TaxTMI 
TaxTMI 
2025 (2) TMI 1569
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.... regard to the reasons given in the petition, we condone the delay and admit all the appeals for hearing. 3. The grounds of appeal filed by the Revenue in ITA No. 682/Hyd/2024 read as under : "1. Both on the fact and in the circumstance of the case, the ld.CIT(A) is not justified in deleting disallowance of Rs. 11,56,60,835/- made u/s 80IA(13). 2. Whether CIT (A) is justified in not considering the contract as a work contract? 3. Whether CIT (A) is justified in not considering the judgment of jurisdictional ITAT in the case of M/s NEC NCC MAYTAS in ITA No. 496/Hyd/2018, wherein issue is identical to the assessee's own case? 4. Whether CIT (A) is justified in considering the business of the assessee company as developing of infrastructure instead of considering work contract as per section 80IA(13)? 5. Whether CIT (A) is justified in overlooking sub contract with M/s. BGR Mining & Infra Ltd? 4. Facts of the case, in brief, are that the assessee-AOP filed its Return of Income for Asst. Year 2017-18 on 27.10.2017, computing total income at Rs. 11,56,60,835/- and claiming the same as a deduction u/s 80IA, with i....
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....l the disputes. Site inspection is the duty of the contractor. The material procurement and all other responsibilities are that of the assessee. Materials were to be procured by the appellant on its own and were not provided by the Government. No payment was to be received by the appellant on account of procurement of any supplies. No mobilization advance of any kind was provided to the appellant by the Government to execute the given project. It is also the duty of the assessee to attend to any works like any diversion of stream, vagus and drains during the process of development. The power supply as well as the temporary diversions, if any, with regard to the highways and the bridges also be the responsibility of the appellant. And most importantly assessee has to undertake maintenance of the project for the specified period. 5.14 So far as safety measures are concerned, the terms also stipulated that the assessee has to arrange the personnel, qualified engineers and Technicians. Appellant also has to undertake the risk of providing insurance against the workmen compensation for labours and also responsible for safety of all the concerned. The assessee has to provide dri....
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.... it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s 80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee, it can safely be concluded that the assessee is engaged in development of the infr....
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....d with the order of ld.CIT(A), Revenue is now in appeal before us. 6. Before us, the Ld.DR submitted that the "formation of Venkatadri Reservoir Bund from 0.000 to Km.6.900 at Vattem Village, Bijinepally Mandal of Mahabubnagar District" is not an infrastructure facility, within the meaning of the Explanation to Section 80-IA of the Act, and therefore, the assessee is not entitled for grant of deduction under Section 80-IA of the Act. For the above-mentioned purposes, the ld.DR has drawn our attention to the order of the AO for the assessment year 2017-18, which is to the following effect : ".....The assessee's claim is that its case falls under section 80IA(4)(i) and therefore the project of formation of Venkatadri Reservoir Bund qualifies as "infrastructure facility project" thereby entitling it for the deduction u/s 80IA(4). Explanation below sub-section (4) defines 'infrastructure facility as- (1) a road, including toll road, a bridge or a rail system; (2) a highway project including housing or other activities being an integral part of the highway project; (3) a water supply project, water treatment system, irrigation project, sanitation and sewera....
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....see has admittedly claimed the same taking itself as the developer by court that a corresponding commercial project firm of "infrastructural facility" as per section 80IA(4) Expln.( c) covering "a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system" only. Our attention has been invited to the corresponding project's architectural design (supra). The assessee has thereafter pleaded that it has undertaken the business risk not only in the development of the said lift channel forming part of the irrigation project which has turned barren uneven tracks of land to a canal but also it had deployed all of the corresponding plant and machinery, labour force followed by retention money's project thereby satisfying all the conditions of development of infrastructure facility. All these assessee's arguments fail to evoke our concurrence for the reasons given hereunder. 9.1 The assessee's first and foremost plea that we ought to adopt liberal interpretation while considering section 80IA(4) claim in the light of relevant facts in the instant case deserves to reject. Suffice ....
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....atisfied all other conditions in sub-section (4) of section 80IA of the Act. We find force in Revenue's instant argument as the Finance Act, 2009 substitutes the earlier explanation that the same would not cover a works contract for the purpose of providing deduction qua industrial undertaking or enterprise engaged in infrastructure development, etc. 12. There is yet another equally important aspect which requires our apt adjudication at this stage i.e. of the clinching legislative expression in the latter explanation "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 the state government)". We note that honourable apex court yet another larger bench decision in Kartar Singh Bhadana Vs. Hari Singh Nalwa & Ors Civil Appeal No. 6931 of 2000 decided on 27.03.2001 had an occasion to deal with the expression "works" used in section 9-A of the Representation of People Act, 1951. Hon'ble court therein went by the shorter Oxford English Dictionary's meaning that "work means a structure or apparatus of some kind; an archite....
