TaxTMI 
TaxTMI 
2020 (12) TMI 851
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.... works contract under section 80- IA(13) of the Act. 2) On the facts and circumstances of the case Ld. CIT(A) has erred by rejecting the submission of appellant that as no new material was brought on record by AO before disallowing the claim of deduction under section 80-IA(4) of Act, it tantamounts to change of opinion, further also rejecting the appellant's submission of the principle of consistency as deduction being allowed for last several years consistently by overlooking the principle of natural justice and tax jurisprudence. 3) On the facts and circumstances of the case Ld. CIT(A) has erred by denying the claim of the appellant as a work contract. I 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the AY 2010-11 on 27.09.2010 declaring gross total income of Rs. 8,79,35,190/- and after claiming deduction of Rs. 8,57,95,998/-, the total income was shown at Rs. 21,39,190/-. During the course of assessment proceedings, it is observed by the Assessing Officer (AO) that the main issue involved is whether the assessee is eligible for claiming deduction u/s 80IA(4) of the Act or not. In response to query raised by....
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....is the contractor has to procure and operate two new machines for the mechanized sweeping work, under this contract. The contractor shall complete mechanical sweeping of main roads by 9.00 a.m. every day. The contractor shall also segregate to collect waste into bio-degradable and non bio-degradable waste and hand over the waste collected to another contractor, appointed by GNIDA for further processing. 3) Ahemedabad Municipal Corporation - The Contractor / appellant has to supply and maintain the hydraulic dumper placer units and matching M.S. containers at about 350 locations, in the city and the Municipal corporation will pay on monthly basis to the contractor, on tones / k.mtr. basis, for disposing of waste from cites to the waste storage depots. The contractor has to lift the container when they are about to fill, carry the same by respective hydraulic unit and empty the same at specified treatment or disposal site and again has to put the container back to its original location. The above contract work reveals that the appellant has to only collect / lift the container filled with the waste and upload to the processing / treatment sites. The work of....
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....al disposal and operation and maintenance of the system. Again, the above work indicate that the actual work of processing and final disposal of waste, by operation and maintenance of the system, has to be done by another contractor, by creating necessary infrastructure and installing the required plant and machinery. Accordingly, he shall only be entitled for deduction and not the appellant, who is doing only contract work, for collecting, transferring and transporting of solid waste to the final disposal sites. 8) Navi Mumbai Municipal Corporation (residence)- The Contractor /appellant has to do cleaning, collection and transportation of MSW i.e. waste generated in the residential area. The contractor has to do collection of waste from bins/ containers placed in the societies (Apartment and other community centres) by using refuse compactor/skip loaders, including debris / construction material. The contractor has to regularly lift and transport all above waste including garden waste, to the final disposal site, by deploying the necessary vehicles, specially designed for the work. 9) Navi Mumbai Municipal Corporation (MIDC) The Contractor /appe....
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....or enterprise, referred into section 80IA, for executing contract work, will not be eligible for tax benefit." Further, relying on the order of the Tribunal in the case of Anthony Motors (P.) Ltd. v. ACIT 64 DTR 470, the Ld. CIT(A) affirmed the disallowance of Rs. 8,57,95,998/- made by the AO. III A 5. Before us, the Ld. counsel for the assessee explains that (i) the deduction u/s 80IA(4) is allowable for a consecutive period of 10 assessment years ; accordingly, when there is no change in the facts, if deduction has been allowed in the initial assessment years, the same cannot be withdrawn in the subsequent years without making the disallowance in the initial years; in the present case, deduction has been allowed for all the earlier assessment years and the AO has now sought to disallow the deduction for the last two years, (ii) deduction has been allowed in some of the earlier assessment years by the AO after carrying out complete scrutiny and passing the assessment order u/s 143(3) of the Act ; in the said order, the AO after considering the issue of claim of deduction u/s 80IA of the Act, held that the assessee is eligible for deduction being engaged in the ac....
