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2024 (12) TMI 697
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....for A.Y. 2010-11, and our decision in this appeal shall apply mutatis mutandis to remaining three appeals. ITA No. 2498/Ahd/2013 (A.Y. 2010-11): 3. This appeal filed by the assessee has arisen from the appellate order dated 23.08.2013 passed by ld. CIT(Appeals)-XVI, Ahmedabad in Appeal No. CIT(Appeals)-XVI/ITO/Wd. 10(1)/272/12-13 for the assessment year 2010-11, which, in turn, has arisen from the assessment order dated 07.02.2013 passed by Assessing Officer u/s. 143(3) of the Income-tax Act. Revised grounds raised by assessee in this appeal read as under : "1. The Learned Commissioner of Income Tax (Appeals) XVI, Ahmedabad erred in sustaining the order of the Income Tax Officer, Ward-10(1), Ahmedabad denying claim for deduction of Rs. 2,12,15,873/- u/s. 80-IA (4) of the Income Tax Act, 1961. 2. The Learned Commissioner of Income Tax (Appeals) - XVI, Ahmedabad erred in treating the appellant as a contractor of infrastructure facility and not as developer thereof, in the facts and circumstances of the nature of activities carried out by the appellant under the agreement with Airport Authority of India for the airport at Bhopal. 3. The Learned Commiss....
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....d Terminal Building at Raja Bhoj Airport, Bhopal is referred to as "Contract Agreement", wherein AAI is referred as "Owner" and the assessee, M/s. BGSCTPL-MSKEL Consortium is referred as "Contractor". Assessing Officer observed that the assessee is a contractor and has not taken any risk as per the agreement. The Assessing Officer observed that in case of cost escalation, i.e., increase in price of any material or the duty, AAI shall reimburse to the contractor such increase in price or the additional or increased duty paid by the contractor and hence, no risk is assumed by the contractor for the work as per agreement. The Assessing Officer issued show cause notice to the assessee. 5. In reply to show cause notice, the assessee submitted that the assessee is a joint venture entity, which came into existence with an object to bid for Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Airport, Bhopal awarded by AAI. Assessee submitted that as per Explanation 1 to section 80-IA(4), infrastructure means a road, bridge, airport, port, inland waterways and inland ports, rail system etc., and the assessee is engaged in development of New Expandable Modular....
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....ts own technical skill and taking specific risks by deploying own resources and hence, the assessee is a developer of the said infrastructure facility and is not merely a contractor. It was also submitted that the Explanation below section 80-IA(13) cannot be derogatory or override the main provisions of the Act as held by Hon'ble Supreme Court in the case of S. Sundaram Pillai & Ors. reported in AIR 1985 (SC) 582. The assessee submitted that it has deployed its own human resources and technical expertise/know-how and these were not supplied by AAI. It was submitted that entire planning of the work has also been designed and carried out by the assessee and the material procured by assessee was consumed in the project using its own know-how by deploying its own resources at its own risk to develop the said infrastructure facility. Thus, in nutshell, it was submitted that the assessee has duly complied with all the conditions for being entitled for deduction u/s. 80-IA(4) and hence, the deduction u/s. 80-IA(4) may be granted. The assessee relied upon the order of ITAT, Rajkot in the case of TARMATBEL( JV) in ITA No. 1111/RJT/2010. Assessing Officer rejected the claim of the assessee ....
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....ficer observed that the assessee has availed/opted for composition scheme under the VAT, which is applicable to works contractor. Thus, after going through all the terms and conditions and nature of the contract, the Assessing Officer was of the view that the assessee is mainly doing the work of civil construction as part of the contract and whole project is not completed individually by the assessee- AOP. The project is planned by AAI, work is completed under the supervision and direction of the AAI, payment is made in advance upto 70 to 90% and after completion of the work, final payment is made by the AAI along with cost escalation. Thus, the Assessing Officer denied deduction u/s. 80-IA(4) of the assessee. 6. Aggrieved, the assessee filed first appeal with ld. CIT(Appeals) and made elaborate submissions to justify that the assessee is a developer and is entitled for deduction u/s. 80-IA(4) of the Act. Learned CIT(Appeals), after considering the contention of the assessee rejected the claim of the assessee and held that the assessee is merely a contractor and hence, not eligible for deduction u/s. 80-IA(4). 7. Now, still aggrieved, the assessee has filed second appeal with....
