TaxTMI 
TaxTMI 
2023 (12) TMI 971
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....d as a contractor not developer. 1.1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating the fact that after the amended provisions of the section 80-IA, a person who enters into a contract will not be eligible for the tax benefit u/s 80-IA of the Act 1.2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating the fact that the company is not in the business of development of the infrastructure project but is merely executing the various welldefined civil construction activities as per the specifications, designs and plans provided by the developers of the infrastructure project. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in allowing enhanced deduction u/s 801A(4) of the Act on the additional income relying upon the Circular of CBDT and earlier decisions without appreciating the fact that in the present case no link has been established that this enhanced profit as a result of survey operation is a part of eligible business profit and the fact that these profits were not reported in audited books. ....
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....sued. Thus, the AO disallowed the claim of the assessee by observing as under: 2.12 After the substitution of the Explanation, the legal position stands further fortified to the effect that the assessee deriving profit and gains from work contracts are not eligible for deduction under the section. The case laws relied upon by the assessee do not help in its case as either they have been rendered on different facts or after the amendment In Explanation below Sub section (13) of Sec. 80-IA by the Finance (No.2) Act 2009 they have been rendered ineffective. From the discussion and facts and circumstances of the instant case, it is proved that the assessee company has acted as "Work Contractor" and not as "Developer" and the income on which deduction u/s.801A(4) of the Act has been claimed was related to the contract works executed by the assessee. Thus, it is proved that the works carried out by the assessee company were not as Developer but as a Work Contractor and by virtue of agreements, the assessee company received the payments from time to time by raising the bills. 2.13 Further, the assessee company has also relied upon the recent citation of Hon'ble IT AT....
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....f work carried out by the assessee and the clauses of the agreements as well case laws also found that the assessee developed the infrastructure projects/facilities as a developer and not as work contractor as alleged by the AO. The relevant observation and finding of the learned CIT(A) in this respect are at pages 55 to 77 of his order. 7. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 8. Both the learned DR and learned AR before us vehemently supported the order of the respective authorities below to the extent favourable to them. 9. We have heard the rival contentions of both the parties and perused the materials available on records. Admittedly, the assessee has claimed deduction under section 80IA(4) of the Act on 13 different projects of infrastructure facilities which has been disallowed by AO. On appeal by the assessee, the learned CIT(A) allowed the claim of deduction by following the order of the predecessor CIT(A) in own case of the assessee from A.Y. 2004-05 to 2011-12 and 2013-14. The learned CIT(A) also given categorical finding that there were no new projects. As such, the deduction on all the 13 projects were claimed ....
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....build-operate-transfer) or the BOOT (build-own-operate-transfer) concepts have been utilised for developing new infrastructure. Applying commercial principles in the operation of infrastructure facilities can provide both managerial and financial efficiency. In view of this, it is proposed to allow a five year tax holiday for any enterprise which builds, maintains and operates any infrastructure facility such as roads, highways, or expressways or new bridges, airports, ports and rapid rail transport system on BOT or BOOT or similar other basis (where there is an ultimate transfer of the facility to a Government or public authority). The enterprise must have entered into an agreement with the Central or State Government or a local authority or any other statutory authority for this purpose. The period within which the infrastructure facility has to be transferred needs to be stipulated in the agreement between the undertaking and the Government concerned. The tax holiday will be in respect of income derived from the use of the infrastructure facilities developed by them. 11.3 Hence, the legislature inserted sub-section 4A to section 80-IA of the Act w.e.f. 1st Apri....
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....ct to a person who executes a project which is in the nature of works contract. 11.8 Coming to the facts of the case on hand, we note that the one of the thrust of the Revenue for denying the benefit to the assessee under the provisions of section 80IA(4) of the Act was revolving around the fact that the assessee is not a developer of infrastructure facility. It is only engaged in the business of work contract awarded to it. The AO also invoked the explanation below to sub section 13 of section 80IA of the Act. Likewise, the assessee has not entered into any contract with Central/ State Government or local authority as specified under section 80IA of the Act. All the allegations of the AO for denying the benefit of deduction under section 80-IA of the Act have been elaborated in the preceding paragraphs. 11.9 To our understanding, the Revenue before invoking the explanation below to section 80IA(13) of the Act was to appreciate the difference between a 'developer' and a 'works contractor'. Generally, in common parlance a person is referred to as 'developer' who undertakes the project to develop and construct at its own responsibility and ta....
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....ke any responsibility for any such kind of loss except where it is responsible. (i) That a developer stands as guarantor for the project developed by it and in the event of any defect in the project, he shall provide the remedy for the same. (j) That a developer shall be exposed to the penalty if it contravenes any of the clauses appearing in the contract awarded by the Government. Thus, the developer is responsible to complete the construction in a specified manner failing which it would be responsible for the consequences of delay/any other fault attributable to it. (k) That a developer shall undertake to maintain safety, security and protection of the environment. (l) That a developer shall provide and maintain at his own cost, all lights, guards, fencing, warning signs and watching, when or where necessary. 11.10 These are few broad sample qualities/ parameters of a developer through which the character of a developer can be defined. 11.11 On the other hand, a 'contractor' is a person who undertakes work on a contract basis. He does not assume risks and responsibilities like that of a developer. He merely carries out the work....
