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TaxTMI 
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2012 (12) TMI 760
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....under section 80IA of the I.T. Act without appreciating the fact that the assessee is not eligible for deduction under section 80IA in most of the infrastructure projects where the assessee is merely a work contractor and not a developer. (ii) The appellant prays the order of the CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. (iii) The appellant craves to amend or alter any ground and/or add new grounds which may be necessary. 4. The following grounds have been raised by the assessee in the Cross Objections (COs), filed : 1. The Learned Commissioner of Income Tax (A) erred in sustaining the order under section 153A of the Act without appreciating the fact that there was no evidence or material found in the course of search action in respect of the year under consideration and hence, the assessment order passed invoking the provisions of section 153A of the Act is bad in law and liable to be quashed. 2. The Learned Commissioner of Income Tax (A) failed to appreciate that no material or evidence was found in the course of search action and hence, the underlying purpose of making assessment under section 153A of the Act i.e.....
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....technical expertise through its own human, financial & material resources. Being in development of infrastructure facilities the assessee uses its own assets which include sophisticated earth excavation machineries, tower cranes, stocks of steel, cement and banking and financial facilities such as FDRs, bank guarantees and credit facilities and advances to its contractors and credits to government departments. According to the AR, the assessee is also exposed on its own, towards various risks and responsibilities such as completion of contracts within stipulated time, maintenance, delayed payments and bad debts, litigation and geological risks. 11. The assessee was subjected to action under section 132 of the Income Tax Act, 1961, on 17.02.2005. In the course of search, the revenue seized certain documents relating to the projects undertaken by the assessee. As a consequence thereof, the assessee made an offer of Rs. 1.95 crores, under section 132(4) of the Income Tax Act, pertaining to assessment year 2005-06, wherein the assessee added back to its income, sundry creditors, which were more then three years, under section 41(1). Except for this, according to the AR, no incriminati....
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....m to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in Clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub section pending on the date of initiation of the search under section 132 or making or requisition under section 132A, as the case may be, shall abate. 14. The AR, in his arguments referred to the provisions, and demonstrated ....
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....ion with the object of the law". 16. More recently, Hon'ble Delhi High Court in the case of L R Gupta v. UOI reported in 194 ITR 32 explained the meaning of undisclosed income. The AR, through the synopsis submitted that CBDT being aware of the complexities for assessment of undisclosed income, issued Circular no. 7, dated 05.09.2003, reported in 263 ITR 106 (St) which clarified what is abatement and pointed out that the circular clarifies that abatement is only for pending assessment as on the date of search, which reads as under, "Para 65.5 The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act sha....
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....e Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Section 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A With all the stop having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six....
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....ion in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income". 19. In continuation, the AR referred to the decision of coordinate Bench at Mumbai in the case of Saf Yeast Co. Pvt. Ltd. v. ACIT in ITA no. 1074/Pu/2007 and ITA no. 5182/Mum/2007, dated 03.10.2010, wherein, the ITAT quashed the assessment for the reasons given in para 20 its order, after applying the ratio arrived at by the Special Bench, concluded (as extracted), 20. Applying the ratio of the above decisions to the facts of the present case, xxxxxxxxxxxxx. The position thus emerging is that where assessment proceedings are pending completion when the search is initiated, the pending assessment proceeding stood abated by virtue of the second proviso to section 153A of the Act. Instead of complying with the requirements of section 153A of the Act, the A.O. proceeded with the pending assessment proceeding for the A.Y. 2004-05 and passed the impugned assessment order during the pendency of the assessment under section 15....
