TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 1225
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....7/Hyd/2017 as well as the assessee's former substantive ground in twin cross appeals ITA Nos.1617 and 1618/Hyd/2017; raise an identical issue of section 80IA deduction in case(s) involving nine irrigation projects viz. KBJNL Work, Guddadamallapur LIS, Singatlur 2nd lift, Singatlur 3rd lift, Teggisiddapur, Sanyasikuppa Work, Ubrani Amurthapura LIS, Jammu Road Work and HMWS & SB Project; of varying sums which were declined by the Assessing Officer but accepted in CIT(A)'s both orders; as against the latter party's assessee's grievance that the learned lower authorities have erred in law and on facts in not treating it as a "developer" engaged in laying out new transmission / distribution power lines (again containing different sums); respectively. Learned CIT(A)'s detailed discussion deciding the instant twin issues thereby accepting the assessee's corresponding deduction claim qua irrigation projects but declining it regarding distribution and transmission lines reads as under : 5.1. First issue relates to AO's action in not allowing deduction of Rs. 12,44,76,019/- claimed u/s. 80IA(4)(iv)(b) of the Act w.r.t. Electrical projects. AO's observations are as under: ....
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....bution of power, set up after 01.04.1999, as eligible activities for fiscal incentives available to infrastructure units. I am sanguine that this proposal will facilitate the restructuring and rehabilitation of the State Electricity Boards." Thus, it is seen that the legislative intention was to afford the tax benefit to all undertakings which were engaged in any of these three activities namely Generation, Distribution and transmission of Power. 6.3.4 That the deduction is meant for power distribution company is also amply made clear in the Circular No. 779 dated 14.09.1999 issued by the CBDT, which is reported in (1999) [240 ITR (St.) 3). Paragraph 39.3.2 of the said circular explains the amendment brought in by the Finance Act, 1999 by inserting Section 80IA of the Act. For the sake of convenience, the extract of the relevant portion of the said Circular, is given below. "To augment transmission and distribution of power in the country, similar benefits are also extended to undertakings setting up new transmission or distribution lines on or after 01.04.1999 on profits derived there from, as are available for generation or generation and distribution of power. ....
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....istribution undertaking. The deduction claimed to the tune of Rs. 3,63,21,718/ - is therefore erroneous and is not admissible. Accordingly, the disallowance made to this extent is therefore upheld." 4.2. The facts for A.Y. 2012-13 are identical as the claim is for the same two projects which were the basis for the claim of deduction for A.Y. 2010-11. Following the decision of Id CIT(A) for A.Y. 2010-11, the claim of deduction u/s. 80IA(4)(iv)(b) is denied and the amount of Rs. 124476019/- is added to the returned income. 6.1. On the other hand, the AR contended as under: "The Assessing Officer denied deduction under section 80IAof the Income Tax Act, 1961 without proper appreciation of the facts of the case. During the course of hearing copies of all the agreements of the development work undertaken were submitted along with a detailed note was submitted. In fact in your appellants own case the Hon'ble ITAT vide its order dated 29-2-2013 in ITA No. 347/Hyd/2008 & others for AY 2003-04 to 2009-10 had allowed the deduction under section 80IA in respect of the irrigation projects as well as electrical projects. It was also submitted that new works in res....
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....ture charged to the Profit and Loss accounts based on the facts of the case. We draw your attention to the decision of the Hon'ble Supreme Court in the case of "Taparia Tools Ltd Vs JCIT 72 ITR 605 (SC)" where in it was held as under: "Section 36(1)(iii) of the Income-tax Act, 1961 - Interest on borrowed capital (Upfront interest charges) - Assessment year 1996-97 - Assessee-company issued debentures for a period of 5 years - Apart from option of half yearly periodical interest, debenture holders were given another option to accept one time upfront discounted interest payment - Assessee was following mercantile system of accounting - It filed its return claiming deduction of upfront interest charges paid during relevant year - However, said amount was shown as deferred revenue expenditure in books of account to be written off over a period of five years - Assessing Officer thus allowed only 1/5th of payment as deduction - Whether since assessee made actual payment, and course of action adopted by assessee was in consonance with provisions of Act, merely because a different treatment was given in books of account could not be a factor which would deprive assess....
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....c). As per this section, a unit which undertakes substantial renovation on modernizing of existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending 31/03/2013, is eligible to claim the said deduction. However, the meaning of substantial renovation and modernization is explained as increase in the plant and machinery in the network of transmission and distribution lines by at least 50% book value of such plant and machinery as on the 1^st day of April, 2004. Since the assessee has not submitted any details, like value of the plant and machinery in the books of contractee company as the assessee is not in the business of transmission or distribution of power, it itself cannot claim. As regards the reliance of the Id. counsel for the assessee on the orders of this ITAT in the Assessee's own case for the earlier AYs, we find that though the projects therein included electricity projects as well, ITAT has not brought out the distinction between section 80IA(4) (iv)(b) and therefore, it cannot be said that this issue is covered by those orders. From the above observations and the detailed observations ....
