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2024 (2) TMI 580
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....aw in the final order of assessment, the AO has erred in not allowing brought forward loss of Rs. 13,65,60,299/- as declared by the appellant in the Revised Computation of Income (filed during assessment proceedings on 01.09.2021) on the ground that brought forward loss for the AY 2017-18 has got converted into profits after additions made for the said assessment year and has also erred in keeping the loss at Rs. 13,65,60,299/- instead of loss of Rs. 14,22,89,453/- for the AY 2017-18 as declared by the appellant in the Revised computation of income for the AY 2017-18 filed during assessment proceedings on 04.09.2021. 3. That on the facts and in law the AO / DRP have erred in disallowing deduction of Rs. 66,14,49,535/-u/s 80IA(4)(i) claimed by the appellant in the return of income. 3.1. That on the facts and in law the AO/DRP have erred in holding that: (a) Contractees, who have allotted work of infrastructural facility to the appellant, are not recognised u/s 80IA(4)(1)(b), and (b) Appellant is merely a contractor and not a "developer". 4. That on the facts and in law the AO has erred in making an addition of Rs. 19,40,67,731/- on accoun....
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.... 2. When the appellant's Application for Early hearing was called out, it was a common ground between the parties that the substantive issues involved in this appeal are squarely covered by the decisions of the Tribunal in the assessee's own case for assessment years 2016-17 and 2017-18 vide ITA No. 705/Del/2021 dated 30.11.2022 and ITA No. 2283/Del/2022 dated 3.11.2023 respectively. 3. In this view of the matter, with the consent of both the parties, the extant appeal is being disposed-off accordingly. 4. Briefly stated, the assessee firm is a joint venture (JV) between two infrastructure companies, namely BSCPL Infrastructure Ltd. and C&C Construction Ltd. It is engaged in construction of roads, toll roads, highways and urban infrastructure including water, sanitation and sewage, power/ telecom transmission towers, commercial buildings, etc. For AY 2018-19, the assessee filed original return on 27.11.2018 declaring total Loss income at Rs. (-) 3,56,94,313/- and deemed total income of Rs. NIL u/s. 115JC of the Act. Its case was picked up for complete scrutiny through CASS. Hence, notice u/s. 143(2) of the Act was issued on 22.09.2019 which was duly served upon the assesse....
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.....3 13,14,55,586/- Disallowance u/s. 36(1)(va) r.w.s. 2(24)(x), as discussed in para 2.5.4 1,08,85,080/- Less Disallowance of deduction claimed u/s. 80IA as discussed in para 2.5.5 NIL Total assessed income Rs. 49,81,91,872/- 4.3 The claim of deduction under section 80IA(4) was denied and taken as 'NIL'. Accordingly, the final assessment was completed on 29.07.2022 by the AO under section 143(3)/ 92CA/ 144C(13) of the Act. 5. Aggrieved thereby, the assessee is in appeal before the Tribunal. 6. Ground No. 1 is general in nature not requiring adjudication. Ground No. 8 relating to disallowance of Rs. 1,08,85,080/- on account of late deposit of EPF has not been pressed. It is, therefore dismissed as not pressed. 7. Now, we proceed to adjudicate the remaining grounds. 8. Ground No. 2 relates to not allowing brought forwards loss of Rs. 13,65,60,99/- as declared by the assessee in the revised computation of income filed during the assessment proceedings on 1.9.2021. On this issue, Ld. AR submitted that recently the ITAT, Delhi vide its order dated 03.11.2023 in assessee's own case for AY 2017-18 in ITA No. 2283/Del/2022 has decid....
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..... The Ld. AO has discussed this issue in para 7 and after obtaining justification for the said claim from the assessee recorded his findings in para 7.2 to 7.7 of his order. The Ld. AO found that during the year the assessee has undertaken various projects including one in Afghanistan and has submitted auditor's report in Form 10CCB as required under section 801A(7) of the Act. In para 7.3 the Ld. AO gave details of 9 projects containing therein name of the project, employer, nature of project and the amount of deduction claimed under section 80IA of the Act. According to the Ld. AO two of the contractee companies, namely Power Grid Corporation of India Ltd. and Ircon International Ltd. are neither Central Govt. nor State Govt. nor a Local Authority nor any other statutory body. Therefore basic condition for claiming deduction under section 80IA(4) is not satisfied in respect of their 5 projects viz. Danapur ROB, Subansari, Ganga Bridge Digha, Ganga Bridge Sonpur and Muzaffarpur ROB. In para 7.4 the Ld. AO observed that the assessee JV is the contractor of Mokama-Munger Project by virtue of EPC Agreement entered on 10.12.2010 between M/s. Mokama- Munger Highway Limited (Project Com....
