TaxTMI 
TaxTMI 
2016 (11) TMI 449
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....al for Asst. Year 2005-06 and Asst. Year 2006-07 vide ITA Nos.811/Ahd/2010 and 812/Ahd/2010 against the order u/s 263 of the Act passed by CIT-1, Ahmedabad of even date 5.3.2010 whereas Revenue is in appeal vide appeal Nos.732/Ahd/2013 and 2132/Ahd/2011 for Asst. Years 2005-06 & 2006-07 respectively against the orders dated 24.12.2012 and 23.6.2011 by CIT(A)-VI, Ahmedabad passed against the order framed by Assessing Officer u/s 143(3) r.w.s. 263 of the Act. 3. We will first take up assessee's appeal against the order of CIT u/s 263 of the Act for Asst. Year 2005-06. 4. Briefly stated facts of the case are that assessee is a private limited company engaged in the manufacturing of waste, water and effluent treatment plant. Return of income was filed on 27.10.2005 declaring total income of Rs. 5,17,644/- which was followed by revised return filed on 04.12.2006 showing income at Rs.NIL and claiming deduction u/s 80IA of the Act at Rs. 33,10,007/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 06/06/2006 followed by notice u/s 142(1) along with questionnaire calling for requisite details. Necessary details were furnished during the course of ass....
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....ing it evidently clear that assessee company has designed, constructed, commissioned, tested, operated, manufactured, water treatment plant and has trained the personnel of GWSSB which are enough to satisfy that works were carried out on time basis as developer and not as contractor. 7. Ld. AR also submitted that during the course of assessment proceedings all necessary details were placed before the assessing authority which are evidenced in the assessment order itself and ld. Assessing Officer has applied his mind within the four corners of law. On the basis of details available on record, the discretionary power was with the assessing authority to treat the assessee as a developer or a works contractor which in this case tilted in favour of assessee as it was treated as a developer. There are series of judgments and decisions wherein it has been held that if the assessing authority at some juncture has two possible legal views and he opts for one then it cannot be said to be prejudicial to the interest of Revenue nor it can be termed as erroneous order. Ld. AR relied on the judgment of Hon. Jurisdictional High Court in the case of Principal CIT vs. Shri Prakash Bhagchand Khat....
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....ereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. [Explanation.-For the purposes of this clause, "infrastructure facility" means- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway [, inland port or navigational channel in....
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....e had raised multiple queries about said aspects. In the order sheet, the Assessment Officer had called upon the assessee to furnish various details including "the details of fixed assets and details of sale of land". Thus, details the assessee had provided under a communication made in October, 2012 in which he had provided details of fixed assets and details of sale of land. On 28.2.2012, the assessee had written to the Assessing Officer as under: "This is with reference to the date of Construction of new Asset for the purpose section 54/54F within a period of three years we would like to mention as follows: 1. Section 54F of the Income-tax Act provides for exemption from tax on long term capital gains arising from transfer of a capital asset other than a residential house property, provided the net consideration is invested in a new asset being a residential house property. For availing of the exemption, the assessee is required to do following acts in addition to satisfying other conditions: *Purchase the residential house property within a period of one year before or two years after *Construct the residential house property within a period ....
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....or should construct a new house within 3 years of the sale of old house by investing therein the nest amount of capital gain arising from the sale or transfer of the old house." 6) It can thus be seen that though final order of assessment was silent on this aspect, the Assessing Officer had carried out inquiries about the nature of sale of land and about the validity of the assessee's claim of deduction under section 54F of the Act. Learned counsel for the Revenue however submitted that these inquiries were confined to the claim of deduction under section 54F of the Act in the context of fulfilling conditions contained therein and may possibly have no relevance to the question whether the sale of land gave rise to a long term capital gain. Looking to the tenor of queries by the Assessing Office and details supplied by the assessee, we are unable to accept such a condition. In that view of the matter, the observation of the Tribunal that the Assessing Officer having made inquiries and when two views are possible, revisional powers could not be exercised, called for no interference. Since with respect to computation and assertions of other aspects of deduction under section 54....
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.... 14. We are not persuaded to take a view different from the view taken by the Tribunal. A clear finding was recorded by the Tribunal that the assessee had filed the details and calculations about the built-up area of the residential units. It would be unreasonable to hold'that the Assessing Officer ignored those details. Moreover the statutory auditors had clearly mentioned the dates of approval of the lay out plan of the residential colonies. The Assessing Officer was thus made aware of the dates on which the approvals were granted in respect of each of the four housing projects. The more important aspect was the applicability of clause (a) of Section SOIB(IO). On this aspect the Tribunal held that any construction carried out before the receipt of necessary approvals would be unauthorized arid could not be recognized. It was found by the Tribunal that in any case there was only site development by filling of pits, leveling of land, construction of roads, wells, laying of sewerage and electricity lines etc. Further there was no dispute regarding the date of commencement of construction with respect to the projects, namely, Golf Link-II and East End Loni. The Tribunal has found....