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....ficiently indicate that the assessee, assuming that not accepting that it is the developer u/s. 80IA(4) of the Act, executed a works contract only under Explanation to section 80IA of the Act and therefore, not entitled for the impugned deduction. 14. The assessee next made a very strong endeavour to place reliance on a catena of case law (supra) including CIT Vs. ABG Heavy Industries Limited (2010) 322 ITR 323 (Bom). We find that neither of these decisions deals with the interplay between the section 80IA(4) Vs. 80IA Explanation involving execution of works contract as is the factual position before us. The said case law distinguished, therefore. 15. Mr. Afzal's last argument seeks to buttress the point that such a strict interpretation employed in dealing with an instance of development of an infrastructure project would tantamount to closing the deduction chapter altogether and more particularly, when this assessee has borne all risks and responsibilities of the lift irrigation project by paying reduction money and performance guarantee(s) as well. We hold that this last argument also fails to cut any ice since the assessee has merely performed a works cont....
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....g the following incomes: 1. Asst. year 2017-18 2. Asst. year 2018-19 3. Asst. year 2020-21 While admitting the income, it claimed deduction u/ s 80IA(4) of the I.T. Act as the income was derived from development of infrastructure project undertaken by the appellant. 3. The Assessing Officer converted the case to scrutiny and issued notice. In the said notice, the Assessing Officer required the assessee to state the reasons as to why deduction u/ s 80IA claimed should not be rejected. The assessee filed detailed written submissions which is extracted between pages 2 and 9 of the assessment order and a copy of the same is submitted. It is submitted that - a) the manner in which the amendments have taken place to the provisions of Sec. 80IA and the history of the said provisions clearly show that any company or consortium of companies which have developed infrastructure project would become entitled for deduction u/ s 80IA of the Act. The assessee is a consortium of companies and have undertaken the development of the project; Therefore, it becomes entitled for deduction . b) It was also submitted that the irrigat....
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....agiri reservoir and lifted to fill the Yedula Reservoir under lift Il. There after the water is drawn from foreshore of Yedula Reservoir and lifted to fill Vattan Reservoir and Kurumurthyraya REservoir and lifted to fill the Udandapur Reservoir under lift IV. Finally the water is drawn from foreshore of Udandapur Reservoir and lifted to fill the K.P. Laxmidevipatli Reservoir under lift V. 6. It can be seen from the above that the work of formation of Reservoir bund is development of lift irrigation scheme from Krn 0.000 to Km 6.900 Kms. 7. The assessee in this regard is submitting a copy of the order of the Hon'ble ITAT in the case of Sushee Hitech Constructions Private Limited for the assessment years 2005-06 to 2007-08. In the said order, the Hon'ble ITAT mentions the following projects and held that they are all development of infrastructure facilities: a) AMRP Nalgonda Earth work excavation and formation of embankment from Ian 135.125 to Ian 136.1550 leading channel to Musi reservoir including excavation of Transmission and diversion channel in 134.000 to km 135.000 of AMRP. b) SRSP FFC Earth work excavation and forming embankrnent of....
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....nd qualified engineers are concerned, the assessee has to make available full time Engineer and Technicians. c) The contractor has to undertake the risk of providing insurance against the workmen compensation; d) Site inspection is the duty of the contractor; e) The material procurement and all other responsibilities are that of the assessee f) The contractor has to execute the work. If any diversion of stream, Vagus and drains during the process of development it shall be the duty of the assessee to attend to such works. g) The power supply is also the responsibility of the assessee h) The temporary diversions, if any, with regard to the highways and the bridges also be the responsibility of the appellant. i)Wherever ramps are to be provided, it shall be the duty of the assessee j) The monsoon drains are to be provided by the assessee; K) The assessee has to provide all the safety measures. l) The assessee has to take possession of the site and get access to the site and settle all the disputes. The entire works has to be got completed with assessee's own funds, men and material. ....
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....f infrastructure; c) The work was executed on its own risk d) It only sought the help of another company i.e. BGR Mining and Infra Ltd. e) All the risks and responsibilities are that of the appellant. 22. Therefore, it cannot be said that the assessee is not entitled for deduction u/ s 80IA(4) of the I.T Act. 23. On an appeal filed before the CIT (Appeals), the learned CIT (Appeals) observed that the project executed by the assessee is an eligible infrastructure facility project and is entitled for deduction u/s 80IA of the I.T. Act. The relevant para of the order of learned CIT (Appeals) is extracted hereunder: "5.4 At this juncture, therefore, deliberation is required on the main issue as to whether the assessee is entitled to the deduction claimed under section 80IA(4) of the Act i.e. such irrigation project undertaken by the appellant during the year under consideration is an eligible project to claim deduction under section 80IA. Explanation to section 80IA(4) is reproduced below to verify the eligibility of the given project: "Explanation. -For the purposes of this clause, "infrastructure facility" means- ....
