TaxTMI 
TaxTMI 
2026 (5) TMI 1255
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.... the findings recorded therein shall apply mutatis mutandis to the other appeal. The Revenue has assailed the impugned order on the following grounds of appeal before us: "1. Whether, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the provision of deduction under Section 80-IA(4) is applicable to constituents of a Joint Venture/Consortium without appreciating that the assessee company had not entered into an agreement with the Central Government, State Government, local authority, or any other statutory body? 2. Whether, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the facts of the case are not in conformity with the clarificatory amendment to Section 80-IA of the Act (Explanation 2 to Section 80-IA inserted by the Finance Act, 2017), which was introduced to unambiguously provide that only those enterprises that have entered into a development agreement with the Central Government, State Government, or local authority and have invested their own funds for developing such facilities would be eligible for the deduction? 3. The appellant....
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....y the assessee company under Section 80IA(4) in its return of income filed under Section 153A of the Act pertained to two major infrastructure projects awarded to the Joint Venture/Consortium in which it was a constituent member, as under: (i) Pranahitha Chevella Lift Irrigation Scheme, Link-II, Package No. 6 (awarded to M/s Navayuga Patel BHEL- Consortium): The aforesaid project involved detailed investigation, design, and execution of a mega lift irrigation system for drawing and lifting 146.24 TMC of water from the Sri Pada Yellampally Reservoir to the Medaram Reservoir, along with the construction of gravity canals, tunnels, pump houses, pressure mains, and execution of civil, hydro-mechanical, and electro-mechanical works. (ii) Stage-II, Phase-I of the Sri Pada Sagar Project (awarded to IVRCL- Navayuga & SEW- JV): This project involved investigation, soil exploration, design, supply, installation, testing, and commissioning of pumping machinery, transformers, substations, pipelines, canals, pump houses, and allied civil structures, CM & CD works, channels without lining and delivery cistern, etc., for developing irrigation potential covering....
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....ction 80IA(4) of the profits of the subject projects. 7. However, the AO, though neither disputed the nature of the projects as infrastructure projects nor the fact that the assessee company had executed the work and undertook risks, but disallowed its claim of deduction raised under Section 80IA(4) of the Act. Ostensibly, the primary ground for the disallowance of the claim of the assessee company for deduction was that the agreements for development were entered into by the Joint Venture/Consortium with Government bodies and not by the assessee company in its individual capacity. According to the AO, the assessee company, being only a constituent member, did not satisfy the condition under clause (b) of Section 80IA(4) of the Act, which required that the enterprise claiming deduction must have entered into an agreement with the Government or a statutory authority. 8. The AO further observed that deduction under Section 80-IA was not applicable to works contracts. According to him, the contracts executed by the assessee company pursuant to assignments from the Joint Venture/Consortium were in the nature of works contracts, as the developer-level risks were borne by the Joint....
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....ed Commissioner of Income Tax, Departmental Representative (for short, "Ld. CIT-DR") at the threshold of hearing of the appeal, submitted that the CIT(A) had grossly erred in law and facts of the case in setting aside the assessment order and allowing the claim of the assessee company for deduction of the profits derived from the subject contracts under section 80IA(4) of the Act. Elaborating on her contention, the Ld. CIT-DR submitted that the assessee company in its original return of income filed under section 139 of the Act, dated 29/11/2017 had not raised any claim of deduction under section 80IA(4) of the Act of the profits derived from the two projects that were awarded to the Joint Venture/Consortium wherein it was one of the constituent member, viz., (i) Project: Pranahitha Chevella Lift Irrigation Scheme, Link-II, Package No. 6 (awarded to M/s. Navayuga Patel BHEL (Consortium); and (ii) Project: Stage-II, Phase-I of the Sri Pada Sagar Project (awarded to IVRCL- Navayuga & SEW-JV). The Ld. CIT-DR submitted that the assessee company had consciously not claimed deduction under section 80IA(4) of the Act with respect to the aforesaid two projects, for the reason that it had n....
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....wn funds to develop such facilities will only be eligible for claiming the benefit of deduction under the said statutory provision. The Ld. CIT-DR submitted that the CIT(A) not only failed to appreciate that as the assessee company had not entered into any agreement with the Government bodies, which disentitled it from claiming deduction under section 80IA(4) of the Act, but had also summarily brushed aside the AO's observation that as the contracts executed by the assessee company upon assignment from the Joint Ventures/Consortium were in the nature of works contracts, thus, on the said count also it was disentitled from claiming the subject deduction. 16. Per contra, Shri Pawan Kumar Chakrapani, CA, Learned Authorized Representative (for short, "Ld. AR") for the assessee company, at the threshold of hearing of the appeal, submitted that the assessee company had filed its original return of income for AY 2017-18 on 29/11/2017, declaring an income of Rs. 222.43 crores (approx.). Subsequently, notice under section 143(2) of the Act, dated 14/09/2018, was issued by the AO. However, as a search and seizure operation was conducted upon the assessee company on 25/10/2018, the pending....
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.... Ld. AR to buttress his contention that the Joint Venture/Consortium were formed only for bidding and securing contracts from Government bodies, but the project work was executed by the constituent members in agreed proportions, wherein they were responsible for executing their respective share of the work, deploying necessary resources, and bearing the associated risks, had drawn our attention to the contents of the JV/Consortium agreements, Award of contract, Supplementary agreements etc. The Ld. AR submitted that the assessee company had either executed the entire work or its proportionate share in the subject projects and had undertaken the corresponding technical, commercial, and financial risks. Also, the Ld. AR submitted that the assessee company, for the aforesaid projects awarded to the Joint Venture/Consortium, had furnished bank guarantees and performance securities in favor of Government bodies. The Ld. AR to fortify his aforesaid contention had drawn support from the observations of the CIT(A) recorded in context of one of the projects, wherein he had observed that as per the consortium agreement, viz., M/s Navayuga- Patel-BHEL, dated 03/05/2008 it was specifically men....
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....ent in its case for AY 2019-20, vide his order passed under section 143(3) r.w.s. 153C of the Act. The Ld. AR submitted that the same set of facts applied to the other project for the subject year, as well as to those pertaining to the immediately succeeding year. 18. The Ld. AR to support his contention that the assessee company being a constituent member of the Joint Venture/Consortium, having executed the respective projects and undertaken the relevant risks, including financial risks etc. as a developer of the infrastructure project, had satisfied the condition of entering into an agreement with the relevant Central or State Government or any authority as specified in clause (b) of section 80IA(4)(i) of the Act, relied upon the orders of the ITAT, Hyderabad "A" Bench in the case of ACIT, Central Circle-2(1), Hyderabad vs. M/s. Megha Engineering & Infrastructure Ltd, ITA No.1499/Hyd/2019, dated 25/09/2024; (ii). The DCIT, Hyderabad Vs. M/s SEW Infrastructure Limited, ITA No. 1721 to 1723/Hyd/2017, dated 26/02/2025; and (iii). DCIT, Central Circle-2(1), Hyderabad vs. M/s. KNR Constructions Limited, ITA Nos.190 & 191/Hyd/2018, dated 23/04/2021. Also, the Ld. AR had relied upon ....
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....d by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years.] (2). The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and operate any infrastructure service or develops an industrial park for develops a special economic zone referred to in clause (ii) of sub-section (4) or generates power or commences transmission or distribution of power or undertakes substant renovation and modernisation of the existing transmission or distribution lines. Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or cl....
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....a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway, inland port or navigational channel in the sea]:]' (5) to (13). XXX XX XXX [Explanation.- For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1).]" 23. We find on a careful perusal of the aforesaid statutory provision that an assessee is entitled to claim deduction under section 80IA(4) of the profits and gains derived from industrial undertakings or enterprises engaged in infrastructure development, subject to the cumulative satisfaction of certain conditions, viz. (i). the gross total income of the assessee includes profits and gains derived from an undertaki....
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....and the Government or statutory authority, but no specific ground has been raised before us challenging the impugned order on the ground that the assessee company is disentitled from claiming the deduction on account of having executed a works contract as contemplated under the "Explanation" to Section 80IA(13) of the Act, inserted by the Finance (No. 2) Act, 2009, with retrospective effect from 01.04.2000. On the contrary, in "Ground of appeal No. (ii)", the Revenue has contended that the allowance of deduction is contrary to a purported "Explanation-2" to section 80IA of the Act, allegedly inserted by the Finance Act, 2017. This contention of the revenue is erroneous, as no such "Explanation-2" was inserted in section 80IA of the Act by the Finance Act, 2017. Accordingly, the "Ground of appeal no. (ii)" raised by the Revenue is not only misconceived, but also does not arise from the impugned order passed by the CIT(A). 27. Be that as it may, we note that the AO, in the assessment order, had, inter alia, observed that the benefit of deduction under section 80IA is not available to a business in the nature of a "works contract" and thus, on that basis, had held that the assessee....