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....has given EMD/performance Bank Guarantee. 8. On the other hand, learned Sr. DR has relied upon orders of the authorities below. 9. We have considered rival contentions and perused material on record including the cited case laws. We have observed that the assessee is an AOP, and is a joint venture consortium of M/s. B.G. Shirke Construction and Technology Pvt. Ltd. and M/s. M.S. Khurana Engineering Ltd., which is claimed to be formed for the purpose of Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Air Port, Bhopal. The assessee has claimed itself to be engaged in the development of infrastructure facility, and has claimed that it is eligible for deduction u/s. 80-IA(4). The said Airport is owned by Airport Authority of India(AAI) who has entered into an agreement with assessee for Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Air Port, Bhopal. Thus, the work is assigned by AAI to the assessee under the agreement entered into between AAI and the assessee for Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Air Port, Bhopal. The facility is to be handed over by the assessee aft....
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....e (ii) of sub-section (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in subsection (2) and thereafter, thirty per cent of such profits and gains for further five assessment years. (3) This section applies to an undertaking referred to in clause (ii) or clause (iv) of subsection (4) which fulfils all the following conditions, namely :- (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose: Provided that nothing contained in this sub-section shall apply in the case of transfer, either in whole or in part, of machinery or plant previously used by a State Elect....
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....995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place: Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017. Explanation.-For the purposes of this clause, "infrastructure fa....
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....if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2017; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2017: Provided that the deduction under this section to an undertaking under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2017. Explanation.-For the purposes of this sub-clause, "substantial renovation and modernisation" means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004; (v) an undertaking owned by an Indian company and....
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....f such audit in the prescribed form duly signed and verified by such accountant. (8) Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-sec....
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....under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. (12A) Nothing contained in sub-section (12) shall apply to any enterprise or undertaking which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007. (13) Nothing contained in this section shall apply to any Special Economic Zones notified on or after the 1st day of April, 2005 in accordance with the scheme referred to in sub-clause (iii) of clause (c) of sub-section (4). Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this 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 (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1). 9.2 On per....
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....d by the banks on behalf of the assessee. These secured advances for material as well mobilisation advances are adjusted against the running bills submitted by the assessee. Thus, assessee is taking the risk and responsibility for these secured advances against material as well mobilisation advances received by the assessee from AAI. In case of any default etc. assessee will be liable to repay the same to AAI , or AAI can directly invoke the bank guarantee and recover the amount. It is contended by Revenue that the assessee is being paid promptly by AAI on submission of the bills as is evident from the fund flow statement submitted by the assessee and hence the assessee is not taking financial risks, but on perusal of the same and other terms and conditions, funds are released after certification by the Engineers-in-charge of AAI that the work has been performed as per quality specifications specified in the tender documents/agreement entered into by the assessee with AAI, and thereafter, the payments are released in timely manner, which is itself in the interest of AAI to expedite the completion of the work within the stipulated time framework to meet deadlines as well as to avoid....
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....sessee shall, at its own expenses, provide all materials required for the works other than those which are to be supplied by AAI. Assessee is required to deposit royalty and obtain necessary permit for collection of stone, sand, red Bajri, Kankar etc. from the Local Authority. It is also stipulated that all materials are to be provided by the assessee in conformity with the specification laid down in the contract. Even it is stipulated that if there is any infringement of any intellectual property rights or any violation of patent etc., the assessee shall be liable for the same and indemnify AAI for the damages suffered by AAI. It is also stipulated that all charges on account of Octroi, Terminal or Sales Tax and other duties on materials obtained for the construction shall be borne by the assessee. No doubt, some of the materials as provided in para 15(b) is to be provided by AAI as is listed in Schedule-B. All costs of loading, transportation, unloading etc. has to be borne by the assessee. The material, which is supplied by AAI, shall be incorporated in the work and accordingly billed to AAI for which AAI shall make deduction while making payment for the material supplied by AAI....
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....sed value of any material, which are non-perishable, non-fragile and non-combustible and are in accordance with the contract and which have been brought on the site in connection therewith and are adequately stored and protected against damage by weather or other causes but which have not at the time of advance been incorporated in the work. For cement & Bitumen, the assessee is eligible for 90% of the assessed value of the material and the assessee is required to submit comprehensive insurance cover for the cost of material and there is a provision for providing bank guarantee by the assessee to the AAI, which is by way of performance guarantee to the tune of 5% of the contract value issued by Nationalized/Scheduled bank. It is also seen from the fund flow statement that the assessee has been timely paid by AAI on submission of bill, but that does not derogate from the fact that the assessee has taken onerous responsibility and such timely payments are in the interest of AAI itself for timely completion of the work and maintaining strict time schedules and quality specifications and standards. The assessee is also eligible to get mobilisation advance not exceeding to 10% of the co....