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....g or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:" 5.7. The appellant is into developing the infrastructure facility. The appellant is a joint venture of two Indian companies namely NCC Limited and HES Infra Private Limited. The appellant has entered into an agreement with Government of Telangana for development of Infrastructure facility. Therefore, the appellant has fulfilled all the conditions stated in section. Section 80IA(4) in pertaining to an enterprise carrying out business of developing of an infrastructure facility. 5.8 Now, it is important to examine the main issue as to whether business carried out by the appellant is that of nature of work contract or that of development and whether the assessee is entitled to the deduction claimed under section 80IA(4) of the Act even after the Explanation inserted after subsection 13 of section 80IA of the Act by the Finance (No. 2) Act 2009 w. e. f. 14-2000. The Explanation reads as follows: "Explanation. -For the removal of doubts, it i....
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....010 & Others dated 23-10-2013 (For A Y 2005-06, 2006-07 & 2007-08). The aforesaid decision is also followed by the Hon'ble jurisdictional ITA T Hyderabad in recent case of Nagarjuna Construction Co. Ltd. (NCCL) vs. DCIT [20241 159 taxmann.com 538 5.10 In that view of the above judicial pronouncements and provision of law, the first and foremost condition imposed upon an assessee is to establish that it worked not as 'work contractor', but as a 'developer'. 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 principal. 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. In other words, 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 true sense, are the persons who are carrying out the business of developing or operating and maintaining or devel....
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....hall be the duty of the assessee to attend to such works. 6. The power supply is also the responsibility of the assessee 7. The temporary diversions, if any, with regard to the highways and the bridges also be the responsibility of the appellant. 8. Wherever ramps are to be provided, it shall be the duty of the assessee. 9. The monsoon drains are to be provided by the assessee; 10. The assessee has to provide all the safety measures. 11. The assessee has to undertake maintenance of the project for the specified period. 12. All the risk and responsibilities were that of the appellant; 13. There was no fixed payment to be Abid-to the appellant as per the contract. Lumpsum payment were to be paid to the appellant upon completion of work on milestone basis and after certification of work completed. There was no fixed tenure in which payment was to be received by the appellant upon submission of the invoice; 14. From each bill, the retention money was withhold, to be paid only after competition of entire project to cover up for damage if any occurred to Government. 15. Bank guarantee is to be provi....
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....s and Technicians. Appellant also has to undertake the risk of providing insurance against the workmen compensation for labours and also responsible for safety of all the concerned. The assessee has to provide drinking water, proper sanitation, drainage, rest rooms etc. as stipulated in different clauses of the TD. Thus, it appears that in order to fulfill the criteria for successful bidder in the tender awarded for developing, operating and maintaining the irrigation project, appellant needs to take all necessary measures for safety of traffic during construction. Needless to mention that in the event the assessee defaults in working or violates any contractual obligation, it shall be liable to penalty in terms of lien of Government over the plant, machinery and equipments and forfeiture of security deposits etc. 5.15 I have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as....
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....see from claiming deduction u/s 80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee, it can safely be concluded that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) of the Act. Therefore, after verification of terms of contracts and risks undertaken by the appellant, it is observed that the appellant is "Developer" and work undertaken by the appellant is that of Development and not a works contract. 5.18. The AO in the assessment order has stated that deduction claimed u/s 80IA is denied because the appellant does not own any fixed asset in order to be engaged in carrying on the business of developing an infrastructure facility. Also, the appellant has sub contracted the project. The appellant in connection to the same has submitted that appellant is a JV and its members do possesses necessary machinery and fixed assets to carry out the project. Further, it has also mentioned that had there been no fixed assets with the members of the JV, the project would have not been awarded by the Government. With regards to sub....
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....servoir Bund' - does not qualify as an infrastructure facility, thereby disallowing the deduction under Section 80-IA of the Act. For the above-mentioned purposes, ld.AR has drawn our attention to the Explanation below Sub-section (4) of 80IA of the Act, which was captured by the Assessing Officer at page 10 of his assessment order, which reads as under : ".....The assessee's claim is that its case falls under section 80IA(4)(i) and therefore the project of formation of Venkatadri Reservoir Bund qualifies as "infrastructure facility project" thereby entitling it for the deduction u/s 80IA(4). Explanation below sub-section (4) defines 'infrastructure facility as- (1) a road, including toll road, a bridge or a rail system; (2) a highway project including housing or other activities being an integral part of the highway project; (3) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (4) a port, airport, inland waterway or inland port or navigational channel in the sea." 10. We found that Clause (3) of Sub-Section (4) of 80IA of the Act includes infrastructu....