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....der section 80IA(4)(i)(b) of the Act, as per which there has to be a direct agreement with the Government Authorities as a pre-condition for claiming deduction under the aforesaid statutory provision, therefore, in absence of any such agreement it is disentitled from claiming the deduction under section 80IA(4) of the Act. In our view, the aforesaid contention of the Ld. CIT-DR is fallacious and does not merit acceptance. We say so because a perusal of the orders of the authorities below and the documents placed on record reveals that the Joint Venture/Consortium was formed by the assessee company, along with the other constituent members, solely for bidding and obtaining the respective contracts from Government bodies. In fact, we find that at the time the Joint Venture/Consortium agreements were executed, it was clearly stated that the work/project awarded to the Joint Venture/Consortium would be executed by its members/constituents. It was mutually agreed among the constituent members that each party shall be responsible for the performance of its scope of work and shall bear all technical, commercial, and financial risks associated with its performance. In our view, on careful ....
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....the agreement is intended or shall be construed as creating a partnership, joint venture, or other legal entity between the parties otherwise than as specifically set out (Clause 16). 32. We find that the AO in the assessment order had observed that the assessee's claim that the JV/Consortium was only a pass-through entity was devoid of any merit in the context of the rights and liabilities with the main contractee. The AO observed that it was the JV that had entered into a contract with the main contractor and that, under the terms of the contract, the entire responsibility for carrying out the project rested with the JV. Elaborating further, the AO observed that if there was any default on the part of the assessee company, the main contractee could not impose any responsibility on the assessee company; such responsibility could only be imposed on the JV/Consortium. It was further observed that the rights and liabilities arising out of the contract would not pass on to the sub-contractors or the constituents of the JV/Consortium merely because, for their own convenience, the work has been distributed amongst them. In our view, the aforesaid observations of the AO are fallacious....
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....nsortium's assets and liabilities. Further, another "Supplementary agreement", dated 03/02/2018, was thereafter entered with the Superintendent Engineer, Karimnagar, through which the total responsibility, including the financial responsibility, was transferred to the assessee company. In fact, we find that the CIT(A) in his order had observed that the claim of the assessee company for deduction under section 80IA(4) of the profits derived from execution of the infrastructure project, viz., "Pranahita Chevella Lift Irrigation Scheme-Link-II (Package-6)", had been allowed by the AO while framing the assessment in its case for AY 2019-20, vide his order passed under section 143(3) r.w.s. 153C of the Act. We, thus, in the backdrop of the aforesaid facts, concur with the CIT(A) that M/s Navayuga-Patel-BHEL consortium was a pass-through entity formed by the assessee company and the other two constituent members to bid for the project, viz. - "Pranahita Chevella Lift Irrigation Scheme-Link-II- (Package-6)" together as a consortium, and on award of the project to the consortium, the constituent members (including the assesse company) had performed the work of the project so awarded as....
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....he part of the assessee company, the main contractee could not impose any responsibility on the assessee company; such responsibility could only be imposed on the JV/Consortium. It was further observed that the rights and liabilities arising out of the contract would not pass on to the sub-contractors or the constituents of the JV/Consortium merely because, for their own convenience, the work has been distributed amongst them. In our view, the aforesaid observations of the AO are fallacious and contrary to the facts borne out from the record. We say so, for the reason that the AO had lost sight of the basic fact that the assessee company, along with the other constituent members of the JV were not subcontracted any work by the JV/Consortium, but as mentioned in the JV agreement the assessee company, along with the other constituent members, had formed the JV for the limited purpose of bidding and securing Central/State Government contracts, i.e., as a pass-through entity, and the actual execution of the projects was carried out by the said constituent members and not the JV/Consortium. Apropos the AO's observation that in case of default on the part of the assessee company, the mai....
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....red into agreements with the Government bodies and thereafter executed the projects in their respective ratios as agreed upon. We thus, in terms of our aforesaid deliberations, are of a firm conviction that the assessee company, viz. Navayuga Engineering Company Limited, as a joint venturer/constituent member of the subject Joint Venture/Consortium, viz. (i). M/s Navayuga-Patel-BHEL (Project - Pranahita Chevella Lift Irrigation Scheme-Link-II- (Package-6); and (ii). IVRCL-Navayuga & SEW-JV (Project: Stage-II, Phase 1 of Sri Pada Sagar Project) had duly satisfied the condition of entering into an "agreement" with the Government as required per the mandate of Section 80IA(4)(i)(b) of the Act. 35. At this juncture, we may herein observe that our aforesaid view that where a Joint Venture/Consortium is formed by the Joint venturers/constituent members only as a pass-through entity, i.e., for bidding and securing the infrastructure development projects of the Central/State Governments and other statutory authorities, and the subject work is executed by the said respective joint ventures/members as per their delineated roles, then such constituent members satisfied the precondition con....
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...., 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 India or by a consortium of such companies. Further, Clause (a) makes it clear that a company registered in India, or a consortium of such company registered in India should be owned the undertaking and Clause (b) states that such entity should be entered into agreement with the relevant authorities. Going by the above provisions, in our considered view, the assessee being one of the constituent partners of JV/ Consortia has signed the agreement with the Central or State Government or local government for development of infrastructure project. Therefore, in our considered view, once the appellant, being a constituent partner JV / Consortia has entered into an agreement with relevant authorities, then it is as good as the appellant has entered into agreement in its individual capacity for development of infrastructure project. This fact has been further strengthened by the relevant JV / Cons....
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....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 period. Going by the above provisions, when the law itself allowed the benefit to successor entity in case of transfer, then there is no reason as to why such deduction shall not be allowed to constituent partner JV / Consortium, more particularly, when the facts of said JVs / Consortium clearly established the fact that the appellant has carried out all the activities, including design and development of project and maintaining of said project. 11. The appellant has relied upon the decision of Income Tax Appellate Tribunal, Hyderabad in assessee's own case for assessment years 2010-11 to 2015-16, in ITA No.607 to 601/Hyd/2016 dt.15.02.2019. We find that the co- ordinate bench of ITAT for earlier years has considered very similar issues and by following the decision of Income Tax Appellate Tribunal, Visakhapatnam in the case of M/s. Transstory (India) Ltd. Vs. ITO (supra) has held that the a....
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....ut 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. There is no dispute with regard to the fulfilment of other requisite conditions. The dispute was only raised that the contract was awarded only to the joint venture and not to the assessee and therefore assessee is not entitled for deduction. Joint venture and the consortium was formed only to obtain the contract from the Government body and they in fact did not execute the work awarded to it. In a joint venture agreement or a consortium agreement, it was agreed that the awarded work had to be executed by the joint venturers or parties to the agreement in an agreed manner. The work was Megha Engg. & Infrastructure Ltd. awarded by the Andhra Pradesh Government and the KSHIP, a body of the State Government of Karnataka to the JV and consortium but the work was executed by the assessee and the other constituents. In case of joint venture agreement, 40 per cent works were executed by the assessee and i....
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....e Supreme Court in the case of Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) and held that in case of a person claiming deduction under the provisions of Section 80IA(4), the onus is on the assessee to 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 coordinate 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....
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.... also taken note of the Judgment of the Hon'ble Apex Court in Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) while adjudicating the issue of deduction u/s. 80IA(4) of the Act. Therefore, in our 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). 14. In this view of the matter and considering the facts and circumstances of the case, and also by following the case laws discussed herein above, we are of the considered view that the assessee is eligible for deduction under Section 80IA(4) of the Act towards profits derived from infrastructure project awarded to JV / Consortium, but executed by the appellant. The ld.CIT(A) af....
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....m 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 without limitation on resources required for the purpose of fulfilment of the scope and also solely responsible for the performance of its scope of work and shall bear all technical, commercial and facing risk involved in performing its scope of work. It was also agreed that none of the party shall assign its rights and obligations to any other party without written consent of other party. From a careful perusal of this joint venture agreement and the consortium agreement, it is evidently clear that the joint venture and the consortium was formed only with an object to bid contract. Once the project or contract is awarded to the joint venture or the consortium, it is to be executed by its constituents or the joint ventures in a ratio agreed upon by the parties. In the instant case in case of a joint venture agreement, the assessee....