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....ality, the 2nd Proviso, prescribing the abatement of the assessment shall have no effect, because, only pending proceedings on the date of search, can get abated. The AR cited the case of Uttra S Shorewal, placed in the unreported portion in 48 SOT 6, wherein the additions made by the AO were deleted by the CIT(A). Additions made in the 153A proceedings were held to be not valid. The relevant observation is, "The intention of section 153A is not to disturb matters that have reached finality between the parties. It is true that the provisions of section apply notwithstanding anything contained in section 147 and section 148. But that only conveys the limited idea that once a search takes place, it is open to the Assessing Officer to assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted and in exercising such power, the Assessing Officer was not bound to take recourse to section 147 or section 148. But this is only for the purpose of initiating proceedings for assessment under section 153A It does not mean that matters that have already been decided between the parties and ha....
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....ll not be proceeded with thereafter. The assessment has now to be made under section 153A(1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merged into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. The question now is, what is the scope of assessment or reassessment of total income under section 153A(1)(b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provi....
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....sed the impugned assessment order during the pendency of the assessment under section 153A of the Act which is a nullity and a such the assessment order dt. 27-12-2006 passed under section 143(3) of the Act is illegal, arbitrary, wholly without jurisdiction and, hence, the same is quashed." 25. The AR, in continuation of his argument that when the proceedings had reached the stage of finality, those proceedings cannot be abated as per 2nd Proviso, pointed out that in so far as the proceedings for assessment year 2004-05 were concerned, even they could be taken to be finalized, as the AO had not issued any notice to regularize the assessment, either 142(1) or 143(2), to make the assessment proceedings pending on the date of search. 26. The AR, therefore concluded that so far as proceedings under section 153A was concerned, the proceedings could not be held to be legal, because (i) no incriminating material and/or document was found, which could indicate some income having been unearthed and (ii) deny the deduction under section 80IA(4), holding that the assessee was only a contractor and not a developer of infrastructure. The AR submitted that this reason cannot be a good enough r....
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....arrying out its business neither fits in the definition of developer by general concepts nor it fits into the category of persons for whose benefit the provisions were introduced. Without prejudice to the above, it is also to be seen as to whether the assessee fulfills all the other conditions prescribed-hi the Section for availing the benefit. This issue has been dealt in subsequent paras. (b) Sub-section 80-IA(4) specifies the entities which are entitled for deduction under section. 80-IA. In clause (i) while stating that any enterprise carrying business of (i) developing or (ii) operating and maintaining or (iii) developing operating and maintaining infrastructure facility, it has been clearly laid down that such enterprise shall fulfill all the conditions laid down in sub clause (a) (b) and (c). Sub clause (c) puts a condition that the enterprise has started or starts operating and maintaining the infrastructure facility on or after first day of April 1995. Thus, the plain language of provisions of sec. 80IA(2) and 4(i)(c) makes it very dear that the deduction to an enterprise is available under this section only when enterprise developers and begins to operate or maintain th....
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...., and once again, he submitted that accept for the change in view with regard to allowance of deduction under section 80IA(4), there is no material, either found in the course of search under section 132 or any other material was brought to the notice, which indicated any concealed income. He submitted that the purpose of section 132 is unearthing undisclosed/concealed income or item of income and where there is no material whatsoever, the case fell within the ratio of All Cargo (SB) (supra), wherein it was held that in case there is a proceeding pending, that shall be abated and provisions of section 153A shall prevail and assessment, in the normal course shall be taken, but where the proceedings had culminated and they have reached the stage of finality, the provisions of section 153A shall only become applicable if there is any evidence/material found, indicating concealment/items of income. 33. The AR further referred to the decision of CIT v. Smt. Shaila Agarwal reported in 346 ITR 130 (All), wherein, it is held, "Section 153A of the Income-tax Act, 1961, provides that where notice under this section is issued as a result of any search under section 132, assessment or reass....
