TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 1794
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....igible in terms of provisions Of section 80-IA Of the Act to the extent of claim Of Rs. 10,56,77,828/-. It further be held that the claim is allowable to the appellant in full. It further be held that rejection of the claim by the AO and that part confirmation by the first appellate authority is contrary to provisions of law and facts prevailing in the case. The claim be allowed in full. The appellant be granted just and proper relief as per provisions of law and facts prevailing in the case. 2. That the Ld. Commissioner Of Income Tax (Appeals) has failed to appreciate that developing, operating and maintenance are distinct and if the Assessee is doing business in any Of these areas, is entitled for the deduction under section 80-IA. 3. That on the facts and in the circumstances of the case, the CIT(A) has erred in facts and also in law in confirming disallowance to the extent of Rs. 2,64,19,457/- legitimately claimed deduction u/s. 80-IA(4) of the Act. 4. That on the facts and in the circumstance of the case the CIT(Appeals) has erred in disregarding the fact that the appellant has been consistently allowed deduction under section 80-IA on the income derived from development, o....
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....forth .the 'scope of work to be undertaken by the assessee was as under under: `Subject to and in accordance with the terms and condition set forth in this Agreement, NHAI hereby grants aid authorises the Concessionaire to investigate, study, design, engineer, procure, finance, construct, operate and maintain the project / project facilities and to exercise and /or enjoy the rights, powers, benefits, privileges, authorisations and entitlements as set forth in this Agreement (`the Concession')' 2.5. Further, the Concession agreement define the term "Project", "Project Site", "Project facilities" "Concession Period" and Schedule D as under: "Project" means design, financing, construction, operations and maintenance of the project facilities in accordance with the provisions of this agreement. "Project Site" commences from Tambaram south of existing ROB at km 28.00, traverses generally in south west direction and ends at km 121.0 near Tindivanam an NH-45. The width of the existing Right of Way (ROW) comprised in the project site is given in Table B-1 to the Concession Agreement. Further the NHAI has acquired additional land to have land width of 20m from the exist....
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.... m over lined drain on the outside through he urban areas. Service roads shall be provided one or both sides as shown in Table D-1 below: TABLE 0-1 (Service Road Locations) Section Km 28 - Km 67 i) Km. 30/050 to Km. 31/200 - Left side ii) Km. 31,775 to Km. 32/325 - Left side Km. 31/500 to Km. 33/400 - Right side iii) Km. 33/800 to Km..34,700 - Left side Km. 33.850 to Km. 34T700 - Right side iv) Km. 35/775 to Km. 36/175 - Left side Km. 35/800 to Km. 36/175 - Right side v) Km. 37/250 to Km. 37750 - Both sides vi) Km. 41/700 to Km. 42/300 - Right side vii) Km. 48,275 to Km. 48,700 - Left side Km. 48,275 to Km. 49/950 - Right side Section Km. 6710 to Km. 121/0 i) Km. 69/700 to Km. 69/900 - Both sides ii) Km. 76/700 to Km. 77/450 - Left side Km. 76/750 to Km. 77/450 - Right side iii) Km. 78/000 to Km 78/350 - Both sides iv) Km. 82/100 to Km. 82/875 - Left side v) Km. 91/010 to Km. 92/750 - Both sides vi) Km. 94,600 to Km. 96,750 - Both sides vii) Km. 100/850 to Km. 101/100 - Left side (approach road to proposed underpass) 2.3 Intersections/junctions 2.3.1 ....
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....ing the commercial operation. 2.10 The ld AR submitted that in lieu of implementation, operation and maintenance of the project and project facilities by the appellant company, NHAI is required to pay semi Annuity of Rs. 41.856 Cr on half yearly basis on each annuity date i.e. May and November as detailed in Schedule-J to the Concession agreement. The amount of annuity payment shall get reduced in the event of non-availability of highway for the default of concessionaire in terms of the Concession Agreement. 2.11. The ld AR submitted, the assessee has been formed as a Special Purpose Vehicle (SPV) to specifically implement, design, develop, operate and maintain the stretch from km 28/0 to km 121/0 on NH-45 on Build, Operate and Transfer (BOT) basis. The infrastructure project, awarded by NHAI on BOT basis falls under the definition of infrastructure facility as per the provision of section 80IA of the Income Tax Act, 1961 and is eligible for deduction @ 100% of the profit earned from the business of development, operation and maintenance of Tambaram-Tindivanam section of NH-45 in the State of Tamil Nadu. The assessee has been allowed deduction u/s 801A from AY 2007-08 onwards a....
