TaxTMI 
TaxTMI 
2022 (1) TMI 1050
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....the same had been incurred on cash basis only. It's case therefore, is that the CIT (A) has erred in law and on facts in restricting the same to the extent of 12.5% only. We note in this factual position that the instant issue is no more res integra since the Tribunal's coordinate bench in assessee's own case for preceding A.Ys 2008-09 to 2013-14 dated 24.4.2021 in ITA Nos 1412/Hyd/2016 & other cases has upheld the CIT (A)'s very findings as under: "3. We note with the able assistance of both the learned representatives that the department had made identical substantive disallowance(s) in case of M/s. Gayathri Projects wherein the CIT(A) granted part relief thereby confirming the same to that @ 12.5% only as upheld in Revenue's batch of appeals ITA 1412/Hyd/2016 & five other cases for Assessment Years 2008- 09 to 2013-14 decided on 24.4.2021 reading as under : " 2. It transpires at the outset that the Revenue has raised its identical twin substantive grounds seeking to challenge correctness of the CIT(A)'s action inter alia restricting disallowance of assessee's certain identical expenditure claim pertaining to Dummugudem Project to the tune of Rs. 15.82 crores (in ....
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....Contractors Pvt Ltd (MPCPL), a subcontractor and the same were accounted in their books and assessed to tax. (iv) The observations of the AO as regards unverifiable nature of vouchers in sweeping, with the specific reference made to only few bills/vouchers. (v) The disallowance of expenses of Rs. 15.82 cr results in abnormal profits on project which is not practical or feasible in the line of business. Accordingly, it was contended by the assessee that with the work done is not disputed, expenditure not disproved and sources for same explained, the disallowance is uncalled for. 8.3 Perused the submissions of the appellant and the brief observations of the AO in asst. order. As could be made out from the facts of the case, the appellant shown to have drawn reasonably huge amounts in cash, from various bank accounts, with the intention of meeting the expenses related to ITA Nos.945, 946 & 1586/Hyd/2016 Dummugudem Project. Since the amounts were drawn in cash and the expenses not supported by reasonable details, the AO was of the opinion that the claim of entire amount as expenses is not allowable. In this regard it may be pertinent to mention that an amount of Rs. 10.09 crores ....
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....section 80IA(4) deduction of Rs. 40,02,85,766, Rs. 58,14,26,419 and Rs. 91,69,09,826 assessment year wise respectively which was disallowed by the Assessing Officer and reversed in the CIT (A)'s detailed discussion reading as under: "9.0 Addition on a/c of disallowance of claim of deduction u/s 80IA(4)- Rs. 40,02,85,766/- 9.1 The AD disallowed the deduction claimed by the appellant u/s 80IA(4), on the ground that the profits under reference were pertaining to the projects executed by the assessee-company as a constituent of the JV on which the assessee is not eligible for deduction u/s.80IA(4). The AD examined the facts of the case visa- vis the conditions stipulated u/s.80IA(4) of I.T.Act, with special reference to important factors such as nomenclature used in work order, nature of agreement, Execution vs Development, Nature of risks borne including the financial risks, operation/put to use of infrastructure facility, role in designing etc, and applied the said yard sticks to all the seven projects under reference/listed below, which were claimed as exempted by the assessee company during the year under reference. 1. ORR, Hyderabad 2. HKR Road Works(SH-1) 3. Indore-Dewa....
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....;ble ITAT. Keeping this in view, in order to keep the issue alive, the claim of deduction u/s.80IA on the project awarded to JVs and Consortiums is disallowed". 9.2 The appellant objected to the said disallowance and the submissions on the issue run as under: "We humbly submit to the Hon'ble Commissioner that the deduction u/s 80IA(4) was claimed only on 6 SPV projects and not all the projects executed during the year. The details of these 6 projects for which the deduction u/s 80IA(4) was claimed as under: Sl Name of the SPV Name of Project & Nature Value of Contract Rs. in crores Turnover during the year Rs. 1 Gayatri Jhansi Roadways Ltd UP-2 Road Project 345.00 16,20-,60,702 2 Gayatri Lalitpur Roadways Ltd UP-3 Road Project 253.00 3,50,12,923 3 Hyderabad Expressways Ltd ORR-4 Road Project 362.00 3,28,69,730 4 Indore Dewas Roadways Ltd Indore Dewas Road work 475.00 1,03,60,80,643 5 HKR Roadways Ltd Hyderabad-Karimnagar-Ramagundam (HKR) Road work 102.83 1,38,86,62,257 6 HKR Roadways Ltd Hyderabad-Karimnagar-Ramagundam (HKR) Road work-4 1,30,65,10,822 7 Sai Maatarin Tollways Ltd Panikoli Rimuli Road work Pack....
