TaxTMI 
TaxTMI 
2013 (5) TMI 80
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....hinery expenses claimed at Rs. 1,89,46,155/- 5. That the learned CIT(Appeals) has erred in law and on facts in enhancing the assessment by disallowing deduction claimed u/s 80IA(4) for an amount of Rs. 1,60,49,232/- which was allowed by the learned Assessing Officer during the course of assessment proceedings. 6. That the Ld. C.I.T. (Appeal) has erred in law and on facts in not bringing any adverse material on record to support that the assessee was not eligible for deduction u/s 80I A(4) nor the appellant has been afforded an opportunity to examine any such adverse material. 7. That the order passed by the authorities below is bad in law and against the facts of the case. 8. That any other relief or reliefs deemed fit in the facts and circumstance of the case may be granted. The appellant craves leave to add, alter or vary the grounds of appeal before or at the time of hearing." 3. The assessee has also raised an additional ground which reads as under :- "That the learned authorities below erred in law and on facts in making an ad-hoc disallowance of Rs. 5,00,000/- out of Paint Expenses claimed at Rs. 2,16,78,425/-." 4. After hearing the ld. Representatives of the parties,....
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....he business (of (i) developing or (ii) operating and maintaining or (iii) operating and maintaining any infrastructure facility which fulfills all the following conditions." Since the assessee company's case is covered by the section as aforesaid that is 'Operating and Maintaining' the condition as laid down in the aforesaid section is fulfilled. 2. Now coming to the conditions annexed with the aforesaid section are: (a) It is owned by a company registered in India or by a consortium of such companies Since the enterprise carrying on the business is registered in India the condition is laid down in (a) is fulfilled (b) It has entered into an agreement with the Central Government or a Sate 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; The assessee company, which is a limited company registered with the Registrar of Companies in India has entered into an agreement with the National Highway Authority of India by mans of contract agreement entered into with agreement No. NHAI/GM/CM/STMC/2003- 2004. The agreement was signed ....
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....ssessee company is enjoyed by the assessee company exclusively and no outside agency is involved in it. The operation and maintenance activities are carried out by the assessee company and none of the agency is allowed to make any clam about the encroachment of the road and its sites. Thus the assessee's company has fulfilled the requirements as contained in the provisions of section 80IA(4)(i)(a)(b) & (c) read with explanation attached thereto, it is eligible for deduction u/s 80IA of the I.T. Act." 9. The assessee preferred appeal before the CIT(A) against the adhoc additions made by the A.O. in respect of disallowance of various expenses. The CIT(A) withdrawn the claim of the assessee under section 80IA(4) of the Act as under:- (CIT(A) page nos.11 & 12) "In the light of these provisions, it is to be seen as to whether the appellant is eligible for deduction u/s. 80IA(4). As regards the Panipat - Jalandhar project, as per the agreement, it was a contract for short-term improvement and routine maintenance of Panipat - Jalandhar section NH-1 from Km. 96 to Km. 372. So, it cannot be said that the assessee was (i) developing or (ii) operating and maintaining or (iii) develop....
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.... examined these documents including the contract agreements, details of work carried out by the assessee and details of expenditures. The ld. Authorised Representative submitted that in subsequent A.Y. 2006-07 the A.O. has allowed claim under section 80IA(4) of the Act and against that order of the A.O. neither appeal nor any other proceedings are pending. The ld. Authorised Representative submitted that the assessee satisfied the condition of sub-clause (a) of clause(i) of sub-section(4) of section 80IA of the Act. The ld. Authorised Representative with reference to relevant section 80IA(4)(i)(a) submitted that there is no dispute regarding the fact that M/s. PNC Construction Co. Ltd. i.e. the assessee is a company registered in India. The assessee was carrying on development/operation and maintenance of infrastructure. The ld. Authorised Representative in support of his contention relied upon an order of I.T.A.T. Mumbai Bench in the case of Patel Engineering Limited vs. Dy. CIT, 94 ITD 411 (Mumb.) 11. The ld. Authorised Representative referring the Assessment Order page nos. 4 & 6 submitted that Panipat Jalandhar project agreements between M/s. NHAI and M/s. PNC Construction Co.....