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....see. The details of the same stand as under: ************* 11.16 On the detailed analysis of the above project, we find that the assessee meets the criteria laid down for the developer as discussed above. As such, the assessee was to make detailed drawings, design calculations/fabrication etc. at its own cost. Further, the assessee is also responsible for arranging methods of the execution of work along with detailed drawings, sketches, furnishing the details of sufficient plants, equipment, and labor. The assessee has to arrange the land for a temporary site office, office laboratory, parking yard, store yard, labor camp, workshop etc. The assessee was duty bound to protect the environment on and off the staff site and avoid the damage or nuisance etc. to the persons or to the property of the public. The assessee was to maintain at its own cost sufficient experienced supervisory staff required for the work and arrangement of their housing. The assessee was to have the field laboratory for the purpose of testing materials. The assessee has to arrange electric power and water supply. The assessee was also under the obligation to provide traffic safety arrangements ....
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....ligible for the deduction under section 80-IA of the Act. Thus, the above parameters may act as guiding factors to decide whether a contractor may be considered as a deemed developer eligible for deduction under section 80-IA(4) of the Act. Admittedly, the assessee was providing and undertaking the risk for carrying out the activity of development of the infrastructure facility in the manner as discussed above. The assessee was also taking technical risk, subject to liquidated damages, providing technical manpower. 11.20 Further, in case of Asstt. CIT v. Pratibha Industries Ltd. [2012] 28 taxmann.com 246/[2013] 141 ITD 151 (Mum.), the Hon'ble Mumbai Tribunal held that where the assessee had invested his own fund, it would be assumed that the assessee was acting as a developer and not as a contractor. Relevant extract of the above decision is reproduced as under: There are letters exchanged, written by the assessee and various Government departments, which indicate that the assessee was awarded the job, wherein the assessee had placed the bank guarantee, against the tendered cost, which proved beyond doubt that the assessee, itself was doing the development of ....
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.... a proper and effective manner, we are of the opinion that literal interpretation, if given, may give rise to an anomaly or absurdity which must be avoided. So as to enable a superior court to interpret a statute in a reasonable manner, the court must place itself in the chair of a reasonable legislator/ author. So done, the rules of purposive construction have to be resorted to which would require the construction of the Act in such a manner so as to see that the object of the Act fulfilled; which in turn would lead the beneficiary under the statutory scheme to fulfill its constitutional obligations as held by the court inter alia in Ashoka Marketing Ltd." 11.24 In view of the above, the explanation below to section 80IA(13) should be read in such a way that the object of the provisions of section 80IA (4) of the Act should not be defeated. As discussed above, the sole purpose of the benefit of deduction under section 80IA(4) of the Act was to bring the development in the area of infrastructure facilities for which the country was in deficient. Thus, if the literal meaning is drawn from the word of the developer and accordingly the deduction of the benefit given under sec....
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....consistent with the dominant object which it seems to sub-serve, (c) To provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) An Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming a hindrance in the interpretation of the same. 11.27 There are, however, other judicial pronouncements of the Hon'ble Supreme Court suggesting that though the rule that an explanation is meant only for filling a gap in the statute or removing any ambiguity or clearing a mischief, such rule of normal application is not unknown to exceptions. 11.28 From the above, it is transpired that the condition of being developer of the infrastructure facility was already embe....
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....-1995. After section 80-IA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility which fulfils certain conditions. Those conditions are : (i) Ownership of the enterprise by a Company registered in India or by a consortium; (ii) An agreement with the Central or State Government, local authority or statutory body; and (iii) The start of operation and maintenance of the infrastructure facility on or after 1- 4-1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1-4-1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object and intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirety would lead to the conclusion that the deduction is available....
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....he case of Katira Construction Vs Union of India reported in 352 ITR 513 wherein the said matter was decided against the assessee. In our considered view, the matter before the Jurisdiction High court was that of constitutional validity of the insertion of explanation as mentioned hereinabove and decided the same in favour of the revenue to this effect that such explanation brought with retrospective effect from 01.04.2000 by the Finance Act No. 2 of 2009 was very well within the competence of Parliament. As such there was no issue raised whether the assessee is acting as a developer or contractor before the Hon'ble Jurisdictional High Court neither, the said issue has been decided in the said judgement. 11.34 The organizations which have awarded the contract are 100% owned by the State Government and therefore it cannot be said that these are private parties. As such the organization awarded the contract to the assessee are the arms of the State Government. 11.35 At the time of hearing, both the learned DR and the AR before us submitted `that projects in respect of which the deduction was claimed by the assessee were of identical nature. Therefore, we have an....
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....xpenses for the relevant period. In other words, the business income of the assessee company would stand enhanced by Rs. 18 Crore which is already reflected in Computation of Total Income and in the Return filed pursuant to notice in this regard. Therefore, consequently the claim for deduction u/s 80-1A(4) of the Act ought to be increased proportionately. 6.4 It is settled position of law that any addition in Business Profits shall invariably lead to enhancement of deduction under Chapter VI-A. Jurisdictional Gujarat High Court has in case of ITO Ward 5(1) vs Keval Construction held that any disallowance would ultimately result in increase in assessee's profits from business which is eligible for profit linked incentive. And therefore, enhanced profits consequent to disallowance is eligible for profit linked deduction under Chapter VI-A of the Act. Hon'ble jurisdictional high court while dismissing appeal of the revenue noted that 5. Having heard counsel on both the question today in this appeal, we find no error in the Tribunal's ultimate conclusion. Even if a certain expenditure which was incurred by the assessee for the purpose of developing housing....