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....pointed out that except Soanbarsa Project and SH-83 Project which are new projects, all contracts are same as those of the preceding year. According to him, the Ld. AO has not disputed that these two new projects have also been executed in a like manner and that there is parity of facts. 8.3 The Ld. AR contended that in para 4.5.3 of directions the Ld. DRP has accepted that the Ld. AO has gone through the details of the contract agreement for each of the 9 projects undertaken by the assessee in the year under consideration during the course of assessment proceedings. There is thus no dispute on facts. 9. The Ld. CIT-DR defended the order of the Ld. AO/DRP. He stated in his written submission that the assessee did not claim deduction under section 80IA in its original return filed on 30.11.2017. Deduction was claimed by filing revised return which is not in accordance with law. 9.1 The Ld. CIT-DR refuted the contention of the Ld. AR that the issue is covered by the decision of the Tribunal for AY 2016-17. The Ld. CIT-DR submitted that deduction for two projects, namely Soanbarsa and SH-83 has been claimed in AY 2017-18 for the first time, hence it cannot b....
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.... Ld. AO analysed the terms and conditions of the agreement between Chief Engineer PWD Meghalaya Shillong and the assessee (1st project) only and did not dispute the statement of the assessee that terms and conditions of all other contracts are akin to that of agreement in project case of Meghalaya Shillong. The Ld. AR contended that the Tribunal in its order for AY 2016-17 noted in para 21 that all the agreements are on record of the Ld. AO and that the grounds for denial of deduction under section 80IA are also same in AY 2016-17. The Tribunal considered all the grounds taken by the Ld. AO/DRP for denial of deduction under section 80IA of the Act and recorded its finding rejecting all of them. Therefore, it cannot be said, as argued by Ld. CIT-DR that the same issue in AY 2017-18 is not covered by the decision of the Tribunal for AY 2016-17. The Ld. AR clarified that both the Ld. AO and Ld. DRP had taken Shillong Project as a lead case for arriving at the conclusion that the assessee is not a developer. However, the Tribunal recorded its findings thereon in its decision in AY 2016-17. 10.2 The Ld. AR further clarified that in AY 2017-18 copies of all the project agreement....
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....in favour of the assessee by the decision of the Tribunal in assessee's own case in ITA No. 705/Del/2021 rendered on 30.11.2022 (copy placed at pages 361-423 of the Paper Book). Disagreement of Ld. CIT-DR is based on the only premise that during the year under consideration deduction under section 80IA has been claimed for two projects viz. Sonbarsa and SH-83 for the first time. This is not at all a valid reason. We have perused the reply filed by the assessee in response to Ld. AO's notice under section 142(1) of the Act (copy at pages 581-615 of Paper Book) during assessment proceedings. The assessee submitted that it is engaged in the business of development of infrastructure facility and that it has claimed deduction under section 80IA of the Act and gave justification therefor. For ease of understanding we reproduce the same hereunder:- "1. Point No. 6 (Deduction u/s 80-1A): With regard to deduction claimed u/s 80-IA, we have state that the assessee is engaged in the business of development of Infrastructure Facility and has claimed deduction u/s 80-IA. With regard to the deduction u/s 80-IA, we have to submit as follows: Section 80-IA: ....
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....otwithstanding anything contained (6) Notwithstanding anything (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub- section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) --------------------------- (9) --------------------------- (10) ------------------------- (11) -------------------------- (12) -------------------------- (12A) ------------------------ (13) -------------------------- 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 awarded by any person (including the Central or State Government) and executed by the undertaking or enterpris....
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....td. Casting RCC Road deck on erected steel truss of rail- cum-road bridge across river Ganga at Patna 74.07.761 7. Muzzafarpur ROB Ircon International Ltd. Construction of Road over Bridge both railway span and adjacent approaches span including reinforced earth wall/retaining wall 1,14,58,821 8. Soanbarsa NHAI (Through Project Company North Bihar Highway Ltd. Augmenting the existing road from km 2.8 to km 89 on Muzaffarpur- Sonbarsa Section of National Highway No.-77 in the State of Bihar by Two-Laning on design, built, finance, operate and transfer. 68,95,11,290 9. SH-83 Bihar State Road Development Corporation Ltd. Two laning of Baghi-Bardiha- Barbigha Road (SH-83) from 0.000 to 37.646 km. 8,90,99,286 Total 226,31,98,158 The assessee complies with all the conditions to claim deduction u/s 80IA as enumerated above. The same has been explained as below: A> AWARD OF WORK BY CENTRAL GOVERNMENT. STATE GOVERNMENT AND OR LOCAL AUTHORITY OR STATUTORY BODY: Your goodself would observe from the above said details of all the projects that projects have either been awarded by St....
