TaxTMI 
TaxTMI 
2012 (5) TMI 181
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....by invoking the provisions of section 41(1) of the Income-tax Act, 1961 and taxed accordingly. The CIT(A) held that the Assessing Officer has specifically not brought into the assessment order as to the debit of a specified amount in a specific year. In a general manner, the assessment order speaks of the claim of the assessee in the earlier year which does not show the year of assessment, the amount allowed by the Department warranting taxation of the sales tax refund in this year. Since the assessee has taken into account the sales tax refund from the Departmental recoveries and deducted only the net recoveries, the adjustment has already taken place while arriving at the gross bills on which 11.5 per cent income has been estimated and according to the CIT(A) no separate addition is warranted. According to the DR the provisions of section 41(1) of the Act are clearly applicable and he submitted that the assessment order to be sustained. On the other hand, the learned AR submitted that the profit of the assessee is estimated at 11.5% of the gross bills after deducting the departmental recoveries and material purchases. The departmental recoveries include sales tax deducted by the ....
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....ng Officer and income of the assessee from sub-contract is estimated at 4%/12.5% of gross contract receipts. 5. We have heard both the parties and perused the material available on record. In our opinion, the estimating of income at 4% of the sub contract for the A.Ys. 2001-2002 and 2002-03 and at 12.5% for the A.Y 2003-04 is very reasonable. The Tribunal is consistently holding that income of the assessee at 9% on main contract executed by the assessee, it would be 8% of gross receipt in case of contract taken by the assessee on sub-contract basis and 4% in case of contract given by the assessee to third party on sub-contract basis and thereafter the assessee is entitled for no deduction towards depreciation as all other deductions deemed to have been allowed u/ss. 30 to 38 of the Act. For this purpose, we place reliance on the order of the Tribunal in the case of Teja Constructions v. Asstt. CIT [2010] 39 SOT 13 (Hyd.) (URO). Further as noted by the CIT(A) in his order for the A.Y. 2003-04 the Tribunal has already confirmed the application of net profit at 12.5% on contract receipt in the case of this assessee for the earlier years. In view of this discussion, we confirm the o....
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.... works contract would not be eligible for deduction under section 80IA(4) of the Act by referring the explanations inserted in Finance Act 2009 retrospectively. The learned CIT(A) confirmed the view taken by the Assessing officer and for these assessment years, the assessee is in appeal before us. 11. The assessee is a company which derives income from construction contract works. For the sake of convenience, we take the appeal pertaining to the assessment year 2007-08. The assessee has filed its return of income on 30-10-2007, showing income of Rs. 16,51,57,700/- after claiming deduction of Rs. 36,11,58,788/-under section 80-IA of the Act. During the assessment proceedings, the assessing officer has asked the assessee to furnish the details of projects which are executed by it during the previous year. In response to this, the assessee has furnished the list of those project works which were executed during the previous year and in respect of which it has claimed deduction under section 80-IA of the Act. During the assessment proceedings, the assessing officer has obtained the copies of works contract agreements entered into by the assessee in respect of such project works and ....
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....ended from time to time are applicable to the assessee. 13. From a reading of the section, it is clear that the deduction is allowable to: (a) any company incorporated; (b) which entered into agreement with Government; or any government body; and undertakes development of infrastructure facility. 14. The purpose for which the said section was amended with effect from the assessment year 2000-01, can be traced to a brochure issued by the Government of India, Ministry of Roads, Transport and High Ways in August, 2001. He has taken support from the aforesaid brochure, a copy of which is filed which is kept on record. In the said brochure, the Government of India extracted some of the decisions taken by it to bring in the development of infrastructure facility in the country. He pointed out that the Government provided the benefits to the Indian entrepreneurs by providing contract packages to the private enterprises. While providing benefits, the government specifically specified certain grants only to BOT Schemes. For the other schemes all the other benefits are made available. The classification provided in the brochure clearly indicates that the schemes of pa....
