TaxTMI 
TaxTMI 
2012 (4) TMI 149
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.... absence of valid search and any incriminating material found at the premises of the assessee. According to the assessee, the assessing officer should not have issued notice under section 153 of the Act. We have heard both the parties on this issue. There was a search operation conducted in the case of Sri Venkata Kutumbarao and others on 28-7-2008 and also search was conducted at the business premises of GVPR Engineers Limited and there was seizure of some incriminating documents and the cases were notified with the DCIT, Central Circle-5, Hyderabad. Thereafter, notice under section 153A has been issued consequent to the search action. Being so, we find no merit in the ground. Accordingly, this ground of the assessee is dismissed. 4. This being the sole ground in ITA No.1481/Hyd/2011, this appeal is accordingly dismissed and in other appeals this ground is dismissed. 5. Second common ground in ITA Nos. 1482 to 1485/Hyd/ 2011, 347/Hyd/08 and 1323/Hyd/08 is with regard to non granting of deduction under section 80IA of the Act without proper appreciation of the fact that the assessee is not a contractor but a developer of infrastructure facility and eligible for deduction unde....
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....perating an infrastructure facility shall not be included in computing the total income. 17.2 Fiscal incentives for development of infrastructure have been provided in the Income-tax Act as a package, so that tax holiday is allowed under section 80-IA to the infrastructure enterprise and income from long-term investment made by the Infrastructure Capital Company or Infrastructure Capital Fund in the approved enterprise is exempt under section 10(23G). Thus, whenever a decision is taken to revise the scope of fiscal incentives to infrastructure by amending section 80-1A, necessary amendments are required to be made in sections 10(23G) as well. 17.3 Thus, as a measure of rationalisation, Finance Act, 2001, has amended section 10(23G) so as to provide that income by way of interest, dividend or long term capital gains of an infrastructure capital fund or an infrastructure capital company, from investments in any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or in a housing project referred to in sub-section (10) of section 80-18 will not be included in computing the total income. This will remove the requirement of conse....
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....infrastructure facility. 47.3 In the case of other infrastructure, namely, for airport, port, inland port and inland waterways, section Bo-IA has been further amended to relax the existing two tier fiscal incentive. Instead, an identical ten year tax holiday may be availed of in a block of initial fifteen years. 47.4 The condition that such infrastructure facility shall be transferred to the Central Government, State Government or local authority has also been removed. However, the agreement with such authorities for creation of such infrastructure will have to be entered into. 47.5 Under sub-section (B) of section Bo-IA, where any goods are transferred for a consideration to any other business of the assessee, the consideration should correspond to the market value of such goods. As in certain cases, the transfer may relate to services, the provision has been accordingly amended to clarify that this would include services. Such services may include marketable services of operation and maintenance (O&M) in case of infrastructure facilities, marketable services for distribution of electricity and specified marketable services in telecom. Instead of the words "industrial und....
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....s not applicable to the case of an enterprise, which is engaged in mere 'development' of infrastructure facility and not its 'operation' and 'maintenance'. Therefore, the question of 'operating and maintaining' of infrastructure facility by such an enterprise before or after any cut off date cannot arise. When the Act provides for deduction under section 80- IA(4), undisputedly for an enterprise, which is only 'developing' the infrastructure facility, unaccompanied by 'operating and maintaining' thereof by such entity, there cannot be any question of providing a condition for such an enterprise to start operating and maintaining the infrastructure facility on or after 1-4- 1995. Since the assessee was only a developer of the infrastructure project and it was not maintaining and operating the infrastructure facility, sub-clause (c) of sub-section (4) of section 80-IA was not applicable. [Para8] Further, from the assessment year 2000-01, deduction under section 80-IA(4) is available if the assessee carries on the business of any one of the abovementioned three types of activities. When an assessee is only developing an infrastructure facility/project and is not maintaining nor ope....
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....herefore, merely because, in the agreement for development of infrastructure facility, assessee was referred to as contractor or because some basic specifications were laid down, it did not detract the assessee from the position of being a developer; nor would it debar the assessee from claiming deduction under section 80- IA(4).[Para9] Therefore, the assessee, who was only engaged in developing the infrastructural facility, i.e., road, and not engaged in the 'operating and maintaining' the said facility, was entitled to the benefits of the deduction under section 80-IA(4). The provisions of sub-clause (c) of clause (i) of section 80-IA (4) were inapplicable to the instant case. Hence, the order of the Commissioner (Appeals) was correct. [Para 13]" 10. Further, he drew our attention to the decision of Bombay High Court in the case of CIT vs. Glenmark Pharmaceuticals Limited (319 ITR 199), the relevant extract of the head note reads as under:- "By the Finance Act of 2009, which substituted the provisions of section 194C, the expression 'work' has now been defined in clause (iv) of the substituted Explanation. Clauses (a) to (d) are the same as clause (a ) to (d) of the erst....
