TaxTMI 
TaxTMI 
2018 (11) TMI 1968
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....ance of deduction claimed under section 80IA of the Income Tax Act. Facts on all vital points are common therefore, for the facility of reference, we take up the facts mainly from the Asstt. Year 2010-11. 3. Brief facts of the case are that the assessee-company at the relevant time was engaged in the business of development of infrastructure projects. It has filed its return of income on 30.9.2012 declaring total income at NIL after claiming deduction at Rs. 1,61,33,833/- under section 80IA of the Income Tax Act. Similarly, in the Asstt. Year 2011-12 it has shown additional income at Rs. 75,97,540/- and claimed deduction under section 80IA at Rs. 1,78,72,268/-. In the asstt. year 2012-13 the assessee has declared NIL income and claimed deduction under section 80IA at Rs. 3,35,57,706/-. The case of the assessee was selected for scrutiny assessment in all these three years. Notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed development of various infrastructure projects during these assessment years. The ld.AO took note of these projects while taking cognizance of t....
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....ENT (v) Vadora Municipal Corporation -STP 01/02/2009 2010-11 DEVELOPMENT (vi) Ahmedabad Municipal Corporation, Kotarpur (O& M) 12/09/2008 2009-10 OPERATION & MAINTENANCE (vii) Ahmedabad Urban Development Authority, Jaspur (O&M) 01/04/2007 2008-09 OPERATION & MAINTENANCE Asstt. Year 2011-12 "2. Sr. No. (4) of the notice u/s. 142(1) dt. 30-10-2013 You have asked the assessee company to demonstrate with necessary evidences that the undertaking fulfills all the conditions of section 80IA. (A) In respect of the following infrastructure projects the Hon'ble Commissioner of Income Tax (Appeal): VI, has allowed the claim u/s. 80IA hence, to avoid the repetitiveness the assessee company do not furnish the information as it is very much on record of the Department and rely on the appellate orders: Project Date of commencement 1st A.Y. of claim Nature of Work Ahmedabad Municipal Corporation, 01-04-2007 2008-09 O&M Ahmedabad Municipal Corporation 12-09-2008 2009-10 O&M GWSSB - Gondal - Kothaira 02-11-2004. 2005-06 Development MPAKVN 02-03-2006 2007-08 Development (B) The development of following infrastructure projects have been cons....
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....02-11-2004 2005-06 Development MPAKVN 02-03-2006 2007-08 Development Vadodara Municipal Corporation 23-10-2009 2010-11 Development of WTP Vadodara Municipal Corporation 01-02-2010 2010-11 Development of STP (B) The Development of following infrastructure projects have been awarded during the year relevant to A.Y. 2011-12 and the assessee company is in appeal before the Hon'ble Commissioner of Income Tax (Appeal): VI, Ahmedabad. Project Date of commencement 1st A.Y. of Claim Nature of work Khambhat Nagar SevaSadan, Khambhat 24-09-2009 2011-12 Development of WTP Gujarat Urban Development Company (GUDC) - Tarsadi 13-04-2010 2011-12 Development of WTP (C) The development of following projects have been awarded during the previous year relevant to A.Y. 2012-13 Project Date of commencement 1st A.Y. of Claim Nature of work Rajasthan Urban Infrastructure Development Project Bundi (RUIDP) 21-07-2011 2012-13 Development of Sewerage Treatment Plant (STP) Ex. Engineer (R&B Division) Tarapur, Anand (Tarapur) 19-09-2011 2012-13 Development of Sewerage Treatment Plant (STP) (A) The assessee company relies on the following appellate orders of the ....
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....gning, construction, commissioning, testing, trial run etc. This also included training of the personnel. All three agreements were produced and were examined in detail. Appellant's claim that it was not a mere contractor was evidenced from these documents. Appellant was found to be a designer of the infrastructure facilities with its technical team. It also constructed infrastructure facilities with its risk and also commissioned the same and carried out trial run. Appellant also operated and maintained the infrastructure facilities created by it for some time and also trained the personnel when required. Considering these facts it cannot be said that appellant was a mere contractor and not a developer. All the decisions referred by the assessing officer and appellant were analysed and in the light of facts of the appellant, it is quite clear that in respect of these three projects, appellant was developer. Appellant relied upon a recent decision of ITAT, Rajkot dated 23.9.10 in ITA No. 1111/RJT/2010 in the case of M/s Tarmet Bel (JV) KCL, Rajkot vs. ITO Wd 1(4), Rajkot. All relevant decision of the issue were discussed in this decision. The relevant extract of this order....
