TaxTMI 
TaxTMI 
2012 (12) TMI 760
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....IT(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) 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 h....
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.... the assessee utilizes its own designs/plans, as feasible for the location of site, specifications and 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, wh....
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....on 132A after the 31st day of May 2003, the Assessing Officer shall : (a) issue notice to such person requiring him 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....
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....oney or in the shape of bullion, jewellery or the like, which belief furnishes the criterion for making a separate classification having a reasonable relation 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 sect....
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....ed to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the 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....
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....without having the need to fallow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination 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 s....
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....eration, certain other decisions as well, whose underlying ratio is that the existence of incriminating document is a must. 23. The AR submitted that, once an assessment, whether under section 143(1) or 143(3) has reached the stage of finality, 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 Of....
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....ut to asses or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will 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 ....
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....ssment 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 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 no....
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....eveloper is not enough, but in case, if the developer does not satisfy all the underlying conditions, as cast by the legislature, the deduction is not allowable. He submits in his conclusions, the relevant portions of the AO's observations, which are extracted as under : "Thus it has been concluded that assessee by virtue of the manner in which it is carrying 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....
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.... all financial commitments to the so called contractor, who basically is the developer in all sense of the matters. The AR further pointed out that there are plethora of judgments wherein the contractors is held as the developer and the relevant deduction has been allowed. 32. The AR once again reiterated his arguments on the issue of validity of proceedings under section 153A, 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 ap....
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.... Delhi High Court in the case of SSP Aviation Ltd. v. DCIT reported in 346 ITR 177, This decision was also referred to in the case of All Cargo (SB), wherein, at page 187 answers the fate of proceedings which is/are pending. 35. The AR, therefore, pressed his grounds taken in each of the CO, with the arguments that the proceedings for assessment years 2000-01 to 2004-05 were legally not correct. 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 153....
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....orted in 137 ITD 287 (Mum-SB), which states, "58. Thus, question No. 1 before us is answered a) as under: (a) In assessments that are abated, the A.O. retains the original jurisdiction as well as jurisdiction conferred on him under s. 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment 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 secti....
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....other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, 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 th....
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....e the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the sane assessment year determining the total income of the assessee in order to ensure this state of affairs namely, that in respect the six assessment years preceding the assessment year relevant to the year in which 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 proce....
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....roceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to fallow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination 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". 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 ....
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....132 on any person, 153A is triggered automatically. This is a settled provision of law and now well supported by the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia, wherein in para 19. The Hon'ble Delhi High Court observes, Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment years, falling within the six assessment years immediately preceding 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 abat....
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..... 51. We refer here, to the arguments of the DR, wherein he pointed out that seized documents no. 18 and 19, which showed that the assessee was co-contractor. As per his arguments, those documents may be considered as incriminating documents for all the years under consideration, particularly from the point of view that the terms of the agreement, on which the assessee was conducting its business on the particular infrastructure facility, was still under continuation. 52. In our opinion, 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 asses....
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....rlier in this combined order, that the assessee entered into an agreement with the Governmental bodies to carry out infrastructures development projects. In the years under consideration, the assessee was carrying on the project concerning water supply. In years covering assessment years 2000-01 to 2004-05, the returns, claiming the deduction under section 80IA(4) was accepted by the AO under section 143(1) and the AO issued refunds, wherever it was required to. In these years, the AO did not regularize the 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 ....
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....y and hence, the condition stipulated in sub-clause (b) of clause (1) of Section 80IA(4) of the I.T. Act is satisfied. (d) The amendment to section 801A in 2000 has made Deduction under section 801A allowable also to the developer of Infrastructure facility. The decision of the Mumbai Tribunal in Patel Engineering Ltd. v. Dy. CIT [2004] 84 TTJ 646 (Mum), relates to the period prior to the amendment where in it was debatable whether deduction was available to the developer of infrastructure facility. Even in the decision the honorable ITAT Mumbai has decided in favour of the Assessee and 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 fina....
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....IT reported in 94 ITD 411 (Mum), wherein the Bench of the ITAT was seized with the similar issue, as in the instant appeals/COs, that we are dealing with. The coordinate Bench held, (extracted) : "The amendment in s. 80IA was brought about by Finance Act, 1995 w.e.f. 1st April, 1996. By virtue of this amendment, exemption under s. 80-IA(4A) was provided to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility. Thus, to be eligible for this deduction an assessee was required to carry out all the three activities i.e. (i) to develop, (ii) to maintain and (iii) to operate. After the modification effected by 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 on....
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.... Since the assessee is only a developer of the Infrastructure project and it is not maintaining and operating the infrastructure facility, cl. (c) of sub-sec (4) is not applicable to the present assessee". Thus going by any of the interpretation as discussed above, deduction under Section 80IA(4) of the Income-tax Act could not be denied even in cases where the enterprise merely develops the infrastructure facility and does not operate and maintain the same". 64. The AO, unable to agree with the explanation as given by the assessee, observed, "3.2 Whereas assessee satisfies the conditions referred by it in its reply reproduced in para 3.1(B) (c) and (f) without any doubt. 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). Acco....
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....cribed in the Section for availing the benefit. This issue has been dealt in subsequent paras. Section 80IA(4) specifies the entities which are entitled for deduction under section. 80IA. 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 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 con....
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...., relevant portion which has been extracted by the CIT(A) which is, "There has also been the contention of the Revenue that the assessee is a contractor, executing civil contract and so it cannot be the developer as such. However, we are unable to agree with this contention of the Revenue. A person, who enters into a contract with another person will be a contractor no doubt; and this assessee having entered into an agreement with the Government of Maharashtra and also with APSEB for development of the infrastructure projects, is obviously a contractor but that does not derogate the assessee from being a developer as well. The term 'contractor" is not essentially contradictory to the term "developer" On the other hand, rather section 80-IA(4) itself provides that 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....