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....or sale, if (i) the property in the article or thing passes to the customer upon the delivery; and (ii) the material that was required was not sourced from the customer/ purchaser, but was independently obtained by the manufacturer from a person other than the customer. The rationale for this was that where a customer provides the material, what the manufacturer does is to convert the material into a product desired by the customer and ownership of the material being that of the customer, the contract essentially involves work of labour and not of a sale. The Parliament recognized the distinction which held the field, both administratively in the form of circulars of the CBDT and judicially in the judgments of the several High Courts. Consequently, the principles underlying the applicability of section 194C as construed administratively and judicially in decided cases, find statutory recognition in the Explanation. The Explanation, therefore, as the Memorandum explaining the clauses of the Finance Bill, 2009 states, was in the nature of a clarification. Where an explanatory provision is brought to remove an ambiguity or to clear a doubt, it is reflective of the law as it has always....
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....tent with the transaction being regarded as a transaction of sale, provided that the requirements of a contract of sale are met. They were net in the instant case. The contract entered into by the assessee was not a contract for carrying on any work within the meaning of section 194C. [Para 32]" 11. Further, he submitted that in the case of the assessee irrigation agreements entered with the State Government and not part of the work. The site has been handed over to the assessee for carrying on the work as per the requirements of the Government and also operating system for a certain period mentioned therein and completed the project at the end of the above said period and as such the assessee is a developer and also operating the system for a certain period. Accordingly, the assessee is entitled for deduction under section 80IA of the Act. He submitted that the assessing officer ignored the fact in all the contracts handed over to the assessee for development of the infrastructure facility. In few cases, after operation for certain period, had to re-hand over back the entire site with the infrastructure facility developed to the owner. He drew our attention to the copies of agr....
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....1 is incorrect which reads as follows:- "7. The assessee's AR has filed a chart giving the details of all the contracts undertaken during the year in respect of which deduction u/s 8OlA was claimed. It is evident from the chart that some of the agreements have been entered into by the assessee with Government of India undertakings besides state Govt. Departments. 11 cannot therefore be said that the assessee entered into an agreement with a statutory body for development of an infrastructure facility which is a mandatory condition laid down in section 8OlA (4)(i)(b) of the Act. None of the contracts undertaken by the assessee are on BOT/BOOT model. On the perusal of the nature of work done in these contracts, it is evident that none of the projects were conceived, designed and planned by the assessee. In none of the projects, the assessee has undertaken the operation and maintenance of the facilities built. Moreover, the assessee was not given the contract for building the entire facility. Only construction of part of the project was given to the assessee. These projects were not funded-by the assessee and the entire capital investment-was made by the Government/local authority ....
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....than live storage area at Simhadri Thermal Power Project for NTPC near Vizag A.P. Simhadri Thermal Power Bharat Heavy Electricals Ltd ( A Govt. of India Undertaking ) 3 SRSPHuzurabad Earthwork excavation & forming embankment construction of structures and CC lining from Km. 9.00 to 26-25 (tail-end) of 4F-21IR OF dem. 48 and its minors Irrigation Project Superintending Engineer Construction Circle, Huzurabad. A.P. 4 SRSP-FFC 21- 22 Earth work excavation and forming embankment from Km. 21.00 to Km 22.00 of FFC from Sri Ram Sagar Project Irrigation Project The Executive Engineer, SRSP - FFC Division, No. 2, Mettpally, Karimnagar Dist. 5 KC Canal LCB-01 Earthwork excavation and CC Lining to distributaries of KC Canal including construction of structures from Km. 0.000 to Km. 1Rs. 20.190 in Reach - I under LCB - 01 Irrigation Project Superintending Engineer KCCMP Construction Circle, No. 1, Kurnool A.P. 6 Electrical Nizamabad Distribution System Improvement works under APL-1 Supplementary in Nizamabad and Adilabad Towns Electrical Work 7 Sanga Reddy Road Work Laying of CC Road over the WBM road in Rajampet....