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....primary collection method by use of handcart, tricycle/three wheelers and HDPE bins. The contract work also includes positioning/ deployment of HDPE dustbins having capacity of 240 litres, 660, litres & 1100 litres as specified in the tender. The said work also includes use of Refuse Compactors, Hook, Container/Dumper Place/Side Loader as well as use of Hydraulic vehicle of a compact body having capacity of 1 to 1.5 ton. b. The contractors agree and undertake to collect wet and dry municipal sold water through door to door collection from the above mentioned area of the Municipal Corporation and the same to be transferred from the premises where it is collected at the site of Land fill site as may be specified by Municipal Corporation. Similarly, it is stated that the scope of work, as per Agreement dated 04.10.2005 between the assessee and Bhiwandi Nizampur Municipal Corporation is provided as under : a. Door to door collection, transfer and transportation of solid waste of four categories viz. Biodegradable. Recyclable, Debris and Sill at source from the streets and public places within the area of Bhiwandi-Nizampur City covering all Kilometers roads and lane....
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....ction of volume toxicity or other physical / chemical properties of waste to make it suitable for final disposal. ................... e. Disposal on land i.e. environmentally safe and sustainable disposal in landfills. Thus the Ld. counsel submits that even waste collection and transportation, by itself, is solid waste management system. In this regard, reliance is placed by him on the decision of the Hon'ble Bombay High Court in the case of ABG Heavy Industries Ltd. 322 ITR 323 wherein it is held that to be eligible for deduction, the assessee need not develop the entire infrastructure and even if the assessee is developing part of the infrastructure, the assessee would be eligible for deduction u/s 80IA of the Act. Finally, the Ld. counsel explains that as because the contract has been awarded by respective municipal authorities does not make the assessee ineligible for claim of deduction u/s 80IA of the Act, as whole work of 'Solid Waste Management' is carried out by the assessee and not the Municipal Authorities; further, section 80IA(4)(i)(b) of the Act requires the assessee to enter into an agreement with the Government for carrying out such an activit....
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....ity and hence, denial of deduction u/s 80IA is an order. Referring to the 'Manual on Solid Waste Management' prepared by the Ministry of Urban Development which include waste collection and transportation, the Ld. DR argues that the counsel for the assessee omitted to read the following points which are crucial : "An effective waste management system includes one or more of the following options: a. Waste collection and transportation b. Resource recovery through sorting and recycling i.e. recovery of materials (such as paper, glass, metals) etc. through separation. c. Resource recovery through waste processing i.e. recovery of materials (such as compost) or recovery of energy through biological, thermal or other processes. d. Waste transformation (without recovery of resources) i.e. reduction of volume, toxicity or other physical/ chemical properties of waste to make it suitable for final disposal." Thus it is stated by him that the assessee is involved only in one activity, namely, waste collection and transportation and no evidence has been produced regarding resource recovery, waste transformation etc. which are post disposal a....
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....anta Samalpatti Operating Ltd. (supra), relied on by the Ld. DR, the Ld. counsel submits that the issue before the High Court was whether the assessee therein was engaged in the activity of generation, or generation and distribution of power and on the facts of the case, the High Court concluded that the assessee therein was not engaged in the activity of generation of power and hence, not eligible for deduction u/s 80IA of the Act. In the present case, it is argued that the issue is as to whether the assessee is engaged in the activity of solid waste management or not and hence the above decision has not application whatsoever to the present case. IV A 8. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. To appreciate the rival contentions, it is pertinent to refer to the agreements. The assessee entered into an 'Agreement for Garbage Collection and Transportation' dated 25.06.2007 with Navi Mumbai Municipal Corporation, Belapur Bhavan, CBD Belapur, Navi Mumbai. The scope of work delineated therein is reproduced below: "1. The Municipal Corporation has appointed the M/s Antony Waste....
