TaxTMI 
TaxTMI 
2025 (2) TMI 1554
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.... disallowance of the deduction u/s. 80IA of Rs. 29,06,918/- made by the A.O. 3. The Appellate Commissioner ought to have seen that the Appellant has developed infrastructure facilities by constructing the infrastructure and was not a works contractor for the government." 3. Thereafter, assessee has filed additional grounds which read as under : "1. The Assessing Officer ought not to have assumed jurisdiction u/s. 153C of the Income Tax Act, 1961, without properly recording the reasons for assuming the jurisdiction. 2. The Assessing Officer ought not to have assumed jurisdiction u/s. 153C, without properly recording the satisfaction note for such assumption." 4. Facts of the case, in brief, are that assessee is a Joint Venture (JV), comprised of (i) M/s. SABIR Dam & Water Works Constructions Company, Tehran, Iran ("SABIR" for short), (ii) M/s SEW Constructions Limited, Hyderabad ("SEW" for short) and (iii) M/s. Prasad & Company (Project Works) Limited, Hyderabad ("PRASAD" for short) engaged in the business of 'contract works' and assessed to tax in the status of an AOP. The assessee AOP filed its original return of income on 31.10.2006 declar....
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....ific direction has been given to the AO to examine the issue afresh in the light of the decision of the co- ordinate bench in the case of M/s. Ramky Infrastructure Ltd. (supra). 7.5 Further, I have perused the decision of co-ordinate bench in the case of M/s. Ramky Infrastructure Ltd. (supra) wherein the issue of the assessee's eligibility to claim deduction u/s. 80IA(4) of the Act was remitted back to the file of the AO with a direction to examine the issue afresh after considering the contract agreement as a whole and all other evidences that may be submitted by the assessee to demonstrate the fact that the assessee had actually developed the infrastructure facilities by undertaking the activities of design, development, engineering, construction, maintenance, financial involvement, defect correction of the contract during the warranty period. Further, the assessee was also directed to participate in the proceedings before the AQ and furnish necessary evidence in support of its claims. 7.6 Also, it is stated in the order that if the assessee is able to establish the fact that itself had carried out the development of the infrastructure facilities along with ....
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....ts i.e., Gorakallu Project and Veligonda Project either on BOT, BOOT or BOLT basis. As clearly stated in the contract agreements (supra), the assessee has taken up the projects on Engineering, Procurement and Construction (EPC) turnkey basis. It is a known fact that in a case of EPC system of contract, funds will be provided by the Government based on the estimation made by the Government. On the other hand, in a case of BOT, BOOT & BOLT system of contract, the contractor is required to arrange the funds on its own and bear the entire cost of executing the project without depending upon the Government. However, they will recover their cost either by way of annuity from the Government or by way of collecting user charges/toll fee. 7.12 By applying these basic principles of contracts, in the instant case, it is an admitted fact that the Government has provided the funds to the assessee on the basis of running bills furnished depending upon the progress in completion of the project, apart from providing mobilisation advance. To be precise, the assessee did not contribute any funds towards executing the project either by way of infusing its own capital or by availing finance f....
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....the seven activities cumulatively while executing the projects under reference i.e., Gorakallu Project and Veligonda Project. At this juncture, it is important to note that the Hon'ble ITAT in the case of M/s. Ramky Infrastructure Ltd., (supra) has made it mandatory that in order to demonstrate that the assessee has carried out development of infrastructure activities as a developer rather than contractor, the assessee should produce clinching evidence that it had cumulatively undertaken all the seven activities mentioned, above. .......... ........ 7.16 However, in the instant case, the assessee has neither executed all the seven activities nor produced any clinching evidence to demonstrate that it had cumulatively undertaken all such activities to prove that it had executed the project/work as a developer rather than a contractor. 7.17 Further, it is clearly evident from the terms of the contract agreements as well as funds supplied by the Government to execute the project by the assessee that the assessee has not undertaken the project in the form of BOT, BOOT & BOLT. Accordingly, I am of the considered opinion that the assessee is not eli....
