TaxTMI 
TaxTMI 
2013 (7) TMI 1226
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....e is a company engaged in the business of civil works and turnkey execution of effluent treatment plants and sewerage treatment plants. It is a civil contractor. During the year under consideration, it has carried out certain contract works allotted by some of the State Governments with regard to construction of housing projects, sanitary systems, etc. It claimed that it had developed infrastructure facilities like water supply system, sanitation, sewerage system and solid waste management etc., and accordingly claimed deduction u/s. 80IA of Rs. 3,43,37,519. 3.2 The Assessing Officer required the assessee to furnish details of projects with respect to the deduction claimed as above. After going through the details relating to contracts in executing the projects as mentioned in page-2 of the assessment order, the Assessing Officer proceeded to examine the claim of deduction u/s. 80IA. The Assessing Officer observed that deduction u/s. 80IA is available to an assessee whose gross total income includes any profits and gains derived by an enterprise, from any business referred to in subsection (4) of section 80IA of the Income-tax Act. According to sec. 80IA(4)(i), 100% deduction ha....
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....0IA of the Act: Sl. No. Description of infrastructure facility Contractee/Developer 1. Providing water facilities and sewerage facilities to newly added areas of Bangalore Maha Palika Municipality. Bangalore Water Supply and Sewerage Board, Bangalore. 2. Providing third stage water supply scheme to Tarikera Town. Karnataka Urban Water Supply and Drainage Board. 3. Providing third stage water supply scheme to Channarayapatna. Karnataka Urban Water Supply and Drainage Board, Channarayapatna. 4. Design, construction and commissioning of 8 million gallon per day capacity water treatment plant with rapid filteration process. Vijayawada Municipal Corporation, Vijayawada. 5. Construction, development and maintaining of Mumbai Waste Management. Mumbai Waste Management Ltd., Mumbai. 6. Expansion of capacity of Kasimedu Pumping Station and Pumping Main Chennai Metropolitan Water Supply Sewerage Board, Chennai. 7. For providing, laying, jointing, testing and commissioning of lateral, interceptor sewers in remaining areas of walled city including construction of manholes, appurtenances a....
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....sessment years and there is only change in figures. Against the denial of deduction u/s. 80IA(4) of the Act, the assessee is in appeal before us. Against this, the assessee is in appeal before us. 4. The learned AR before us reiterated the same submissions as made before the lower authorities. The crux of the arguments of the assessee's counsel before us is that the assessee is engaged in development of infrastructure facilities. Being so it is entitled for deduction u/s. 80IA of the Act. He also relied on various judgements as mentioned below: a) M/s. GVPR Engineers Ltd. vs. ACIT, in ITA No. 347/Hyd/2008 dated 29.2.2012. b) M/s. Koya and Company Construction Pvt. Ltd. vs. ACIT in ITA No. 180/Hyd/2006 & Ors. c) M/s. KMC Constructions Ltd. vs. ACIT in ITA No. 996/Hyd/2003 & Ors. dated 16.3.2012. d) M/s. Nagarjuna Construction Company Ltd. vs. ACIT, ITA No. 141/Hyd/2007 & Ors. dated 27.8.2012. e) M/s. Maytas NCC (JV) vs. ACIT, ITA No. 1292/Hyd/2010 dated 27.8.2012. f) Lakshmi Civil Engineering Works vs. Addl. CIT, ITA No. 766/PN/09 & Ors., dated 8.6.2011. g) ABG Heavy Industries Ltd. 322 ITR 323 (Bom) h) K....
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....999. A new sub section (4) was introduced by the said Finance Act. Sub section (4) extended deduction to such enterprises which develop infrastructure or which maintain and operate infrastructure facility or which develops, maintains and operates an infrastructure facility. It is clarified by the Board that sub section (4A) was deleted and the deduction earlier available continues in lieu of sub section (4) of Section 80IA. Therefore, the condition mentioned in sub section (4A) that an enterprise commencing its activity of operating, maintaining the infrastructure facility on or after the first day of April, 1995 would only be eligible for deduction. Therefore, it applies to those enterprises which were earlier eligible for deduction under sub section (4A) and which will be continued to be eligible for deduction under sub-section (4). Such provision has no application to the case of the assessee, which became eligible for deduction under sub-section (4) of Sec. 80IA of the Act. Therefore, sub-clause (c) came into play only in respect of those concerns which claimed deduction for maintaining and developing the infrastructure facility and not for the assessee who only develops. The m....