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....SP-FFC 21-22 Earthwork excavation and forming embankment from Km. 21.00 to Km 22.00 of FFC from Sri Ram Sagar Project Irrigation Project The Executive Engineer, SRSP - FFC Division, No. 2, Mettpally, Karimnagar Dist. 3 SRBC-38 Earthwork excavation and Construction of Structures for Micro network distribution system for Block 13 & 14 of Packages No. 38 Irrigation Project The Superintending Engineer SRBC Circle, No. 1, Nandyal, Kurnool, AP 4 KC Canal LCB- 01 Earthwork excavation and CC Lining to distributaries of KC Canal including construction of structures from Km. 0.000 to Km. 120.190 in Reach - I under LCB - 01 Irrigation Project Superintending Engineer KCCMP Construction Circle, No. 1, Kurnool A.P. 5 SRSC FFC 0-7 Construction of CM &D works (8 Nos.) including Earth Work Excavation and forming embankment of canal gaps from Km 0.000 to Km 7.000 Irrigation Project Superintending Engineer SRSP-Flood Flow Canal Circle, Dharoor Camp, Jagtial 6 Sanga Reddy Road Work Laying of CC Road over the WBM road in Rajampet locality, Indira Colony, Prashanth Nagar Colony Road Work M.C.H. Sanga Reddy, A.P. 7 SRBC-37 Eart....
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....A F.Y. 2005-06 A.Y. 2006-07 ANDHRA PRADESH STATE Sl. No. Name of the Project Name of the work Nature of Facility Agreement entered in connection with work with 1 TGP-EWE&FE of Distributaries in Block No. 20 & 21,22-28 and 29 to 37 Earth Work Excavation of canal and forming banks including construction of structures of the distributor system in Block No-20- 21,22-27,28 and 29-37 of T.G.P. Under VBR Irrigation Project Superintending Engineer, Telugu Ganga Project Circle, Nandyal 2 Earthwork excavation and forming embankment from Km. 70.00 to Km 86.00 of FFC from Sri Ram Sagar Project Earth work excavation and forming embankment from Km. 70.00 to Km 86.00 of FFC from Sri Ram Sagar Project Irrigation Project Simplex-Subash JV, Kolkata 3 Electrical cable work in Dilsukhnagar & Narayanguda area Electrical cable work in Dilsukhnagar & Narayanguda area Electrical Work Chief General Manager (Operations, APCPDCL, Hyderabad) 4 Electrical cable work in Charminar area Electrical cable work in Charminar area Electrical Work Chief General Manager (Operations, APCPDCL, Hyderabad) 5 Electrical work in Mahaboob Nagar....
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....1IR of DEM.48 and its minors Irrigation Project Superintending Engineer Construction Circle., Huzurabad, A.P. 2 SRSC FFC 0-7 Construction of CM & D works (8 Nos.) including Earth Work Excavation and forming embankment of canal gaps from Km 0.000 to Km 7.000 Irrigation Project Superintending Engineer SRSPFlood Flow Canal Circle, Dharoor Camp, Jagtial 3 TGP Work Earthwork excavation of canal and forming banks including construction of structures of the distributor system in Block No-20-21,22-27,28 and 29-37 of T.G.P. Under VBR Irrigation Project Superintending Engineer Telugu Ganga Project Circle, Nandyal 4 SRSP FFC21-23 Earthwork excavation and forming embankment from Km 21.00 to Km 23.00 of FFC from Sri Ram Sagar Project minors Irrigation Project The Executive Engineer, SRSP-FFC Division, No. 2, Mettpally, Karimnagar Dist 5 SRSP FFC Km 70-86 Earthwork excavation and forming embankment from Km.70.00 to Km. 86.00 of FFC from Sri Ram Sagar Project Irrigation Project Simplex-Subash JV, Kolkata 6 Shilparamam Electrical cable work in Dilsukhnagar & Narayanguda area Electrical Work Chief General Manager (Oper....