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....t and maintenance of the projects had been assigned to the assessee either on BOT or BOOT or BOLT basis. More so in the case of Veligonda Project, the assessee had primarily undertaken construction of a tunnel which cannot be termed as an independent irrigation project. 7.22 Under these circumstances, in the absence of any clinching evidence furnished by the assessee to prove its credentials as the developer of the projects, I don't find any merit in the assessee's grounds of appeal that it is eligible to claim deduction u/s. 80IA(4) of the Act. Accordingly, the disallowance of deduction u/s. 80IA(4) of the Act is confirmed on merits. Thus, the grounds of appeal raised by the assessee on this issue are dismissed. Execution of the project through/by JV constituents and sub- contractors: 7.23 Alternatively, even otherwise, the assessee is not entitled to claim deduction u/s. 80IA(4) of the Act inasmuch as the assessee JV has not executed the projects on its own, but the same had been executed through/by its JV constituents and outside sub-contractors. To be precise, subsequent to entering into the agreements with the Government, the assessee has dis....
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....seen from the decision of the Hon'ble ITAT, Vizag Bench (supra), it is clearly evident that the assessee JV, having not executed the work itself, is not eligible for claiming deduction u/s. 80IA(4) of the Act. The fact that the JV did not execute the work by itself, but allocated the same to constituents of JV and outside sub-contractors in not disputed in the instant case. Accordingly, I am of the considered view that, on account of alternative ground also, the assessee is not eligible to claim deduction u/s. 80IA(4) of the Act. Thus, the grounds of appeal filed by the assessee are dismissed." 6. Feeling aggrieved with the order of LD.CIT(A), the assessee is now in appeal before us. 6.1. First, we will deal with the additional grounds raised by the assessee. 7. Before us, the ld.AR submitted that the assessment order was passed u/s 143(3) r.w.s. 153C of the Act and the additions were not made in the hands of the assessee on the basis of the incriminating material found during the course of search from the premises of the searched person. It was submitted that in the present case, the search action was initiated in the group cases of M/s. SEW Constructions Limited and ....
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....f the Act, the assessee was required to fulfill, seven specific activities as captured by him in 7.14 of his order, which are are to the following effect : 1. Design, 2. Development, 3. Engineering, 4. Construction, 5. Maintenance, 6. Financial involvement, and 7. Defect correction of the contract during the warranty period. 11. Before us, ld.AR submitted that the Ld.CIT(A) has examined and held that the assessee has failed to perform all the activities cumulatively while executing the projects under reference. Furthermore, the Ld.CIT(A) in para 7.1.7 has noted down that the assessee has not executed the project either by BOT (build- operate-transfer) or BOOT (built-own-operate-transfer) or BOLT (build-own-lease-transfer). It was submitted that the findings of the Ld.CIT(A) that the assessee was merely acting as civil contractor and not a developer as the funds for raising the agricultural facilities were provided by the State Government and further, it was mentioned that the assessee was having the mobilization advances of 5% is not correct. It was submitted by the ld.AR that the assessee has fulfilled all the oblig....
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.... the usage of the infrastructure facility created by the assessee (irrigation project, water supply, etc.) to qualify it as a 'developer' from the end users. Further the CBDT Circular No. 733, dated 30.01.1996, clarifies the applicability of Section 194C of the Income-tax Act, 1961, concerning the deduction of tax at source (TDS) on payments made to contractors for carrying out work. This circular only provides guidance on whether TDS under Section 194C is applicable to payments made by broadcasting and telecasting companies (including production of programs for broadcasting or telecasting) to advertising agencies and payments by advertising agencies to media owners (such as Doordarshan, newspapers, etc.) and it can not be extended the activities of the assessee. 14. It was submitted that after the issuance of the circular, the Act was amended 01.04.2002 and definition of infrastructure facility was expanded to include the creation of the irrigation project or sewerage system in the Explanation to sub-section (4) of 80IA of the Act. It was submitted that the Circular 717 and 733 can't be applicable to the 'infrastructure facility' whereby any assessee has developed a water suppl....
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....ll within the realm of infrastructure facility and therefore, the assessee is entitled to claim deduction under Section 80IA(4) of the Act. 18. Now the question before us is whether the assessee has fulfilled all the conditions as required and referred by the Ld.CIT(A) in para 7.14 of the order pursuant to the direction of the Tribunal. The Ld.CIT(A) while deciding the issue has not made any specific comments for any of these 7 aspects, other than the finance. It was submitted that assessee has not mobilized his own funds and is not into financial risk and is not operating the project on the basis of BOT or BOOT or BOLT and therefore, the assessee is not entitled to the benefit of Section 80IA of the Act. 18.1. We found that Clause (3) of Sub-Section (4) of 80IA of the Act includes infrastructure facilities such as a water supply project, water treatment system, irrigation project, sanitation and sewerage system or sold waste management system. In the present case, the assessee had constructed Gorakallu Balancing Reservoir as per the agreement made by the Superintending Engineer, SRBC Circle No.1, Nandyal. The scope of work under the contract was briefly given on page 1248 of....
