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TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 667
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....ction u/s.80IA(4) as the appellant failed to fulfill the condition specified u/s.80IA(4) of the Act. The order passed by the Id. CIT(A) is totally unjustified on facts as also in law and claim of deduction u/s.80IA(4) may kindly be directed to be allowed. 3. Your Honor's appellant craves leave to add, amend, alter or withdraw any or more grounds of appeal on or before the hearing of appeal." 3. The brief facts of the case are that the assessee is engaged in the business of infrastructure project development & civil construction. It filed return of income for the year under consideration declaring total income at Rs. 1,20,47,190/- and claimed deduction of Rs. 1,04,08,739/- u/s 80IA(4) of the Act. During the assessment proceedings, the AO denied the claim of the assessee u/s 80IA(4) of the Act on ground that the assessee is not a Developer but is a Contractor and therefore not eligible for deduction u/s 80IA(4) of the Act. The AO further alleged that the assessee has not maintained separate accounts for each infrastructure facilities and hence assessee failed to fulfill the conditions prescribed u/s 80IA(4) of the Act and therefore he rejected the claim of deduction of Rs....
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.... the facility and execution of works contract awarded by an agency engaged in developing such facility. 3. The explanation must be seen as one being in the nature of plain and simple explanation and not either adding or subtracting anything to the existing statutory provision. 4. The legislature by way of impugned amendment has distinguished between the cases of developing/operating and maintaining/developing, operating and maintaining any infrastructure facility from the works contract awarded by any person, be it the central or state government, executed by the undertaking or enterprise seeking such an exemption. There is an intrinsic difference between developing and infrastructure facility and executing a works contract. 5.4 In the present case, it is an undisputed fact that the appellant has awarded works contract by the State Government. The appellant's contention that because of the investment made and the cumulative nature of work carried out by him, he is a developer and hence entitled for deduction u/s. 80IA(4), has no force in light of the principles laid down by the Hon'ble Gujarat High Court in the case of Katira Construction (supra).....
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....operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: The above provision has been further clarified by way of explanation under sub-section (13) of section 80-IA(4) of the Act, with retrospective effect from 01-04-2000, which reads as under: Explanation.-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 sub-section (4) which is in the nature of a works contract awar....
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....a person who enters into a contract with another person [i.e., undertaking or enterprise referred to in section 80-IA] for executing works contract, will not be eligible for the tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-2001 and subsequent years. 5.3 A reading of the various Statutory provisions read with the Memorandum brings out the following salient features of claim of deduction under section 80-IA(4) of the Act: Firstly, purpose of introduction of beneficial provisions under section 80- IA(4) of the Act is for encouraging private sector participation. Secondly, only investment in development of the infrastructure sector is eligible for deduction under section 80-IA(4) of the Act and benefit is not available for the persons who merely "executes" the "civil construction work" or "any other works contract". Thirdly, where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA(4) of the Act. Fourth, the Income Tax Act does not defin....
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....f the Act (because that would be defeating the very purpose for which section 80-IA(4) of the Act was introduced), but the benefit is sought to be denied only to persons who merely "execute" works contract. Therefore, in cases where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, benefit under section 80-IA(4) of the Act would be available. Therefore, a co-joint reading of all the provisions reproduced above, read with the memorandum, points to the fact that the benefit under section 80-IA(4) of the Act continues to be available to works "contractor/civil contractor" engaged in "development" of the project by making the investment and himself executing the development work and is only sought to be denied to those class of persons engaged merely in "execution" of works contract/ civil construction work. 5.5 Now, in the absence of any definition of "works contractor" with reference to section 80-IA(4) of the Act, the issue for consideration is what class of cases would fall under the definition of "mere execution" of works contract and hence not eligible for benefits under section 80-IA(4) of the Act which case....