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....intaining). It makes it clear that the provision would apply to any enterprise carrying on the business of developing or carrying on the business of operating and maintaining or carrying on the business of development, operating and maintaining the infrastructure facility. Therefore, there is no requirement that all the three activities should have been carried on by a single enterprise so as to enable it to claim deduction under section 80IA(4) of the Act. This view is also supported by the decision of the Bombay High Court in the case of CIT v. ABG Heavy Industries Ltd. [2010] 322 ITR 323/189 Taxman 54. It mentioned clearly that the three conditions development, operation and maintenance were not intended to be cumulative in nature. Therefore, any assessee who has undertaken any one of the activity is eligible for deduction under section 80IA(4) of the Act. The Mumbai Bench of the ITAT in the case of Asstt. CIT v. Bharat Udyog Ltd. [2009] 118 ITD 336/[2008] 24 SOT 412 (Mum.) also held that after the amendment of Section 80IA(4) it is applicable to enterprises who are engaged in developing infrastructural facility. Earlier, the Mumbai Bench in the case of Patel Engg. Ltd., v. Dy. ....
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....4) to clarify the nature of the word developer. The clarification issued by the Board makes it clear that an assessee who executes the development work and carries out the civil construction work is a developer. The Board is also of the view that those persons working for others are the works contractors and not the developers. In the case of the assessee, the assessee itself undertook the work of development and therefore, it is a developer, even according to the Circular issued by the Board. It is submitted that it is carrying on such development activity and deriving income. 19. He drew our attention to the various activities undertaken by the assessee which are entitled for deduction u/s 80IA of the Act which are as follows: S. No. Description of work along with date of Agreement Name of the Employer Clause under which possession is taken over by the assessee Clause under which possession is handed over to Govt. Clause No. and period of maintenance 1. Widening and strengthening of Cuddapah-Renigunta Road. Agreement dated 1.03.1999. Engineer-in-Chief, PWD (Roads & Buildings), Admn. and EAP, Govt. of Andhra Pradesh. Sub-Clause 42.1 of ....
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....abad Section. Agreement dated 06.10.1997. Chief Engineer, National Highway (PW) Region, 5th Floor, Konkan Bhavan, Navi Mumbai. Sub Clause 42.1 of Agreement Sub Clause 48.1 of Agreement. Sub Clause 49.1 of Agreement. Period of maintenance (DLP) is 12 months. 9. Widening and strengthening of Kodumur-Yemmiganur road from km 0/0 to km 10/270 and 27/0 to 32/430 and Devanakonda-Pathikonda roads from 0/0 to 18/268 in Kurnool Dist. Agreement dated 01.03.1999. Superintending Engineer (R&B), APHM & ECRP Circle, Nandyal. Site was handed over on 01.03.1999. Period of maintenance (DLP) is 365 days. 10. Executing the work of improvements to Hyderabad to Bijapur Road from km 80/0 to 109/0 in Ranga Reddy Dist. Agreement dated 03.03.1999. Superintending Engineer (R&B), APHM & ECRP Circle, Warangal. Clause 21 of the Agreement Clause 35 of Agreement. Period of maintenance (DLP) is 365 days. 11. Strengthening of SH 151, 60A, 12 from Ladvel-Dakor-Godhra and paving of shoulders (km 18/700 to km 0/500 & km 90/100 to km 135/700) Agreement dated 25.12.2002. Secretary, Roads & Buildings Dept., 14/2, New Sachivalaya, Gan....
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....20. Agreement dated 18.08.2005. National Highways Authority of India, New Delhi. Sub Clause 42.1 of Agreement Sub Clause 48.1 (a) of Agreement Sub Clause 49.1 of Agreement. Period of Maintenance (DLP) is 365 days. 19. Rehabilitation and upgrading of km 449.150 to km 509.000 of NH-76 in Rajasthan. Pkg. No. RJ-10. Agreement dated 12.08.2005. National Highways Authority of India, New Delhi. Sub Clause 41.1 of Agreement (commencement of work) Sub Clause 48.2 of Agreement Sub Clause 49.1 of Agreement. Period of Maintenance (DLP) is 365 days. 20. According to AR an analysis of the above works undertaken by the assessee clearly indicates that it carries on the activities of development of infrastructure facility. The counsel for the assessee submitted drew our attention to one copy of the complete agreement entered into by it with NHAI by stating that all the agreements are similar. 21. It is submitted by counsel for assessee that, as per the agreement, the possession of the site is handed over to the assessee by the Government. The assessee takes possession and access to the property and thereafter it shall be the responsibility of the assessee t....