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.... acted merely as a contractor but was involved in planning, designing, financing and coordinating and all other ancillary and incidental activities of developing the infrastructure facilities as per the contract. In the case of M/s. Sushee Hitech Construction Pvt. Ltd. ITA 414/ Hyd 2012 dt. 17/06/2013, Tribunal held as under: "Therefore, in our considered view, the assessee should not be denied the deduction under section 80lA of the Act as the contracts involves development, operating, maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract. In our opinion the contracts which contain above features to be segregated and on this deduction u/s. 8o-IA has to be granted and the other agreements which are pure works contracts hit by the Explanation section 80IA(13), those work are not entitle for deduction u/s. 80lA of the Act. The profit from such contracts which involves development, operating, maintenance, financial involvement and defect correction and liability period is to be computed by Assessing Officer on pro-rata basis of turnover. In the case of M/s. KMC Construction Ltd., vs. AClT ITA 99....
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.... of appeal treated as Allowed". Further in the A.V 2004 - 05 also, the same road works were carried on by GPL and pursuant to the order of Hon'ble Commissioner of Income Tax (Appeals), wherein the Hon'ble OT in para 13.3.6 of the order has directed AO as under: "Accordingly, the AO is directed to allow the amount of Rs. 6,45,23,517/- claimed as deduction u/s 80IA(4), being the profits of JVs, as claimed in return of income, while computing the total income. Accordingly, this ground of appeal treated as Allowed." Further in the A.V 2005 - 06 also, the same road works were carried on by GPL and pursuant to the order of Hon'ble Commissioner of Income Tax (Appeals), wherein the Hon'ble OT in para 13.3.6 of the order has directed AO as under: "Accordingly the AO is directed to allow the amount of Rs. 6,45,23,517/- claimed as deduction u/s 801A(4), being the profits of JVs, as claimed in return of income, while computing the total income. Accordingly this ground of appeal treated as Allowed." Further in the A.V 2006 - 07 also, the same road works were carried on by GPL and pursuant to the order of Hon'ble Commissioner of Income Tax (Appeals), wherein the Hon....
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....ipline, mandates that the same should be followed unreservedly in all its aspects and therefore the decision of the ITAT is binding on all lower authorities unless reversed by a superior Court. Hence, the AD is not justified in claiming that in order to keep the issue alive, the claim of deduction u/s. 801A(4) on the project awarded to JV's and consortium is allowed." 9.3 In this connection, similar issue came up for adjudication in the assessee's own case for the A.Yrs. 2011-12, 2012-13 & 2013- 14 on the allowability of deduction u/s.80IA in the case of Joint Ventures. The issue has been examined by my predecessor in appeals in ITA No.0267/14-15, 0037/15-16 and 0036/15-16 dtd.17-03-16, 21-07-16 & 21-07-16. The operative part of the said order for A.Y.2012-13, dtd.21-07-16 in para No.13.3 to 13.3.6 is as under: 13.3 Perused the submissions of the appellant and the brief observations of the AO in assessment order. As could be seen from the facts/information brought on record, the assessee company shown to be engaged in infrastructural activity of various kind, as enumerated in this order and among the works the company from whom the company derived profits for the year....
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.... of PNC Constructions Co Pvt Ltd Vs DCIT (144 ITO 577), which have been further upheld by Allahabad High Court, and AO preferred not to allow deduction merely because order of ITAT, Vishakhapatnam Bench in the decision relied by the assessee, was not accepted by the department and a further appeal preferred before High Court. As regard to the binding nature of decision of ITAT, the similar issue is discussed by CIT(A)-12, Hyderabad in the case of M/s.Megha Engineering & Infrastructure Ltd., in Appeal No.0292/2014- 15/CIT(A)-12/Hyd/15-16, wherein the claim of deduction u/s.80IA(4) on the profits attributable to JV/Consortia are held to be allowed, in spite of the fact of further appeal against the order of ITA T, Visakhapatnam, made by the Department based on the judicial discipline. Turning to the further facts of the case, the AO is satisfied with the claim for deduction u/s.80IA(4), having explained the nature of income that are attributable to the projects awarded to JVs but executed by the assessee, as constituent. Thus, based on facts of the case, and ratio of judicial decisions in this regard, the claims were held to be allowable as deduction in the hands of the constituent, ....