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....rs may also observe from the copy of the agreement with IRCON International (submitted separately) that the Tender Documents were issued by the Ministry of Railways. IRCON International has executed the contracts under the Ministry of Railways. Organisational Structure of Ministry of Power: We are also submitting herewith relevant pages of the Annual Report for the FY 2015-16 of Ministry of Power. It explains complete Organisation Structure of Ministry of Power. Your Honour would observe that Power Grid Corporation of India Ltd. is a part of Ministry of Power as depicted in the Organisation Structure. Your Honour would further observe the purpose of incorporating the above said PGCIL as detailed below: Power Grid Corporation of India Limited (PGCIL) Power Grid Corporation of India Limited (POWERGRID) was incorporated on October 23, 1989 & has been the notified Central Transmission Utility since 1998. The Corporation is responsible for integrated development of inter-state transmission system in the country for evacuation of power from central sector projects, system strengthening scheme etc., and for implementation of transmission projects assign....
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....nt Resolution that the assessee would collect toll upon completion of such project. Upon the completion of the project period, the entire infrastructure so developed would vest in the Government. Signatory to the applicant may be GSRDC for all practical purposes and in essence, it was the agreement between the assessee and the State Government. We are conscious that condition (b) of subsection (4) of section 80IA requires the assessee to have entered into agreement with the Central Government or a State Government or a local authority or any other statutory authority. However, rigid interpretation of this provision as canvassed by the Revenue would only result into the assessees involved in genuine infrastructure development projects for and on behalf of the Government or local authorities would be denied the deduction merely on the ground that the State Government had created a nodal agency for working out the finer details and nitty- gritty of such infrastructure development. The purpose of creating such nodal agencies as well as the legislative intent of granting deduction to the assessee engaged in developing, maintaining or operating any infrastructure projects for Central or ....
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....y and crucial components of a Railway System) back to Indian Railways for maintenance and operation, and shall ultimately transfer it to Indian Railways. 3. This is to clarify that, the said (BOLT) Scheme of the Indian Railways shall be eligible for the benefit of section 80-IA of the Income-tax Act, 1961, since it is not legally possible for any enterprise other than the Indian Railways to maintain and operate a Railway System. However, this concession shall be applicable only to an infrastructure facility meant for development of Rail System and not to any other infrastructure facility including Rolling Stocks." Circular: No. 733, dated 3-1-1996. Your Honour would observe from the above that Hon'ble CBDT has allowed deduction u/s 80-IA on the projects awarded by Indian Railway under BOLT System other than BOT & BOOT Systems. This clearly shows the intent of the legislature that projects awarded by PSUs / PSES duly qualify for deduction u/s 80-IA as these PSUs & PSES are incorporated by Central/ State Governments for carrying out the projects of the Government. Central/ State Governments or Statutory Bodies do not award any contract directly....
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....ity subject to satisfaction of the conditions laid down in the section. The Explanation to sub-section 80- IA(4)(i) states that for the purpose of this clause, infrastructure facility means inter alia:- "(a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; The issue has been examined by the Board. It has been decided 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)(). However, simply relaying of an existing road would not be classifiable as a new infrastructure facility for this purpose. Thus as per the Circular issued by the CBDT, it is settled that widening of existing roads by construction of additional lanes of a highway shall be considered to be new infrastructure facility for the purpose of Section 801A(4)(1) of the Act. From all the agreement, it can be deduced that the assessee has actually carried out the work of widening/ improvement/ upgradation of roads and construction o....
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....is a labour contract under which the contractor merely employs his labour as per the directions of the contractee. Further, attention is invited to relevant extracts of section 194C of the IT Act: "(iv)" work" shall include- (a) Advertising; (b) Broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) Carriage of goods or passengers by any mode of transport other than by railways; (d) Catering; (e) Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer." Thus as per section 194C of the Act also, "works contract" does not include a contract wherein, the contractor in addition to employing labour, procures material from a third party. Thus, contracts involving mere labour of the contractor are included in the purview of "works contract". Hon'ble Supreme Court in case of Associated Cement Co....