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....nt, the methodology to be adopted for executing the contract obtained. Before going into the main issues, we feel that it is imperative to discuss about the status and legal position of "Joint Venture" vis-a-vis Income tax Act. The Joint Ventures are not be governed by the provisions of the "Indian Partnership Act, 1932. It is also a known fact that there is no statute which governs a Joint Venture. Hence the issue regarding the relationship between the members and also between the members and the Joint venture has to be decided on the basis of the terms of agreement entered between the parties. Though the "Joint Venture Agreements" generally fall in the category of "Association of Persons" (AOP) under the Income tax Act, yet their assessability in the status of "AOP" was not free from doubt and we notice that the authorities have decided this issue on the basis of facts and circumstances of each case. (8) The Hon'ble Supreme Court has made a detailed discussion on the concept of "Joint Venture" in the case of Fazir Chand Gulati v. Uppal Agencies Private Ltd. (2008) 10 SCC 345. The relevant observations are extracted below:- "17. This Court had occasion to con....
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....pply partnership law to joint ventures when appropriate. In fact, it has been said that the trend in the law has been to blur the distinctions between a partnership and a joint venture, very little law being found applicable to one that does not apply to the other. Thus, the liability for torts of parties to a joint venture agreement is governed by the law applicable to partnerships." "A joint venture is to be distinguished from a relationship of Independent contractor, the latter being one who, exercising an independent employment, contracts to do work according to his own methods and without being subject to the control of his employer except as to the result of the work, while a joint venture is a special combination of two or more persons where, in some specific venture, a profit is jointly sought without any actual partnership or corporate designation." [Emphasis supplied] To the same effect is the definition in Corpus Juris Secundum (Vol. 48A pages 314-315): "Joint venture," a term used interchangeably and synonymous with joint adventure', or coventure, has been defined as a special combination of two or more persons wherein some specific ventur....
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....ontrolling in determining whether a joint venture exists, are: 9. On a careful reading of the order of the Hon'ble Supreme Court, we notice the following essential ingredients for a "Joint Venture". (1) joint ownership and control of property; (2) sharing of expenses, profits and losses, and having and exercising some voice in determining division of net earnings; (3) community of control over, and active participation in, management and direction of business enterprise; (4) intention of parties, express or implied; and (5) fixing of salaries by joint agreement." 10. As stated earlier, in order to participate in the global tender process, some of the foreign companies have established joint ventures with the Indian Companies. With regard to the issue of the assessability of Joint ventures, the foreign companies have approached the Authority for Advance Ruling (AAR). We discuss below the decision rendered by AAR in brief. (a) Van Oord ACZ BV (248 ITR 399) : In this case the parties therein had specifically provided in the agreement that each party will bear its own loss and retain the profits separately. There was also specific declarati....
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.... to the assessability of the "Joint Venture" per se. Both the assessee and the department have taken the stand that the "Joint Venture "is assessable in the status of "Association of Person". However, the issue is whether the AO is right in treating the Joint Venture-AOP as the main contractor and its members as the sub-contractors, thereby estimating the income which was not earned by the Joint Venture. 11. On the basis of the understanding of the concept of "Joint Venture", let us consider the facts in the present case. The amended clause 3 reads as under: "(a) The joint venturers shall subject to the provisions hereinafter contained, be entitled to share the work as mutually agreed on item wise, depending on the work schedule. Sharing of the work and execution of the work can be altered at any given time with mutual consent of both the J. V. Partners". As per the original clause 3(a), the members of Joint Venture would share in a prescribed percentage in all profits arising out of joint venture. However, the said clause was in contradiction to the preamble of the agreement; wherein it had been stated that the members are desirous of sharing the contrac....
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....pal, viz., M/s Konkan Railway. In reality, both the parties have divided the contract works between themselves and they have executed their share of work on their own risks. It is pertinent to note here that the AO has not given any finding on the issues like that each member had authority to interfere with or control the work executed by the other member; that both the members have jointly executed the project and thus produced the income jointly. In our opinion, the finding on the lines stated above is crucial to determine the issue of availability of income in the hands of Joint Venture- AOP. On the contrary, the AO is on record that the each of the members has declared the income derived from their respective share of contract works in their hands. In this kind of situation, we do not find any merit in the presumption made by the AO that the Joint Venture is the "Main Contractor" and the members are the "Sub-contractors". Once this presumption has been found to be wrong, then the question of estimation of income by way of Sub-contract commission does not arise. So also the question of deduction of tax u/s. 194C(2) of the Act and the disallowance u/s. 40(a)(ia) does not arise. I....
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....developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely- (a) it is 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 any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining 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: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facil....
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....f the operation and maintenance were not so transferred to the transferee undertaking: Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates and industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006" the figures, letters and words "31st day of March, 2011" had been substituted; (iv) an undertaking which,- ** ** ** (vi) ** ** ** 11. Turning to the facts of the case, we find that joint venture and the consortium was formed only to obtain the contract from the Government body and they in fact did not execute the work awarded to it. In a joint venture agreement or a consortium agreement, it was agreed that the awarded work had to be executed by the joint venturers or parties to the agreement in an agreed manner. The work was awarded by the Andhra Pradesh Government and the KSHIP, a body of the State Government of Karnataka to the J.V. and consortium but the work was executed by the assessee and the other constituents. In case of joint venture agreement, 40% works were executed by the assessee....
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....t - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court." (iii). PNC Construction Co. Limited Vs. DCIT, ITA No. 145/Agr/2012, dated 15/12/2013 : The Tribunal had, in its aforesaid order observed that though the infrastructure project was awarded by the Government of Madhya Pradesh to NCC-PNC, Joint Venture, which was formed with the sole purpose to submit a joint bid for Sagar-Beena project, the assesee company, which had undertaken to execute the project, being a member of the Joint Venture (JV) satisfied the conditions laid down in Section 80IA(4)(i)(a) & (b) of the Act and thus, was entitled for deduction under the said section. For the sake of clarity, we deem it apposite to cull out the observations of the Tribunal, as under (relevant extract): "25. With this back ground of discussions, if we consider the facts of the case under consideration, we find that the infrastructure project was awarded by the Government of Madhya Pradesh, a copy of the agreement has been placed in assessee's Paper Book at page no.56. This agreement was in ....
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.... the Government of Madhya Pradesh to NCC-PNC (Joint Venture), a consortium of companies, the conditions prescribed in Section 80IA(4)(i)(a) & (b) were satisfied by the assessee company, i.e., a constituent member of the Joint Venture (JV), as it had carried out the defined business of developing or operating or maintaining any infrastructure and had offered the profits and gains from the said project in its hands. (iv). Dy. CIT Vs. M/s KNR Constructions Limited, ITA Nos. 190 & 191/Hyd/2008. The Tribunal, in its aforesaid order, had relied on the order of the ITAT, Visakhapatnam, in the case of Transstroy (India) Limited Vs. ITO (supra), and held that the assessee company, a member of the Joint Venture (JV), having executed the project that was awarded by the Government/Statutory body to the JV, was entitled to claim deduction under Section 80IA(4) of the profits derived from the said project. For the sake of clarity, we deem it apposite to cull out the observations of the Tribunal, as under: "5. We have given our thoughtful consideration to rival pleadings. Coming to Revenue's first and foremost argument regarding consortiums' and JVs entitlement to claim 80IA ....
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....g in the business of development or operating and maintaining or developing operating and maintaining any infrastructure facility which fulfils certain conditions, such an "eligible assessee" is entitled to claim deduction u/sec.80IA(4) of the Act . Therefore from a plain reading of the above provision, it is undisputedly clear that deduction is allowable only for a "project specific" but not "an assessee specific" which is further fortified by the proviso provided therein, where the statute allowed deduction to a successor entity for the remaining period of exemption in case the project is transferred to any other entity for the purpose of operation and maintenance of the project. Therefore, we are of the considered view that once the Assessing Officer having satisfied that all the projects developed by the assessee are infrastructure projects and are eligible for deduction u/sec.80IA(4) of the Act, the Assessing Officer erred in disallowing the claim of deduction merely on the ground of not entering into direct agreement with Central/State Governments, Local Authority or Statutory Body etc. In our considered view, the purpose of forming J V is, it used to make sure that the condi....
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....ckdrop of the aforesaid facts, dismissed the appeal of the revenue and observed that the subject income could not have been taxed again in the hands of the assessee-joint venture, viz. SMSL UANCRL (JV). In the backdrop of the aforesaid observations of the Hon'ble High Court, we are of the view that, as in the present case before us, the income from the subject projects had been disclosed by the assessee company, viz. M/s Navyuga Engineering Company Limited (supra) in its "books of accounts" as well as in its return of income for the year under consideration, which, thereafter, had been accepted by the AO while framing the assessment in its case under Section 153A of the Act, dated 07/05/2021, it can safely be concluded that as for all practical purposes the assessee company along with the other constituent members had associated and formed the JVs/Consortiums for the limited purpose of bidding for the Government projects and thereafter executed the said respective projects, thus satisfied the condition contemplated under Section 80IA(4) of the Act. 37. Apart from our aforesaid observations, we may herein observe that as per the "Memorandum" explaining the provisions in the Finan....
