TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 950
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.... in the circumstances of the case and in law, the Ld CIT(A) erred in up-holding the additions made in assessment order passed under section 153A of the Act even in absence of any incriminating documents. 2. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in not allowing additional claim of deduction of Rs. 35,80,390/- u/s 80IA of the Income-tax Act, 1961 as lodged during the course of appellant proceedings in respect of income earned from work done as a member on behalf of its Joint Ventures, M/s Balaji ARSS (JV) and SBEPL-GRIL(JV) even when the appellant was eligible for deduction u/s 80IA of the Act in respect of profit earned from work undertaken by the appellant as a member of the consortium in respect of the projects undertaken by the joint ventures/consortiums 3. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in maintaining the disallowance of claim of deduction of Rs. 47,15,405/- under section 80IAB of the Income Tax Act, 1961 without properly appreciating the facts of the case and submission made before him. 4. The appellant reserves the right to add, alter and modify the grounds of appe....
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....as withdrawn. 6. Ground No.2 is relating to the claim of deduction u/s.80IA(4) of the Act at Rs. 35,80,590/- which was firstly claimed by the assessee before the ld. CIT(A). It was the claim of the assessee before the ld. CIT(A) that it has earned profits on the infrastructure facilities developed by it as a constituent of two Joint Ventures (JVs), namely M/s Balaji ARSS (JV) and SBEPL-GRIL (JV). The assessee claimed that since it has exclusively carried out the execution work of developing the infrastructure facility, therefore, it is eligible for the deduction u/s.80IA(4) of the Act on such profits. In support of the same, the necessary audit report along with relevant documents were filed before the ld. CIT(A), who has not allowed such claim of the assessee by holding that the assessee is not the enterprises as defined u/s.80IA(4) of the Act for claiming the deduction. Against such action of the ld. CIT(A), the assessee is in appeal before us. 7. Ld. AR of the assessee submitted that during the year under appeal, the assessee has entered into two separate Joint Ventures, firstly in the name of M/s Balaji ARSS (JV), wherein JV was awarded contract for construction of Railway Ov....
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....rk done as a member on behalf of its Joint Ventures, M/s Balaji ARSS (JV) and SBEPL-GRIL (JV). 3.2.1] The appellant entered into two joint ventures for carrying out eligible infrastructural projects as per section 80IA of the Act. Detail of such joint ventures entered into by the appellant is as under: S. No Name of the JVs Name and shares of the members Profit earned by the appellant from the said project [in Rs.] 1 M/s Balaji ARSS (JV) 1. M/s Shree Balaji Engicons Pvt. Ltd. (Presently known as M/s Shree Balaji Engicons Limited) - 70% 2. M/s ARSS Infrastructure Projects Limited -30% 2,02,535 Nature of work to be undertaken - Construction of ROB at km 530.269 RCC T-beam Girder and other allied works in connection with setting up Alumina smelter plant at Lapanga Station (Deposit work) (Two Packet System) awarded by East Coast Railway Construction Organisation 2 M/s SBEPL-GRIL (JV| 1. M/ s Shree Balaji Engicons Pvt. Ltd. (Presently known as M/s Shree Balaji Engicons Limited) - 70% 2. M/s G R Infraprojects Limited - 30% 33,77,855 Nature of work to be undertaken - Widening and single/ intermediate strengthening of existing 104/0 and km 117/0 lane with geometric improvem....
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....year ended 31st March, 2011 in respect of income earned and expenses incurred by the appellant for work done on behalf of the joint-venture, M/s Balaji-ARSS (JV) 549 Copy of acknowledgement of income-tax return alone with computation of income of M/s Balaji-ARSS (JV) as filed under section 139 of the Income-Tax 1.8 Act, 1961 for the Assessment Year 2013-14 wherein deduction under section 80IA of the Act was claimed along with copy of audited final accounts of M/s Balaji-ARSS (JV) for the year ended 31st March 2013 550-556 2 Documents related to M/s SBEPL-GRIL (JV): 2.1 Copy of audited final accounts for the year ended 31st March, 2011 557-562 2.2 Agreement with Executive Engineer, N.H Division. Jharsuguda for widening and strengthening of existing single/ intermediate lane with geometric improvement to two lane Carriageway 563-743 Joint Bidding Agreement entered into by M/s Shree Balaji Engicons Pvt. 2.3 Ltd., the appellant with M/s G R Infraproiects Limited for formation of JV in the name of M/s SBEPL-GRIL (JV) Copy of Memorandum of Understanding between M/s Shree Balaji Engicons 744-748 2.4 Pvt. L....
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.... joint venture or the consortium, it is executed by its constituents or the joint ventures in a ratio agreed upon by the parties For all practical purposes, it is the constituents/ members of the joint venture who execute the project awarded to the joint venture 3.4] In the facts of the present case, it is an undisputed fact that the appellant entered into Joint ventures with other parties with the sole purpose of fulfilling the eligibility criteria for obtaining the contract from Government bodies. Further, it is also an uncontroverted fact that constituents of the joint venture Le, appellant and the other party, actually executed the project awarded to the joint venture and that they were solely responsible for the performance of its scope of work and would also bear all technical, commercial and facing risk involved in performing its scope of work Relevant extract of few of the judicial precedents wherein it is held that the members of the JV are eligible for deduction under section 80IA of the Act in respect of work executed by them are reproduced hereunder for ready reference of the Hon'ble Bench: 3.5.1] The Hon'ble High Court of Allahabad in the case of CIT v....
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....pport of his contention relied upon following decisions:- (i) ACIT v. JSR Constructions (P.) Ltd. (IT Appeal No.898/Bang/2009 order dated 29.03.2011). (ii) Dy. CIT v. Transstroy (India) Ltd. (IT Appeal No. 325 & 326/Viz/2011 order dated 13.04.2012). 22. The objection of the CIT(A) in allowing deduction under section 80IA of the Act in respect of Sagar-Beena Project is that the assessee did not satisfy the conditions laid down under section 80IA(4)(b) of the Act. The objection of the CIT(A) is that there is nothing to suggest on record that the assessee had entered into any agreement with the Central Government or a State Government or a local authority or any other statutory body. He further noted that the assessee has entered into agreement with M/s. Nagarjuna Construction Company Limited, an entity which is not mentioned in section 80IA(4)(b) of the Act. To examine the case of the CITA), we would like to refer the word 'consortium of such companies in section 80IA(a) of the Act. The Section 80IA[4](a) provides that infrastructure facility as approved in (1) is owned by consortium of such companies. The consortium word has not been defined in section 80IA/4) of the Ac....
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.... find that the asses has satisfied the conditions laid down in section 80IA(4)(i)(a)(b)of the Act. We are, therefore, of the view that the assessee is entitled for deduction under section 80IA(4) of the Act in respect of Sagar Beena Project." (Emphasis supplied 3.5.2] The Hon'ble ITAT Bangalore Bench 'A' in the case of the ACIT v. M/s JSR Constructions (P) Ltd. (ITA No. 898/Bang/2009] has held that: "3. Brief facts of the case are that the assessee company, engaged in the business of civil engineering works and construction of national highways. filed its return of income on 31.10.2005 declaring NIL income and claiming deduction of Rs. 2,25,13,170/- u/s 80IA of the IT Act. The assessee company had also shown a book profit of Rs. 3,64,09,495/- u/s 115JB of the Act. During the assessment proceedings u/s 143(3) of the Act, from the profits and loss account filed along with the return of income, the AO observed that the assessee had shown the total contract receipts at Rs. 50,71,06,783/- whereas as per the TDS certificates, the total contract receipts works out to Rs. 50,72,62,959/-. Thus, there is a difference of Rs. 1,56,176/ between the total contract receipts as p....