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...., and qualitative improvement in, infrastructure (viz, expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract." Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case 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 of the Act. In contrast to this, 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 tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April 2000 and will accordingly apply in relati....
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....er the land or the project. However, in some case there can be a situation that the developer has to take the approval of the design from the Government/contractee but that will not change the status of the developer as works contractor. (b) That the first phase for the developers is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. (c) That a developer has to execute managerial responsibility by engaging the requisite qualified/ skilled / semi-skilled staff and the labourers including the other supporting staff. As the developer under takes the complete responsibility of the manpower to be used in developing the infrastructure facility. (d) The assessee has to utilize its expertise, experience including its technical knowhow in the development of the project. (e) That a developer has to execute financial responsibility. A developer is therefore expected to arrange finances either by private placement or from financial institutions for the ....
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....as the contractors are those persons who merely execute part of these functions on behalf of developer and do not own any risks and responsibilities of the work. In such cases, the contractors may not be eligible for the deduction under section 80-IA of the Act, as they are not developing any infrastructure facility but only providing assistance to the actual developer. 13.4 In view of the above, we note that it is possible to ascertain whether a civil construction work is assigned on development basis or contract basis only on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it can be ascertained about the nature of the contract assigned that whether it is a "work contract" or a "development contract....." TRUE TEST THEREFORE IS WHO IS CARRYING ON ENTREPRENEUR RISK. The above proposition has also echoed by the decision of Kolkatta ITAT in case of ACIT vs Ho Hup Simplex reported in (2018) 92 taxmann.com 106(Kol) and it is held as under: "6.15 We find that like any other entrepreneur who employs his material, plant, machinery, labour etc in a project and undertakes risk, the assessee was also ex....
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....chinery, labour etc in a project and has undertaken risk. This has been narrated in detail in for each project as follows: Before detailing the fulfilment of the above said conditions, we are giving hereby flow chart of getting construction contracts from NHAI, PWD, IRCON, DFCC, PGCIL etc. ELOW CHART FOR OBTAINING CONSTRUCTION CONTRACTS: • Different Ministries such as Road & Transport Ministry, Railway Ministry, Power Ministry etc. decide about the development of infrastructure facility as per their yearly plan and as provided in the budget every year. • According to the plan, these Ministries give work to different PSUs/PSES or other autonomous bodies - PWD, NHAI or other PSUs. • These PSUs/ PSES/ Autonomous Bodies float the Tender on the leading newspaper and on their web-site. • Interested parties collect the tender documents from the concerned offices. This tender documents contains, specifications, standards (including what type of material to be used), schedule, drawings of the entire project. • The department will also provide the Estimated Project Cost (bench mark). • Th....
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....010-11-172. Detailed Project Description: Clause 9 of the Contract Data contains detailed project description as follows. 9. Work consists of Earthwork, GSB, WMM, DBM, BC, Bridges, Culverts, Retaining/ Breast Wall, Road Sign etc. The work shall, inter-alia, include the following, as specified or as directed. (A) Road Works Site clearance; setting-out and layout: widening of existing carriageway and strengthening including camber corrections; construction of new roads/ parallel service roads: bituminous pavements remodelling/construction of junctions, intersections, bus bays, lay byes; supplying and placing of drainage channels, flume, guard posts and construction/extensions of cross guard other related items: drainage works, bridges, approaches and other related stones; road marking, road signs and kilometre/ hectometre stones; protective works for roads/ bridges; all aspects of quality assurance of various components of the works; rectification of the defects in the completed works during the Defects Liability Period: submission of "As built" drawings and any other related documents; and other item of work as may be required to be carried out fo....
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....he Contract Data to carry out the functions stated in the Schedule or other personnel approved by the Engineer. The Engineer will approve any proposed replacement of key personnel only if their qualifications abilities and relevant experience are substantially equal to or better than those of the personnel listed in the Schedule. 12 Contractor's Risks 12.1 All risks of loss of or damage to physical property and of personal injury and death which arise during and in consequence of the performance of the Contract other than the excepted risks are the responsibility of the Contractor. 13 Insurance 13.1 The Contractor shall provide in the joint names of the Employer and the Contractor, insurance cover from the Start Date to the end of the Defect Liability Period in the amounts and deductibles stated in the Contract Data for the following events which are due to the Contractor's Risks: (a) loss of or damage to the Works, Plant and Materials; (b) loss of or damage to Equipment; (c) loss of or damage of property (except the Works, Plant, Materials and Equipments) in connection with the Contract; and (d) person....
