TaxTMI 
TaxTMI 
2017 (11) TMI 242
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....for both these assessment years. After perusing the affidavit filed by the Revenue explaining the delay, we condone the delay and admit these appeal. 4. Facts in brief:- The assessee is a company and is engaged in the business of Ground Engineering, Civil & Structural works, building of power plants, construction of roads and highways etc. and trading in goods. For the Assessment Year 2005- 06, the assessee filed its return of income on 30/10/2005, declaring 'Nil' income, wherein a deduction has been claimed u/s 80-IA of the Act. For the Assessment Year 2006-07, the assessee declared total income of Rs. 28,57,87,330/-, after claiming deduction of Rs. 12,29,72,673/-. The Assessing Officer, for the Assessment Year 2005-06, partly allowed the claim of the assesse for deduction u/s 80-IA of the Act and for Assessment Year 2006- 07, the entire claim of deduction made by the assessee u/s 80-IA of the Act, was disallowed. Aggrieved, the Revenue carried the matter in appeal. 5. The ld. First Appellate Authority, allowed both the appeals by stating that the issue is covered in favour of the assessee by following the order of his predecessor in the assessee's own case for the Assess....
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.... not is speaking order, and hence the same cannot be upheld. 8.1. Coming to each of these projects, he submitted that a launchpad built for GS LV Mark III facilities of Satish Dhawan Space Centre SHAR at Sriharikota, Andhra Pradesh, cannot be considered as an airport and the assessee was trying to expand the definition of the term 'airport' by importing the meanings from various dictionaries and claiming deductions. He submitted that launchpad cannot be considered as an airport. 8.2. On the issue of development of a Jetty at the Naval Base at Visakhapatnam, he argued that this is the defence facility and cannot be considered as an infrastructural facility as defined in the explanation to sub Section 4 of Section 80IA of the Act. 8.3. On the development of a bus terminal complex for Karnataka State Transport Corporation at Bangalore, he submitted that only if the assessee was executing a highway project, then only as a part of this project of development of the bus terminal complex can be considered as an infrastructure. He submitted that as the bus terminal complex is a standalone project, it does not fall within the ken to section 80IA(4) of the Act. 8.4. Coming to the....
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....ransport Corporation at Bangalore, he submitted that CBDT has notified that even multilevel computerised car parking is an infrastructural facility. He submitted it is an error on the part of the revenue to argue that a bus terminal complex would be an infrastructural facility only if the highway construction is also executed by the assessee. 9.3. On the works undertaken for Kundankulam Nuclear Power Project, submitted that the assessee has not pressed for deduction on the profits earned on this project. 9.4. For the Assessment Year 2006-07, he submitted that the issue is no more res integra , as the AO has himself granted deduction on various projects undertaken by the assessee for the Assessment Year 2005-06 and as the Jurisdictional Tribunal for the earlier Assessment Years, upheld the claim of the assessee. On a query from the Bench, as to whether each and every infrastructural project has been examined by the Assessing Officer, he drew the attention of the Bench to pages 2 to 4 of the Assessment Order, and submitted that the Assessing Officer has not given any finding against the assessee on this issue. As regards Assessment Year 2005-06, he contended that each of the pr....
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....Airport and hence the claim regarding nature of infrastructure facility was contradictory. He further alleged that Launch Pad is not an Airport. He, therefore, held that the profit from the above project is not allowable as deduction u/s 801A of the Act. 9.3.3 In this respect, attention is drawn to the meaning of the words 'Airport' and 'Launch Pad': Airport means a complex from where air going vehicles take off from the ground. The Collins Essential English Dictionary defines 'Airport' as:" a landing and taking-off areas for civil aircraft, with facilities for aircraft maintenance and passenger arrival and departure Airport has also been defined as an airfield equipped with control tower and hangars as well as accommodations for passengers and cargo. The American Heritage Dictionary of the English Language defines 'Launch Pad' as: i: The base or platform from which a rocket or space vehicle is Iaunched. ii: A foundation or starting point. The Collins Essential English Dictionary defines 'Launch Pad' as : A platform from which a spacecraft, rocket, or missile is launched 9.3.4 Pl....
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....rent or tide or to protect a harbour or shoreline from storms or erosion. 2. A wharf. Collins Essential Dictionary defines jetty as 1. a landing pier or dock 2. a structure built from a shore out into the water to protect a harbour As per Thesaurus, jetty means a protective structure of stone or concrete; extends from shore into the water to prevent a beach from washing away Kernermn English Learner's Dictionary defines jetty as a small pier for use as a landing-place 1. A port is a. A place on a waterway with facilities for loading and unloading ships. b. The waterfront district of a city. 2. A place along a coast that gives ships and boats protection from storms and rough water' a harbour. 9.4.3 From the above definitions, it is seen that a port is a harbour and a jetty is a structure that projects into a body of water to protect a harbor or shoreline from storms or erosion. Thus, it cannot be denied that a jetty is a part of port. 9.4.4 It is not the case of the A.O. that the jetty is not a port. The contention of the AO. is that the jetty cannot be included under the head 'port' as it was d....