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....47.2 118 47.4 106 47.2 119 47.4 107 47.2 120 37 108 47.2 121 37 Further, the NHAI has acquired additional land to have land width of 20m from the existing paved shoulder edge on right side from km 67.00 to km 111.00 and on left side from km 111.00 to km 121.000 The project Site shall also include additional land if any. handed over by NHAI to accomrnodate any Of the Project Facilities. 04. On the basis of the above, it was submitted that the assessee was given work by National Highways Authority of India, for developing the infrastructure as mentioned in Schedule -D (supra) and therefore the assessee was entitled to the benefit u/s.80IA of the Act. The assessee before us had also drawn our attention to page 114 of the paper book where it was mentioned that it was the duty of concessionaire to operate and maintenance project facilities as per standard and specification set out in the agreement. Based on the above, it was submitted that the assessee has laid down the infrastructure and is also operating and maintaining the newly laid down infrastructure and hence the assessee is entitled to deduction u/s.80IA of the Act. The assessing officer in the Assessment ord....
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....nd expenses reacting to widening, strengthening and having regard to the fact that the assessee is not only required to widen and strengthen the Carriageway but is also required to operate and maintain t h e road on periodical basis as well as it has to carry out major maintenance work every five years. Keeping in view of the above and in the absence of any break- up of income and expenses relating to each activity, an amount to the extent of 50% deduction claimed under section 80- IA is considered as attributable to the activity of strengthening of existing road and accordingly 50% of the claim mad e U/s 80IA is being disallowed as per as per details given below: Income Under the head business Rs. 11,29,02,768 Deduction U/s 80- IA claimed by assessee Rs. 11,29,02,768 Less: disallowed 50% on account of relaying And strengthening of existing 2 lane Rs. 5,64,51,384 Rs. 5,64,51,384 05. Feeling aggrieved by the decision of the AO the assessee filed appeal before the CIT (A), who after examining the facts and the applicability of certain judgments, had decided the issue with respect to a) With respect to the strengthening of carriageway from 28 km to 67 kms, the CIT (A....
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....nsidered as relaying (or repair and maintenance) of the existing road. If such a narrow meaning is given it would defeat the purpose of Concession allowed, benefit allowed u/s 801A and the same would be contrary to the legislative intent behind providing tax concession u/s 801A as well as the circular of CBDT which clearly provides that the strengthening and widening of existing Highway would tantamount to new infrastructure facility and simple relaying of existing road i.e. repair and maintenance, would not be considered as new infrastructure facility. 17. It would be evident from the above, that the Appellant is eligible for deduction under section 80IA of the Income Tax Act, 1961 as the appellant is solely engaged in the business of developing, operating and maintaining highway from KM 28/0 to KM 121/0 on Tambaram Tindivanam Section of NH-45 in the State of Tamil Nadu on BOT basis and has undertaken the strengthening of the existing 4 lane from KM 28/0 to KM 67/0 and 2 lane from KM 67/0 to 121/0 and widening it into 4 lane in accordance with the provisions of section 80IA(4) and the settled legal position as stated above. 18. It is relevant to note that the Appellant has bee....
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....assessee carrying on business of developing of roads or infrastructure facility who have entered into a valid contract with the Government or Government agency for developing, operating and maintaining any infrastructure facility, 2. Deduction u/s 80IA is available to entities who are (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, 3. Deduction u/s 80IA is to be allowed when assessee had developed a road project and transferred the same for the purpose of operation and maintaining to third party, 4. Deduction u/s 8-IA is to be allowed to the assessee, as the assessee is a developer and not a works contractor when it has procured raw material, make arrangement for power, water, plant & machinery etc. and conducted all other activity needed for construction and has invested huge funds in the project for developing, operating and maintaining any infrastructure facility, 5. Work involving strengthening, improving and widening of existing road is to be considered as new infrastructure facility eligible for deduction under section 80-IA, 6. If the assessee is engaged in the business of construction / d....