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....in the Works between the Start Date and the end of the Defects Correction period shall be remedied by the Contractor at the Contractor's cost if the loss or damage arises from the Contractor's acts or omissions. SPECIAL CONDITIONS OF CONTRACT 1. LABOUR The Contractor shall, unless otherwise provided in the Contract, make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. 2. COMPLIANCE WITH LABOUR REGULATIONS: During the continuance of the contract, the Contractor and his sub-contractors shall abide at all times by all existing labour enactments and rules made there under, regulations, notifications and bye laws of the State or Central Government or local authority and any other labour law- ADDITIONAL SPECIAL CONDITION 1 From the date of taking over of site by contractor till the completion of the whole work, the entire responsibility for maintenance of the road portion including the portions where the work is not yet started (in addition to the maintenance of the already executed works) shall lie with the contractor. In case the....
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....ure facility includes road, bridge, railway system etc. Your Honours would observe from the following clauses that th assessee was engaged in the development of a new infrastructur facility which includes road, bridges railway system etc. Kindly see underlined portion of Letter of Acceptance which provides details of the project to be executed: "Construction of Road over Bridge both railway span and adjacent approaches span including Reinforced Earth Wall /Retaining wall in lieu of LC-35 B at Km 613/11-12 between section Phulwarisharif- Danapur, on EC Railway, Bihar." Detailed Scope of Work has been detailed in Special Conditions of the Contract, which provides as follows: "2.0 SCOPE OF WORK: The scope of the work shall comprises for carrying out all the construction activities related to "Construction of Road over Bridge both railway span and adjacent approaches span including Reinforced Earth wall/ Retaining wall in lieu of LC-35 B at Km 552/11-13 between section Phulwarisharif - Danapur Section on Patna Mughalsarai Route in Danapur Division of E C Railway, Bihar." The details of ROB is/are indicated elsewhere in the tender documents/ ....
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....d specifications for any/all such items for finalizing rates & obtain instructions from the Engineer for its execution. Awaiting approval of Rates for any such item, the work will not be stopped at site. The AOR is to be prepared based on RCD SOR (latest) and/or MOSRTH standard codes of practice, MOSRTH Standard Data Book and/or as per instruction of the Engineer. (vi) The contract shall submit a detailed construction delivery program for completion of proposed ROB alongwith schedule of matching resources deployment proposed within 14 days from issue of LOA. (vii) The contractor shall carry out construction of all components of ROB based upon approved drawing, design & approved methodology, following codal provisions and requirements etc. for all safe & sound completion of the proposed ROB by providing his own Manpower, Machineries, Materials etc. complete. (viii) The contractor shall submit free of cost all "As' built" drawings "(in Hard copies and soft copies)" in appropriate size & sufficient number of copies, as directed by the Engineer. (ix) The contractor shall provide complete design for any/all load test e. g. Plate load test, Pile lo....
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....nding upon the site conditions and requirements of the design & Drawings. The decision of the engineer-in-charge shall be final in this regard. (xviii) Construction of road side Drain, Drainage scheme & spouts, Footpath, smooth transition to and from ROB approaches, removal & clearing of all left over material & clearing of all left over material & Debris within / from ROB limits, completion of approaches & adjoining service road with Concrete pavement / bituminous wearing surfaces, etc. all activities essential for completion of ROB. The above said detailed project description duly includes construction of a new Road over Bridge and Scope of Work includes complete responsibility of the contractor, which establishes development of "New Infrastructure Facility". C> THIRD CONDITION - The assessee is a developer of New Infrastructure Facility. Following clauses of the Contract Agreement would substantiate that the applicant is Developer of a New Infrastructure facility and not a mere contractor as the applicant has undertaken both managerial as well as financial responsibility; it is under an obligation to design the project; it is fully responsible....
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....mitted by the Engineer in specific case and as per the conditions mentioned elsewhere in the tender document. In any case use of Portland Slag Cement (PSC) is prohibited and cannot be used in any component of the Contract 6.3 STEEL FOR REIUFORCEMENT Reinforcement steel shall be procured by contractor from either of following: i. SAIL, ii. RINL iii. TISCO The Contractor shall procure reinforcement steel from the any of the above manufacturer in accordance with the specification of the contract. The Contractor shall submit the proof of procurement of reinforcement steel from one of the above agencies. The Contractor shall be submit the test certificates regarding the quality of the steel. In any specific case such as scarcity/shortage/Non production etc., the contractor may approach & request The Engineer, with supporting test certificates satisfying the required quality standards, to approve an alternative source. This will be at sole discretion of The Engineer to accept/reject contractor's request as he ascertains, in the interest of work. 6.4 STRUCTURAL STEEL Structural steel shall be procured by contracto....