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....ntative in support of his contention relied upon the judgement of Hon'ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Limited (supra) and an order of I.T.A.T. in the case of ACIT vs. Bharat Udyog Limited, 118 ITD 336 (Mum). 15. The ld. Departmental Representative, on the other hand, relied upon the order of CIT(A) and submitted that the condition specified in section 80IA(4)(i)(a) has not been satisfied in the case of the assessee. The ld. Departmental Representative submitted that contract work for Panipat Jalandhar Project was a contract only for routine maintenance. The assessee did not build up the Highway. The ld. Departmental Representative submitted that the agreement entered into by the assessee with Nagarjuna Construction Co. Ltd. was not filed by the assessee. The ld. Departmental Representative submitted that the decisions relied upon by the ld. Authorised Representative is distinguishable on facts. The ld. Departmental Representative submitted that the CIT(A) has rightly withdrawn the claim under section 80IA(4) of the Act as the A.O. was not correct in allowing the claim. The ld. Departmental Representative submitted that the CIT(A) decided the i....
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...., port, inland waterways and inland port, rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette; (b) a highway project including housing or other activities being an integral part of the highway project; and (c) a water supply project, irrigation project, sanitation and sewerage system." Relevant Circulars That the scope and effect of the amendment, which brought about the introduction of sub-section (4A) has been explained in the Department's Circular No.717 dated 14th August, 1995 as under:- "Finance Act, 1995 34.2 Industrial modernisation requires a massive expansion of, and qualitative improvement is infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports, ports and rapid urban rail transport systems. Additional resources are needed to fulfil the requirements of the country within a reasonable time frame. In many countries the BOT (build-operate-transfer) or the BOOT (build-own-operate-transfer) concepts have been utilised for developing new infrastructure. Finance Act, 1995 34.3 Applying commercial principles in the operation of infrastructu....
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....ver the equipments to the JNPT free of cost. Under the contract, the assessee furnished an indemnity to the JNPT towards damages that might have been sustained by the equipments or to any property of the Port Trust or to the lives, persons or properties of others. The assessee claimed the benefit of deduction under section 80-IA. The Assessing Officer rejected the claim holding that the assessee was merely engaged in the business of supplying, installing, testing, commissioning and maintaining cranes at the Port and was not in the business of developing, maintaining and operating a Port and, consequently, it could not be held to be in the business of developing an infrastructural facility. On appeal, the Commissioner (Appeals) allowed the deduction under section 80-IA to the assessee. The Tribunal confirmed the order of the Commissioner (Appeals). On appeal to the High Court, the revenue contended that (i ) section 80-IA requires the assessee to develop, operate and maintain an infrastructural facility in order to qualify for a deduction and in the instant case the assessee was not a developer of the facility but had only supplied and installed the container handling cranes at the ....
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.... an infrastructure facility was contemporaneously construed by the Authorities at all material times, to cover within its purview the development of an infrastructure facility under a Scheme by which an enterprise would build, own, lease and eventually transfer the facility. This was perhaps a practical realisation of the fact a developer may not possess the wherewithal, expertise or resources to operate a facility, once constructed. Parliament eventually stepped in to clarify that it was not invariably necessary for a developer to operate and maintain the facility. Parliament when it amended the law was obviously aware of the administrative practice resulting in the circulars of CBDT. The fact that in such a Scheme, an enterprise would not operate the facility itself was not regarded as being a statutory bar to the entitlement to a deduction under section 80-IA of the Act. The Court cannot be unmindful in the present case of the underlying objects and reasons for a grant of deduction to an enterprise engaged in the development of an infrastructure facility. The provision was intended to give an incentive to investment for infrastructural growth in the country. In Bajaj Tempo v. CI....
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....nt, local authority or statutory body; and (iii) The start of operation and maintenance of the infrastructure facility on or after 1-4-1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1-4-1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object and intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirety would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1-4-1995. In the present case, the assessee clearly fulfilled this condition. 23. In the view which we have taken, all the assessment years in question to which this batch of appeals relates would be gove....
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....ment of Maharashtra in respect of Koyna project and APSEB in respect of the Srisailam project, because, the investments have been made by them. 45. In the circumstances, as per the contentions raised before us orally as also in writing by the two rival representatives, the moot question that poses itself for our consideration is as to whether the assessee can be said to be developer when the amount has been paid to the assessee for the development work carried out by the assessee. In order to properly appreciate this question, it would be relevant, and no less beneficial, to refer to the legislative history of section 80- IA. As we have noted earlier, the amendment in section 80-IA was brought about by Finance Act, 1995 w.e.f. 1st April, 1996. By virtue of this amendment, exemption under section 80-IA 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 Finance Act, 1999, w.e.f. 1st April, 2000, deduction under....
