TaxTMI 
TaxTMI 
2024 (10) TMI 855
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.... the customers of which are as under: a) Public Works Department, Maharashtra Govt. Maharashtra b) Pimpri Chinchwad Municipal Corporation, Pimpri c) Pune Municipal Corporation, Pune. d) Private Sector Aamby City Developers Ltd. Vilage Ambavane. e) Irrigation Department Maharashtra Govt. Maharashtra. 4. The Assessing Officer further noted that the assessee during the year under consideration has claimed deduction u/s 80IA(4) of the Act at Rs. 7,21,32,410/-. He therefore, asked the assessee to explain as to how the assessee is entitled to claim such deduction especially when similar disallowance was made in the preceding assessment years. In response to the same, the assessee filed its submissions justifying its claim, the details of which have been reproduced by the Assessing Officer and which read as under: "The assessee has claimed deduction 80IA(4) of the Income Tax Act in respect of 44 infrastructure facilities developed by it. The list of these infrastructure facilities along with description of the infrastructure facilities the name and address of the Government Authorities Awarding the project, the date of the allotment of the project and the turnover in respect ....
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....ed into various agreements with the Government Local Authorities/others statutory bodies through the process of the tenders awarded to the assessee company for development-of-new infrastructure facilities/projects. The assessee has started developing all the infrastructure facilities/projects, for which deduction has been claimed, after 1st April 1995 In view of the above the assessee fully qualifies for the deduction u/s 80IA(4) of the Income Tax Act 4. It is further submitted that the process of the assessee company, bidding for various projects through the process of tenders etc and the projects being awarded to the assessee and the accepting the projects amounts to entering into an agreement with the project awarding Government / local Authority or other Statutory Body, as the case may be. 5.1 It is further submitted that the various infrastructure facilities/projects awarded to the assessee company cannot be described as mere works contracts. It is submitted that under the various infrastructure facilities/projects awarded to the assessee company the assessee does not act as a mere works contactor but the assessee's role is that of a developer of infrastructure facil....
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....ic for Primary Health sub center at Gojubavi, Tal. - Baramati, Dist. - Pune Purposed Clinic for Primary health centre and Staff Quarters to be constructed in the Building The Executive Engineer, Pune Zilla Parishad, Work dept (S), Pune 3,69,484/- Retaining wall from Khadakwasla Dam to NadedPhata (Ch.0 to 3710) (including Construction 7 Structural Work) Construction of RCC retaining wall as per drawings at the location as indicated & / or instructed by the client along with alignment. The Commissioner, Pune Municipal Corporation, Pune 2,22,621/- The construction of bus stand, Clinic for primary health centre and retaining wall (a structure which retains or holds soil behind it and in no way it can be said to be a water supply project) do not fall within the category of infrastructure facility as envisaged in the provisions of sec.80IA(4). Therefore deduction claimed u/s 80IA(4) on profits from these projects of Rs. 18,63,082/- is disallowed and added to the returned income." 7. The Assessing Officer further noted from the list of projects submitted that the assessee has claimed deduction u/s 80IA(4) of the Act even on profits derived from projects which were received ....
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....contractor' have not been defined in or for the purposes of section 80-IA. The primary question which arises is that how to find out the meaning of a word or an expression which is not defined in the Act. The Honourable Supreme Court in the case of CWT Vs Officer-in-charge (court of wards), Baigah [(1976) 105 ITR 133 (SC)] in which it was held that the ordinary dictionary meaning of a word cannot be disregarded. According to Oxford Advanced Learner's dictionary. "developer" is a person or company that designs and creates new products, whereas "contractor" is a person or a company that has a contract to do work or provides services or goods to another. The new shorter Oxford dictionary defines the word "contractor" as "A person who enters into a contract or agreement, a person or firm that undertakes work by contract, esp. for building to specified plans". In the light of the meaning ascribed to these words by the dictionaries it is observed that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project himself or assign some parts of it to others. On the contrary the contractor is the one who i....
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....hat is to be used for execution of the project along with the technical specifications and brand/make of each of the machinery/equipment. iv. Material used for execution of the project has also been specified and the agreement even goes on to state the material has to be procured from government approved suppliers only. The agreement also elaborates the technical specifications and quality of the material to be used. v. Assessee has to adhere to the timeline for completion of the project which will be supervised by designated officers and must submit timely progress reports to the authority vi. The assessee is required to submit RA bills at regular intervals and accordingly payment will be received from the Government authority. vii. The assessee carries no risk in the contract. As per the financial statement of the assessee mobilization/material advance received by assessee as on 31/03/2016 and 31/03/2015 is Rs. 5,49,04,424/- and Rs. 3,04,61,293/-. Thus assessee is protected from financial liability by the authority awarding the contract. The financial risk to the assessee is 'Nil' as is evident from the advances received Assessee is also receiving funds from autho....