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....p; 2 SRSP FFC-21-23 Handing over of site and defect liability period of 24 months 51 4 KC Canal 21. possession of site g.) defects liability period shall be 24 months 80-83 5 SRSC FFC -07 Handing over of site and defect liability period of 24 months 54 3 SRBC-38 21, Possession of site, 58, operation and maintenance manuals 22 7 SRBC-37 21, Possession of site, 58, operation and maintenance manuals 26,27 AY 2006-07 Sl. No. of Eligible Products Eligible Products Assessment year 2004-05 Clause under which exemption is claimed Paper Book Page No. 1 TGP EWE & FE 9.1 The defect liability period shall be 2 years (maintenance period) 29 2 FFC from Sri Ram Sagar Project (c) Maintenance of the project for 24 months, Appendix CW, OM Scope of service-operation & maintenance of the system 82-86 10 Const. Drainage, BNGL 1.1. Maintenance period shall be 24 months, Article-8 Defects liability period and maintenance period. 34 & 35 AY 2007-08 Sl. No. of Eligible Products Assessment year 2004-05 Clause under which exemption is claimed Paper Book Page No. ....
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....tion canals and irrigation systems. In this connection, he drew our attention to the order of the Tribunal in the case of B.T. Patil & Sons cited supra specifically to paras 36 to 41 which reads as follows:- "36. Here it is important to mention that the Legislature inserted the word 'or' between (i) and (ii) with effect from 1-4-2002, which is applicable to assessment year 2002-03. So with effect from the assessment year 2002-03, not only the enterprise (i) developing, (ii) operating and maintaining the infrastructure facility shall be entitled to deduction, but also the enterprise which is only (i) developing or (ii) operating and maintaining the infrastructure facility. From such year onwards the enterprise which only develops the infrastructure facility and thereafter transfers it to someone else for operating and maintaining on behalf of transferee shall also be covered for the purposes of granting benefit. The difference in the situation between assessment year 2002-03 onwards and prior two years is that whereas the operation and maintenance of the infrastructure facility on behalf of the enterprise developing is necessary in the former period, but in the later period, the ....
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.... him, development includes the works to be done relating to the planning, designing, engineering and financing, etc., of the project. He relied on the judgment of the Hon'ble Supreme Court in the case of Hindustan Aeronautics Ltd. v. State of Orissa [1984) 55 STC 327 in which it has been observed that in a contract for work, the person producing has no property in the thing produced as a whole, even if part or whole of the material used by him may have been his property earlier. He also relied on another judgment of the Hon'ble Supreme Court in the case of Tamil Nadu v. Anandam Vishwanathan [1989) 1 SCC 613 in which it was held that the nature of contract can be found only when the intention of parties is found out. The fact that in the execution of the works contract some material are used and the property in the goods so used passes to the other party, the contractor undertaking the work will not necessarily be deemed, on that account, to sell the material. It was, therefore, argued that the developer is a person who brings in additional resources by way of investment and technical expertise for developing the infrastructure facilities. Since the assessee had simply done a part o....
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....nary meaning of the terms used therein". Similar view has been expressed by the Hon'ble Supreme Court in the case of CWT v. Officer-In- Charge (Court of Wards) [1976]105 ITR 133 in which it was held that the ordinary dictionary meaning of a word cannot be disregarded. 40. Coming back to our point of ascertaining the meaning of the words 'contractor' as well as 'developer', which have neither been defined in the Act nor in the General Clauses Act, we fall upon Oxford Advanced Learner's Dictionary to find out their meaning. According to this dictionary,. "developer" is a person or company that designs and creates new products, whereas "contractor" is a person or a company that has a contract to do work or provides services or goods to another. The New Shorter Oxford Dictionary defines the word "contractor" as : person who enters into a contract or agreement. Now chiefly spec. a person or firm that undertakes work by contract, esp. for building to specified plans". In the light of the meaning ascribed to these words by the dictionaries, it is observed that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the ent....
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.... development. Absence of infrastructure poses significant barriers to growth and development. A model which relied exclusively on the provision of basic infrastructure by the State was found to be deficient. Section 80-lA was an instrument of legislative policy, conceived with a view to provide an impetus to private sector participation in infrastructural projects. Contemporaneously, with the provisions which were made by Parliament in section 80-IA of the Act, explanatory circulars issued in an administrative capacity by the Central Board of Direct Taxes held the field. These circulars gave expression to the scope and ambit of the concession was provided by section 80-IA. The evolution of section 80-lA would show a progressive liberalisation of the legislative scheme, in the interests of aiding the growth of infrastructure. The administrative circulars issued by the Central Board of Direct Taxes in implementation of section 80-IA similarly liberalised the scheme, consistent with the Act. The expression "development" has not been artificially defined for the purposes of section 80-lA of the Act and must, therefore, receive its ordinary and natural meaning. An assessee does not h....