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....elopment etc. The only reason for the disallowance by the AO is that the assessee has undertaken the sub-contract works and has also not undertaken the new contracts during the relevant asst. year. We find that the assessee has filed sufficient evidence before the CIT(A) to prove his case that it is party to the consortium, which was engaged in the business of civil construction and was also awarded the contract by the NHAI. It was also proved that the assessee has invested the entire capital for completion of the contract and so it was entitled to receive the entire contract receipts. In such a case, we are satisfied that the assessee has itself carried on the works contract and was not a sub-contractor carrying on the works contract. Further, as rightly held by the CITIA), every year the assessee cannot be expected to enter into new contract for the reason that the infrastructure project are by the very nature carried on over a period of time and cannot be completed within a year. The main aim of allowing the deduction u/s 80IA is for improving the infrastructure facilities in the country In view of the same, we are of the opinion that the CITA) has properly appreciated the evide....
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....early indicates that the joint Venture was only a de jure contractor but in fact the assessee was a de facto contractor. 10. There is no dispute with regard to the nature of business or the activities undertaken by the assessees. The dispute is only with regard to the identity of a person to whom this benefit of deduction u/s 80IA(4) can be allowed. We have carefully perused the provisions of section 80IA(4) and we find that the benefit of exemption/ deduction is to be allowed to any enterprise carrying on business of developing or operating and maintaining or developing, operating, maintaining any infrastructure facility subject to fulfilment of certain conditions. One of the condition is that the enterprise should be owned by a company registered in India or by a consortium of such companies or any other body established or constituted under any centre or any state Act. The other condition is that it has entered into an agreement with the Central Government or a State Government or local authorities or any other statutory body for developing, operating and maintaining or developing, operating & maintaining a new infrastructure facility. There is no dispute with regard to the f....
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....res through joint venture and the work was executed by them. As per provisions of section 80IA(4), the benefit of deduction under this section is to be given only to the enterprise who carried on the classified business. Therefore, in the light of this legal proposition, we are of the view that the assessee is entitled for the deductions u/s. 80IA(4) on the profit earned from the execution of the work awarded to JV and consortium. We accordingly set aside the order of the CITA) and direct the A.O to allow the deductions. Emphasis Supplied 3.5.4) The decision of the Hon'ble ITAT Visakhapatnam Bench cited supra has also been followed by the Hon'ble ITAT Hyderabad Bench 'B' in the case of DCIT, Central Circle-2,Hyd. vs. Megha Engg. & Infrastructure Ltd. (ITA No. 607, 608, 609 610/H/2016) in Para 9.2 of the order wherein the Coordinate Bench of Tribunal also held that constituents/ members of the joint venture shall be eligible to claim the benefit of deduction u/s 80IA(4) of the Act in respect of eligible infrastructural projects awarded to the joint venture. 3.6) In view of the findings reiterated in the judicial precedents cited supra, it becomes abundantly c....
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....ne as a member on behalf of its joint ventures, M/s Balaji ARBS (JV) and BBEFL-GRIL (JV). 3.7.2) With due respect, it is being highlighted that the Lat CITIA) has wrongly interpreted the decision of Hon'ble ITAT Visakhapatnam Bench in the case of Transstory India Adv. ITO. Ward-2 Guntur reported in (2012) 134 ITD 269 (Visakhapatnam) in the said case, 100% of the work of consortium was executed by the appellant and therefore, there was no question of claiming deduction under section 80IA of the Act by the Joint Venture. The Hon'ble ITAT Vishakhapatnam Bench has rightly concluded that as per section 80IA of the Act, the benefit of deduction under this section is to be given to the enterprise who carried on the Classified business. However, the Hon'ble ITAT Vishakhapatnam Bench in no way has concluded that if the JV's are eligible for deduction under section 80IA of the Act, the members of the JV's will be merely termed as contractors and will not be eligible for deduction under section 80IA of the Act in respect of work performed by them as interpreted by Ld CIT(A) Since, in the said cane, 100% of work of JV was performed by members only, there was no claim of ....
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....int venture agreements, the members of the JV have regulated the relationship entered with respect to their joint responsibility that existed in relation to the member. The Joint Venture is formed for execution of specific work by the members of the JV only. Henceforth, the members of the JV cannot be termed as sub-contractors to JV in respect of work executed by them for and behalf of JV. 3.7.6) It is also utterly important to highlight the relevant clauses of Joint Venture Agreement/ Joint Bidding Agreement as formed between the members of the joint ventures, M/s Balaji ARSS (JV) and SBEPL-GRIL (JV) for understanding the relationship between the members of JV and the JV which are reproduced hereunder for ready reference of the Hon'ble Bench: *Joint Venture Agreement between Shree Balaji Engicons Private Limited, the appellant and ARSS Infrastructure Projects Limited for formation of JVMs Balaji ARSS (JV): Clause No.3 3. The 'Parties' have resolved that the distribution of share, responsibilities, profits, losses and remuneration shall be as under : a) Lead Partner's share : 70% Name Shree Balaji Engicons Pvt. Ltd. Responsibilities : (Technical, Financial ....
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....signed to JV and G R Infrastructure Limited will perform 30% of the work assigned to the JV. Henceforth, it is evident that the agreement itself mentioned that the actual amount of work will be performed by JV only for which the JV was formed. * Clause No. 12: ------------------- 12. It is agreed that both the partners will work together for the mutual benefit of the JV and each partner agrees to indemnify and keep indemnified the other against any loss, damages, liabilities, cost expenses, claim suffered, incurred by it as a consequence of any act, omission or default of such member. Both Partners are committed to be jointly and severally liable for due performance, recourse/sanctioned in the event of default or withdrawal of any partner and arrangement for required indemnities. On perusal of the above, it is evident that the members of the JV were jointly and severally liable in respect of work executed by them. Hence, it is evident that each member of JV stands in the relation of Principal, as well as agent, as to each of the other members with the general scope of the Enterprise. 3.7.7) On perusal of the joint venture agreement/joint binding agreements as formed ....
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....de a detailed discussion on the Concept of Joint Venture the case of Faqir Chand Gulati u. Uppal Agencies Private Ltd. (2008) 10 SCC 345. The relevant observations are extracted below:- 17. This Court had occasion to consider the nature of joint venture in New Horizons Ltd v. Union of India (1995 (1) SCC 478). This Court held The expression joint venture is more frequently used in the United States. It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses. [Black's LawDictionary, Sixth Edition, p.839]. According to Words and Phrases, Permanent Edition, a joint venture is an association of two or more persons to carry out a single business enterprise for profit [P.117, Vol. 23). "Emphasis supplied) The following definition of joint venture....
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....ngeably and synonymous with joint adventure', or coventure, has been defined as a special combination of two or more persons wherein some specific venture for profit is jointly sought without any actual partnership or corporate designation, or as an association of two or more persons to carry out a single business enterprise for profit or a special combination of persons undertaking jointly some specific adventure for profit, for which purpose they combine their property, money, effects, skill, and knowledge....... Among the acts or conduct which are indicative of a joint venture, no single one of which is controlling in determining whether a joint venture exists, are: (1) joint ownership and control of property; (2) sharing of expenses, profits and losses, and having and exercising some voice in determining division of net ramings. (3) community of control over, and active participation in management and direction of business enterprise, (4) intention of parties, express or implied, and (Sifixing of salaries by joint agreement." (emphasis supplied) Black's Law Dictionary (7th Edition, page 843) defines joint venture thus Joint Venture: A business undertaking by two or m....
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.... their own risks. It is pertinent to note here that the AO has not given any finding on the issues like that each member had authority to interfere with or control the work executed by the other member, that both the members have jointly executed the project and thus produced the income jointly. In our opinion, the finding on the lines stated above is crucial to determine the issue of availability of income in the hands of Joint Venture- AOP. On the contrary, the AO is on record that the each of the ITA Nos. 496 & 497/12 ITA No. 178/13 & ITA Nos. 140 & 141/14 members has declared the income derived from their respective share of contract works in their hands. In this kind of situation, we do not find any merit in the presumption made by the AO that the Joint Venture is the Main Contractor and the members are the Sub- contractors. Once this presumption has been found to be wrong, then the question of estimation of income by way of Subcontract commission does not arise. So also the question of deduction of tax u/s 194C(2) of the Act and the disallowance u/s 40(a)(ia) does not arise. In view of the fore going discussions, we do not find any infirmity in the decision reached by the Ld ....