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...., of which it is only a part. It is evident from the agreements filed by the assessee that the assessee undertook to execute the work on NHAI's specifications, at rates agreed upon, subject to measurement, within a period of 36 months of commencement. 6. He submitted that agreement filed by the assessee in the paper book wherein the details of rate analysis, Bill of quantities etc., make it clear that the assessee had no autonomy in matters of design and specification which completely vested with the employer. The only lawful entitlement of the assessee was to be paid for the measurement of work completed at rates agreed upon. The partial and sectional nature of the proposed work is immediately clear from this notice and it is also apparent from this that the section of the road proposed for improvement has no independent existence capable of satisfying the requirement of section 80 IA (2). Therefore, this project is incapable of commencement of operations by itself, or to quality the larger infrastructure facility of which it is a part. The assessee also gets mobilisation advance as well as interest-free advance for machinery purchase and there is no element of entrepreneurial ....
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....mbiguity, provisions cannot be interpreted to confer a benefit upon the assessee. The provision is incapable of application to the facts of the assessee's case because the assessee is only an executor of a contract, which is in turn, part of a larger project undertaken by the Government, or its agency. By referring to the two decisions relied upon by the learned counsel for the assessee, Mumbai High Court in the case of CIT vs. ABG Heavy industries Limited reported in 322 ITR 323 and ITAT Pune Bench in the case of Laxmi Civil Engineering Pvt. Ltd., vs. Addl. CIT Kolhapur (unreported/ITA No.766/Pn/09 dated 8-6-2011), it is submitted that these decisions supported the proposition that (i) the ITAT's decision in the case of B.T. Patil & Sons, Larger Bench (Mumbai) reported in 126 TTJ 577 is no longer good law, and (ii) the distinction between developer and contractor is no longer relevant in the context of changed law explained by the Mumbai High Court in the case of ABG Heavy Industries (supra) and followed within its jurisdiction by the Pune Bench of the ITAT in the case of Laxmi Civil Engg. (supra). It is submitted that such reliance is neither correct nor relevant in deciding the ....
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.... in the first place. vi) Some of the attributes of a developer were discussed in the case of B.T. Patil, none of whom were absent in the case of ABG Heavy Industries. 9. The decision of the Mumbai High Court, though later in time was different in facts that there was no occasion even to refer to the ITAT's decision in the case of B.T. Patil. Therefore, it can be said that the decision of the Mumbai High Court in the case of ABG Heavy Industries will be binding in its jurisdiction for infrastructure contract cases, only in so far as the facts of the case are compatible. For the same reason, there can be no adverse implication for the precedent value of the B.T. Patil case. As submitted hereinabove, on immediate and necessary consequence of the retrospective amendment introduced by the Finance Act, 2009 inserting Explanation below section 80 IA(13), is that any business transacted in terms of a works contract stands disqualified from seeking deduction under section 80I(A(4). The decision of the Mumbai High Court in the case of ABG would have no application from this point of view also. Since the agreement in ABG was a BOLT agreement and not a works contract their Lordship....
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....arified that part of the project would qualify if so certified by the Port Authorities. The container handling cranes assembly was certified to be an integral part of the Port Complex by the Port Authority. This is contextually very different from parts of the running length of a highway or irrigation canal being executed on a rate contract. The Department's argument that the assessee did not actually operate or maintain the facility in question was not upheld because the benefits of the section were held to be available to BOT/BOLT contracts by CBDT Circulars, which were any way binding on the IT authorities. In the case of the present case, it is not even claimed by the assessee that the work was carried out under a BOT/BOLT contract, or that it was not a works contract. It is further submitted that the distinction between business of development operation/maintenance and development / operation/ maintenance was removed with the change in law effective from 1-4- 2002, and that this was explained by the decision of the Mumbai High Court in the case of ABG Heavy Industries is fallacious for the following reasons: "The Mumbai High Court decision was rendered in the context ....
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....iders the Tribunal decision of B.T. Patil as well as its jurisdictional High Court decision in the case of ABG and goes on to hold that the assessee is not entitled to the deduction under section 80IA (4) in view of the Explanation introduced with retrospective effect. 12. The learned Departmental Representative relied upon subsection (2) of Sec. 80IA of the Act and submitted that the deduction under sub-section (1) would be available for a period of 10 consecutive assessment years out of 15 years beginning from the year in which an undertaking or enterprise develops, begins to operate any infrastructure facility or starts providing telecommunication system. Therefore, he is of the view that unless operation of the infrastructure facility is also undertaken; the assessee would not be eligible for deduction. It is submitted that this section provides for an option to the assessee to choose to claim deduction for any 10 years out of 15 years commencing from the date of commencement of the maintenance and operation. For that limited purpose of facilitating an assessee who becomes eligible for deduction under section 80IA(4) in choosing the period of 10 years, the said provision was....