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....of infrastructure facility falls within the realm of Section 80IA of the Act. Furthermore, even the co-ordinate Bench of the Tribunal in the case of M/s. NEC NCC MAYTAS-JV, Hyderabad Vs. DCIT (supra) vide para 13 of the said order has agreed that such activities qualify under Section 80IA, though the deduction was denied in that case on the ground that the assessee was merely a work contractor and not a developer. The relevant portion of paragraph 13 reads as under : "13. We go by the foregoing observations of their lordships and observe that the stages I & II of the Bhima Lift Irrigation project undertaken by the assessee containing " all the civil works like canal approach to the tunnel, tunnel, surge pool pump house, delivery mains manufacturing, testing, inspection, packing, supply, erection and commissioning of electro mechanical and hydro mechanical equipment" 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. Learne....
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....or damage to physical property and of personal injury and death arising on account of performance of the Contract shall be the responsibility of the Contractor. - It is the responsibility of the assessee for arranging the land for borrowing area rests with the contractor. - The contractor shall construct and commission the work in accordance with the specifications and drawings. - The contractor at his cost shall forma temporary diversion wherever necessary. - The work of diversion arrangement should be carefully planned and prepared by the contractor. - The contractor has to arrange for bailing out water, protection to the work in progress and the portions of works already completed and safety measures for men and material. - Contractor shall be responsible for safety of all activities on Site. - The contractor shall make his own arrangement for obtaining power from Electricity Department. - The contractor is paid for the quantity of the work done at the schedule rate in the Bill of Quantities for each item. - The weightage for different components taken together including those included in the price ....
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.... both the Departmental Representative (DR) and the Authorized Representative (AR), as well as noting the judicial precedents presented, including Katira Construction Ltd. v. ACIT, M.S. Khurana Engineering Ltd. v. ACIT, and Montecarlo Ltd. v. Principal CIT, we are tasked with determining whether the assessee qualifies for the deduction under Section 80IA(4) of the Act. The primary point of contention is whether the assessee acted as a "developer" within the meaning of the section, thus eligible for the deduction, or merely as a "contractor," which would disqualify it from this benefit. Both the Departmental Representative (DR) and the Authorized Representative (AR) presented judicial precedents, including Katira Construction Ltd. v. ACIT (supra), M.S. Khurana Engineering Ltd. v. ACIT, and the Hon'ble Gujarat High Court's decision in the case of Montecarlo Ltd. v. Principal CIT (supra). A thorough analysis of these cases is necessary to assess the responsibilities, risks, and controls borne by the assessee, especially in light of the jurisdictional precedent set by Montecarlo Ltd., which aligns closely with the principles established in Katira Construction Ltd. 14.1.....
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....s recognized in Montecarlo Ltd.. 14.5. Employment and Management of Skilled Workforce (Clause 13.1(c) in Katira): Both Katira and Montecarlo Ltd. emphasize that developers must recruit and manage skilled personnel. In this case, the assessee engaged project managers, engineers, and other skilled professionals, taking responsibility for all manpower requirements. This mirrors the approach upheld in Montecarlo Ltd., where the Co-ordinate Bench observed that managing personnel indicated significant managerial control-- characteristics of a developer. 14.6. Technical Know-How and Expertise (Clause 13.1(d) in Katira): The Katira and Montecarlo Ltd. decisions both require that developers possess technical expertise, deploying skills essential to infrastructure development. The assessee's experience in similar projects and its use of technical knowledge in the MPSH project aligns well with the standards set in these decisions, showing that it actively contributed specialized expertise to the project. 14.7. Financial Responsibility and Risk Bearing (Clause 13.1(e) in Katira): As outlined in both Katira and Montecarlo Ltd., developers assume entrepren....
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....ed in these decisions. 14.13. Public Safety and Environmental Standards (Clause 13.1(k) and 13.1(l) in Katira): Both Katira and Montecarlo Ltd. mandate safety and environmental compliance, which the assessee fulfilled through extensive safety protocols and environmental protections, aligning with the standards expected of a developer. 15. The DR relied on two key decisions: M.S. Khurana Engineering Ltd. v. ACIT and NEC NCC Maytas JV. However, these decisions are distinguishable from the present case, and neither restricts the applicability of Section 80IA(4) of the Act in light of the jurisdictional precedent established in Montecarlo Ltd. v. Principal CIT, which adopts a broader interpretation in favour of infrastructure development. In Coordinate Bench restored the matter to the CIT (A) due to incomplete consideration of facts by the CIT(A), who had not fully analyzed the roles and risks undertaken by the assessee. The CIT (A) had classified the assessee as a contractor without examining its managerial responsibilities, financial risks, or control over project execution, leading the Co-ordinate Bench to require a re-evaluation. Unlike Khurana Engineering, the CI....
