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2014 (9) TMI 82
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....eous deserves to be quashed. It be so held now. 2. Ld. CIT (A) erred in law and on facts in holding that no risks was undertaken by the appellant while executing the projects as it was entitled to only fixed percentage of project cost. This observation of ld. CIT(A) without appraising himself of the fact of the case is completely irrelevant and uncalled for since it traversed beyond assessment order that deserves to be reversed and deduction as claimed u/s 80IA(4) of the Act to be granted. 3. Ld. CIT(A) further erred in law and on facts in not taking cognizance of the two decisions relied upon by the appellant directly applicable to the facts of the case but referred to decisions having no bearing to the facts. Ld. CIT(A) failed to appreciate controversy in proper perspective taking relevant facts into consideration to hold the appellant as developer entitled to claim deduction u/s 80IA(4) of the Act instead of denying deduction by choosing to follow appellate order of earlier year. It be so held now. 3. The ld. Departmental Representative has no objection to the admission of the aforesaid additional grounds of appeal raised by the assessee. Hence, they were admitted and t....
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....operating and maintaining a new infrastructure facility; It has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995; All the above conditions are duly complied by the Gujarat Urban Development Co. Ltd. (GUDC LTD.) Quantum of Deduction: Where the gross total income of the assessee includes any profits and gains derived by an undertaking or enterprise from any eligible business as defined u/s80IA(4), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of an amount equal to 100% of profits and gains derived from such business for 10 Consecutive assessment years. The company receives specific earmarked Grants / funds and which are to be used strictly for the earmarked projects only. GUDC LTD. is solely responsible to carry out the infrastructure development activities on behalf of Urban Local Bodies as directed by the Government of Gujarat. The company identifies need for infrastructure facilities, prepares feasibility and detailed project reports, arranges for finance and carries out the implementation of the infrastruc....
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....all not apply to 'business which is in nature of work contract'. (II) Whether an Assessee is a 'developer' or 'work contractor' depends on the nature of work undertaken by the assessee. Contracts involving design, development, operating and maintenance, financial involvement, and defect correction and liability period cannot be called as simple work contract. A case where in an undeveloped area, infrastructure is developed and handed over to the Government / Urban Local Bodies cannot be considered as a mere work contract but has to be considered as development of infrastructural facilities'. This is squarely applicable to Gujarat Urban Development Co. Ltd. also. Conclusion of Deduction U/s 80IA to GUDC LTD:  Thus company satisfies the conditions as stipulated under the provisions of Section 80IA(4)(i) of the IT Act.  Thus GUDC Ltd is clearly a "Developer" and it is not a "Work Contractor" [M/s. Tarmet Bel KCL, Rajkot vs. ITO Ward 1(4), Rajkot] 6.3 I have considered the facts of the instant case, the submissions, the assessment order, amendment in the law and the decisions relied upon. It is to mention here that similar issue h....
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.... and excluded by the undertaking or enterprise referred to in sub-section (1)." In view of the above, the appellant is not eligible for deduction as claimed. The appellant has also relied on the decision of the Hon'ble Rajkot ITAT in the case of Tarmet Bel (JV) KCL Rajkot vs. ITO, Wd.1, Rajkot in ITA No.1111/Rjt/2010. In this case relied upon by the appellant, the Hon'ble Rajkot Bench has discussed and decided various other issues also. It is also to be noted that the appellant has gone in further appeal before the Hon'ble ITAT against the order passed by the CIT(A) for earlier years, which has been decided by the Hon'ble ITAT against the appellant and in favour of the Revenue. In view of the above discussion, in the foregoing paras above, and following the ratio of the decision taken by the Hon'ble ITAT in the appellant's own case, it is held that appellant not eligible for deduction claimed u/s 80IA(4) and the decision of the AO is upheld. The appeal of the appellant is therefore, dismissed." 6. We find that the Tribunal in assessee's own case, vide a consolidated order dated 19.03.2014, has held as under:- "10.1. Briefly stated facts ar....
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....the case of Gujarat Safai Kamdar Vikas Nigam vs. ACIT, Gandhinagar Circle, Gandhinagar (ITA No.3232/Ahd/2008, order dated 17/04/2009, and Gujarat State Disaster Management Authority vs. ACIT, Gandhinagar Circle, Gandhinagar, ITA No.949/Ahd/2009, order dated 05/06/2006. In the entirety of facts and circumstances, the appellant is doing the work of a concern engaged in work which is in the nature of a works contact awarded by any person (including the Central or State Government) and executed by it. Here it is to be noted that as per the amended Explanation below section 80IA(13) with retrospective effect from 1.4.2000; the work should not be of the nature (emphasis supplied) of contract and not only contract. Here the project costs and source thereof not being revenue of the appellant, it being not affected by the actual cost and efficiency of work, the assets created and the source not being of the appellant at any stage and it being entitled to a fixed remuneration for its professional services; it clearly is falling in the excluded category as per the amended Explanation below section 80IA(13); and therefore, not eligible for deduction. The decision of the Hon'ble Mumba....