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....o 253/Mum/2012) (Mumbai Tribunal) 12 Shristi Infrastructure Development Corporation Ltd Vs ITO (ITA No 412/Del/2006 and 1245/Del/2008) (Delhi Tribunal) 13 UP State Bridge Corporation Limited vs DCIT (62 Taxmann.com 61) (Lucknow Tribunal) 14 L&T Transportation Infrastructure Limited Vs ITO (12 Taxmann.com 469) (Chennai Tribunal) 15 Sanee Infrastructure (P) Ltd Vs ACIT. (23 Taxmann.com 345) (Indore Tribunal) 16 Aqua Plumbing (P) Ltd vs ACIT. (ITA No - 447/Agra/2006 & ITA No - 698/Agra/2008) (Agra Tribunal) 17 CIT Vs Tata Hydro Electric Power Supply Co. (122 ITR 288) (Bomba High Court) 18 CIT vs ABG Heavy Industries Ltd (322 ITR 323) (Bombay High Court) 19 Bajaj Tempo Limited vs CIT (196 ITR 188) (Supreme Court) 20 Radhasoami Satsang Vs CIT (60 taxmann.com 248) (Supreme Court) 09 On the basis of the above it was submitted that in all the above judgments it was the consistent view taken by the Hon'ble High Courts and the Tribunals that the strengthening and widening of existing road would come within the purview of the laying down of infrastructure and hence the assessee is entitled to the benefit u/s.80IA of the Act. It was unanimously held by the courts in the abo....
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....ate to give the deduction to such undertaking which are involved in development and creation of the infrastructure. Section 80IA(4) provides circumstances when this section shall be applicable . 11.2 From the reading of 80IA(4)(i)(b) it is amply clear that, if an enterprise has entered into agreement with central government, state government or local authority, for developing, operating and maintaining of a new infrastructure, then said assessee would be entitled for deduction u/s.80IA of the Act. The infrastructure facilities is defined in Explanation to Section 80IA(4), as under : Explanation For the purposes of this clause, "infrastructure facility" means- (a) a road including toll road, a bridge or a rail system ; (b) a highway project including housing or other activities being an integral part of the highway project ; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system ; (d) a port, airport, inland waterway, inland port or navigational channel in the sea ; 12. From a conjoint reading of Section 80IA(4)(b) and the Explanation to 80IA , it is clear that if an assessee is (i) developing....
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....xt year of operations. 3.0 Maintenance Requirements 3.1 Road Works A. Maintenance Standards a. During Implementation Period. the Concessionaire shall maintain the existing 2 lane highway in traffic worthy conditims as per the Intervention levels 1 and 2 provided in Table 1 -1; Tablo 1-1 Interventions Levels (Existing 2 lane /4 lane highway during Implementation Period) b. During Operations Period. All the road works and payments in the Facilities the facilities shall be maintained in traffic-worthy condition as per the intervention lovels 1 & 2 as provided in the Table 1 - 2 through the various maintenance activities set out later. worst surface characteristics, which include the rut areas and depressions etc. The Concessionaire shall ensure that at no point during the Operations Period the roughness in the road surface shall fall below than the prescribed acceptable roughness values given in Table I - 2. c. The structural condition of the flexible pavement Of the Project Highway shall be assessed every year by taking Benkelman Beam Deflections and working out characteristic deflections of homogeneous sections of the Project Highway as per IRC-8I-1997. In the case o....