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....n under Section 80IA(4) of the Act: 39. We shall now deal with the second facet of the Ld. CIT- DR's contention, that as the contracts executed by the assessee company on assignment from JVs and Consortium are in the nature of works contracts, therefore, as per the "Explanation" below Section 80IA(13) of the Act, as made available on the statute vide the Finance (No.2) Act, 2009, w.r.e.f 01/04/2000, it was not entitled to claim deduction of the profits derived therefrom under Section 80IA(4) of the Act. At this stage, we may herein observe that though the AO had held the aforesaid two projects, viz. (i). M/s Navayuga-Patel-BHEL (Project - Pranahita Chevella Lift Irrigation Scheme-Link-II- (Package-6); and (ii). IVRCL-Navayuga & SEW-JV (Project: Stage-II, Phase 1 of Sri Pada Sagar Project) as "works contract", but had in the same breath allowed the assessee company's claim for deduction under Section 80IA(4) w.r.t the three other similar projects that were directly awarded to it and had not drawn any adverse inference on the ground that the same were in the nature of works contract. 40. As observed by us hereinabove, the aforesaid issue had neither been assailed before us by t....
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....ira Constructions Ltd. Vs. Union of India & Ors. [2013] 31 taxmann.com 250 (Gujarat), and had summarily observed that the contracts executed by the assessee company upon assignment from JVs and Consortium were in the nature of a works contract, as it did not carry any risk of the developer, and the entire risk was carried by the main contractor or JV in most cases. It was further observed that the assessee company carried only business risk, which is present in all enterprises, and there was no risk of a developer in its case. The AO, based on his aforesaid observations, had, by drawing support from the "Explanation" to Section 80IA of the Act, as was initially made available on the statute vide the Finance Act, 2007, w.r.e.f 01/04/2000, and, thereafter, substituted by the Finance (No.2) Act, 2009, w.r.e.f 01/04/2000, declined the claim of the assessee company for deduction under Section 80IA(4) of the Act. 42. We have given thoughtful consideration to the aforesaid issue in the backdrop of the orders of the authorities below and the contentions advanced by the Ld. Authorized Representatives of both parties. 43. Before proceeding further, we deem it apposite to briefly refer ....
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....w.e.f 01.04.2002, an assessee whose gross total income included any profits and gains derived by an undertaking or enterprise from "developing" any infrastructure facility was subject to fulfilment of certain conditions contemplated in sub-clause (a) to (c) entitled to claim a deduction under Section 80IA(4) of the Act. However, an "Explanation" to Section 80IA(13) was made available on the statute vide the Finance (No.2) Act, 2009 (substituting that was earlier made available by the Finance Act, 2007) w.r.e.f 01/04/2000, as per which the deduction under Section 80IA(4) would not be available to a business which is in the nature of a "works contract" awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1) of Section 80IAof the Act. 44. Now, this takes us to the "Explanation" to Section 80IA of the Act inserted vide Finance (No.2) Act, 2009 with retrospective effect from 1.4.2000 (which had substituted the "Explanation" as was earlier made available on statute vide the Finance Act, 2007, w.r.e.f 01/04/2000), which reads as under: "For the removal of doubts, it is hereby declared that n....
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....by an enterprise from "developing an infrastructure facility" will be entitled for deduction under Section 80IA(4) of the Act, but if the "Explanation" is interpreted in a way that income from infrastructure development work undertaken under any contract with any person including the Central or State Government is also not eligible for deduction under Section 80- IA, then the basic intention behind extension of said benefit to a "developer" will be defeated and Section 80IA(4) to the said extent will become redundant. We, thus, based on our aforesaid deliberations, are of a firm conviction that the "Explanation" below Section 80IA(13) will not divest an eligible assessee of its claim of deduction of the profits derived from "development" of an infrastructure facility, but at the same time the said tax holiday will not be available to a business in the nature of a "works contract" whether awarded by Central or State Government or any person. 46. Admittedly, the words "developer" and "contractor" have not been defined in or for the purposes of section 80IA of the Act. Also, it is a settled legal position that, ordinarily, the meaning or definition of a word used in one statute can....
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....ntract to do a work or provides services or goods to another. Further, to understand the scope and gamut of the term "Work", we can borrow the meaning ascribed to it as per the "Explanation" below Section 194C(7) of the Act, which reads as under: (iv). "work" shall include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.]" (emphasis supplied by us) 48. We further draw support from the meaning of the aforesaid terms as had been looked into by the Hon'ble Courts. We find that the Hon'ble High Court of Bombay, in its recent order in the case of The Commissioner of Income Tax, Central-II, Mumbai, vs. M/s Patel Engg. Ltd., I....
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....assessee executes the work by shouldering investment & technical risk by employing team of technically & administratively qualified persons and where it is also liable for liquidated damages if it fails to fulfil the obligation laid down in the agreement. 33. Dealing with the submission of the Revenue that the assessee is a contractor and not a developer for the purpose of Section 80-IA, it is seen that during the assessment year, the assessee was essentially engaged in the business of activity of development of construction of two projects i.e., Koyna Project executed pursuant to the agreement with the Government of Maharashtra, and Srisailam Project executed pursuant to the agreement with the Government of Andhra Pradesh. The Koyna dam was constructed with the purpose of irrigation and water supply in Konkan region and also with the intent to generate 1-itxa 1146- 04-J.doc hydro-electricity. The Srisailam Project situated on Krishna river, is a multi-purpose project developed for the purpose of water supply, irrigation and generation of hydro-electric power. 34. Shri Dada submitted that the meaning of term "developer" means a person carrying out the action of de....
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....though ownership of the underlying land remains with the Government. The Hon'ble High Court also clarified that merely describing the assessee as a "Contractor" in the agreement or the deduction of TDS under the relevant provisions would not determine its status, and also, the ownership of the infrastructural facility is not a requirement for claiming deduction under section 80IA(4) of the Act. For the sake of clarity, we deem it apposite to cull out the observations of the Hon'ble High Court of Gujarat in PCIT Vs. Montecarlo Construction Ltd. (2024) 161 taxmann.com 222 (Gujarat), wherein it had referred to and upheld the view taken by both the lower authorities, observing as under (relevant extract): "3.4 Being aggrieved the assessee preferred appeal before the CIT (Appeal). The CIT (Appeal) allowed the appeal by observing as under: "40. Considering the above discussion wherein it is amplified by quoting various clauses of agreements entered between the appellant and the respective State Government bodies, it becomes clear that the appellant cannot be merely considered as a contractor. The perusal of scope of work, the designing responsibility of the appellant, m....
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....refore not sustainable. The same is hereby ordered to be deleted and the claim of deduction by the Appellant is hereby allowed. 42. The appeal is thus allowed." 3.5 to 3.6 xxx xxx xxx 3.7 The Tribunal after considering the submissions of the assessee and after analysing the facts of the case arrived at the following conclusion: "11.16 On the detailed analysis of the above project, we find that the assessee meets the criteria laid down for the developer as discussed above. As such, the assessee was to make detailed drawings, design calculations/fabrication etc. at its own cost. Further, the assessee is also responsible for arranging methods of the execution of work along with detailed drawings, sketches, furnishing the details of sufficient plants, equipment, and labor. The assessee has to arrange the land for a temporary site office, office laboratory, parking yard, store yard, labor camp, workshop etc. The assessee was duty bound to protect the environment on and off the staff site and avoid the damage or nuisance etc. to the persons or to the property of the public. The assessee was to maintain at its own cost sufficient experienced supervisory....
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....ssee. Interim payment to the tune of estimated contract value in respect of the development work done for each month after retention and other adjustments were to be made, security deposit was to be paid by the assessee, there was a penalty for delay, procurement of the material was the responsibility of the assessee, procurement of land for camp, for shop, labour camp etc. also the employment of qualified engineers, action and compensation in respect of bad work, defect liability of the accidents to persons in relation to Workman Compensation Act, indemnity insurance of the workmen employed. The CIT (Appeal) and the Tribunal considering such aspects of the tendered agreement, concurrently held that the assessee has entered into a development of infrastructure facility agreement and not the works contract." 50. The aforesaid order was followed by the Hon'ble High Court in the assessee's own case in PCIT Vs. Montecarlo Construction Ltd. (2025) 475 ITR 143 (Gujarat), wherein it was held that the assessee company was a developer of the infrastructure facility and not a contractor, and was eligible for deduction under Section 80IA(4) of the Act. Thereafter, the revenue had carried t....