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....rk detailed in the agreement involves significant infrastructure development, including the design, engineering, and construction of various critical components of the water supply and irrigation project. Given that the assessee is responsible for the execution of these projects and their subsequent operation and maintenance, which qualify the assessee as a developer under the relevant provisions of the Act. 19. The general conditions of the contract were mentioned from page 1290 to 1326 of the contract such as A) General B) Time for Completion C) Quality Control D) Cost Control E) Finishing the Contract and F) Other General Conditions. From the perusal of these contract conditions, it is evident that the assessee was actively involved in the design, execution, and completion of the project, fulfilling all contractual obligations. In line with the contract, the assessee was responsible for paying all applicable duties, levies, and charges, as required, ensuring full compliance with the contractual and legal framework. 20. With respect to functioning of the assessee, the assessee has taken bank guarantee, insurance and has also given earnest money and has also undertaken vario....
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....rm 'infrastructure facility' to include a wider range of projects, especially in the water and sanitation sectors. 23. Explanation Inserted by Finance Act, 2007: The Finance Act, 2007, inserted an explanation to Section 80IA of the Income Tax Act that specifically excluded "works contracts" from being eligible for the benefits under Section 80IA. Prior to this amendment, an enterprise executing a "works contract" (a contract involving the execution of construction, installation, or similar services) was eligible for tax benefits under Section 80IA if the contract was awarded by the government or any public authority. Explanation Inserted by Finance Act, 2009: The Finance Act, 2009, further amended Section 80IA to expand the scope of the exclusion related to "works contracts." It stated that the exclusion applied not only to works contracts awarded by private parties but also to contracts awarded by the Central or State Government. 23.1. In other words, after 2009, the benefit under Section 80IA was denied even if the contract was awarded by a government authority (Central or State). However, prior to 2009, there was restriction on the work executed for state or centr....
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....nt portion of the Tribunal's order is as under: 10. We have heard the rival submissions and perused the materials available on record. The only moot issue that requires adjudication in this present appeal is whether the assessee is eligible to claim deduction u/s. 80IA(4)(iii) of the Act, for which it is essential to determine whether the said income is categorized under the head 'income from house property' or 'business income'. For this, it is necessary to consider the nature of the business of the assessee which is deriving income from the operation and management of the buildings out of rent from lease of rental space and rent from lease of furniture and fit-out and facility management charges towards maintenance and upkeep of the premises that is rented out. Pursuant to the notice u/s. 153A of the Act, the assessee filed its return of income declaring the same as profit and gains out of business or profession. The revenue has taken a contrary view that the same is 'income from house property'. The assessee has relied on the CBDT circular no. 16/2017 dated 25.04.2017 which has clarified that the income from letting out of premises/developed space along with other facil....
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.... the Tribunal has allowed the claim of the assessee. 12. From the above observation, it is evident that this issue has been recurring in nature were the Tribunal has constantly granted relief to the assessee by holding that the assessee is entitled to claim deduction u/s. 80IA(4)(iii) of the Act. Even on the merits of the case, it is pertinent that the Industrial Park Scheme, 2002, notified by the GOI in exercise of powers u/s. 80IA(4)(iii) of the Act facilitates projects for setting up industrial parks which are eligible for claiming deduction u/s. 80IA(4)(iii) of the Act. There is no iota of doubt that the assessee was entitled to get benefit under this provision, for the reason that the assessment order does not speak of any violation in the conditions specified in the scheme, though, the revenue has raised a specific ground of appeal that the minimum 30 industrial units requisite for claiming deduction has not been satisfied. The assessment order nowhere has specified that the assessee has not complied with the said condition. In the absence of the same, we find no infirmity in the order of the ld. CIT(A) in allowing the deduction claimed by the assessee u/s. 80IA(4)(i....