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....drainage systems. The CIT (A) held that the assessee's active involvement in infrastructure projects aligned with the statutory objective of creating new facilities benefiting the public, confirming its status as a developer. The CIT (A) highlighted that the assessee bore significant financial and operational risks, including providing performance guarantees, facing potential liquidated damages for delays, and being liable for retention money. These elements evidenced the assessee's entrepreneurial risk, a hallmark of developer activities under Section 80IA. The CIT (A) referenced the legislative history and amendments to Section 80IA of the Act, particularly the Finance Act of 2000, which progressively liberalized the section to encourage private sector participation in infrastructure. Notably, this amendment clarified that "developing," "operating and maintaining," or any combination of these functions qualifies for deductions. The CIT (A) found that this liberalization intended to include entities like the assessee, whose activities contribute directly to public infrastructure creation. Emphasizing the entrepreneurial and operational risks borne by the assessee, the CIT ....
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.... indicative of a developer taking on significant financial obligations to fund long-term projects. This high leverage level aligns with the financial risk a developer assumes, as developers typically engage in substantial upfront investment and long project cycles. The subsequent decrease in leverage suggests strategic risk management, reinforcing the financial commitment typical of developers. Operational Risk: * Low profit margins, fluctuating between 2.83% and 3.25%, highlight the cost-intensive nature of infrastructure projects and the narrow margins within which developers operate. The company's low profitability indicates a commitment to long-term project sustainability rather than short-term gains, consistent with a developer's operational profile. * The inconsistency in inventory turnover and high receivables suggest challenges typical of developers, who often face delayed payments linked to project milestones and demand cycles. This delay in cash inflows impacts liquidity but is an inherent risk in large-scale infrastructure development projects. Liquidity Risk: * Moderate liquidity risk is evident from the current ratio trends a....
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....apparent that the assessee operates as a developer rather than merely a contractor. The risk profile--characterized by substantial leverage, operational responsibility, liquidity constraints, and market dependency- supports the classification of the assessee as a developer under Section 80IA of the Act. By assuming extensive financial, operational, and market risks, the assessee aligns with the statutory definition of a developer, undertaking comprehensive responsibilities in infrastructure creation. 16.7. The financial statements serve as indicators of the business's nature, scope, and the substantive responsibilities borne by the assessee, which collectively affirm that the assessee's activities qualify under the broader framework of infrastructure development as envisaged under Section 80IA of the Act. This analysis will provide the foundation for determining eligibility and distinguishing the assessee's role in alignment with legislative intent, statutory provisions, and relevant judicial precedents, ultimately supporting the assessee's position for developer status. 16.8. Furthermore, in line with the Hon'ble Gujarat High Court's decis....
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....the deduction is allowed in respect of "profits and gains derived from the eligible business." Section 80IA(5) of the Act further stipulates that for computing the deduction, the eligible business is treated as the "only source of income," and income attributable to the eligible undertaking should be calculated in isolation. However, judicial interpretations have clarified that the term "total income" for deduction purposes is often based on the final assessed income, reflecting the eligible business's actual income post-assessment adjustments. 16.14. Upon examining the provisions and judicial precedents, we agree with the assessee's interpretation that Section 80IA of the Act deductions should apply to the total income of the eligible unit as assessed by the AO, including any additions or disallowances made during the assessment process. The legislative intent of Section 80IA of the Act is to incentivize infrastructure development and industrial growth by providing deductions on income attributable to eligible undertakings. This objective is best achieved by allowing deductions on the income computed as per the final assessment, which captures the true profits of ....
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...., Telangana State. Therefore, the parameters which are applicable to BOOT Projects can't be applied mutatis mutandis to the creation of irrigation and agricultural projects, as the freedom to charge in a particular manner cannot be extended to the developer of such irrigational infrastructure facilities. However, the same is not true with respect to the projects such as highways, tunnels, airports or metro stations, because the cost incurred by the developer can always be factored into the usage charges. However, in agricultural infrastructure, identifying and recovering costs from the end user is difficult. To merely categorize this as a work contract would be a fallacy, as all the risks, rewards, and responsibilities lie with the assessee engaged in the creation of the infrastructure facility. For these reasons, reliance on the decision in the case of JMC Projects (India) Ltd., (supra) is warranted in the facts of the present case. 18. It is useful to mention here that the co-ordinate Bench of the Tribunal in the case of M/s. NEC NCC MAYTAS-JV (supra) has relied upon the decision of Hon'ble Gujarat High Court in the case of Katira Construction Ltd Vs. ACIT. However, the de....