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....contract" has not been defined in section 80-IA or elsewhere in the Act the ordinary dictionary meaning of such a word, or the legal interpretation given to the same has to be considered while arriving at a decision as to whether the Appellant falls under the category of a "developer" or a "works contract I find that the AO in para 5.9 to 5.11 of his assessment order has given a clear factual analysis along with support of multiple case laws to arrive at a understanding of what constitutes a "works contract" In a number of judgments the Apex Court has had occasion to discuss this including the following cases: a) HAL Ltd. vs. State of Orissa, reported in 55 STC 327 b) State of Tamilnadu vs. Anandam Vishwanathan [1989] reported in 1 SCC 613 (SC) c) State of Gujarat vs. Variety Body Builders AIR reported in 1976 SC 2108 d) State of Andhra Pradesh vs. Kone Elevators (India) Ltd., reported in 3 SCC 389 [2005] 7.2 I find that the Assessing Officer has very elaborately and cogently discussed the various issues to reach a conclusion that the projects undertaken by the Appellant do not satisfy the criteria that would define a "developer". On the other hand, the nature of these pr....
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....s 7.6 In view of the above discussion, I am of the considered opinion that the nature of work carried out by the appellant company is such that it cannot be defined as development of infrastructure facility. On the other hand the facts as elaborated by the Assessing Officer lead to the conclusion that the Appellant company is merely carrying out work execution of "works contract" with little or no risk to itself and as per detailed directions and specifications provided to it The view of the AO in this regard is therefore correct and confirmed. 7.7 The appellant, further, referred to a decision of the Hon'ble Madras High Court in the case of Chettinad Lignite Transport Services (P) Ltd. 207 taxmann.com 12 (Madras) wherein it was held that proviso to section 80IA(4) does not require that there should be a direct agreement between the assessee and the specified authority for availing the benefits u/s. 80IA of the Act. Reliance was also placed on the decision of the Hon'ble Gujarat High Court in the case of Ranjit Project Pvt. Ltd. 94 taxmann.com 320 (Gujrat) contending that in the said decision the Hon'ble High Court held that where the assessee had entered into an ag....
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....d u/s. 80IA(4) of the I. T. Act in respect of these contracts is very clearly not allowed. Further, I find that the appellant has given a number of Government construction receipts furnishing copies of work orders during appellate proceedings. Such work orders, ipso-facto, do not prove that the appellant had fulfilled the conditions as laid down in section 80IA(4) of the Act for the detailed reasons given by the AOs in different assessment years for AY 2014-15 to 2015-16 to which I am inclined to agree. Fourthly, the appellant has cited a number of decisions in his written submissions as discussed above, which, I find are not applicable on the facts of the case of the appellant. In view of above, I hold that on merit of the case when considered, the appellant is not eligible to such deduction u/s. 80IA(4) of the Act. However, after examining and analyzing the facts of the case, it is decided that the appellant is not entitled to the deduction u/s. 80IA(4) of the Act of Rs. 4,87,32,327/- as claimed it in the grounds of appeal for the facts as detailed above. The claim of the Appellant made during Appellate proceedings is therefore, disallowed and these grounds of the Appeal are dism....
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.... submitted that the provisions of section 80IA(4) of the Act were introduced to encourage the private sector to participate in infrastructure development in the country which is very necessary for the economic development of the country. Referring to para 5.1 of the assessment order, the Ld. Counsel drew the attention of the Bench, according to which the assessee had undertaken the various projects, the customers of which are as under: a) Public Works Department, Maharashtra Govt. Maharashtra b) Pimpri Chinchwad Municipal Corporation, Pimpri c) Pune Municipal Corporation, Pune. d) Private Sector Aamby City Developers Ltd. Vilage Ambavane. e) Irrigation Department Maharashtra Govt. Maharashtra. 12. He submitted that the deduction u/s 80IA(4) is available to any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining the specified infrastructure facilities and subject to the specified conditions. He submitted that the assessee in the instant case has satisfied all the specified conditions in as much as it is a limited company and had entered into contracts with government departments for develop....
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....the same in the return of income and the same was claimed only during assessment proceedings. There was no discussion on merit. However, for the impugned assessment year, the assessee has claimed in the return of income. Therefore, the assessee is entitled to deduction u/s 80IA(4). 18. He submitted that the Assessing Officer in the instant case has proceeded on misconceived issue. The issue here is not that of whether the transaction is a contract of sale or contract of work. The issue here is whether the assessee has developed infrastructure facility as a developer or as a works contractor. He submitted that even though the term "works contract" has not been defined under the Act but in the Explanatory memorandum while introducing the amendment, the government has explained the connotation of the term "works contract". Referring to the CBDT Circular No.3/2008, dated 12.03.2008, he submitted that the department has issued a circular clarifying as to who is a works contractor for the purpose of section 80IA(4). Referring to the following decisions, he submitted that the issue stands decided in favour of the assessee: i) CIT vs. ABG Heavy Industries Ltd. (2010) 322 ITR 323 ii) B....
