TaxTMI 
TaxTMI 
2013 (6) TMI 737
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....n of the Assessing Officer in reopening the assessment. 3. On the facts and in the circumstances of the case the order of the learned CIT(A) erred in law and facts of the case in confirming the disallowance of the Assessing Officer of the deduction claimed by the appellant under section 80IA in respect of profits derived from the eligible business of developing infrastructure facility defined in Explanation to Section 80IA (4) (i). 4. On the facts and in the circumstances of the case the order of the learned CIT(A) erred in law and facts of the case in confirming the addition of Rs. 4,23,918/- which is a mistake apparent record. 5. The appellant crave leave to add to/delete/ modify/alter/ amend/substitute all or any of the grounds." 2. Ground No. 1 and 5 are general in nature and it needs no adjudication. 3. Ground No.2 is relating to the legal issue of validity of proceeding initiated under section 147 of the Act. Briefly the facts relating to this issue are that the assessee filed its return for the A.Y. 2000-01 on 31.10.2000 declaring Nil income after claiming deduction under section 80IA of the Act. The return was processed under section 143(1) of the Act on 11.1.2....
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....ork merely as a contractor. In response to the notice issued, the assessee submitted that it is an enterprise owned by consortium of companies registered in India and is in the business of developing of infrastructure facilities. Being a highway project as defined in clause (b) of section 80IA(4), it was submitted that it had developed a bridge and approach road as per the terms of the contract which were new infrastructure facilities. Hence, the provisions contained in sub-section 4 of section 80IA are applicable to the assessee. The Assessing Officer, however, was of the view that as per the provisions of Section 80IA(4A) as it existed at the relevant period, the assessee would be eligible to deduction under section 80IA only if it has fulfilled all the conditions under section 80IA(4A) of the Act. The Assessing Officer on interpreting the contract entered with BDA came to a conclusion that the assessee's job is restricted to complete the said contract with certain conditions prescribed like performance security, retention money, completion time, liquidated damages for deal in completing works, defects liability period etc., From this, the Assessing Officer concluded that the ass....
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.... under section 80IA is available to the person who invests capital in the capacity of a owner and not the one who is depending on the principal for infusion of funds for creating the infrastructure facilities. The Assessing Officer further held that though the assessee had undertaken the work of construction of approaches to road by the BDA in terms of clause (b) of subsection 4 of Section 80IA it was not developing a new infrastructure facilities but was engaged only in construction of road over bridge and grade separator crossing. The Assessing Officer further noted that the initial assessment year from which the deduction is to be allowed has been defined in old section 80IA(12) (c) (2) which means the assessment year specified by the assessee, not falling beyond the 12th assessment year starting from the previous year in which the enterprise begins operating and maintaining infrastructure facilities. He, therefore, came to a conclusion that unless the enterprise begins to operate and maintain infrastructure facilities, it cannot be considered to be eligible for deduction under section 80IA of the Act. On the aforesaid analysis, the Assessing Officer disallowed the claim of dedu....
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....ployer. Therefore, I have no hesitation in concluding that such contracts are not envisaged by the legislature for allowing the benefit of Sec.80IA of the Act. 10. In view of the above aforesaid discussion, I conclude that the appellant has not fulfilled .all the conditions and requirements stipulated u/s.80IA as it acted only as a "contractor" and not a "developer" in respect of the said projects, which were never owned by it and further never operated and maintained by it. The claim of deduction of Rs. 55,17,349/- under the said section therefore, is disallowed. The ground is therefore, decided against the appellant." 7. Being aggrieved of the aforesaid Order of the CIT(A), the assessee is in appeal before us. The learned A.R. submitted before us that the assessee has acted as a developer and therefore, is entitled to deduction under section 80IA of the Act. He further submitted that the amendment made to section 80IA(4) of the Act by the Finance Act, 1999 and Finance Act, 2001 makes it clear that all the activities mentioned under section 80IA (4) need not be undertaken cumulatively for claiming deduction under section 80IA(4) of the Act. Even if the assessee undertakes....
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....ument as a whole and keeping in view the nature and scope of the work, it cannot be said that the assessee is not a developer and has executed the work merely as a contractor. It was submitted that the assessee has not only employed technical personnel for executing the work but has also invested his own funds in purchase of materials, plant and machinery. The learned A.R. submitted that the nature and scope of work would clearly reveal the fact that assessee has undertaken the work of developing the infrastructure facilities. The learned A.R. relying upon the decision of the Coordinate Bench in the case of M/s. KMC Construction Ltd. vs. ACIT, Circle 2 (2), Hyderabad in ITA.No.96/Hyd/2003 dated 16.3.2012 a copy of which is at page 42 of the compilation of case laws, submitted that the ITAT, Hyderabad Bench considering identical nature of contract in the case of KMC Constructions has held that the assessee is entitled for deduction under section 80IA(4) of the Act. The learned A.R. relying upon the decision of the I.T.A.T. Pune Bench in ITA.No.1408 and 1409/PN/2003 in the case of B.T.Patil and Sons, Belgaum Construction Pvt. Ltd. vs. ACIT, submitted that the assessee neither be a ow....
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....he decisions cited before us. Before we delve into the issue in dispute it would be appropriate to look into the relevant provisions at this stage. Deduction for development of infrastructure facility as per old section 80IA was contained in subsection (4A) which read as under : (4A) This section applies to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :- (i) the enterprise is owned by a company registered in India or by a consortium of such companies. (ii) the enterprise has entered into an agreement with the Central Government or a State Government or a Local Authority or any other Statutory Body for developing, maintaining and operating a new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the central Government, state Government, Local Authority or such other statutory body, as the case may be, within the period stipulated in the agreement. (iii) the enterprise starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995. 10. The aforesaid provision was amended by ....
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....om A.Y. 2000-2001. In the case of KMC Constructions Ltd. (supra), the Coordinate Bench of this Tribunal in clear terms held that the amended provisions of section 80IA(4) would apply from A.Y. 2000-01. The Tribunal further held that where an assessee incurs expenditure on its own for purchase of materials and towards labour charges and itself executes the development work, it will be eligible for deduction under section 80IA of the Act. It was further held that the word 'owned' in sub-clause (a) on clause (1) of sub-section (4) of section 80IA of the Act referred to the enterprise. In otherwords, the enterprise carrying on development of the infrastructure facilities should be owned by a company or consortium of companies. The infrastructure facilities need not be owned by a company. It was held that 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 new HUF Firm etc., The Coordinate Bench further held that for arriving at a conclusion as to whether the work done is to develop the infrastructure or it involves construction of a partic....
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....greements 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." 12. In the case of M/s. KMC Construction Ltd. also the Coordinate Bench of this tribunal allowed the claim of deduction under section 80IA of the Act as the assessee had clearly demonstrated that it had undertaken huge risk in terms of development of technical personnel, plant and machinery, technical knowhow expertise and financial resources. Thus, the principle that would emerge from the above said decisions of the Coordinate Bench is that assessee would be entitled for deduction under section 80IA(4) of the Act, if he develops the infrastructure facilities. However, the assessee has to demonstrate that it has actually carried on development of infrastructure facilities cumulatively undertaking with all the activities ....