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....ighway (MPSH) as a lead project against these criteria and analyze them with respect to Montecarlo Ltd., where similar principles were applied. 14.2. Full Responsibility for Execution and Completion (Clause 13.1(a) in Katira): According to Katira, a developer must assume comprehensive responsibility for the project, encompassing all stages from inception through completion. In Montecarlo Ltd., the Co-ordinate Bench and the Hon'ble Gujarat High Court emphasized that the developer's role includes end-to-end responsibility, requiring the entity to manage and execute work beyond construction. Here, the assessee's responsibilities in the MPSH project extended to all aspects of project design, execution, and handover, mirroring the obligations seen in Montecarlo Ltd., where the court upheld that an entity with such overarching responsibilities qualifies as a developer. 14.3. Operational Autonomy and Approval Requirements (Clause 13.1(a) in Katira): Katira states that developers may require limited government approvals without negating their status as developers. In Montecarlo Ltd., the Hon'ble Gujarat High Court reinforced this, noting that operational a....
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.... assessee demonstrates alignment with the financial responsibilities defined for developers. 14.8. Supply and Testing of Materials (Clause 13.1(f) in Katira): In Katira and similarly in Montecarlo Ltd., developers are expected to source quality materials independently, without reliance on government supply. The assessee complied with quality standards under Clause 36.1 of the Scope of Work, sourcing materials and overseeing quality control, much like the operations in Montecarlo Ltd., where the Co-ordinate bench observed material procurement as an indicator of developer status. 14.9. Provision and Use of Machinery (Clause 13.1(g) in Katira): Katira and Montecarlo Ltd. require developers to supply necessary equipment. The assessee in this case used its machinery, including specialized equipment, fulfilling the developer's responsibility of machinery provision. This approach resonates with Montecarlo Ltd., where similar machinery use supported the court's conclusion in favour of developer status. 14.10. Insurance and Comprehensive Risk Coverage (Clause 13.1(h) in Katira): The Katira guidelines mandate insurance and risk management, as supported by M....
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....ing, and progress. The Co-ordinate Bench found that the JV operated under strict government control, received lump-sum payments and mobilization advances, and bore minimal financial and operational risks, disqualifying it from Section 80IA(4) of the Act as a developer. In contrast, the present assessee bears substantial entrepreneurial and financial risks, including performance guarantees, liquidated damages, and retention money, assuming the obligations and risks typically associated with a developer. The decisions in M.S. Khurana Engineering Ltd. and NEC NCC Maytas JV are not applicable in this case due to their factual and procedural distinctions, as well as the jurisdictional clarification in Montecarlo Ltd. that supports a broader interpretation of developer status under Section 80IA(4) of the Act. The present assessee's comprehensive control, significant financial risk, and managerial responsibilities align with the characteristics of a developer as outlined in Montecarlo Ltd., rendering the DR's reliance on these cases misplaced. 16. We have perused the order of CIT(A) in detail. The CIT(A)'s order provides an in-depth examination of the eligibility crit....
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....IT(A) cited M/s. Tarmat Bel (JV) vs. ITO (Rajkot Bench) and Om Metals Infra Projects Ltd. vs. CIT (Jaipur Bench), which held that contractors managing substantial project responsibilities qualify as developers eligible for Section 80IA of the Act deductions. These judicial precedents reinforced the CIT(A)'s position, supporting the assessee's developer status. 16.1. After perusing the CIT(A)'s comprehensive analysis, we find that the CIT(A) rightly interpreted the assessee's role as a developer under Section 80IA(4) of the Act. The CIT(A)'s reliance on Circular No. 4/2010, along with precedents from rulings of various Benches of the Tribunal and Hon'ble Supreme Court guidance, provides a robust legal basis to affirm the developer status of the assessee. 16.2 The financial statements of the assessee, spanning Assessment Years (AYs) 2007-08 to 2015-16, provide a comprehensive view of the business's financial and operational profile, reflecting the nature, scope, and risk involved in its activities. The financial parameters across these years serve as indicators of the business's state of affairs, highlighting the responsibilities, ris....