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....ovision of adequate number of qualified personnel, erection, maintenance and running of laboratory including all consumable during execution of works. The design of job mix, well in advance, shall be done by the contractor and got approved by IRCON/Consultants. IRCON/Consultants reserve the right to suggest changes in the job mix submitted by the contract, or and no claim on account of these changes shall be entertained from the contractor. The approved job mix would be followed strictly by the contractor. The contractor shall also be responsible for carrying out all tests at site and getting approval from the client for the same. For site testing all the materials, equipment, consumables, Stationary & samples etc. including manpower will be arranged by contractor, at his own cost. 10.0 DEPLOYMENT OF ENGINEERS 10.1 The Contractor shall provide and keep on the works, during the execution of the works, efficient and competent Engineers to ensure that the work is executed strictly as per provisions of the Contract. 18.0 INSURANCE (This clause supersedes the clause '9.0' of General Conditions of Contract). Before commencing ....
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.... The Contractor shall submit the programme for completion of work to the Engineer for his approval within 15 days from the date of receipt of letter of acceptance. Unless otherwise directed the programme shall be in the form of Bar-Chart showing proposed execution of quantities of principal items of work. The programme shall be related to the capability of equipment proposed to be deployed and site conditions. The Contractor shall also provide in writing methodology for execution of major items of work as desired by the Engineer. The submission and approval of such programme shell not relieve the Contractor of any of his duties or responsibilities or obligations under the contract. The Engineer shall have full power and authority during the progress of work to issue such instructions as may be necessary for the proper and adequate execution of the work. 23.0 SAFETY OF PUBLIC AND PUBLIC UTILITIES i) Existing road or water courses or any other utility shall not be blocked, cut through, altered, diverted or obstructed in any way by the Contractor, except with the permission of the Engineer. All compensation claimed by any Department /Organisation for any unauthorize....
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....y the IRCON International Ltd. (A Government of India Enterprise); ii> The Project is for development of "New Infrastructure facility" as the Government is constructing a new Road over Bridge at Danapur, Bihar; iii> The Project was awarded after 01.04.1995; iv> The applicant has to execute the given project wholly and exclusively. v> The above said terms and conditions duly establish that total risk of the project is on the applicant; and is responsible for both managerial and financial responsibility; has duly given performance guarantee to the Employer; has bigger role than a Contractor, the applicant has to amend errors which may arise therein; it has to make own arrangement for plant, labour and material and hence, the applicant is a Developer. Hence, it is prayed that deduction u/s 80IA may kindly be allowed for Danapur ROB Project. We have made our submissions for two of our Projects. It is clarified that all other projects have also been executed in a like manner and there is parity of facts. If your goodself require submission of all the projects, we would be glad to submit the same. However, we are submitting the agreem....
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.... taken up. At page 614 (internal page 34) of Paper Book it was submitted that submissions have been made for above two projects. It is however clarified that all other projects have also been executed in a like manner and there is parity of facts. The assessee was prepared to make submission for all the projects, if required. However, the assessee submitted agreements of all other projects including Sonbarsa Project and SH-83 Project. It was clarified that Mokama-Munger Project and Sonbarsa Project were awarded by NHAI to the assessee company. 14.1 We observe that a comprehensive note in support of the assessee's claim that it is a developer of an infrastructure facility and not a work contractor was given (pages 592-597) of Paper Book- Internal pages 12-17). 15. Neither the Ld. AO nor the Ld. DRP required the assessee to demonstrate as to how the necessary conditions for claiming deduction under section 80IA were fulfilled for Sonbarsa Project and SH-83 Project even though the assessee had offered to do so. None-the-less the fact remains that copy of agreement for these two projects were submitted before the Ld. AO. If he wanted, he could have gone into further d....
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.... for developing two Layning with paved shoulders of Mokama-Munger section of NH80 in the State of Bihar on BOT basis under NHDP-III. The LOA clearly specifies that assessee JV shall promote and incorporate the concessionary as a Limited Liability Company under the Companies Act as the NTT which shall undertake and perform the obligations and exercise the rights of the builder under LOA including the obligation to enter into the concession agreement pursuant to the LOA for executing the project. This clearly shows that MokamaMunger Highway Ltd. was incorporated as a pre condition for execution of the project as per the terms of LOA issued by NHAI to the assessee JV. Therefore, since NHAI through LOA has put a condition for incorporation of Limited Liability Company under the Companies Act for the purpose of undertaking and performing the obligation and exercise the rights of the builder under LOA and also to enter concession agreement pursuant to LOA for executing the project we are of the view that the assessee fulfills the basic condition under sub-section (4) of Section 80IA of the Act. 24. Coming to the last contention of the AO that the assessee is not a developer but ....
