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2018 (10) TMI 585
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....ction 80IA(4) of Rs. 3,68,23,111/- and Rs. 3,44,02,015/- in the Asstt.Years 2005-06 and 2006-07 respectively. The ld.AO has scrutinized return in both the years and passed orders under section 143(3) on 31.12.2007 and 29.12.2010. Thereafter, he reopened the assessment by recording reasons and issued notice under section 148 on 15.3.2010 and 6.7.2010 in the Asstt.Year 2005-06 and 2006-07 respectively. In the scrutiny assessment orders, he allowed deduction under section 80IA(4), but in the re-assessment order, he disallowed the claim on the ground that the assessee-company was not in the business of development of infrastructure project, rather it has worked as a contractor. 4. Before averting to the issue of reopening as well as disallowance of deduction under section 80IA(4) on merit, we would like to first to address the issue, whether delay in filing appeal in the Asstt.Year 2005- 06 deserves to be condoned or not. In support of his submissions, application for condonation of delay and affidavit of Director of assessee-company, Welspoun Projects Ltd. (formerly known as MSK Projects (India) Ltd. Shri Sandeep Garg have been filed. In his affidavit, the deponent has deposed as u....
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....n claimed u/s 80IA of the Income Tax Act. 6. I hereby further state that the Company did not file an appeal against CIT(A) order dated 14/10/2011 merely because it was under a bonafide belief that the said retrospective amendment was squarely applicable and thus deduction u/s 80-IA was not available to it. Also, that the Assessing Officer while finalizing the assessment had assured the appellant company that no penalty will be levied on the appellant because of the reason that the addition was made on account of .a retrospective amendment. Even after assuring the appellant for not levying the penalty, the Learned Assessing Officer passed a penalty order u/s 271(1)(c) of the Income Tax Act dated 25.3.2013, alleging that the company had filed accurate particulars of income while filing its return of income. Being aggrieved of the impugned penalty order, the appellant filed an appeal before the CIT(A) on 24.04.2013., wherein the Chartered Accountant Firm appointed to draft and file the appeal referred to very recent case laws. Decision of jurisdictional High Court in the. case of C1T v/s Katira Construction reported in the month of March 2013 where in the High Court ....
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.... to agitate the issue with the department further on an understanding that the department would not initiate penalty proceedings. But Department has initiated penalty proceedings against the assessee. It imposed penalty under section 271(1)(c) of the Act on 25.3.2013 alleging that the company had filed inaccurate particulars of income while filing its return, and therefore, against the order of the CIT(A) it has been forced to file the appeal, otherwise, it would be burdened with penalty as well as directors would be exposed to criminal proceedings. He further contended that the issue on merit regarding admissibility of deduction under section 80IA(4) is concerned, that has been decided in favour of the assessee by the ITAT in the Asstt.Year 2010-11. He placed on record copy of the Tribunal's order passed in ITA No.2940/Ahd/2013 and 2956/Ahd/2013. The Tribunal has decided above cross appeals vide order dated 28.9.2017. He further submitted that in Asstt.Year 2008-09 the deduction under section 80IA(4) has been allowed by the Commissioner while exercising revisional power under section 264 of the Act. He also emphasised that identical issue is open before the Tribunal in the Asstt.y....
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....is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so." 7. Similarly, we would like to make reference to authoritative pronouncement of Hon'ble Supreme Court in the case of N.Balakrishnan Vs. M. Krishnamurthy (supra). It reads as under: "Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed ....
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....ent case. Now doubt, when the ld.CIT(A) has upheld disallowance of deduction under section 80IA(4) of the Act in 2011, the assessee did not file appeal presumably under the impression that this deduction is not admissible to it, and the department will not initiate penalty proceedings. However, subsequently Department has initiated penalty proceedings and imposed penalty for furnishing inaccurate particulars of income. This step at the end of the Department could expose the assessee under further financial liability as well as criminal proceedings. In between, there has been a lot of development about interpretation and construction of section 80IA(4) at the end of the Hon'ble High Courts. The ld.CIT(A) has also decided this issue against the assessee in the Asstt.Year 2006-07. Cumulative settings of all these factors would goad the assessee to challenge order of the ld.CIT(A) in the Asstt.Year 2005-06 also. Taking into consideration all these facts and circumstances, we are of the view that though some misconception and misconstruction of facts crept in the mind of decision making officer of the company, whether to file appeal or not, when the CIT(A) has decided this appeal, but s....
