AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 258
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....no. 1159/Kol/2013 for AY 2009-10 and 990, 991, 992, 993, 994 and 995/2016 for AYs 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 respectively with the direction to consider all documents and particulars including remand report and rejoinder afresh. 2. Originally the appellant's appeal against the assessment order dated 14-11-2007 passed u/s 143(3) was disposed of by the CIT (Appeals) vide his appellate order dated 30-06-2010. The appeal was against disallowance of claim for deduction of Rs. 6,18,17,507/- u/s 80IA of the Act. Brief history of the case is as under as extracted from the order of the Ld. CIT(A): 3.1. CASE HISTORY: Subsequently, Revenue filed an appeal before the Tribunal against the abovementioned appellate order. The Tribunal, vide its order dated 25- 07-2014 (combined Order for AYs 2006-07, 2007-08, 2005-06, 2008-09 and 2004- 05), observed that the CIT (Appeals) in relation to the appeal for the AY 2006-07, had violated the provisions of sub-sections (1) and (2) of section 250 of the Act by not serving notice to the AO as a result of which natural justice was denied to the Revenue. On the basis of the above observation, the Tribunal held that the orde....
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....hat he has neither discussed nor considered the same, inasmuch as, no comment whatsoever has been made by him either on the remand report submitted by the Assessing Officer or even on the rejoinder filed by the assessee. He has simply held that the issue relating to the assessee's claim for deduction under section 80IA was already considered and decided in favour of the assessee by his Id. predecessor vide his order dated 30.10.2009 passed in the first round and after extracting the relevant portion of the said order, he allowed the claim of the assessee for deduction under section 80IA by simply following the same. As already noted by us, the said order of the Id. CIT (Appeals) dated 30.10.2009 passed in the first round was set aside by the Tribunal on the ground of violation of principles of natural justice after having found that no opportunity of being heard was given by the Id. CIT(Appeals) to the Assessing Officer and the matter was accordingly remitted back to the Id. CIT(Ap- peals) for deciding the same afresh in accordance with law after giving the As- sessing Officer proper and sufficient opportunity of being heard. In these facts and circumstances of the case, when t....
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....ant was allegedly not eligible for deduction u/ s 80-IA. 3. That without prejudice to the contention raised in Ground No. 1 above, the Ld. Commissioner of Income-tax (Appeals), NFAC, failed to appreciate that the Certificate issued by Hooghly River Bridge Commissioner (HRBC) and Delhi Metro Rail Corporation Ltd. (DMRC) had allegedly not certified that the appellant had been entrusted with conceptualising the concerned Infrastructure Projects. 4. That without prejudice to the contention raised in Ground No. 1 above, the Ld. Commissioner of Income-tax (Appeals), NFAC, was wrong in not appreciating that the financing the concerned Projects had been made by the appellant. 5. That without prejudice to the contentions raised in Grounds Nos. 1 to 4 above, the Ld. Commissioner of Income-tax (Appeals), NFAC, erred in considering the appellant allegedly as a Contractor only and not a Developer and thus he was wrong in holding that the appellant was allegedly not eligible for deduction u/s 80-IA. 6. That the appellant craves leave to add, alter or withdraw any ground or grounds of appeal at or before the hearing of the Appeal." 4. Brief facts of the case....
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..... We have heard the rival contentions and also gone through the documents and paper book filed before us. While the assessee claims that the deduction under section 80-IA should be allowed, the Ld. DR relied upon the order of the Ld. CIT(A) and stated that since the assessee was a contractor, the deduction should not be allowed. 6. Before deciding the issue, it would be appropriate at this stage to refer to the order of the Ld. AO, who had required the assessee to justify the claim for deduction u/s 80-IA. The submission of the assessee made during the course of the assessment proceeding has been summarised as under by the Ld. AO: (a) That the assessee has been carrying on the business of developing and maintaining flyovers and metro railway which fall under the category of infrastructure facility under explanation to section 80- IA(4)(i); (b) That it carried on developmental works in pursuance of agreement entered into with prescribed authority of the central government; (c) That the works carried on can in no way be compared to that of a contractor who carries out the work allotted to it whereas the assessee does development of infrastructure work; ....
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....rt, Airport etc. The enterprise carrying on the business of developing maintaining and operating any infrastructure facility which fulfills all the following conditions: (1) The Enterprise is owned by a company registered in India. (2) The Enterprise has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for developing. maintaining and operating a new infrastructure facility. In case of an enterprise carrying on the business of developing or operating and maintaining or Developing, Operating & maintaining an infrastructure facility, the audit report in Form No .- 10CCB shall be accompanied by a copy of the agreement of the enterprise with the Central Government or the State Government or the local authority for carrying on the business of Developing etc. viz. the infrastructure facility. In any other case, the audit report in Form-10CCB shall be accompanied by a copy of the agreement, approval or permission as the case may be, to carry on the activity signed or issued by the Central government or the State Government or the Local authority for carrying on the eligible busin....