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....balances, and high current liabilities also indicate reliance on project completions and customer payments, a common characteristic of developers with substantial liquidity requirements. Market and Profitability Risk: • • The company's primary income is derived from contract receipts i.e the projects, which are contingent on project completion and client certification. This dependency exposes the company to market and client-related risks, such as changes in demand, government policies, and competitive pressures in the infrastructure sector. * Low profitability margins further suggest sensitivity to cost fluctuations and competitive pricing pressures, which is common among developers in a highly competitive sector. 16.4. We have also noted the off-balance sheet items of liabilities i.e. Contingent liabilities and observe that there's a significant increase in contingent liabilities, especially in guarantees for joint ventures and disputed tax and royalty demands, which indicate growing exposure to financial and operational risks. 16.5. From a business risk and reward perspective, contingent liabilities are critic....
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.... it assumes the independent roles and responsibilities associated with developing infrastructure. The assessee's case here mirrors Montecarlo Ltd., where the Hon'ble Gujarat High Court upheld deductions for infrastructure developers who mobilized resources, bore risks, and undertook comprehensive JMC Projects (India) Ltd. vs. DCIT-ACIT (By assessee and Revenue) Asst. Years : 2007-08 to 2015- 16 development duties. Given the binding nature of this jurisdictional precedent, we respectfully follow Montecarlo Ltd., concurring with the CIT(A) that the assessee qualifies as a developer entitled to deductions under Section 80IA(4) of the Act. 16.9. In view of the above, we find that the CIT(A) rightly allowed the assessee's claim under Section 80IA(4) of the Act based on its function as a developer in infrastructure projects. The CIT(A)'s reliance on statutory interpretation, judicial precedents, and CBDT guidance provides a sound basis for affirming the assessee's eligibility for the deduction. 16.10. Accordingly, the Revenue's appeals on the s relating to deduction u/s. 80IA of the Act are dismissed, and the orders of the CIT(A) granting the ass....
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....al assessed income of the eligible industrial undertaking. This ensures that the deduction accurately reflects the undertaking's profits, consistent with statutory provisions and judicial interpretations. 17. The assessee's respective grounds in ITA No.1749/Ahd/2016 for AY 2012-13 are allowed." 16. The co-ordinate Bench of the Tribunal, while deciding the issue in the case of JMC Projects (India) Ltd., (supra) had the occasion to deal with the decision relied upon by the Ld.DR namely, M/s. NEC NCC MAYTAS-JV (supra) and has provided elaborate reasoning as to why the said decision is clearly distinguishable. It was observed that the assessee operates as a developer rather than merely a contractor. The risks undertaken, the professional expertise required, the substantial leverage, operational responsibility, liquidity constraints, and market exposure collectively characterize the assessee as a 'Developer' under Section 80IA of the Act. 16.1. Similarly, if you examine the various stipulations given in the present case, it is clear that the assessee, by assuming essentially extensive financial and market risks, qualifies as a developer, undertaking co....
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....sion in Montecarlo Ltd. Vs. PCIT (supra) has held that the scope and application of section 80IA is much broader than what was interpreted in Katira Construction Ltd. and M.S. Khurana Engineering Ltd. (supra). 19. The findings of the co-ordinate Bench of the Tribunal in the case of JMC Projects (India) Ltd., (supra) have already been reproduced hereinabove. Besides, it is necessary to mention here the recent judgment of Hon'ble Gujarat High Court in an identical case involving a group company of the assessee namely, PCIT Vs. M/s. N.C.C.M.S.K.E.L (JV) reported in 2024(11) TMI 91 (Tax Appeal No.781 of 2024 dt.15.10.2024). In this case, while dealing with the issue of airport construction, the Hon'ble Gujarat High Court, in paras 3.6 and 4 of the order, held that even the development of airports by the assessee, which is identical to the assessee before us, amounts to the creation of an infrastructure facility and such activity qualifies the assessee as a developer, as it assumes financial and entrepreneurial risks associated with the development of new project. Consequently, the assessee qualifies as a developer. The relevant portion of the Hon'ble Gujarat High C....