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.... "works contract" only. Once the essential threshold of assessee being engaged in "development" of a "new infrastructural facility" is satisfied, as a subsequent step, we need to analyze whether the "other conditions" for qualifying as a "developer" are satisfied i.e. the assessee has taken the necessary financial and entrepreneurial risk associated with development of a new project, so as to qualify as a "developer". 17. In this case, we observe that the assessee entered into contract a contract for construction of new domestic arrival block at Sardar Vallabhbhai Patel International Airport, Ahmedabad (refer Pages 144 145 of Paper Book and Pages 27,28-30 of CIT (Appeals) order). It is observed that Ld. CIT (A) at Page 28 of his order observed that the assessee was awarded a contract for full-fledged development undefined of an Airport along-with all facilities like AC, flight information display system, full electrification etc. Therefore, evidently the contract has not been awarded to the assessee for carrying out any repairs, maintenance or upkeep etc. of existing airport facility, but the assessee has been awarded contract for bringing into existence a new infrastructu....
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....e project for approval of AAI etc. which all support the fact that the assessee undefined is in the instant facts is a "developer" within the meaning of Section 80-IA of the Act and is eligible for claim of deduction under Section 80-IA(4) of the Act. We observe that Ld. CIT (A) undertook a detailed analysis of the scope of work undertaken by the assessee and the various risks and responsibilities undertaken by the assessee and then came to conclusion that assessee qualifies as a "developer" and is eligible to claim of deduction under Section 80-IA(4) of the Act. Accordingly, we find no infirmity in the order of CIT(Appeals) so as to call for any interference." 4. In view of the above concurrent findings of fact arrived at by the CIT (Appeals) and the Tribunal, it cannot be said that the responden-tassessee is not a developer as it is found that the assessee was awarded a contract for full-fledged development of an undefined Airport which is evidently not for any repairs or maintenance or upkeep or revamp of the existing Airport facilities but the assessee was entrusted with the work contract of developing a new infrastructure facility at Sardar Vallabhbhai Patel Internati....
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....artment before the Hon'ble Supreme Court in CIT v. Ranjit Projects (P.) Ltd. [Special Leave Petition (Civil) Diary No. 8895 of 2019, dated 8-42019]. 15. In Commissioner of Income Tax v. Continental Warehousing Corporation [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bombay) one of the substantial question which was considered was whether the tribunal erred in holding that the assessee therein was entitled to deduction under Section 80IA(4) which was contrary to the circular of the Central Board of Direct Taxes No. 10 of 2005. The said question was decided against the revenue and in favour of the assessee on the following lines:- 39. A perusal thereof would indicate as to how the Legislature had in mind deduction in respect of profits and gains from industrial undertakings or enterprises engaged in the infrastructure development etc. We are concerned with sub-section (4) and as it read at the relevant time. It says that this section applies to any enterprise carrying on the business of developing or operating and maintaining any infrastructure facility which fulfills all the conditions, namely, it is owned by a company registered in India or b....
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....tax should be liberally construed. Decision in Bajaj Tempo Ltd. v. Commissioner of Income-tax (1992) 3 SCC 78/[1992] 62 Taxman 480/196 ITR 188 (SC) was referred to wherein it was held that the provision granting incentive for promoting economic growth and development in taxing statute should be liberally construed and restrictions placed on it by way of exception should be construed in a reasonable and purposive manner so as to advance the objective of the provision. The decision in State of Jharkhand v. Tata Cummins Ltd. (2006) 4 SCC 57/2008 taxmann.com 1129 (SC) was also referred which related to a matter dealing with a tax exemption for setting up an industry in a backward area wherein it was held as follows:- "16. Before analysing the above policy read with the notifications, it is important to bear in mind the connotation of the word "tax". A tax is a payment for raising general revenue. It is a burden. It is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read s....
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....ction provided for under Section 80IA(4) of the Act is for a beneficial purpose, the purpose being to promote industrial undertakings or enterprises engaged in infrastructural developments etc. Therefore, the interpretation to be given to the said provision should advance the object for which the provision was introduced and not to frustrate it. With the above legal principle in mind, we are now required to examine the factual position which in our view has been elaborately dealt with by the learned tribunal." 21. Taking guidance from the decision of the Hon'ble Calcutta High Court, if we restrict the grant of beneficial provisions to the Government or its extended arm (Government Undertaking), it will be detrimental to the purpose for which Section 80IA was introduced, i.e., to boost the creation of infrastructure. Practically, the Government or Government Undertaking does not usually execute the work itself; rather, it awards the creation of infrastructure work to various JV/Companies that fulfill the financial and technical qualifications. 22. We may also note the common saying that the Government has no business to do business. However, it is the responsibility of the Gov....
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....aged in infrastructure development etc. Sub-section (4) of Section 80IA of the Act, deals with deduction towards profits derived by any enterprise 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 following conditions, namely... "(a) it should be owned by a company registered in India or by a consortium of such companies or [by an authority or a board or a corporation or any other body established or constituted under the central state Act, (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any statutory body for (i). developing or (i) Operating and maintaining or (ii). Developing, operating & maintaining, (c). It has started or starts operating and maintaining the infrastructure facility on or after the 1st Day of April 1995." 12. As per the said section, an "Enterprise" should be owned by a company registered in India or by a consortium of such companies. Further, it shall enter into agreement with the Central Government or a State Government or any local author....
