AI Drafter 
TaxTMI 
TaxTMI 
2018 (11) TMI 1794
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....tion on NH -45 in the State of Tamil Nadu is eligible 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 se....
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.... Article 2 of the Concession agreement "Grant of Concession" set 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. ....
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....median, 1.50 m paved shoulders and 1.0m earthen shoulder. with granular sub base on outer side. 2.2 Service Roads A 5.50 m wide pavement with a raised footpath of width 1.5 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 ....
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....curred an amount of Rs. 361.95 Crores for the implementation of the project / project facilities in terms of the Concession agreement with NHAI. The aforesaid cost of the project was financed as per details below :- Source of Fund Amount (Rs. in Equity Capital 1.00 Crore) Preference Capital 106.70 Debt in the form of loan from banks 254.25 TOTAL 361.95 2.9 Besides, the appellant is also required to operate and maintain the project for period of 15 years from the date of achieving 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, deve....
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....35 44 69 42 36 44 70 44 37 44 71 44 38 44 72 44 39 44 73 44 40 44.4 74 44 41 44.4 75 42 42 44.4 76 42 43 44.4 77 42 44 44.4 78 42 45 42 79 42 46 42 80 36 47 42 81 36 48 42 82 36 49 42 83 36 50 42 84 36 51 60 85 42 52 60 86 42 53 60 87 42 54 60 88 42 55 60 89 42 56 60 90 39 57 60 91 39 58 60 92 39 59 60 93 39 60 60 94 39 61 38 95 39.5 62 38 96 39.5 Km Land Width (m) Km Land Width (m) 96 39.5 109 47.2 97 39.5 110 47.6 98 39.5 111 47.6 99 39.5 112 47.6 100 38 113 47.6 101 38 114 47.6 102 38 115 47.4 103 38 116 47.4 104 38 117 47.4 105 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 ....
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....80-IA with respect to strengthening of existing road which is nothing but a works contract. The income derived from works contract is not eligible for deduction u/s. 80-IA as held in the following decisions: (i) Chennai ITAT in the case of ACIT v Indwell Lianings Pvt. Ltd. Appeal No. : ITA Nos. 1631 & 1632 (Mds.)/2007. (ii) Delhi ITAT in the case of Shristi Infrastructure Development Corporation Ltd. (33 SOT 407).. (iii) Hyderabad ITAT in the case of M/s. Koya And Company Construction Ltd vs, ITO in ITA No 417/Hydi/2013 for AY 2008-09 and ITA Nio.418/Hyd/2013 for AY 2009-10 (iv) Mumbai ITAT in the case of Smc Infrastructure P. Ltd, Thane vs ACIT in ITA No 678 & 679/Mum/2010 for AY 2006-07 (v) Biotech Medicals (P) Ltd., 121 'TTJ 858 (vi) B.T.Patil & Sons Belgaum vs. ACIT 126 TTJ 577 (Mum) (vii) Ahmedabad ITAT in the case of Modern Construction Co (P.) Ltd vs DCIT (42 Taxmann.com 172) (Ahd-Trib) (viii) Hyderabad ITAT in the case of KMC Constructions Ltd vs. ACIT (21 Taxmann.com 138) (Hyd-Trib) 8. In absence of breakup of income and expenses reacting to widening, strengthening and having regard to the fact ....
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.... to the income arising to the activity of strengthening of the existing four-lane and also for reduction of deduction from 50%to 25% of 80IA claim , whereas Revenue is in appeal before us in respect of treatment given by the CIT(A) treating the development done by the assessee as infrastructure . 07. The Ld. AR before us had submitted a detailed note in support of the argument and submitted as under : "It is respectfully submitted that the Assessing Officer as well as learned CIT(Appeals) have placed reliance on the wordings given in Circular No - 4/2010 dated May 18, 2010 of CBDT which uses the language "simply relaying of an existing road would not be classifiable as a new infrastructure facility" is totally misplaced in as much as simple relaying of existing roads would mean repair and maintenance of same. However, in the present case it is not so since the Concession granted to the Appellant is an integrated one i.e. strengthening as well as widening of stretch from KM 28/0 to KM 121/0 from 2 lane to 4 lane coupled with operation and maintenance of same for a period of 15 years. The strengthening of roads in such an integrated Concession in no way can be considered ....
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....of the assessee to the extent of 50% by holding that work undertaken by the assessee for Widening to four lanes is eligible for deduction but he held that the work undertaken by the assessee for strengthening of existing two lane carriageway in km. 27.80 to km. 61.00 Jagatpur-Chandikhol Section of National Highway No.5 in the State of Orissa is not eligible for such deduction and since this is a combined contract and separate profit is not determinable, he held the 50% of the entire profit is for such work in respect of strengthening of existing two lane carriageway and to this extent, he disallowed the claim of the assessee. When we examine this legal position in the light of this fact that in all earlier years, the AO has himself allowed the claim of the assessee in the orders passed by him u/s 143 (3), there is no infirmity in the order of CIT (A) and hence, we decline to interfere." Copy of the order of Hontie Bangalore ITAT in ITA No 1132 & 1133/BanfJ2018 for AY 2013-14 and AY 2014-15 in the case of M/s GMR TuniAnakapalli Expressways Limited is enclosed herewith for your Honour's ready reference. " 08 The Ld. AR has made following arguments: 1. Deducti....
