TaxTMI 
TaxTMI 
2017 (1) TMI 1200
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....m made by the assessee by a sum of Rs. 2,78,385/- for the following reasons :- "From the computation of total income it is seen that the assessee company has claimed deduction of Rs. 1,49,16,548/- u/s 80IA(4) of the IT,Act,1961 in support of which Form No.10CCB has been submitted. From Form No.l0CCB it is seen that in computing profit from the eligible unit to compute deduction u/s 80IA the proportionate head office expenses of Rs. 2,78,385/-has not been deducted from the construction charges received to arrive at profit from eligible business. Therefore, profit by the identical amount has been inflated and thereby excess deduction of the amount has been claimed. The actual profit earned from the eligible unit will be as under :- Particulars Amount (in Rs.) Amount (in Rs.) Income Construciton charges received 4,78,91,401 Expenditure As claimed 2,59,69,851 Add: Proportionate Head Office expenses as discussed above. 2,78,385 2,62,48,236 Profit before depreciation 2,16,43,165 Depreciation 70,05,002 Profit after depreciation 1,46,38,163 &....
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....warded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1)." The above Explanation was substituted by the Finance (No.2) Act, 2009, w.r.e.f 1-4- 2000. 6. Prior to its substitution, Explanation, as inserted by the Finance Act, 2007, w.r.e.f 1- 4-2000, read as under: "Explanation - For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contact entered into with the undertaking or enterprise, as the case may be." 7. In the case of M/s. B.T. Patil & Sons Belgaum Construction Private Limited vs. The Asst. Commissioner of Income-tax, Circle-2, Kolhapur, (Lager bench of ITAT, Mumbai, October,2009) ITA Nos. 1408&1409/PN/2003, it was held that Section 80- IA(4) (even pre-amendment) applies only to a "developer". The difference between a "developer" and "contractor" is that the former designs and conceives new projects while the latter executes the same. 8. According to the CIT, since the assessee was merely executing the job of civil construction, it was not eligible u/s. 80-IA(4). The CIT was of the further view that....
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....ly culminate in an order u/s.263 of the Act. It was further submitted by him that the only reason by the CIT in the impugned order for invoking the powers of section 263 of the Act is the decision of the Hon'ble Pune Bench in the case of M/.s. B.T.Patil & Sons and the retrospective amendment to section 80IA of the Act. It was submitted by him that in the decision rendered by the Pune Bench of the Tribunal in the case of M/s. B.T.Patil & Sons (supra) it was held that there is a difference between the developer and the contractor and that a person who merely executes the job of civil construction does not design or concieve new projects and he only executes the job of civil construction and was therefore eligible for deduction u/s 80IA(4) of the Act. The ld. Counsel for the assessee brought to our notice that the aforesaid decision of the Pune Bench of the Tribunal was a decision rendered by a third member owing to difference of opinion on the issue of deduction u/s.80IA(4)(i) of the Act between the members of the Division Bench which heard the issue. After decision of the third member the appeal was posted for hearing before the divisional bench for passing an order giving effect to....
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....ssible of compliance. The Explanation below 80-IA (13) inserted by FA 2007 & 2009 w.r.e.f 1.4.2000 which provides that s. 80-IA(4) shall not apply to a person executing a "works contract" does not apply to a case where the assessee executes the work by shouldering Investment & technical risk by employing team of technically & administratively qualified persons and it is liable for liquidated damages if failed to fulfill the obligation laid down in the agreement and also securing by Bank guarantee. On facts, the assessee had shouldered the investment & technical risk in respect of the work executed and it was liable for liquidated damages if failed to fulfill the obligation laid down in the agreement. The liability which had been assumed by the assessee were obligations involving the development of an infrastructure facility. Consequently, it is not correct to say that the assessee is merely a contractor & not a developer. The assessee is eligible for benefit u/s 80-1A even if only part of the Infrastructural Project work is executed by it. 13. The ld. Counsel submitted that a reading of the aforesaid order of the Hon'ble Division Bench of the Tribunal in the case of M/S.B.T.Pati....
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.... so, his order was erroneous and prejudicial to the interest of the revenue and was amenable for revision u/s.263 of the Act as an order erroneous and prejudicial to the interest of the revenue. According to him whatever be the law on the issue, this basis analysis ought to have been done by the AO while allowing the claim of the Assessee u/s.80IA(4)(i) of the Act. It was submitted by him that in the absence of reference to the terms of the contract, the revenue from which was claimed as exempt u/s.80IA(4)(i) of the Act, by the AO in the order of assessment, jurisdiction u/s.263 of the Act was rightly invoked by the CIT. He therefore supported the order of the CIT. 15. We have given a very careful consideration to the rival submissions. Sec.80IA(4)(i) of the Act which allows deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc., reads as follows: "80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there s....
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.... sanitation and sewerage system or solid waste management system; (d) a port , airport, inland waterway, inland port or navigational channel in the sea; ..................... 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 subsection (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1)." 16. The aforesaid Explanation to Sec.80IA of the Act was Substituted by the Finance (No.2) Act, 2009, w.r.e.f. 1-4-2000. Prior to its substitution, Explanation, as inserted by The Finance Act, 2007, w.r.e.f. 1-4-2000, read as under : " Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be." 17. The provisions of Section 80IA (4) of the Act were introduced by the Finance Act, 1999, in substitution to the provisions of 80IA (4A) of the Act which were deleted from the Act. ....
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....ce u/s.263 of the Act. 19. The CIT in the impugned order has heavily relied on the decision of the Third Member in the case of M/S.B.T.Patil & Sons (supra) and raised doubts as to whether the Assessee can be regarded as a developer or person carrying out works contract. As rightly pointed out by the learned counsel for the Assessee, the tests laid down in the decision of the larger Bench of ITAT, Mumbai in the case of B.T.Patil & Sons (supra) with regard to whether the person claiming deduction u/s.80IA(4)(i) of the Act should be owner of the infrastructure facility and that any person carrying out infrastructure development under a contract with Government would be considered as falling within Explanation to Sec.80IA of the Act was itself not good law in view of the subsequent decision of the Hon'ble Bombay High Court in the case of ABG Heavy Industries (supra) and the order of the Division bench giving effect to the decision of the Third Member in the case of B.T.Patil & Sons (supra). 20. The CIT has also observed in his order that the Assessee was not owner of the infrastructure facility. The expression "owned" in sub- clause (a) of clause (1) of sub section (4) of Section....