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....sessee is also required to make its own arrangement for storage of materials, machines etc. at his own cost. 9.5 Similarly, as stipulated in SCC-Electrical, the assessee is required for construction of Integrated Terminal Building for Domestic/International Operations at Bhopal Airport with following special condition: "This tender is for providing Integrated Terminal Building for Domestic/International Operations at Bhopal Airport. SH: Civil, Sanitary Plumbing, Internal & External Electrification, sub station equipments, HVAC with BMS, PA & CCTV System, FIDS System, Escalators & Elevators, Conveyor Belts etc." 9.6 It is also stipulated in para-4 of SCC-Electrical that on award of work, the assessee shall prepare and furnish the shop drawings for approval to the Engineer-in-charge before execution as stipulated as under : "4. DRAWINGS On award of work, the successful tenderer shall prepare and furnish the shop drawings for approval to the Engineer-in-charge before execution. Such drawings shall be based upon item specifications, local laws and regulations for the following works. a) Internal & External Electrification including UPS system. ....
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....ct . It is also stipulated in the agreement entered into by the assessee with AAI that no construction, equipment will be supplied by the AAI and the assessee has to arrange for all. Even DG sets and pumps and generators will also be provided by the assessee at the site. Even water and power has to be arranged/ supplied by assessee at its own cost. The assessee has placed on record fund flow statement, which is summary of running account bill and amounts received from AAI at page 248 of the paper book. On perusal of the same, it is observed in brief that the assessee has been given mobilisation advance by AAI as well as secured advance, but these advances are secured advances and the assessee is taking full financial risks and responsibility for these advances. Further, these mobilisation/secured advances are adjusted against the running bills submitted by the assessee. We have also perused the running bills as well as the ledger account submitted by the assessee in the paper book. 9.9 The assessee has also relied upon the judgment and order of Hon'ble Gujarat High Court in the case of PCIT(Central) v. Monte Carlo Construction Limited R/Tax Appeal 786 of 2023, wherein Hon'ble Gu....
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.... a security deposit to the employer and indemnify at the same time for any losses/damage caused to any property/life in course of execution of works. Further, the assessee was responsible for the correction of defects arising in the works at its own cost. For that purpose, the MPRDCL retained the money payable to the assessee as a measure to ensure the quality of the work and to make liable the assessee in the event of a defect, if any. Thus, it cannot be said that the assessee had not taken any risk in the given facts and circumstances especially when the assessee has undertaken the project as a whole for the development of the road right from the beginning till the end. Thus, on perusal of the terms and conditions in the tender documents furnished by the assessee, it is clear that the assessee was not a works contractor simply but a developer and hence, the explanation to section 80-IA(13) does not apply to the assessee." 3.8. The Tribunal also dealt with the contention raised on behalf of the Revenue with regard to the issue of award of contract by the MPRDCL, a nodal agency being wholly owned undertaking of the Government of Madhya Pradesh as such contention was raised....
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....current findings of fact arrived at by the CIT (Appeal) as well as the Tribunal that the assessee has undertaken the development of infrastructure facility and is eligible to claim the deduction under Section 80IA(4) of the Act. 3.11. Section 80IA of the Act provides for deduction from the gross total income of the assessee which includes any profit and gains derived by an undertaking or an enterprise from any business referred to in Subsection 4 of the Act as eligible business by providing deduction of an amount equal to the 100% of the profit and gains derived from such business for 10 consecutive assessment years. Subsection 4 of Section 80IA of the Act reads as under:- "(4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entere....
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.... as enumerated by the CIT (Appeal) as under:- "To examine whether the project assigned to this Appellant was in the capacity of a "Contractor" or the Appellant has executed the work as a "Developer" with respect to the ROAD PROJECTS, I have perused the terms of some of the agreements. My attention has been drawn on agreements with "Madhya Pradesh Road Development Corporation Limited", from which the Appellant have been awarded two Road Projects, wherein the scope of the work has been defined as follows:- Sl. No. Name of Road Approx. Length Km Scope of Bid/Development work 1 Package-1: Chindwara - Amarwara-Narsingpur" Road Project: SH 47 103.3 Rehabilitation, Widening, Upgradation & Strengthening 2 Package-14: "LakhnadonMandla-Dindori" Road Project: SH 11 & 40 149.8 18 The Appellant has drawn my attention to the relevant clauses of the Tender Documents in support of its contention of being "Developer of the Infrastructure Facilities" 3.14. The CIT (Appeal) has further examined as to whether the project assigned to the assessee was in capacity of a contractor or the same was executed as a developer with respect to the canal ....