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....dar Vallabhbhai Patel International Airport. 18. The next issue for consideration is whether the assessee has undertaken the necessary financial and entrepreneurial risk so as to qualify as a "developer", or is it a case that the undefined assessee is merely acting on the directions of AAI wherein complete responsibility for finance, man-power, scope of work, penalty provisions etc. are to be borne by AAI and assessee is only working at the behest and under the control and directions of AAI. In this case, we observe that the assessee has furnished bank guarantee to AAI (refer Pages 51-61 of the Paper Book), the assessee has furnished detailed program and CPM work diagram to AAI for its approval (refer Pages 51-61 of the Paper Book), the assessee has prepared and submitted electrical layout drawing for site office (refer Pages 69-70 of Paper Book), the assessee has prepared various other designs like curtain glazing wall (refer Pages 72-98 of Paper Book), honey comb panels designs (refer Pages 99-103 of Paper Book), design for air handling unit Duct & Pipe (refer Pages 104-124 of the Paper Book) etc. Further, the assessee has also undertaken to provide all materials for the....
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....The Appeal therefore, being devoid of any merit is accordingly dismissed." 20. We further find that in the case of ACIT Vs. Bothra Shipping Services (P.) Ltd. reported in [2024] 166 taxmann.com 608 (Calcutta), the Hon'ble Kolkata High Court has held as under : "6. The Hon'ble Supreme Court in Commissioner of Income Tax v. Container Corporation of India Limited [2018] 93 taxmann.com 31/255 Taxman 334/404 ITR 397 (SC) explained the object and scope of Section 80IA of the Act by observing that with the purpose of boosting the country's infrastructure specially the transport infrastructure, Finance Act, 1995 which came into effect April 01, 1996 brought an amendment to the provisions of Section 80IA of the Act. In the said decision, the Hon'ble Supreme Court upheld the views taken in the case of Commissioner of Income Tax v. A.L. Logistics Private Limited [2015] 55 taxmann.com 283/230 Taxman 194/374 ITR 609 (Madras). In the said decision, the Hon'ble Division Bench has held that the specific issue as to whether in the absence of a specific agreement with the Central/State Government, local authority or statutory body the assessee is entitled to cla....
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....ng and maintaining or developing, operating and maintaining a new infrastructure facility and it has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995. The explanation defines the infrastructure facility to mean, inter alia, a port, airport, inland waterway, inland port or navigational channel in the sea. The word "inland port" was always there in clause (d). What was there prior to its substitution by Finance Act of 2007 with effect from 1st April, 2008, were the words "or inland port". Now the word "or" is deleted, but the words are "inland port or navigational channel in the sea". Thus, an "inland port" was always within the contemplation of the Legislature and it is treated specifically as a infrastructural facility. Therefore, to that extent Mr. Dastur is right in his submission. 7. While considering the judgments relied on by the learned senior standing counsel for the department with regard to how the words in fiscal statute should be interpreted, we are obliged to take note of the decision of the Hon'ble Supreme Court in Government of Kerala v. Mother Superior Adoration Convent (2021) 5 SCC 602/[2021] 126....
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....be read liberally keeping in mind the objects envisaged by the industrial policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statute." 17. The Hon'ble Supreme Court took note of the Hon'ble Five Judges Bench of the Hon'ble Supreme Court in Commissioner of Customs (Import) v. Dilip Kumar & Company (2018) 9 SCC 1/[2018] 95 taxmann.com 327 (SC). The Hon'ble Supreme Court after taking note of the ultimate conclusion arrived at in the case of Dilip Kumar and Company (supra) held as follows:- 26. It may be noticed that the five-Judge Bench judgment did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub silentio the line of judgments qua beneficial exemptions has been done away with by this five- Judge Beach. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (see Quinn v. Leathem as followed in State of Orissa v. Sudhansu Sekhar Misra, SCR at pp. 162-63: AIR at pp. 651-52. para 13)....
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.... our considered opinion, such an assessee should be considered a developer within the four corners of the law. We are, accordingly, of the opinion that the assessee is a developer within the meaning of the law and is entitled to claim the benefit under Section 80IA of the Act. 23. We also draw strength from the recent decision of the co-ordinate Bench of the Tribunal in the case of Prathima Infrastructure Limited Vs. ACIT in ITA No.451/Hyd/2024 dt.27.11.2024 reported in (2024) (12) TMI 310), wherein the assessee was engaged in a similar activity and was granted deduction u/s 80IA of the Act. The co-ordinate Bench of the Tribunal in the said case in paras 13 to 16, has held as under : "11. We have heard both parties, perused the material available on record and gone through the orders of the authorities below. We have also carefully considered the relevant case laws relied upon by the AO and LD.CIT(A) in support of their reasoning and also case laws relied upon by the assessee in support of their contentions. The AO disallowed deduction claimed under Section 80IA(4) towards profits derived from infrastructure project Pranahita Chevella Lift Irrigation Scheme, Link-....