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....serving as under :- 15. After going through rival submissions and material on record, we find that Hon'ble Supreme Court in the case of Max India Ltd. (supra) has held that in case at the Kirloskar Brothers A.Y. 2003-04 & 2004-05 time of passing an order u/s 143(3) two views were inherently possible on the word "profits" occurring in the proviso to section 80-HHC(3) and therefore, subsequent amendment of section 80-HHC made in the year 2005, though retrospective, did not render the order of the Assessing Officer erroneous and prejudicial to the interest of the Revenue, the CIT could not exercise powers u/s 263 of the Act. Following the same analogy, we find that at the relevant point of time, two views were possible before retrospective amendment to section 80-IAwhere by Explanation was inserted by the Finance (No. 2) Act, 2009 with retrospective effect from 1-4-2000 which reads as under: "Explanation - For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) a....
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....er u/s 263 of the Act and restored the assessment order u/s 143(3) of the Act. Therefore issue raised in this appeal is decided in favour of assessee. Accordingly, the appeal of assessee is allowed. 16. In appeal of assessee in ITA No.812/Ahd/2010 for Asst. Year 2006-07, the issue raised is similar to that of appeal in ITA No.811/Ahd/2010 for Asst. Year 2005-06. We therefore, apply our decision taken in ITA No.811/Ahd/2010 and set aside the order of ld. CIT u/s 263 of the Act and restore the order of Assessing Officer u/s 143(3) of the Act dated 28.3.2008 allowing deduction u/s 80IA of Rs. 38,35,761/-. This appeal of the assessee is also allowed. 17. Now we take up ITA No.732/Ahd/2013 for Asst. Year 2005-06 and appeal in ITA No.2132/Ahd/2011 for Asst. Year 2006-07 (Revenue's appeals). Revenue is in appeals against the orders passed u/s 143(3) r.w.s. 263 allowing the deduction u/s 80IA of the Act to the assessee. 18. As we have already decided the appeal in favour of assessee in ITA No.811/Ahd/2010 & ITA No.812/Ahd/2010 for Asst. Year 2005- 06 & Asst. Year 2006-07, quashing the order u/s 263 of the Act passed by ld. CIT, it will be academic to deal with these two appeals of....
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....We have heard the rival contentions and perused the material on the record and also gone through the decision relied on by the ld. AR. Solitary grievance of the Revenue is against the order of ld. CIT(A) allowing the claim of Rs. 42,19,807/- u/s 80IA of the Act. We observe that ld. CIT(A) has allowed the claim under section 80IA of the Act towards profit earned from three projects namely -GWSSBADB, Gondal, GWSSB-Gondal & MPAKVN by observing as below :- 2.3 I have considered the facts of the case, assessment order and appellant's submission. Appellant claimed deduction u/s 80IA(4) of IT Act on five infrastructure development projects before assessing officer as under :- 1. GWSSB -Asian Development Bank (ADB) Project 2. GWSSB -Gondal/Katharia 3. Ahmedabad Municipal Corporation 4. GWSSB -Nadiad 5. MP Audyogik Kendra Vikas Nigam Ltd. (IMPAKVN) However in appeal submission dated 27.10.2010 appellant did not pursue its claim in respect of two projects namely -Ahmedabad municipal corporation and GWSSB Nadiad, it was submitted that these projects relates to maintenance and other services and not infrastructure development therefore 80IA claim in respect of these projec....
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....ing technical know-how to execute the work and to face the consequences of attendant risks. We find that the risks ore upon the assessee and not upon the Govt, These elements are generally missing in the case of a sub-contractor. Here, the appellant is directly engaged in performing its functions Further, in the case of Om Metals Infraprojects Ltd.(supra), it is held that if it is the assessee mobilizing people, plants, technical expertise etc., the assessee can be said to be a developer and that the assessee cannot be denied deduct/on from the profits of developing the infrastructure facility though it may not operate or maintain the same, particularly in view of the insertion of the word "or" in Sec. 80IA{4)." Honorable 1TAT held that if assessee assumes the risk of project, plan the project work, employ technical skills, mobilize people, funds and resources then assessee cannot be denied the deduction from the profit of developing infrastructure. Appellant's case is identical since in respect of these three projects appellant designed the infrastructure projects, took risk of the project, commissioned the project and conducted trial run, deployed its own resources. In the....
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.... of materials himself and executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-1A. In contrast to this, an assesses, who enters into a contract with another person including Government or an undertaking or enterprise referred to in section 80-IA, for executing works contract, will not be eligible for the tax benefit under section 80-IA. The word 'owned' in subclause (a.) of clause (I) of sub-sec.(4) of section 80-IA refers to the enterprise. By reading of the section, it is clear that the enterprises carrying on development of infrastructure 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 80-IA(4) and not any other person like individual, HUF, firm etc. [Para 26] According to sub-clause (a ), clause ([) of sub-section (4) of section 8....
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....Hem as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to he done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of the such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Government 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 regul....