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....greement is void. In the present case, the question is mainly focussed on the contractual relationship of the assessee and its partners. This principle embodies in the section 20 of the Indian Contract Act has great relevance. It turns out that the formats of the agreement entered into with the partners and the styling of accounts prepared by them are products of mistakes of fact, and therefore, the agreement is not to be relied on to hold that the assessee is acting in the status of contractors vis-a-vis sub contractors. Therefore, it is to be seen that the question of TDS in the present case cannot be considered only on the basis of the agreements entered into between the assessee and its partners. 18. The liability u/s. 194C(2) is cast on the assessees only when they are in fact and in substance acting in the relationship of contractors and sub-contractors. Dehors the agreements and accounts, when it is found that they are acting jointly, for the purpose of their contract business, there cannot be a relationship of contractor and sub- contractor and there may not be an occasion to invoke Section 194C(2). When the said provision relating to deduction of tax at source is not ap....
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....to be charged interest u/s. 201(1A) of the Act." 3.9) in the view of the findings as laid down in the above judicial precedents, it is evident that in a Joint venture agreement, there sub-contract between JV and the constituents and sixce the JV has been formed only to procure contract works from the Government which is executed by the members of the JV only at a specified ratio. Henceforth, in a Joint venture, it cannot the concluded that the JV is a contractor and the members of the JV are sub-contractors in respect of work executed by them in the present case in hand, the appellant was member of Joint Venture, M/s Balaji ARSS (JV) and SREPL-GRIL (JV) which was formed for execution of specific work by members of the JV only and the members of the JV were in relation to the principal as well as agent to each other members with the general scope of the Enterprise. Henceforth, there was not contractual relationship between the members of the JV and the JV. 3:10) Hence, the Ld CIT(A) was not correct in not allowing further deduction of Rs. 35,80,390/- u/s 80IA of the Act in respect of income/profit earned from work done as a member on behalf of its joint ventures, M/s Balaji AR....
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....n Section 80IA(4) of the Act, there is express provision for allowability of deduction that it is available only to the enterprises which had entered into the agreement with the State Government/Central Government/local authority and since in the instant case no such agreement is executed between the assessee and any such authority, and the project was awarded by such Government authority to the joint venture only and, therefore, the assessee is not eligible for deduction u/s.80IA(4) of the Act on the execution of work in such project. He further submit that the assessee simply worked as a sub-contractor executing the work contract, thus, as per the explanation to Section 80IA(13) of the Act, it is not eligible for deduction u/s.80IA(4) of the Act. He further submitted that the assessee is not a developer and also submitted that as per the scope of work given in the tender document in Chapter III available in page no.397 of the paper book, the work is to be executed by the contractor i.e. joint venture firm and not by the constituent, therefore, he prayed for confirming the order of the ld. CIT(A) in not allowing the deduction to the assessee. The extract of the page 397 of paper b....
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....documents 1 Documents related to M/s Balaji-ARSS (JV) 1.1 Copy of audited final accounts for the year ended 31 March, 2011 1.2 Agreement with East Coast Railway for construction of ROB at km 330.269 RCC T-beum Ginder and other allied works in connection with setting up Alumina smelter plant at Lapanga Station (Deposit work) (Two Packet System) awarded by East Coast Railway Construction Organisation 1.3 Joint-Venture (JV) Agreement entered into by the appellant with M/s ARSS Infrastructure Projects Limited for formation of JV in the name of M/s Balaji-ARSS (JV) after awarding of tender by East Coast Railway 1.4 Copy of supporting invoices raised by the appellant to M/s Balaji-ARSS (JV) 1.5 Copy of supporting invoices raised by the appellant to M//s Balaji-ARSS (JV) 1.6 Copy of Profit and Loss account for the year ended 31 March, 2011 in respect of income carned and expenses incurred by the appellant for work done on behalf of the joint-venture. M/s Balaji ARSS (JV) 1.7 Copy of acknowledgement of income-tax return along with computation of income of M/s Balaji ARSS (JV) as filed u/s. 139 of the Income-Tax Act, 1961 for the Assessment Year 2013-14 wherein deduct....
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....ty without written consent of other party. From a careful perusal of this joint venture agreement and the consortium agreement, it is evidently clear that the joint venture and the consortium was formed only with an object to bid contract. Once the project or contract is awarded to the joint venture or the consortium, it is to be executed by its constituents or the joint ventures in a ratio agreed upon by the parties. In the instant case in case of a joint venture agreement, the assessee was entitled to execute the 40% of total work awarded by the Andhra Pradesh Government to the joint venture and in case of a consortium it was agreed that the entire work is to be executed by the assessee itself. Therefore for all practical purposes, it was the assessee who executed the work contract or the project awarded to the joint venture, No doubt the joint venture is an independent identity and has filed its return of income and was also assessed to tax but it did not offer any profit or income earned on this project/works awarded to it nor did he claim any exemption/deduction u/s 80IA(4) of the Act. These facts clearly indicate that the joint Venture was only a de jure contractor but in fac....
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.... get Deduction U/s 80IA of the Act. Considering the submission of AR and Order of the Jurisdictional ITAT. JVs are entitled to deduction u/s 80IA being the "developer" and members are not entitled to deduction u/s 80IA in the guile of being a "developer". 6.10 As seen in earlier para, the Judgements of the Hon'ble ITAT, Vizag has given the benefit of deduction to the members since the JV has not offered any income or profit on any of the projects awarded to it nor claimed any deduction u/s 80IA of the Act. In the present case both JVs have shown profit and claimed deduction u/s 80IA from AY 2013-14 but due to ignorance has not claimed deduction v/s 80IA for the AY 2011-12 & 2012-13. However, they have claimed deduction from AY 2013-14 onward. Hence, the factual matrix in the case of Transstory (India) Ltd are not applicable to the assessee as the assessee has claimed deduction u/s 80IA from AY 2013-14 and due to ignorance they have not claimed in the Ay 2011-12 & 2012-13 which they are otherwise entitled to. 6.11 Considering the fact that the members are mere work contractors and not "developers", the factual matrix of the judicial precedent cited by the AR are not applic....
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.... bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway, inland port or navigational channel in the sea; (ii) any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, 2005. Explanation.-For the purposes of this clause, "domestic satellite" means a satellite owned and operated by an Indian company for providing telecommunication service; (iii) any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified79 by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006 : Provided ....
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....vember, 2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and such Indian company is notified before the 31st day of December, 2005 by the Central Government for the purposes of this clause; (b) such undertaking begins to generate or transmit or distribute power before the 31st day of March, 2011; (vi) [***] 13. In the present case, to our understanding the "enterprises" as referred to in Section 80IA(4)(i) of the Act are two joint ventures namely M/s Balaji ARSS-JV and M/s SBNEPL-GRIL JV. These joint ventures are incorporated in terms of joint venture agreements executed between the parties known as constituent of joint ventures and the said joint ventures are separate legal entity having their own PAN number and assessed as AOP. The Joint Ventures has entered into an agreement with the respective authorities i.e. East Coast Railways and the Chief Engineer, NH, Odisha for development of infrastructure facility. Both the joint ventures have started after first day of April, 1995. Thus, these joint ventures are the "enterprises" as referred to ....
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....the chart reproduced in para 10 above, they have share gross receipt in almost 55% - 45% ratio for this year. The bills against the execution of work were separately raised by the assessee to M/s Balaji ARSS-JV, which is evident from the copies of the invoices available in the paper. M/s Balaji-ARSS (JV) and SBEPL-GRIL (JV) have raised the bills to their respective principals against the works executed by them and had received the amounts which were in turn paid to the parties who have executed the work. In such manner these constituents parties are only the sub-contractors and cannot be treated as the "enterprises" for claiming deduction u/s.80IA(4) of the Act. From perusal of the work order given by the East Coast Railway to M/s Balaji ARSS (JV) and the Chief Engineering, NH, Odisha to M/s SBEPL-GRILL(JV), it is clear that the works have been awarded to the respective joint ventures wherein they have been termed as the "contractors" by the respective authorities. The relevant copy of the work orders are as under:- 17. It is also observed that the awardee i.e. the principals have retained the certain amounts towards the performance guarantee which in no way could be treated as ri....