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....contracts nor referred to the Circular issued by the CBDT with reference to section 80IA(4), which is binding on him. Therefore, the order of the CIT(A) upholding the order of the Assessing Officer denying the claim of deduction u/s 80IA(4) of the Act is not in accordance with law. 20. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the CIT(A). He submitted that the Ld. CIT(A) has given justifiable reasons while upholding the action of the Assessing Officer in denying the claim of deduction u/s 80IA(4) of the Act. Referring to the decision of the Hyderabad Bench of the Tribunal in the case of M/s. NEC NCC MAYTAS-JV vs. DCIT vide ITA No.496/Hyd/2018 and batch of other appeals, order dated 12.05.2021, he submitted that an identical issue has been decided by the Hyderabad Bench of the Tribunal and the deduction claimed u/s 80IA(4) has been denied. Referring to the decision of the Ahmedabad Bench of the Tribunal in the case of M.S. Khurana Engineering Ltd. (2024) 162 taxmann.com 7 (Ahmedabad - Trib.), he drew the attention of the Bench to the following head note: "Where Commissioner (Appeals) had made general and bald observations while grantin....
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....dertakes the project, develops and construct the project on its own risk and responsibility like that of a developer. According to the Ld. Counsel for the assessee, the assessee has invested its own funds, has given bank guarantee, has engaged requisite qualified / skilled / semi-skilled staff and the labourers and brought plant & machineries to be utilized in the project. He has also adhered to the timelines for completing the project and tasks comprised therein, has also undertaken to bear the consequences for delay in completion of the project and tasks comprised therein. Further, there is defect liability period and there is retention money / security deposit for due compliances including of quality works. It is also his submission that the various decisions relied on by the Assessing Officer as well as the CIT(A) are distinguishable and not applicable to the facts of the present case. Further, the Hon'ble jurisdictional High Court has also taken a view in favour of the assessee in the case of CIT vs. ABG Heavy Industries Ltd. (supra). 23. We find the Assessing Officer in the instant case has not gone through the terms and conditions of each and every project undertaken by the....
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....y of the assessee to guarantee the availability of the equipment; to ensure that the equipment is in operation on a round the clock basis; to provide for repairs and to ensure the operation and availability of the equipment in accordance with the terms of the contract. 17. The obligations which have been assumed by the assessee under the terms of the contract are obligations involving the development of an infrastructure facility. Section 80IA of the Act essentially contemplated a deduction in a situation where an enterprise carried on the business of developing, maintaining and operating an infrastructure facility. A Port was defined to be included within the purview of the expression infrastructure facility. The obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years after which the cranes were to vest in JNPT free of cost. An assessee did not have to develop the entire port in order to qualify for a deduction under Section 80....
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....s of the cranes were provided by the Port Authority did not absolve the assessee of the overall responsibility of operating the cranes, under the terms of the contract. 20. Counsel appearing on behalf of the assessee urged that the requirement that the assessee ought to have developed, maintained and operated the facility is not a condition which is to be read in the cumulative. The learned counsel submitted that the scheme under Section 80IA of the Act was to provide a concession in order to attract private investment in infrastructure. It is in this background that the CBDT issued a clarificatory circular on 14th August 1995 stating that infrastructure facilities developed on a BOT, BOOT or other similar basis were within the contemplation of the provision. Reliance was placed on the circulars dated 23rd June 2000 and 16th December 2005 as being indicative of the fact that the requirement of developing, maintaining and operating an infrastructure facility were never regarded to be cumulative. The learned counsel urged that it was in line with the Board's understanding of the provisions of Section 80IA of the Act that the Parliament eventually stepped in by amending the prov....
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....ously construed by the Authorities at all material times, to cover within its purview the development of an infrastructure facility under a Scheme by which an enterprise would build, own, lease and eventually transfer the facility. This was perhaps a practical realisation of the fact a developer may not possess the wherewithal, expertise or resources to operate a facility, once constructed. Parliament eventually stepped in to clarify that it was not invariably necessary for a developer to operate and maintain the facility. Parliament when it amended the law was obviously aware of the administrative practice resulting in the circulars of CBDT. The fact that in such a Scheme, an enterprise would not operate the facility itself was not regarded as being a statutory bar to the entitlement to a deduction under Section 80IA of the Act . The Court cannot be unmindful in the present case of the underlying objects and reasons for a grant of deduction to an enterprise engaged in the development of an infrastructure facility. The provision was intended to give an incentive to investment for infrastructural growth in the country. In Bajaj Tempo V/s. Commissioner of Income Tax,1 the Supreme Cou....
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....ody; and (iii) 2 (1997) 224 ITR 677 (S.C.) 3 (2009) 319 ITR 306 (S.C.) The start of operation and maintenance of the infrastructure facility on or after 1st April 1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1st April 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 to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1st April 1995. In the present case, the assessee clearly fulfilled this condition. 23. In the view which we have taken, all the assessment years in question to which th....