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....xplanation has to be read in the context of the application of the main provisions of Section 80IA(4) of the Act. From a reading of Section 80IA(4)(i) of the Act, it is clear that the deduction is available for any company which enters into agreement with any government or government body. It is clear that the deduction is available not for any person but for those companies entering into agreement with the government or other Government bodies/corporations. It is also made clear that the deduction is available for the corporate bodies entering into agreement with the government organizations. Therefore, the main provision makes it clear that the deduction is available to companies entering into agreement with government bodies or Government. Therefore, it is not correct to read the explanation to mean that the government body is eligible for deduction under section 80IA of the Act and the company entering into agreement with such government body is not eligible for deduction. 23. In so far as the meaning of the word "works contract" is concerned, the ld. AR placed reliance on the judgement of Bombay High Court in the case of CIT v. Glenmark Pharmaceuticals Ltd., [2010] 324 ITR ....
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....ible for deduction under section 80IA(4) though he is described as a contractor and was paid by the Government. (4) The decision of the ITAT in the case of Metal Infra Projects Ltd. v. CIT [2009] 26 DTR 359 (JP) (Trib.) wherein it is held that simply because the agreement mentioned the assessee as contractor, he would not cease to be the developer. 25. It is submitted by the AR that the word "contractor" used in the agreements entered into would not debar the assessee from being a developer. In fact the assessee entered into agreement for development of infrastructure facility and therefore, it is a contractor. Therefore, the authorities are not justified to hold that the assessee is not a developer simply because he is mentioned as a contractor in the agreement. The Revenue authorities cannot make a distinction between the words "Contractor" and "developer". The conditions mentioned in the Income-Tax Act in Sec. 80-IA are that the assessee shall be a company and should have entered into an agreement with the Government or Government body for development of the infrastructure facility. Even if it did so in the process of fulfilling the contract, it would be eligible for....
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.... is no such mention in the provisions of sec. 80IA(4) that the assessee should invest its own money in the process of development. The only requirement is that the enterprise should be a company and such enterprise should be in the business of development of infrastructure facility. How the funds are pooled for the purpose is not mentioned in the Act. The department cannot introduce words into the Act to give a different meaning. They have to read the provisions as they exist in the Act. A plain reading of the provisions of section 80IA(4) does not indicate that the assessee to be eligible for deduction should have introduced its own funds. Various courts have held that the provisions allowing relief should be read liberally and nothing can be added to the words used in the Act so as to disentitle an assessee for the relief and also various courts have held that it is not open for the Department to read what is not there either in the documents or in the statutory provision, for which he placed copies of the case laws in the paper book submitted. 26. On the other hand, the learned departmental representative submitted written submissions based on the arguments put forth before u....
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....ucture facility. It is clarified by the Board that sub section (4A) was deleted and the deduction earlier available continues in lieu of sub section (4) of Section 80IA. Therefore, the condition mentioned in sub section (4A) that an enterprise commencing its activity of operating, maintaining the infrastructure facility on or after the first day of April, 1995 would only be eligible for deduction. Therefore, it applies to those enterprises which were earlier eligible for deduction under sub section (4A) and which will be continued to be eligible for deduction under sub-section (4). Such provision has no application to the case of the assessee, which became eligible for deduction under sub-section (4) of Sec. 80IA of the Act. Therefore, sub-clause (c) came into play only in respect of those concerns which claimed deduction for maintaining and developing the infrastructure facility and not for the assessee who only develops. The meaning of the word "developer" and the eligibility of the business to claim deduction meant for 'development of infrastructural facilities' within the meaning of section 80IA has to be seen in the context of the genesis and legislative history of the section....
