TaxTMI 
TaxTMI 
2013 (5) TMI 300
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.... risk and investment is undertaken by the assessee. 5. The CIT(A) erred in law in considering works contracts for deduction u/s. 80IA though they are not eligible under law for such deduction. 3. The assessee in the CO raised the following grounds:- The learned CIT(A)-I, Vijayawada ought to have clearly held that 1. Having regard to the technical nature of the work under taken by the Respondent which was demonstrated before him and therefore ought to have clearly held that the Respondent was entitled for deduction u/s 80-IA(4) of the IT Act 1961. 2. The learned CIT (A)-I, Vijayawada having found as a matter of fact on the basis of Tender documents produced before him that the projects undertaken by the Respondent involved development, operating, maintenance, financial involvement, defect correction and liability period and hence ought to have clearly held that the Respondent was an Infrastructure developer within the meaning of section 80IA(4) of the IT Act 1961 and was therefore eligible for the deduction of the profits derived therefrom. 3. The learned CIT(A)-I, Vijayawada ought to have held that the respondent is entitled to deduction u/s 80IA(4) at Rs. 9,48,73....
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....cture development should be owned by the company and not that the infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word "ownership" is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80IA (4) and not any other person like individual, HUF, Firm etc. 25. We also find that according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word "it" denotes the enterprise carrying on the business. The word "it" cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word "it" is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. 26. The next question is to be answered is whether the assessee is a developer or mere works contracto....
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....her by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 80IA....
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....tion 80IA of the Act. But, certainly, the Explanation cannot be read to do away with the eligibility of the developer; otherwise, the parliament would have simply reversed the Amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only mere works contact or sub-contract as distinct from the developer. This is clear from the express intension of the parliament while introducing the Explanation. The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before us that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financi....
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....maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to amendment the "or" between three activities was not there, after the amendment "or" has been inserted w.e.f. 1-4-2002 by Finance Act 2001. 31. Accordingly, the assessee is entitled for deduction under section 80IA of the Act on the projects which involve above activities. Therefore, in our considered view, the assessee should not be denied the deduction under section 80IA of the Act if the contracts involves development, operating, maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s 80IA of Act. In our opinion the contracts which contain above features to be segregated on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from the contracts which involves development, operating, maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata bas....
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....racts which contain above features to be segregated and on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from such contracts which involves development, operating, maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine and grant deduction on eligible turnover as directed above." 26. In view of the above orders of the Tribunal on similar issue relating to deduction u/s. section 80-IA(4), we are inclined to remit the issue back to the file of the Assessing Officer to decide the issue in the light of the above order." 8. Further the same issue came for consideration in the case of Bhooratnam Construction Co. Pvt. Ltd. in ITA Nos. 270 & 271/Hyd/ 2011. The Tribunal vide order dated 7.9.2012 held as follows:- "8. We have heard both the parties and perused the material on record. In our opinion, as seen from the facts of the case, the assessee has not produced copies of tender/c....