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.... to undertake the maintenance of the infrastructure for a period of 12 months or more after handing over of the project to the Government, Sixth, if during the period of construction any damage is incurred and whether the contractor shall be responsible for the same i.e. whether the assessee has to furnish a security deposit to the Employer and indemnify the employer of any losses/damage caused to any property/life in course of execution of works Seventh, whether the contractor was responsible for the correction of defects arising in the works at its own cost and responsibility. 5.7 To sum up, (i) first to see any new infrastructural facility has been put in place (and not mere repairs/ restoration/ upgradation/ strengthening etc. is done of the existing facility) (ii) In addition to works contract, the assessee undertakes addition responsibilities and risks attached to the project being undertaken, both financial risk as well as undertaking responsibility towards various other obligations attached towards successful completion and handling over the project including post completion performance guarantee, then he would, in our considered view, be eligible to deduction u/s 80-IA(....
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.... contract covers various liabilities in respect to the assessee for any damage done in or outside of work. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying or repairing of an existing Road would not be classifiable as a new infrastructure facility for this purpose. In the instant facts, looking into the fact that the project involved four laning of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project is eligible for deduction u/s 80-IA(4) of the Act. Project 2: Executive Engineer Gandhinagar :'G" Road: As per the terms of agreement, we observe that this is a project undertaken for converting existing h....
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....he Act in respect of revenue is earned from project 5 above. Project 6: MPRRDA P.I.U. No. 1 Pac 1951-A: The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years. Further, the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project. Looking into the totality of facts of the instant project, we are of the considered view that the assessee has brought in place a new infrastructure facility as envisaged /s 80-IA(4) of the Act and further in view of the terms and conditions highlighted above, the assessee is eligible for claim of deduction /s 80-IA(4) of the Act in respect of revenue is earned from project 6 above. Project 7: MPRRDA P.I.U. No. 1 Pac 1958: The scope of work in respect of this project is conversion of Kutcha road to pucca road along with necessary maintenance works for a period of five years. Further, the terms of the contract, the assessee would be required to furnish performance security and additional security in respect of this project. Looking into the totality of facts of the ins....
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....se of section 80-IA(4). However, simply relaying or repairing of an existing Road would not be classifiable as a new infrastructure facility for this purpose. In the instant facts, looking into the fact that the project involved four laning of the existing roads and coupled with the terms of contract, in our considered view, the revenue from this project No. 9is eligible for deduction u/s 80-IA(4) of the Act. Project 10: NBCC (Package XXVV): The scope of work in respect of project number 10 is construction of link road from Lakhpat to BP-1175 at Rann of Kutch, Gujarat for the length of 24.840 km. As per the terms contract, the assessee was liable to mobilise all assessee planned/machinery and equipment as required for the successful and timely completion of work (page 263 of paper book). Further, the assessee was required performance Bank guarantee equivalent to 5% of the contract value (page 263 of the paper book). In addition, the assessee was also required to get security deposit/retention money from each earning bill equivalent to 5% of the value of each running bill (page 275 of paper book). Further, as per the terms of the contract the responsibility of mobilisation of ....
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.... that no new road has been brought into existence and further there is also no expansion/widening of the existing roads. Therefore, in respect of project number 12, we are of the considered view that the assessee has not brought into existence/developed any new "infrastructure facility" and hence he is not eligible for claim of deduction under section 80-IA(4) of the Act. As discussed above, in order to be eligible for claim of deductionunder section 80-IA(4) of the Act, the primary condition which needs to be met is that the assessee should have developed/brought into existence of a new infrastructure facility. In our considered view, mere strengthening of the existing roads would not qualify as bringing into existence in a new infrastructure facility so as to be eligible for claim of deduction under section 80-IA(4) of the Act. Accordingly, in our considered view, the assessee is not eligible for claim of deduction under section 80-IA(4) of the Act in respect of revenues from project number 12. Project 13: Executive Engineer R&B Division Bhuj (Mundra PKG-3): A perusal of the terms of the contract in respect of project 13 indicates that scope of work in this project is on....