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....rrect. 36. We have heard the rival contentions at length, in the instant COs, the issue being agitated is, when there was no evidence or incriminating material found in the course of search operations, the assessment orders passed, invoking the provisions under section 153A were bad in law and liable to be quashed, as the underlying purpose of making assessment of total income, under section 153A, i.e. to assess income which was not disclosed or would not have been disclosed, failed, and thus the assessment made as if it were regular scrutiny assessment was beyond jurisdiction. 37. The search operations were carried out on the assessee's business premises & the residential premises of its Directors on 17.02.2005. As a consequence of which, the AO initiated proceeding under section 153A for assessment year 2000-01 to assessment year 2004-05. From the arguments advanced by the AR and which were not controverted by the DR before us and by the department in the proceedings before the revenue authorities are : (a) during search operations no incriminating document was found and seized, which could indicate any undisclosed income (b) the only addition made by the AO was on acco....
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....ment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (i) undisclosed income or property discovered in the course of search Therefore what emerges is that no doubt 153A shall be initiated, and all the six years shall become subject matter of assessment under section 153A. The AO shall get the free hand, through abatement, only on the proceedings that are/is pending. It is, in these abated proceedings, AO can frame the assessment(s) afresh. But in a case or in a circumstances where the proceedings have reached finality, assessment under section 153A read with 143(3) has to be made as was originally made/assessed and in case where certain incriminating documents have been found indicating undisclosed income, then the addition shall only be restricted to those documents/incriminating material, and clubbed only to the assessment framed originally, as the law does not permit the AO to disturb already concluded issues, whether it pertained to any income or expenditure or deduction, as al....
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....ed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered assess or reassess the "total income" of the aforesaid years. This is significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under section 153A, however, the Assessing Officer has been given the power to assessee or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment .years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is to be sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment ye....
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....hich the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Sub-Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when ....
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....he original assessment order and the income that escaped assessment are clubbed together and assessed as the total income". But when we come to third circumstance i.e. circumstance (c), we find that this has been left unanswered. Para 23 of the judgment, the Hon'ble Delhi High Court mentions that the issue is left open. 43. This, has been explained in the graphic made below and the relevant portion is in italics therein. This can be explained through this graphic : PICTURE 44. To answer the question, as to what shall be the assessment of total income, where there is/are no pending proceedings and no incriminating material, we have to trace out the logical conclusion, by harmonising the legislative intendments and the judicial decisions, as held by the Hon'ble Supreme Court of India in the case of K P Varghese (supra), wherein it was observed, so as to achieve the obvious intention of the Legislature and produce a rational construction. When we look into the decision of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra), we find that the Hon'ble Court has pointed out that in case where there is no abatement, total income has to be determined by clubbing to....
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....ding the assessment year relevant to the previous year in which the search or requisition was made". 47. When we look into clause (b) of sub section (1) of section 153A, the legislature has granted an authority on the AO to assess or reassess the total income. This clause has to be read along with 2nd Proviso, where the law has laid restriction over the AO as to which assessment would become eligible for being assessed or reassessed. 2nd proviso specifies that the AO can only assess or reassess the assessment years which are still pending before him, as the legislature has only mentioned the words assessee or reassess, which power is only vested with the AO, therefore, no other proceeding can get abated, which includes appeal, revision or rectification (as per Circular no. 7 (supra)). 48. Now we have to tread into a situation where on the date of initiation of search under section 132 or requisition of books, no proceeding(s) is pending, but in the search, material is found indicating incriminating material. In this situation, the AO embarks on a jurisdiction, wherein he has to club the two sets of incomes, i.e. returned income and the unearthed income and arrive at the total inc....
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....the referred documents may be considered relevant initially, for the purposes of 2nd Proviso to section 153A, but in any case, these documents cannot be read as stand-alone and in isolation, but have to be read along with other connected documents. 53. When we peruse the assessment orders, as well as the denial of deduction under section 80IA(4), at no point of time, the AO has been able to bring on record or refer to any material, which could be said to be either incriminating, or found in the course of search, indicating undisclosed income. On the contrary, we find that even the withdrawal of impugned deduction is only based on the changed interpretation of the AO, i.e. whether the assessee was really a contractor or was the assessee really the developer of infrastructure, and working for and on behalf of the government. Still looking from the point of view of the AO, as to how the deduction could be denied, we, do not find either any change in the relevant provision allowing deduction, nor was there any change in the factual circumstance, which could have lead to a distinguishable circumstance, or anything else, which the assessee did not bring on record in the computation of i....
