AI Drafter 
TaxTMI 
TaxTMI 
2013 (11) TMI 1768
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....rned Commissioner of Income Tax (Appeals)-VIII, Ahmedabad has also erred in not considering the contention of the appellant that in respect of interest income, the same has to be net off against the interest payment and in that case, there is net debit of interest of Rs. 2,19,764/- 3. The appellant prays to allow deduction u/s 80IA(4) of the Income Tax Act, 1961 as claimed by the appellant." 2. For A.Y. 2002-03, Revenue has raised the grounds as under: "The ld. CIT(A) erred in law and on the facts of the case in holding that the assessee is eligible for deduction u/s. 80IA(4)." 2.1 Since the grounds of both the sides are connected with each other, therefore, hereby decided by this common order. 3. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) r.w.s. 147 for AYs 2002-03 dated 30.11.2006 were that the assessee-company is engaged in the business of construction. For AY 2002-03 assessee has claimed a deduction u/s.80IA of Rs. 39,94,336/-. In support assessee has furnished form 10CCB along with the return of income. The basis of deduction u/s.80IA, as per assessee, is that an enterprise is required to carry on the business....
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....s formed an opinion that the work was executed on behalf of the owner, i.e. the authorities given the contract. The assessee has not worked as a developer because for providing infrastructure facilities the assessee has not used its own funds. The assessee has raised bills for the work carried out and received the payment from those authorities. As per AO, the assessee had neither operating nor maintaining those infrastructure facilities. The assessee had only executed the "work contract" and there was no operation or maintenance on the part of the assessee. As per AO, section 80IA provides deduction from the profits and gains of an Enterprise carrying on the business of "developing or operating" and "maintaining or developing", operating and maintaining any infrastructure facility. In his opinion, the assessee has not fulfilled all the conditions specified u/s.80IA(4) of IT Act. By placing reliance on the following decisions, the claim of deduction was disallowed. i) Commissioner of income-tax vs. N.C.Budharaja & Company 204 ITR 412 (SC). ii) CIT Vs. Magaska International (India) Pvt.Ltd. 254 ITR 283 (Del). iii) CIT vs. Geotech Foundation & Constructions....
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....as either operated or maintained or both the infrastructure facility. It is also not clear that how ld.CIT(A) has held that the infrastructure facility has actually been owned by the assessee. The assessee has merely acted as a civil contractor because the running bills were raised and in turn the Government authorities have made the payment. It was purely an agreement of a contractor, hence it was not allowable. Ld. DR has placed reliance on B.T.Patil & Sons Belgaum Construction Pvt.Ltd. vs. Asst.CIT 126 TTJ 577 (T.M.)[Mum.]. 4. On the other hand, from the side of the Assessee, ld.AR Mr. M.G. Patel argued that the infrastructure facilities are provided by the assessee, therefore entitled for claim of deduction u/s.80IA(4). As per ld.AR the matter is covered by CIT vs. ABG Heavy Industries Ltd. 322 ITR 323 (Bom.). The ld.AR has also placed reliance on following orders of the Tribunal:- Sl.No(s) In the case of..... In ITA No(s)..... 1. Laxmi Civil Engg.P.Ltd. ITAT "A" Bench Pune in ITA Nos.766/PN/09, 254/PN/08, 431/PN/07 & 435/PN/07 for AYs 2006-07, 2005-06, 2003-04 & 2004-05 order dated 8.6.2011 2. M/s.Om Metals Infraprojects Ltd. vs. The CIT ITAT "A" ....
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.... contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section(1)]." From the reading of the Explanation, now it is clear that the business referred to in sub-section (4) of section 80IA should not be in the nature of "works contract" awarded by any State or Central Government. In this connection, the main allegation of the AO was that the nature of work and the nature of clauses of agreement have indicated that the work assigned to this assessee was nothing but "works contract". Nevertheless, this controversy can be settled by carefully perusing the CBDT Circular No.717 dated 14.08.1995 reported as 215 ITR (Statute) 70, 91, duly considered by Hon'ble Bombay High Court in the case of ABG Heavy Industries Ltd. 322 ITR 323 (Bom.), for ready reference relevant paragraphs reproduced below:- "Five-year tax holiday for infrastructure development: 34.1... 34.2. Industrial modernization requires a massive expansion of, and qualitative improvement in infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports, ports....
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....ping". Meaning thereby that an enterprise which is developing an infrastructure facility is also entitled for 80IA(4) deduction. It is worth to mention that the section has prescribed the term "or" and not the term "and" while categorizing the three situations. Due to this reason, the business of "developing" on stand alone basis thus also qualify for 80IA(4) deduction. At this stage, we may like to describe the term "developer". A developer is a person who undertakes the responsibility to develop a project. A developer is therefore not a civil contractor simplicitor. If we apply the commercial aspect, then a developer has to execute both managerial as well as financial responsibility. The role of a developer, according to us, is larger than that of a contractor. 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. 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. To ascertain whether a civil constructi....
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....tructure facility. According to us, therefore, in a situation where the agreement is either of the three, i.e. BOT, BOOT or BOLT, then both the twin conditions apply; i.e. unless the assessee really develops and begins to operate infrastructure facility there is no question of granting any deduction for the reason that the period of deduction cannot commence unless the enterprise develops and beings to operate the infrastructure facility. 6.6. There is a distinction between "developer" and a "contractor". In a case of civil contractor, its duty is only of civil construction. After the civil construction is over, he is paid for the job of civil construction as per the bills raised. At that point of time, his contract is over and the agreement ends. After the completion and at the end of the agreement, a civil contractor handed over the site to the owner. A civil contractor constructs as per the specifications given. A contractor do not involve much of his own money but raises bill of his civil work of his civil construction work time-to-time to collect the expenditure incurred. A contractor has no domain over the land or the site. His access to the site is restricted and limited ....
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....ssion made hereinabove. The second step is to ascertain whether the assessee has carried development work only. The third step is whether the assessee has not only developed but also operated and maintained the infrastructure facility. After ascertaining these aspects, he is then directed to assess the profit of the enterprise. Due to these reasons, we deem it proper to restore this issue back to the file of the AO to decide de novo in the light of the discussions/directions made hereinabove. Resultantly, Ground No.1 for AY 2002-03 raised by the Revenue are hereby allowed for statistical purposes. 7. As far as the appeal of the assessee is concerned, all the three grounds revolved around the issue of claim of deduction u/s.80IA of IT Act. The question is whether the interest income and the miscellaneous receipts have nexus or attributable to the project of the assessee are yet to be decided in the light of the directions given hereinabove. The assessee, is therefore, required to establish that the interest income and the miscellaneous receipts are derived by such undertaking engaged in infrastructure development. Due to this reason, all the grounds raised by the assessee are als....
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....e total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this Sub-section, be deemed to represent the income in respect of which particulars have been concealed. The effect of this Explanation is that if the necessary ingredients as stated herein are satisfied then the amount disallowed in computing total income shall for the purposes of Clause (c) of this section, be deemed to represent the income in respect of which particulars have been concealed. The necessary elements for attracting this Explanation are three fold:- a) the person fails to offer his explanation, or b) he offers the explanation which is found by the A.O. to be false, or c) the person offers explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating the same have been disclosed by him. 4.7 If the case falls in any three of ingredients, then the deeming provision into play and the amount added or disallowed in computing the total income is considered as the income in respect of ....