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2017 (1) TMI 1830
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....t year 2006-07. 2. The Revenue has raised the following grounds: 2.1 The CIT(A) erred in deleting the disallowance of deduction u/s. 80IA. 2.2 The CIT(A) ought to have appreciated that, as per sec. 80IA(4)(i), any enterprise carrying on business of (i) developing or ; (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility alone is eligible for deduction u/s. 80IA. 2.3 The CIT(A) failed to appreciate that the Gove./local bodies which own the infrastructure is the developer and the assessee is a mere contractor and hence not eligible to the deduction u/s. 80IA. 2.4 The CIT(A) failed to appreciate that as per sec. 80IA(1), the assessee is eligible for deduction only for the profits and gains derived from any business referred to in sec. 80IA(40 and in the assessee's case, the net income derived by the assessee by entering into a mere contract agreement for development of infrastructural facilities cannot be equated to profits and gains derived by the assessee's undertaking derived from the profits and gains of development of infrastructural facilities. 2.5 The CIT(A) ought to have appreciated that some of the....
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....he case was selected for scrutiny and notice u/s. 143(2) and 142(1) along with questionnaire was issued. In compliance to notice, Ld. AR appeared from time to time and furnished the details as called for. The Ld. AO in the assessment found that the assessee company has assailed deduction u/s. 80IA Rs. 14,28,54,064/- and claimed to have complied the conditions stipulated u/s. 80IA(4) of the Act. The Ld. AO perused the main conditions for claim of deduction u/s. 80IA being (i) the assessee must be an enterprise carrying on a business of developing infrastructure facility; (ii) is owned by the assessee ; (iii) and entered into an agreement with local authorities for infrastructure development facilities, to be eligible to claim Deduction u/s. 80IA of the Act. The Ld. AR filed the information of execution of civil contract works and claimed as a developer and supported with the Tribunal decision of Mumbai in the case of Patel Engineers Vs. DCIT, 94 ITT 411(Mumbai) where it was clarified that: "A person who enters into an contract with another person, will be a contractor no doubt; and the assessee having entered into an agreement with the Government of Authority for developmen....
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....e facility project, realise its cost? If the infrastructure facility is just after its development, transferred to the Government, naturally the cost would be paid by the Central Government. The amendment brought in by the Finance Act, 1999 was with the sole intention/purpose of providing deduction u/s. 80IA to the person, who only develops or who only maintains and operates an infrastructure facility. If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. When the legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction, it presupposes that there can be income to developer, i.e. to the person who is carrying on the activity of only developing infrastructure facility. Obvious as it is, a developer would have income only if he is paid for development of infrastructure facility, for the simple reason that he is not having the right/authorisation to operate the infrastructure facility and to collect toll therefrom, as he has no other source for recoupmen....
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....rs and Revenue has not accepted decision of CIT(A) in earlier years and filed appeal before Tribunal and disallowed the claim of deduction u/s. 80IA Rs. 14,28,54,064/- and also disallowed forex exchange loss of Rs. 45,00,613/-, as the assessee company could not prove with evidence whether the forex exchange loss was incurred in Regular business transaction or was due to forward contracts and passed the order u/s. 143(3) dated 26.12.2008 determining total income of Rs. 17,17,02,474/- and raised the demand. 4. Aggrieved by the order, the assessee filed an appeal with the CIT(A). The Ld. AR argued the grounds and reiterated the submissions along with the evidence made in the assessment proceedings in supporting the claim of deduction u/s. 80IA. The Ld. CIT(A) viewed the findings and dealt exhaustively on the provisions and relied on the judicial decisions and made an distinction between the Developer and Contractor and also considered the written submissions, contract agreements, bidding documents, various drawings and designs submitted for the development of infrastructure facilities and took support from the decisions of High Court and Tribunal and earlier years CIT(A) decisions ....