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....e assessment proceedings by the issue of notice either under section 142 or 143(2). 59. Search and seizure operations were carried out on 17.02.2005, i.e. financial year 2004-05, falling in assessment year 2005-06. For the financial year in which the search took place, the assessee offered under section 132(4), an amount of Rs. 1.95 crores under section 41(1), covering creditors which were more then three years old. 60. As per the provisions of section 153A(1), the AO issued notices calling upon the assessee to file its returns of income for the relevant assessment years, i.e. assessment years 2000-01 to 2005-06, which the assessee filed, and the assessment proceedings were undertaken. 61. In the assessment proceedings, undertaken by the AO, the AO asked the assessee, as to how the assessee fulfilled the basic condition of being a developer of infrastructure facilities, and if it is unable to fulfill the basic conditions, why the deduction under section 80IA(4) should not be denied/disallowed, which the assessee had been claiming year to year. 62. In reply to the show cause, the assessee replied, "3.1 The assessee furnished a note for justification of his claim in which, afte....
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....allowed deduction under section 80IA. Post amendment w.e.f. Assessment year 2000-2001 it has been very clear that deduction under section 80IA is also allowable to the developer. The amendment has specifically included developer of infrastructure facility under sub clause 4 of section 80IA. Post amendment the situation is more favourable to the Assessee. (e) Thus deduction under s 80IA(4) of the Income-tax Act could be availed even in cases where the enterprise merely develops the infrastructure facility and does not operate and maintain the same. (f) The last and the final condition is the meaning assigned to the term infrastructure facility in the Explanation under clause (c) of sub-s. (4)(i) of section 80IA of the Act. As per the facts stated, the Assessee has entered into agreements for development of roads, bridges, water transmission system, railway-stations, etc. and thus, the projects developed or undertaken for development falls within the scope of the meaning assigned to infrastructure facility. Hence, in the case of the Assessee, this test also gets satisfied. Accordingly, it has claimed that it is entitled for benefit of deduction. The assessee has also submitted ....
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.... the finance Act, 1999 w.e.f. 1st April, 2000, deduction under s. 80-IA (4) has been made available to any enterprise carrying on the business of (i) developing or (ii) maintaining and operating, or (iii) developing, maintaining and operating the infrastructure faculty. Therefore, from asst. yr. 2000-01, deduction is available to the assessee carries on the business of any one of the abovementioned types of activities, and accordingly also when the assessee is carrying activity of only developing. When an assessee is only developing the infrastructure faculty/project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it, otherwise, how such person, who develops the infrastructure facility project, realize its cost where infrastructure facility is, after its development, transferred to the Government, naturally the cost would be paid by the Government. Therefore merely because the Maharashtra Government or APSEB has paid for the development of infrastructure' facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation canvassed by the Revenue au....
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....bt. There are several doubts over the satisfaction of the other conditions. For example whether the assessee is a developer or merely a contractor. By way of arguments reproduced in para 3.1 (B)(b) and (c) assessee has claimed that it fulfills the conditions laid down in sec 801A(4)(i)(a) and (b). But conditions laid down in sub clauses (a) to (c) of clause (i) of sub sec. (4) need to be satisfied simultaneously, whereas assessee ignored to comment upon conditions laid down in sub clause (c). Accordingly, assessee was issued show cause notice dated 21.12.2006 in which it was mentioned that apparently the assessee was not entitled for deduction under section 801A for the following reasons - (a) The deduction is available only for developers while from the business process discussed, it appears to be a mere contractor. With regard to business process assessee was also asked to clarify its role in conceptualization and designing, of the facilities. It was also brought to the notice of the assessee that TDS is being made on payments corresponding to the contracts executed by it. (b) It is merely constructing the facility not subsequently maintaining or operating the facility. In vi....