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....ealth, sanitation department of Corporation being desirous of revamping the present set-up of its solid waste management services by integrating (i) Door to door collection and transportation of solid waste to final disposal site and (ii) setting up compost plant and its Operation at the site to be given by corporation on Build, Own, Operate, Maintain and Transfer of immovable infrastructure created for the project for a new period of ten years, to meet the requirements of Municipal Solid Waste (Management and Handling) Rules 2000 invited tenders from competent contractors in prescribed form." 8.2 Similarly, the assessee entered into an agreement dated 08.08.2003 with Ulhasnagar Municipal Corporation for "Transportation of solid waste processing and final disposal site" for a period of 10 years. The preamble to "Instructions to Bidder" states that : "The Ulhasnagar Municipal Corporation therefore, intends to revamp entirely its collection, transfer, and transportation system of solid waste. The prime approach in the tender aims at providing the services in an integrated manner for all types of wastes -garbage recyclable , debris and construction waste, silt, gr....
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....Debris and Silt at source from the streets and public places within the area of Bhiwandi-Nizampur City covering all Kilometers roads and lanes in the entire area of the Corporation on Build / Own, Operate, Maintain and Transfer of immovable infrastructure basis; and (b) Setting up compost plant for the Organic waste for the organic waste collected from slaughter house, cow dungs, vegetable and fish market and solid waste which has 90% organic waste." The work specification of the project/work therein is stated below: "The work is required to be performed on Build/Own, Operate, Maintain and Transfer of only immovable infrastructure and facilities created by the successful bidder for carrying out the work under this tender/contract for a period of 10 years." 8.6 In the agreement dated 05.09.2005 entered between the assessee and Kalyan Dombivali Mahanagar Palika, the project scope stipulates the following: "2.1 Project Scope 2.1.1 The Project shall include the following: a) Primary Collection: Lifting of Sweeping of MSW from the all Roads, By lanes and the interior Road, slums, residential area, commercial area, door to door col....
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....at - "7. Bio-degradable waste shall be transported and delivered at Vermicomposting yard situated at Viswerapurama. Recyclable waste and the non-biodegradable wastes shall be delivered at the place assigned by the Municipality. Garbage shall not be delivered at any other place other than the place assigned." Also it is stated that the assessee has to execute an agreement with the Municipality complying with the scope of work mentioned in the RPF document and other terms and conditions as mentioned below: "(1) IEC Activities: (a) For creating awareness regarding Solid Waste Management among the public. You have to conduct street meetings, ward meetings with the concerned street committee members, ward councilors and concerned public health staffs. The report of it has to be submitted along with every month bill for payment. (b) The IEC activities should promote the ecological management of solid waste in compliance with the philosophy of Reduce, Reuse, Recycle, Recover and safe disposal. (c) The ultimate effect of IEC activities should protect public health, the environment and natural resources (Water, land, air) as per MSW R....
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....cieties and dispose off the same at the designated site. The garbage is collected through primary collection method such as use by handcraft, tricycle etc. The assessee is also required to deploy dustbins in different capacities of 240 litres, 660 litres etc. as specified in the agreement. The assessee is further required to utilize specified hydraulic vehicles for the purpose of collection, transportation and disposal of solid waste. The assessee has been claiming deduction u/s 80IA(4) of the Act on the income earned by it from the activity of solid waste management. There is no dispute that 'Solid Waste Management System' is one of the infrastructure facilities as defined in Explanation to the section 80IA(4) of the Act, which entitles the assessee to claim deduction for the consecutive period of 10 years. Functional elements of a 'Municipal Solid Waste Management System' as drawn in the 'Manual on Solid Waste Management' by Central Public Health & Engineering Organization is enclosed herewith as Annexure - 1. In M.O.H. Uduman and Ors. v. M.O.H. Aslum, AIR 1991 SC 1020, the Hon'ble Supreme Court has held that : "It is settled canon of construction that a contrac....
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....ructures have been built under BOT or BOLT scheme and at the expiry of the lease agreement such equipment would be transferred to the port authorities. The Commissioner (Appeals) thus, held that supply, commissioning and operation of cranes/equipment by the assessee were done under the BOLT scheme and accordingly, directed the Assessing Officer to allow deduction under section 80-IA and reducing it from book profit under section 115JA. On Revenue's appeal, the Tribunal held that:- "The issue for consideration in the instant case was as to whether the agreement entered into between the assessee and the port for the supply, installation, testing, commissioning and maintenance of the cranes on lease for a period of ten years at the container terminal of said port was an infrastructure facility operated by the assessee entitled for the claim of deduction under section 80-IA. The term 'infrastructure facility' is defined under section 80-IA(12)(ca). Applying the definition of 'infrastructure facility' as defined under section 80-IA(12)(ca) to the facts of the instant case it was found that 'port' and the facilities provided at port were covered by the definition of infrastru....