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....t. 27. He submitted that agreement filed by the assessee in the paper book wherein the details of rate analysis, Bill of quantities etc., make it clear that the assessee had no autonomy in matters of design and specification which completely vested with the employer. The only lawful entitlement of the assessee was to be paid for the measurement of work completed at rates agreed upon. The partial and sectional nature of the proposed work is immediately clear from this notice and it is also apparent from this that the section of the road proposed for improvement has no independent existence capable of satisfying the requirement of section 80IA(2). Therefore, this project is incapable of commencement of operations by itself, or to quality the larger infrastructure facility of which it is a part. The assessee also gets mobilisation advance as well as interest-free advance for machinery purchase and there is no element of entrepreneurial initiative or financial participation of the contractor in this kind of a project. The successful bidder merely executes a Government contract and gets paid for it at mutually agreed rates and the nature of responsibilities assumed under the other co....
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....the assessee is only an executor of a contract, which is in turn, part of a larger project undertaken by the Government, or its agency. By referring to the two decisions relied upon by the learned counsel for the assessee, Mumbai High Court in the case of ABG Heavy industries Ltd. (supra) and ITAT Pune Bench in the case of Laxmi Civil Engg. (P.) Ltd. (supra) dated 8-6-2011), it is submitted that these decisions supported the proposition that (i) the ITAT's decision in the case of B.T. Patil & Sons Belgaum Construction (P.) Ltd. v. Asst. CIT [2010] 35 SOT 171 (Mum.) (LB) is no longer good law, and (ii) the distinction between developer and contractor is no longer relevant in the context of changed law explained by the Mumbai High Court in the case of ABG Heavy Industries Ltd. (supra) and followed within its jurisdiction by the Pune Bench of the ITAT in the case of Laxmi Civil Engg. (P.) Ltd. (supra). It is submitted that such reliance is neither correct nor relevant in deciding the issues on hand. This position is elaborated in the following paras. In the case of Laxmi Civil Engg. (P.) Ltd., (supra) the argument of the assessee that was accepted by the ITAT, Pune Bench is broadly- t....
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....stries. 30. The decision of the Mumbai High Court, though later in time was different in facts that there was no occasion even to refer to the ITAT's decision in the case of B.T. Patil & Sons Belgaum constructions (P.) Ltd. (supra). Therefore, it can be said that the decision of the Mumbai High Court in the case of ABG Heavy Industries Ltd. (supra) will be binding in its jurisdiction for infrastructure contract cases, only in so far as the facts of the case are compatible. For the same reason, there can be no adverse implication for the precedent value of the B.T. Patil case. As submitted hereinabove, on immediate and necessary consequence of the retrospective amendment introduced by the Finance Act, 2009 inserting Explanation below section 80IA(13), is that any business transacted in terms of a works contract stands disqualified from seeking deduction under section 80I(A(4). The decision of the Mumbai High Court in the case of ABG would have no application from this point of view also. Since the agreement in ABG was a BOLT agreement and not a works contract their Lordships had no occasion to consider the Explanation introduced in Finance Act, 2009 with effect from 1-4-2001. Eve....
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....ject would qualify if so certified by the Port Authorities. The container handling cranes assembly was certified to be an integral part of the Port Complex by the Port Authority. This is contextually very different from parts of the running length of a highway or irrigation canal being executed on a rate contract. The Department's argument that the assessee did not actually operate or maintain the facility in question was not upheld because the benefits of the section were held to be available to BOT/BOLT contracts by CBDT Circulars, which were any way binding on the IT authorities. In the case of the present case, it is not even claimed by the assessee that the work was carried out under a BOT/BOLT contract, or that it was not a works contract. It is further submitted that the distinction between business of development operation/maintenance and development/operation/maintenance was removed with the change in law effective from 1-4-2002, and that this was explained by the decision of the Mumbai High Court in the case of ABG Heavy Industries Ltd. (supra) is fallacious for the following reasons: "The Mumbai High Court decision was rendered in the context of a BOLT contract, which....
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....ion in the case of Laxmi Civil Engg. (P.) Ltd. (supra) considers the Tribunal decision of B.T. Patil as well as its jurisdictional High Court decision in the case of ABG and goes on to hold that the assessee is not entitled to the deduction under section 80IA(4) in view of the Explanation introduced with retrospective effect. 33. The learned Departmental Representative relied upon sub-section (2) of Sec. 80IA of the Act and submitted that the deduction under sub-section (1) would be available for a period of 10 consecutive assessment years out of 15 years beginning from the year in which an undertaking or enterprise develops, begins to operate any infrastructure facility or starts providing telecommunication system. Therefore, he is of the view that unless operation of the infrastructure facility is also undertaken; the assessee would not be eligible for deduction. It is submitted that this section provides for an option to the assessee to choose to claim deduction for any 10 years out of 15 years commencing from the date of commencement of the maintenance and operation. For that limited purpose of facilitating an assessee who becomes eligible for deduction under section 80IA(4)....
