TaxTMI 
TaxTMI 
2017 (5) TMI 528
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....eesta Lower Dam project. 3. At the outset, the Ld. Counsel for the Assessee submits that the claim for deduction u/s 80IA(4) has been allowed by the Coordinate Bench of this Tribunal by sustaining the order of the Ld. CIT (Appeals) in ITA No.6605/Mum/2013 dated 18.11.2015 for the assessment year 2005-06 in the appeal proceedings against the assessment order passed u/s 143(3) of the Act. The Ld. Counsel referring to pg.37 to 40 of the order submits that the Assessee was held to be a developer and not a contractor and therefore eligible for deduction u/s 80IA(4) on the infrastructure facilities developed by the Assessee. Therefore, he requests that the same may be followed. 4. The Ld. DR placed reliance on the orders of the Assessing Officer. 5. We have heard the rival submissions, perused the orders of the authorities below and the decision of the Coordinate Bench in ITA No.6605/Mum/2013 dated 18.11.2015 and find that the Tribunal held that the Assessee is a developer, entitled for deduction u/s 80IA(4) in respect of the project. While holding so, it was observed as under : "6. Rival contentions have been heard and record perused. The Revenue has challenged the decision ....
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....ver, the Koyna project has also been held to be eligible for deduction in B.T. Patil& Sons Belgaum Construction Pvt. Ltd. After analyzing the terms of the contract, the CIT(A) reiterated that for all the projects, based on the investment, financial and technical risks undertaken by the contractor, the assessee is a developer of the respective projects. As regards the issue whether, to be eligible for deduction, the assessee has to develop the entire infrastructure facility and not only a part thereof, the CIT(A) relied on the CBDT circular no. 4/2010, the decisions of the ITAT in the assessee's own case, B.T. Patil& Sons Belgaum Construction Ltd. 34 Taxmann.com 97 and the Honbie Bombay High Court in ABG Heavy Industries Ltd. 8. We also found that the CIT(A) has dealt in great detail the scope of the work, risk and responsibilities undertaken by the assessee and after applying the proposition of law laid down in the following decisions arrived at the conclusion that assessee was a developer and not only a contractor :- i) Patel Engineering Ltd. v. OCIT 94 ITO 411; ii) B.T. Patil & Sons Belgaum Constructions (P.) Ltd. v. ACIT, 34 taxmann.com 97; iii)....
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.... 10. We have heard the rival contentions. The issue has been considered and the disallowance made u/s 14A is deleted by the Coordinate Bench observing as under : "12. With regard to disallowance u/s.14A, it was observed by the NO that assessee has invested funds in joint ventures, the income from which does not form part of the total income. The A.O was therefore of the view that the proportionate interest allocable to such funds on pro-rata basis has to be disallowed, The assessee objected to the said proposal stating that no capital amount has been invested in the joint venture and that with regard to the partnership firm only Rs,25,000!- has been contributed towards capital which is out of own funds. It was also stated before the A.O that as regards the debit balance outstanding with them, the same are not in the nature of investment in capital but mainly due to the company's share of profit and machinery hire charges lying with them, which is already reflected as income in the P&L A/c. Without prejudice, it was further stated before the A.O that the current account transactions are carried out from bank where sale proceeds of the assessee are deposited and also that t....
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.... A.O under s. 14A of the Act. The disallowance on a sum of Rs. 88,69,9371- is deleted." 15. Ld. DR relied on the order of AO. On the other hand, the contention of Id. AR was that at the time of the hearing it was specifically pointed out to the A.O that the entire debit balance as shown above comprises of either amounts receivable by the appellant on account of hire charges of machinery from the JV or the appellant's share of profit in the JV firm. Factually it is stated that in Patel KNR JV, the debit balance of Rs. 9,01,67,275 as on 31 .3.2005, comprises of machinery hire charges received / receivable of Rs. 10,01,60,225 by the assessee from them and the share of profit of the appellant in the said JV aggregates to Rs. 8,24,05,845; both, together, aggregating to Rs.l0,25,66,070. Hence the debit balance the said JV is not on account of any funds invested by the assessee in such JV, In KNR Patel JV the debit balance of Rs. 7,49,10,863 as on 31,3,2005, comprise solely of machinery hire charges received / receivable of Rs. 12,69,86,836 by the appellant from them and the share of profit of the assessee in the said JV aggregates to Rs. 6,32,94,249; both, together, aggregating to....