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....onsidered as such, we note that the business activity of the nature of "BT" (build and transfer) also falls within eligible construction activity that is activity eligible for deduction under section 80-IA inasmuch as mere "development" as such and unassociated/unaccompanied with 'operate' and 'maintenance' also falls within such business activity as is eligible for deduction under section 80-IA. In the case of such a construction activity, which does not involve the 'operate' aspect, the question of an assessee engaged in such activity (of 'BT' carrying on only 'development') to recover his costs of construction of his own from the infrastructure project/facility itself does not arise, and so for the recoupment of the costs, the same have to be paid whether through running bills or otherwise; and considering the largeness/hugeness of the total financial investment involved, some advance if paid at some point of time, will not, in our view, change the basic nature/feature of the assessee's business activity. Therefore, merely because the present assessee was paid by the Government, for development work, it cannot be denied deduction under....
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....fore, 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 position of being a developer, nor will it debar the assessee from claiming deduction under section 80-IA(4). Discussed/considered as above, we hold that the assessee having carried out the work of constructing the abovementioned two projects, 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). 48. Now we proceed to consider the second issue, which is whether the infrastructure facility or the enterprise developing the infrastructure facility, is to be owned by the company registered in India? The learned CIT/Departmental Representative contended that the infrastructure facility should be owned by the company registered in India. Ground No. 1 of the Revenue's cross-objection is also to this effect. He contended that in this case, both the infrastructure facilities were not owned by the asse....
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....tc. Obviously, the infrastructure facility cannot be such an entrant as it cannot enter into an agreement with the Central Government or with anybody else. Understandably, it is only the 'enterprise', which can enter into an agreement with the Central Government or State Government or any other person. As such, viewed as above also, the word "it" denotes "the enterprise" and not "the infrastructure facility". 51. Accordingly, the conclusion drawn by learned CIT(A) on this count, that is on the count as to what is required to be owned in sub- clause (a) of clause (i) of sub-section (4) of section 80-IA, whether 'infrastructure facility' or 'the enterprise' is found to have rightly been drawn and quite justified, and the same need not be interfered with. 52. As seen above, we have held that 'the enterprise' should be owned by a company registered in India. In the instant case, the assessee is a company registered in India, which owns the enterprise and which developed the infrastructure facility. We, therefore, hold that the second condition for eligibility of deduction under section 80-IA(4) is also fulfilled by the assessee and ground No. 1 of the ....
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....essee for carrying out development work. In this reference, he referred to clause 12 of agreement with APSEB (i.e., p. 8 of assessee's paper book 2), and clause 42 of agreement with Government of Maharashtra (i.e., p. 32 of the assessee's paper book 2). He also stated that after completion of development of infrastructure facility, the same was transferred by handing over possession thereof. In support of this, he referred to p. 11 of assessee's paper book 1 for handing over of possession of infrastructure facility. We find that section 80-IA(4)(i)( b) requires development of infrastructure facility and transfer thereof as per agreement and it cannot be disputed in view of the material on record that the assessee has transferred the infrastructure facility developed by it, by handing over possession thereof to the Government of Maharashtra/APSEB, as required by the agreement. The very handing over of the possession of the developed infrastructure facility/project is the transfer of infrastructure facility/project by assessee to the Government/authority. The handing over of infrastructure facility/project by developer to Government/local authority/statutory body takes pl....
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....arashtra/APSEB on its completion only and without operating it, that is without resorting to the collection of toll therefrom for recoupment of its costs. Accordingly, in our opinion, the assessee has duly complied with this condition as well. We, therefore, hold that ground No. 2 of Revenue's cross objection has no merit and the same accordingly fails. ...................................................................................... 68. We have considered the rival contentions as also the relevant material on record. We may note that the statutory provision as contained in section 80-IA provides for "development of infrastructure facility". It nowhere provides that entire infrastructure project is to be developed by one enterprise. It is revealed from record that both the projects were multi-purpose projects for water supply, irrigation and power generation. The assessee has developed such part of the project, as was for supply of water from river/lake to turbine. Therefore, the assessee has developed "infrastructure facility" for supply of water and for irrigation. Merely because development work done by assessee is a point to point milestone of a multi-purpose project,....
