TaxTMI 
TaxTMI 
2013 (10) TMI 1411
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....ntract for construction of barrage across river Cauvery in Mayanur Village, Karur District, Tamil Nadu, for approximate value of Rs. 174,01,80,550, of which the assessee received a sum of Rs. 12,25,56,120 during assessment year 2009-10 and Rs. 27,74,35,887 during the assessment year 2010-11, on which it returned a profit of Rs. 1,96,08,979 for assessment year 2009-10 and Rs. 3,88,30,345 for assessment year 2010-11. It claimed deduction under S.80IA for both the years. The Assessing Officer held that the assessee was not the owner of the project, but was merely a contractor executing the work on behalf of the Government of Tamil Nadu. The Assessing Officer also held that the assessee did not develop the infrastructure facility as the funds had been provided by the Government and the assessee had merely executed the work as a contractor. He also held that the assessee did not begin the operation of the infrastructure facility during the years in appeal, as only part of the work had been completed and the barrage was not operational. He also held that the assessee was bound to maintain separate accounts for the works in respect of which ti had claimed deduction under S.80IA, whereas t....
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....impugned order, which reads as follows- "5.15 To summarise, the appellant has neither conceived of the project nor been involved with its designing. It had not been involved with the preparation of financial estimates for the project. It had no role in its operation and maintenance. Its financial involvement was of a normal business; it undertook the normal business risks associated with any business and these were not in the nature of 'entrepreneurial and investment risks' associated with a developer. The Agreement provided for supply of material by the Government. Therefore, seen from the various parameters laid down by the ITAT in its decisions cited above, I do not find any reason to hold that the appellant is a developer and not a contractor. The rejection of the claim of deduction u/s. 80IA I, therefore upheld and the appeal is dismissed on this issue for both the years." Aggrieved by the order of the CIT(A) for both the yeas on this issue, assessee preferred the present appeals before us. 6. The learned counsel for the assessee, reiterating the contentions urged before he lower authorities, submitted that the assessee is clearly entitled for relief under S.8....
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....ified in the agreement itself, and the entire work was to eb completed in 24 months, and the agreement also specified the periodical progress which had to be adhered to by the assessee. Referring to the financial risk and commitment, he submitted that the agreement clearly provided for the assessee to be paid as a direct quid pro quo for the amount of work done by it, and the sum of Rs. 174.02 crores was not merely the estimated cost of the project but the amount payable by the Government for the work assigned to the assessee. Learned Departmental Representative submitted that Para 1 of the agreement, reproduced by the CIT(A) in the impugned order, makes it clear that the payment was in consideration of the execution and completion of the works. In this behalf, it is submitted that the fact that the agreement also provided for variations in the amount payable to the assessee on the basis of 'final measurements at unit prices' further established the nature of relationship/status of the assessee as that of a contractor. Even though the assessee was required to make some financial commitment both in the form of security deposit for execution of work and in the form of deducti....
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....al Nos.1 to 17 and forms part of the articles of agreement dated 9th February, 2009 (Agreement CR No.90/LS/Floods/2008-2009. We have gone through the said 'SCHEDULE B - LIST OF DRAWINGS' attached to the contract agreement and also plan attached to it. This is the initial plan attached to the contract agreement, on the basis of which the assessee has to execute the project. To execute the work, the assessee has to draw separate designs and drawings. For that purpose, the assessee employed two Project Managers, who are qualified Civil Engineers with BE qualification and twelve years experience in the field, ten site engineers with BE qualification, having eight years experience in this field. The assessee also employed another twelve site engineers having Diploma in Civil Engineering. The plans and designs given in the documents are general in nature, and they themselves cannot be taken as comprehensive for being executed. They are only a basic drawings and designs, based on which the assessee has to prepare the working plans, drawings and designs, and thereby implement the project. The reasoning given by the CIT(A) in this behalf in the impugned order to deny deduction is no....
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....er documents that in respect of any machineries made available by the Department to the assessee, hire charges would be recovered for such machineries supplied by the Government. It is also specifically mentioned that whatever such machinery is supplied by the Government, shall be handed over back to the Government in proper and same form. This specific clause clearly indicates that the assessee has got any machinery from the Department free of cost. The assessee having paid hire charges of the usage of the machinery, it cannot be said that the assessee has not used machinery either owned or hired by it. In this view of the matter, it is not correct to say that that the assessee has not used its men, material and machinery, and consequently, the reason given by the CIT(A) that the assessee has not used its own men, material and machinery cannot be accepted as valid. 11. Further reason given by the CIT(A) for denying deduction under S.80IA to the assessee is that the assessee has not undertaken any risks. The observations of the CIT(A) in this behalf are also not valid and correct. It was clearly mentioned in the agreement that the assessee shall execute and furnish indemnity bon....
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....d and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. We find that the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the 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 the cattle and bullock carts i....