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....nd not contractual labels. 53. We further find that the Hon'ble High Court of Rajasthan in the case of CIT, Jaipur Vs. M/s Om Metal Infraprojects Ltd., ITA No. 33 of 2012, dated 22.08.2017, had upheld the order passed by the Tribunal in ITA NO. 911/JP/2010 for Assessment Year: 2007-08. In the said case, the assessee company had constructed an earthen dam to provide irrigation to certain parts of Maharashtra and also provide drinking water as a part of an irrigation project, viz. "Goshi Khurd Project" promoted by the Government of Maharashtra undertaking, viz. Vidarbha Irrigation Development Corporation, Nagpur. The assessee company had claimed a deduction under Section 80IA(4) for "profits derived" from the aforesaid infrastructure project of Rs. 16.89 crores (approx.). However, the AO by drawing support from the "Explanation" below Section 80IA(13) that was applicable w.r.e.f 01/04/2000, concluded that as the assessee company was awarded a "works contract" by the State Government of Maharashtra which was part of the total work of construction, development and operation of irrigation project, thus, its claim for deduction under Section 80IA(4) was not tenable. The CIT(A) upheld ....
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....greement for development of an infrastructure facility, viz. (i) taken over from the Government the possession of the premises of the project for development of the infrastructure facility; (ii) undertaken all the responsibilities to do all the acts till the possession of the property is handed back to the Government; (iii). shall facilitate the people to use the available existing facility even while the process of development is in progress; (iv). any loss to the public caused in the process would be the responsibility of the assessee; (v). all the works for the development of the infrastructure facility were to be executed by the assessee; (vi). the assessee's duty was to develop infrastructure, whether or not it involved the construction of a particular item as agreed to in the agreement; (vii). the agreement was not for a specific work, but it was for the development of the facility as a whole; (viii). the assessee was not entrusted with any specific work to be done by the assessee; (ix). the material required was to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material; (x). the Government was not to provide any materi....
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....the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any speci....
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....enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. 30. We find that the decision relied on by the learned counsel for the assessee in the case of CIT vs. Laxmi civil Engineering works [supra] squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction under section 80IA of the Act after considering the Judgement of the Mumbai High Court in the case of ABG Heavy Engineering [supra]. The case of ABG is not the pure developer whereas, in the present case, the assessee is the pure developer. We also find that Section 80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer ....
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....as simple works contract to deny the deduction u/s. 80IA of Act. In our opinion the contracts which contain above features to be segregated on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitle for deduction u/s. 80IA of the Act. The profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. It is needless to say that similar view has been taken by the Chennai Bench of the Tribunal and deduction u/s. 80IA was granted in the case of M/s. Chettinad Lignite Transport Services (P) Ltd., in ITA No. 2287/Mds/06 order dated 27th July, 2007 for the assessment year 2004-05. Later in ITA No. 1179/Mds/08 vide order dated 26th February, 2010 the Tribunal has taken the same view by inter-alia holding as follows: "7. Moreover, the reasons for introducing the Explanation were clarified....
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....low Section 80IA(13) of the Act. The Tribunal, while setting aside the orders of the authorities below, had observed as under: "Therefore, in our considered view, the assessee should not be denied the deduction under section 80IA of the Act if the contracts involves design, development, operating & maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s. 80IA of Act." (emphasis supplied by us) Further, a similar view had been taken by the ITAT, Chennai in The ACIT, Circle-IV, Chennai Vs. M/s R.R Constructions, ITA No. 2061/Mds/2010, dated 03/10/2011. In the said case, the AO had though observed that as the assessee company was a "works contractor" and not a "developer", it was as per the "Explanation" below Section 80IA(13) of the Act not entitled for deduction under Section 80IA(4) of the Act, but his order declining the claim of for deduction under Section 80IA(4) was set-aside by the CIT(A). On appeal, the Tribunal upheld the CIT(A) order. It was observed by the Tribunal that if an assessee, after taking a contract from the Government, develops infrastru....
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....n work in the capacity of a contractor but also he is assigned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it can be ascertained about the nature of the contract assigned that whether it is a "work contract" or a "development contract". (h) That in a "development contract" responsibility is fully assigned to the developer for execution and completion of work. (i) That although the ownership of the site or the ownership over the land remains with the owner but during the period of development agreement the developer exercise complete domain over the land or the project. (j) That a developer is not expected to raise bills at every step of construction but he is expected to charge the cost of construction plus mark-up of his profit from the assignee of the contract.(k) That a developer is therefore expected to arrange finances and also to undertake risk. (l) That in contrast to the rights of a " contactor" a "developer" is authorized t....
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....y cannot be treated as a mere works contractor. It was observed that the essence of a works contract lies in execution without discretion, where the contractor merely follows pre-determined specifications without assuming any significant technical or financial risk. We find that the said principle has also been elaborated by the Hon'ble High Court of Gujarat in PCIT vs. Montecarlo Construction Ltd. (2024) 168 taxmann.com 596 (Guj), wherein the Court has drawn a clear distinction between a "developer" and a "works contractor" by emphasizing that a developer is one who conceives, designs, executes, and delivers an infrastructure facility, whereas a works contractor merely executes the work assigned to him. The Hon'ble High Court specifically observed that where the assessee undertakes investigation, design, engineering, and execution, and bears the risks associated with such activities, the contract cannot be categorized as a "works contract". Further, the Hon'ble High Court of Gujarat reiterated its aforesaid view in PCIT vs. Montecarlo Construction Ltd. (2025) 475 ITR 143 (Guj), and once again affirmed that the "Explanation" to Section 80IA(13) applies only to pure works contracts ....
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....ear Vemunur (V), Ramagundam (M), Karimnagar District to Madaram Reservoir near Nandi Meadaram (V), Dharmarama (M), Karimnagar District with the Components such as 1. Lined Gravity Canals reservoir near Nandi Madaram Gravity Ca. 2. CM & CD Works 3. Lifts 4. Lined Tunnels 5. Pressure Mains and with all associate Civil Hydro- Mechanical and Electro- Mechanical Works. No Navyuga Engineering Company Limited Navyuga Engineering Company Limited Navyuga Engineering Company Limited 12.11.2008 11.12.2019 Navyuga Engineering Company Limited Navyuga Engineerin g Company Limited 15 years 2 years 2. Sripada Sagar Project Stage -II Phase "Iinvestigation, soil exploration, design, supply, installation, testing and commissioning of pumping machinery, transformers sub-stations, raising mains including construction of pump house all civil structures, CM & CD works channels and delivery cistern etc., to develop 2.00 lac acres of ayacut in the upland area of Karimnagar District from Sripada Sagar Project. No As per the share of work executed by the members:, Navyuga Engineering Company Limited, IVRCL Limited & SEW Infrastructure Limited As per the share o....
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....outside the purview of a "works contract". We are thus of the view that testing the nature of the project against the aforesaid judicial parameters clearly establishes that the assessee company acted as a developer of the mega irrigation project. (iii). We further find on a perusal of the record that the total value of works to be carried out under the L.O.A issued by the I & CAD Department amounted to a substantial amount of Rs. 3859.71 crores (approx.). We find that all the works involved in developing the infrastructure facility were to be executed by the assessee company. The agreement was not for a specific work, but was for the development of the infrastructure facility as a whole. In fact, the assessee company was not entrusted with any specific work to be done by the assessee company, but with the work of development of an infrastructure facility, i.e., a mega irrigation project which was spread over a period of 11 years (approx.) [12.11.2008 (date of commencement of the project) till 11.12.2019 (date of completion of the project)]. The material for executing the infrastructure project was not to be supplied by the Government but was to be procured by the assessee ....
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....he aforesaid facts filed by the assessee company before the CIT(A). We thus, based on our aforesaid observations, are of a firm conviction that as the assessee company had brought into existence by way of scientific structural planning, technical expertise, and precise execution the infrastructure facility, viz. "Project - Pranahita Chevella Lift Irrigation Scheme- Link-II- (Package-6)", after carrying out designing, drawings, investigation, estimation, land plans etc., and bearing the financial, operational and other executional risks as a developer, which, after its completion on 11/12/2019, was to be operated and maintained by it for a period of 15 years along with a defect liability period of 2 years, therefore, it is a "developer" of the subject project and cannot be brought within the meaning of a simpliciter "works contractor". (v). We thus, based on our aforesaid observations, are of the view that as the assessee company had, as a "developer", developed the project, viz. "Project - Pranahita Chevella Lift Irrigation Scheme-Link-II- (Package-6)", therefore, the "Explanation" to Section 80IA made available on the statute vide the Finance (No.2) Act, 2009, w.r.e.f 01/....