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....ighways Ltd.; (2) MSK Infrastructure and Toll Bridge Pvt. Ltd. and (3) Alfa Engicon Pvt. Ltd., have been amalgamated with the appellant-company with effect from 1st January, 2005, as approved by the Hon'ble High Court of Gujarat on 2nd November, 2006. The Assessing Officer after considering all the relevant facts, allowed the deduction by accepting the revised computation of total income and he made certain other disallowances. 2.2 Subsequent to the completion of the original assessment, as mentioned above, reassessment proceedings were initiated by issue of notice u/s.148 of the I.T. Act on 15.3.2010. The reassessment order which is subject matter of the present appellate proceedings was passed on 29.12.2010. While re-computing the total income in this reassessment order the Assessing Officer disallowed the claim for deduction u/s.80-IA(4). The Assessing Officer has recorded his finding at pages 8 to 10 of his order. He has mentioned that during the previous year relevant to this assessment year the appellant-company was only a Civil Contractor. He has mentioned that the appellant-company worked only as a sub-contractor for MSK Infrastructure and Toll Bridge Pvt. Ltd.....
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.... Officer originally in the assessment made u/s.143(3) of the I.T. Act after detailed scrutiny. All relevant material/documents were available before the Assessing Officer who made the original assessment. The relevant facts may be stated below in chronological order for kind consideration of this Hon'ble Tribunal: (1) M.P. Rajya Setu Nirman Nigam Ltd. (MPRSNN for short), as authorized by the Government of M.P., invited tenders from qualified companies for developing, strengthening, re-constructing, widening, rehabilitation, operation and maintenance of the following Toll Road sections: (a) Raisen-Rahatgarh Road Project (b) Hoshangabad-Harda-Khandwa Road Project (2) Since the appellant-company was fully qualified and well-equipped to undertake the development, completion and operation/maintenance of the above projects, it participated in the tender process. (3) After undergoing the rigorous processes, MPRSNN vide its letter dated 11.3.2002 addressed to the appellant-company, conveyed acceptance of appellant-company's tender in respect of Raisen- Rahatgarh Road project and similarly vide its letter dated 28.3.2002, MPRSNN also conveyed....
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....idiary companies by MPRSNN. The cost of Hoshangabad-Harda-Khandwa Road project was Rs. 81.00 crores and the cost of Raisen-Rahatgarh Road project was Rs. 57.73 crores. (7) It is notable that the entire work relating to the two projects was handed over to the appellant-company by the two subsidiary companies which included "detailed designing, engineering, construction, operation and maintenance for all practical purposes the appellant-company stepped into the shoes of the two subsidiary companies to whom the works were directly awarded by MPRSNN under the tripartite agreements referred to above. The execution of these works also involved complete financing and procurement as also operating and maintaining on BOT (Build, Operate and Transfer) basis. (8) All the terms and conditions of the tripartite agreements were repeated in the bipartite agreements which means that all responsibilities were taken over by the appellant-company for satisfactory execution of the works and further operating and maintaining these works on BOT basis. (9) To get a comprehensive view of the responsibilities cast upon the appellant-company, a reference may be made to only some o....
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....g the Construction Defects Liability Period and maintain technical requirements and performance standards. (k) At page-48, the appellant-company is to bear all risks or losses or damages to the work or any part thereof till the date of issue of Maintenance Certificate. (l) At page-51, it is the responsibility of the appellant-company to get the works insured. (m) At page-61 of the agreement, special conditions of contract have been specified. In these special conditions, all the conditions of the tripartite agreements as incorporated in Schedules J to N thereto have been stipulated. From the above stipulations contained in the tripartite and bipartite agreements, it is apparent that the two subsidiary companies are only intermediary vehicles and the entire responsibility of developing, maintaining, operating and the ultimate transfer is on the appellantcompany with all risks and rewards. (10) A very important feature to be noted is that during the course of all the aforesaid arrangements of entering into tripartite and bipartite agreements, it was contemplated that the two subsidiary companies would merge and amalgamate with the appellant-company....
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....V subsidiary companies merged and amalgamated with the appellant-company and the appellant-company legally took over the entire work of both the projects involving complete development, maintenance, operation and ultimate transfer to the statutory body of the Government of Madhya Pradesh. 2.6 In the backdrop of the factual position explained above, the moot question to be considered is as to whether the appellant-company is eligible for deduction u/s.80-IA(4) of the I.T. Act. The relevant provisions of sub-section (4) read as under: "(4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining]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....