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....rranty/defect liability period. Such maintenance is provided by every manufacturer during the warranty period but no deduction is available. The assessee is not operating and maintaining the infrastructure facility and therefore is not eligible for deduction u/s.80IA(4)(i)(c). 5.3. Further, the department has filed appeal to Hon'ble High court of Andhra Pradesh against the decision of Hon'ble ITAT wherein the ITAT has held that the agreement is not in the nature of work contract and thereby provisions of Explanation to section 80IA(13) are not attracted. Hence, to maintain consistency with the stand of the revenue and to keep the issued alive, the claim of deduction u/s.80IA(4)(i)(c) amounting to Rs. 107741470/- is disallowed and added to total income. This disallowance is also made on the ground that the assessee is not a developer and is not operating and maintaining the infrastructure facility as discussed in para 5.1. and 5.2. supra." 6.1. On the other hand, the AR contends as under: "Your appellant is a closely held domestic company carrying on business of development of infrastructure projects. Your appellant filed its return of income for a....
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.... the assessment years 2011-12 and 2012-13 following the decision of the TT'A' for AY 2010-11 had decided the deduction under section 80IA(4)(iv)(b) in your appellants own case. A copy of the CIT(A) order for AY 2012-13 is enclosed for your perusal. These appeals are pending before the ITAT." 6.2. I have gone through the AO's observations and ARs contentions. It is to be mentioned here that in the assessee's own case for the A.Y.2003-04-2009-2010 on the same issue, the Hon'ble ITAT, Hyderabad Bench 'B', Hyderabad in ITA No. 347/Hyd/2008 dt:29-02- 2012 passed order in favour of the assessee. The headnote of the said order is reproduced as under: "Deduction under section 80IA - the assessee contended that he is not a contractor but a developer of infrastructure facility - revenue denied it as the assessee not developed any new infrastructure facility as required under section 80IA(4)(i)(b) had only taken up the renovation and modernization of the existing net work/infrastructure facilities - Held that :- in view of retrospective amendment, the most important question for examination on facts is whether the business agreement in question ca....
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....covered u/s 80IA of the Act. 4. Mr. Anil Kumar next sought to buttress to point out the assessee's both foregoing activities i.e. development / maintenance of irrigation projects as well as laying new transmission lines distribution network in power sector; are duly eligible for the impugned deduction since it had acted as a developer. Having borne entire business as well as financial risk; as the case may be lastly referred to the CIT(A)'s detailed discussion treating it as eligible for the impugned deduction in preceding assessment years. 4.1 We find no merit in the assessee's stand. This tribunal's co-ordinate bench recent order dt.12.05.2021 in ITA No.496/Hyd/2018 M/s. NEC NCC MAYTAS - JV Vs. DCIT has already decided the issue that development of such irrigation works in furtherance to government agencies / "works contracts" come under the statutory explanation to section 80IA inserted by the Finance Act 2009 w.e.f. 01.04.2000 substituting the earlier one introduced by the Finance Act 2007 w.e.f. 01.04.2007 as under : "8. We have heard the foregoing rival submissions qua the instant issue of section 80IA deduction. The assessee has admittedly claimed the same tak....
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....ction shall apply in relation to a business referred to in subsection (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 in sub-section (1)." 11. Learned CIT-DR at this stage quoted Katira Constructions Limited Vs. Union of India and Others (2013) 352 ITR 513 (Guj) upholding vires of the latter explanation that the same is purely explanatory in nature than amending the existing provision and therefore, the question of it being levying any tax with retrospective effect would not rise. It is thus explicitly clear that their lordships have held this latter explanation in the nature of a plain and simple one; neither adding nor subtracting anything to the earlier explanation, inserted vide Finance Acts, 2009 and 2007; respectively. Learned CIT-DR further sought to pin point the fact that the latter explanation inserted vide Finance Act, 2009 w.e.f. ;1.4.2000 has rather covered a work contract as not entitled for the impugned deduction despite the fact that the concerned assessee satisfied all other conditions in sub-section (4) of section 80IA of the Ac....
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....pment" indeed formed an architectural as well as engineering structure and therefore, amounts to an execution of a "works contract awarded by the state government" through its irrigation development only and covered u/s. 80IA Explanation incorporated in the Act by the Finance Act, 2009 w.e.f. 1.4.2000. Learned CIT-DR at this stage invited our attention to page 18 in assessee's Paper Book II Part 1 that it had purely executed "works contract" only in view of the fact that the irrigation department had issued it mobilization advances on multiple occasions from time to time. He next took us to agreement clause 3.15 containing "contract price and payment" making it evident that the assessee had to be paid on "fixed lump sum monthly basis" only. And further that the assessee was entitled to get "fixed lump sum monthly instalment payments provided value of the work executed is more than or equal to the fixed lump sum monthly instalment as indicated in the agreement." The said agreement stipulated advance payments to the assessee qua supply of goods at the site. All these facts sufficiently indicate that the assessee, assuming that not accepting that it is the developer u/s. ....
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....ly conclude both the learned lower authorities have rightly disallowed assessee's 80IA deduction claim involving varying sum(s) (supra) in their respective orders. The same stands confirmed. These assessee's appeals are dismissed therefore." 5. Suffice to say; the foregoing detailed discussion has thrown sufficient light as to what amounts to 'work contracts' to imply "architectural or engineering operations" only. There could be hardly any dispute that both irrigation works as well as laying of distribution and transmission power lines herein amounts to "architectural or engineering operations" only. We therefore adopt the foregoing detailed discussion mutatis and mutandis to uphold the Assessing Officer's action disallowing the assessee's impugned twin deduction claims on these very grounds and hold that even if the assessee is taken as a "developer" of the corresponding infrastructural facility going by section 80IA(4) or necessary implication or interpretation; as the case may be, it would still hit by the former latter explanation inserted in the Act by the Finance Act, 2004 w.e.f. 01.04.2000. We therefore accept the Revenue's instant identical sole substantive grie....