TaxTMI 
TaxTMI 
2015 (3) TMI 941
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....s. In its return of Income, the assessee claimed deduction under Section 80-IB(10) which was declined by the Assessing Officer ("AO") in the course of assessment under Section 143(3). The AO observed that the assessee company had been undertaking construction activity since 1996-97. The company had been allotted in FY 2001-02 a housing project worth Rs. 12,53,65,692/- for constructing housing units measuring 450 sq. ft. each on more than one acre of land at Sector-62, Noida by the Indian Railway Welfare Organisation ("IRWO"). A housing Project worth Rs. 22,82,96,800/- had also been allotted for the construction of housing units measuring 38 to 42 sq. metre each on a total area of more than one acre of land at Sector 14, Dwarka, Phase-II, New Delhi, by the Delhi Development Authority ("DDA"). Both these continued in the year under consideration. The the contract receipts from these works during the year under consideration disclosed was Rs. 5,47,85,200/-. The profit from this contract receipt was shown at Rs. 48,40,725/-. Of this, Rs. 47,03,714/- was claimed as tax exempt income by virtue of Section 80-IB(10) of the Act. 3. The AO, upon a textual analysis of Section 80IB (10) was o....
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....decision, the AO observed that against the order of ITAT dated 17.02.2006, the department had filed an appeal before this Court. He did not follow the decision of the ITAT and held that considering the facts and circumstances of the case, the deduction claimed under Section 80IB(10) could not be allowed as the assessee was a contractor and not a developer. The CIT(A) allowed the assessee's claim. Aggrieved, the revenue unavailingly appealed to the ITAT. 5. From the record, the ITAT found that the assessee company was mostly engaged in the business of building and developing housing projects together with infrastructure. During the years under consideration, it had developed and executed two housing projects for DDA and IRWO. The profits derived from these projects were claimed as tax exempt under Section 80IB(10). The revenue contended that the assessee was a mere contractor and not a developer and consequently in view of the amendment introduced retrospectively by insertion of Explanation to Section 80IB(10), the assessee's claim for deduction was ineligible. The ITAT agreed that exemption under Section 80IB(10) is only available to an assessee who is working as a develop....
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....ssee, following is the scope of work assigned to the assessee :- "Terms and Conditions" (i) The scope of work, as stated in the NIT to the executed on Turnkey basis includes planning, designing, soil testing, earth filling, civil works, including its electrification, services like street lighting, sewerage, water supply drainage, roads, horticulture, landscaping, provision of dual water supply system, rains water harvesting as also construction of community hall, shopping centre, boundary wall, electric sub station, installation of transformer and equipment in it, laying of HT Cables, LT network, service cables etc. and making the units complete and habitable including watch and ward for 3 (three) years from the date of recorded completion. This scope of work given in the NIT is only indicative and not exhaustive. The agency shall be responsible for execution of all items required for completing these houses in all respects to make these units habitable and ready for occupation as well as functioning of all services, making environment fit for habitation without any additional cost, complete as per direction of the Engineer-in-charge. (ii) The facts will be maintained till these....
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....lation of transformer, laying HT cables etc. 23. The detailed scope of the work as enumerated above which was undertaken by the assessee, it can safely be concluded that on the facts of the case, the assessee has worked as a developer and not merely as a work contractor. Accordingly, we do not find any merit in the action of the AO for declining claim of deduction u/s 80IB(10) of IT Act. With regard to AO's observation that the project should be owned by the assessee for claim of exemption u/s 80IB(10) is misplaced insofar as there is no condition in Section 80IB that the project undertaken by the assessee as a developer and builder should be owned by the assessee. The only condition is with regard to the fact that only activity of developing and building a housing project would be eligible for claim of exemption u/s 80IB. It means that the assessee who is a developer and builder in substance would only be eligible for the deduction and not a contractor simplicitor. With regard to the learned DR's contention that since the assessee himself has shown as a contractor in the tax audit report he will not be eligible for claim of deduction u/s 80IB. In this regard, it is pertinent to m....
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....uch infrastructure facility to the Government or local authority and that such enterprise should start maintaining infrastructure facility on or after 1st April, 1995. According to the revenue, the assessee did not fulfill any of those conditions. 8. It was argued that deduction under Section 80-IA(4) was provided to infrastructure project developers to supplement State effort to finance and develop such facilities. Exemption under Section 80-IA(4) was provided to encourage private sector participation in infrastructure development. To qualify for exemption, the enterprise should carry on the business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating an infrastructure facility. Counsel also compared Section 80-IA(4A) introduced by Finance Act, 1995 with the provisions of Section 80-IA(10), to highlight the similarity in scope and content. Counsel lastly urged that the distinction between a works contract and an infrastructure development is the element of risk which necessarily always is with the owner. In the absence of that risk element, every contractor can claim to be a project developer, which defeats the intention of Section 80-....
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.... in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section(4) shall apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted. Explanation 1.-For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) such machinery or plan....
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....i) is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997 : Provided that the provisions of this clause shall not apply to blocks licensed under a contract awarded after the 31st day of March, 2011 under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated the 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or a State Government in any other manner; (This proviso was inserted in by the Finance Act, 2011, w.e.f. 1-4-2012). (iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998 but not later than the 31st day of March, 2012; (iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (hereafter referred to as "NELP-VIII") under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of natural gas on or after the 1st day of April, 2009;....
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....by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher; (e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housin....
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....tion, therefore, to be considered is, whether the Revenue is justified in reading the expression "plot of land" in section 80-IB(10)(b) as "vacant plot of land" ? 26. The object of section 80-IB(10) in granting deduction equal to one hundred per cent. of the profits of an undertaking arising from developing and constructing a housing project is with a view to boost the stock of houses for lower and middle income groups subject to fulfilling the specified conditions. The fact that the maximum size of the residential unit in a housing project situated within the city of Mumbai and Delhi is restricted to 1000 square feet clearly shows that the intention of the Legislature is to make available a large number of medium size residential units for the benefit of the common man. However, in the absence of defining the expression "housing project " and in the absence of specifying the size or the number of housing projects required to be constructed on a plot of land having minimum area of one acre, even one housing project containing multiple residential units of a size not exceeding 1000 square feet constructed on a plot of land having minimum area of one acre would be eligible for secti....
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....amendment to determine whether the amendment is clarificatory or substantive." In this case, the Explanation states that the benefit of deduction would not apply to someone who "executes the housing project as a works contract awarded by any person" applies from the date that explanation was enacted. In the facts of this case, it is evident that the assessee was awarded both contracts as turnkey projects. The conceptualization, overall planning and execution, oversight of entire execution, deployment of personnel at various stages, etc. was with the assessee. In almost similar circumstances, the Gujarat High Court in Katira Construction Co Ltd v Union of India 2013 (352) ITR 513 held the assessee to have engaged in the development and construction of a housing project: "the development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the architects and engineers. Additionally, assessee was also authorized to appoint any other archit....