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....armoniously construed with the main provision under which a deduction is available to an assessee who develops; or 'operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirety would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after April 1, 1995. The assessee, in terms of the policy of the Government of India to encourage private sector participation in the development of infrastructure, bid for and was awarded a contract for leasing of container handling cranes at the Jawaharlal Nehru Port Trust (JNPT). In pursuance of the contract, the assessee deployed rail mounted quay side cranes, rail mounted gantry cranes and rubber tired gantry cranes at the container handling terminal of the JNPT. JNPT....
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....ars for loading and unloading of containers at the port and that the cranes that were to be supplied by the assessee formed an integral part of the port. JNPT clarified that the contracts had been executed under the BOLT scheme and in accordance with its directions; the cranes would be transferred to the port trust at no cost on the expiry of a period of ten years of the commencement of the contract. The obligations which had been assumed by the assessee under the terms of the contract were obligations involving the development of an infrastructure facility. Section 80-IA of the Act essentially contemplated a deduction in a situation where an enterprise carried on the business of developing, maintaining and operating an infrastructure facility. A port was defined to be included within the purview of the expression "infrastructure facility". The obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which the cranes were to vest....
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....000, Circular 779 dated 14-98-1999 (240 ITR st. 32), Circular 794 dated 19-8-2000, Circular 14/2001 (252 ITR st. 98) and Circular 3/2008 dated 12-03-2008 (168 Taxman st. 12,54) brings out the objectives of the statute and expectations of the law-makers in bringing the enactment. The statutory provisions as would be apparent from the Circulars and Explanatory Notes referred to herein-above seek to incorporate a quid pro quo between introduction of investment and entrepreneurial resources from the private sector and a tax deduction from the government to enable recoupment of expenditure incurred. The BOT/BOOT models seek to augment infrastructural assets in addition to governmental spending and not simply feed on government expenditure. The deduction under section 80IA is, therefore, available to the former, and not to the latter forms of business. The deduction claimed under section 80IA of the Act as prescribed in sub-section (1) is "in accordance with and subject to the provisions of this section...." in sub section (2), it is stated that the deduction is available for the specified number of years "brining from the year in which the undertaking or the enterprise develops and begi....
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....t as furnished in the paper book that the maintenance function was actually remedying of defects for a prescribed period. No separate charges have been collected and this cannot be seen as a maintenance function. 20. On these facts, having regard to the responsibilities assumed under the agreement, the assessee cannot be seen as a developer, instead he plays the role of an executor/contractor. Be that as it may, it was urged by the departmental representative in the reply that the issue whether the assessee was a developer for the purposes of section 80IA after the changes in law w.e.f. 1-4- 2002 is not material for adjudication of the grounds in the impugned appellate orders. This is because in so far as the contracts in question are in the nature of works contracts, the explanation inserted below section 80IA (13) with retrospective effect from 1-4-2000 has over-riding influence and debars the assessee's claim. Further it is contended that the introduction of the explanation below section 80 IA(13) in 2007 with retrospective effect from 1-4-2000 puts matters beyond doubt. The law on the subject of application of a retrospective amendment is clear from the special Bench decisio....
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....larger Bench) in B.T. Patil as well as the Mumbai High Court in ABG case was decided. Without such detail, there is no point of comparability between the Pune Bench decision and the other cases. The unanswered questions emerging there-from are - i) Can we assume that there was a BOLT contract or was it a works contract? ii) Can we assume that the assessee took ownership control of the asset created? iii) The circumstances under which the enterprise in ABG Heavy Industries became akin to a developer, and do they obtain in the case of LCE? Such as 10 year ownership; retransfer; assumption of assured responsibility regarding operational readiness, etc., noticed in ABG Heavy Industries are not noticed in the facts of the case as digested by the afore mentioned decision of the Pune Bench of the ITAT in the case of LCE. iv) The unbundling of conditions of development, operation & maintenance, and development operation and maintenance, in the sense of making them non cumulative by amendment of law effective from 1-4- 2002 is not the only relevant issue. The larger issue is whether the assessee is a developer in the first place. v) In the case of B.T. Patil, the cumulative o....