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....ctive shares. The respective joint venturers/members, i.e., the assessee company, IVRCL & SEW, were to execute the project work in accordance with their respective delineated shares. Additionally, they would undertake the operation and maintenance of the project for a period of 2 years, as per their respective share of work executed. We further find that all works involved in developing the infrastructure facility were to be executed by the joint venturers/members of the JV. The agreement was not for a specific work, but was for the development of the infrastructure facility as a whole. In fact, the assessee company was not entrusted with any specific work, but with the development of an infrastructure facility, i.e., an irrigation project to be built on the river Godavari for supplying water to additional agricultural areas not covered in Stage 1. The said project was started on 03.04.2005 and was yet to be completed during the subject year. The material for executing the infrastructure project was not to be supplied by the Government but was to be procured by the contractor. The Government had provided the subject infrastructure project work in a stage-wise manner (Stage II, Phas....
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....e meaning of a simpliciter "works contractor". 59. Accordingly, based on our aforesaid observations, we are of the view that as the assessee company had, as a developer, developed its delineated share of the irrigation project, viz. "Project: Stage-II, Phase 1 of Sri Pada Sagar Project" along with the other joint venturers/co-members, i.e., IVRCL & SEW, therefore it will not be hit by the "Explanation" to Section 80IA made available on the statute vide the Finance (No.2) Act, 2009, w.r.e.f 01/04/2000. 60. Before parting on the aforesaid issue, we may herein observe that, as we have based on our aforesaid observations, concluded that the assessee company had executed the respective irrigation projects as a "developer", therefore, the reliance placed by the AO upon the judgment of the Hon'ble High Court of Gujarat in the case of Katira Constructions Ltd. Vs. Union of India & Ors. [2013] 31 taxmann.com 250 (Gujarat), wherein it has been held that the "Explanation" to Section 80IA of the Act, as made available on the statute vide the Finance (No. 2) Act of 2009 with effect from 01-04-2000, was valid and, being clarificatory in nature, was applicable retrospectively, thus, will no....
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....IA(4) of the Act of Rs. 415,12,32,105/-). 65. Search & seizure proceedings under Section 132 of the Act were conducted in the case of the assessee company on 25.10.2018. Thereafter, the assessee company, in response to notice issued under section 153A of the Act, had filed its return of income on 21.09.2019, declaring an income of Rs. 133,34,99,930/- (after claiming deduction under Section 80IA(4) of Rs. 454,89,93,363/-) and "book profit" under section 115JB of the Act at Rs. 463,29,62,382/-. In the return of income filed in response to notice issued under section 153A of the Act, the assessee company had claimed deduction under section 80IA(4) of the Act of Rs. 454,89,93,363/-, which comprised, viz. (i). deduction in respect of profits derived from three projects directly awarded to it; and (ii). deduction of the profits derived from five projects executed by it as a constituent member of Joint Ventures/Consortiums. The assessee company also furnished the audit report in "Form No. 10CCB" in support of its aforesaid claim of deduction. The Joint Ventures/Consortiums had not claimed deduction under section 80IA(4) of the Act. 66. During the course of the assessment proceedings....
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.... full technical, financial, and entrepreneurial risks, and had performed functions akin to those of a developer, not merely those of a contractor. It was further submitted that the Joint Venture (JV) was only a consortium arrangement for securing the Government contracts, whereas the actual execution of the projects was carried out by the constituent members in their respective shares. 70. Thereafter, the CIT(A), after deliberating on the JV agreements, Supplementary agreements, and Contracts of the respective projects awarded to the five Joint Ventures/Consortia, wherein the assessee company was a constituent member, dealt with the salient features of the said projects, as under: A). Navayuga-Patel-BHEl Consortium: The CIT(A) observed that the aforesaid consortium was entered into between Navayuga Engineering Company Limited (assessee company), M/s. Patel Engineering Limited and BHEL, vide an agreement, dated 03/05/2008. Thereafter, it was observed by him that an "Article of Contract", dated 12/11/2008, was executed between Navayuga-Patel-BHEL (Consortium) and the Superintendent Engineer, SYP Circle, Manchiryal, wherein the terms on which the work of "Pranahita Chevella L....
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....tel Engineering Limited would execute the entire contract and remain solely responsible for the consortium's assets and liabilities. (vi). The CIT(A) observed that a supplementary agreement, dated 02/03/2018, was entered into with the Superintendent Engineer, Karimnagar, through which the total responsibility, including financial responsibility, was transferred from M/s. Navayuga-Patel-BHEL (consortium) to the assessee company. Also, it was observed by him that the claim of the assessee company for deduction under section 80IA(4) of the profits derived from execution of the infrastructure project, i.e., "Pranahita Chevella Lift Irrigation Scheme-Link-II- (Package-6)" was allowed by the AO while framing the assessment of the assessee company vide his order passed under section 143(3) r.w.s 153C of the Act for AY 2019-20. B). Navayuga Transstroy, JV: The CIT(A) observed that the assessee company M/s. Navayuga Engineering Co. Ltd. and M/s Transstroy India Limited had executed the Joint Venture (JV) agreement, dated 01/12/2004. The CIT(A) further observed that an "Article of Agreement", dated 21/03/2005, was executed between M/s. Navayuga-Transtroy, JV and Superinten....
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....005 was executed between the assessee company and M/s. Transstroy India Limited, wherein the scope of work to be carried out by the assessee company regarding the water resources development projects was mentioned as under: "1) Scope of Work: The scope of work of the individual of the Joint Venture for execution of the Project specifies as under: a) Navayuga: (i) Overall Supervision, Project Management, Quality Control and Coordination with clients. (ii) Execution of the work at the quoted rates including provision of all materials, equipment, all personnel required for the work and including all direct & indirect expenses involved. (iii) Providing of all necessary Bank Guarantees towards Performance Guarantees, Security Deposits, Advances, etc., (iv) Providing of all Insurance covers required as per the contract (v) Payment of all Taxes, Duties etc., as applicable in terms of the contract. (vi) Bearing all costs of Arbitration for settlement of claims with "Employer" if applicable. (vii) All liabilities and liquidated damages, if any, arising out of the agreement." (v). The CIT(A), r....
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....desirous of taking up the work of "Kaleshwaram Project. Sundilla Barrage Construction of Barrage with Radial Gates, Hoisting arrangements Including formation of Guide Bunds on either side of Barrage etc., across Godavari river near Sundilla (V), Khamanpur (M), Karimnagar District" and have caused an estimate of probable quantities contained in Schedule-A drawings and specifications describing the work to be done to be prepared. And where as the said Schedule-A, Drawings numbered serially 1 to inclusive (Schedule-B) and the special specifications (Schedule-C), Additional Conditions for Materials (Schedule-D), General Conditions (Schedule-E), Detailed Tender Notice, Tender articles of agreement have been signed by or on behalf of the parties hereto." (vi). The CIT(A) observed that the supplementary JV Agreement, dated 30/05/2016 entered between the assessee company and M/s. GMW Private Limited, inter alia, revealed the scope of work of the assessee company, which read as under: "1) Scope of Work: The scope of work of the individual of the Joint Venture for execution of the Project shall be as under: a) Navayuga: (i) Overall Superv....
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....ved with the performance of its scope of work. Also, it was stated that the physical division of each party's scope of work shall be mutually agreed upon after the award of the work. (iv). The CIT(A) observed that the contract agreement, dated 26/09/2005, entered into between the Superintendent Engineer, MGJLIP Circle, Mahaboobnagar and M/s. Navayuga-IVRCL & SEW, JV revealed the scope of work, which read as follows: "Navayuga-IVRCL & SEW JV having its office at Plot No. 1259, Lakshmi Towers, Road No. 36, Jubilee Hills, Hyderabad 500033 (hereinafter called "the Contractor) of the other post. Whereas the Employer desirer that the Works known as Execution of Stage -2 Pumping Station (5x30MW) of Kalwakurthi Lift Irrigation Scheme at Jonnalaboguda Balancing Reservoir near Khanapur Village, Koderu Mandal, Mahaboobnagar District of Andhra Pradesh, India on EPC basis Tender No: T.No.34/NKLI/2004-2005 Dated: 12.01.2005 should be executed by the Contractor, and has accepted a Tender of the Contractor for the execution and completion of these Works and the remedying of any defects Is therein Including Operation and Maintenance of the Work for three (3) years aft....