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....or claiming deduction under Section 80IA(4) of the Act, any enterprise engaged in the business of developing or, operating and maintaining or any developing, operating and maintaining any infrastructure facility and satisfy the above conditions can claim deduction towards profit derived from development of any infrastructure project. In the present case, there is no dispute with regard to satisfying the conditions of enterprise owned by a company registered in India or by a consortium of such companies. In fact, the appellant is owned by an Indian company. The only dispute is with regard to entering into an agreement with the Central Government or a State Government or any local authority or any other statutory body. In fact, the AO never disputed the fact that the Enterprise is owned by an Indian company and also satisfied the other conditions, however, disputed the condition of entering into an agreement with the Central Government or a State Government or any local authority or any other statutory body. According to the AO, the appellant has not satisfied the condition of entering into agreement with the Central Government or a State Government or any local authority or any othe....
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..... HCC, in terms of Clause 43 of Agreement dated 02-12-2008, sub-contracted entire civil work in the project on back-to-back basis to the appellant with all risks and rewards. Further, before entering into sub-contract work with the appellant, the Principal Contractor M/s.HCC has taken permission from the Government of Andhra Pradesh, Irrigation and C.A.D Department and the developer of the project has approved the appellant for executing the civil works. Therefore, it is necessary for us to examine the eligibility of the appellant to claim deduction under Section 80IA of the Act, in light of the infrastructure project developed by the Government of Andhra Pradesh, Irrigation and C.A.D. Department, the JV agreement between the constituent partners dated 02-12- 2009, bid document for the Project Pranahitha Chevella Lift Irrigation Scheme, issued by the Government of Andhra Pradesh and the Work Order issued by M/s.HCC to the appellant company. 14. The project Pranahitha Chevella Lift Irrigation Scheme is a huge irrigation Scheme developed by the Government of Andhra Pradesh for lifting 88.24 TMC of water from Mid Manair to new reservoir at Ananthagiri Village, Illanthakunta M....
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.... that the agreement between the appellant and M/s.HCC is not in terms of section 80IA(4) of the Act, and thus, in our considered view, reasons given by the Assessing Officer is incorrect and cannot be accepted. 15. Having said so, let us come back to the nature of work undertaken by the assessee. As we have said in earlier part of this order, the appellant has developed an infrastructure facility, in the nature of irrigation project, which satisfies the conditions for claiming deduction under Section 80IA(4) of the Act. Further, if you go by the scope of the project work, as defined in the BID document, it is a huge irrigation project for drawing 88.24 TMC water from Mid Manair Reservoir in 120 days with a static head of about 88 mtrs lift in single stage at Anantagiri Village and the project requires large-scale civil, mechanical, and electrical works. Therefore, going by the nature of the project and size, in our considered view, the appellant has undertaken all the entrepreneurial and investment risk that any developer would have undertaken. The appellant has also undertaken the risks of the project. There was no reduction in quantum or quality of risk undertaken by the....
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....e legislation has extended the scope of deduction under Section 80IA of the Act, keeping in view the capital intensive nature of big infrastructure projects like irrigation projects etc. The CBDT issued a Circular No.4 of 2010, dated 18.05.2010, which was issued after introduction of the explanation by the Finance Act 2009, and a reading of the Circular would indicate that the Board clearly mentioned that the widening of existing road is an infrastructure facility, and any enterprise carrying out the widening of an existing road would be eligible for deduction under Section 80IA(4) of the Act. This also shows that it was never in contemplation of Legislature to assign a literal and constricted meaning to development vis-à-vis a simple contract. Therefore, from the intention of the legislation and clarifications issued by the CBDT, it is absolutely clear that the sole motive of the provisions of Section 80IA of the Act, is to provide deduction towards profit derived by the enterprise from development of an infrastructure facility and further, by way of proviso to Section 80IA(4), the Legislature has provided deduction for remaining period to any enterprise, who succeeds the p....