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....l Representative on this count, therefore fails. 71. In view of our above discussion, we hold the assessee to have fulfilled all the requisite conditions prescribed under sub-section (4) of section 80-IA for being eligible for deduction under section 80-IA. We, therefore, delete this disallowance of assessee's claim for deduction of Rs. 18,47,09,510 under section 80-IA and direct the Assessing Officer to allow the same. As such ground No. 1 in assessee's appeal stands allowed and the Revenue's cross-objection stands rejected. We order accordingly. 17. In the light of above back ground of discussions, if we consider the facts of the case under consideration, we notice that the A.O. has allowed the claim under section 80IA(4) of the Act. But the CIT(A) exercised his power under section 251 of the Act and withdrawn the claim under section 80IA(4) of the Act. The assessee claimed deduction under section 80IA(4) in respect of two projects - (1) Panipet-Jalandhar Project and (2) Sagar-Beena Project. The CIT(A) withdrew the claim under section 80IA(4) in respect of Panipat-Jalandhar Project on the ground that it was a contract only for short term improvements and routine mai....
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....r at his cost as per direction of the Engineer. Routine road maintenance means the planned ongoing works and activities required to ensure public safety, repair small defects and to maintain the road in the required condition. Ad hoc maintenance means the carrying out of unscheduled maintenance occasioned by irregular events such as accidents, natural failures, abnormal weather and the like, as mentioned in technical specification and performance standards. The routine and ad hoc Road Maintenance shall include, amongst others, activities such as:- Repairing Local Potholes Crack Sealing Asphalt Treatment Road Sign Maintenance Road Markings Guard Rail and supplementary road furniture repairs" - Maintenance of Rigid Pavements Repair of Fences Repairs of Accident Damaged Assets Maintenance of Culverts, Drains and Channels - Clearing of Litter and Debris Periodic Maintenance of Flexible Pavement Horticultural maintenance 19. Clause 4.3 is reproduced as under :- "4.3 Road property maintenance The Contractor shall ensure the maximum availability and efficient utilization of the assets for the NHAI. This shall also include the protection of the right of way from encroachmen....
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....nipat-Jalandhar Project. Sagar-Beena Project. 22. The objection of the CIT(A) in allowing deduction under section 80IA of the Act in respect of Sagar-Beena Project is that the assessee did not satisfy the conditions laid down under section 80IA(4)(b) of the Act. The objection of the CIT(A) is that there is nothing to suggest on record that the assessee had entered into any agreement with the Central Government or a State Government or a local authority or any other statutory body. He further noted that the assessee has entered into agreement with M/s. Nagarjuna Construction Company Limited, an entity which is not mentioned in section 80IA(4)(b) of the Act. To examine the case of the CIT(A), we would like to refer the word "consortium of such companies" in section 80IA)(i)(a) of the Act. The Section 80IA(4)(i)(a) provides that infrastructure facility as approved in (i) is owned by consortium of such companies. The consortium word has not been defined in section 80IA(4) of the Act. If we consider the dictionary meaning of that word, according to the "New International Webster's Comprehensive Dictionary" it is "Lichens, (fellowship) Law Coalition, union, as of incorporated compa....
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....We have carefully examined the order of the CIT(A) and the order of the Tribunal in the assessee's own case for the assessment year 2006-07. on careful perusal of this order of the Tribunal, we find that Tribunal has examined the issue in detail in the light of legal provisions and various judicial pronouncements and finally concluded that for all practical purposes, the contract was awarded to the constituents of the joint venture through joint venture and the work was executed by them. Therefore, the benefit of deduction under this section is to be given only to the enterprises who carried on the classified business. The relevant portion of the order of the Tribunal is extracted hereunder for the sake of reference" "Turning to the facts of the case, we find that joint venture and the consortium was formed only to obtain the contract form the Government body and they in fact did not execute the work awarded to it. In a joint venture agreement or a consortium agreement, it was agreed that the awarded work had to be executed by the joint ventures or parties to the agreement in an agreed manner. The work was awarded by the Andhra Pradesh Government and the KSHIP, a body of the S....