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.... DCIT reported in 144 ITO 577 is also applicable to the facts of the case, where the assessee was constituent in JV and project agreements were between the State Government and JV/consortia and the deduction claimed by assessee as constituent of JV/Consortia, was held to be allowable. It is also relevant to refer to the citation of judicial decision where the Hon'ble Allahabad High Court has upheld the order of ITAT Agra, in case of PNC Constructions Co. Ltd (supra). The relevant portion of the decision runs as under: "The statutory provision under section-80IA(4) states that where the total income of the assessee includes any profit and gain from the enterprises i,e., joint venture or Special Private Venture (S.P. V.) carrying on the defined business of developing or operating or maintaining any infrastructure finally then assessee would be liable for deduction. It is also provided that the project should be owned by the company or consortium of companies, who got the contract from the State, as mentioned in Articfe-12 of the Constitution. But this facility is available only w.e.f 01-04-1995, as per the amended provision and for the assessment year it is applicable. When i....
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....nt involved as it had to carry out the construction of the irrigation project or and widening the road (supra) concerned as per the specific terms and conditions and prescribed specifications only. We notice in this factual backdrop that this tribunal's recent co-ordinate bench's decision in M/s. NEC NCC MAYTAS - JV Vs. DCIT (supra) has considered the "Explanation" regarding "works contract" u/s 80IA of the Act holding as follows : "4.1 We find no merit in the assessee's stand. This tribunal's co-ordinate bench recent order dt.12.05.2021 in ITA No.496/Hyd/2018 M/s. NEC NCC MAYTAS - JV Vs. DCIT has already decided the issue that development of such irrigation works in furtherance to government agencies / "works contracts" come under the statutory explanation to section 80IA inserted by the Finance Act 2009 w.e.f. 01.04.2000 substituting the earlier one introduced by the Finance Act 2007 w.e.f. 01.04.2007 as under : "8. We have heard the foregoing rival submissions qua the instant issue of section 80IA deduction. The assessee has admittedly claimed the same taking itself as the developer by court that a corresponding commercial project firm of "infrastructural facility" as per se....
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....cluding the central or state government) and executed by the undertaking or enterprise referred in sub-section (1)." 11. Learned CIT-DR at this stage quoted Katira Constructions Limited Vs. Union of India and Others (2013) 352 ITR 513 (Guj) upholding vires of the latter explanation that the same is purely explanatory in nature than amending the existing provision and therefore, the question of it being levying any tax with retrospective effect would not rise. It is thus explicitly clear that their lordships have held this latter explanation in the nature of a plain and simple one; neither adding nor subtracting anything to the earlier explanation, inserted vide Finance Acts, 2009 and 2007; respectively. Learned CIT-DR further sought to pin point the fact that the latter explanation inserted vide Finance Act, 2009 w.e.f. ;1.4.2000 has rather covered a work contract as not entitled for the impugned deduction despite the fact that the concerned assessee satisfied all other conditions in sub-section (4) of section 80IA of the Act. We find force in Revenue's instant argument as the Finance Act, 2009 substitutes the earlier explanation that the same would not cover a works contract f....
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....h its irrigation development only and covered u/s. 80IA Explanation incorporated in the Act by the Finance Act, 2009 w.e.f. 1.4.2000. Learned CIT-DR at this stage invited our attention to page 18 in assessee's Paper Book II Part 1 that it had purely executed "works contract" only in view of the fact that the irrigation department had issued it mobilization advances on multiple occasions from time to time. He next took us to agreement clause 3.15 containing "contract price and payment" making it evident that the assessee had to be paid on "fixed lump sum monthly basis" only. And further that the assessee was entitled to get "fixed lump sum monthly instalment payments provided value of the work executed is more than or equal to the fixed lump sum monthly instalment as indicated in the agreement." The said agreement stipulated advance payments to the assessee qua supply of goods at the site. All these facts sufficiently indicate that the assessee, assuming that not accepting that it is the developer u/s. 80IA(4) of the Act, executed a works contract only under Explanation to section 80IA of the Act and therefore, not entitled for the impugned deduction. 14. The assessee next mad....