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....n that, there is no dispute with regard to the project developed by the assessee, which is an infrastructure facility, as defined under Section 80IA(4) of the Act. On perusal of the documents submitted by the assessee, it is seen that the project Pranahitha Chevella Lift Irrigation System, Link-4, Package No. 10, on which the appellant has claimed deduction under Section 80 IA(4) of the Act, has been awarded by the Government of Andhra Pradesh, Irrigation and C.A.D Department to M/s. HCC-MEIL-BHEL(JV) in terms of Agreement dated 02-12-2008. As per the agreement between the JV and Government of Andhra Pradesh, the civil work is to be carried out by M/s.HCC and mechanical work of the project is to be carried out by M/s.MEIL and M/s.BHEL. The agreement between Government of Andhra Pradesh and JV provides for certain clauses, including sub-contracting certain portion of work to any other contractor, who fulfills eligibility criteria, as per the tender document floated by the Government of Andhra Pradesh for development of said infrastructure project, but the only condition for sub-contracting work to other contractor is, the person, who executing the works should have eligible cri....
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....ther, M/s.HCC-MEIL-BHEL(JV) has sub-contracted the entire civil work to the appellant company, after considering the experience and strength of the appellant and also after obtaining necessary permission from the authorities, as required under the BID document. Since the condition of sub-contracting portion of work to other contractor is ingrained in the agreement between the JV and Government of Andhra Pradesh itself, in our considered view, the agreement between the appellant company and M/s.HCC for developing the project (civil works) is akin to agreement with the Central Government or a State Government or any local authority or any other statutory body. In our considered view, once the project is considered to be 'eligible project' in terms of provisions of Section 80IA(4) of the Act and there is a provision for sub-contracting portion of the work to the other contractor, as per clauses of the agreement between the parties, in our considered view, the agreement between the appellant company and one of the JV partners is as good as, the agreement between the authorities and the developer for developing the project and it goes back to the date of original agreement. Therefore, w....
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....rrigation projects. Therefore, having noticed that the assessee has carried out development of infrastructure project, as defined under Section 80IA(4), upon satisfying the conditions of the BID document, in our considered view, the AO ought not to have rejected the claim of the appellant merely for the reason that the appellant has not entered into any direct agreement with the Central Government or a State Government or any local authority or any other statutory body. In our considered view, if you go by the provisions to Section 80IA(4) of the Act, it even allows deduction under Section 80IA(4) of the Act, to a successor entity, in case of transfer of project to other entity for operating and maintaining of infrastructure facility, and thus, in our considered view, the proviso does not require that there should be a direct agreement between the transferee enterprise and the specified authority for availing the benefit under Section 80IA of the Act, and this legal principle is supported by the decision of Hon'ble Madras High Court in the case of CIT Vs. Chettinad Lignite Transport Services (P.) Ltd (supra). 16. We further noted that the professed goal of the legislat....
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....cility, and after considering the relevant facts and also provisions of Section 80IA(4) of the Act, held that even the sub-contractor is eligible for deduction as per the proviso of Section 80IA(4) of the Act, and there is no requirement of direct agreement between the specified authority and the transfer enterprise. The relevant findings of the Hon'ble High Court of Madras are as under : "8. From a reading of the aforesaid Provisos to Section 80IA (4), it is clear that the Legislature intended to extend the said bene fit under section 80IA of the Act to an enterprise involved in (i) developing or; (ii) operating and maintaining Or; (iii) developing, operating and maintaining any infrastructure facility. The term "infrastructure facility" has been defined in the Explanation and the same includes a toll road, a bridge or a rail system, a highway project, etc. These are, obviously, big infrastructure facilities for which the enterprise in question should enter into a contract with the Central Government or State Government or Local Authority. However, the Proviso intends to extend the benefit of the said deduction under Section 80IA of the Act even to a transferee or a c....
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....;1499/Hyd/2019 dated 25.09.2024, wherein the Coordinate Bench of the Tribunal has considered the deduction claimed under Section 80IA(4) of the Act, by a constituent partner of JV, in light of agreement between the JV and specified authority, and after considering the relevant provisions held that partner of JV is also eligible for deduction, if such deduction is not claimed by the JV. The Co-ordinate Bench of the Tribunal further held that in case of agreement with the specified authority, if the JV is entered into agreement with the specified authority, it is as good as the constituent partner is entered into agreement with the specified authority and further held that it satisfies the conditions provided under Section 80IA(4) of the Act. The relevant findings of the Tribunal are as under : "10. We have heard both parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the appellant has executed several development projects as enumerated in the assessment order and among the works, some projects were directly awarded to the appellant as main developer / builder, while some projects wer....