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....ed to the said benefit as if the transfer in question had not taken place. It has been found by the Assessing Authority himself, the present assessee in Transport Services Private Limited under M/s. Chettinad, the present case that an Agreement dated 16.04.2002 captioned as Lignite Transport System with M/s. ST-CMS Electric Company Private Limited, had undertaken the work of developing the said railway sidings and was operating and maintaining the same. The only ground on which the Assessing Authority denied the said benefit was that the assessee himself did not enter into any such contract with the Railways or with the Central Government. 9. The learned Tribunal, however, in our opinion, rightly applied the Proviso to Section 80IA(4) of the Act and held that since the assessee was recognised as contractor for these railway sidings, which undoubtedly fell under the definition of "infrastructure facility," it was entitled to the said benefit under Section 80IA of the Act. The grounds on which the Assessing Authority denied the said benefit to the assessee ignoring the effect of Provisos to Section 80IA(4), therefore, could not be sustained. The Tribunal, in our opinion, has....
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....he fact that the projects executed by the appellant, including those projects which were awarded to JVs/ Consortiums, but executed by the assessee are infrastructure projects, as defined under Section 80IA(4) of the Act and thus, on being satisfied with the relevant provisions therein, the assessee is eligible for deduction under Section 80IA(4) of the Act. The only dispute is with regard to not satisfying clause (b) of Section 80IA(4)(1), which states that in order to claim deduction under Section 80IA(4) of the Act, the enterprises shall enter into an agreement with the Central government or State Government or local authority or any authority for developing, operating and maintaining or developing, operating and maintaining a new infrastructure facility. The appellant claims that it has satisfied clause (a) of Section 80IA(4) of the Act, because as a constituent partner of JV /Consortia, it has signed agreement with relevant Central or State Government or local authority for development of infrastructure project. Further, as per clause (a) of Section 80IA(4) of the Act, in order to claim deduction under Section 80IA(4), the enterprise should be owned by a company registered in I....
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....are of the considered view that once the assessee, being a constituent partner of the JV/Consortium, has executed the project and also undertaken relevant risks, including financial risks, the assessee becomes a developer of the infrastructure project and also as a constituent partner of the JV/Consortium, satisfied the condition of entering into an agreement with relevant Central or State government or any authority as specified in clause (b) of Section 80IA(4)(1) of the Act. This is further fortified by the provisions of Section 80IA(4) of the Act and as per the proviso, the deduction is allowed to a successor entity in case one enterprise developed such infrastructure facility and after development, transfer such infrastructure facility to another Enterprise for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with agreement with the Central / State Government or local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired ....
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.... 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 per cent 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 under s. 80 - IA(4). These facts clearly indicates that the joint venture was only a de jure contractor but in fact the assessee was a de facto contractor. ....
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....ofits derived from the projects awarded to JV / Consortium but executed by the appellant. The decision of the ITAT Lucknow Bench has been upheld by the Hon'ble Allahabad High Court. The sum and substance of the ratios laid down by the various benches of the Tribunal is that when the appellant has satisfied all the conditions prescribed under Section 80IA(4) of the Act, but merely for the reason that the agreement is entered into by JV / Consortium, the deduction under Section 80IA(4) cannot be denied." 19. Coming back to the case laws relied upon by the ld.DR in the case of DCIT Vs. M/s.HES Infra Private Limited (supra). The co-ordinate Bench of the Tribunal by following the decision of Hon'ble Supreme Court in the case of Commissioner of Customs (Import) Vs. M/s. Dilip Kumar and Company and others (supra), rejected the claim of the appellant deduction under Section 80IA of the Act, for not satisfying the condition of entering into agreement with specified authority. We find that the Co-ordinate Bench of the Tribunal of ITAT in the case of ACIT Vs. Megha Engineering and Infrastructure Ltd, (supra) has considered the decision relied upon by the ld.DR in the case of DCIT....
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.... authority for what it decides and not what it matters logically follow from it. This being the case, it is obvious that the beneficial purpose of exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of those cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand should be eschewed. Going by the subsequent decision of the Hon'ble Supreme Court in the above case, it is undisputedly clear that exemption provisions should be interpreted liberally in order to achieve the objectives of the legislature and going by the above ratio, in our considered view, there is no dispute with regard to the fact in the present case, the appellant is engaged in the business of developing infrastructure project like irrigation project, water supply system, hydropower plants and roads and railway lines and the statute provides for specific exemption under section 80IA(4) of the Act in respect of infrastructure projects, in our considered view, going by the liberal interpretation of the sta....