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....007-08 & 787/Ahd/2012 for 2008-09. 10. The ld. CIT(A) has held as under:- "7. The next issue is against the action of the AO in disallowing and adding interest of Rs. 22,63,60,745/-. 7.1 The AO on perusal of the balance sheet, Table forming part of Schedule-11 shows status grant for various projects. The total interest received by the assessee of Rs. 22,63,60,745/- was not offered for tax. On a detailed query of the details filed before him the AO noticed that FDRs were kept in the name of Gujarat Urban Development Company Ltd. The surplus available with the assessee was parked with GSFS and interest was earned by the assessee. The AO further observed that the fund was not temporarily parked but it was parked for a long time. The AO has also explained in the order of assessment as to how the income received has escaped from tax net. The assessee received grant which is parked with GSFS. GSFS pays interest and claims interest as expenses. GSFS uses this amount for giving loan to another Government Undertaking and receives interest on that and shows it as income. The Government undertaking which has taken loan from GSFS claims interest as expenses He therefore, held that the....
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....t amount and the income does not belong to the assessee at all. When the project is completed, the difference between Actual Expenditure and Grant & Interest is arrived at and balance is to be refunded to the Govt. of Gujarat/Funding Agencies, Whenever the project/scheme Expenditure exceeds the grants received, the Interest earned thereon has been respectively utilized since it forms part of the grants funds itself for successful completion of the project/scheme of public interest The above issue of Interest has been decided by the Income Tax Appellate Tribunal (ITA 2671/Ahd/2013) and pronounced judgment in favor of GUDCLTD. for the A.Y.2010-2011 and concluded that Interest is not the income of the Assessee and cannot be added to the income of Assessee. (Copy of order is attached herewith). The above issue of Interest was decided in favor of GUDC LTD. for the A.Y. 2007-2008 by the CIT (Appeal). The department had filed an appeal before the ITAT. The ITAT has dismissed the appeal of the Department." 7.3 I have considered the facts of the case, assessment order and the submissions of the appellant. I find that similar issue has been allowed in favour of the appellant. How....
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....ment of Gujarat and working as a Nodal Agency for implementing various projects for which various grants are received by the appellant during the year which are parked by the appellant in GSFS and the same were placed in the form of FDRs on long term in the name of the appellant on which the appellant has earned total interest of Rs. 20,18,23,408/-. On the one hand the corporation is paying interest on borrowings which is being debited as an expenditure and on the other hand the income earned as interest income is not being offered for taxation*under the head Surplus Funds. ii) It is also a fact that the money is being parked in GSFS on the directives of Gujarat Municipal Finance Board (GMFC) is also a separate limited entity and taxable under the provisions of Income-tax Act and GSFS has been debiting Rs. 22,63,60,745/-in its balance sheet as a payment made to appellant and not to GMFC. Hence, it is a natural principle under the Income-tax Act that if an amount is debited at one side, it has to be credited on the other side in the same manner. In the case of GSFS, it is claiming the interest as a deduction which is required to be taxed in the hands of the appellant. iii) Tho....
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.... the case of U.P.Bhumi Sudhar Nigam vs. CIT reported at (2006) 280 ITR 197 (All.) and on the judgement of Hon'ble Allahabad High Court rendered in the case of CIT vs. Indo Gulf Fertilizer & Chemical Corpn.Ltd. reported at (2006) 280 ITR 621 (All.). 5.2. On the contrary, the ld.Sr.counsel for the assessee submitted that the AO has wrongly applied the judgement of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT reported at (1997) 227 ITR 172 (SC). He submitted that the assessee is only a nodal agency supervising the work assigned by the different agencies and the advances given as per the agreement were placed in fixed deposits. The interest so accrued was not offered for tax since such interest was credited to the respective accounts of the agencies and utilized for the purpose of projects. He submitted that under the identical facts, the Hon'ble Gujarat High Court in the case of CIT vs. Sar Infracon Pvt.Ltd. has decided this issue in favour of assessee. He further placed reliance on the judgement of Hon'ble Karnataka High Court rendered in the case of CIT vs. Karnataka Urban Infrastructure Development & Finance Corpn. re....