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....he "Articles of Contract", dated 03/04/2005, "Earnest Money Deposit" (EMD) of Rs. 43.42 crores (approx.) was agreed to be retained with the Government up to 02/01/2010, which was to be contributed by all three constituents of the JV in proportion to their respective stakes in JV. (vii). The CIT(A) observed that the contribution of "Earnest Money Deposit" of Rs. 43,42,50,000/- comprised of, viz., (i) M/s. Navayuga Engineering Company Limited: Rs. 15,65,44,000/-; (ii) IVRCL Infrastructure and Projects Limited: Rs. 15,53,44,000/-; and (iii) M/s. SEW Constructions Limited: Rs. 12,37,62,000/- 71. Thereafter, the CIT(A), based on his aforesaid observations, relied upon the order passed by the ITAT, Hyderabad in the case of M/s. ACIT vs. Megha Engineering & Infrastructure Limited, ITA No.1499/Hyd/2019, dated 25/09/2019, and observed in his order, as under: (i) that the assessee company, as a constituent member of the JV/Consortium, had paid a substantial amount as a bank guarantee to the State Government as an Earnest Money Deposit (EMD) towards performance guarantee. (ii). that the bank guarantee was provided by the assessee company and not the respective JV....
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.... 73. Thereafter, the CIT(A), based on his aforesaid observations, examined the nature and scope of the work executed by the assessee company as a constituent of the JVs/Consortium, and observed as under: (i) M/s Nayayuga Patel BHEL Consortium: The nature of work is given in para no. 6.4/10(v) of this order. The project Pranahitha Chevella Lift Irrigation Scheme Lift II, package -6 is identical to the project before Hon'ble ITAT while deciding the case of M/s Pratima Infrastructure Limited. After noticing the nature, scope and extent of the project, Hon'ble ITAT held that the projects of such nature are huge infrastructure facilities and the constituents involved in execution of such projects undertake entrepreneurial and investment risk that any developer would have undertaken. In the present case, appellant being a lead partner majority stake holder in the joint ventures had undertaken entrepreneurial and investment risk that any developer would undertake. (ii) M/s Navayuga Transstroy JV: The nature and scope of work undertaken by the appellant as a part of constituent JV is as under: "Whereas the Government of Andhra Pradesh (Herein after called....
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....ies contained in Schedule-A drawings and specifications describing the work to be done to be prepared. And where as the said Schedule-A, Drawings numbered serially 1 to inclusive (Schedule-B) and the special specifications (Schedule-C), Additional Conditions for Materials (Schedule-D), General Conditions (Schedule-E), Detailed Tender Notice, Tender articles of agreement have been signed by or on behalf of the parties hereto." For the above work the scope of work allocated and executed by the appellant as per supplementary JV agreement is as follows: "1) Scope of work: The scope of work of the individual parties of the Joint Venture for execution of the Project shall be as under:- a) Navayuga: (i) Overall Supervision, Project Management, Quality Control and Coordination with Employer. (i) Execution of the entire work at the quoted rates including provision of all materials, equipment, all personnel required for the work and including all direct & indirect expenses involved till the completion of defect liability period as per the requirement of the Contract. (iii) Providing of all necessary Bank Guarantees towar....
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.... 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 Statutory body. The nature and scope of work undertaken and executed by the appellant as a constituent of JV is large and complex infrastructure facilities. The appellant company was involved in investigation, design, estimation, construction, supply, erection, testing, commission and maintenance of electro mechanical works, civil works, road construction, hydro mechanical works and delivery pipe line etc in equal proportion to its share in JV as a constituent member. As per mutually agreed terms and conditions between the constituents of the JV/Consortium it was agreed that each party shall be responsible for the provisions of contract without limitation on resources required for the purpose of the scope and also solely responsible for the performance of its scope and shall bear all technical, commercial and financial risk involved in performing its scope of work. In facts of the case, the nature and size of the projects in which appellant company involved as a constituent member, clearly deli....
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....w such correct amount. In view of this, sub part 1(e) is allowed." 75. The CIT(Appeals), after examining the Joint Venture agreements, scope of work, and nature of activities undertaken by the assessee company, observed that the assessee company was involved in investigation, design, estimation, and execution of the projects and had undertaken substantial financial and technical risks. He observed that the nature, size, and complexity of the projects, and the responsibilities assumed by the assessee company, clearly established that it was functioning as a "developer" of infrastructure facilities and not merely as a "works contractor" or a sub-contractor. The CIT (Appeals) also relied upon certain judicial precedents, including the decision of the Tribunal in the case of Pratima Infrastructure Limited vs. ACIT in ITA No. 451/Hyd/2024, wherein it was held that even a sub-contractor executing part of a large infrastructure project is eligible for deduction under section 80IA(4) of the Act, if the nature of work is akin to that of a developer. It was further noted that the provisions of section 80IA(4) do not mandate that there must be a direct agreement between the assessee and th....
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....e were in the nature of works contract. (A). Pranahita Chevella Lift Irrigation Scheme - Link II (Package 6): (i). As we have based on our deliberations recorded in the context of the aforesaid project, viz. "Pranahita Chevella Lift Irrigation Scheme - Link II (Package 6)", while disposing of the revenues appeal for the immediately preceding year, i.e., AY 2017-18 in ITA No. 457/Hyd/2025, concluded, viz. (i). that the assessee company, viz. Navayuga Engineering Company Limited, as a joint venturer/constituent member of the subject Joint Venture/Consortium, viz. M/s Navayuga-Patel-BHEL [Project - Pranahita Chevella Lift Irrigation Scheme-Link-II- (Package-6)] duly satisfied the condition of entering into an "agreement" with the Government as required per the mandate of Section 80IA(4)(i)(b) of the Act; and (ii). as a developer, had developed the project, viz. "Project - Pranahita Chevella Lift Irrigation Scheme-Link-II- (Package-6), therefore, the "Explanation" to Section 80IA made available on the statute vide the Finance (No.2) Act, 2009, w.r.e.f 01/04/2000 will not apply in its case, and had based on the said observations upheld the view taken by the CIT(A) that....
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....istence of any real joint responsibility or mutual agency between the parties. Instead of functioning as a unified enterprise, the arrangement emphasizes independence in execution and risk allocation (Clause 5.3). In our view, such a structure typically indicates that the parties did not intend to come together to jointly earn income, but rather to work in parallel under a common contractual umbrella. (ii). The subsequent agreement dated 21.03.2005 entered into with the Government of Andhra Pradesh formally places the joint venture as the contracting entity for a large-scale irrigation project involving the construction of an earth dam, spillway, canals, and associated infrastructure. We find that, although the contract is executed in the name of the joint venture, the detailed description of work, read with the JV agreement, makes it evident that the actual execution responsibilities are divided between the constituent members. The government's recognition of the JV as a single contracting party is therefore more of a matter of administrative and contractual convenience rather than a reflection of how the work is to be performed in substance. Accordingly, we are of firm c....
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....rved by us hereinabove, that the AO had lost sight of the basic fact that the assessee company alongwith the other constituent members of the JVs/Consortium were not sub-contracted any work by the JV/Consortia, but the fact (as mentioned in the JV/Consortium agreements) was that the assessee company alongwith the other constituent members had formed the JV/Consortium for the limited purpose of bidding and securing Central/State Government contracts, i.e., as a pass through entity, and the actual execution of the projects was carried out by the said constituent members and not the JV/Consortium (Clause 1 of JV agreement, dated 01/12/2004/Page 1 of Supplementary JV agreement, dated 01/02/2005). Apropos the AO's observation that in case of default on the part of the assessee company, the main contractor, i.e., the Government body, cannot fix responsibility on the assessee company and such responsibility could only be fixed on the JV/Consortium, we are afraid that the same is misconceived and contrary to the facts borne from the record. We say so, for the reason that in the "JV agreement", dated 01/12/2004, the JV members had acknowledged and affirmed that despite delineation of the re....
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....developer. On the other hand, a works contractor, in the strict sense, would merely execute predefined tasks without assuming such responsibilities. We, thus, are of firm conviction that by applying the ratio of both the aforesaid judgments, viz., (i). The CIT Central II, Mumbai Vs. M/s Patel Engineering Ltd. (supra); and (ii). PCIT vs. Montecarlo Construction Ltd. (supra), the role of the assessee company in the subject project clearly falls within the scope and gamut of a development activity. (iii). We find that as per the JV supplementary agreement, dated 01.02.2005, the assessee company shall be solely responsible for the overall performance of the project, and shall independently bear all technical, commercial, and financial risks arising in the project. The project commenced on 21.03.2005 and was completed on 30.06.2020. It was agreed that the assessee company would undertake the operation and maintenance (O&M) of the project for a period of 2 years. The assessee company was entrusted with overall supervision, project management, quality control, coordination with the employer, execution of work, procurement of materials and manpower, and assumption of all financial....