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....business filed with return of Income. Audit Report u/s. 10CCB was not filed along with original return of Income, and was filed during the course of assessment proceedings. However more importantly, no agreement with Govt/ Local authority, permission/ approval letter was included, so assessee did not fulfill this condition. So, all the condition required for claiming deduction u/s. 80IA was absent and thereby assessee is not entitled to claim deduction u/ s. 80IA It is also very clear from records and documents submitted that the assessee was awarded contract job for part civil construction of their project for which assessee received contractor's payment after deducting T.D.S. from time to time. Therefore, the assessee is not engaged in development, Maintenance, Operation etc. as are pre-requisite conditions of Infrastructure Project eligible for deduction under section- 80IA, nor has entered into agreement with Government or Local Authority for development of infrastructure facility. The assessee was simply awarded a civil construction job as a contractor. Assessee had also submitted that the details submitted for AY 2006-07 should be considered alo....
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.... benefit. It also held that this had been made clear by Explanation to Section 80IB which has been inserted by the Finance Act, 2007 w.r.e.f. 1.4.2000. The ratio of this case is applicable to assessee company. In view of aforesaid arguements, it is very clear that assessee company filed inaccurate particulars for claiming deduction u/ s.80IA. As the provision of section- 80IA are not satisfied, the claim of deduction u/s 80IA is rejected. This denial also attracts initiation of penalty provisions u/ s 271(1)(c) for concealment of income and filing inaccurate particulars of income. 7. Before the Ld. CIT(A), the assessee submitted as under in the Statement of Facts filed with the appeal memo: The appellant has been in the business of carrying out High Technology Construction Activities. In pursuance of agreements entered into with the Government of India, certain State Governments and Local Authorities/ Statutory Bodies formed by the respective Governments, the appellant developed a number of Infrastructure projects such as the Metro Railway in Kolkata as well as in Delhi, several Flyovers in Kolkata, etc. The Metro Railway projects have been taken up and complet....
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....n nature and in the process such development had to pass through various phases. During the assessment proceeding the appellant submitted necessary details as regards its claim for deduction u/s 80-IA. A detailed Note along with various supporting documents evidencing the nature of works carried out by the appellant in developing Infrastructure facilities, was furnished by the appellant before the Assessing Officer for properly appreciating the appellant's involvement as a developer of Infrastructure facilities. However, the Assessing Officer did not properly consider the detailed particulars and explanations furnished before him by the appellant in the matter of its claim for deduction u/s 80-1A. The Assessing Officer did not appreciate the fact that all these developmental works had been carried out by the appellant in pursuance agreements entered into with the Local Authorities and Statutory Bodies. In regard to "local authorities" the Assessing Officer considered the definition of the term "local authority" as given in section 10(20) without appreciating the fact that such definition had been exclusively for the purpose of section 10(20) and such definition would n....
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.... during the previous year relevant for the Assessment Year 2007-08. The Assessing Officer held that in view of the appellant maintaining Mercantile system of accounting the above-referred aggregate sum of Rs. 2,69,434 was being added back. In view of the rejection of the appellant's claim for deduction u/s 80-IA of Rs.6,18, 17,507 and the disallowance of the above-referred sum of Rs.2,69,434 and a further disallowance of Rs.55,256 u/ s 40(a)(ia), there appeared a total income of Rs.6,21,42,197 while as per the Return the Total Income had been Nil. The Assessing Officer computed the tax/interest payable by the appellant at Rs 31,36,906 which was inclusive of Rs. 7,78,338/ -. 7.1 The Ld. CIT(A) considered the provisions of section 80-IA, as it was in 2007-08 by the Finance Act, 2006, the conditions required to be fulfilled, legislative intention etc. He has also discussed the facts as claimed by the assessee and as noted by the Ld. AO. He also considered the remand report dated 10.11.2014 of the Assessing Officer, the rejoinder to the remand report filed by the assessee, the discussion on the appellant's claim of eligibility and the basis of law and facts, whether....
