4). The Tribunal allowed the appeals of the Revenue for statistical purposes.