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.... 32 Early Warning 32.1 The Contractor is to warn the Engineer at the earliest opportunity of specific likely future events or circumstances that may adversely affect the quality of the work, increase the Contract Price or delay the execution of works. The Engineer may require the Contractor to provide an estimate of the expected effect of the future event or circumstance on the Contract Price and Completion Date. The estimate is to be provided by the Contractor as soon as reasonable possible. 49 Liquidated Damages 49.1 The Contractor shall pay liquidated damages to the Employer at the r rate per day stated in the Contract Data for each day that the Completion Date is later than the Intended Completion Date (for the whole of the works or the milestone as stated in the contract data). The total amount of liquidated damages shall not exceed the amount defined in the Contract Data. The Employer may deduct liquidated damages from payments due to the Contractor. Payment of liquidated damages does not affect the Contractor's liabilities. 52 Securities 52.1 The Performance Security (including additional security for unbalanced bids) shall be....
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....; Above responsibilities and duties duly substantiate that the assessee is not a simplicitor contractor rather the assessee is developer of the project." 25. The above clauses of the agreement clearly shows that the assessee is liable for all risks for loss, damage to physical property, personal death insurance in consequence of performance of contract liable for liquidated damages to the employer due to delay in execution of contract, liable for cost of repairs for the loss or damages to the works or materials. Assessee is responsible for whole work from the date of takeover of the site till completion responsibility for maintenance of the road portion including the portions where the work is not started. All these clauses goes to show that the assessee is not a simplicitor contractor rather the assessee is a developer of the project. Therefore, the contention of the AO that the assessee is not a developer but only a contractor is misconceived." 17. We are conscious that the tax benefit under section 80IA was introduced for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the person who merely e....
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.... allowable as deduction to the assessee u/s. 40(a)(i) was Rs. 19,11,54,669/-. The difference of Rs. 19,40,67,731/- was thus suo moto disallowed in the revised computation of income filed by the assessee during the course of assessment. It was further canvassed that in the draft assessment order while finally computing the total income of the assessee, AO started the computational process from the income / loss reported in the original return of income and hence disallowance was made pursuant to the finding at para 4.2 of the draft assessment were correct and in accordance with law. However, in the final assessment order, while finally computing total income of the assessee, the AO has started the computational process from the total income disclosed by the assessee in the revised computation of total income filed during the course of assessment. Excess deduction of Rs. 19,40,67,731/- was suo moto disallowed by the assessee in the revised computation of total income. Hence, according to him, no such disallowance was again called for once starting point was the Revised Computation of total income. Accordingly, he requested that directions be issued to the AO to correct this computati....
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.... directions given by it in AY 2016- 17 the issue being identical. Paras 4.2.2 & 4.2.3 of Ld. DRP's directions dated 31.05.2022 under section 144C(5) of the Act refer. 22. Before us the Ld. AR submitted that similar issue came up for consideration before the Tribunal in AY 2016-17 wherein the issue has been set aside and matter has been restored back to Ld. TPO for fresh adjudication. The Ld. CIT-DR conceded. 23. We have perused the order of the Tribunal in ITA No. 705/Del/2021 dated 30.11.2022. In para 30-35 thereof, the Tribunal recorded its observations and findings which we reproduce hereunder:- "30. Heard rival submissions, perused the orders of the authorities below. The TPO observed that as per the balance sheet assessee had given advance of Rs.8,14,37,921/- to BSE C&C JV Nepal Pvt. Ltd. which is an Associate Enterprise and required the assessee to show cause why it should not be treated as a separate transaction and ALP of interest chargeable be determined. Assessee submitted that it had charged no interest on such advance receivables as the AE Company is being established by JV Partners in the 50:50 ratio by BSE PL & C&C to provide working capital....
