2016 (10) TMI 1369

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.... Officer noticed that assessee has claimed deduction of Rs. 49,46,123/- under the provision of section 80-IA(4) against its work contract income which the Assessing Officer said is not in accordance with law. The Assessing Officer issued show cause notice to the assessee that why the aforesaid deduction should not be disallowed. In this connection, the assessee has replied to the show cause notice which is reproduced as under:- "4. In response, the assessee vide reply dated 14-11-2011 stated as under:- "With reference to the above, under instruction and on behalf of our above named client we submit the following for your honour's kind and sympathetic consideration: 1.0 The applicant is assessed under the name and style of BBEL STPL (JV), Rajkot. The applicant is doing the infrastructure work assigned by the Government National Airport Authority for constructing Airport runways, etc. However, your honour intends to withdraw the claim of deduction u/s.80IA(4) of the IT Act, amounting to Rs.49,46,122/- in view of the latest amendment in the explanation 13 of section 80/A(4). 2.2 In this context, it is to be stated that the applicant is very much....

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....n technical knowledge of how to develop and lay roads, dams, bridges etc. and it has its own technical as well as managerial pool of manpower for the same. Proofs regarding technical and financial capacity of the contractor are required to be furnished to the Government. In some cases, even the design of the infrastructure project is first prepared by the applicant and then submitted to the Government. The applicant has purchased and employed its own materials for development and construction of the infrastructure facility. Sub letting is also not permitted. Although, it was required to act under a contract, it has done so as it is required to honour a contractual obligation with the Government but at the same time, neither the contract nor the Government imparted the technical know how or resources to the assessee, as all these factors of business development have been factually imparted and looked after by the applicant itself under its own acumen as an entrepreneur. The entire planning of its business as also the work has been done by the applicant and not by the Government. The specifications of the work may have been prescribed in the contract in advance, but however building ....

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....e same in past by the Department cannot be said to be engaged in the business of works contract only. v) Merely because the applicant has acted under a Government contract, it cannot be denied deduction nor can it be held that it has acted only as a works contractor. This is more so because one of the fundamental pre-conditions of sec. 80IA(4) is that the infrastructure facility must have been developed or developed, operated and maintained by entering into a contract with the Government. Therefore, contract with the Government is a sine qua non for becoming eligible for the deduction. Therefore, contracting by itself cannot make the applicant a works contractor. In our country all lands and infrastructure other than those privately owned, belong to the State and hence one can develop infrastructure facility only under a government mandate which is given in the form of a contract. Once there is a contract for a new facility, there are bound to be obligations under the contract which include obligations of, inter alia, observing the specifications of the infrastructure facility. Hence, although there may be such pre decided specifications in the contract, the execution ther....

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..... The well established rule of consistency also lays down that if a deduction has been granted in earlier years after due application of mind, the same should not be disturbed ordinarily. For this proposition, reliance is placed on several decisions of. High Courts and Tribunals reported at - 104 TTJ 881 (Del), 289 ITR 318 (Del), 245 ITR 492 (Del), 311 ITR 346 (P&H). Reliance is placed on the decision of Apex court in the case of Radhasoami Satsang vs. CIT- 193 ITR 321 (SC) wherein the Hon'ble Court has stated that in the absence of any material change in circumstances of the case, a different view than that taken in earlier years, could not be taken. . (x) It is pertinent to mention here that once the applicant becomes an eligible undertaking under the substantive and primary provisions of sub section- (4), namely that of developing of new infrastructure facility, it cannot be denied deduction on the ground of operating and maintaining of the same. Reliance is place upon the decision in the case of Om Metal Infraprojects Ltd. (2009) 26 DTR (Jp) 359. The applicant relies upon the order of the Hon'ble ITAT, Rajkot Bench, Rajkot passed in the case of M/s. KC....

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....ng Officer held that the assessee is not eligible for deduction out of business income under the provision of the said section. Against the order of the Assessing Officer, the assessee filed the appeal before the Ld. Commissioner of Income Tax(A). The Ld. Commissioner of Income Tax(A) has allowed the deduction and the decision of the the Ld.CIT(A) is reproduced as under "3.3 The case of the appellant is identical. In the present case also, though the appellant entered into a contract with Government, or Semi- Government Authorities, but such a contract is a part of the primary condition mentioned in Section 80IA(4), and further, the nature of work carried out by the appellant shows that the appellant not only directly carried out work as per the of allotted job, but it also employed various resources of its own by way of machineries, technical knowledge, manpower, material etc. and also funded the same out of it own capital and borrowings. The appellant was required to furnish guarantees, including free maintenance of infrastructure facilities. All these factor combined clearly show that the appellant assumed considerable risk in the capacity of a businessman, and thus, al....

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....sition in the above-referred judicial decisions, it is held that the appellant is entitled/to a deduction u/s.80IA(4) and accordingly the AO is directed to allow the same." 5. During the course of appellant proceeding before us the learned DR contended that the learned CIT (A) erred in law and on facts in deleting the addition made by the assessing officer. The Ld. CIT(A) also placed reliance on the order of the assessing officer. He also stated that the purpose of deduction is to provide incentive to the assessee when he invest and built and develop the project through his own investment. He also placed reliance on the judicial pronouncement in the case of B. T. Patil & Sons Belgaum Construction (P) Ltd. v/s ACIT (2010) 35 SOT 171 (Mum). On the other hand the learned counsel has placed reliance on the order of learned CIT(appeal). He also submitted a copy of the decision rendered by the ITAT Rajkot Bench, Rajkot in the case of M/s Ketan Construction Ltd. v/s DCIT ITA No.1107/RJT/2010 and stated that the case of BP Patil & Sons Begaum Construction has already been dealt and distinguished in this order. The issue is covered by the decision of the Hon'ble ITAT, Rajkot Bench, R....