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....i)(c) makes it very dear that the deduction to an enterprise is available under this section only when enterprise develops and begins to operate or maintain the infrastructure facility". 67. The AO, on these observations, disallowed the deduction under section 80IA to the assessee. 68. The assessee, on denial of deduction under section 153A read with 143(3), approached the CIT(A), wherein, the assessee agitated that provisions of section 153A cannot be construed as regular assessment or reassessment and hence the AO would be barred to undertake enquiries with regard to disallowances/deductions, which have already been finalized. 69. The CIT(A), rejected the assessee's appeals, on the legality of the assessments framed under section 153A (which has been dealt with by us in the COs) and on merits, the CIT(A) perused the submissions and records produced by the assessee. The CIT(A) observed that it was the assessee who deployed its technical personnel who undertook studies on site and took all the responsibilities from the start of the project till its completion. He also observed only the conception of the idea and selection and ownership of site, where the particular project h....
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....at assessee should develop the infrastructure facility as per agreement with the Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being developer. The assessee, presently under consideration before us, has developed infrastructure facility as per agreement with Maharashtra State Government/APSEB. Therefore, merely because, in the agreement for development of infrastructure facility, assessee is referred to as contractor or because some basic specifications are laid down, it does not detract the assessee from the constructing the above mentioned two project, namely Srisailam Project and Koyana Project, as detailed above, is appropriately a developer of the said two infrastructure facilities, and in turn is entitled, and entitled justifiably, to claim deduction under section 80-IA(4)." (Emphasis supplied). Thus from the above, it clearly follows that there is no difference between a contractor and a developer and that mere development of an infrastructure facility also entitles the appellant to claim deduction under section 80-IA". 71. The CIT(A), after examining....
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....r, is entitled to claim the deduction under section 80-IA". The CIT(A), therefore, rejected the observation of the AO with regard to the distinction between developer and contractor as well as the concept of BOT/BOOT and that the assessee has not fulfilled the conditions under section 80IA(2) and 80IA(4) completely. The CIT(A) also rejected the observation of the AO that the case of Patel Engineering (supra) was distinguishable on facts. He, therefore, overruled the disallowance made by the AO, and allowed the same for assessment years 2000-01 to 2005-06. 72. Against this decision of the department is in appeal before the ITAT. 73. Before us, the DR supported order of the AO and submitted that conclusion of the AO that the assessee was only a contractor and not the developer was correct in law, because as per the papers seized from the premises of PIL it was found that the assessee was working for/in unison with Mukut Group of Industries, therefore, the DR submitted that the assessee was at best a contractor and in no way it can be called the developer. The DR also submitted that since these papers were found from the searched premises, which had the direct bearing on the allowa....
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.... the matter in favour of the assessee with this finding that assessee is eligible to claim the deduction in question under section 80-IA(4). The issue is thus decided in favour of the assessee. The related grounds are thus allowed with this direction to the AO to allow the claimed deduction to the assessee". 76. It was submitted that the decision of Hon'ble Bombay High Court in the case of ABG Heavy Industries has been followed in a number of decisions, which have been made part of the APB, along with a no. of other decisions, which are as follows No. Contents Page No. 1 Mahalakshmi Infraproject Limited v. ACIT (Bom. HC) 247-248 2 Mahalaxmi Construction Corp. Ltd. v. ACIT (Pune ITAT) 249 - 254 3 Laxmi Civil Engg. Pvt. Ltd. v. Addl. CIT (Pune ITAT) 255 - 257 4 Pratibha Construction & Engineers (I) Pvt. Ltd. (Pune ITAT) 258 - 263 5 Tarmet Bel (JV) v. ITO (Rajkot ITAT) 264 -273 6 GVPR Engineers Ltd. v. ACIT (Hyd . ITAT) 274-313 77. The AR pointed out that similar question came up before the Coordinate Bench at Hyderabad in the case of GVPR Engineers Ltd. v ACIT in ITAs no. 347, 1323/Hyd/2008, wherein, vide order dated 29.02,2012, it was held (head notes), ....