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....business of Development of Infrastructure facilities, viz., Flyovers (Bridges) and Metro Railway (Railway System). In pursu- ance of Agreements entered into between the appellant and the prescribed Gov- ernment authorities being Local Authorities, viz., HRBC and DMRC, during the Financial Year 2006-07 (relevant for the Assessment Year 2007-08) the appellant developed Infrastructure projects being Flyovers in Kolkata and Metro Railway in Delhi. On the basis of the desire of the concerned Local Authorities the appellant was required to give its own ideas supported by highly technical diagrams/ plans as regards the viability of the development of a Flyover and/ or Metro Railway at the places owned by the Government. It was only after several sets of discussions held between the appellant and the Local Authorities that the decisions were fi- nally taken for the development of Flyover at Kolkata and Metro Railway at Delhi. The entire process to be adopted for carrying out the developmental works, had been planned by the appellant and after thorough examination thereof and nec- essary sanctioning by the Local Authorities, the appellant could proceed with the construction of flyovers as w....
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....appellant submitted necessary details as regards its claim for deduction u/s 80-IA. A detailed Note along with various sup- porting documents evidencing the nature of works carried out by the appellant in developing Infrastructure facilities, was furnished by the appellant before the As- sessing Officer for properly appreciating the appellant's involvement as a devel- oper of Infrastructure facilities. However, the Assessing Officer did not properly consider the detailed particulars and explanations furnished before him by the appellant in the matter of its claim for deduction u/s 80-IA. The Assessing Officer did not appreciate the fact that all these developmental works had been carried out by the appellant in pursuance of Agreements entered into with the local au- thorities and/ or statutory bodies. In regard to "local authorities" the Assessing Officer considered the definition of the term "local authority" as given in section 10(20A) without appreciating the fact that such definition had been exclusively for the purpose of section 10(20A) and such definition would not hold good for any other provision of the Income-tax Act, 1961. The Assessing Officer held that ac- cording ....
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....by the appellant from its own sources and/ or borrowings. It was only on the basis of completion of phase-wise developments that the relevant Local Authori- ties made payments to the appellant. The entire Technical expertise required for the designing, conceptualising and planning of the Infrastructure Facilities projects, had to be arranged by the appel- lant at its own cost. In relation to DMRC Railway Projects it had been required of the appellant to incur the necessary expenses towards the development out of its own fund at the first instance and only after completing substantial portion of the project, the appellant could raise progressive bills on DMRC. From these facts it would be clear that the entire risk for this project towards development of Infrastructure facility, had to be borne by the appellant on its own. It was only after the progress of the devel- opment to a particular extent, the appellant could raise bills on DMRC. The rele- vant details of incurring expenses and raising of the Bills had earlier been pro- duced before the Assessing Officer, but those were not considered by the As- sessing Officer while examining the eligibility of the appella....
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....ariahat. A copy of the above- mentioned Certificate has been included in the Paper Book (pages 275 to 277). The requirement of section 80-IA(4)(i) is that the concerned enterprise must be car- rying on the business of Developing an Infrastructure Facility and it should be owned by an Indian Company. Further, the enterprise must have entered into an agreement with the Government or Local Authority/ Statutory Body for Developing a new Infrastructure Facility. The appellant's different units were in the busi- nesses of Developing Infrastructure Facilities and those units were owned by the appellant which is an Indian Company. All the Infrastructure Facility Develop- ments were carried on and completed by the appellants' respective Units as per the Terms and Conditions contained in the relevant Agreements entered into by the appellant with DMRC and HRBC which were Joint venture of the Government of India and Government of Delhi and prescribed LocalAuthority respectively as explained hereinbefore. The main requirement was as to who had been develop- ing the Infrastructure facility. It was the appellant who through its different units had been carrying out the Developmen....
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....intenance/ operation along with development, for being entitled to deduction, was changed. From this itself it becomes clear that what the government intended was to allow deduction to that person who just develops the Infrastructure facility. It has to be appreciated that the land on which the Infrastructure facilities, viz., Flyover(Bridge) and/ or Metro Railway (Railway System) would be constructed, would always belong to the gov- ernment and, therefore, if the development work would be carried out by the gov- ernment itself there would be no meaning of allowing any deduction u/s 80- IA(1)/(4)(i). It is only in a case where a person other than the government under- takes the Developmental work that the said person becomes entitled for deduc- tion. Since the person engaged by the government or any of its authorities would earn its charges for development works and not through operation/ maintenance of the concerned Infrastructure facility, the deduction u/s 80-IA would be in rela- tion to the said charges for development which would mainly comprise of charges for construction of the facilities. In the appellant's case the Local Authorities after all the procedural formalities....