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....al position, the benefit of section 80-IA(4) would be available to a developer and not to a contractor simplicitor. In the present case the lower authorities have denied the benefit of section 80-IA(4) to the appellant-company on the assumption that the appellant-company is engaged in executing merely a works contract and it is not carrying on the business of developing an infrastructure facility. The facts stated above clearly establish that the entire work form A to Z has been executed by the appellantcompany for developing the two road projects in respect of the tenders submitted by the appellant-company were accepted by the statutory body, but mutual consent under tripartite agreements two subsidiary companies were also involved for some technical reasons, with the intention that these two subsidiary companies would be amalgamated with the appellant-company, as agreed to by the statutory body of the Government of Madhya Pradesh. As already mentioned above, the amalgamation became effective from 1st January, 2005 which is before close of the accounting year relevant to the assessment year under appeal. In these circumstances, when the appellantcompany has entirely and exclusivel....
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....828/Ahd/2010. In this order the Hon'ble Tribunal has considered in great detail the attributes of a "developer" in contradistinction to the attributes of a "contractor". The Hon'ble Tribunal has also considered various cases which were referred to by the Hon'ble ITAT, Amritsar in the case of M/s. TRG Industries (supra). The Hon'ble Tribunal Ahmedabad has further considered the following two relevant judgements: (i) CIT vs. Radhe Developers, 341 ITR 403 (Guj.) (ii) GVPR Engineers Ltd. vs. ACIT, 21 Taxmann.com 25 (Hyd.) 2.10 The Hon'ble Tribunal has succinctly brought out the difference between a "developer" and a "contractor" at para-13 of the order which is reproduced below for ready reference: "13. In the background of the above discussion, it can be summarized that an enterprise has to enter into an agreement with the Central or State Government or a Local Authority or any Statutory Authority. That undisputedly the infrastructure facility belonged to the Government, therefore the infrastructure facility is owned by the Government. But the enterprise which is developing or constructing the infrastructure facility is to be own....
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....ies and responsibilities can only be examined on the basis of the terms and conditions of the contract agreement. 12.7. Now we shall examine about a "developer". From the above reading we have 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 an 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 he is assigned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis....
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....aid work. There are triparte and bye-party agreements between these three companies as well as State of Madhya Pradesh from whom it has taken Raisen Rahatgarh Road project. Subsequently, both these subsidiaries have been amalgamated with assessee-company on the appointed date i.e. 1.1.2005. It means that during the previous year relevant to the Asstt.Year 2005- 06, the amalgamation became effective and both subsidiaries amalgamated with the assessee-company. The assessee has provided all these facts to the notice of the Revenue authorities, but they have not made any discussion on these issues. It simply issued a notice that it has wrongly claimed the deduction and thereafter disallowed it. At this stage, we would like to make reference to the finding of the AO in the Asstt.Year 2006-07 which has not specified anything. The finding recorded reads as under: "The assessee was supposed to file the return within 30 days from the receipt of the notice u/s 148 dated 06.07.2010,the assessee did not file the return within 30 days, Hence, a notice u/s 142(1) r.w.s 129 of the Act for A.Y. 2006-07 as issued on 18.07.2011 &\vas served upon the assessee on 19.07.2011, The asse....
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....aterial. The Hon'ble Court has held that re-opening is being made on account of change of opinion and it is not justifiable. In the present case, the ld.AO has re-appreciated the material. Earlier, the AO considered the assessee as engaged in the business of development of infrastructure project, but later on the basis of same material he construed the assessee as a contractor. To our mind, it is a just his change of opinion, and there is no tangible material in possession of the AO to reopen the assessment. Therefore, we allow first ground of appeal in both the years, and quash re-assessment orders in both the years. 13. So far as the issue on merit is concerned, we find that identical issue has been decided by the Tribunal in the Asstt.Year 2010-11 as well as by the CIT while exercising revisional jurisdiction under section 264 in the Asstt.year 2008-09. The finding of the Tribunal in ITA No.2940/Ahd/2013 and 2956/Ahd/2013 in the Asstt.Year 2010-11 reads as under: "8. The Revenue's third substantive ground challenges correctness of the CIT(A)'s action treating the assessee as an infrastructure developer and not a works contractor qua its BOT road projects in M....