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....s in respect of the confirmation of the disallowance of claim for deduction u/s 80IA(4) of the Act in respect of Teesta Lower Dam Project. Referring to page 62 to 64 of the Order, the Ld. Counsel for the Assessee submits that the Coordinate Bench decided this issue in favour of the Assessee. 13. The Ld. DR placed reliance on the assessment order. 14. This aspect of the matter has been considered by the Coordinate Bench and the Coordinate Bench following the decision of the ITAT Pune Bench in the case of Kirloskar Brothers Ltd. allowed the claim of the Assessee u/s 80IA(4) in respect to the Teesta Lower Dam project observing as under : 37. In Cross Objection, the assessee has taken a ground against denial of deduction u/s.801A(4) in respect of NHPC project. The AO declined the deduction in respect of profit from NHPC on the plea that NHPC is a Government of India Enterprise but that does not make it a Government of India or State. 38. Ld. AR placed reliance on the decisions of the Hon'ble Apex Court in Som Prakash Rekhi v. UOl &Anr. 19131, AIR 212 and Pradeep Kumar Biswas &Ors. v. Indian Institute of Chemical which have been referred to in the decision of the Honbie ....
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....] any infrastructure facility which fulfils all the following conditions, namely (a) it is owned by a company registered in India or by a consortium of such companies [or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;] [(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;] (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter 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 G....
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....) of sub-section (4) of section 801A of the Act prescribes that the enterprise referred therein shall fulfill the conditions prescribed by way of sub-clauses (a), (b) and (c). In terms of sub-clause (a), it is provided that enterprise carrying on the eligible business should be owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. Sub- clause (b) provides that the enterprise carrying on the eligible business should have entered into an agreement with the Central Government or State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. Sub-clause (c) prescribes that the enterprise should start operating and maintaining the infrastructure facility on or after the 1st day of April, 1995. Ostensibly, the aforesaid three conditions are required to be fulfilled before an enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any in....
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....g Scheme and thus the mandatory condition prescribed in section 801A (4)(i)(b) of the Act has not been complied with. 11. Per contra, the learned counsel for the assessee has vehemently reiterated the position of the assessee taken before the lower authorities to the effect that the contract with SSNNL fulfills the condition prescribed in section 801A(4)(i)(b) of the Act. The arguments of the assessee are two-fold. Firstly, it has referred to the judgements of the Hon'ble Supreme Court in the case of (i) Som Prakash Rekhi vs. Union of India & Anr., 1981 AIR 212; and, (ii) Pradeep Kumar Biswas & Ors. vs. Indian Institute of Chemical dated 06.04.2002, copies of which have been placed on record. On the basis of the aforesaid judgements, it is canvassed that an entity, like SSNNL, is liable to be considered as an instrumentality or an agency of the Government, and thus, it qualifies to an entity specified in section 801A(4)(i) of the Act. Secondly, it is sought to be made out that having regard to the background and peculiar features of SSNNL, the said concern is executing Governmental functions and is not engaged in any commercial activities. A reference has also been mad....
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....power houses are to be carried out under supervision of the Sardar Sarovar Construction Advisory Committee set up by the Central Government pursuant to the decision of the Narmada Water Disputes Tribunal. The directions that may be issued by the Narmada Control Authority and the Review Committee appointed by the Central Government pursuant to the decision of the Narmada Water Disputes Tribunal are also required to be complied by SSNNL. 13. The other objects, inter-a/ia, include undertaking resettlement and rehabilitation of the population affected by the Sardar Sarovar project; to construct, operate and maintain hydro power generation stations along with canal system, transmission lines, etc.. The objects also include promoting schemes in the State of Gujarat for flood control in the Narmada river basin and schemes for irrigation and water supply in the State for utilization of water from Sardar Sarovar. In sum and substance, the objects to be pursued by SSNNL are pre-dominantly functions which are ordinarily performed by Government. 14. On this point, we may refer to the decision of the Ahmedabad Bench of the Tribunal in the case of JCIT vs. Sardar Sarovar Narmad....
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....ions of a State. 17. At this point, we may refer to the judgement of the Hon'ble Supreme Court in the case of Som Prakash Rekhi (supra). In the said case, dispute was between Burmah Shell, a company under the Companies Act, 1956, and one of its former employees. The company MIs Burmah Shell was acquired by Government of India and later it was known as Bharat Petroleum. A Writ Petition was filed by the employee against Bharat Petroleum. A preliminarily objection arose as to whether the Writ Petition was maintainable against MIs Bharat Petroleum as it was neither a statutory corporation and nor a Government department. The Court examined whether it was a State within the meaning of Article 12 of the Constitution of India. The Hon 'ble Supreme Court laid down certain tests in this context and the relevant portion of the Head notes of judgement is as under:- "2. Some of the tests laid down by this Court for deciding whether a body is State within the meaning of Article 12 are: (I) If the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of the G....