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....evidence for which separate request has been made for its admission as these documents could not be submitted before AO due to paucity of time. Your Honours would observe from the above said ledger accounts that earlier there was a credit balance. After transfer of LCs issued by JV Partners, the amount due to Nepal Unit was converted to a debit balance. This debit balance was shown as receivable in the books of the applicant company. e) Your goodself would observe that the applicant company has not given any advance to its foreign AE. This is only the transfer of LCs issued by JV Partners on account of closure of business activities in Nepal which has turned credit balance to a debit balance. We are also enclosing year-wise detail of Credit and Debit Balances of M/s BSC C&C Nepal Pvt Limited (Site-wise) for your kind perusal. This is an additional evidence for which separate request has been made for its admission as these documents could not be submitted before AO due to paucity of time. From details submitted your goodself will appreciate that the account balance of M/s BSC C&C Nepal Pvt Limited got converted from a debit to credit in FY 2011- ....
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....mercial I transaction. Unlike a loan or borrowing, it is not an independent transaction which can be viewed on standalone basis. What can be examined on the touchstone of arm's length principles is the commercial transaction itself, as a result of which the debit balance has come into existence, and the terms and conditions, including terms of payment, on which the said commercial transaction has been entered into. The payment terms are an integral part of any commercial transaction, and the transaction value takes into account the terms of payment, such as permissible credit period, as well. The residuary clause in the definition of 'international transaction', i.e., any other transaction having a bearing on the proof its, incomes, losses or assets of such enterprises, does not apply to a continuing debit balance, on the given facts of the case, for the elementary reason that there is nothing on record to show that as a result of not realizing the debts from associated enterprises, there has been any impact on profits, incomes, losses or assets of the assessee. In view of these discussions, in our considered view, a continuing debit balance per se, in the account of th....
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....y in equal ratio and hence, no adjustment on account of interest on the debit balance of Nepal Company should be made to the returned income of the applicant." 32. As could be seen from the above, the assessee contended before the DRP that the ledger accounts in earlier years showed credit balance and after transfer of LCs issued by JV Partners the amount due to Nepal Unit was converted to a debit balance and this was shown as receivable in the books of the assessee company. It was contended that the assessee company has not given any advance to its foreign AE and this is only transfer of LCs issued by JV Partners on account of closure of business activities in Nepal which has turned into credit balance to a debit balance and the assessee furnished year wise details of credit and debit balances of BSC C&C Nepal Pvt. Ltd. as additional evidences. It was also contended that the account balances of BSC C&C Nepal Pvt. Ltd. got converted from a debit to credit in FY 2011-12. Thereafter, in financial years 2012-13 to 2015-16 the account remained as debit due of Rs.8.14 crores. It was contended that in the assessments for these years it has never been the case of the Department t....
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.... finding by the DRP though the assessee has produced additional evidences before the DRP and made its submissions which were not made before the Assessing Officer." 24. Since the parties agree that the issue is covered by the decision (supra) of the Tribunal, respectfully following the same we send the matter back to the Ld. AO/TPO for deciding the issue afresh keeping in view the evidence submitted by the assessee as also the observations of the Hon'ble Delhi High Court in PCIT vs. Kusum Health Care (P) Ltd. 398 ITR 66 (Del.) and as per law. This ground is treated as allowed for statistical purpose. 11.1 Following the aforesaid precedent, we send the matter back to the AO for deciding the issue afresh keeping in view the evidence submitted by the assessee as also the observations of the Hon'ble Delhi High Court in PCIT vs. Kusum Health Care (P) Ltd. 398 ITR 66 (Del.) and as per law. This Ground No. 5, 5.1 & 5.2 are treated as allowed for statistical purpose. 12. Ground no. 6 and 7 relate to addition of Rs. 13,14,55,586/- on account of retention money retained by the employer on the ground that the retention money is received by the assessee and hence, no deduction i....
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....e us the Ld. AR submitted that for the year under consideration the assessee had claimed that a sum of Rs. 18,84,08,295/- on account of retention money retained by the employer is not chargeable to tax. However, the assessee had offered for tax a sum of Rs. 7,23,59,198/- released by the employer of the assessee for which project completion certificate was received by the assessee during the year. He referred to certain decisions in support of the proposition that retention money is not liable to tax as the same accrues only when project completion certificate is received. However, the Ld. AR submitted that in view of amended law by way of insertion of section 43CB, the issue be restored back to the file of the Ld. AO for fresh decision. 27. The Ld. CIT-DR objected to remanding back of the issue to the Ld. AO for adjudication afresh. 28. We have given careful thought to the rival submission. It is not in dispute and the parties agree that the Finance Act, 2018 has inserted section 43CB with retrospective effect from 01.04.2017 and thus apply to AY 2017-18 and subsequent years. It is also not in dispute that in the case of the assessee the amended law has to be appl....