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....n order of the Special Bench even though it is from the jurisdictional Bench of the Tribunal, however, where the judgment of the non jurisdictional High Court, though the only judgment on the point, has been rendered without having been informed about certain statutory provisions that are directly relevant, it is not to be followed." 24. Without prejudice to the argument that the stand that the Mumbai High Court's order in ABG runs on completely different facts, it is respectfully pointed out that this decision cannot be a binding precedent, in any case, for the above-cited reason also and this issue can be seen in another perspective. There is nothing in the case of ABG Heavy Industries that supports the view that the 'developer' has to e seen de hors the contract and its stipulations. In the case of ABG Heavy Industries the Revenue took the stand that the assessee was not a developer because it was only a supplier of the equipment. This did not find favour because it was held that the nature of the business had to be seen in terms of the obligations assumed under the contract which included not only supply and installation of the cranes but also testing, commitment of operatio....
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....tor'. The briefly stated facts are as follows: "The distinction between creation of product vs. Rendering of service (para -40), owner vs. Executor of owner's plan with reference to project specification (para-42), vesting of property, subject to retransfer if need be (para 46) and need for interpretation to avoid absurd results (para 50)". 25. The DR submitted that in view of the terms of the relevant contract, it was possible to give a finding that the business was not one of 'development' per se. Therefore, the changes in law after 1-4-2002 were not even called into play in the case of B.T. Patil. It is further submitted that the Mumbai High Court's decision in the case of ABG Heavy Industries not only runs on different facts, it does not even refer to the case of B T Patil. Furthermore, the Mumbai High Court's stand that the nature of the business should be seen in the context of the obligations assumed under the contract only complements, not contradicts the larger Bench's distinction between a developer and contractor simpliciter, as noted hereinabove. It would be wrong and therefore to suggest that the case of B.T. Patil has been impliedly over-ruled by the High Court'....
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....e belongs to is explained in sub-clause (a). Therefore, the word "ownership" is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80IA (4) and not any other person like individual, HUF, Firm etc. 27. We also find that according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word "it" denotes the enterprise carrying on the business. The word "it" cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word "it" is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. 28. The next question is to be answered is whether the assessee is a developer or mere works contractor. The Revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin to works contract and he is not eligible fo....
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....of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 80IA (4) of the Act. The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. 29. We also find that as per the provisions of the section....
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....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 know-how, expertise and financial resources. Further, the order of Tribunal in the case of B.T.Patil cited supra is prior to amendment to sec 80IA(4), after the amendment the section 80IA(4) read as (i) developing or (ii) o....
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....nt and himself executes the development work, he carries out the civil construction work, he will be eligible for the tax benefit under section 80IA." 31. The above order was followed in subsequent assessment years 2007-2008 & 2008-09 in ITA Nos. 1312 & 1313/Mds/2011 vide order dated 18.11.2011 in the case of the same assessee. Being so, we are inclined to partly allow the ground relating to claiming of deduction u/s. 80IA. 32. The next ground in ITA Nos. 1484, 1485 and 1487/Hyd/ 2011 (assessee's appeals) and revenue appeals viz., 1471 to 1473/ Hyd/2011 is with regard to the sustaining/deleting of the expenses in the absence of bills and vouchers. 33. The assessing officer for assessment year 2006-07(ITA No.1484/Hyd/2011) disallowed 15% of the amount of Rs.4,06,91,006/- on the reason that the vouchers are not supported by any evidence as to the identity of persons, quantum of work and nature of work done by the assessee. The assessing officer also observed that the assessee has claimed huge expenses towards work done and in the absence of the detailed vouchers, and some of the vouchers not supported by any evidence, as to the identity of payee, he disallowed 15% of the exp....
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.... in these years also at 5%. This ground in assessee appeals i.e., ITA Nos. 1484/Hyd/11 1485/Hyd/11 and 1487/Hyd/2011 is partly allowed and revenue's appeals in 1471/Hyd/11, 1472/Hyd/11 and 1473/Hyd/11 is dismissed. 38. The next common ground in assessee appeal ITA No.1485/Hyd/2011 and Revenue appeal 1472/Hyd/2011 for assessment year 2007-2008 is with regard to sustaining the disallowance of Rs.75 lakhs out of Rs.2.5 crores disallowed by the assessing officer. Against this issue, both are in appeal before us. 39. Brief facts of this issue are that the assessee had produced only self made vouchers and bills in respect of purchase of sand. Therefore, he has disallowed Rs.2.50 crores out of Rs.54,66,15,221/-. On appeal, the CIT (A) sustained Rs.75 lakhs out of Rs.2.50 crores. Against this, both are in appeal before us. 40. We have heard both the parties and perused the material on record. It is admitted fact that the expenditure relating to purchase of sand at Kadapa is supported by self-made vouchers. As such, there are chances of inflating the expenditure. In this case, reasonable disallowance could be made, if the assessee has not produced any details of payee and quantum o....