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....xecutants of the project awarded to such joint venture. Therefore, the facts of the case of M/s PNC Construction (supra) are fully distinguishable from the facts of the present case of the assessee and are not applicable. 19. Likewise, the reliance placed by the assessee on the decision of coordinate bench of the Bangalore Tribunal in the case of M/s JSR Constructions (P) Ltd., passed in ITA No.898/BANG/2009, dated 29.03.2011 and the decision of the ITAT Vizag Bench of the Tribunal in the case of Transstory (India) Ltd., reported in (2012) 134 ITD 269 (Visakha) are also distinguishable on facts wherein in both of these cases also, the entire work was executed by one of the constituent of the joint venture who was allowed deduction u/s.80IA of the Act, whereas in the present case as observed above, the assessee has partly executed the contract and partly by the other constituent and JV's have also claimed deduction u/s.80IA of the Act. Thus, the ratio laid down in these cases is not applicable to the present case. 20. Further, ld. AR of the assessee placed heavy reliance upon the decision of coordinate bench of Hyderabad Tribunal in the case of Megha Engineering & Infrastructure L....
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....se of appellate proceedings by way of additional ground of appeal and also filed the necessary audit reports required for claiming such deduction. All these clearly established that the conclusion reached by the coordinate bench of Hyderabad Tribunal in the case Megha Engg. (supra) is based on facts which are entirely different from the facts of the case of the assessee thus the ratio laid down by the coordinate bench in the case of Megha Engg.(Supra) is not applicable to the case in hand. 21. In all the other cases relied by the assessee also has similar facts thus cannot be followed having different facts. 22. The assessee has also placed reliance on the decision of the Hon'ble Supreme Court in the case of Faqir Chand Gulati Vs. Uppal Agencies Pvt. Ltd. reported in (2008) 10 SCC 345 (SC), wherein the Hon'ble Supreme Court has discussed the concept of joint venture. Accordingly to ld. AR the joint venture was formed only to procure the contract work and the parties have requested with respect to their joint responsibility that existed in relation to the principal and, therefore, once the parties have taken the responsibility towards principal they stepped into the shoe of the jo....
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....as per Explanation to 80IA(13) works contracts are not eligible for deduction u/s.80IA(4) of the Act. The concession 80IA was provided in the statue to the developers who take all the risks and responsibility to create a new infrastructure facility and not to those entities who simply execute the work and received the remuneration immediately or in advance as mobilization advance. 25. It is also a matter of fact that assessee was not able to demonstrate whether the other constituent of joint ventures had claimed deduction u/s.80IA(4) of the Act on the income on their part of the receipts. On specific query by the bench, the ld. AR stated that he was not aware. On the contrary, it is an undisputed fact that both the principals i.e. Joint Ventures, who have been awarded the project form the respective authorities i.e. East Coast Railway and the Chief Engineer, NH, Odisha, had claimed deduction u/s.80IA of the Act on the income earned by the execution of such projects. 26. Recently the coordinate bench of the Tribunal ITAT Mumbai in the case of AJR Infra and Tolling Limited, passed in ITA No.2330/Mum/2022 along with other connected appeals, dated 31.01.2024 has held that the deducti....
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....int Venture agreement for the similar kind of business of developer akin to the related assessee i.e. Shri Balaji Engicon Pvt. Ltd. (ITA No.194/CTK/2019). It has also been contended that the work was executed by the member of consortium, material were purchased by them, plant and machinery of members of consortium was also used and investment and other financial risk were also undertaken by the assessee in the capacity of member of consortium. He specifically pointed out that the work was obtained on the strength of technical and financial capacity of assessee and was executed under its supervision by Joint Venture entity and the work contract of developer-cum-contractor was neither sublet nor sub-contracted to any other outsider third party or entity, therefore, these two assessees are also eligible for deduction u/s.80IA(4) of the Act. The above factual position have not been controverted by the ld. CITDR during his arguments before the Bench and on careful reading of sub-clause (a) of clause (i) of Section 4 of Section 80IA of the Act, we clearly observe that the said provision also applies to an entity or company owned by a company registered in India or by consortium of such c....
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....y the constituents of the JV who now claimed that it had carried out major part of the execution, therefore, is also entitled deduction u/s.80IA of the Act on the same project. In our understanding deduction u/s.80IA of the Act cannot be allowed to two entities by treating them as enterprises and developer at the same time. 30. In view of the foregoing discussion, we are of the considered view that the assessee is not entitled for the work executed by it for and on behalf of Joint Venture, which is the enterprises eligible for deduction u/s.80IA(4) of the Act. Accordingly, ground No.2 of the assessee is dismissed. 31. In ground No.3, the assessee has challenged the disallowance deduction of Rs. 47,15,405/- claimed u/s.80IAB of the Act. 32. Brief facts leading to this ground of appeal are that the assessee had claimed that during the year under appeal, it has awarded contract from Vedanta Aluminum Ltd. for construction of road at its site which was declared by the Government as Special Economic Zone (SEZ) in terms of the Notification dated 27.02.2009. Assessee claimed that since the plant of Vedanta was declared as SEZ by the Government and assessee has constructed road, it comes....
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....he option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which a Special Economic Zone has been notified by the Central Government : Provided that where in computing the total income of any undertaking, being a Developer for any assessment year, its profits and gains had not been included by application of the provisions of sub-section (13) of section 80IA, the undertaking being the Developer shall be entitled to deduction referred to in this section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided in sub-section (1) or sub-section (2), as the case may be : Provided further that in a case where an undertaking, being a Developer who develops a Special Economic Zone on or after the 1st day of April, 2005 and transfers the operation and maintenance of such Special Economic Zone to another Developer (hereafter in this section referred to as the transferee Developer), the deduction under sub-section (1) shall be allowed to such transferee Developer for the remaining period in the ten consecutive assessment years as ....
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.... modification, the Departmental Representatives made a prayer that permission to pray for recall of the order may be granted in case any of the conditions in the reports made available by the AO subsequently show that the issues were required to be contested. 40. In view of the above, we dismiss the appeal filed by the Revenue on account of low tax effect as per the monetary limit prescribed by the CBDT vide its Circular No.09/2024, dated 17.09.2024. However, it is made clear that the Department is at liberty to file Miscellaneous Application, if the tax effect is found to be more than the prescribed limit of Rs. 60,00,000/- as per amendment carried out by the CBDT in Circular No.09/2024, dated 17th September, 2024, or any of the conditions etc. as available in the amended para 10 of Circular No.3/2018, dated 20th August, 2018. Accordingly, the appeal of the Revenue is dismissed. 41. Thus, the appeal of the revenue in ITA No.320/CTK/2023 for A.Y.2011-2012 is dismissed. ITA No.296/CTK/2023 (AY : 2013-2014) 42. In this appeal the assessee has raised the following grounds of appeal :- 1. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in n....
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....T(A)-2, Bhubaneswar for the assessment year 2016-2017. 47. First, we shall take the appeal of the assessee in ITA No.88/CTK/2023, wherein the assessee has the raised the following grounds :- 1. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in confirming the addition of Rs. 4,25,543/- out of total addition of Rs. 31,87,692/ made to the total income of the appellant under section 14A of the Incometax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962 without properly appreciating the facts of the case and submissions filed before him. 2. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in confirming the addition of Rs. 4,25,543/- out of total addition of Rs. 31,87,692/ made to the total income of the appellant under section 14A of the Incometax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962 even when the said addition was made without issuance of show-cause notice during the course of assessment proceedings. 3. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in confirming the addition of Rs. 4,25,543/- out of total addition of Rs. 31,87,692/....