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....hened by the relevant JV / Consortium agreement between the JV partners, wherein it has been clearly specified that this JV / Consortia has been constituted for the purpose of preparing or submitting qualification document and joint bid for the project. The said agreement further states that in the event of the contract being awarded to the JV / Consortium, being the members of the said JV / Consortium, the development works as contemplated by the above contract shall be executed as per the development and scope of works, but for no other purposes. We further noted that the JV / Consortia agreement between members clearly specify the scope of undertaking, its exclusivity, role and responsibility of the JV partners and risk to be undertaken by each of the JV partners. Further, immediately after JV / Consortium, the same has been informed to relevant authorities and also the plan of action has been submitted to the principles for execution of development projects. Further, in few cases, the appellant, being the constituent partner of the JV has directly submitted bills to the authorities and the principles has directly paid to appellant, instead of JV / Consortia, after deducting the....
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.... Vs. ITO (supra) has held that the assessee is entitled for deduction under section 80IA(4) of the Act on the profits earned from the execution of the projects awarded to JV / Consortium. The relevant findings of the Tribunal are as under. "9.2 With regard to other issue, i.e. contracts awarded to JVs and whether the assessee can claim the same as a constituent of the above JVs, the coordinate bench of ITAT, Visakhapatnam in the case of Transstory (India) Ltd. (supra) held that the constituents of JVs are eligible to claim deduction u/s 80IA. For the sake of clarity, we reproduce the findings of the Bench in the said case, as under: "Undisputedly the joint venture or the consortium was formed only to obtain the contract from the Government bodies. At the time of execution of the joint venture or the consortium, it has been made clear that work/project awarded to the joint venture would be executed by the joint venturers or the constituents. As per mutually agreed terms and conditions between them, it was also agreed that each party shall be responsible for the provisions of contract without limitation on resources required for the purpose of fulfilment of the scop....
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....ere executed by the assessee and in case of consortium, the 100 per cent work was executed by the assessee. Whatever bills were raised by the assessee for the work executed on JV and consortium, the joint venture and consortium in turn raised the further bill of the same amount to the Government. Whatever payment was received by the joint venture, it was accordingly transferred to their constituents. Therefore, the joint venture or the consortium was only a paper entity and has not executed in contract itself. They have also not offered any income out of the work executed by its constituents, nor did they claim any deductions under s. 80 -IA(4). Therefore, in all practical purposes, the contract was awarded to the constituents of the joint venturers through joint venture and the work was executed by them. As per provisions of s. 80-IA(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, the assessee is entitled for the deductions under s. 80-IA(4) on the profit earned from the execution of the work awarded to JV and consortium." Respectfully following....
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.... prove that the assessee has fulfilled all the parameters laid down by the statute for claiming deduction. Since the appellant has not entered into agreement with these Government / statutory authorities, there is a violation as laid down by the statute and the assessee is not entitled to claim deduction. With due respect, we are unable to follow the decision relied upon by the ld.DR for the simple reason that, in the above case, the Tribunal has not discussed whether the appellant is otherwise eligible for deduction under Section 80IA(4) of the Act or not. Secondly, while deciding the issue, the Tribunal has not considered the decision of co-ordinate bench in appellant's own case for earlier years and other decisions rendered by the co-ordinate bench of the Tribunal. Further, the Hon'ble Supreme Court, in a subsequent decision in the case of Government of Kerala and another Vs. Mother Superior Adoration Convent in Civil Appeal No. 202 of 2012, after considering its earlier decision in case of Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) held that the 5-Judge Bench did not refer to line of authority which made a distinction between ....
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.... considered view, the arguments of the learned counsel for the revenue in light of the order of ITAT in the case of DCIT Vs. HES Infra (P) Ltd., that the earlier order of the Tribunal in assessee's own case, has not considered the Hon'ble Apex Court's decision in the case of Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra), is not correct. Therefore, we prefer to follow the decision of ITAT, Hyderabad Bench in assessee's own case, rather than the decision relied upon by the ld. D.R. in the case of DCIT Vs. HES Infra Pvt. Ltd (supra)." 20. In this view of the matter, considering the facts and circumstances of the case, and also, by following the decision of Hon'ble Madras High Court in the case of CIT Vs. Chettinad Lignite Transport Services (P.) Ltd (supra) and the decision of ITAT in the case of ACIT Vs. Megha Engineering and Infrastructure Ltd., (supra), we are of the considered view that the appellant is entitled for deduction u/s 80IA(4) of the Act, towards profits derived from development of infrastructure facility. The LD.CIT(A) without appreciating the relevant facts, simply sustained the addition made by the Assessing Office....