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....financial support is received from the State. In our considered opinion, the said test is fulfilled in the case of SSNNL as per the detailed discussion made by the Ahmedabad Bench of the Tribunal in the case of Sardar Sarovar Narmada Nigam Ltd.. Moreover, the Memorandum of Association and Articles of Association of SSNNL clearly establish that the said concern is operating under superintendence and direction of the Government of Gujarat. It has also been pointed out before us that the Directors of the SSNNL are drawn from the officials of the Government of Gujarat. The next test is the existence of deep and pervasive State control. In this context emerges that the Board of Directors of SSNNL are appointed by the Gujarat Government and it consists of the Government employees of the rank of Secretary/Additional Secretaries. The next test is whether the corporation enjoys monopoly status which is otherwise conferred on a State. The objects to be pursued by the SSNNL, the powers conferred on it, as revealed by the Memorandum of Association clearly suggest that SSNNL is in the activity of executing, operating and maintaining the Sardar Sarovar project comprising of a dam across river Na....
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....cable in the case of SSNNL, and it is to be understood as an entity specified in section 801A(4)(i)(b) of the Act. 21. The C/T(A) and the learned Departmental Representative appearing for the Revenue has relied on the judgement of the Hon'b/e Supreme Court in the case of Steel Authority of India Ltd. (supra) and that of Heavy Engineering Mazdoor Union (supra) to say that entities such like SSNNL cannot be considered as statutory bodies even though the entire share capital is owned by the Government of India. We have considered the said judgements and find that the ratio decided therein has no relevance to the issue in dispute before us. In the case of Steel Authority of India Ltd. (supra), dispute related to certain commercial transactions between a private company and SAIL and no issue arose as to whether Steel Authority of India Ltd. was special purpose vehicle carrying out State functions or not. It may also be important to note that Steel Authority of India Ltd. is in the business of sale and manufacturing of steel which perhaps cannot be looked upon as a State monopoly function as distinct from the activities of SSNNL, which is the subject-matter for consideration....
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....ology and development of new technology done by assessee was without any mandate or requirements from SSNNL, but it was done by the assessee while executing its scope of work awarded by SSNNL. Detailed submissions have been made by the assessee before the lower authorities and the same is also placed in the Paper Book filed before us, including other material in the form of contract with SSNNL, communications with Government of Gujarat and SSNNL, etc to justify that assessee was not merely acting as a contractor. 26. Having regard to the scope of work executed by the assessee, it is difficult to comprehended that assessee was merely acting as a contractor. In common parlance, a contractor is understood as a person who carries out the assigned work as per the directions given by the contractee. In the present case, the assessee has used own-developed technology and its own resources to conceptualize, design, erect, commission, test and operate the 'Saurashtra Branch Canal Pumping Scheme'. Therefore, in our view, assessee is to be understood as a 'developer', and distinct from a 'contractor' qua the impugned contract awarded by SSNNL. The Chennai Benc....
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....he project executed for SSNNL is self-contradictory. 28. Before us, the aforesaid assertions of the assessee have not been assailed by the learned Departmental Representative. Be that as it may, in our view, having regard to the aforesaid discussion, assessee cannot be treated as a contractor for the work assigned by SSNNL and it is to be understood as a 'developer' within the meaning of section 80IA(4) of the Act. 29. Another objection taken by the Revenue is that assessee only constructed/developed the infrastructure facility but did not operate the same. This aspect of the controversy has been clearly answered by the Hon'ble Bombay High Court in the case of ABC Heavy Industries Ltd. (supra). Even an enterprise which is engaged only in development of an infrastructure facility has also been held to be eligible for section 801A benefits. Therefore, the said objection of the Revenue is not justified. In any case, it has also been pointed out before us that assessee has operated the infrastructure facility for a period of two years. Be that as it may, we find no justification in the aforesaid objection, which is dismissed. 30. It is also a plea....