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....t any compensation after completion of project. In view of above, whether the CIT(A) was justified in holding the eligibility of assessee company for deduction u/s 80IA on receipts accrued prior to completion of the project. 6. Any other ground of appeal that may arise at the time of hearing. 49. Ground No.1 raised in appeal of the assessee (ITA No.88/CTK/2023) is in relation to the addition of Rs. 4,25,543/- confirmed by the ld. CIT(A) out of the total disallowance of Rs. 31,87,692/- made u/s.14A of the Act. 50. Brief facts of the case are that the assessee has interest bearing funds and is having exempt income in the shape of profits earned from the joint ventures. The AO was of the opinion that since the nexus between the interest bearing funds with the investments made having exempt income is not established, therefore, provision of Section 14A of the Act are clearly applicable and he made the disallowance u/s.14A of the Act after invoking the provisions of Rule 8D of the I.T.Rules, 1962. In first appeal, ld. CIT(A) has deleted the disallowance to the extent of Rs. 27,62,149/- made by applying the provisions of Rule 8D(2)(i) and upheld Rs. 4,25,543/- as per rule 8D(2)(iii....
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....he facts for the year under appeal to the appeal decided by us for A.Y.2011-2012. Thus, following the reasoning given in the said appeal of the assessee for A.Y.2011-2012, this ground of appeal i.e. ground No.4 is also dismissed. 55. Thus, ITA No.88/CTK/2023 filed by the assessee is dismissed. ITA No.141/CTK/2023(AY : 2016-2017) 56. In this appeal the revenue has challenged the allowability of deduction u/s.80IA(4) on the profits of the infrastructure facilities developed by the assessee, which was allowed by the ld. CIT(A). 57. Brief facts of the case are that during the year under appeal, the assessee has claimed deduction u/s.80IA(4) of the Act at Rs. 9,82,61,053/-, which was disallowed by the AO by holding that those works have been carried out by the assessee are in nature of work contract, therefore, the assessee is not entitled for deduction u/s.80IA(4) of the Act. In first appeal, the ld. CIT(A) by following the decision of the coordinate bench of the Tribunal for A.Y.2013-2014, in ITA No.195/CTK/2019, dated 23.12.2021, wherein the Tribunal has declared the assessee as developer-cumcontractor sharing risk and responsibility as the developer, thus, entitled for deductio....
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....escribed time limit is mandatory conditions for claiming exemption u/s 10(46) of the Income Tax Act. 3. In its judgment the Hon'ble Supreme Court has mentioned in para 11 of the Judgment that "As per the settled position of law, an assessee claiming exemption has to strictly and literally comply with the exemption provisions. Further, in the same para, while distinguishing Chapter III(Exemptions) and Chapter VIIA(Deductions) of the Income Tax Act, the Hon'ble Supreme Court has also held that "None of the decisions which are relied upon on behalf of the assessee on interpretation of Chapter VIA shall be applicable while considering the claim u/s 10B(8) of the Act." 4. Further, the Hon'ble Supreme Court in para 12 of the aforesaid judgment has reiterated that "As observed hereinabove, the exemption provisions are to be strictly and literally complied with and the same cannot be construed as procedural requirement." 5. The Hon'ble Supreme Court has also held that if the language of the section prescribing the conditions for claim of any exemption is unambiguous, and interpretation contrary to the provision is erroneous. The relevant part of para 14 of the abov....
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....ant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein." 59. Ld. CIT-DR, thus, submitted that the assessee has executed the works as a work contractor and its case is falling under the category of explanation to Section 13A of the Act. Therefore, the assessee is not eligible for deduction u/s.80IA(4) of the Act and requested for confirming the order of the AO. 60. On the other hand, ld. AR vehemently supported the order of the ld. CIT(A) and submitted that the assessee has worked as a developer. Section 80IA(4) of the Act states that deduction is available to the developer carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfills all the conditions prescribed thereunder, as the assessee company is developing infrastructure facilities wherein the works have been awarded by the respective authorities and the nature of work clearly in the nature of developing the infrastructure facilities, therefore, it should be allowed the deduction u/s.80IA(....
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....ecifying that the provisions of Section 80IA shall not apply in relation to a business referred to sub-section (4) which is in the nature of work contract awarded by any person including the central government or state Government and executed by the undertaking or enterprises was referred in sub-section (1) and this amendment was made applicable with retrospective effect i.e. 01.04.2000, this explanation restricts the benefit of deduction u/s.80IA(4) of the Act to a person who executes a project, which is in the nature of works contract. For proper understanding of said Explanation, it is required to consider the difference between a developer-cum-contractor and work contractor. In a common meaning a person is referred as developer-cumcontractor who undertakes a project to develop and conduct on own responsibility and takes all the risk including investment risk, financial risk, entrepreneur risk and all kinds of business risk. 43. In our humble understanding keeping view the nature of business as elaborated by the assessee and not controverted by the revenue, we clearly observe that the assessee obtained work by way of tenders wherein he submitted all technical bids in the form....
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....) of the Act will be available to the developers, who undertakes entrepreneur and investment risk and not for the contractors who undertakes only works contracts. This proposition has also rendered by the ITAT Cuttack Bench in the case of ARSS Infrastructure Ltd. (supra) as heavily relied on by the Id. AR 45. In view of foregoing discussion, we are of the considered view that the ld. AR has successfully demonstrated by way of all relevant details and documents that the assessee at present, has undertaken huge risk in terms of deployment of technical persons, plant and machinery, technical knowhow, expertise managerial and financial resources which qualifies the assessee as developer- cum-contractor and the assessee is not merely a contractor who undertakes work contracts only. The financial statements, balance sheet and profit and loss account, clearly demonstrate that the assessee has used its own machinery and equipment of more than Rs. 42 crores and has purchased and consumed materials of more than Rs. 102 crores, purchased from various vendors relevant financial period, which was not provided by the contractee, these factual positien has not been controverted by the Id. Pr.C....
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....of deduction claimed u/s 80IA of the Act by relying on the decision of Hon'ble Jurisdictional Bench of ITAT in the case of the appellant only for Assessment Year 2014-15. Relevant extract of Ld CIT(A)'s order dated 29-08-2023 is reproduced hereunder for ready reference of the Hon'ble Bench: "5.9.3 On this issue the Hon'ble ITAT, Cuttack in its order IT A No. 195/CTK/2019, dtd 23.12.2021 decreed that the appellant was a developer-cum-contractor assuming risks and responsibilities akin to a developer, the work executed was not in the nature of works contract but the same was for development of infrastructure in nature, the TDS was rightly deducted under section 194C of the Act as a contractor, the contract was for development of Infrastructure facility and therefore, the appellant company was eligible to claim the benefit of deduction u/s 80IA(4) of the IT. Act, 1961. As per the Hon'ble ITAT, Explanation inserted below section 80IA(13) of the I.T. Act, 1961 denying the benefit of deduction to a works contractor shall not be applicable in the case of the appellant In view of factual matrix Hon'ble ITAT, Cuttack's above discussion I am of the considered opinio....
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....ed in the assessment order are as under: 1.4.1 The moot question which arises for consideration is whether the appellant is a "developer as envisaged under section 80IA of the Act or is it merely a contractor engaged in works contract" as observed by the Ld. AO. 1.4.2] At the outset, it would be relevant to go through the provisions of section 80IA of the Act, so far as it is relevant to the issue in hand which is reproduced hereunder: "Deductions in respect of profits and gains from industrial undertakings or development, etc. enterprises engaged in infrastructure 80IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (4) This section applies to- (i) any enterprise carrying on the business of (1) de....
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....d 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 subclause (m) 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). 1.4.3) On perusal of the order passed by the Ld. AO, it becomes crystal clear that there was no adverse finding of the Ld. AO regarding the non-compliance of any of the conditions specified in sub-section (4) of section 80IA of the Act. The sole grievance of the Ld. AΟ while disallowing the claim of deduction u/s 80IA of the Act was with reference to the Explanation inserted below sub-section (13) of section 80IA of the Act wherein a business which is in the nature of works contract is debarred from claiming any benefit under the said section Hence, the entire discussion in the subsequent paragraphs shall be confined to ....