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....y on the judgement of Gujarat High Court in the case of Katira Construction Ltd. v. Union of India & Ors., 352 ITR 513. 14. We have heard both the parties and perused the material on record. Similar issue came for consideration before this Tribunal in the case of NCC-ECCI (JV) vs. ITO in ITA Nos. 124 & 125/Hyd/2009. The Tribunal vide order dated 17.6.2013 held as follows: "9. We have heard rival submissions and perused the material available on record. We have also carefully applied our mind to the decisions cited before us. Before we delve into the issue in dispute it would be appropriate to look into the relevant provisions at this stage. Deduction for development of infrastructure facility as per old section 80IA was contained in sub-section (4A) which read as under : (4A) This section applies to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :- (i) the enterprise is owned by a company registered in India or by a consortium of such companies. (ii) the enterprise has entered into an agreement with the Central Government or a State....
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....me eligible for deduction. It would be evident from the Orders passed by the Assessing Officer as well as CIT(A), claim of deduction under section 80IA was disallowed firstly on the ground that assessee is not the owner of the infrastructure facilities, secondly it has not undertaken all the three activities and thirdly it has executed the work merely as contractor. In case of CIT vs. ABG Heavy Industries Ltd. 322 ITR 323 the Hon'ble Bombay High Court held that amendment effected to sec. 80IA(4) by Finance Act, 2001 being clarificatory in nature will be applicable retrospectively from A.Y. 2000-2001. In the case of KMC Constructions Ltd. (supra), the Coordinate Bench of this Tribunal in clear terms held that the amended provisions of section 80IA(4) would apply from A.Y. 2000-01. The Tribunal further held that where an assessee incurs expenditure on its own for purchase of materials and towards labour charges and itself executes the development work, it will be eligible for deduction under section 80IA of the Act. It was further held that the word 'owned' in sub-clause (a) on clause (1) of sub-section (4) of section 80IA of the Act referred to the enterprise. In other words, the en....
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..... (supra), the Coordinate Bench of this Tribunal after considering several other decisions of various Benches of the Tribunal held as under : "Therefore, in our considered view, the assessee should not be denied the deduction under section 80IA of the Act as the contracts involves development, operating, maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract. In our opinion the contracts which contain above features to be segregated and on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by the Explanation section 80IA(13), those work are not entitle for deduction u/s. 80IA of the Act. The profit from such contracts which involves development, operating, maintenance, financial involvement and defect correction and liability period is to be computed by Assessing Officer on pro-rata basis of turnover. The Assessing Officer is directed to examine and grant deduction on eligible turnover as directed above." 13. In the case of M/s. KMC Construction Ltd. also the Coordinate Bench of this tribunal allowed the claim of deduction unde....
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.... CIT(A) and direct the Assessing Officer to decide the issue afresh by keeping in view of our observations made hereinabove. Needless to mention that the Assessing Officer shall afford a reasonable opportunity of being heard to the assessee. Accordingly, ground No. 3 is allowed for statistical purposes. 15. Recently there was a judgement from Hon'ble Gujarat High Court in the case of Katira Construction Ltd. v. Union of India & Ors., 352 ITR 513 wherein it was held as follows: "The Explanation inserted below sub-section (13) of section BO-IA of the Income-tax Act, 1961, by the Finance (No. 2) Act, 2009, with retrospective effect from April 1, 2000, which provides that nothing contained in the 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 and executed by an undertaking or enterprise, is valid. Parliament has power not only to legislate with respect to the subject-matter on hand, but also with retrospective effect, if so found necessary. In the field of taxation, Parliament enjoys considerable latitude in framing and implementing policies. The wisdom of Parliament in e....
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.... from April 1, 2002, some significant changes were made in the provisions. Such changes were (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the Explanation of the term infrastructure facility was changed to besides others, a road including toll road instead of the hitherto existing expression road; and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away 'With. These changes, however, would not alter the situation vis-a-vis the Explanation. The basic requirement of the enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining infrastructure facility was not done away with. Even as amended with effect from April 1, 2002, section 80-IA(4) could be construed as not including execution of works c....