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....erve that Section 80-IA(4)(i)(b) of the Act states that the assessee can enter into an agreement with Central Government or a State Government or a Local Authority or any Statutory Body for development of new infrastructure facility. The relevant extracts of Section 80-IA(4) of the Act are reproduced for ready reference:- "(4) This section applies to-- ..... (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;" 11. The Government of India constituted the International Airports Authority of India (IAAI) in 1972 to manage the nation's international airports while the National Airports Authority of India (NAAI) was constituted in 1986 to look after domestic airports. Both the above M/s. N.C.C-M.S.K.E.L. (JV) vs. ITO Asst. Years -2007-08 & 2008- 09 organizations were merged in April 1995 by an Act of Parliament, namely, the Airports Authority of India Act, 1994 and has been constituted as a Statutory Body and was named as Airpo....
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....justments, were to be made to the assessee, security deposit was to be paid by the assessee, there was penalty for delay by the assessee in completion of the project, procurement of the material was the responsibility of the assessee, procurement of land for camp, for shop, labour camp etc. and also the employment of qualified engineers, action and compensation in respect of bad work, defect liability of the accidents to persons in relation to Workman Compensation Act, indemnity insurance of the workmen employed etc. were all the responsibility of the assessee. Accordingly, the Gujarat High Court held that the Ld. CIT(A) and Tribunal considering such aspects of the tender agreement, concurrently held that the assessee had entered into a contract for "development" of infrastructure facility agreement and not a"works contract" and was eligible for claim of deduction under Section 80-IA(4) of the Act. 16. In the instant facts we have to firstly see whether the assessee is engaged in "development" for any "new infrastructural facility" or is engaged only in carrying out repair works or other incidental works, not amounting to development of a new infrastructural facility. In o....
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....under the control and directions of AAI. In this case, we observe that the assessee has furnished bank guarantee to AAI (refer Pages 51-61 of the Paper Book), the assessee has furnished detailed program and CPM work diagram to AAI for its approval (refer Pages 51-61 of the Paper Book), the assessee has prepared and submitted electrical layout drawing for site office (refer Pages 69-70 of Paper Book), the assessee has prepared various other designs like curtain glazing wall (refer Pages 72-98 of Paper Book), honey comb panels designs (refer Pages 99-103 of Paper Book), design for air handling unit Duct & Pipe (refer Pages 104-124 of the Paper Book) etc. Further, the assessee has also undertaken to provide all materials for the project at it's own expenses (other than those which are supplied by AAI) (refer Pages 131 and 06 of Paper Book). The assessee has also undertaken to indemnify AAI employees against action for claim or proceedings relating to infringement or use of any patent or design etc. (refer Pages 132 of Paper Book). Accordingly, looking into the facts of the instant case, it is observed that the assessee has M/s. N.C.C-M.S.K.E.L. (JV) vs. ITO Asst. Years - 2007-08 &....
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....ITAT, Rajkot. (iii). M/s. Ketan Construction (ITA No. 219 to 222/Rjt/2015 & 1999 to 202/Rjt/2015 dated 03.06.2020 - ITAT Rajkot. (iv). M/s. KCL - BEL Tarmat (JV) (ITA No. 192, 193/Rjt/2011, 214/Rjt/2011 and 485/Rjt/2014 dated 03.12.2018 - ITAT Rajkot. (v). Welspun Projects Ltd. Projects Ltd. (ITA No. 1864/A/2013 & 225/A/2014 dated 08.10.2018 (2018) 54 CCH 70 - ITAT, Ahmedabad. (vi). M/s. BBELSTPL(JV) (ITA No. 507/Rjt/2012 dated 28.10.2016- ITAT Rajkot. (vii). TARMAT - BEL (JV) (ITA No. 1111/Rjt/2010 dated 23.09.2010 - ITAT Rajkot (viii). Hon'ble Jammu & Kashmir High Court judgment and order in the case of CIT vs. TRG Industries Pvt. Ltd. (2017) 155 DTR 109 (J & K HC) (ix). DCIT v. M/s. Simplex Infrastructure (2017) 49 CCH-88 - ITAT, Kolkata. (x) Hon'ble Delhi High Court judgment and order in CIT v. VRM India Limited ITA No. 2069 & Ors. , dated 18.03.2015 (xi) ITAT , Ahmedabad order in the case of Sugam Construction Pvt Limited v. ITO, reported in (2012) 34 CCH 0383 (xii) ITAT, Hyderabad order in the case of GVPR Engineers Limited (2012) 32 CCH 0296 (xiii) ITAT, Pune Bench order in the....