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....other person (i.e. undertaking or enterprise referred to in section 80IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA This amendment will take retrospective effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-01 and subsequent years. (Clause 22) Emphasis Supplied 1.4.7 The Explanatory Memorandum clearly laid out that purpose of extending tax benefit u/s 80IA of the Act was to encourage investments from the private sector and hence work contracts, i.e. contracts involving merely labour (or mere execution of construction without making investments) were kept outside the purview of the provisions of section 80IA of the Act. The Explanatory Memorandum clearly stated that the deduction u/s 80IA of the Act would be available to developers who undertake entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. 1.4.8) A new Explanation was thereafter inserted by the Finance (No. 2) Bill of 2009 with retrospective effect from April 1, 2000 substituting the explanation inserted earlier and it read as under: "Explanation For the removal of dou....
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....t been defined u/s 80IA of the Act. Hence, the natural meaning of the word shall apply. As per the Oxford Dictionary, the term work means application of effort to a purpose or use of energy. Thus, going by the dictionary meaning, 'works contract' means a contract which involves effort or in other words labour of the contractor. Further, as per the Black's Law Dictionary, the term work means labour or in other words physical and mental exertion to attain an end especially as controlled by and for the benefit of the employer. Thus, as per Black's Law also, a 'works contract' is a labour contract under which the contractor merely employs his labour as per the directions of the contractee 1.4.13) On perusal of these definitions, it can be safely concluded that a works contract constitutes a contract under which the contractor is merely employing his efforts or labour. Under such a contract, the contractee provides the material and other requisites ja complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said material turns the material into a desired product 1.4.14 The Hon'ble Bombay High Cour....
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....f 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, a contractor and a developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor 1.4.18) However, it is pertinent to note that the Ld AO utterly failed to appreciate the thick and unbreachable line of demarcation between the terms, 'contractor' and 'developer' as discussed supra. Rather, the Ld. AO observed in the assessment order passed u/s 143(3) of the Act that the appellant was not a "developer but merely a "works contractor". In light of the contentions discussed supra, the findings of the Ld. AO do not hold water for the below mentioned reasons: Every person who enters into an agreement with Central Government and State Government Departments, local authorities, other corporate etc. for development of an infrastructural facility envisaged in section 80IA of the Act would necessari....
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....tion 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). 13.1 The aforesaid Explanation to section 80IA was inserted by the Finance Act, 2007 and later on amended by the Finance (No.2) Act, 2009 but the same was made applicable with retrospective effect i.e. 1-4-2000 Thus explanation restricts the benefit of deduction under section 80IA(4) of the Act to a person who executes a project which is in the nature of works contract. For this purpose, first of all it is imperative to appreciate the difference between a 'developer and a contractor Generally in common parlance a person is referred as 'developer who undertakes the project to develop and construct on its own responsibility and takes all the risks of the development These responsibilities and risk can be categorized as under. (a) That in a development contract responsibility is fully assigned to the developer to do all acts for execution and completion of work right from designing the project till handing over the ....
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....ed by the Government. Thus, the developer is responsible to complete the construction in a specified manner failing which it would be responsible for the consequences of delay/any other fault attributable to it. (k) That a developer shall undertake to maintain safety, security and protection of the environment (l) That a developer shall provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. These are few broad sample qualities/parameters of a developer through which the character of a developer can be defined. 13.2 On the other hand, a contractor is a person who undertakes work on a contract basis. He does not assume risks and responsibilities like that of a developer. He merely carries out the work as has been instructed to him by the contractee Moreover, in case of such work the contractor gets fixed amount of revenue for executing such work and is not entitled to any share of profit from revenue generated by the developer/land owner, 13.3 To summarize, the developer acts as a principal whereas the contractor acts as an agent in performing the functions as required by the developer. The developers, in ....
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....f the Act 13.14 In view of the above discussion, it may be concluded that even after the amendment by the Finance Act, 2007 and the Finance Act, 2009, the contractors performing the work in the nature of a developer-cum contractor and assuming risks and responsibilities shall be eligible for deduction under section 80IA in respect of the eligible infrastructural facilities Hence the ground of appeal of the assessee is allowed." (Emphasis Supplied) 1.5.2] The Hon'ble ITAT Kolkata Bench 'A' in the case of ACIT, Circle-12(2), Kolkata Vs. M/s Simplex Infrastructures Ltd. reported in [TS-163-ITAT-2021(Kol)] vide order dated 10.03.2021 has categorically held as under: *7. From the aforesaid activities undertaken by the assessee we note that the contractor assessee's activities involves substantial risk. It is noted that like any other entrepreneur' who employs his material, plant, machinery, labour etc. in a project and undertakes risk, the assessee was also exposed to substantial amount of risk by virtue of engaging his establishment in the infrastructure projects. In addition, the assessee was exposed to further risk of non completion of work within time,....
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....e of ABG Heavy Industries (supra), the assessee therein had not developed the entire port but it was only the supplier of cranes at the loading and unloading terminal at the said JNPT port. Thus assessee us not required to execute the entire project as observed by the Third Member Another significant word used here is owned, which indicates that the infrastructure facility should be owned by a company so as to be entitled to deduction under this section. The work done by the assessee is not owned by it, it does not satisfy sub clause(a) of section 80IA(4)). The infrastructure facility should be owned by the assessee is not correct interpretation. It is evident from section itself as clarified by the jurisdictional High Court in ABG Heavy Industries (supra) inter alia held that the assessee has shouldered out Investment & technical risk in respect of the work executed and it is liable for liquidated damages if failed to fulfill the obligation laid down in the agreement. The liability which has been assumed by the assessee under terms of the contract are obligations involving the development of an infrastructure facility. The assessee has also in its employment technically and admini....
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....a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the Works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure 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 12 to 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 un- developed area, infrastructure is developed and handed over to the Government a....
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....acility project, realize its cost? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee had paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation done by the Assessing Officer is accepted, no enterprise carrying on the business of only developing he infrastructure facility would be entitled to deduction under section 80IA(4), which is not the intention of the law. An enterprise, which develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. The legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction. It presupposes that there can be income to developer i.e to the person who is carrying on the activity of only development infrastructure facility. Ostensibly, a developer would have income only if he is paid for the developme....
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.... (i) The ITAT (Ahmedabad) in case of Sugam Construction (P) Ltd. us. ITO 156 SOT 45] held that it is also gathered (a) That a developer is a person who undertakes the responsibility to develop a project (b) That a developer is therefore not a civil contractor simplicitor (c) That if we apply the commercial aspect, then a developer has to execute both managerial as well as financial responsibility (d) That the role of a developer, according to us, is larger than that of a contractor (e) That when a person is acting as a developer, then he is under obligation to design the project, it is another aspect that such design has to be approved by the owner of the project, ie. the Government in the present case (1) That he has not only to execute the construction work in the capacity of a contractor but also he is assigned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it can be ascertained about the nature of the contract assigned that whether it....
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....ITAT (Hyderabad) in case of Siva Swathi Construction (P) Ltd. (supra) held that "Further reason given by the Id. CIT(A) for denying deduction under S.80IA to the assessee is that the assessee has not undertaken any risks. The observations of the Id. CIT(A) in this behalf are also not valid and correct. It was clearly mentioned in the agreement that the assessee shall execute and furnish indemnity bond for a period of four years, indemnifying the Government against any loss or expenditure incurred, to repair any defect noticed due to faulty working done by the contractor or substandard material used by the contractor. Further, it is also mentioned in the contract agreement that the assessee shall not claim for any loss due to foreseen circumstances, including suspension of work due to course. It is also provided that in the event of accident to people employed by the assessee resulting in compensation to be paid as per the Workmen's Compensation Act the same shall be paid by the contractor, viz the assessee only. In view of the various specific clauses in the agreement fastening the risks to be undertaken by the assessee, discussed above, it cannot be said that the assessee has ....
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....eement entered into between the assessee and National Highway Authority of India, some of which have been listed below: (i) General obligations The assessee shall, with due care and diligence, design, execute and complete the work and remedy any defects therein in accordance with the provision of the contract. The assessee shall provide all superintendence, labour, material, plant, require in for such design, execution, completion and remedying of any defects (page 12, para 8.1) (ii) Material, Plant and workmanship:Page -21, para 36.1 (iii) Equipment, Temporary works and materials Page 31, para 54.1 (iv) Labour: The assessee was to make its own arrangement for the engagement of all staff and labour and for their payment, housing and feeding. (page 21, para 34.1) (v) Superintendence: The assessee was to provide all the necessary superintendence required during the execution of the Works. Page 14, para 15.1 (vii) Safety, security and protection of environment. The assessee was responsible for safety of all person on the site Provide and maintain at his own cost all lights, guards, fencing, warning signs, etc. Take all reasonable steps to protect the environment. (Pa....