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....sub-clause (a) of clause (1) of sub-section (4) of section 80-IA refers 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 land 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 80-IA(4) and not any other person like individual, HUF, firm etc. 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 i....
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....s 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 Government 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 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 undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular, dated 18-5-2010, such activity is eligible for deduction under section 80-IA(4). 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 revenu....
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....n 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 80-IA is available to developers who undertakes entrepreneurial and investment risk and not to the contractors, who undertake only business risk Without any doubt, the assessee clearly demonstrated that it has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources. After the amendment section 80-IA(4) is read as (1) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility. While prior to amendment the 'or' between three activities was not there, after the amendment 'or' has been inserted with effect from 1-4-2002 by Finance Act, 2001. Therefore, if the contracts involve design, development, operating and maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under section 80-IA. The contracts which contain above feature....
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....a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;] (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be availab....
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..... We also found the distinction has been drawn by the legislature itself, because in the impugned section, the words have been used "any enterprise", but when we see section 80IAB, the legislature uses the words, "................an assessee, being a developer, ....". Therefore, tracing the difference, within the legislation itself, proves the fact, that the legislature is inclined to allow the deduction to an enterprise, who is in the business of infrastructure development, irrespective of itself being a developer. 82. We find that, the AO accepts that the assessee is an infrastructure developer. But we look into the main objection of the AO that being a developer by itself is not enough to avail the deduction, but the assessee should have maintained, operated and handed it back to the government. We must observe here that the AO erred in interpreting the relevant clause (i), because after each qualification, the legislature has used the word "or", which does not join the qualifications but separates one qualification from the other. Besides this, the AO erred once again to not to read sub clause (b), which reads as, "it has entered into an agreement....". Here, "it" would mean, ....
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....s Objections filed by the assessee for assessment years 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 are dismissed. ITA No. 2202/Mum/2008 : Appeal by the department : Asst. year 2005-06 88. The appeal filed by the department raises the following grounds of appeal : (i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of deduction under section 80IA of the I.T. Act without appreciating the fact that the assessee is not eligible for deduction under section 80IA in most of the infrastructure projects where the assessee is merely a work contractor and not a developer. (ii) On the facts and in the circumstances of the case and in law without prejudice to above, the Ld. CIT(A) erred in allowing deduction under section 80IA on amount of liabilities written back without appreciating the fact that the assessee failed to prove that such liabilities pertained to projects entitled to deduction under section. 80IA of the I. T. Act. 89. So far as ground no. 1 is concerned, we have already held in assessment years 2000-01 to 2004-05, that deduction shall be available to the assessee. 90. We, therefore, are not going into detail....
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....usiness, then it has to be added back as a business income. 101. In the instant case, the CIT(A) has also taken note of the fact that the assessee was having two types of projects, i.e., which qualify for deduction under section 80IA and which do not qualify. But while the assessee is undertaking both types of the projects, it is procuring materials such as cement, steel and all other materials, which are need used for both types of projects. In such circumstance, it is difficult to make precise allocation. As held by the coordinate Bench at Mumbai in Extrusion Process (P) Ltd. v. ITO, ITA no. 630/Mum/2003, reported in 107 TTJ 1001 (Mum) that even for computing deduction under section 80HHC, it would be added as business income. 102. Here, in the instant case, we are concerned with domestic projects, and the ceased liabilities are emanating from the normal course of business of the assessee. Hence, we are of the opinion that the liabilities written back would be added to the claim of deduction under section 80IA. Since the assessee also has non-80IA projects and it has been accepted by the assessee that these written back liabilities would also pertain to non 80IA projects, in th....