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....Enterprises circulars. We also found that entire share capital of NHPC is owned by the President of India and is a Schedule "A" enterprise and is top ten companies in terms of investment. On incorporation, NHPC took over the execution of various projects from Central Hydroelectric Projects Control Board, a government authority. Resources are earmarked for NHPC in the budgetary allocations of the India budget, more particularly for Teesta Lower Dam project also. NHPC has signed a MOU whereby the commitments I assistance to be received by NHPC from the Government are enumerated. In the Ministry of Power, Government of India work allocation is made for NHPC, including in respect of Jammu & Kashmir; co-ordination, forwarding of returns to Prime Minister's office, Ministry of Home Affairs and other Departments, concerning power issues of J & K. in sum and substance, the objects to be pursued are ordinarily performed by Government Thus, assessee's contract with NHPC fulfills the condition prescribed in section 801A(4)(i)(b) of the Act as it performs functions akin to state. 41. Applying the text laid down by the Hon'ble Supreme Court in the case of Som Prakash Rekhi (supra....
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.... 14579381 1391424 13187956 Santacruz Chembur Link Road 59790181 2888979 515800 2373179 Ghatghar 919755893 45517800 8040559 37477241 Teesta Lowe Dam 1690878716 13587488 1458613 12128875 Kalwakurti Lift Irrigation Project 17820000 6347004 153730 6193274 Mutp 272327784 6864474 2349325 4515150 Srisailam Weir work 214195365 19386170 1847827 17538343 Total 19,91,57,768 9.2 The appellant contends that no such reallocation of expenditure is called for since the activities of the US branch is to monitor the global trends in the infrastructure industry regarding technology etc. and that the Panvel Workshop is used for storing new machinery till they are dispatched to the sites and for repairs and services. It is pointed out that since the expenditure with regard to the US branch has no bearing/ nexus with eligible infrastructure project, it is not a cost center. The expenses incurred on the Panvel workshop has no bearing/ nexus with the eligible infrastructure project, it/s not a cost center. In view of the above, it/s requested that the allocation of such expenditure t....
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....llocation of expenses and in reduction of 801A deduction. 26. It was contended by Id. AR that such reallocation of expenses is not required with reference to the Panvel workshop and the USA office as it has no bearing I nexus with the eligible infrastructure projects; whereas the USA branch monitors the emerging trends in the construction industry, the Panvel workshop is used for storage and repairs of equipments. As per Id. AR for computing the "profits and gains of business derived from the eligible infrastructure facility (project), all expenses directly incurred on the project only need to be reduced to calculate its profits and gains. It is trite that "income" results when expenses are reduced from the revenues. The courts have held that the term "income derived from" is narrower than "income attributable to" and accordingly it is submitted that the expenses incurred at the USA branch and the Panvel workshop cannot be reduced while computing "income derived from" the project though such expenses may be attributable to the infrastructure facility. Reliance was placed on the decision of the coordinate bench of the Tribunal in DCW Ltd. v. Additional CIT 37 SOT 322 (Mum), where....
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....advances. The Ld. Counsel submits that this issue is also decided by the Tribunal in its order at page nos. 50 to 52 in paras 31 to 33. 22. The Ld. DR placed reliance on the assessment order. 23. We have heard the rival submissions and find that in respect of advances received, the Tribunal directed the Assessing Officer to grant credit for TDS in the year of deduction itself observing as under : "30. The AO did not allow credit of TDS in respect of advances received. 31. By the impugned order the CIT(A) confirmed the action of the AO after observing as under :- "11. 1 On a consideration of this ground no relief can be afforded to the appellant since credit for TDS will be granted as and when the income is offered to tax. The appellant requires credit of Rs. 2,73,73,1621/- deducted from the advances received. It has been pointed out by the A. 0 that TDS on advance have regularly been disallowed in the earlier years and the appellant is on further appeal. Consistent with the stand taken in earlier years the A.O has not allowed credit with respect to the TDS on advances. However,, the A.O has himself agreed that the corresponding income for TDS advances amounting....
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...., In ACIT v. Peddu Srinivas Rao ITA 324Nizag12009 mobilisation advance was received and on identical facts it was held that credit for such TDS should be given in the year of deduction of TDS itself. This decision was followed in Zelan Projects Pvt. Ltd. v. DCIT ITA 1361/Hyd/2013 fel::pBS-ee]. Similarly, in Arvind Murjani Brands (P.) Ltd.v, ITO 21 Taxmanncom 131 (Mum) E , it was held that where tax is deducted at source on an amount which is not at all chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in the year of receipt of amount, in which the tax was deducted at source. 33. In respect of advance against work and material, we found that the said advance is reflected as a reduction from construction work in progress, which itself is valued at contract rates i.e. selling price. In other words, the income pertaining to such advance is already impregnated in the work in progress offered for tax during the impugned year itself. The Tribunal in ACIT v.Patel KNR Joint Venture ITA 5230/Mum/2012, on identical facts, following Toyo Engineering Ltd., decided in favour of the assessee....