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.... met by the appellant in detailed submissions quoted earlier. Respectfully following the recent decision of ITAT Rajkot bench which squarely applies to the facts of the appellant's case, assessing officer is directed to allow deduction u/s 80IA of IT act in respect of the three projects namely GWSSB-ADB project, GWSSB-Gondal and MPAKVN project. 26. We further observe that from the agreement entered into by the assessee with GWSSB & MPAKVN with regard to their scope of work wherein assessee is required to designing (process, hydraulic, structure, equipment and aesthetically) providing, constructing and commissioning conventional water treatment plant consisting of all civil, mechanical and electrical components including necessary hydraulic testing, structural testing, equipment testing, trial run etc. The assessee is also required to arrange cement, sand steel and equipments etc. and undertake soil investigation and other exploration work. In all the assessee company has to design, construct, commission, test/operate and maintain water treatment plant. All these conditions akin to the contract awarded to the assessee duly come within the ambit of the conditions laid down u/s....
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....atment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word 'it' is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. [Para 27] The next question to he answered is whether the assessee is a developer or mere works contractor. The revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin (o works contract and it is not eligible for deduction under section 80-IA(4). Whether the assessee is a developer or works contractor purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to he analysed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. The Government handed over the possession of the premises of projects to the assessee for ....
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....under section 80-IA (4). This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the revenue. The circular issued by the Board clearly indicate that the assessee is eligible for deduction under section 8()-IA(4). The department is not correct in holding that the assessee is a mere contractor in the work and not a developer. [Para 28] As per the provisions of section 80-IA, a person being a company has to enter into an agreement with the Government or Government undertakings. Such an agreement is a contract and for the purpose of the agreement a person may be called as a contractor as he entered into a contract. But the word 'contractor' is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word 'contractor' is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer canno....
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....re, if the contracts involve design, development, operating and maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under .section 80-IA. The contracts which contain above features to be segregated, this deduction under section 80-IA have to be granted and the other agreements which are pure works contracts hit by the Explanation to section 80-JA(13), those work are not entitled for deduction under section 80-IA. The profit from the contracts which involve Resign, development, operating and maintenance, financial involvement, and defect correction and liability period is to be computed by the Assessing Officer on pro rata basis of turnover. The Assessing Officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. [Para 30] 28. Further similar issue also came up before the Tribunal, Hyderabad Bench in the case of Sushee Hi Tech Constructions (P) Ltd. vs. DCIT (2013) 33 taxmann.com 236 (Hyderabad-Trib), wherein dealing with the issue has decided the same by observing as below :- FACTS -1 The assessee had undert....
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....t under section 80- IA. The word 'owned' in sub-clause (a] of clause (1) of sub-section (4) of section 80-IA refers to the enterprise. By reading of the section, it is clear that the enterprises carrying on development of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. Thai the provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word 'ownership' is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80-1 A(4) and not any other person like individual. HUF, firm. etc. [Para 31] * According to sub-clause (a), clause (/) of sub-section (4) of section 80- IA. the word 'it' denotes the enterprise carrying on (he business. The word 'it' cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system. Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, th....
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....ucture facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of I 2 (o 24 months. During this period, if any damages are occurred, it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010. such activity is eligible for deduction under section 80-IA (4). This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. * Therefore: the assessee is a developer and not a works contractor as presumed by the revenue. The circular issued by the Board clearly indicates that the assessee is eligible for deduction under section 80- IA (4). The....
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....ge investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80-IA is available to developers who undertake entrepreneurial and investment risk and not for the contractors, who undertake only business risk. Without any doubt, the assessee clearly demonstrated that it has undertaken huge risks in terms of deployment of technical personnel, plain and machinery, technical know-how, expertise and financial resources. * Further, after the amendment the section 80-IA(4) read as (/) developing or (//') operating and maintaining or (///') developing, operating and maintaining any infrastructure facility. Prior to amendment the 'or' between three activities was not there, after the amendment 'or' has been inserted with effect from 1-4-2002 by Finance Act, 2001. * Therefore, the assessee should not be denied the deduction under section 80-IA, as if the contracts involve development, operating, maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract. The contr....
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....e was not agitated before the Tribunal. Considering the smallness of the amount involved in all these years, the issue was not pressed by the assessee, hence these grounds are rejected in all three years. Interest income on FDR has rightly been assessed as income from other sources and rightly been excluded from eligible profit from the amount of deduction under section 80IA. Accordingly, this issue is decided against the assessee. 9. In the next common grounds, the assessee has pleaded that the ld.CIT(A) has upheld disallowance of employees contribution towards PF and ESI, which was deposited after expiry of time limit. This disallowance was made with the aid of section 2(24)(x) of the Income tax Act. The ld.counsel for the assessee did not dispute that the issue is covered against the assessee by the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corpn., 366 ITR 170 wherein Hon'ble Court has held that if employee's contribution is not being deposited within time limit prescribed in provident fund and ESI Act then deduction of such amount will not be admissible to the assessee. The ld.CIT(A) has rightly based its reliance upon the decis....