TaxTMI 
TaxTMI 
2024 (10) TMI 855
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the assessee has undertaken 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. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ucture facility on or after the 1st day of April, 1995. 3. The assessee is a company incorporated under the companies act. The assessee has entered 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 fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....econstruction of Bus station with sub work at Karad in Satara Division Reconstruct of old bus stand as per tender drawing The Executive Engineer, S.T. Pune Region. 12,70,977/- Clinic 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 returne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act by observing as under: "5.9. It is also required to be examined as to whether the assessee can be called as 'developer' within the meaning of section 80IA(4) or is only a works contractor. The words 'developer' and '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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as per which the assessee has to carry out the required project. Any change in plan or design has to be done with the approval of the officer designated by the authority as mentioned in the agreement. iii. Agreement also specifies the exact nature of machinery/equipment that 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 asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under the category of eligible business as defined therein, if the said undertaking or enterprise carries out work which is in the nature of "works contract". This situation shall remain unchanged even if such a contract is awarded by a Central or State Government and executed by an enterprises referred to in sub-section 1. Since "works 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jects. Though this fact was clearly stated in the Remand Report, before me the appellant has not put forth any argument to contradict the same. It is stated that the appellant utilized its own funds employees and expertise while carrying out the work, but this statement is not borne out by any evidences. Therefore, it is clear that no risk is taken by the appellant in executing these contracts 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 no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claimed u/s. 80IA(4) the same was given as a sub-contract to the Appellant. The AO also had stated that the construction of Talathi Office building cum quarters in Daund Taluka, Dist. Pune and the retaining wall from Khadakwasla Dam to Naded Phata in which deduction u/s. 80IA(4) was claimed, could not be construed as the projects falling under the definition of infrastructure facility. Hence, the deduction claimed 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 eligibl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... failed to prove that it had fulfilled the conditions as laid down in section 80IA(4) of the Act without giving any valid and logical reason as well as without bringing on record any corroborative evidence in support of the same. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 11. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A) in confirming the disallowance u/s 80IA(4) of the Act made by the Assessing Officer. He 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) I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt was concerned with the question of fact as to whether the lands under consideration were "agricultural" or not for the purposes of wealth u/s 2(e)(i) of the Wealth Tax Act, 1957. He accordingly submitted that all these decisions relied on by the lower authorities are distinguishable and not applicable to the facts of the present case. 17. So far as the case of the Assessing Officer that in the preceding year, such disallowance was made is concerned, he submitted that the same was disallowed on the ground that the assessee had not claimed 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity deposit for due compliances including of quality works. However, in the case of a works contractor, an assessee merely executes the civil construction work or any other work, does not make any investment and does not take risks relating to the funds. He does not take risks and responsibilities like that of a developer. He merely carries out the work as has been instructed to him by the contractee. Therefore, the assessee in the instant case is entitled to the benefit of deduction u/s 80IA(4) of the Act. However, the Assessing Officer in the instant case has neither gone through the individual 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 H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctor and not a developer. The reasons of the Assessing Officer for the denial of such 80IA(4) deduction as claimed by the assessee have already been reproduced in the preceding paragraphs. We find the Ld. CIT(A) also upheld the action of the Assessing Officer in treating the assessee as merely a works contractor and not a developer and therefore, not entitled to the claim of deduction u/s 80IA(4) of the Act, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the assessee is not a works contractor and is a developer who undertakes 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. F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the contract however made it clear that it was the obligation of the assessee to make the equipment available for operation for a stipulated minimum number of days during the year and made the assessee liable to liquidated damages in the event that this was not possible. JNPT by its letter dated 27th March 2000 clarified that the difference between the two options that had been given to the assessee consisted of a payment of Rs. 40,00,000/- which was to be retained by JNPT in the event that the operators were provided by the Port for operating the cranes. At the same time, JNPT clarified that it was the responsibility 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 develop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat at the material time for A.Ys 1997-98 and 1998-99, it was necessary for the assessee to cumulatively fulfill the requirement of developing, operating and maintaining the infrastructure facility. It was urged that the assessee, even if it be held to have developed the facility, cannot be regarded as operating the facility. For the reasons already indicated, it is not possible to accept the submission. As we have already noted the assessee had as a matter of fact developed the facility. The Tribunal has also arrived at a finding of fact that the assessee was under the contract required to operate the facility. Merely because the operators 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n clarified the position of CBDT that structures which have been built inter alia under a BOLT Scheme upto A.Y. 2001-2002 would qualify for a deduction under Section 80IA of the Act. In fact from A.Y. 2002-2003, the process was further liberalized, consistent with the basic purpose and object of granting the concession. In this background, particularly in the context of the objective sought to be achieved and in the absence of any challenge on the part of the Revenue on the applicability of the binding circulars of CBDT, we are of the view that the condition as regards development, operation and maintenance of an infrastructure facility was contemporaneously 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1st April 1995. After Section 80IA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility which fulfills certain conditions. Those conditions are : (i) Ownership of the enterprise by a Company registered in India or by a consortium; (ii) An agreement with the Central or State Government, local authority or statutory body; and (iii) 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....