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....006 Rs. 69,68,30,089/-, to substantiate the investment of the assessee company in the project undertakings and working capital facility of Rs. 62,10,00,000/- as on 31.03.2006 to support the assessee company, abundant investments in execution of the infrastructure projects and equipments as a part of contract agreement. The Ld. CIT(A) referred to the investments made in various engineering software to be utilised by the assessee to execute the preliminary and engineering drawings for the projects and had developed more than 160 process and production patents. The assessee company is a pioneer in water and sewerage treatment technology having Research and Development centres in Switzerland, Vienna, Austria, Chennai and has mobilized and synthesized people, plans, technical expertise, supervision, co-ordination and control etc., to develop and create the infrastructure facilities and also developer in all projects entered with Chennai Metro Water Sewerage Board and the Government of West Bengal. The Ld. CIT(A) found that the assessee company has satisfied the ratio laid down in the Tribunal decisions of Patel Engineering's (Supra) and Om Metal Infra Projects (Supra) and dealt on t....
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....nfrastructure facilities mentioned in section 80IA(4) of the Act. The appellant has filed copies of plants/drawings of the relevant projects in order to support the contentions that the work undertaken by them was totally new and independent and hence the same cannot be stated to be repair or renovation and the existing old projects. It was submitted that the appellant has developed the said infrastructure facilities right from start for each project and wherever it is described as expansion of the project, it is with reference to only the infrastructure facility earlier existing but the project undertaken by the appellant is also physically inspected a few sites of the appellant such as expansion project (water pumping) or sewerage system of T. Nagar which have been included in the category of "expansion" of infrastructure facilities. In fact, such projects have been developed by the appellant quite independent of the existing facility. Therefore, in my considered view, the expansion projects undertaken and developed by the appellant are required to be considered as independent projects eligible for de u/s. 80IA." Finally Ld. CIT(A) based on details exhaustive submissions and j....
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.... Chennai ITAT ITA No. 544/Mds/2010 02. Laxmi Civil Engineering P Ltd., Pune ITAT ITA No. 766/PN/09, 254/PN/08, 431/PN/07 & 435/PN/07 03. BT Patil & Sons Belgam Constructions (P) Ltd, Bombay HC ITA No. 1307/2011 04. BT Patil & Sons Belgam Constructions (P) Ltd, Pune ITAT ITA No. 1408 & 1409/PN/2003 05. ABG Heavy Industries Ltd Bombay HC 322 ITR 323 06. Koya & Company Constructions Pvt. Ltd, Hyderabad ITAT ITA No. 180/Hyd/2006, 167-168/Hyd/08, 221/Hyd/09 07. Siva Swathi Constructions P. Ltd Hyderabad ITAT ITA No. 1008- 1009/HYD/2013 08. Ramki Infrastructure Ltd., Hyderabad ITAT ITA No 472475/HYD/09 & ITA No. 1906, 1668/HYD/2011 09. GVPR Engineers, GSP Infratech, G Siva Sankar Reddy, GSP Veera Reddy Hyderabad ITAT 10. Sushee Hi Tech Constructions Hyderabad ITAT ITA No. 269 & 1165/HYD/2009 & 1171/HYD/2010 11. KMC Constructions Ltd., Hyderabad ITAT ITA No. 233/HYD/2001 12. M/s. Ayyappa Infra Projects Pvt. Ltd Hyderabad ITAT ITA N....
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.... electric works, power plants, water works, water treatment plants and to undertake turnkey projects of every description and to undertake the supervision of any plant or factory and to invest in or acquire interest in companies carrying on the above business. " The Ld. AR submitted that the assessee's company main objects are complied and is involved in execution of infrastructure projects from the conceptualization to commissioning such as designing, basic & detailed engineering, procurement, construction, erection, testing and commissioning, trial run and subsequent operation and maintenance (O & M) of water/waste water treatment plants and sewerage system. We found the assessee substantiated it works with the process flow chart of Turnkey Project on execution of effluent treatment plant of different projects referred as Annexure-2 involving activity of more than 20 stages. The assessee company has entered into agreement with various Municipal bodies/ local authorities, State Government authorities for execution of projects for development of new water treatment plants, whereas, the Assessing Officer considered that the assessee is not a developer of the projects but is a....