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....h. The agreement with Government of Madhya Pradesh and NCC-PNC joint venture accepted the concept of Joint Venture vide clause no.27.1 which is at page no.95 of assessee's Paper Book. On perusal of agreements and supplementary agreement, we notice that the CIT(A) failed to consider the relevant provision of section 80IA(4)(i)(a) which provides that the prescribed infrastructure project in section 80IA(4)(i) is owned by company registered in India or by a consortium of such companies. The CIT(A) has considered only clause 80IA(4)(i)(b) of the Act without considering section 80IA(4)(i)(a) of the Act. If we read both the clauses of sub-section (4)(i)(a) and (b), we find that the project agreement was with the Madhya Pradesh Government and it was owned by consortium of companies registered in India i.e. NCC-PNC. Thus, in the light of above discussions and in view of the decisions of the I.T.A.T. in the case of ACIT vs. JSR Constructions (P) Ltd, ITA No.898/Bang/2009, order dated 29.03.2011 and DCIT vs. M/s. Transstroy (India) Limited, ITA No.325 & 326/Viz/2011, order dated 13.04.2012, we find that the assessee has satisfied the conditions laid down in section 80IA(4)(i)(a)(b) of th....
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.... Developers & Investors (P) Ltd. vs. ITAT & Ors. (2005) 277 ITR 239 (MP) (Page No.243) that there should be consistency so that litigants are aware where they stand. If the Courts and Tribunals are allowed to take the view like the one in present case, it would lead to anarchy and total chaos which would be against judicial propriety and discipline. We may also refer the following judgements in this regard:- i) CIT Vs. Goodlas Nerolac Paints Ltd., 188 ITR 1(Bom.): (Page 5 ) "This, however, does not mean that subsequent Bench of the Tribunal should come to a conclusion totally contradictory to the conclusion reached by the earlier Benchof the Tribunal in the same case for an earlier year on a similar set of facts. Such a thing may not be in the larger public interest as it is likely to shake the confidence of the public in the system". ii) Sayaji Iron & Engg. Co. Vs. CIT [2002] 253 ITR 749 (Guj.):[Page 753] - "9.4: In relation to the aforesaid approach of the CIT(A) and the Tribunal we cannot do better than reiterate what Madras High Court has stated in the case of CIT Vs. L.G. Ramamurthi & Ors. 1977 CTR (Mad) 416: (1977) 110ITR 453 (Mad): :" No Tribunal of fact has any right or....
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....e, require no independent finding. 33. The brief facts of ground no.2 are that during the assessment proceedings, the A.O. noticed that the assessee has claimed Rs. 61,64,601/- on account of signboard expenses. The assessee has failed to produce all the relevant bills. In absence of bills, the A.O. noticed that these expenses could not be verified. However, the A.O. admitted that in the line of work of assessee's company certain amount of signage are a mandatory requirement, but in absence of complete voucher and details, the A.O. disallowed Rs. 5,00,000/- to cover leakage of revenue. The CIT(A) has confirmed the action of the A.O. 34. We have heard the ld. Representatives of the parties and records perused. We notice that various signboards were installed and placed at various locations/sites of the assessee company. This was sated to be a business requirement of the assessee company. The A.O. made adhoc addition without pointing out any specific expenses which were incurred for non-business purposes. Expenses incurred for the purpose of business are allowable under section 37 of the Act. The said section provides that the expenditure in question should not be in the nature ....
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....ess. This fact has not been disputed by the A.O. The A.O. made the disallowance without pointing out any specific expenditure which was incurred other than for the purposes of business. In the light of the detailed discussion made while deciding ground no.2 in paragraph nos.33 & 34 of this order, following the said discussion, we delete the adhoc addition of Rs. 5,00,000/- 37. Brief facts in respect of ground no.4 are that during the assessment proceedings, the A.O. noticed that the assessee has claimed Repairs & Machinery expenses of Rs. 1,89,46,155/-. The A.O. made adhoc addition of Rs. 10,00,000/- to cover the possible leakage. The disallowance made by the A.O. has been confirmed by the CIT(A). 38. We have heard the ld. Representatives of the parties and records perused. There is no dispute that the expenses were incurred for the purposes of business. The A.O. admitted that such expenses are necessary for carrying out the business of the assessee. However, he made the addition on presumption basis. In the light of detailed discussion made above while deciding ground no.2 in paragraph nos.33 A.Y. 2005-06 & 34 of this order, following the said discussion, we delete the addition ....