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....port the development of Infrastructure facility it deployed its various resources like material, manpower, machinery etc. In addition it exposed itself to various risks 6.21 In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon including that of co-ordinate bench of this tribunal in SPML Infra Ltd. (supra), we hold that the assessee is a developer and not a mere works contractor and accordingly is eligible for deduction u/s 80IA of the Act, which has been rightly held by the lid CITA Accordingly, we do not find any infirmity in the order of the Id CITA. Accordingly, the grounds raised by the revenue are dismissed" Emphasis Supplied 1.5.7] The Hon'ble Gujarat High Court in the case of CIT v. Radhe Developers reported in [2012] 341 ITR 403 (Gujarat) has dealt with the scope of 'works contractor' in the context of section 80-IB of the Act and has held that: "36. We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sal....
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....ssessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other acivities including enrolling members, accepting members, carrying out modifications engaging professional agencies and seen. Most significantly the risk element was entirely that of the assessee. The landowner agreed to accept only a fixed price for the land in question. The assesse agreed to pay off the landowner first before appropriating any part of the sale consideration of the housing units for his benefit be short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies Landowner would receive a fix pre-determined amount towards the price of land and was thus insulated against any risk 37. By no stretch of imagination can it be said that the assessee acted only as a Works contractor Emphasis Supplied 1.5.8] The Hon'....
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.... Engg. Ltd.(supra). We are convinced with the argument of the Id.AR that a contractor can also be a developer. In this context, our attention has been drawn on a latest decision of Hon'ble Gujarat High Court pronounced in the case of CIT v. Radhe Developers (2012) 341 ITR 403/204Taxman 543/17 taxmann.com 156 (Guj.), wherein the issue was in respect of claim of deduction u/s.80IB(10)of IT Act and the assessee happened to be "developer-cum-building contractor". The Hon'ble Court has held that the said developer had to make the construction and to engage labour on contract, therefore the term "developer" has to be understood in common parlance as well as in legal sense. The Hon'ble Court has taken the help of Webstersencyclopedia and other dictionaries and thereupon opined that the term "developer" carries a much wider connotation. As far as the agreement with Surat Municipal Corporation is concerned, the assessee has been referred as "party of the first part", hence no serous objection has been raised by the Revenue. On account of these reasons and following the view expressed by the Hon'ble Court as also considering the nature of the work executed by this assessee, w....
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....ees. The developer undertakes the risk and reward of the project and is accountable to the authorities for the development work carried out by them. Therefore the assessee in the present case cannot and should not be characterized anything other than a developer. 16. According to this 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 person who enters inte a contract or agreement. Now chiefly spec, a person or firm that undertakes work by contract, esp for building to specified plans. In the light of the meaning ascribed to these words by the dictionaries, it may be observed that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project himself or assign some parts of it to others. On the contrary, the contractor is the one who is assigned a particular job to be accomplished on the behalf of the developer. His duty is to translate such design into reality. There may, in certain circ....
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....orted in [2023] 155 taxmann.com 657 (SC) has dismissed the SLP as filed by the Department against the decision of Hon'ble High Court of Calcutta in the case of PCIT v. MBL Infrastructure Limited reported in [2023] 155 taxmann.com 656 (Calcutta) wherein it was held that: 4. In paragraph 9 of the impugned order, learned Tribunal has noted the factual contend namely with regard to the purchases which were undertaken by the respondent/assessee as also the terms and conditions of the agreement entered into by the assessee with the concerned highways department and having been factually satisfied that the deduction claimed by the assessse i admissible, had granted relief More importantly the Tribunal and taken note of the fact that for the previous assessment years 2010-11 the learned Tribunal And adjudicated the issue and had granted relief for assessee and for the subsequent years 2013-14 and 2014-15 disallowance has been made under section 80IA of the Act That apart the learned Tribunal has alas taken note of various decisions of the Hon'ble Supreme Court which had laid down the legal principle as to what and under what circumstances the Commissioner of Income-tax can exercise ....
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....t a developer. Para 4.1 Appendix to ITB 928 2 Financial Risk i) Undertaking that the assessee would rest a minimum of 25% of the value of the work during the implementation of the contract. ii) EMD to be deposited at the time of filing bid iii) Bank Guarantee furnished by the assessee against guarantee the performance Undertaking Para c) to Memorandum Para'd) to Memorandum Para e) to Memorandum 912 912 912 912 3 Technical Expertise The assessee is required to submit specifications and drawings showing the proposed Temporary works to the engineer for approval thereby exhibiting Technical expertise Para 18 963 4 Entrepreneurial Risk The assessee is required to bear all the risk of loss of or damage to physical property and of personal injury and death which may arise during the consequence and of in the performance of the contract thereby taking all entrepreneurial involved the risks Para 12 962 5 Human Resource The assessee has required to admit staffs with approval of Engineer according to their Qualifications, abilities and relevant experience as of the personnel listed in the schedule thereby depicting. requirem....
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.... equipments deployed for execution of the projects, experience of similar work undertaken in the past and performance record etc. which clearly establish that the appellant worked as a developer-cum-contractor during the execution of these projects. 1.6.5) In view of the parameters laid down in the judicial precedents (supra), on perusal of the relevant clauses of the agreements entered into by the appellant with these employers and on perusal of the documents furnished at the time of applying for tender, there remains absolutely no doubt that the appellant was a contractor performing the work in the nature of a developer-cum-contractor and was assuming risks and responsibilities which made it eligible for deduction under section 80IA of the Act in respect of the eligible infrastructural facilities for the below-mentioned reasons: (i) The appellant was assigned full responsibility to do all acts for execution and completion of work right from the beginning till handing over of the project to the employer. The contract was not for a specific work but for development of the infrastructural facility as a whole. The contract also bound the appellant for change of scope of work in....
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....taking the liability for correction of defects (xi) The appellant was also liable to pay liquidated damages to the employer in the event of breach of any of the conditions stipulated in the contract. 1.6.6) The above-mentioned reasons clearly exhibit that the present case was not a case wherein the appellant was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requisites from the client and all he has to do is to employ labour. Rather, in the facts of the present case, the appellant was assigned with the responsibility of development of the infrastructural facility as a whole and the fact that the appellant deployed its resources (material, machinery, labour etc.) in the construction work and that the appellant was liable to indemnify the employer for any losses/ damage caused to any property/ life in the course of execution of work, clearly exhibited the risks undertaken by the appellant. 1.6.7) Further, it is also being highlighted that the appellant has executed work pertaining to agreement with Chief Engineer N.H. Division, Bhubaneswar (Odisha) for Wideni....
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.... as well as definition of "work" provided in section 194C of the Act. Relying on the definition of "work" provided in section 194C of the Act, it is submitted that the term, "work" does not include "manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer". It is further submitted that no material was supplied by the employer to the appellant and that the appellant was solely responsible to mobilize and procure all the material and other resources as per the specification of the employer and accordingly, it was contended that the appellant was not a works contractor as defined u/s 194C of the Act. 1.7.3] Reliance is also placed on the judgment of the Hon'ble ITAT Kolkata Bench in the case of Adhunik Infrastructure (P) Ltd. vs. J.C.LT, Range 10, Kolkata I.T.A. No. 1281/Kol/2015) wherein it was held that: 9.3.2. Thus as per section 194C of the Act also, "works contract does not include a contract wherein, the contractor in addition to employing labour, procures material from a third party. Thus, contracts involving mere labour of the contractor are included in the pur....