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....e No. AAA/GVPR/03 is also financial statements of the company for the financial year 2007-08. In the Annexure AAA/GVPR/01 to AAA/GVPR/03 were also seized which represent the expenditure of Rs.22.60 lakhs for the year under consideration was not recorded in the books of account. According to the assessing officer, the difference between provisional balance sheet and final financial statement works out to Rs.3,26,15,537 and the same was added to the income of the assessee and this was confirmed by the CIT (A). Against this, the assessee is in appeal before us. 44. We have heard both the parties and perused the material available on record. In this case, the addition is made towards the difference between projected/provisional balance-sheet and the final balance-sheet. The assessee has given explanation before the lower authorities that it has prepared the balance-sheet showing higher profit which is on account of showing higher work in progress with a view to obtain higher financial assistance from banks. It was also agreed by the Managing Director in his deposition dated 12-9-2008 that he is having no knowledge of impact of his statement. The actual fact is that the department ha....
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....any. The assessing officer was of the opinion that the said money belonged to Sri G. Siva Shanker Reddy who handed over the said amount to Sri K. Venkata Kutumba Rao. Therefore, the addition was made in the hands of the assessee company on protective basis and on substantive basis in the case of Sri Siva Shanker Reddy. 46. We have heard both the parties and perused the material on record. In this case, it is admitted fact that the cash was found in the hands of Sri K. Venkata Kutumba Rao. It was admitted fact that the cash was given by Sri Siva Shanker Reddy to Sri K. Venkata Kutumba Rao. There is no dispute that the said cash was found with K. Venkata Kutumba Rao and the bank accounts of the assessee company reflected the huge withdrawal on various dates prior to search action. It is not disputed that M/s. GVPR Engineers Limited owned this cash and confirmed that it is belonged to them which is meant to be sent to various project sites where the work was going on. The department is not ready to accept this explanation, instead they are of the opinion that the cash actually belonged to Sri Siva Shanker Reddy only. In our opinion, this view of the department is not correct. If Sr....
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....n we have sustained the disallowance at 5% of the expenditure by following the order of the Tribunal in the case of M/s GSP Infratech Development Ltd., Hyderabad in ITA Nos. 1396/Hyd/2011 and others vide order dated 27th December, 2011 wherein we have confirmed the disallowance at 5% of such expenses . Accordingly, this ground is partly allowed. 51. The next ground in ITA No.1401/Hyd/11 is with regard to confirmation of addition of Rs.1,31,07,090/- being the difference in profit as per the projected statement and audited statement as on 31-3-2006 and in the absence of any seized material to say that the income has not been accounted for in the books of accounts. We have decided this issue in the case of GVPR Engineers in ITA No.1486/Hyd/2011 for assessment year 2008-09 in earlier paragraph Nos. 41 to 42 of this order. Therefore, on similar lines, we decide this issue also in favour of the assessee subject to sustaining of addition of Rs.50 lakhs admitted by the assessee as income towards work in progress. Hence, this ground of the assessee is partly allowed. 52. The next ground in revenue's appeal No.1359/Hyd/08 in the case of GSP Infra Tech is with regard to the deletion of ....
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....2-11-2007. As the partner of M/s SK Builders has categorically stated that the sale agreement is entered into with GSP Infratech Limited for a consideration of Rs.3,37,77,500/- and also taking into the fact of the assessee company's rejection of the same stating that the transaction has been cancelled, the sum of Rs.3,37,77,500/- is added towards returned income of the assessee company on protective basis in the hands of Veera Shekar Reddy. On appeal, the CIT (A) gave direction to the assessing officer not to make addition in the case of the assessee if there is addition in the hands of Smt Vijayalakshmi w/o Sri GSP Veera Reddy. 53. In the case of Sri Veera Shekar Reddy in ITA No.1490/Hyd/2011, the CIT (A) confirmed the addition of Rs.95,73,500/- made by the assessing officer. Against this, the assessee is in appeal before us. 54. We have heard both the parties on this issue. The department cannot have any grievance in deletion of this amount in the hands of GSP Infratech made on protective basis because the CIT (A) confirmed the addition in the hands of Sri Veera Shekar Reddy. The learned authorised representative submitted before us with regard to the addition in the hands ....