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....ejoinder, the learned counsel for the assessee submitted that the assessee introduced huge money in its business activity as on 31-3-2007. The own capital and the loan capital introduced by the assessee is Rs. 342,56,11,907 (excluding the mobilization advance received from the Government) as against the turnover achieved at Rs. 660.80 crores. This would mean that the assessee invested its own funds in process of development of the infrastructure facility. The assessee has to wait for a period of 56 days/28 days for the payment after submission of the bill. Further the Government of India obtained the finance from outside the Country for the purpose of development of infrastructure facility. 36. The assessee utilized the funds either of its own or borrowed from others for the purposes of undertaking the development activity. Therefore, it cannot be said that the assessee has not utilized its own funds. The assessee also utilized its own technical personnel and undertook risk in the process of the business activity. It is not correct to mention that the assessee did not invest its own funds and did not employ its technical personnel. The requirement of the tender includes possessi....
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....eriod of work; he would not be responsible for maintenance of the infrastructure facility during the course of development; he would not be liable for maintaining the work afterwards also. The assessee, on the other hand, is made responsible for all such activities. It is also submitted that the Government of India authorized the NHAI to call for the tenders for the work. The Govt. of India received a loan from Overseas Economic Co-operation Fund, towards the cost of development. Accordingly, a tender was issued by the NHAI. Section 31 of the NHAI Act empowers the Central Government to temporarily divest the NHAI from development by handing it over to any person authorized for the purpose. The NHAI is authorized by the Government to entrust the duty of development of project to any other eligible person. In the process, the assessee became the successful bidder and undertook the work of development. 38. Further the ld. AR submitted that the learned DR mentioned that tax was deducted at source by the Government under sec. 194 C of the Act and therefore, the work undertaken is only a works contract and not development. In this regard the assessee submitted that the provisions of s....
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....es carrying on the activity of operating and maintaining. The circular No. 794 dated 09-08-2000 referred to by the learned DR clearly mentions that the benefits under section 80IA(4) were extended to water treatment and solid waste management system in order to attract commercial enterprises to operate such facilities. This circular also has no application for the facts of the assessee's case. The Circular No. 14 of 2001 referred to by the learned DR not on the point. It also clarifies the position as obtaining prior to 1999-2000 and later. It does not apply to the years under consideration. 40. The learned DR also refers to the Circular No. 3 of 2008 dated 12-03-2008. In the said circular it was made clear that the benefit under section 80IA is allowable in a case where a person makes investment and he executes the development work i.e. carrying out the civil construction work. In contrast to this, a person who enters into a contract with any other person for executing the works contract will not be eligible for the tax benefits under section 80IA. It is submitted that the assessee makes the investment on its own in so far as the works are concerned and itself executes the deve....
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....e learned DR is not in consonance with the provisions of law and, therefore, the said decisions favour the assessee and not the department. The learned DR also referred to the observations made by the Special Bench of the ITAT in the case of B.T. Patil & sons Belgaum Constructions (P.) Ltd. (supra). It is submitted that the said decision is recalled and the observations made cannot be considered. Further, the Bombay High Court in the case of ABG Heavy Industries Ltd. (supra) held that the three conditions mentioned in Sec. 80IA(4) need not cumulatively be fulfilled. Therefore, any observation to the contrary by the Special Bench is not relevant at present. The submissions of the learned DR of A Bench are mostly to the effect that the assessee is not a developer, but only a works contractor and that the assessee's who engage themselves in all the three activities alone would be eligible for deduction under sec. 80IA of the Act. It is already submitted in detail that it is a developer and not engaged in the works contract alone and that for the purpose of being eligible for deduction under section 80IA of the Act, one need not carry on all the activities of Develop, operate and maint....