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.... 58,53,877 1,16,90,76,966 2007-08 1,19,04,09,447 6,94,930 1,76,97,65,551 The assessee company has utilized its own funds, borrowings and internal earnings and provided Guarantees for undertaking the projects where funds are invested and taken various insurance policies to protect the interest of the assessee in all the projects to cover the risks and has invested in assets for the execution of the project and has registered patents and continuously engages in Research and Development Activities. 8. The Ld. AR elaborately demonstrated the facts and dealt on specific findings in the order of CIT(A) and supported with paper book containing details of copies of contracts and financial statements. We find that Ld. AO has placed reliance on the Tribunal decision of the Indwel Lining (P) Ltd., 122 TTJ 137 (Mds) which was considered by the East Coast Constructions Ltd., (Supra) and was distinguished where assessee was only civil contractor and did only civil works. Whereas, Ld. DR focused on the later decision of the Tribunal ACIT Vs. Sree Sella Infrastructure & Projects Ltd., in ITA No. 1294/Mds/2011 for the assessment year 2008-09 dated 28.09.2012 at Page 7 Para 6 w....
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.... "Now, let us examine the facts of the given case. It is an undeniable fact that the assessee is engaged in the civil construction work like construction of flyover, bridge underpass, sewerage, water supply etc. for various local bodies, railways, Central/State Governments. In fact, as per the terms of agreement, even the initial proposals formulated by the Department which are stated to be tentative, the assessee has the liberty to make different proposals without detrimental to the general features of the Departmental proposal, like Road level/bottom of deck level, MFL, Sill level, Linear water way, width of the bridge etc. Right from the drawings to the work of construction has been done by this assessee and has borne the cost itself. The company has constructed, delivered and maintained and security is also maintained thereafter. So, this is a case of transfer of property chatter and not a contract or service. A 'developer' as per the Advanced Law Lexicon means "a person engaged in development or operation or maintenance of Special Economic Zone, and also includes any person authorized for such purpose by any such developer". In the case of ACIT vs Bharat Udyog Ltd, 'F' ....
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..../project by the developer to the Government or authority takes place after recoupment of the developer's costs whether it be "BT' or 'BOT' or 'BOOT' because in 'BOT' and 'BOOT' this recoupment is by way of collection of toll therefrom whereas in 'BT' it is by way of periodical payment by the Government/Authority. The land involved in infrastructure facility/project always belongs to the Government/Local authority etc., whether it be the case of 'BOT' or 'BOOT' and it is handed over by the Government/Authority to the developer for development of infrastructure facility/Project. The same has been the position in the given case as well. So, deduction u/s 80IA(4) is also available to this assessee which has undertaken work of a mere 'developer'. Rather, the statutory provision as contained in section 80IA which provides for deduction of infrastructure facility no way provides that entire infrastructure facility project has to be developed by one enterprise. Thus, as per section 80IA the assessee should develop the infrastructure facility as per the agreement with the Central/State Government/Local Authority. Entering into a lawful agreement and thereby becoming should, in no way be a b....
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....or tax benefit u/s 80IA of the Act. Accordingly, with the foregoing discussion, we hold that the assessee is entitled to deduction u/s 80IA(4) of the Act, and therefore, we order to delete the addition made in this respect." We are of the opinion that the above co-ordinate bench decision is challenged by the Revenue before High Court and the same is pending. But as a judicial precedence and the facts explained before us are supported by the evidence by the Ld. AR relying on co-ordinate bench decision. Accordingly, we are not inclined to interfere with the orders of the CIT(A) who has discussed and examined the issue vis-a-vis explanations of the assessee and we upheld the same. 9. In the result, the ground of the Revenue is dismissed. 10. On the next ground of forex exchange loss, we found that the Ld. CIT(A) relied on the decision of the Sutlej Cotton Mills (Supra) at Page 31 of order as under: "The law may therefore, now be taken to be well settled that where profit or loss arises to an se on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading pr....