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....our satellite terminals planned in the city's peripheral areas. It will also reduce the load on the Kempe Gowda Bus Station by handling about 2,250 long- distance and city bus services. The Bangalore Metropolitan Transport Corporation (BMTC) buses will have space for operating its services from within the terminal. By stopping many inter-State buses such as those 99in9 towards Kerala at Mysore Road, traffic congestion will also be reduced within the city. For Southbound passengers to places such as Mysore, Madikeri and Kerala, it will become easy because shuttle bus services are also to be operated from the suburbs. The project is no doubt a part of a highway project and falls within the purview of clause (b) of the Explanation to sub-section (4) of section 80lA of the Act. The contention of the Assessing Officer that it cannot be included under the head 'highway project' nor does it form the integral part of any highway project which the assessee has developed, thus cannot be accepted, 9.5.4 Further, the A.O. has also stated that the said infrastructure facility cannot be included under the head 'road' as Bus Terminal is not a road or its exte....
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....t, made the assessee on 9 projects. Even otherwise, the issue is adjudicated in favour of the assessee by the Coordinate Bench of the Tribunal in the assessee's own case for Assessment Year 2010-11. Hence we dismiss this argument of the ld. D/R as devoid of merit. 14. In the result, the appeal of the assessee is allowed for statistical purposes. 15. Now we deal with the appeal of the Revenue for the Assessment Year 2006-07. 16. Ground No. 1, is against the deletion of the disallowance made by the assessing officer on a claim of deduction u/s 80IA of the Act. The assessing officer in his order, was of the view that the assessee is a contractor and not a developer. At paragraph 1.46 and 1.47, he held as follows 17. The ld. CIT(A), followed the decision of his predecessor in the assessee's own case for the earlier assessment year and granted relief. The order of the ld. CIT(A), for the earlier assessment year 2007-08 & 2010-11 (supra) has been upheld by the Kolkata 'B' Bench of the Tribunal in ITA No. 1840/Kol/2014 for the Assessment Year 2010-11, order dt. 30/06/2017. The Tribunal in turn followed on the decision of the assessee's own case in ITA No. 2168/Kol/2013, Order ....
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....i) the company engages itself in any of the following activities: (a) Development of infrastructure facility (b) Operation and maintenance of infrastructure facility (c) Development, operation and maintenance of infrastructure facility 6.2 Now the assessee in the given case is a company which, pursuant to agreements with various Government bodies, engaged itself in the development of infrastructure facility as defined in the Explanation to sub section 4 of section 80-IA . These set of facts have not been disputed by the AO. The Ld. AO disallowed the claim on the ground that the assessee has challenged the provisions of explanation to section 80IA of the Act to the Hon'ble High Court and the Court has restrained to enforce the demand that may be raised in pursuance to the explanation to section 80IA of the Act. There is no direction to keep the assessment proceedings under abeyance. The AO treated the assessee as a mere works contractor conducting mere civil construction and hence as per the explanation to section 80- IA(13), the deduction is not available to him. However on examination of the records we find that the assessee has withdrawn th....
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....cts involving mere labour of the contractor are included in the purview of "works contract". Further, attention is invited to the judgment of the Supreme Court in case of Associated Cement Co. Ltd. vs. CIT [201 ITR 435], wherein the Hon'ble Court while interpreting the term 'work' u/s 194C held that "Words'any work' in sub-s. (1) of s. 194C means any work including supply of labour to carry out work and is not intended to be confined to or restricted to works contract, therefore, a person who credits to the account of or pays to a contractor any sum payable on behalf of organizations specified in s. 194C(1) for carrying out any work (including supply of labour for carrying out any work) is liable to deduct income-tax as required under that sub-section. The words in the sub-sections (1) of 194C 'on income comprised therein' appearing immediately after the words 'deduct an amount equal to two per cent of such sum as income-tax' from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract, but deduction is to be made out of paymen....
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....erson who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work, i.e., carries out the civil construction work he will be eligible for tax benefit under section 80- IA of the Act. In contrast to this, a person who enters into a contract with another person (i.e., undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for tax benefit under section 80- IA. This amendment will take retrospective effect from 1st April 2000 and will accordingly apply in relation to the assessment year 2000-01 and subsequent years. The Explanatory Memorandum clearly lays out that purpose of extending tax benefit u/s 80-IA was to encourage investments from the private sector and hence work contracts, i.e. contracts involving merely labour (or mere execution of construction without making investments) are outside the purview of the provisions of section 80-1A. Thus, the term "works contract" used in Explanation to section 80-IA(l3) means a contract of developing infrastructure by merely employing labour and mak....
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....izes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. 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 regular traffic. Therefore, it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18- 05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The department is n....