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....ecution brought into existence the infrastructure facility, viz. Sri Komaram Bhim Project (Peddavagu project), which involves the construction of an earth dam, spillway, canal network, and irrigation infrastructure, etc.; (ii) had borne the financial, operational and other executional risks as a developer; and (iii). remained under the obligation to operate and maintain the project for a period of 2 years, along with a defect liability period of 2 years; therefore, it is a "developer" of the subject project and cannot be brought within the meaning of a simpliciter "works contract". 78. We, thus, based on our aforesaid observations, are of the view that as the assessee company had as a developer, developed its delineated share of the infrastructure facility, viz. Sri Komaram Bhim Project (Peddavagu project), therefore, will not be hit by the "Explanation" to Section 80IA, as has been made available in the statute vide the Finance (No.2) Act, 2009, w.r.e.f. 01/04/2000. (D). Kaleshwaram Project - Sundilla Barrage : Re: Agreement with the Central/State Government or other statutory body has been entered into by the Joint Venture and not by the assessee company: ....
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....use 1(a)]. The scope of work of the assessee company mirrors that of its earlier supplementary agreement with M/s Transstroy (India) Private Limited (supra) and again places the entire burden of execution and risk on the assessee company. The repetition of this structure across different projects and partners indicates a consistent business model in which the assessee company acts as the principal executor, while the JV framework is used to meet eligibility criteria or contractual requirements imposed by the government authorities. (iv). We find that the aforesaid JV agreements reveal a clear pattern, wherein though the contracts are formally awarded to joint ventures, the substance of the arrangements reflects independent performance by the constituent members, with one dominant partner assuming primary responsibility, i.e, the assessee company. We further find no evidence of a common pool of profits, joint management of operations, or shared assumption of risks, as typically associated with a true joint venture or association of persons. Instead, the parties have consciously structured their relationship to maintain separability in execution and financial exposure. The J....
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....responsibility for carrying out the project rested with the JV. Elaborating further, the AO had observed that if there was any default on the part of the assessee company, the main contractee could not impose any responsibility on the assessee company, and such responsibility could only be imposed on the JV/Consortium. It was further observed that the rights and liabilities arising out of the contract would not pass on to the sub-contractors or the constituents of the JV/Consortium merely because, for their own convenience, the work has been distributed amongst them. In our view, the aforesaid observations of the AO are fallacious and contrary to the facts borne out from the record. We say so, for the reason that as observed by us hereinabove, that the AO had lost sight of the basic fact that the assessee company alongwith the other constituent members of the JVs/Consortium were not sub-contracted any work by the JV/Consortia, but the fact (as mentioned in the JV/Consortium agreements) was that the assessee company alongwith the other constituent members had formed the JV/Consortium for the limited purpose of bidding and securing Central/State Government contracts, i.e., as a pass ....
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.... operational efficiency of the barrage. We are of the view that in the backdrop of the observations of the Hon'ble High Court of Bombay in The CIT Central II, Mumbai Vs. M/s Patel Engineering Ltd. (supra), such responsibility for delivering a functional infrastructure facility is indicative of a developer. Also, as observed by us hereinabove, the Hon'ble High Court of Gujarat in PCIT vs. Montecarlo Construction Ltd. (supra) has held that where the assessee undertakes such specialized and risk-intensive activities, the contract cannot be treated as a works contract. Therefore, in our view, the role of the assessee company in this project also satisfies the test of a developer. (iii). We further find that the total value of works to be carried out by the Contractor was Rs. 1248.27 crores (approx.) (as per the "Articles of Contract", dated 15/07/201608). The Earnest Money Deposit (EMD) of Rs. 31,20,68,300/- was retained with the Government, viz., the Bank Guarantee dated 12/07/2016 issued by PNB, Large Corporate Branch, Banjara Hills, Hyderabad, for the due fulfillment of the contract to the satisfaction of the Government authority. It was agreed to keep EMD valid till the co....
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.... Kamleshwaram Project - Sundilla Barrage, and not a works contract. Further, we find that the assessee company utilized its funds, expertise, and unskilled, semi-skilled, and skilled employees, deployed its plant & machinery and technology, and took full responsibility for developing the infrastructure facility. Further, as per the record, the risk factor involved in the development of the project was to be borne by the assessee company. (vi). We, thus, are of the view that as the assessee company had, viz. (i), based on its scientific structural planning, technical expertise, and precise execution, brought into existence the infrastructure facility, viz. Kamleshwaram Project (Sundilla Barrage), which involves the construction of a barrage including radial gates, hoisting arrangements including formation of guide bunds on either side of the barrage, and associated civil works, etc., across the Godavari river; (ii) had borne the financial, operational, and other executional risks as a developer; and (iii). remained under the obligation to operate and maintain the project for a period of 2 years, along with a defect liability period of 2 years; therefore, it is a "developer"....
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.... although the contract is executed in the name of the joint venture, the detailed description of the work and the background JV agreement make it clear that the actual execution responsibilities are divided between the constituent members. The government's recognition of the JV as a single contracting party is therefore more of a matter of administrative and contractual convenience rather than a reflection of how the work is to be performed in substance. Accordingly, we are of firm conviction that the JV does not appear to possess independent operational capability; instead, it relies entirely on its members to discharge the obligations. (iii). The joint venture agreement dated 12.10.2005 (after award) further reinforces this position by explicitly allocating the scope of work amongst the JV members, viz. (i). M/s Navyuga Engineering Company Limited; (ii).M/s IVRCL Infrastructure & Projects Limited; and (iii). M/s SEW Constructions Limited. The risks and liabilities arising from the contract were limited to the extent of the work assigned to each JV partner (Page 4). However, the assessee company is entrusted with the overall responsibility of providing bank guarantee bond....
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....tity, and the actual execution of the projects was carried out by the said constituent members and not the JV/Consortium (Clause 1 of JV agreement dated 09/03/2005). Apropos the AO's observation that in case of default on the part of the assessee company, the main contractor, i.e., the Government body, cannot fix responsibility on the assessee company and such responsibility could only be fixed on the JV/Consortium, we are afraid that the same is misconceived and contrary to the facts borne from the record. We say so, for the reason that the "JV agreement", dated 09/03/2005, specifically provides that notwithstanding the delineation of the responsibilities amongst the JV members, they had acknowledged and affirmed to be jointly and severally bound to the Employer, i.e., the Government body for the execution of the contract for the project awarded in accordance with the terms and conditions (Clause 5.5 of JV agreement dated 09/03/2005). (v). We, thus, based on our aforesaid observations read in the backdrop of our deliberations on the aforesaid issue and the judicial pronouncements relied upon in the appeal for the preceding year, i.e., AY 2017-18 in ITA No. 457/Hyd/2025, c....
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....nding on 31.03.2017 (date of completion), including designing and commissioning. Accordingly, by applying the ratio of the judgment of the Hon'ble High Court of Gujarat in PCIT vs. Montecarlo Construction Ltd. (supra), such comprehensive responsibility coupled with risk assumption by the assessee company in the execution of the subject project clearly excludes the contract from the category of a works contract and brings it within the meaning of a developer. (iii). We are of the view that the execution of the aforesaid project would necessarily involve hydrological analysis, engineering design, and integration of multiple systems, which cannot be carried out without significant technical expertise and independent decision-making. We are further of the firm conviction that by applying the ratio of the judgment of the Hon'ble Bombay High Court in The CIT Central II, Mumbai Vs. M/s Patel Engineering Ltd. (supra), as the assessee company was not merely executing instructions but was actively involved in the designing and engineering of a complex irrigation project and had assumed financial, operational, and other executional risks, and assumed responsibility for the functional....
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....ent, with a further obligation to provide Operation & Maintenance (O&M) for a period of 3 years and a defect liability period of 2 years. (iv). We thus, based on our aforesaid observations, are of a firm conviction that as the assessee company had brought into existence by way of scientific structural planning, technical expertise, and precise execution the infrastructure facility, viz. "Stage-2 Pumping Station of Kalwakurthy Lift Irrigation Scheme", after carrying out designing, drawings, investigation, estimation, land plans etc., and bearing the financial, operational and other executional risks as a developer, which, after its completion on 31/03/2017, was to be operated and maintained by it for a period of 3 years along with a defect liability period of 2 years, therefore, it is a "developer" of the subject project and cannot be brought with the meaning of a simpliciter "works contractor". (v). We thus, based on our aforesaid observations, are of the view that as the assessee company had, as a "developer", developed the project, viz. "Stage-2 Pumping Station of Kalwakurthy Lift Irrigation Scheme", therefore, the "Explanation" to Section 80IA made available on....