TaxTMI 
TaxTMI 
2022 (1) TMI 1050
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....lving varying sums on account of the fact that 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 pertaini....
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.... AO failed to consider the fact that an amount of Rs. 10.09 cr. were paid to M/s.Mohan Projects 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 a....
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....ils in its identical former substantive grievance in all these appeals therefore. 4. Next comes the later identical issue of 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 we....
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....ansstroy India Limited wherein it was held that deduction u/s.80-IA is allowable to Joint Ventures, was not accepted by the Revenue and further appeal has been filed before the Hon'ble High Court, against the order of the Hon'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 ....
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....ndia) Ltd, has held that Section SO*IA extends the benefits to a consortium of companies as well and hence, the JV partners who are actually executing the contract would be eligible for tax holiday In the case of M/s. Sushee Hightech Construction Pvt. Ltd. vs. DCIT, ITA 414/ Hyd/2012 dt 17/06/2013. The Company has not 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....
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.... pursuant to the order of Hon'ble Commissioner of Income Tax (Appeals), wherein the Hon'ble CIT in para 11.3.6 of the order has directed AO as under: "Accordingly, the Assessing Officer is directed to allow the total amount of Rs. 28,06,60,883/-, 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 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 un....
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....was executed by GPL. As per the provisions of Sec.80IA(4), the benefit of deduction under this section is to be given only to the entity which carried on the classified business, which in the case is the appellant and it was also submitted that the contention of the AD that the decision of Hon'ble (TAT in Transstroy case was not accepted by the revenue and further appeal has been filed before the Hon'ble High Court, is not acceptable as it is emphasized that judicial discipline, 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.17-0....
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....IA(4), as claimed by the assessee and the issue on assessability of incomes of JV or it's constituent, is already settled by Judicial decisions. The further objection of the appellant to the decision of the AO for not allowing deduction u/s. 80lA (4), on the ground that decision of ITAT was not accepted by department, is not based on any legal basis. The AO did not distinguish or dispute the facts as upheld by ITAT Visakhapatnam, which has been further supported by the decision of ITAT Agra, in the case 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 a....
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.... AD under reference, unless the said order is stayed or suspended by a Superior Court or a different view is taken by the another Tribunal in the said jurisdiction. In this case, it was not the case of the AD to show that the decision of ITAT, Vishakapatnam, in the case of Transtroy India Ltd (supra), as relied by the assessee, is not binding on him. 13.3.5 Apart from application of the order of ITAT, Visakhapatnam in case of Transtroy (India) Ltd, (supra), whose decision is very much binding on the AD, the decision of ITAT, Agra, in the case of PNC Constructions Co. Ltd Vs 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 ....
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....-05 to 2006-07 in assessee's case itself has adjudicated the very same issue in former's favour as follows: "6. We have given our thoughtful consideration to rival contentions and find no merit in the assessee's foregoing arguments supporting the CIT(A)'s action holding it partly eligible for the impugned section 80IA deduction relief. There is hardly any dispute about the assessee having undertaken irrigation and road projects from the concerned government departments in the nature of "works contract" only wherein it not only received mobilization advances in the initial stage but also there was no risk element 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/201....
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....ereof. This is for the reason that the legislature has reintroduced the Explanation; formerly inserted by the Finance Act, 2007 w.e.f. 1.4.2007 that "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise as the case may be," followed by its substitution by the Finance Act, 2009 w.e.f. 1.4.2000 that "for the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in subsection (4) which is in the nature of a works contract awarded by any person (including 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 la....
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....n lead to some absurdity or there is something in the context or in the object of the statute to the contrary. 13. We go by the foregoing observations of their lordships and observe that the stages I & II of the Bhima Lift Irrigation project undertaken by the assessee containing " all the civil works like canal approach to the tunnel, tunnel, surge pool pump house, delivery mains manufacturing, testing, inspection, packing, supply, erection and commissioning of electro mechanical and hydro mechanical equipment" indeed formed an architectural as well as engineering structure and therefore, amounts to an execution of a "works contract awarded by the state government" through 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....
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....the facts of the instant case. It is clear that the assessee has first of all been paid mobilization advances by the state government's department on periodic basis, and, then only it executed the corresponding lift irrigation project works contract followed by its yet another claim of section 80IA of the Act deduction (supra). We are afraid that such a liberal interpretation would amount to going against the stricter interpretation principle in view of honourable apex court decision (supra). We accordingly conclude both the learned lower authorities have rightly disallowed assessee's 80IA deduction claim involving varying sum(s) (supra) in their respective orders. The same stands confirmed. These assessee's appeals are dismissed therefore." 7. We thus hold that section 80IA's Explanation(s) is squarely attracted herein that even if the assessee itself is treated as the developer under sub-section (4) of the very provision, the impugned claim shall be hit by the foregoing Explanation as its business is in the nature of a "works contract" only. Reliance placed on all earlier orders (supra); not considering the statutory "Explanation(s)", are not forced to be binding....