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....wards labour charges and itself executes the development work i.e., carries out the civil construction work, it will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, a assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act. We find that the word "owned" in sub-clause (a) of clause (1) of sub section (4) of Section 80IA of the Act refer to the enterprise. By reading of the section, it is clear that the enterprises carrying on development of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise 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. 45. We also find that according to sub-....
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.... is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 48 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....
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....ereas, in the present case, the assessee is the pure developer. We also find that Section 80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80IA of the Act, which ultimately culminated into Amendment under section 80IA of the Act, in the Finance Act 2001, to give effect to the aforesaid circulars issued by the CBDT. We also find that, to avoid misuse of the aforesaid amendment, an Explanation was inserted in Section 80IA of the Act, in the Finance Act-2007 and 2009, to clarify that mere works contract would not be eligible for deductions under section 80IA of the Act. But, certainly, the Explanation cannot be read to do away with the eligibility of the developer; otherwise, the parliament would have simply reversed the Amendment made 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 sub-....
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.... (a) Construction of additional two lane carriageway by the side of existing two lane road in km 27.80 to 61.00 (b) Strengthening of existing pavement by providing bituminous strengthening overlays (c) Provision of central median, pavement shoulders and service roads. (d) Improvement of junctions/ geometrics, pavement profile correction, lane marking and providing road signages. (e) Repair/rehabilitation of existing bridges. (f) Construction/reconstruction of bridges. (g) Improvement of drainage system, widening/providing culverts, cattle crossings etc. (h) Other miscellaneous items pertinent to the project. (i) Maintenance of the said infrastructure for a period of 48 months (during the period of development of 36 months and defect liability period of 12 months) 49. For this purpose, the possession of the site is handed over to the assessee by the Government. The assessee takes possession and access to the property and thereafter i....
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....007 for the assessment year 2004-05. Later in ITA No. 1179/Mds/08 vide order dated 26th February, 2010 the Tribunal has taken the same view by inter alia holding as follows: "7. Moreover, the reasons for introducing the Explanation were clarified as providing a tax benefit because modernisation requires a massive expansion and qualitative improvement in infrastructures like expressways, highways, airports, ports and rapid urban rail transport systems. For that purpose, private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other work contract has been encouraged by giving tax benefits. Thus the provisions of section 80IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the section but where a person makes the investment and himself executes the development work, he carries out the civil construction work, he will be eligible for the tax benefit under section 80IA." 53. The above order was followed in subsequent assessment years 2007-2008 & 2008-09 in ITA Nos. 1312 & 1313/Mds/2011 vide order....
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...., who develop the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. The legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction, it presupposes that there can be income to developer i.e. to the person who is carrying on the activity of only development infrastructure facility. Ostensibly, a developer would have income only if he is paid for the development of infrastructure facility, for the simple reason that he is not having the right/authorization to operate the infrastructure facility and to collect toll there from, has no other source of recoupment of his cost of development. While filing the return, the assessee had made claim under section 80IA(4) of the Act. 4. The assessee has also produced all six agreements regarding six projects undertaken before the Assessing Officer, whose copies are available before us also. It is a fact that even after taking a contract from the Government, if the assessee develops infrastructure facilities, it would be regarded as a 'developer' and no....
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....s divided into two portions 80IA and 80IB. Section 80IA(4) prescribes about the deduction available to a developer who develops infrastructure facilities. In view of the amendment inserted by the Finance Act, 2007, with retrospective effect from 1.4.2000, the deduction u/s 80IA is available to those assessees who are 'investing and developing infrastructure facility' and not to persons who simply executes 'works-contracts'. Explanation in question, as it stands today, reads as under: "Explanation - For the removal of doubts, it is hereby declared that nothing contained in this section(i.e. 80IA) shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be." In contrast to this, a person who enters into a contract with another person (i.e., undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for tax benefit under section 80- IA. 10. We have found that the assessee-company is a works contractor, who has entered into agreement with the local bodies to execute certain part of the work awarded to it through contract for infrastructure facility. It is true that whe....