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....activities carried on by the appellant and he formed a wrong opinion as- suming the appellant to be a mere Contractor. The appellant submits that if the Ld. CIT(Appeals) would have properly appreciated the submissions made by the appellant then he would have concluded that the activities carried on by the ap- pellant had not been a mere Work Contract but had been of the nature of devel- opment of Infrastructure facilities. The issues relating to the Fund employment, Technical expertise, designing, conceptualising, development of the Infrastructure facilities, burden of risk on the appellant in the matter of the development of In- frastructure facilities, were not properly look into by the Ld. CIT(Appeals). Further the Ld. CIT(Appeals) did not look into the references made to the decisions taken by the Jurisdictional Hon'ble ITAT, Kolkata as well as by the Hon'ble ITAT, Hy- derabad where under the circumstances similar to the appellant's case the Hon'ble ITATs had held that the concerned assessees should be treated as devel- oper and thus those assessees were eligible for deduction u/s 80-IA. Copies of the following Orders of the Hon'ble ITATs have been included ....
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....ny infrastructure facility, OR (iv) Works contract Infrastructure facility shall have to be only road including toll road, a bridge or a rail system. 19. As per assessment order, assessee claimed that it was developing and main- taining flyovers and Metro railway lines and it did development work in pursu- ance of agreement with government or statutory bodies. But AO wrote that from its submissions it is seen that assessee was NOT engaged in developing road, bridge, rail system. In the appellate proceeding before me, appellant has fur- nished certificates from two contract-awarding organizations, Delhi Metro Rail- way Corporation (DMRC) (joint venture of government of India and government of Delhi) and Hooghly River Bridge Commissioner (HRBC), a statutory organization under government of West Bengal. These certificates merely said that the as- sessee was 'entrusted with construction' and then 'constructed' flyovers and that they had necessary men and machines. No other activity like developing or main- taining or operating of the flyover is certified. As far as the certificates issued by HRBC are concerned, one work was done before 2002 an....
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....act-awarding organization, constructing the projects and then handing over to contract-awarding organization. I do not find in the certificates issued by HRBC and DMRC that appellant did conceptualizing. The concept of a flyover or underpass or subway or tunnel was actually finalized by contractee organization and then only they floated the tender. The designing is done by assessee but not independently as the same is done as per instruction or desire of the contract awarding organization. The word 'developing' does not essentially mean assessee did anything more than what is conveyed by these three words and the words "releasing for public use' may not be exactly so be- cause it is normally the prerogative of owners of the project to decide when the bridge or road will be opened for public. No evidence has been produced ever before any authority to show that assessee either had the right to do or actually did the work of conceptualizing or commissioning or releasing the infrastructural project like flyovers for public use. In absence of such evidence, I think this is exaggerated claim. In Para 3.3.7 of his order, CIT (A) had said that it was works contract because asse....
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....r statutory body, the burden on government is not eased and, so, that is not the legislative intention. In my opinion, giving the benefit of 100% tax exemption u/s 80IA for executing construction on contract with financing from government through periodic reimbursements is not eligible for the deduction. In fact, that is why Explanation was inserted under sub-section (13) of section 80IA to convey the objective loud and clear. It is also said in the order that in all official documents, the assessee is termed as contractor and its work as contract. CIT (A)'s earlier order did not discuss citing any law or judgments of Supreme Court/ High Courts who are empowered to interpret law - when one is a developer and when works contractor. He has given his own inferences. Appellant has also made own self-serving statements to claim that it was a developer and not works contractor but without authority of any case law or statutory provision of law. Only the Supreme Court and High Courts can interpret law and only their inter- pretation is binding. Hence, I am unable to accept either the CIT(A)'s earlier orders or appellant's claim. 23. WORKS CONTRACT - In its submissions....
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.... Clause No. 2 (i) was inserted in Madras General Sales Tax Act (Madras IX of 1939) and it defined the 'Works Contract' to mean any agreement for carrying out for cash, deferred payment or other valuable consideration the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property or the fitting out, improvement or repair of any movable property. 200 MEN 23.3. In The State of Andhra Pradesh v. The Guntur Tobacco Limited (1965) 16 STC 240 it was held "a contract for work in the execution of which goods are used may take one of the three forms. The contract may be for work to be done for remuneration and for supply of materials used in the execution of the work for the price; it may be a contract for work in which the use of materials is accessory or incidental to the execution of work or it may be a contract for work and use or supply of materials though not accessory to the execution of the contract is voluntary or gratuitous ... In the last class there is no sale because though property passes it does not pass for a price. Whether a contract is of the first or the second class must depend upon the circumstances: if it ....