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.... applying his labour to the said material turns the material into a desired product 1.7.4] The Hon'ble Jurisdictional Bench of ITAT in the case of ARISS Infrastructure Projects Ltd. Vs. ACIT, Circle-2(1), Bhubaneswar [ITA Nos. 142 & 143/CTK/2010) has categorically held as under: "10. Now coming to the merits of the deduction u/s 80IA(4) of the Act. A of the provisions of section 80IA(4) of the Act shows that in the explanation A perusal of the provisions of sections 80IA(4) of the Act shows that in the explanation infrastructure facility has been specified to mean a road including a toll road, a bridge or a rail system. Admittedly, the assessee is doing the business of development of railway tracks and bridges thereof as also roads. If, we are to accept the contention of the Ld. CIT that the provisions of section 80IA(4) of the Act after the substitution of the explanation to section 80IA of the Act was introduced was only for the purpose of giving the benefit to BOT contracts then, the explanation to section 80IA(4) of the Act becomes otiose. This is as explanation to section 80IA(4) of the Act specifically provides for the road to include a toll road, a bridge or a rail....
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....ssee u/s. 80IA(4) of the Act without making any amendment to the explanation to section 80IA(4) of the Act, the said explanation substituted by the Finance Act, 2009 w.e.f. 01.04.2000 being an hindrance to the statutory deduction available to the assessee under the provisions of section 80IA(4), the said explanation would have to stand down in view of the decision of the Hon'ble Supreme Court in the case of S. Sundaram Pillai, referred to supra Consequently, on this ground also the order passed u/s. 263 of the Act by the Ld. CIT for AY 2006-07 and 2007-08 stands quashed. Appeals of the assessee are allowed." 1.7.5) In view of the above discussion and findings reiterated in the judicial precedents cited supra, it becomes quite clear that even though the definition of "work" provided in section 194C of the Act is "Inclusive" and not "exhaustive", yet, it specifically excludes from Purview, "manufacturing or supplying a product according to the requirement at specification of a customer by using material purchased from a person, other than such customer. Therefore, it is evident that a works contract constitutes a contract under which the contractor is merely employing his effo....
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....e)-O] * Tantia Constructions Limited v. DCII reported in (TS-6372- ITAT-2016(Kolkata) * Simplex Som Datt Builders JV ITO reported in (TS-7085- ITAT-2013(Kolkata) * ACIT ICC)-45 Pratibha Industries Lid reported in 2012] 28 taxmann.com 246 (Mumbai- Trib 1.9] In view of the detailed explanations/justification discussed supra with respect to each observation of the Ld. AO as discussed in the assessment order for disallowing the claim of deduction u/s 80IA of the Act, it becomes crystal clear that the appellant satisfied all the conditions prescribed u/s 80IA(4) of the Act for claiming benefit of deduction therein. The deduction claimed by the appellant u/s 80IA of the Act was within the four corners of law in light of the facts involved in the present case which was duly supported with the findings re- iterated in the numerous judicial precedents cited (supra). 1.10] In view of the elaborate discussion duly corroborated with the findings re-iterated in the Judicial precedents cited supra, it becomes abundantly clear that the appellant satisfied all the conditions prescribed therein for claiming the benefit of deductions u/s 80IA(4) of the Act. The deductions claimed by th....
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....tract will not be eligible for benefit of deduction but the assessee cannot be put in the basket of work contractor and keeping in view wider scope of his work and various business risks such as entrepreneur, finance and other risks, the assessee has qualified a position of developer-cum-contractor, thus, proviso below section 80IA(13) of the Act does not create any bar in the allowability of deduction u/s.80IA(4) of the Act to the assessee. 46. From the relevant parts of the impugned revisionary order u/s.263 of the Act, we observe that the ld. Pr.CIT has made vehement emphasis on the precondition for allowability u/s.80IA(4) of the Act that the assessee is required to act as a developer, who is also operating and maintaining infrastructural facilities and has also placed reliance on the judgment of the Hon'ble High Court of Bombay in the case of AVG Heavy Industries Ltd. (supra), On careful and respectful perusal of the judgment of Hon'ble Bombay High Court particularly from paras 22 and 23, it is amply clear that after the amendment to clause (i) of the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any inf....
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.... Act of 2001 would be defeated. A harmonious reading of the provision in its entirety would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1st April 1995. In the present case, the assessee clearly fulfilled this condition. 23. In the view which we have taken, all the assessment years in question to which this batch of appeals relates would be governed by the same principle. The subsequent amendment of Section 80IA(4A) of the Act to clarify that the provision would apply to an enterprise engaged in (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining an infrastructure facility was reflective of a position which was always construed to hold the field. Before the amendment that was brought about by Parliament by Finance Act of 2001, we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made by Parliament to Section 80IA(4) of....
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....the character of merely work contract and at the same time we are of the fortified opinion that the development work of infrastructure facility had been undertaken by the assessee out of which impugned amount of profit accrued to the assessee, hence, the ld. Pr.CIT was not justified and correct in distinguishing the judgment of Hon'ble High Court of Bombay in the case of AVG Industries (supra) and other related judgment on this issue. 47.2 The ld. AR has also placed strong reliance on the order of ITAT Kolkata Bench in the case of ACIT Vs. Ho Hup Simplex JV [2018] 92 taxmann.com 108 (Kolkata-Trib.). In this case, the assessee was awarded a contract to construct Road by NHAI and it was to procure raw material, make arrangements for power, water, plant machinery etc., and conduct all other activities needed for construction, assessee was a developer and not a mere works contractor and, accordingly was held eligible for deduction u/s.80IA of the Act and similar facts exist in the present case and, thus, this proposition also supports the ground of assessee on merits. 47.3 The ld. CITDR has placed vehement reliance on the decision of Hon'ble Madras High Court in the case of Covan....
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....m which reproduced below, clearly explains the purpose of tax benefit for encouraging private sector participation by way of investment in developing of the infrastructure sector and not to the persons who merely executes the civil construction work or any other works contract. The memorandum has been reported in (2007) 289 ITR(St.) 292 at page 312, which reads as under :- "Section 80IA, 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 requires a passive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) 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 (or the persons who merely execute the civil construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80IA shall not a....
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....rporated by the AO in the assessment order at pages 4 to 9 :- 63. From perusal of the particulars of work, we find that the works provide in Sl.No.(b), 2(c) & 10(a) are not in the nature of new infrastructure facilities rather they related to either of supply and stacking of machine crushed stone or improvement of existing road, which do not create any new infrastructure facility. The profits earned on such projects cannot be eligible for deduction u/s.80IA(4) of the Act. However, remaining projects undertaken are in relation to the development of infrastructure facilities, therefore, we are in agreement with the order of the ld. CIT(A) to such extent and the profits earned from those projects is allowed as deduction u/s.80IA(4) of the Act and direct the AO to exclude the profits of these three projects from the eligible amount of deduction u/s.80IA of the Act. 64. Thus, the appeal of the revenue is partly allowed. ITA No.89/CTK/2023 (AY:2017-2018) (by the assessee) 65. In this appeal, the assessee has raised the sole ground with regard to disallowance of additional claim of Rs. 6,02,75,436/- for deduction u/s.80IA of the Act in respect of the profit earned from work undertake....
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....(4) of the Act. We direct accordingly. 69. Thus, appeal of the revenue in ITA No.142/CTK/2023 is partly allowed for statistical purposes. ITA No.13/CTK/2023 (AY : 2018-2019)( by the revenue) 70. The revenue in its appeal has raised the following grounds :- 1. The CITIA) erred in law in allowing deduction u/s 80IA(4) to the assessee when the assessee doesn't satisfy the requisite conditions to be eligible to get the deduction u/s 80IA(4) of the Act. 2. The CIT(A) ought to appreciate that in the facts and circumstances of the case the meaning of works contract' as in Explanation to Section 80IA as borrowed from section 194C applies only to labour contract and not to a composite contract of construction of an infrastructure facility. 3. The CIT(A) was not correct in holding that the infrastructure facility executed by the assessee (Contractor) can be considered to be owned by it within the meaning of item (a) of clause (i) of sub section (4) of Section 80IA. 4. The CIT(A) erred in treating the Contract receipts received by assessee-company in lieu of execution of contract work be considered as profit and gains of business for deduction u/s 80IA. 5. The deduct....