TaxTMI 
TaxTMI 
2017 (11) TMI 242
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....ng 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 Assessment Year 2010-11, in Appeal No. 850/II/12(2)/09-10....
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.... 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 development of turbine building, he supported the order of the Assessing Officer. 8.5. The ld. DR, made a sub....
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....n 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 project and the nature of work was examined by the Assessing Officer and no adverse inference was drawn that this is not an inf....
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....herefore, 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 Please note that a Heliport is an airport for helicopters. Similarly, a Launch pad is nothing but an airport for space crafts, rocket or missiles. In common parlance, the word airport means a platform....
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....arbour 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 developed at a 'naval Base' rather than a port. A bare perusal of the definition of infrastructure facility as envisaged in Section 801A(4) would show that the word 'port' is included therein without any further conditions in regard to its location. In this respect please ....
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....l. 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 extension. In this respect attention is drawn to the notification dated 13.7.2000 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes wherein the following was stated: 'In exercise of the powers conferred by the Explanation C (i) of section 10(23G) and explanation (a) t....
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..... 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 dt. 08/02/2017. The ITAT at para 8 & 9 of this order held as follows:- "6. We have heard rival contentions and perused the materials available on record. From the foregoing discussion we find that the provisions of Section 80-IA of the Act applies to the enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii....
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....ure 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 the appeal filed before the Hon'ble High Court. At this juncture attention in this regard is firstly invited to the provisions of the Explanation of Section 80-IA of the Act as produced below: "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 th....
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....ntract, 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 payments made to the contractor." 6.3 We see no reason to curtail or to cut down the meaning of the plain words used in the section. ''Any work" means any work and not a "works contract'', which has a special connotation in the tax law. Indeed in the sub- section the "work" referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of the Legislature that the "work" in the sub-section is not intended to be confined to or r....
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....l 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 making no investments. We also find support from the following judgments: The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs. ACIT (2012) 32 CCH 0296 HydTrib (2012) 51 SOT 0207 (Hyd) (URO). The relevant extract of the order is reproduced as under : "The next question to be answered is whether the assessee is a developer or mere works contractor. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. E....
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.... 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 not correct in holding that the assessee is a mere contractor of the work and not a developer." 6.4 It was also observed that "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 80IA of the Act is available to developers who undertakes entrepreneurial and inv....
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....lt 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 respectively, copies of which are furnished by the assessee at pages 21 and 66 of the paper-book. In this view of the matter, the reason given by the CIT(A) on this aspect for denying deduction to the assessee under S.80-IA is also not valid. Thus in light of the aforesaid decision of the Tribunal Hyderabad Bench, the contention of the AO is not valid. Further, merely because the assessee was receiving payments from the Government in progress of work it cannot be said that the projects were financed by Government. In this regard it i....
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....wer 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 contention of the assessee finds strength from the following judgments: The ITAT (Mumbai) in case of ACIT v. Bharat Udyog Ltd. (2009) 123 TTJ 0689 : (2009) 23 DTR 0433 : (2009) 118 ITD 0336 : (2008) 24 SOT 0412 "After the amendment effected by Finance Act, 1999 w.e.f. 1st April, 2000, the deduction under s. 80-IA(4) has become available to any enterprise carrying on the business of (i) developing, or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. Sub-cl. (c) of cl. (i) of s. 80-IA(4) is obvio....
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.... 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 infrastructure facility and to collect toll therefrom, and has no other source of recoupment of his cost of development. Considered as such, the business activity of the nature of build and transfer also falls within eligible construction activity, that is, activity eligible for deduction under s. 80-IA inasmuch as mere 'development' as such and unassociated/ unaccompanied with 'operate' and 'maintenance' also falls within such business activity as is eligible for deduction under s. 80-IA. Therefore, merely because the present assessee was pa....
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.... 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 infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation done by the Assessing Officer is accepted, no enterprise carrying on the business of only developing he infrastructure facility would be entitled to deduction under section 80IA(4), which is not the intention of the law. An enterprise, which 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 infrastruc....
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....used 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 therefore not a civil contractor simplicitor. (c) That if we apply the commercial aspect, then a developer has to execute both managerial as well as financial responsibility. (d) That the role of a developer, according to us, is larger than that of a contractor. (e) That when a person is acting as a developer, then he is under obligation to design the project, it is another aspect that such design has to be approved by the owner of the project, i. e. the Government in the present case. (f) That he has not only to execute the construction work in the capacity of a contractor but also h....
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....arly 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 risks. The observations of the ld. CIT(A) in this behalf are also not valid and correct. It was clearly mentioned in the agreement that the assessee shall execute and furnish indemnity bond for a period of four years, indemnifying the Government against any loss or expenditure incurred, to repair any defect noticed due to faulty working done by the contractor or substandard material used by the contractor. Further, it is also mentioned in the contract agreement that the assessee shall not claim for any loss due to foreseen circumstances, including suspension of work due to cause. It is ....