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....gn, financing, construction, commissioning, maintenance, operation and management of the Airport. Accordingly, BIAL awarded a contract to design, finance, construct and operate an Aviation Fuel facility at the Bangalore International Airport to the assessee by entering into a Service Provider Right Holder ('SPRH'). 15. The assessee company constructed the aviation fuel facility at Bangalore In- ternational Airport. The aviation fuel facility as mentioned in SPRH means the fuel farm, the feeder lines and the hydrant system required to be constructed, com- missioned, operated and maintained in accordance with the specifications agreed between the assessee and BIAL in its SPRH agreement. The assessee completed the construction of aviation fuel facility in April 2008 and the facility was put to use on 24 May 2008. It is also operating the aviation fuel facility at Bangalore International Airport. Since the assessee is engaged in the business of developing, operating and maintaining "infrastructure facility" as defined in Explanation to section 80-IA(4) of the Act, in the return, it claimed deduction under section 80- IA(1) read with section 80-IA(4). ... ....
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....g, constructing and operating an aviation fuel facility and providing into-plane refueling services at the airports. He invited our attention to the various clauses of SPRH and Operating agreement viz., Clause 4 (page 15 & 17), Clause 10 (page 26), Clause 19 (page 34835) which show that the assessee has constructed the aviation fuel facility and is the owner of the aviation fuel fa- cility for the period of 20 years at the end of which period the same is required to be transferred to BIAL. The said facility is under Built Own Operate and Transfer (BOOT) Model and as per CBDT Circular No.717 dated 14 August 1995 the de- duction under section 80-IA is available in case of Built Operate Transfer (BOT) or Built Own Operate & Transfer (BOOT) projects. The Id. AR pointed out to the au- dited financial statements for the year ended 31 March 2015. Note no. 10 of the Audited Financial Statement provides details of the Tangible fixed assets of the assessee wherefrom it may be observed that the assessee has capitalized fuel farm facility and Hydrant system in the books of account since it is the owner of these assets. Therefore, the assessee satisfies the condition of owning the infra- struct....
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....eloped the entire metro system and has itself conceded that part of the electrification was given to some other agency. The entire project was not financed by the assessee so as to be treated as a developer. 9.2 The assessee may be correct in stating that "Local Authority" defined under section 10(20) is for the exclusive purpose of section 10(20). Though the argument may appear correct, however if a term is not defined elsewhere, its definition as appearing at any other place in the statute can be relied upon. Section 10(20) defines a local authority, but it does not imply that a local authority as per the definition, which enjoys exempt income, will be defined differently if the term occurs at any other the place. Moreover, the Ld. CIT(A) has taken the definition as per the order of the Hon'ble Supreme Court and there does not appear any material difference between the definition as per section 10(20) and as is held by the Hon'ble Supreme Court, which has been referred to by the Ld. CIT(A). Hence, neither the DMRC nor the HRBC are Local Authorities. Although Hooghly River Bridge Commissioners is a statutory organisation under the Government of West Bengal, however as i....
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....s/ authority or board or corporation or any other body established or constituted under any central or state Act No adverse finding (a) It has entered into agreement with the central/ state government or local authority or statutory body for develop- ing/ operating and maintaining/ devel- oping, operating and maintaining any in- frastructure facility Not fulfilled (b) it has started or starts operating and maintaining the infrastructure facility on or after the 1.4.1995 No adverse finding (c) If the infrastructure facility is trans- ferred to another undertaking or enter- prise after developing, it is the transferee undertaking which will get the deduction for unexpired period. This and the words 'develops and begins to operate' in Pro- viso to Section 80IA(2) indicate that if fa- cility is simply developed, deduction will not be for twenty years. It will have to be operated and maintained by developer or transferee and the operating/main- taining undertaking will get it for re- maining period. The flyovers and metro rail tunnels etc were handed over to contractee organization after construction. For this reason also, even if deduction allowed in year o....
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....s 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. LEGISLATIVE INTENTION: Memorandum of Finance Act, 2007, read, "Clarification regarding developer with reference to infrastructure facil- ity, industrial park, etc. for the purposes of section 80-IA Section 80-IA, inter-alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, Industrial Parks and Special Economic Zones. The tax benefit was introduced for the reason that industrial modernization re- quires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport sys- tems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely exe- cute the civil const....
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....not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-1A) for executing works contract, will not be eligible for the tax benefit under section 80-IA. 4. Applicability- This amendment will take effect retrospectively from the 1st day of April, 2000 and will, accordingly, apply in relation to the assessment year 2000- 2001 and subsequent assessment years." 10. Since the assessee had not made the investment in both the projects, nor the agreements in this regard place any such burden upon the assessee as no financial package for financing the projects were submitted before both the agencies, hence it cannot be treated as a developer for the projects, which is the primary condition for claiming deduction under section 80-IA. The segregation of act....