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.... of the infrastructure because the infrastructure which is already developed is incapable of being developed again. Hence the assessee is not entitled to any relief pertain to disallowance relating to existing four lanes 28 km to 67kms. 16.1 Now we will discuss the decision cited by the assessee. In The first judgment relied upon by the assessee was Kotarki Construction P. Ltd (supra). In this regard, the Ld. AR submitted that the relaying of roads and maintenance of roads would fall within the four corners of Section 80IA. The findings of the Hon'ble jurisdictional High Court in para 18 and 19 have been reproduced elsewhere in this order. If we look into the facts which are mentioned in para 7 of the judgment, wherein it is stated as under : It is further stated by the Executive Engineer PWD, Bidar that out of the total work of Rs. 1,94,93,022/- work to the extent of Rs. 4,88,236/- pertains to repairs and the work relating to the construction of road is Rs. 1,90,04,786/-. If the above facts are read along with the finding recorded by the Hon'ble High Court in para 18 and 19, it is clear that the work of improvement of road, relaying, repair of roads etc., have bee....
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....ening of road. The Tribunal relied upon the CBDT circular and held the action of the CIT (A) as correct. However, in the present case, there is no widening of the road. Hence, it is not applicable. 16.5 The assessee also relied upon the decision of the Tribunal in the matter of Vijay Infrastructure Ltd v. ACIT (ITA.254/LKW/2015, dt.30.10.2015], where in para 14.2, the facts were mentioned, as under : 14.2 From the above Para of this tribunal order, it comes out that if the contracts involves design, development, operating & maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under s. 80IA and profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be accepted as development and cannot be said to be contract simplicitor to apply the explanation. In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in development of road and is not a mere contractor as he had deployed his own capital, used his own management and expertise in ma....
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....ne carriage way into four lane and thus the assessee was found to be eligible for the benefit u/s.80IA of the Act. 16.8 The submission of the assessee that the principle of consistency is required to be followed. In our view the principle of consistency is merely a guiding factor to decide the issue in the absence of higher wisdom available in the form of binding decision of the superior court. In the present case, as mentioned herein above, the Hon'ble jurisdictional High Court in the matter of Kotarki Constructions (P.) Ltd.(supra) in paras 18 and 19 held as under : 18. The said Explanation as explained in the Memorandum of Finance Bill 2007 as quoted above, clearly lays down the guidelines when it says, " in contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA", intended to deny the benefit of such deduction only to the sub-contractors, who were executing such works contracts on behalf of the principal contractors and pure and simple they being the subcontractors, naturally, the dou....
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....hin section 80IA, then the assessee is entitled to deduction. However in the said case the AO had denied the repair and maintenance expenditure from the purview of section 80IA and therefore the Hon'ble High Court has held that relaying and strengthening of the existing infrastructure would not fall within 80IA. 16.9. In view of the above, once there is a binding judgment of the Hon'ble jurisdictional High Court, operating in the field and applicable to the facts of the case, there is no purpose of perpetuating the error committed by the AO / CIT (A) in earlier years. Accordingly we do not agree with the contention of the assessee that following the principle of consistency the claim of the assessee is required to be allowed. In the result ground no 1&2 of assessee appeal are dismissed. 17. In the present case, as mentioned herein above, the facts are entirely different. There was no expansion of two lane into four lane by the assessee for 28 kms to 67 kms and as such the benefit of the decision of the coordinate bench cannot be extended. Moreover, the assessee has not pointed out any facts before us which entitle the assessee to the benefit of Section 80IA for strengthening, rep....
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....greement 21. Based on the above exercise and reply if any received from the assessee , the Commissioner is to decide the deduction which the assessee is entitled in respect of widening of Road for the project 67 kms to 121 kms . However in respect of the annuity actually relatable to the first category namely maintenance and operation of existing four lane of 28 to 67 kms the assessee would not be entitled for any deduction Needless to say that the above said exercise shall be done by the CIT (A) after giving the notice and after examining the objection of the assessee. In the result ground no 3-4 of assessee are allowed for statistical purposes. 22. The In the result the appeal of the assessee is allowed for statistical purposes Ground no.2 of Revenue appeal in 1130 & 1131/Bang/2018 is as under : 2. The ld. CIT (A) erred in allowing the claim u/s.80IA when the contract work performed does not fall within the definition of new infrastructure facility u/s.80IA and is in contravention to not fall within the definition of new infrastructure facility u/s.80IA and is in contravention to CGDT circular No.4/2010 dated 18.05.2010. 23. In this regard, the CIT (A) in para 4.7 has allo....