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....he agreement in respect of four-lane is not only required to strengthen the lanes so as to make it compatible to combat the heavy flow of traffic but also to build-up the service lane for the discharging of obligation under the agreement. The Ld. AR relied upon the following judgment : Sl. No. Copy Of Decisions 1 Kotarki Construction (P) Ltd VS ACIT. Central Circle - 2(1) 89 taxmann.com 265) (Karnataka High Court) 2 Principal CIT. Vadodara vs Nila Baurat Engineering Ltd (87 taxmann.com 90) (Gujarat High Court) 3 CIT v. TRG Industries (P) Ltd. [2016] (76 taxmann.com 105) Jammu & Kashmir High Court 4 CIT v. PNC Construction co. Ltd (55 taxmann.com 21) (Allahabad High Court) 5 ACIT Vs HO Hup Sirnplex JV (92 taxmann.com 106) (Kolkata Tribunal ) 6 Parnika Commercial & Estate (P.) Ltd. vs Addl. CIT (72 taxmann.com 177) (Delhi Tribunal) 7 Somdutt Builders - NCC JV vs ACIT (ITA Nos - 148 & 481/Hyd/2009) (Hyderabad Tribunal) 8 DCIT vs KMC Construction Ltd (ITA Nos - 1627, 1628, 1629, 1630. 1631. 1632, 1633 & 1634/Hyd/2013) (Hyderabad Tribunal) 9 Rohan & Rajdeep Infrastructure Vs ACIT (ITA No - 1214/PN/2010) (Pune Tribunal) 10....
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.... that even the Hon'ble jurisdictional High Court had made a distinction between laying down of the additional road and the strengthening of the existing road and had also restricted the claim of the assessee in the matter of Kotari Construction P. Ltd (supra), was only with respect to the laying of the additional road and the repairing and maintenance of the existing road has been kept outside the purview of Section 80IA of the Act. The Ld. DR has further pointed out that the reliance of the assessee on maintenance and laying down of the service road for the purpose of claiming the benefit of section 80IA is unfounded because the service roads cannot be equated with the main lane. The maintenance of existing main lane from 28 to 68 kms was the essential purpose of the agreement for which the contract was given by NHAI to the assessee and therefore the benefit cannot be given to the assessee. 11.1 We have heard the rival submissions and perused the record as also the case laws cited by both the parties. Before we deal with the factual aspect of the matter, it is relevant to keep in mind the purposes of introduction of Section 80IA in the statute book. In our understanding the pur....
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....down the new infrastructure pursuant to the agreement entered between the assessee and NHAI, the assessing officer has granted the benefit of 50% of deduction , only on the premise, that the assessee had laid down the new infrastructure from 67 km to 121 km . Even otherwise , this issue of laying down of the additional lanes along with the integration and assimilation of the existing 2 lanes is no more res- integra, as it accommodated by the board in its circular mentioned by the assessing officer and the appellate authority. 13. Further If we examine the facts of the present case, it is clear from page 115 onwards that the work undertaken by the assessee were in the nature of operating and maintaining of the existing roads. For the purposes of clarify we are reproducing herein the scope of work which is as under : 2.0 Operation and Maintenance Manual and O & M Plans a. prior to the commencement of any construction activity, the Concessionaire, in consultation with the Independent Engineer, shall finalise the O&M Plan - implementation Period. b. AS provided in Schedule H. prior to making application for the Completion cetificate for the Project the Con....
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....entitled the assessee to claim the benefit of laying down of the new infrastructure. we do not find that the benefit of maintenance and creation of service road can be given to the assessee. 16. The nature of activity which was undertaken by the assessee as we had understood from scope of work (supra) was only of maintaining and operating of the existing four lanes 28 km to 67kms. If we allow this kind of activity to fall with the ambit of Section 80IA, it will not be in consonance with the aims and objects for which this section has been introduced. The Explanation to section 80IA(4) provides the development of highway project including housing project to be integral part of highway projects. Hypothetically if we permit the claim of the assessee for repairing and maintenance of the existing infrastructure then this provision would be subjected to misuse and unscrupulous contractors would claim benefit of 80IA, who were into redeveloping, repair or re-plaster the existing houses. In our understanding the same cannot be permitted as it would be beyond the scope of Section 80IA of the Act. Further there is a distinction between the widening of the existing road by constructing add....