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..... Ltd. vs DCIT, Circle-3(2) in ITA No.1008-09/Hyd/2013 for AYs 2009-10 & 2010-11 dated 25.10.2013 held that "The next reason given by the CIT(A) is with regard to non- financial participation by the assessee, as the assessee has got mobilization advance. The mobilization advance has not been given freely. It has been given only after the assessee furnished a bank guarantee, and the bank guarantee has been given by the bank only after getting enough security from the assessee, to protect itself from any risk on account of any default on the part of the assessee. The assessee has taken financial assistance from bank and paid huge interest of Rs. 2,87,10,943.00 for assessment year 2009-10 and of Rs. 9,35,78,373.00 for assessment year 2010-11, as seen from the Profit and Loss Account of the assessee for the relevant years ending on 31.3.2009 and 31.3.2010 respectively, copies of which are furnished by the assessee at pages 20 and 65 of the paper-book. Similarly, assessee has invested its own fund of Rs. 5,55,00,000.00 for assessment year 2009-10 and of Rs. 7,86,75,710.00 for the assessment year 2010-11, as seen from the Balance Sheet of the assessee as on 31.3.2009 and 31.3.2010 respec....
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....es the existence of an agreement with the Government. Moreover, if section 80-IA grants deduction on profits from the activity of development carried out in pursuance of an agreement with the Government it presupposes that assessee will earn some profits from mere development (without operating and maintaining) of the infrastructure facility. Now the relevant question that arises here is that how would an assessee engaged in mere developmental activity (and no operation) pursuant to an agreement with the Government earn profits ? The obvious answer is that the assessee will recover its cost of development from the Government otherwise the entire cost of development will be a loss in its hands. Thus, if deduction u/s 80-IA is denied on the ground that the assessee had received payments from Government, then an assessee who is only a "developer" (and not an operator) will never be entitled to deduction u/s 80-IA, which is clearly not the intention of legislature as discussed by the Bombay High Court in case of ABG Heavy Industries Ltd. Thus, merely because the assessee was paid by the Government for development work it cannot be denied deduction under section 80-IA(4). The c....
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....lly the cost would be paid by the Government. Therefore, merely because the transferee has paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation canvassed by the Revenue authorities is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under s. 80-IA(4), which is not the intention of the law. If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. When the legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction, it presupposes that there can be income to developer, i.e., to the person who is carrying on the activity of only developing infrastructure facility. Obvious as it is, a developer would have income only if he is paid for development of infrastructure facility, for the simple reason that he is not having the right/authorisation to operate the infras....
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....ssee is referred to as 'contractor' in the agreement for development of infrastructure facility or some basic specifications are laid down, would not debar the assessee from claiming deduction under s. 80-IA(4)." If a person who only develops the infrastructure facility was not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he was not operating the infrastructure facility. Merely because the assessee was paid by the Government for development work it could not be denied deduction under section 80-IA(4). The Chennai Bench of Tribunal in case of R.R. Constructions, Chennai vs. Department of Income tax held that "When an assessee is only developing an infrastructure facility project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person, who develops the infrastructure facility project, realize its cost? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee had paid for the development of infrastr....
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.... entrepreneurial and investment risk. In this regard, the AO has observed that the assessee is executing the contract against predetermined revenue w.r.t the above, it is submitted that under the impugned contracts, the assessee was merely carrying out the civil construction work. It was responsible for overall development of the infrastructure facility. It was merely provided with the site which it had to develop into an infrastructural facility by deploying his resources i.e. material, plant & machinery, labour, supervisors etc. It was responsible for any damage/loss caused to any property or life in course of execution of the works. It was even responsible for remedying of the defects in the works at its cost. It was also required to operate and maintain the infrastructure facility. Hence, it cannot be said that the contract with the Government was to carry out mere civil construction. Attention in this regard is invited to the following: (i) The ITAT (Ahmedabad) in case of Sugam Construction (P) Ltd. vs. ITO [56 SOT 45] held that "It is also gathered (a) That a developer is a person who undertakes the responsibility to develop a project. (b) That a developer is therefo....
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....urial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before the court that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources." Thus, the fact that the assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the assessee vide the agreements has clearly demonstrated the various risks undertaken by it. The assessee was to furnish a security deposit to the Employer and indemnify the employer of any losses/damage caused to any property/life in course of execution of works. Further, it was responsible for the correction of defects arising in the works at it cost. Thus, it cannot be said that the assessee had not undertaken any risk. The ITAT (Hyderabad] in case of Siva Swathi Construction (P) Ltd. (supra) held that "Further reason given by the ld. CIT(A) for denying deduction under S.80IA to the assessee is that the assessee has not undertaken any ris....
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....d." 18. Respectfully following the same, we uphold the order of the ld. CIT(A), on this issue. 18.1. We find that the assessing officer, in this case has passed an order for the impugned Assessment Year, seven days after passing the assessment order for the Assessment Year 2005-06. The Assessing Officer had allowed the claim for deduction of the assessee on 9 projects in that year. A similar disallowance was not made for the Assessment Year 2005-06. No fault was found by the Assessing Officer on any of the projects while noting down the details of each of the seven projects undertaken by the assessee during the year. No adverse inference has been drawn on any of these seven projects that they do not qualify to be infrastructural facilities in terms of section 80 IA(4) of the Act. Under these circumstances, we are of the considered opinion that the submissions of the ld. DR, that the issue should be restored to the file of the assessing officer for examining the eligibility of each project is devoid of merit. Hence we reject the same 19. In the result, Ground No. 1 of the revenue is dismissed. 20. Ground No. 2, is against the deletion of a disallowance by the ld. CIT(A) ....