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....larified by Circular No. 733 dated 31-1-1996, which provided that one of the conditions to be fulfilled by the enterprises is that it should develop, maintain and operate a new infrastructure facility, which shall be transferred to the Central Govt./State Govt./local authority within the period stipulated in the agreement. Taking into consideration the definition of 'infrastructure facility' provided under section 80-IA and the conditions to be fulfilled under sub-section (4A) to section 80- IA it was clear that the assessee was an 'infrastructure facility' and the operations carried out by the assessee fell within the extended definition of 'Port' as provided by the CBDT Circular No. 793. The assessee entered into an agreement with the port for the supply, installation, testing, commissioning and maintenance of the cranes under the BOLT Scheme, wherein it had been agreed upon by the parties that on the expiry of term of agreement, i.e., period of ten years, the said cranes would be transferred to the port at no extra cost. In the Certificate dated 31-5-2004, the port had admitted that the said cranes after its erection and installation, formed an integral part of the port....
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....ssee was entitled to the relief in the light of the circular No. 793 which was binding on the departmental authorities. Accordingly, the assessee was a 'infrastructure facility' entitled to the claim of deduction under sub-section (4A) of section 80-IA . The said such deduction under section 80-IA would be considered while calculating the book profits under section 115JA." It is apposite to mention here the following obssrvation of the Tribunal in the above case:- 29. The Mumbai bench of Tribunal in Patel Engg. Ltd. v. Dy. CIT [2004] 84 TTJ (Mum.) 646 had held that the statutory provision as contained in section 80-IA provides for 'development of infrastructure facility, but it nowhere provides that the entire infrastructure project is to be developed by one enterprise'. It has been further held in the facts of that case that the assessee had developed the infrastructure facility for part of the project and is entitled the claim of deduction under section 80-IA(4) of the Act, so long as the nature of development falls within the ambit of 'infrastructure facility'. [Emphasis, by underlining, supplied by us] On appeal by the Revenue, the Hon'ble Bombay High Co....
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....PT by its letter dated 27th March 2000 clarified that the difference between the two options that had been given to the assessee consisted of a payment of Rs. 40,00,000/- which was to be retained by JNPT in the event that the operators were provided by the Port for operating the cranes. At the same time, JNPT clarified that it was the responsibility of the assessee to guarantee the availability of the equipment; to ensure that the equipment is in operation on a round the clock basis; to provide for repairs and to ensure the operation and availability of the equipment in accordance with the terms of the contract. 17. The obligations which have been assumed by the assessee under the terms of the contract are obligations involving the development of an infrastructure facility. Section 80IA of the Act essentially contemplated a deduction in a situation where an enterprise carried on the business of developing, maintaining and operating an infrastructure facility. A Port was defined to be included within the purview of the expression infrastructure facility. The obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of....
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....pra). 12.2 To recapitulate, an examination of the agreement entered into by the assessee with the various authorities such as Municipal Corporation of Greater Mumbai, Navi Mumbai Municipal Corporation etc. extracted at length hereinabove clearly indicate that the assessee is required to collect wet and dry garbage and debris from individual household as well as co-operative societies and dispose of the same at the designated site. The contract work also includes positioning/ deployment of HDPE dustbins having capacity of 240 litres, 660, litres & 1100 litres as specified in the tender. The said work also includes use of Refuse Compactors, Hook, Container/Dumper Place/Side Loader as well as use of Hydraulic vehicle of a compact body having capacity of 1 to 1.5 ton. Again to recapitulate in brief, in the agreement dated 08.10.2008 entered between the assessee and Amritsar Municipal Corporation, it is stated that : "A. The Ministry of Environment and Forests (MoEF), Government of India (Gol), has formulated the Solid Waste (Management and Handling) Rules 2000, which makes it mandatory for every Municipal Authority to implement a scientific solid waste management system ....