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....ents for water, power and machinery, was entitled to deduction u/s.80IA or not. In that context, the coordinate bench had held that the assessee was entitled to the benefit of Section 80IA of the Act, as it developed the new infrastructure. In the present case, the dispute is whether the assessee has developed, maintained and operated a new infrastructure or not as we have noticed herein above, the assessee here has not created any new infrastructure rather had only improved and maintained the existing infrastructure for the stretch 28 to 67 kms of the said highway. Therefore the assessee is not entitled to the benefit of section 80IA(4). Hence this decision is not applicable. 16.3 The next decision relied upon by the assessee is in the matter of Rohan & Rajdeep Infrastructure v. ACIT of ITAT, Pune [ITA.1214/PN/2010]. The facts of this case also are different as that was a case of widening of road and levelling and integrating of the existing road thereafter. Para 8 of the above decision shows that the case was pertaining to increasing the height of the road and widening by one meter vide shoulders by using Dalmera Kankar in 50 cm thickness In the present case, the firs....
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....ar that the dispute in the said case was in respect to whether a developer of infrastructure is entitled to the benefit of Section 80IA or not. However, the facts in the present case are different and hence this decision is not applicable. 16.6 Another decision referred by the assessee was in the matter of Adhunik Infrastructure P. Ltd, [ITA.1281/Kol/2015, dt.23.05.2018], in para 9.4, the Tribunal has discussed the various decisions and came to the conclusion that a developer is entitled to the benefit of section 80IA. In the present case, the facts in dispute before us pertains to whether a developer who has maintained and operated an existing infrastructure is entitled to benefit of section 80IA(4) or not. As the assessee here has not laid down or created a new infrastructure, from 28 to 67 km of the Highway, therefore the assessee is not entitled to the benefit of section 80IA. 16.7 One other decision relied upon by the assessee is in the matter of UP State Bridge Corporation Ltd v. DCIT [62 taxman.com 61] of Lucknow Tribunal, wherein the Tribunal has recorded that the principle of consistency is required to be followed. At this stage, if we look into the....
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....he relevant facts, Certificates issued by the Executive Engineers and nature of work undertaken by the petitionerassessee and the works like improvement of roads, re-laying of the roads, repair of the roads etc., have been excluded while computing the Deduction u/S.80-IA(4) of the Act. Therefore, the deduction allowed to the extent of 68.75% only for the works which fell within the four corners of Section 80-IA(4) of the Act could not have been disallowed or intended to be disallowed by resort to Section 147/148 of the Act under the garb of subsequent Assessment order passed for the subsequent A.Y.2013-14, which also prima facie indicates that the Assessing Authority has been swayed by the words "improvement, repairs and widening (sic !) of already existing roads". While the widening of the roads is intended to be included within the ambit of "infrastructure facility" by the CBDT, the Assessing Authority intends to deny the said claim under the sway of the word "works contracts" as employed in the Explanation inserted by the Finance Act, 2007. Such sweeping and general words before being used to invoke the reassessment powers u/S. 147/148 of the Act, the Assessing Authority has to ....
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....ch of laying down and widening the existing 2 way carriage way to four lane was available with the lower authorities. The AO based on the adhoc working had disallowed to 50% of total revenue on the presumption that 50% of revenue belonged to the infrastructure which was already existing whereas e commissioner on appeal reduced it to 25% on the basis that only 25% of the total revenue belongs to the existing 4 lane infrastructure , feeling aggrieved the assessee is in appeal before us. 19. On perusal of the orders passed by the lower authorities we're not able to comprehend the basis of arriving at the figure of 50% or 25% . There is no rational for the lower authorities to estimate the revenue in respect to the infrastructure already in place , specially under the circumstances when the records are available with the NHAI, which had granted the entity and contract of the assessee. In the result the working done by both the lower authorities were without any basis and was done on adhoc basis in our view both the authorities should have called the record from the NHAI and thereafter decided the matter. 20. In the light of the above we deem it appropriate to remand the matter to....
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....efit u/s.80IA. For that purposes the assessee relies upon the decision of the coordinate bench in the matter of Somdutt Builders-NCC (JV) V. ACIT [ITA No.148 and 481/Hyd/2009, dt.03.02.2017] and also the decision of the jurisdictional High Court in the matter of Kotarki Construction P. Ltd (supra). 26. We have heard the rival contentions and perused the record. It is undisputed that the assessee has undertaken the work of strengthening of existing two lanes carriage way and has also undertaken the work of widening the same to four lane and integrating the same with the existing four lane high way. In the process of strengthening, widening of two lane to four lane, the assessee has performed various functions of the developer and for that purposes the assessee has laid bridges, structures, drainage, intersection, junction, main lane and has thus has completed the widening of two lane to four lane for the stretch of 67/0 to 121/0 kms. As per Schedule D to agreement, it is the obligation on the part of the assessee to widen, align and strengthen the lanes. Thus in our understanding the activity undertaken by the assessee comes within the purview of developing the new infras....