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....-section (13) of section 80-IA, which reads as under : "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be." According to Attorney's Pocket Dictionary, in relation to a corporation or business, the term "undertaking" denotes its whole enterprise and the word "enterprise" connotes all the related activities performed either through unified operation or common control by any person or persons for a common business purpose. The mens legis with reference to developer of infrastructure facility can be gathered from the memorandum explaining the provisions in the Finance Bill, 2007, reported in [2007] 289 ITR (St.) 292 at page 312, which reads as under : "Section 80-IA, inter alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, industrial parks and special economic zones. The tax benefit was introduced for the reason that industrial modernization requires a passive expansion of, and qualitative improvement in, infrastructure (viz., expresswa....
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.....6.2011 are being extracted herein below: 5. We heard both the parties and perused the orders of the revenue. The contentious issues before us are (i) whether the contractor is synonymous with the developer within the meaning of section 80IA(4)(i) of the Act; (ii) whether the condition placed in clause (c) is applicable to the case of a developer, who is not carrying on business of operating and maintaining the infrastructural facilities. In our opinion, the answer to these question are provided by the judgment of the Bombay High Court in the case of ABG Heavy Engg Ltd (supra). In this regard, we perused the above cited para-22 of the said judgment and for the sake of completeness, the said paragraph is reproduced as under:- "22. The submission which was urged on behalf of the Revenue is that Clause (iii) of sub-section (4A) of section 80-lA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1st April, 1995. The same requirement is embodied in sub clause (1) of sub-clause (4) of the amended provisions. It was urged that since the assessee was not operating and maintaining the facility, he did not....
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....aking claim of deduction u/s section 80IA(4) of the Act. From the above, it is evident that the person who only develops the infrastructure do not have the occasion to operate and maintain the infrastructure. It is further evident that the harmonious reading is necessary and mandatory in view of High Court's judgment in the case of an enterprise carrying on business or developing which is the case of the assessee, all the conditions referred to clause (i) of section 80IA(4) should refer to the conditions as applicable to the developer. In other words, the developer who is only developing the infrastructure facilities since he does not operate and maintain Infrastructural facilities, cannot be expected to fulfil the condition at sub clause (c) which is an impossibility and the requirements to fulfil the said condition shall amount to absurdity and therefore uncalled for. Therefore, we find requirement of harmonious reading of sub-clause (c) vis-à-vis of clause (i) of section 80IA(4) of the Act. Thus, the discussion in High Court's decision in paragraph-22 extracted above, is directly applicable to the facts of the case and eventually is entitled for the deduction under sectio....
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....n-depth deliberations, discussions and examination of these provisions, finally, it has been resolved that if an enterprise even after entering into a contract with a local authority or the Governments, may be Central or State, in case it constructs the infrastructure facility, operates it and also maintains the same, it would be eligible for this deduction. 14. Now, let us examine the facts of the given case. It is an undeniable fact that the assessee is engaged in the civil construction work like construction of flyover, bridge underpass, sewerage, water supply etc. for various local bodies, railways, Central/State Governments. In fact, as per the terms of agreement, even the initial proposals formulated by the Department which are stated to be tentative, the assessee has the liberty to make different proposals without detrimental to the general features of the Departmental proposal, like Road level/bottom of deck level, MFL, Sill level, Linear water way, width of the bridge etc. Right from the drawings to the work of construction has been done by this assessee and has borne the cost itself. The company has constructed, delivered and maintained and security is also maintained ....
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....ferred the infrastructure facility developed by it by handing over the possession thereof to the concerned authority as required by the agreement. The handing over of the possession of developed infrastructure facility/project is the transfer of the infrastructure facility/project by the assessee to the authority. The handing over of the infrastructure facility/project by the developer to the Government or authority takes place after recoupment of the developer's costs whether it be "BT' or 'BOT' or 'BOOT' because in 'BOT' and 'BOOT' this recoupment is by way of collection of toll there from whereas in 'BT' it is by way of periodical payment by the Government/Authority. The land involved in infrastructure facility/project always belongs to the Government/Local authority etc., whether it be the case of 'BOT' or 'BOOT' and it is handed over by the Government/Authority to the developer for development of infrastructure facility/Project. The same has been the position in the given case as well. So, deduction u/s 80IA(4) is also available to this assessee which has undertaken work of a mere 'developer'. Rather, the statutory provision as contained in section 80IA which provides for dedu....