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....tutory authorities, as the infrastructure projects would always be conceived by them. This surely was not the legislative intention behind the introduction of the provisions of section 80-IA. The fact that the appellant executed infrastructural projects is not disputed by the AO. What is disputed is that the appellant was not a developer, but merely a contractor. As is clear from the discussion above, the AO's reasoning is faulty. It is further an undisputed fact that the appellant is not a subcontractor. That being so, the appellant is entitled to claim the deduction under section. 80-IA(4). For all these reasons and placing reliance on the decision of the Mumbai ITAT in the case of Patel Engg. Ltd. (supra), it is thus held that even as a developer the appellant, as it is not a sub-contractor, 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 Pate....
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....on is available to an assessee, who develops; or operates and maintain; or develops, maintains and operates an infrastructural facility. In other words a developer who only develops (i.e., constructs) an infrastructural facility is not envisaged to operate and maintain such facility, cannot be accepted to fulfil the condition in clause (c) of sec. 80-IA(4) since it would be an impossibility. Therefore, in view of the construction placed by the Hon'ble Bombay High Court on the requirements of clause (c) of sec. 80-IA(4)(i) requiring it to be harmoniously read with the main sec. 80-IA(4), we do not find substance in the objection raised by the Revenue. We thus respectfully following the decision of the Hon'ble Bombay High Court on the issue in the case of CIT v. ABG Heavy Industries Ltd & Ors (supra) decide 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 Hi....
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.... available under section 80-IA(4) itself Further, the very fact that the legislature mentioned the words (1) 'developing' or (ii) 'operating and maintaining' or (iii) 'developing, operating and maintaining' clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Act. Where an assessee incur expenditure for purchase of materials himself and executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, an assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in section 80-IA, for executing works contract, will not be eligible for the tax benefit under section 80-IA. The word 'owned' in 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. ....
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.... responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee 's duty 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 Government or the people in the process of such development would be that of the assessee. The assessee hands over ....
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....ulminated into amendment under section 80-IA in the Finance Act, 2001, to give effect to the aforesaid circulars issued by the CBDT To avoid misuse of the aforesaid amendment, an Explanation was inserted in section 80-IA, in the Finance Act, 2007 to 2009, to clarify that mere works contract would not be eligible for deductions under section 80-IA. 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 do mere works contract or sub-contract as distinct from the developer. This is clear from the express intention 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 80-IA is available to developers who undertakes entrepreneurial and investment risk and....
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....the decision of the AO to deny the deduction under section 80IA was correct in law and prayed that the order of the CIT(A) be set aside. 80. We have heard the arguments from both the sides. The basic issue before us is, whether at all, deduction under section 80IA(4) could be allowed to the assessee, on the premise that the assessee was a contractor and not the developer, as agitated by the DR/AO. To address the impugned issue, we must first refer to the section which has been debated, i.e. section 80IA(4). The section reads as under: "(4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or 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....
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....rial undertaking, but there is a slight departure in sub-section (4) of section 80IA, which is the impugned section before us. It has to be noticed that it is available to any enterprise, which means, it can be made available to an assessee, which itself may not even be an industrial undertaking, which in literal meaning, envisages, that even an enterprise, who secures an infrastructure development and gets it developed through its vendors, even then, the deduction shall be available to it (though Proviso to clause (iii), may allow the deduction to be transferred to another undertaking). Looking from the legislative point only, we find that the assessee is in a much better foundation, because, not only it secured the development project from the Government agency, but it itself was developing the same. The case of the assessee is similar to the case of GVPR Engineers Ltd. (supra), wherein who can be called as a contractor in development projects, has been explained, as reproduced in earlier paras. 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 legi....
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....19, referred to earlier, wherein the DR had strenuously argued that the assessee was a co-contractor. 84. The other argument by the AO and the DR had been that the assessee accepted itself to be contractor, by accepting the tax to be deducted under section 194C, which is relevant, only in case of a contractor, also cannot be accepted. Because, first, we have to ascertain whether the assessee falls under section 80IA/80IA(4), because Chapter XVII, wherein section 194C is embedded, is only a machinery chapter for collection and recovery of taxes. 85. Under these circumstances, we are unable to convince ourselves to sustain the disallowance under section 80IA(4), made by the AO. We, therefore, sustain the order(s) of the CIT(A), allowing the deduction under section 80IA(4), as claimed by the assessee. 86. The appeals filed by the department, covering assessment years 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 are dismissed. 87. In the result, the appeals filed by the department, as well as the Cross 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. ye....
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....f the liabilities written back on the proportion of turnovers of 80IA projects & non-80IA projects and he directed the AO to allow the liabilities written back to be added for the computation of deduction under section 80IA(4). 97. Aggrieved, the department is in appeal before the ITAT on this ground. 98. The DR reiterated the observations of the AO in his submissions and pleaded that written back liabilities cannot be included for the allowance of deduction under section 80IA. 99. On the other hand, the AR also reiterated the submissions made by him before the revenue authorities and pleaded that only this bifurcation is the most appropriate method to distinguish the liabilities written back between 80IA Projects and non 80IA projects. He, therefore, pleaded that the CIT(A) was very fair to give a reasonable direction to the AO. 100. We have heard the arguments. It is not the case of the department that these liabilities were non business. When the liabilities which have been written back/offered to tax by the assessee pertains to the business, 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 tha....