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....ity of the developer; otherwise, the Parliament would have simply reversed {he amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the lax holiday to the entities who do mere works contract or sub-contract as distinct from the developer. This is clear from the express intention 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 80-IA is available to developers who undertakes entrepreneurial and investment risk and no! to the contractors, who undertake only business risk. Without any doubt, the assessee clearly demonstrated that it has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources. After the amendment section 80-IA(4) is read as (\) developing or (\\) operating and maintaining or (\\\) developing, operating and maintaining any infrast....
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....er. The authorities took the view that unless operation of the infrastructure facility was also undertaken, the assessee would not be eligible for deduction. On appeal Held -I Ownership of infrastructure facility not required for deduction under section 80-IA * The provisions of section 80-1 A(4) when introduced afresh by the Finance Act, 1999, the provisions under section 80-IA(4A) were deleted from the Act. The deductions available for any enterprise earlier under section 80-1A(4A) are also made available under section 80-IA(4) itself. Further, the very fact that the Legislature mentioned the words (/') 'developing' or (//) 'operating and maintaining1 or (/;'/') 'developing, operating and maintaining1 clearly indicated that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income-tax Act. Where an assessee incurres expenditure for purchase of materials himself and executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, an assessee, who enters into a contr....
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....e 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; construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work; it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in p....
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....s a contractor. [Para 34] * Section 80-IA intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intends to grant the incentives to such entities. * The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80-IA, which ultimately culminated into amendment under section 80-IA in the Finance Act, 2001. to give effect to the circulars issued by the CBDT. lo avoid misuse of the aforesaid amendment, an Explanation was inserted in section 80-IA in the Finance Act 2007 and 2009. to clarify that mere works contract would not be eligible for deductions under section 80-IA. 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 do 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....
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....ec.80IA sub-sec.(4) of the Act, we are of the considered view that assessee is not merely a contractor but a developer looking to the scope of activities undertaken by it for the completion of the project and, therefore, eligible for deduction u/s 80IA of the Act. We therefore, find no reason to interfere with the order of ld. CIT(A) and uphold the same. The ground raised by the Revenue is dismissed. The appeal of Revenue is dismissed. 30. In appeal in ITA No.733/Ahd/2013 and ITA No. 935/Ahd/2013 for Asst. Years 2008-09 and 2009-10 Revenue has raised similar issue against the orders of ld. CIT(A) for allowing Rs. Rs. 35,26,005/- and Rs. 52,26,225/- respectively. 31. As the issue is similar to that which we have adjudicated for Asst. Year 2007-08. We apply the same decision to these appeals and we find no reason to interfere with the orders of ld. CIT(A), we uphold the same. Accordingly, the appeals filed by the Revenue are dismissed for Asst. Year 2008-09 and Asst. Year 2009-10. 32. For Asst. Year 2007-08 assessee has filed Cross Objection No.30/Ahd/2011 in ITA No.250/Ahd/2011 against the confirmation of disallowance of business loss of Rs. 17,77,540/- holding as trading l....
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....nce given by the appellant for obtaining project is held to be in the normal course of business and such losses are revenue in nature. However for allowing such loss, other condition is that it should be proved as loss. Appellant has not submitted evidence to prove that the loss is final and there is no scope of recovery. It is not a claim of bad debts where mere writing off is sufficient. For claiming loss under section 28, onus is on the appellant to prove that it is final. Since appellant has not proved the loss, the same Is not allowable In this year. However if appellant is able to prove the loss in any future year, the same will be allowable in that year as business loss under section 28. 33. Now Cross Objection has been filed by the assessee. 34. Ld. AR at the outset requested that ld. CIT(A) has sustained the disallowance for the very reason that assessee has been unable to prove the loss by not submitting any evidence. Ld. AR made a request that if the matter is set aside to the Assessing Officer for examining this issue necessary evidence will be placed for verification before ld. Assessing Officer towards justification of the claim that the impugned amount of....
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..../Ahd/2013 (Assessee's appeal) for Asst. Year 2009-10 Grounds of appeal - 1. The Id. Commissioner of Income Tax (Appeals): VI, Ahmedabad [hereinafter referred to as CIT(A)] has grievously erred in law and on facts in issuing direction to exclude interest earned on bank FDR, which were placed in terms of contracts awarded through tenders, from the profits derived from projects eligible u/s. 80IA (para: 3.4 page: 11 of the appellate order). 2. The Id. CIT(A) has grievously erred in law and on facts in confirming the disallowance of Rs. 3,21,458/- (the correct amount is Rs. 3,19,458/-) u/s. 2(24)(x) r.w.s. 36(1)(va) although Rs. 2,02,010/- has been paid during the relevant previous year and Rs. 1,17,448/- has been paid before the due date of filing of return of income u/s. 139(1) of the Income Tax Act. 3. The Appellant company craves leave to add to, alter, amend, modify, substitute any of the ground as and when the occasion may arise. 38. Ground No.1 is common in these two appeals of assessee against the orders of ld. CIT(A) for not allowing deduction u/s 80IA of the Act towards interest earned on bank FDRs. Ld. AR did not press this common ground in both these appeals ....